11/17/2016 ECONOMICS AND REVENUE Connecting the Dots CONNECTING THE DOTS Current Events Forecast Revenue Estimate 1
11/17/2016 CONNECTING THE DOTS Current Events Forecast Revenue Estimate CONNECTING THE DOTS Current Events Forecast Revenue Estimate 2
11/17/2016 CONNECTING THE DOTS Current Events Forecast Revenue Estimate CURRENT EVENTS State Government Headlines and what’s happening SABHRS accounting cash received Newspapers Other accounting transactions Known lawsuits Tax return data Mining and well drilling data Portfolio of investments State land leasing information Other 3
11/17/2016 FORECASTS AND REVENUE ESTIMATES Economy Forecast IHS and others Revenue Estimate by LFD Overall economic indicators Individual Income Tax Gross State Product/Personal Income Corporation Tax Wages Property Tax Several commodity prices Other Insurance Tax Demographics Oil and Natural Gas Taxes Other commodity forecast sources All general fund sources Company surveys: estimated production Related state special sources IHS ECONOMIC FORECAST LFD uses several state specific and national forecasts in revenue modeling Gross state product, while not specifically used in LFD modeling, encompasses underlying trends and is consistent with overall economic forecast and parameters used by LFD The following slides walk through the IHS trends for Gross State Product (GSP) Personal income (PI) Total wage disbursements (Wages) Employment 4
11/17/2016 CY 2016 A SLOW GROWTH YEAR FOR GSP $3,500 $3,000 $2,500 $2,000 $ Millions $1,500 $1,000 $500 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -$500 -$1,000 $ Change in Montana Gross State Product (GSP): LFD calculations based on November IHS data GSP DRAG FROM MINING & AG CLEARS OUT IN CY 2017 $2,500 $2,000 Government $1,500 Services $1,000 $ Millions Trade, Transp.& Utilities $500 Manufacturing Construction $0 Mining 2014 2015 2016 2017 2018 2019 -$500 Agriculture -$1,000 -$1,500 $ Growth in GSP by Industry Sector: LFD calculations based on November IHS data 5
11/17/2016 SERVICES CONTINUE TO GROW $1,400 $1,200 Management, Admin, Other $1,000 Professional & Business Services, Information $ Millions $800 Leisure & Hospitality $600 Health Services & Private $400 Educational Financial Activities $200 $0 2014 2015 2016 2017 2018 2019 $ GSP Growth in Services Only - LFD calculations based on November IHS data RECENT ECONOMIC SHIFT FROM MINING & AG 2013 3.5% 3.2% 2017 5.2% Agriculture 14.8% 7.2% 15.3% 6.2% Mining 5.4% 6.9% Construction 6.4% Manufacturing 19.5% Trade, Transp.& Utilities 19.1% 41.9% Services 45.4% Government 6
11/17/2016 GSP, PI & WAGES: SIMILAR GROWTH PATTERNS 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -2% -4% GSP Personal Income Wage Disbursements % Growth in CY GSP , PI, Wages - LFD calculations based on November IHS data $ CHANGE IN PERSONAL INCOME BY CALENDAR YEAR $3,000 $2,500 $2,000 $1,500 $ Millions $1,000 $500 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -$500 -$1,000 LFD calculations based on November IHS data 7
11/17/2016 $ CHANGE WAGE DISBURSEMENTS BY CALENDAR YEAR $1,500 $1,000 $ Millions $500 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -$500 LFD calculations based on November IHS data GF REVENUE MORE VOLATILE THAN THE ECONOMY 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -5% -10% -15% General Fund GSP Personal Income Wage Disbursements % Growth in FY GF, GSP , PI, Wages - LFD calculations based on SABHRS & November IHS data 8
11/17/2016 LFD REVENUE ESTIMATE BY FISCAL YEAR 15% 10.8%11.6% 11.0% 9.6% 10% 7.1% 6.8% 5.9% 4.2% 5.4% 5.1% 5.0% 5% 0% 0.0% -5% -3.6% -7.5% -10% -10.0% -15% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 BIENNIUM GROWTH BY MAJOR SOURCE 6.0% 5.4% 5.1% 5.0% 4.2% 4.0% Remaining Sources Oil & Natural Gas Taxes 3.0% Corporation Income Tax Individual Income Tax 2.0% 1.0% 0.0% FY 2017 FY 2018 FY 2019 9
11/17/2016 INDIVIDUAL INCOME TAX CONTRIBUTION TO GROWTH: DRIVEN BY LIABILITY GROWTH WITH A TAXPAYER SHIFT IN FY 2017 4.0% 3.8% 3.4% 3.0% 2.2% 2.0% Audits Trended Base Tax Liability 1.0% 0.0% FY 2017 FY 2018 FY 2019 -1.0% CORPORATION INCOME TAX CONTRIBUTION TO GROWTH: LED BY NATURAL RESOURCES WITH AUDIT & REFUND SHIFTS 2.0% 1.5% 1.3% Increased Audits 1.0% Reduced Refunds 0.7% Tax Liability 0.5% 0.2% 0.0% FY 2017 FY 2018 FY 2019 10
11/17/2016 OIL & NATURAL GAS TAXES GROWTH Tax holiday production becomes taxable Price increases partially offset declining production REMAINING SOURCES CONTRIBUTION TO GROWTH: PROPERTY TAX 2-YEAR REAPPRAISAL & HIGHER INTEREST EARNINGS 2.0% 1.5% 1.2% 1.1% Remainder 1.0% Interest Earnings Property Tax 0.4% 0.5% 0.0% FY 2017 FY 2018 FY 2019 11
11/17/2016 CONNECTING THE DOTS Revenue Estimate: Current Events: Boomers retiring Retirement income growth higher than GSP Slow and steady growth on small segment Technology industry growth of the economy Not a large source of revenue gain High tourism year for national parks REVENUE TEAM Overall estimate details Specific source details More connecting the dots 12
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