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Oregon Economic and Revenue Forecast State Employee

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									         Oregon Economic and
          Revenue Forecast

                                 June 2008
                           Volume XXVIII, No. 2




                               Theodore R. Kulongoski
                                     Governor
State of Oregon                                                        Prepared By:
Department of Administrative Services                   Office of Economic Analysis
Scott Harra, Director
                            ___________________________________

                                      SUBSCRIPTIONS
                            ___________________________________


The Oregon Economic and Revenue Forecast, is published quarterly, as follows: March, June,
September, and December.

To subscribe, send the following information to:

        Oregon Economic and Revenue Forecast
        Office of Economic Analysis
        Department of Administrative Services
        155 Cottage Street, NE, U20
        Salem, OR 97301-3966


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If you have any questions regarding subscriptions to the forecast, please call Monique Toombs at
503-378-3405 or send e-mail to monique.toombs@state.or.us

The Economic and Revenue Forecast document is also available on our web page at:
http://oregon.gov/DAS/OEA/. Data files are also available for download on our web page.


                                                                                      June 2008




                                                   i
              Department of Administrative Services

                               Scott Harra, Director


                       Office of Economic Analysis

                   Tom Potiowsky, State Economist
                 Dae Baek, Deputy State Economist
                Michael Kennedy, Senior Economist
              Kanhaiya Vaidya, Senior Demographer
       Joshua Harwood, Corrections Forecast Analyst
     Summer Warner, Acting Administrative Assistant



                       http://oregon.gov/DAS/OEA/




ii
                            ___________________________________

                                        FOREWORD
                            ___________________________________


This document contains the Oregon economic and revenue forecasts. The Oregon economic forecast
is published to provide information to planners and policy makers in state agencies and private
organizations for use in their decision making processes. The Oregon revenue forecast is published to
open the revenue forecasting process to public review. It is the basis for much of the budgeting in
state government.

The report is issued four times a year; in March, June, September, and December.

The economic model assumptions and results are reviewed by the Department of Administrative
Services Economic Advisory Committee and by the Governor's Council of Economic Advisors. The
Department of Administrative Services Economic Advisory Committee consists of 15 economists
employed by state agencies, while the Governor's Council of Economic Advisors is a group of 12
economists from academia, finance, utilities, and industry.

Members of the Economic Advisory Committee and the Governor's Council of Economic Advisors
provide a two-way flow of information. The Department of Administrative Services makes
preliminary forecasts and receives feedback on the reasonableness of such forecasts and assumptions
employed. After the discussion of the preliminary forecast, the Department of Administrative
Services makes a final forecast using the suggestions and comments made by the two reviewing
committees.

The results from the economic model are in turn used to provide a preliminary forecast for state tax
revenues. The preliminary results are reviewed by the Council of Revenue Forecast Advisors. The
Council of Revenue Forecast Advisors consists of 15 specialists with backgrounds in accounting,
financial planning, and economics. Members bring specific specialties in tax issues and represent
private practices, accounting firms, corporations, government (Oregon Department of Revenue and
Legislative Revenue Office), and the Governor’s Council of Economic Advisors. After discussion of
the preliminary revenue forecast, the Department of Administrative Services makes a final revenue
forecast using the suggestions and comments made by the reviewing committee.

Readers who have questions or wish to submit suggestions may contact the Office of Economic
Analysis 503-378-3405.



                                                       Scott Harra, Director
                                                       Department of Administrative Service




                                                 iii
iv
                                     ___________________________________

                                               TABLE OF CONTENTS
                                       ___________________________________

EXECUTIVE SUMMARY............................................................................................................. 1
I.        ECONOMIC FORECAST.................................................................................................. 9
     A.   National Economic Review and Forecast ........................................................................... 9
     B.   International Review and Outlook .................................................................................... 15
     C.   Western Region: Demographic Review............................................................................ 21
     D.   Oregon Economic Review and Forecast........................................................................... 27
II.       REVENUE FORECAST ................................................................................................ 55
     A.   2007-09 General Fund Revenues...................................................................................... 55
     B.   Extended General Fund Revenue Outlook ....................................................................... 57
     C.   Tax Law Assumptions....................................................................................................... 58
     D.   Forecast Risks ................................................................................................................... 58
     E.   Lottery Earnings Forecast ................................................................................................. 59
APPENDIX A:                 ECONOMIC FORECAST DETAIL............................................................. 63
APPENDIX B:                 REVENUE FORECAST DETAIL ............................................................... 91
APPENDIX C:                 POPULATION FORECASTS BY AGE AND SEX................................... 105




                                                                      v
vi
EXECUTIVE SUMMARY

June 2008


Oregon Economic Forecast

The December 2007 edition of this forecast reported job losses for the third quarter of 2007, the first
quarterly loss of jobs in four years. After job number revisions released in late February 2008, the
third quarter of 2007 was revised upward for a gain of 0.9 percent. With the most recent quarter
coming in at 1.7 percent job growth for the first quarter of 2008, jobs have increased every quarter
for the past 19 quarters. But the rate of job growth has definitely slowed. On a year-over-year (Y/Y)
basis, jobs increased in the first quarter by 0.9 percent, much slower than the average Y/Y pace of 2.7
percent from 2004 to 2006.

The US economy is very near recessionary conditions. Forecasting firms Global Insight and
Moody’s Economy.com both state the US economy entered a recession either very late 2007 or this
first quarter of 2008. In April, more than half the panelist on the Blue Chip Economic Indicators
survey view the US economy as being in recession or soon will be. Jobs in the US have declined the
last four months starting with January 2008. Both housing and energy issues are weighing in on
financial markets and consumers. With consensus and data essentially agreeing that the US economy
is in recession, the question for going forward is now “how long and how deep”.

The view for Oregon is similar. Post WWII, Oregon has never failed to follow the US business
cycle. The depth and duration of expansions and downturns have been different. The two most
recent US recessions, 1991 and 2001, show this difference. In 1991, job losses in the Oregon
economy were only 1.6 percent, close to the US average. The story was reversed in 2001 when
Oregon lost jobs at a rate of 4.0 percent, higher than the US average. The duration of job loss in
Oregon in 1991 was relatively short at around 8 months, while the 2001 downturn stretched into 31
months.

OEA views the current downturn to be closer to the 1991 rather than the 2001 recession. A number
of points for this view were expressed in the March 2008 Oregon Economic and Revenue Forecast.
The crucial assumptions are: a mild recession for the US economy, a relatively milder downturn in
the Oregon housing market (fewer foreclosures, less price depreciations, relatively smaller supply
overhang), and continued strength in foreign exports. Oregon is not immune from a US recession as
the slowdown in growth and lost jobs in various sectors makes this point evident. But the depth and
duration of this downturn should not be as severe as at the start of this decade.

OEA forecasts a decline of 0.6 percent growth for the second quarter of this year. Job growth
will essentially be flat for the second half of 2008 with moderate growth for 2009. Annual
average job growth is forecasted to be 0.6 percent in 2008 and 0.7 percent in 2009.

The wood products sector is projected to loose jobs at a rate of 5.6 percent in 2008 and 1.7
percent in 2009. As the housing market improves into 2010, wood products jobs should grow
3.8 percent.




                                                  1
Computer and electronic equipment sector will see job declines of 3.1 percent in 2008 and 2.1
percent in 2009.

This will still be a tough year for transportation equipment sector with job losses of 6.7 percent
and further losses of 1.4 percent in 2009.

The outlook for metals and machinery manufacturing is for continued growth through 2008 with
job increases of 2.6 percent followed by slower pace with job growth of 1.8 percent in 2009.

Employment in food processing is forecast to increase 3.5 percent in 2008 and 1.9 in 2009.

Construction employment is projected to decrease annually by 8.0 percent in 2008 and
2.3 percent in 2009.

Trade, transportation, and utilities sector employment will increase by 0.5 percent during 2008
followed by 0.7 percent growth in 2009.

The information sector, which includes traditional publishers such as newspapers and publishers
of software, has slower growth moving into 2008 with a projected job gain of 1.4 percent.
Continued slow growth should prevail with job gains of 0.4 percent in 2009.

The financial activities sector is expected to lose 1.9 percent of its workers in 2008 and then a
mild addition of 0.7 percent in 2009.

Professional and business services are projected to grow 2.1 percent in 2008 and 2009.

Education and health services will grow 3.9 percent in 2008 and 2.6 percent in 2009. Health
services are the underlying growth for this sector.

Leisure and hospitality is projected to grow 3.1 percent in 2008 and 0.6 percent in 2009.

The government sector will increase by 1.7 percent in 2008 and 0.7 percent in 2009. State
government employment is expected to increase by 1.0 percent in 2008 and 0.2 percent in 2009.
Local government employment is expected to increase by 1.8 percent in 2008 and 1.0 percent in
2009.

Forecast Risks

The forecast projects a slowing Oregon economy in 2008 which continues into the first half of 2009
with mild growth in the second half. This outlook faces heightened risks for a much deeper
downturn in 2008 and 2009.

With the national economy going through a slowdown in the first quarter of 2008, the risks are
higher from any disturbances that could throw the economy off track. The same major drag for the
slowdown, a slowing housing market, could hurt the economy further when it is most susceptible.
The credit crunch and the ensuing instability in the global financial market bring added uncertainty.
Businesses are nervous about potential repercussions from the turmoil in the financial markets across



                                                 2
the world. Any geopolitical disruptions during this time would be more harmful than when the
economy is stronger.

Despite good headline inflation numbers, inflation pressures still exist. The Fed continues to warn
about a potential flare-up in inflation pressure. The expectation is that the softening economy will
ease inflation pressures. However, sharply higher oil and gasoline prices coupled with a sharp rise in
food prices will add inflationary pressure. A weaker dollar may contribute to price pressure through
a run-up in import prices.

The housing market in Oregon and the U.S. continue to work off excesses accumulated in the past
housing boom. Building permits and housing starts are sharply down. In fact, both have declined
more than expected. With declining sales, home prices are coming down at the national level. While
house price appreciation has continued in Oregon, some parts of the country have seen house prices
drop substantially. House prices will continue to soften in most regions. Negative wealth effect
from lower house values and less mortgage equity withdrawal will dampen consumer spending.
There is a risk that the housing market may deteriorate worse than expected.

The subprime mortgage problem has led to bankruptcies and huge write-offs in the financial industry.
While the credit squeeze continues for some borrowers, short-term financing through the commercial
paper market has begun to stabilize. Stricter lending standards also limit credit access, but qualified
borrowers continue to enjoy stable financing.

Record oil prices remain a substantial risk. So far, the world economy has withstood the attack of
high oil prices remarkably well. Still, there is no question that high oil prices are a significant threat
to the already soft U.S. economy.

A variety of factors could disrupt oil supplies, and higher energy prices cannot be ruled out. Crude
oil prices continue to hover around record levels. The global supply is still tight, and demand is still
strong, particularly from China and the rest of Asia. Geopolitical tensions continue to exist, and
there is always room for speculative attacks. There is an indication that current oil prices are being
partly supported by speculators.

The federal stimulus checks should mildly boost growth in the second half of 2008. But risks remain
that once the stimulus checks are over, the economy will sink back into very low growth or recession
in 2009.

We will continue to monitor and recognize the potential impacts of these risk factors on the Oregon
economy. We have identified the major risks now facing the Oregon economy in the list below:

•   Contagion of the credit crunch and financial market instability. The current instability in the
    financial market is weighing on business confidence, which may lead businesses to change their
    capital spending plans. The central banks are ready to inject more money to alleviate short-term
    credit problems, and their measures have been successful so far. At the same time, the Fed has
    lowered interest rates to stimulate the economy.

•   A further worsening in the housing market. Low interest rates and easy lending standards have
    aided a boom in home purchases and mortgage refinancing. With the subprime mortgage
    problem spreading and tighter lending standards in place, the mortgage market is not as



                                                    3
    conducive to residential real estate activity as in the past. Any drop in house price appreciation
    coupled with a large drop in mortgage equity withdrawal will slow down consumer spending.
    The Oregon housing market could be adversely impacted by a major housing correction in
    California and the rest of the nation. Continued gains in employment and personal income will
    be needed to keep consumer spending from falling. The federal fiscal stimulus package should
    help alleviate the slower consumer spending.

•   Loss of federal timber payments to Oregon counties. A one year extension of federal timber
    payments will expire at the end of fiscal year 2007. Thirty-one counties would be affected by the
    loss of $282 million in funding, especially impacting Douglas and Lane counties. Loss of public
    services could have adverse impacts on economic activity.

•   A major deceleration in the U.S economy and a global downturn triggered by the U.S. slowdown.
    The U.S. economy has been an important engine of growth for the global economy. Thanks to a
    strong global economy, the chances are lower that the U.S. slowdown will set off a global
    downturn. The rest of the world is growing nicely even with a soft U.S. economy, but if the U.S.
    economy falters even more, the whole world will surely feel the impact. Asia in particular will
    be severely affected due to its large exposure to the U.S. economy.

•   A sharp fall of the U.S. dollar. Depreciation of the dollar against foreign currencies promotes
    U.S. exports as U.S. products become more price-competitive (or less expensive). Oregon’s
    manufacturing sector has a large dependency on international markets. If the U.S. dollar falls too
    quickly, this could harm Oregon’s trading partners because the lower dollar makes imports more
    expensive to U.S. consumers. As U.S. trading partners export less to the U.S., their economies
    may weaken and lower their demand for Oregon products. In the end, a controlled lowering of
    the U.S. dollar is most beneficial to the Oregon economy.

•   A sharp and major stock market correction. This would slow consumer spending. Lower stock
    prices could also limit the ability of businesses to raise necessary capital in the equity markets.

•   A hard landing in China. The Chinese economy is growing very fast. Building construction and
    other business investments are largely responsible for this economic growth. Inflationary
    pressure is strong. The central government’s efforts to curb growth have produced minimal
    success. Limited experience in macro policymaking may result in an undesirable set of policy
    measures. A major slowdown in China will hurt most Asian economies, along with commodity-
    exporting countries, including Canada. Given that Canada and Asian countries are the major
    destinations of Oregon’s manufacturing exports, the manufacturing sector would be negatively
    impacted.

•   Geopolitical risks. Uncertainty still abounds in Iraq. Tensions with Iran and heightened security
    risks weigh on businesses and consumers. Disruptions in travel, oil supplies, and consumer
    confidence could be severe. The drop in business activity could deepen if this uncertainty
    persists or if the transition out of the Iraq war goes badly for the U.S. The winding down of
    military expenses will not greatly impact Oregon. There is also an upside risk that the transition
    will go more smoothly than anticipated, and stability in the Mideast will provide a stronger than
    forecasted stimulus to the economy.




                                                  4
•   Inflation and Federal Reserve Bank reactions. A growing economy with surging energy costs is
    a formula for inflation. Even with a slowing economy, higher inflation than forecasted may force
    the Federal Reserve to raise interest rates more quickly and to higher levels. This action could
    further slow the U.S. economy and in turn slow down the Oregon economy as higher interest
    rates hurt consumers and businesses.

•   Rising regional energy prices. More businesses may slow production and lay off workers. A
    geopolitical incident could dramatically disrupt gasoline and natural gas prices. Regionally,
    electricity generation is subject to weather patterns and natural gas prices. As demand surpasses
    the available capacity of hydro generation, electric generation may move towards natural gas-
    powered turbine engines. Higher electricity prices could result because they are pegged to
    natural gas prices.

•   Initiatives, referendums, and referrals. Generally, the ballot box brings a number of unknowns
    that could have sweeping impacts on the Oregon economy.


Demographic Forecast

Oregon’s estimated population on July 1, 2007 reached 3,745,455. That was an increase of 1.5
percent over the 2006 population. The recent growth since 2005 is considerably higher than the 1.1
percent annual average growth rate between 2000 and 2005. Overall, population change since 2000 is
much lower than the rate of growth of well over 2.0 percent during the early 1990s. Oregon’s
population will continue to grow at a moderately high rate in the near future. Based on the current
forecast, Oregon’s population will reach 4.165 million in the year 2015 with an annual rate of growth
of 1.3 percent.

Oregon’s economic condition heavily influences the state’s population growth. Its economy
determines the ability to attract job seekers from other states and beyond. As Oregon’s total fertility
rate remains below the replacement level, long-term growth comes from net in-migration. Working-
age adults come to Oregon as long as we have good economic and employment situations. The net
migration during the 1980s, which included a major recession, contributed to 22 percent of the
population change. On the other extreme, net migration accounted for 73 percent of the population
change during the booming 1990s. This share of migration declined to 57 percent in 2002. As a sign
of modest economic gain, the net migration will account for nearly 64 percent of the population
change in the near future.

Growth in all age groups will show the effects of the baby-boom and their echo generations during
the period of 2007-2015. It will also reflect demographics impacted by the depression era birth
cohort combined with migration of the working age population and elderly retirees. After a period of
slow growth in the past, the elderly population (65+) growth has picked up in pace and will surge as
the baby-boom generation starts to enter this age group. The annual growth of the elderly population
will exceed 3.0 percent during the forecast horizon as the boomers continue to enter retirement age.
The youngest elderly (aged 65-74) will grow at an extremely fast pace due to the direct impact of the
baby-boom generation entering retirement age. The elderly aged 75-84 will shrink in numbers until
2009, as the depression era birth-cohort will dominate this group. The oldest elderly (aged 85+) will
continue to grow at a moderately high rate due to the combination of cohort change, continued




                                                  5
positive net migration, and improving longevity. However, the annual growth rate will continue to
taper as the depression era small birth cohort transitions from the younger age group.

As the baby-boom generation matures, the once fast-paced growth of population aged 45-64 will
gradually taper to nearly a 0 percent rate by 2012. The young adult population (aged 18-24) will
grow at an average of 0.3 percent annually, considerably slower than the rate averaging 1.1 percent
experienced between 2000 and 2007. This will ease the pressure on public spending on college
education. Children under the age of five show a high rate of growth after a slow growth period in
the recent past. The K-12 population (aged 5-17) will show very slow growth which will translate
into slow growth in school enrollments. The 25-44 age group population has reversed the several
year trend of decline. The decline was mainly due to the exiting baby-boom cohort. This age group
has seen positive growth starting in the year 2003 and will approach 1.4 percent annual growth by the
year 2011.

Revenue Forecast

The forecast for General Fund revenues for the 2007-09 biennium is $13,016.7 million, an
increase of $91.2 million from the March 2008 forecast. The increase is the product of unique
circumstances in personal income taxes, rather than an indication of stronger-than-expected
economic conditions. In the absence of these countervailing receipts, the forecast would be
down slightly. Including the beginning balance of $1,436.7 million, total available resources
amount to $14,091.9 million, a decline of $46.9 million from the Close of Session forecast. The
projected ending balance for 2007-09 equals $143.0 million, $114.2 million above the March
2008 forecast.

Total General Fund revenues will increase 20.7 percent to $15,706.3 million in 2009-11.
Personal income tax growth of 23.4 percent, which will raise collections to $13,952.1 million, is
due in part to the $1.084 billion kicker rebate distributed in the prior biennium. In addition, the
sunset of the Bush tax cuts in 2011 are expected to have a short-run positive impact on personal
income taxes, particularly through capital gains realizations. Corporate income taxes will grow
9.1 percent to $881.8 million, an inflated rate of growth due to the accelerated depreciation
allowed by the Economic Stimulus Act of 2008. All other revenues will reach $872.3 million,
mildly below the prior biennium’s level.

General Fund revenues will total $17,708.1 million in 2011-13, an increase of 12.7 percent from
the prior period. For the 2013-15 biennium, General Fund revenues will equal $20,013.1
million, a 13.0 percent increase from the prior biennium.

Projected lottery earnings will total $1,339.3 million, an increase of $9.0 million from the prior
forecast. The gain was split evenly between traditional projects and video lottery. Including the
beginning balance and other earnings, total available resources equal $1,417.5 million.

During the Special Session in February 2008, the legislature increased the lottery fund allocation
to the State School Fund by $20.0 million. The current forecast for the ending balance in the
Economic Development Fund is $11.7 million.




                                                 6
Lottery earnings are expected to grow 2.6 percent to $1,374.5 million for the 2009-11 biennium.
The weak growth is the result of an absence of administrative savings for the biennium,
compared with $60.9 million in the current biennium. Video lottery earnings will increase 8.8
percent, while traditional products will decline slightly. Total available resources will amount to
$1,390.7.

Lottery earnings will amount to $1,553.8 million in 2011-13, a 13.0 percent increase over the
previous biennium. Including interest earnings, available resources will total $1,559.8 million.
For the 2013-15 biennium, lottery earnings will climb to $1,740.9 million while available
resources will equal $1,746.9 million.




                                                 7
8
I.      ECONOMIC FORECAST

June 2008

This edition of the National Economic Review and Forecast contains excerpts from Nigel Gault,
U.S. Economy: Current Situation: Forecast Flash, Global Insight, April 2008. This publication
summarizes Global Insight’s baseline national forecast that OEA incorporates into the Oregon
economic and revenue models. Editorial comments written by OEA staff are enclosed in [ ]. In
addition, Table N.1 provides a quick look at the annual rates. Table N.2 provides a look at the
forecast change from the last forecast. Graph N.1 provides a graphic U.S. history and forecast.
A full version of Global Insight’s U.S. Executive Summary can be found at our website.
www.oregon.gov/DAS/OEA/docs/economic/nationalfull.pdf

A.      National Economic Review and Forecast

Forecast Flash
–Excerpted from Nigel Gault, U.S. Economy: Current Situation: Forecast Flash, Global Insight, April 2008

The Fed Pulls Out All the Stops

In response to the implosion of Bear Stearns, the Federal Reserve has pulled out all the stops to
try to calm the crisis in the financial markets and prevent it from pulling the U.S. economy into a
deep recession. It guaranteed $29 billion of Bear Stearns' securities, while opening its discount
lending window to investment banks. And it lopped another 75 basis points off its federal funds
rate, taking it down to 2.25%. Opening the discount window to investment banks does seem to
have calmed fears that Bear Stearns might just be the first in a series of dominos to fall. And
mortgage rates in the conventional fixed-rate market have fallen, although remaining unusually
high relative to Treasuries. But the evidence continues to suggest that the economy is already, at
the very least, in a shallow recession. And the size of the losses still being absorbed by the credit
markets and the magnitude of the de-leveraging process that is under way suggest that even if the
Fed can avoid a deep recession, growth will remain subpar for some time.

Weakness Spreading Far Beyond Housing. The downturn has spread well beyond the housing
sector, its original source. Consumer spending growth has slowed sharply, nonresidential
construction appears to have peaked, business equipment spending is slipping, and state and
local government finances are coming under increased stress. Essentially, all of the previous
props to growth have disappeared—with one exception. Export growth remains robust, while
imports are falling. This year, we expect U.S. domestic spending growth to be zero—but GDP
still grows 1.2%, entirely due to the combination of rising exports and falling imports.

First-Quarter Growth: Zero, Plus or Minus a Few Tenths. The incoming evidence suggests
that first-quarter GDP growth will be close to zero. Our forecast projects a small decline, of just
0.1%, but a small increase is clearly possible. We expect domestic demand to fall by a steep
1.1%, but the support from foreign trade adds a full percentage point to growth, as in the fourth
quarter.




                                                       9
Second-Quarter GDP More Clearly Negative. If first-quarter GDP comes in slightly positive,
is there still a recession under way? We would say yes, because a recession is decided by
monthly movements in key indicators such as employment and industrial production, which we
expect to show a series of declines during the first half of the year. And we think that GDP
weakness will be more evident in the second quarter, when we expect a 0.7% decline. We see
domestic spending dropping even more steeply, by 2.0%, as consumer spending joins the list of
falling items. We now anticipate that oil prices will stay above $100/barrel for the quarter,
pushing up gasoline prices and squeezing spending power.

Stimulus Helps the Second Half, But Impact Is Just Temporary. Second-quarter growth
would be more negative still but for the help from the fiscal-stimulus package. Consumers will
begin receiving tax rebates in May, and we assume that they spend about 20% of the rebates
within three months of receipt and another 20% in the following three months. On a quarterly
basis, the primary boost to growth is felt in the third quarter (GDP growth of 2.4%), but by the
fourth quarter the impetus is fading again (growth is 1.1%), and in the first quarter of 2009
growth (at 0.3%) is perilously close to zero again. Not until mid-2009 do we see a more
sustainable recovery, as the Fed's low-interest-rate medicine begins to work and financial
institutions begin to lend more freely, helped by the likelihood that house prices will be
bottoming out.

Fed Expected to Cut Further. Although Fed officials are still indicating that their number one
concern remains the downside risks to growth, some are worrying that they are starting to take
risks with inflation; two FOMC voters dissented from the March 18 rate cut. But our view is that
the growing evidence of economic contraction will induce the Fed to take out further insurance
against a downward spiral. Therefore, we expect the Fed to take the federal funds rate down
another 75 basis points by midyear, to 1.50%, and to hold there for the rest of 2008.

  Figure N.1*




* Figure N.1 was taken from Nigel Gault, U.S. Economy: Current Situation: Forecast Flash, Global Insight, April 2008.




                                                                         10
11
12
Graph N.1




            13
14
B. International Review and Outlook

Introduction

The global economy faces a ton of headwinds. Almost all the regions ion the world are expected to
see deceleration of economic growth, and some parts will experience more pronounced slowdown.
Inflation is back, creating worries about stagflation - a combination of stagnant economy and high
inflation. This possibility of stagflation is rising as oil prices continue to set record highs.

China and the U.S. have been two important engines of growth for the world. In May 2008 Monthly
Forecast Analysis, the Global Insight declares that the combination of a severe U.S. recession and a
Chinese hard landing could send the world economy into recession. It places 30 percent probability
to that scenario.

Despite domestic economic worries, the exports have been saving grace for many countries,
including the U.S. The U.S. export grew 17.2 percent year over year (Y/Y) in the first three months
of the year. Oregon’s exports also grew similarly, registering 15.7 percent increase led by a sharp
increase in agricultural products and a robust growth in computer and electronics. Oregon’s share in
total U.S. exports is 1.5 percent.

Recent Developments and Outlook for Oregon Export Markets

While Oregon’s major export markets continue to prosper, they face the same deteriorating economic
environment as any other countries in the world in 2008 and 2009. Many Asian countries are
reporting robust economic growth in the beginning of 2008. Domestic demand in these countries
play a role but intraregional trade with China as anchor definitely has helped to offset the
negative impact from the U.S. and European slowdown. Still, downside risks abound for the
Asian economy because of continuous unraveling of global financial market and an uncertain
global economic outlook.

Japan’s economic growth will slow as strengthening Japanese yen puts pressure on export sector.
According to the Wall Street Journal (May 23, 2008), the Japanese Cabinet Office, in the latest
monthly economic report, kept its overall economic assessment unchanged but lowered its
forecast for exports and housing, suggesting that economic risks are on the rise. The Cabinet
Office didn't change its view on other sectors of the economy, such as capital spending and
inventories. 2008 and 2009 will see growth rates much lower than 2007.

China continues to post remarkable growth rates. However, export growth is slowing partly due
to sluggish shipments to the U.S. Tightening monetary policy in the country is a consequence of
excessive liquidity, overheating real estate market, and rising inflation. Added uncertainty is the
economic fallout associated with the recent devastating earthquake in Sichuan Province. Still,
China’s economy will continue to grow at a rapid pace but a bit slower than in the past.

Eurozone economic growth is set for a sharp slowdown in the coming months. Industrial
production and exports have begun to weaken. Still, inflation concern has kept the European
Central Bank from lowering interest rate.




                                                15
U.K. economy is on a shaky ground. Consumer spending remains weak thanks to rising
mortgage payments, tightening credit, and higher inflation. Businesses are cutting back on
investment due to uncertainty surrounding the economy. Service sector has weakened quite a bit.
Like the rest of Europe, the U.K. economy will experience slower growth in 2008 and 2009.

The energy sector in Canada and Mexico continues to reap the benefits from high prices.
However, the U.S. economy is mired in a recession-like downturn and the slowing U.S. demand
will have negative consequences in non-energy sectors in these countries.

Table I.1 shows global economic            Table I.1
forecast by the Global Insight (GI). The
global economic growth is sharply
decelerating in 2008.       The global
economy will slow down further in the
rest of 2008 and the countries will
register lower economic growth
compared to the recent past. The world
economy is expected to grow 3.1 percent
in 2008 after a very strong 3.9 percent
growth in 2007. 2009 will see only a
slight improvement over 2008 because
of residual weakness in the economy in
the beginning of the year.




Table I.2 summarizes the Blue Chip         Table I.2
Consensus forecast (May 2008) for
Oregon’s major export markets. It is
consistent with the GI forecast shown in
Table I.1.




                                               16
Oregon Exports

While the domestic economy is reeling from the slumping housing sector and the uncertainty
surrounding the financial industry, the export sector of the U.S. economy has been a leading
contributor to economic growth. With the support of global expansion and a favorable U.S. dollar,
U.S. merchandise exports increased 17.2 percent in current value in the first quarter 2008 Y/Y.


During the same period,              Graph I.1
Oregon’s exports grew 15.7
percent, reaching $4.7 billion.
Oregon’s exports account for 1.5
percent of total U.S. exports.
Behind      this    increase    is
tremendous growth in exports of
agricultural     products     and
computer       and     electronics
products. Graph I.1 illustrates
Oregon’s total exports. After a
brief slowdown in the middle of
2007, the export growth has
reaccelerated.




Table I.3 shows Oregon’s exports and growth rates by industry through first quarter 2008 Y/Y.
These are the top ten industries by export volume (in value). Global expansion, a business
investment boom in Asia, and a weak U.S. dollar combined to promote exports of agricultural
products, computer and electronics, chemicals, and other industries.

                                     Table I.3
The computer and electronics
sector saw a strong rebound Y/Y
in exports to Asia after a short
pause in the first part of 2007. A
disappointing development is
that there was some decrease in
exports of industrial machinery
and transportation equipment,
reflecting cautious business
investment environment.




                                                 17
Graph I.2 illustrates quarterly exports by major industry since 1997. The graph demonstrates a
continued robust increase in computer and electronics since 2005. It reflects a major increase in
exports to Malaysia (69.6 percent increase), China (up 24.3 percent), the Philippines (160.3 percent
up), and Costa Rica (14.9 percent increase).

Agricultural exports have been a     Graph I.2
major beneficiary of recent high
commodity prices. Exports to
major Asian countries increased
by 50-350 percent in 1Q 2008
Y/Y.

Agricultural exports have been a
major beneficiary of recent high
commodity prices. Exports to
major Asian countries increased
by 50-350 percent in 1Q 2008
Y/Y.




Table I.4 charts exports of Oregon products to major destinations. Canada remains by far the biggest
export destination for Oregon products thanks to that country’s continued robust growth. 1Q 2008
saw a slight decline in exports Y/Y and growing uncertainty will further pressure prospect of Oregon
exports to Canada.

Japan is now the number-two export
                                               Table I.4
destination as of 1Q 2008. There has been
a tremendous increase in exports to Japan,
reflecting the solid expansion in that
country.     Overall exports to Japan
increased 25.8 percent Y/Y. Increasing
exports of agricultural products (up 57.5
percent), wood products (up 22.8 percent)
and chemicals more than offset the
declining computer and electronics
products. Japan’s economy faces the same
uncertainty as the world, so export to
Japan may not be as robust as in the recent
past.

Malaysia is the third largest destination of
Oregon exports. About 94 percent of total
exports to Malaysia are computer and
electronics. Exports to the Philippines
increased sharply, putting the country as
the fourth largest export destination of


                                                 18
Oregon exports. More than 90 percent of exports are computer and electronics and agricultural
products.

Exports to China continued
robust growth, increasing 18.4      Graph I.3
percent Y/Y.           To meet
increasing demand from both the
domestic market and abroad,
China will have to further build
up its manufacturing sector.
Consequently, the country will
buy more capital equipment
from Oregon. Computer and
electronics exports explain more
than 2/3 of total exports.

Graph I.3 shows the quarterly
export trend for Oregon’s major
markets since 1997. Exports to
Canada continue to stay high. A
sharp gain in exports to Japan is
evident. Exports to Malaysia
and the Philippines picked up
very sharply.




                                                19
20
C. Western Region: Comparative Trend Analysis

Introduction
This section was generated using the Pacific Northwest Regional Economic Analysis Project
(PNREAP) http://www.pnreap.org/. The project is managed by Dr. Gary Smith, Director of
PNREAP. All tables and text below were generated from this web site. We invite our readers to
explore this versatile site for the vast area of economic information down to the county level. The
produced report below is only one example of the types of charts and text that can be produced using
data from the Bureau of Economic Analysis. Although this example only compares Oregon and
Washington with the United States, the following western states are available: California, Arizona,
Nevada, Montana, and Idaho.


                US-REAP: Comparative Indicators
      United States Per Capita Income by State: 2006 vs. 1969




   Graph W.1




                                                21
.

    Graph W.2


.




                22
               US-REAP: Comparative Trends Analysis: Oregon vs. Washington,
                            Per Capita Income, 1969 – 2006
Introduction
Per Capita Income is one of the most widely used indicators for gauging the economic performance
and changing fortunes of local economies. It is used as a yardstick to assess the economic well being
of a region’s residents and the quality of consumer markets. It serves a barometer for calibrating the
economic performance for calibrating the economic performance of a region over time and to judge
differences in relative economic prosperity between regions. Shifting trends in local per capita
income growth have important social and political ramifications and significant implications in
formulating local economic development strategies and initiates.

Definition: Per Capita Personal Income is the total personal income of an area divided by its
resident population as of July 1. Use and interpret per capita income estimates with care in
consideration of factors such as the following:

Personal income is measured as a flow throughout the year, while the measurement of population is
at one point in mid-year. Therefore, per capita income is distorted if a significant change in
population occurs during the year.

For smaller counties in particular, per capita income in any giving year may be exceptionally high or
low for the short run because of unusual local conditions, such as a bumper crop, a catastrophe, or a
major construction project as the building of a dam or nuclear power plant.

Farm incomes are notorious for being especially volatile year-to-year, owing to changing weather,
work market conditions, and alterations in government programs. Therefore, the per capita income of
farm-dependent counties may exhibit sharp fluctuations over time.

The presence of large institutional populations – such as residents attending a local college or the
residents of a local prison or state mental institution – can significantly lower the per capita income
estimates of an area. Such results may not reflect the relative economic well being of the non-
institutional population and may mislead if care is not giving to their interpretation.




                                                  23
                                           Graph W.3
Graph W-3 depicts Oregon’s annual per
capita income over 1969-2006 in current
and constant (2000) dollars. Constant
dollar measurements remove the effects
of inflation. They allow for comparison
of changes in the real purchasing power
of per capita income over time.

When measured in current dollars,
Oregon’s per capita income increased
808.8%, from $3,664 in 1969 to
$33,299 in 2006. When measured in
constant 2000 dollars to adjust for
inflation, it advanced 100.2%, from
$14,508 in 1969 to $29,038 in 2006.
                                           Graph W.4
The long-term growth of Oregon’s real
per capita income is compared with that
of Washington and the nation in graph
W-4. Cumulative growth indices
express each state’s real per capita
income as 100 for the base year 1969,
and the per capita income of subsequent
years as a percent of 1969. These
indices allow a direct comparison of the
differences in cumulative growth in per
capita income for Oregon, Washington,
and the nation.

Oregon’s real per capita income
climbed 100.2% over 1969-2006,
trailed the gain by Washington
(106.2%), and fell below the increase nationally (110.8%).
                                           Graph W.5
Graph W-5 highlights Oregon and
Washington per capita income relative
to national trends by tracking their per
capita incomes as a percent of the
national average over 1969-2006.

In 1969, Oregon’s real per capita
income amounted to 95.52% of the
national average; in 2006, it comprised
90.70%.      Similarly,     in   1969,
Washington’s per capita income totaled
106.41% of the national average; in
2006 it consisted of 104.08%.




                                                 24
                                             Graph W.6
Graph W-6 highlights the short-run
pattern of growth in Oregon’s real per
capita income by tracking its percent
change year-to-year since 1969. The
overall average annual percent change
for the 38-year period is plotted to serve
as a reference for identifying periods of
relative-high—and relative low—growth
against the long-term trend.

Oregon’s real per capita income grew on
average at an annual rate of 1.91% over
1969-2006.

Over the past three decades some
counties, regions, and states have
                                             Graph W.7
experienced extreme swings in growth,
and often such swings have tended to
coincide with the decades themselves.
Graph W-7 again traces the annual
percent change in Oregon real per capita
income since 1969, but this time they are
displayed with average growth rates for
the decade of the 1970s, 1980s, the
1990s and 2000-2006.

During the 1970s, Oregon’s annual
population growth rate averaged 3.17%.
It averaged 1.16% during the 1980s,
2.06% in the 1990s, and 0.98% thus far
this decade (2000-2006).
                                             Graph W.8
Graph W-8 compares the decade average
growth rates for Oregon noted in the
previous graph with corresponding
decade averages for Washington and the
nation. As the graph reveals, Oregon’s
average real per capita income growth
outpaced Washington’s average during
the 1970 (3.17% vs. 2.66%), trailed
Washington’s average during the 1980s
(1.16% vs. 1.42%), fell below
Washington’s average during the 1990s
(2.06% vs. 2.49%), and amounted to less
than Washington’s average over the 7
year period for this decade, 2000-2006
(0.98% vs. 1.16%).




                                                 25
Relative to nationwide real per capita income growth trends, Oregon led the nation during the 1970s
(3.17% vs. 2.51%), trailed the nation in the 1980s (1.16% vs. 2.17%), exceeded the nation in the
1990s (2.06% vs. 1.77%), and recorded underneath the nation from 2000-2006 (0.98% vs. 1.62%).




 Graph W.8




                                                26
D.      Oregon Economic Review and Forecast

Summary of Recent Trends

Statewide Trends

The December 2007 edition of this forecast reported job losses for the third quarter of 2007, the first
quarterly loss of jobs in four years. After job number revisions released in late February 2008, the
third quarter of 2007 was revised upward for a gain of 0.9 percent. With the most recent quarter
coming in at 1.7 percent job growth for the first quarter of 2008, jobs have increased every quarter
for the past 19 quarters. But the rate of job growth has definitely slowed. On a year-over-year (Y/Y)
basis, jobs increased in the first quarter by 0.9 percent, much slower than the average Y/Y pace of 2.7
percent from 2004 to 2006.

The declining housing market continues to impact related job sectors. Construction jobs continued
their steep job cuts of the fourth quarter. Financial activities added jobs in the first quarter but their
Y/Y growth is still down. Including the first quarter of 2008, wood products have now lost jobs over
the previous eight quarters.

The recession-like conditions at the national level have also impacted the manufacturing sector.
Durable goods manufacturing sectors all lost jobs in the first quarter, except for metals and
machinery. Retail and wholesale trade posted gains but their growth has been very slow over the
past three quarters.

Many sectors turned in strong job growths. Professional and business services, health services,
leisure and hospitality, and federal government all had strong job growth in the first quarter.

The most recent Blue Chip Job Growth               Figure O. 1
rankings place Oregon 26th in the nation for
Y/Y job growth. Between March 2007 and
March 2008, jobs increased by 10,400, or
0.61 percent. The relative performance of
the fifty states is shown in Figure O.1.

Wyoming turns in a strong job growth of
2.7 percent, ranking 1st in the nation.
California had small job losses ranking at
42nd. Idaho’s job gains placed the state at
the 36th fastest for the period.
Washington’s job gain was 1.7 percent,
ranking 6th among the 50 states.

OEA’s forecast for first quarter annualized
job growth was a positive 0.3 percent
compared to the reported positive 1.7 percent. Table O.1 provides details of actual first quarter
growth compared to the March 2008 forecast and shows annualized growth comparisons and Y/Y
growth. Unless noted otherwise, all percentage rates discussed on the next page reflect annualized
rates of change of seasonally adjusted data for the first quarter of 2008.



                                                   27
.
Table O.1




The relatively strong job growth for the first quarter is due mainly to the following sectors: retail
trade, wholesale trade, professional and business services, health services, leisure and hospitality,
and local government. The Office of Economic Analysis does not take this as a sign that jobs are
no longer slowing. The relatively mild weather combined with sectors prone to larger
movements over a quarter may have contributed to the higher growth rate. With the slowing US
economy and weakness in the manufacturing sector in Oregon, the first quarter growth is not
indicative of present economic trends. We will continue to monitor the job data in the coming
months.




                                                 28
Total private employment gained 5,200 jobs from the fourth quarter for a 1.4 percent increase.
Manufacturing employment declined by 2,300 jobs; a 4.3 percent decrease from the fourth
quarter. The Y/Y employment for manufacturing is down 2.4 percent. Private non-
manufacturing employment gained 7,400 jobs for a 2.4 percent increase from the fourth quarter.
This sector’s job Y/Y gain is 1.0 percent. The government sector also had gains of 2,300 jobs for
growth of 3.2 percent.

Within manufacturing, durable goods employment declined by 6.6 percent. Wood products are
impacted by the declining housing market and lost 500 jobs or a decline of 6.6 percent.
Computer and electronic products also lost jobs at a 5.0 percent rate. Transportation equipment
shed 530 jobs for a decline of 11.8 percent. This sector is down Y/Y by 8.2 percent. Other
durable goods, which include electrical equipment, appliance, and furniture products, declined jobs
by 6.9 percent. One sector of continued job growth is metals and machinery, growing 2.7 percent.

Food processing, a highly seasonable sector, reported job gains of 4.8 percent. Other labor sectors
within nondurable manufacturing, which include paper and allied products, were essentially flat at
job gains of 0.5 percent.

In the private nonmanufacturing sector, construction lost the highest percentage of jobs at 13.2
percent or around 3,500 jobs. Construction jobs first surpassed the 100,000 number in 2006 but
have fallen back to 98,600. The downward impacts from the housing market are lowering the
job numbers in construction.

Retail trade and wholesale trade added jobs at growth rates of 4.9 percent and 2.9 percent,
respectively. Slower growth is evident with the Y/Y rate in retail down from over 3.0 percent to
1.9 percent while wholesale trade Y/Y job growth is -0.5 percent.

Two other areas of rapid job growth were professional and business services and health services.
Professional and business services jobs grew 6.1 percent following three quarters of declines.
The Y/Y job growth is 1.2 percent, considerably less then the plus four percent growth in 2006.
Health services added jobs at a 7.7 percent rate with Y/Y growth of 4.0 percent, basically
ignoring the job growth slowdown in other sectors.

Information, which includes publishers of software, increase jobs by 1.3 percent. Leisure and
hospitality job gains were 3.0 percent, running counter to the slowing economy and high energy
prices. Financial activities, while gaining 1.3 percent in the quarter, are down Y/Y by 2.3
percent, reflecting the down housing market and credit problems.

The government sector increased jobs by 3.2 percent on strength in all three levels of
government. Federal jobs were up 8.7 percent, state jobs up 1.3 percent, and local government
jobs up 2.4 percent.




                                                29
Regional Trends

The state’s over-the-year employment growth remained positive – at 0.9 percent – in the first quarter
of 2008. This was slower than the 2.4 percent growth one year earlier. March and April brought even
slower growth, at 0.6 and 0.7 percent.

Regional growth rates ranged from no growth to 1.4 percent growth. In all regions, job growth in
early 2008 was slower than in early 2007. The slowing trend was most noticeable in Central and
Eastern Oregon. Central Oregon, where over-the-year growth was 3.7 percent in early 2007, had a
growth rate of 1.1 percent in early 2008. Eastern Oregon slowed more than two full percentage
points, from 2.2 percent in early 2007 to completely flat over-the-year in early 2008.

The Portland area also saw a noteworthy slowdown in job growth – a drop from 2.6 percent in the
first quarter of 2007 to 1.4 percent in the first quarter of 2008. Despite the decline, this was the
fastest growth rate of all regions.

Slowdown also occurred in the Willamette Valley and the Coast. The Willamette Valley’s growth
rate was just 0.5 percent in the first quarter of 2008, much slower than the 2.2 percent growth the
year before. Employment on the Coast grew 0.7 percent between the first quarter of 2007 and the
first quarter of 2008, a full point slower than the 1.7 percent growth the prior year.

Southern Oregon, where growth came in under 1 percent for most of 2007, did not see much
additional slowing in the first quarter. In early 2008, growth was 0.5 percent, similar to the 0.8
percent growth in the first quarter of 2007.

Unemployment rates have trended up over the course of the past year. Four out of six regions had
over-the-year increases of at least 0.5 percentage point in April: Coast, Southern, Central, and
Eastern. In the largest increases, Southern Oregon’s rate moved up 1.5 percentage points over the
year, while Central Oregon’s rate increase was even greater, at 1.9 percentage points. Portland and
the Willamette Valley had rates fairly similar to last April, increasing 0.2 percentage point each.

       Greater Portland Area Sees Slower Job Growth:
       Clackamas, Columbia, Multnomah, Washington, and Yamhill counties

Over-the-year job growth in the region has continued to slow. Growth peaked at more than 3 percent
in most of 2006, but shrunk to 1.7 percent at the end of 2007. The first quarter of 2008 was even
slower, at 1.4 percent. March and April were the weakest yet, with growth hovering at about 1
percent year-over-year. By first quarter 2008, Washington and Yamhill counties showed very slight
job drops over the year. Columbia County has seen a bit of resurgence; after one negative quarter – a
loss of 0.4 percent in the third quarter of 2007 – growth picked up again to 1.2 percent over the year
by early 2008, with April’s preliminary numbers echoing that strength. Clackamas County added 1.3
percent over the year, but the rate of growth has slowed from over 2 percent throughout 2007, and a
3.0 percent rate in the first quarter of 2007. Multnomah County’s growth of 2.3 percent in early 2008
was quite similar to one year ago, when the rate was 2.1 percent.

One major issue affecting the metro area is the housing situation. Despite significant weakness in
residential building permits and jobs, public and commercial projects continue to support stable



                                                 30
construction employment. Work is continuing on several office buildings in Lake Oswego and
Hillsboro, as well as several retail developments in Clark County, Washington. Residential
construction employment fell below its year-ago level in February and by April was 400 jobs below
its total in April 2007, a loss of nearly 5 percent.

The weakness in building permits and parts of construction continues to cause ripples in other sectors
of the economy, notably finance. Financial activities began to decline year-over-year in October, and
was down 1,200 jobs – about 1.7 percent – by April.

Industries within manufacturing show a wide divergence in trend. Wood products is suffering the
effects of the housing downturn, and a downturn in high tech is also weighing on job totals. Primary
metal manufacturing, on the other hand, hit a high for this decade of 7,000 jobs in March, and
repeated this strength in April preliminary figures. Layoff announcements at various high-tech
manufacturers made the news, but so did the plans for employment at new solar-cell factories that
have not yet been fully realized.

Of the region’s counties, Washington County’s manufacturing sector has been weakest, falling 1,800
jobs since spring 2007. The loss of 3.8 percent was largely due to the county’s concentration in high
tech.

The metro area's unemployment rate was 4.8 percent in April (preliminary), similar to the 4.6 percent
rate the prior year.

       Willamette Valley Growth Slows Significantly Year over Year:
       Benton, Lane, Linn, Marion, and Polk counties

The Valley region’s employment totals were nearly flat over the year, up just 0.5 percentage point as
of the first quarter of 2008 and much slower than the 2.2 percent annual growth in early 2007. In
March and April employment was essentially unchanged over the year.

Linn County had the region’s highest growth rate, at 1.0 percent – down one-half point from 1.6
percent in first quarter 2007. Durable goods manufacturing grew 3 percent over the year ending in
April (preliminary), strengthened by a 100-job gain in primary metals. Transportation, warehousing,
and utilities has also posted solid gains. Benton County’s growth rate averaged 0.4 percent in the first
quarter of 2008, down from the rate of 1.0 percent in early 2007. However, March and April numbers
showed slight declines year-over-year. Health care and social assistance added 140 jobs, nearly 3
percent, over the year ending in April. State government education sank into the red year-over-year
in March and April, 150 jobs below its total last year.

The larger metro areas in the region also slowed. Marion and Polk counties had a combined growth
rate of 0.7 percent, down from 2.5 percent growth in the first quarter of 2007. Food manufacturing
has been especially strong since the middle of 2007. Further south, Lane County was nearly flat,
adding just 0.2 percent to its employment – much slower than the 2.5 percent growth rate in early
2007. Transportation equipment manufacturing has been losing jobs since mid-2006, a trend that
continued into 2008 with layoffs affecting hundreds of workers at RV manufacturers. With the
addition of several new medical centers making headlines, health care employment in the county
added 600 jobs over the year.




                                                  31
The region’s unemployment rates remained at levels similar to those of one year ago.

       Coastal Oregon Sees Growth Drop Below 1 percent:
       Clatsop, Coos, Curry, Lincoln, and Tillamook counties

The Coastal region started 2008 with year-over-year growth of 0.7 percent, down from 1.7 percent
growth in the first quarter of 2007. Growth rates varied greatly, ranging from over 3 percent in
Clatsop County to -1.4 percent in Curry County. Lincoln, Coos, and Tillamook counties were
essentially unchanged. March and April brought progressively deeper declines in Curry, Lincoln, and
Tillamook counties.

Job gains in local public education and the leisure and hospitality sector added to Clatsop County’s
overall job growth. Tillamook County had a variety of offsetting gains and losses at the industry
level, with educational and health services and leisure and hospitality dropping the most jobs. Leisure
dropped below the 1,000 mark in January and February for the first time since early 2005.

In Lincoln County, many sectors came in below year-ago levels in April. Professional and business
services started declining on a year-over-year basis at the beginning of 2007, and was 150 jobs below
year-ago in both March and April.

Coos County added to its educational and health services sector as well as to its leisure and
hospitality sector. Bandon Dunes is currently constructing its fourth 18-hole golf course. And there
are plans for a mixed-retail development in North Bend near the Mill Casino and Hotel, which is in
the midst of an expansion and remodel. However, the closure of the CORP railroad due to unsafe
conditions in a few tunnels has left area manufacturers scrambling for alternative means of
transporting goods out of the area, mainly via additional trucks on the local highways.

Curry County lost construction jobs over the past year, with many other industries dipping slightly
below their year-ago levels. The slowing California real estate market has affected Curry County to a
greater degree than Coos County. There was more of a boom-bust cycle in home sales and
construction in Curry County, where the number of residential building permits in 2007 sank to the
lowest level since at least 1990.

Unemployment rates in the region are 0.5 percentage point above year-ago. Rates are highest in Coos
and Curry counties: above 8 percent in the first quarter, and moderating to the mid 7-percent range in
April.

       Southern Oregon Growth Similar to One Year Ago:
       Douglas, Jackson, and Josephine counties

The three southern Oregon counties along Interstate 5 gained 0.5 percent between early 2007 and
early 2008. Jackson County started the year slightly less than 1 percent above the year-ago quarter.
Douglas and Josephine counties posted little change over the year, at 0.4 and -0.4 respectively.

Douglas County’s educational and health services and federal government employment remain above
year-ago levels. Murphy Company held a grand reopening in March; the original facility burnt down
in 2005. In other developments, Seven Feathers Hotel and Casino Resort in Canyonville has plans to
expand, and Costco hopes to open a store in Roseburg by the end of the year.



                                                  32
Jackson County’s headline growth rate of 0.9 percent is hiding a wide variety of industry growth
trends. The slowdown in housing meant construction and financial activities started to decline year-
over-year early in 2007, a trend that continued into early 2008. Those losses have been offset by job
gains in leisure and hospitality and professional and business services as well as in health care. The
county’s over-the-year growth of 1.1 percent in the first quarter of 2008 down was lower than the 1.8
percent growth in early 2007.

Josephine County spent 2007 in decline, with employment totals down over 1 percent consistently
throughout the year. Early 2008 brought only a little relief, with the decline moderating to -0.4
percent in the first quarter. Wholesale trade and health care and social assistance are bright spots in
county employment. Local government is recovering from a trough early in 2008, making its over-
the-year comparison look favorable though it is still below employment two years ago. Goods-
producing sectors have been quite weak, with construction and wood product manufacturing
employment declining since late 2006. Natural resources (logging) and mining began trending down
more recently.

Unemployment rates in Southern Oregon’s three counties are higher than in many other areas of
Oregon, and significantly higher than one year ago. Douglas and Josephine counties’ rates averaged
over 9 percent in the first quarter, while Jackson County’s rate was above 7 percent.

       Central Oregon Growth Still Decent, but Slower:
       Crook, Deschutes, Gilliam, Hood River, Jefferson, Klamath, Lake, Sherman, Wasco, and
       Wheeler counties

Central Oregon added 1.1 percent to its total nonfarm payroll employment between the first quarter
of 2007 and the same quarter of 2008. Though that rate was down 2.6 percentage points from the
prior year, it was faster than statewide growth, and the second fastest of all regions’ growth rates.

Hood River County has seen stronger growth the past three quarters than it did the prior year.
Employment stood 2.6 percent higher during the first quarter than in early 2007. Leisure and
hospitality climbed with late winter snowfall and manufacturing was solidly above year-ago levels in
early 2008. Two of the least populous counties – Gilliam and Sherman – posted the state’s strongest
growth between the first quarter of 2007 and the same quarter one year later, at 8.4 and 5.9 percent
respectively. Additional jobs in Sherman and Gilliam counties partly reflect the development of wind
energy projects.

Deschutes County’s 1.8 percent annual gain was spread across many industries, although goods-
producing sectors showed weakness, often related to the housing downturn. Declines occurred in
natural resources, mining, and construction; durable goods manufacturing; and financial activities.
Jefferson County employment is up 2.0 percent over the year, after slipping into decline in mid-2007.
Manufacturing has plummeted in the county, dipping to lower levels than at any other time this
decade, with job losses in wood products and the 2007 closure of a boat manufacturer.

Lake County’s job growth has nearly come to a halt, gaining 0.9 percent between early 2007 and
early 2008. Klamath and Wasco counties saw little change in employment over the past year.

Two counties in Central Oregon – Crook and Wheeler – have been declining year-over-year for
several quarters. In Crook County, job losses have been concentrated in wood product
manufacturing, a sector closely tied to demand for home building.


                                                  33
Unemployment rates across the region are up nearly 2 full percentage points. Increases have been
concentrated in the high-desert counties: Deschutes, Crook, and Jefferson. The Columbia Gorge
counties – Gilliam, Hood River, Sherman, Wasco, and Wheeler – are little changed over the year.

Eastern Oregon Counties Diverge:
Baker, Grant, Harney, Malheur, Morrow, Umatilla, Union, and Wallowa counties

The eight-county Eastern Oregon region had no change in jobs in the first quarter of 2008 from one
year earlier. During the first half of 2007 growth was averaging over 2 percent. The recent stability at
the regional level hides stark differences among counties. County-level growth ranged from -3.9
percent to 3.4 percent over the past year.

Baker, Malheur, and Morrow counties continue to gain jobs and have a recent history of fairly stable
growth. Among these, Morrow County’s growth has slowed from the torrid pace during 2007, but the
county still has the region’s highest growth rate, at 3.4 percent. Baker and Malheur had very similar
over-the-year growth rates in early 2007 and early 2008.

Four counties – Grant, Harney, Union, and Wallowa – lost jobs over the year. Union County pared
the largest number of jobs, and Grant lost the largest percentage, down 3.9 percent between early
2007 and early 2008. Employment is down partly due to curtailments in wood product manufacturing
as well as logging.

Unemployment rates in the first quarter were at least 1 percentage point above year-ago levels in six
of the eight counties: Baker, Grant, Harney, Malheur, Union, and Wallowa.

Information on employment in Oregon’s 15 workforce regions and 36 counties is available at
www.QualityInfo.org.

For more information, contact Jessica Nelson, employment economist, Jessica.R.Nelson@state.or.us,
503-947-1276.




                                                  34
Oregon Index of Leading Indicators (OILI)

 Figure O.2

                                     Oregon Index of Leading Indicators
                            (Six Month Annualized Percent Change, through April '08)
           30%                                                                                    6.0%


           20%                                                                                    4.0%


           10%                                                                                    2.0%


            0%                                                                                    0.0%


           -10%                                                                                   -2.0%


           -20%                                                                                   -4.0%
                         Recession in Oregon

           -30%                                                                                   -6.0%
                  1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
                         Leading Index (L)      Diffusion Index <50       Nonfarm Employment(R)


Short-Term Outlook

Overview

The US economy is very near recessionary conditions. Forecasting firms Global Insight and
Moody’s Economy.com both state the US economy entered a recession either very late 2007 or this
first quarter of 2008. In April, more than half the panelist on the Blue Chip Economic Indicators
survey view the US economy as being in recession or soon will be. Jobs in the US have declined the
last four months starting with January 2008. Both housing and energy issues are weighing in on
financial markets and consumers. With consensus and data essentially agreeing that the US economy
is in recession, the question for going forward is now “how long and how deep”.

The debate runs across the board on the depth and duration of the US economic recession. Those
that believe the subprime mortgage fallout is only the tip of the iceberg see a long and protracted
recession. The forecasting firm used by the Office of Economic Analysis, Global Insight, sees a
relatively mild recession. Their view is described as an upward sloped “W” for the growth of real
GDP. The first half of 2008 is the recession period followed by stronger growth the second half only
to be followed by a smaller downturn in the first half of 2009. The federal stimulus package plus the
cut in interest rates from the Federal Reserve will lift the economy in the second half, of 2008 but is
not enough to sustain growth into the first half of 2009. This translates into a job growth picture that
picks up slightly in the second half of 2008 but really doesn’t recover until the second half of 2009.




                                                       35
The view for Oregon is similar. Post WWII, Oregon has never failed to follow the US business
cycle. The depth and duration of expansions and downturns have been different. The two most
recent US recessions, 1991 and 2001, show this difference. In 1991, job losses in the Oregon
economy were only 1.6 percent, close to the US average. The story was reversed in 2001 when
Oregon lost jobs at a rate of 4.0 percent, higher than the US average. The duration of job loss in
Oregon in 1991 was relatively short at around 8 months, while the 2001 downturn stretched into 31
months.

OEA views the current downturn to be closer to the 1991 rather than the 2001 recession. A number
of points for this view were expressed in the March 2008 Oregon Economic and Revenue Forecast.
The crucial assumptions are: a mild recession for the US economy, a relatively milder downturn in
the Oregon housing market (fewer foreclosures, less price depreciations, relatively smaller supply
overhang), and continued strength in foreign exports. Oregon is not immune from a US recession as
the slowdown in growth and lost jobs in various sectors makes this point evident. But the depth and
duration of this downturn should not be as severe as at the start of this decade.

OEA forecasts a decline of 0.6 percent growth for the second quarter of this year. Job growth
will essentially be flat for the second half of 2008 with moderate growth for 2009. Annual
average job growth is forecasted to be 0.6 percent in 2008 and 0.7 percent in 2009.


Table O.2 compares OEA’s forecast to other published forecasts. OEA’s forecast follows the
pattern of the other forecasts. Generally, a weak economy in 2008 is followed by marginal
improvement in 2009. OEA differs slightly in viewing the downturn as longer and thus not
much of a rebound in 2009.
Table O. 2




The forecasts in Table O.2 also differ as to their relationship between employment growth and
personal income growth. While OEA has employment growth slightly rising in 2009, personal
income growth drops by nine-tenths of a percentage point. Global Insight has job growth
rebounding stronger in 2009 as well as personal income growth. All forecasts have employment
and personal income rebounding stronger in 2009 compared to OEA, with the exception that
Wells Fargo has personal income growth the same in 2008 and 2009. The forecasts presented
were released before the most recent data that was available to OEA and thus these forecasts may
change with their next release.



                                                36
Table O.3




            37
Goods Producing Sectors

[References to specific businesses and organizations are from public news sources and from
compiled news items published in Around the State, Workforce Analysis Section, Oregon
Employment Department.]

The wood products sector continues to be hard hit by the housing downturn. The Random Lengths
Composite Price (Random Lengths Publications, March 2008) for lumber are down to $239 per
thousand feet compared to $244 per thousand feet in February. Prices averaged $422 per
thousand feet in March 2005. The Western Wood Products Association (WWPA) projects
lumber production in 2008 to drop 11.5 percent, the lowest volume since 1982. WWPA forecast
housing starts this year to decline once more, down 60 percent from their 2005 levels. Energy
costs are also mounting, including the higher freight costs from trucking firms facing steep diesel
prices. The one saving grace for this sector is the export market, which is benefiting from the
low value of the dollar. The housing downturn has impacted lumber mills throughout the state
causing temporary and permanent work stoppages. The list is long and this is just a sampling:
Interfor Pacific in Gilchrist, Boise veneer plant in St. Helens, Bright Wood Corporation in
Madras, Boise Cascade in Elgin, Island City, and La Grande, Malheur Lumber Country in John
Day, US Timber in Baker City, The Swanson Group in Glendale, Springfield, Roseburg, Noti,
and Glide, Warm Springs Forest Product Industries, and Weyerhaeuser Company in Junction
City. Related to the wood products classification, Champion Homes in Silverton will close its
manufactured-home factory laying off about 160 workers. On hold until market conditions
improve is the Collins Companies new sawmill in Boardman. The Murphy Company did open
its new veneer plant in Sutherlin with a reduced labor force compared to the original plant that
burnt down in 2005. Capping off this list is the closure of 160-year-old Pope & Talbot and the
loss of 180 workers in and around Halsey. The wood products sector is projected to loose jobs at
a rate of 5.6 percent in 2008 and 1.7 percent in 2009. As the housing market improves into 2010,
wood products jobs should grow 3.8 percent.

The computer and electronic equipment sector is projected to slow with the economy. The
semiconductor equipment book-to-bill ratio moved down to 0.89 in March compared to February
but is up from 0.79 in September 2007. Worldwide sales of semiconductors were up only 1.5
percent in February compared to February 2007 according to the Semiconductor Industry
Association (SIA). ISuppli cut their forecast for chip sales in 2008 to 4.0 percent from 7.5
percent citing continued slowing for the US economy. Although the slowing of sales is not good
news, the situation is much better than the large sales declines associated with the 2001
recession. Inventories are in better shape and export markets are helping out, but the slowdown
in the US economy is negatively impacting this sector. Computer and electronic equipment
sector will see job declines of 3.1 percent in 2008 and 2.1 percent in 2009.

The transportation equipment sector continues to struggle in the face of rising diesel and gasoline
prices and the slowing US economy. The effects of reductions at Freightliner and the end of
production run-up to ahead of raised engine emission standards. Country Coach in Junction City
laid off an estimated 100 workers. Monaco Coach plans to cut 300 jobs in Oregon. Fleetwood
Manufacturing near Island City and Northwood Manufacturing in La Grande have reported
layoffs. Skyline Corporation will close its Nomad McMinnville RV plant in June laying off 84
workers. Still, there were some good news reports. Cessna, taking over the Columbia Aircraft


                                                38
site, is slowly ramping up production. North River Boats is moving production from Tacoma to
Roseburg where it will build a new plant, but has also laid off employees in Green due to
slowing recreational boat sales. Boeing in Gresham is increasing its workforce. This will still be
a tough year for this sector with job losses of 6.7 percent and further losses of 1.4 percent in
2009.

Metals and machinery manufacturing should continue to add jobs but at a slower pace as the
national economy slows. This sector has consistently added jobs helped out by a strong export
market. The outlook is for continued growth through 2008 with job increases of 2.6 percent
followed by slower pace with job growth of 1.8 percent in 2009.

Employment in food processing is forecast to increase 3.5 percent in 2008 and 1.9 in 2009. This
sector is subject to wide employment swings due to seasonal factors. Bay Valley Foods is
closing its Portland pickle plant effecting 88 employees. A forecast for a lower value of the U.S.
dollar and continued growth in Pacific Rim economies should help exports, but consolidations
for this industry are likely to dominate the job numbers.

Although not included in the nonfarm employment sector for natural resources and mining, the
fishing industry sector may see a tough year. Recommendations from the Pacific Fisheries
Management Council will severely limit or close commercial salmon fishing over the Oregon
Coast from Cape Falcon (north of Manzanita) to Point Sur in California. Oregon Resources
Corporation will commence mining chromate in Coos County adding around 70 jobs. The
natural resource and mining employment sector is relatively small compared to state wide totals
with around 8,500 jobs. One company changes can greatly move the growth rates for this sector.
The projected job growth is for a loss of 9.3 percent in 2008 and 0.9 percent in 2009.

Construction employment is projected to decrease annually by 8.0 percent in 2008 and
2.3 percent in 2009. Single-family residential construction has been hard hit by the declining
housing market. Single-family building permits are down 51.0 percent year to date for March
2008. The nonresidential side of construction is still holding up but is expected to decline as this
sector tends to be a lagging indicator to the economy. Knife River Corporation in Bend has laid
off 70 to 75 workers at its heavy construction company. Although construction continues with
public works, this project will not be enough to counter the residential downturn and probable
slowing of the commercial real estate market.

Service Producing Sectors

Trade, transportation, and utilities sector employment will increase by 0.5 percent during 2008
followed by 0.7 percent growth in 2009. Portland International Airport reports passenger traffic
was up 6.3 percent in the first quarter of 2008 compared to the same period a year ago. The
increase has picked up from the 2.5 percent growth rate during 2007, with international travel
holding strong. With consumer spending slowing, retail trade is also expected to slow. Retail
jobs are projected to increase 1.6 percent in 2008 and 1.1 percent in 2009. Heavy-truck dealer
Roberts Motor is closing, impacting 162 jobs. Wickes Furniture continues to close various retail
outlets.




                                                39
The information sector, which includes traditional publishers such as newspapers and publishers
of software, has slower growth moving into 2008 with a projected job gain of 1.4 percent.
Continued slow growth should prevail with job gains of 0.4 percent in 2009.

The continued downturn in the housing market and the accompanied trouble loans, mainly tied to
subprime mortgages, are causing trouble of the financial activities sector. The financial
institutions tied to the housing market will see tough times through 2009. Besides the housing
market impacts, Nationwide Insurance will eliminate 240 jobs mostly at its Portland office.
Rental firms are included in this sector and will get a boost from the Enterprise Rent-A-Car call
center in Eugene with 120 full-time employees. This sector is expected to lose 1.9 percent of its
workers in 2008 and then a mild addition of 0.7 percent in 2009.

Professional and business services are projected to grow 2.1 percent in 2008 and 2009. Call
centers continue to expand and contract in this sector. Hewlett-Packard Company has added
more than 500 employees at its Stream International Inc. call center in Beaverton. Semperian, a
subsidiary of General Motors Acceptance Corporation, plans to close its Eugene call center and
cut 237 jobs. Although growth is expected to be better than most sectors, the slowing economy
has dampened this sector compared to the strong growth years of 2004 and 2005.

Education and health services will grow 3.9 percent in 2008 and 2.6 percent in 2009. Health
services are the underlying growth for this sector.

Leisure and hospitality is projected to grow 3.1 percent in 2008 and 0.6 percent in 2009. The
relatively strong outlook for 2008 is based on strong growth in the later part of 2007 and the first
quarter of 2008. As energy prices increase the cost of travel and people cut back on discretionary
spending due to the slowing economy, the projection is for this sector to slow its growth thought
the second half of 2008 and into 2009.

The government sector will increase by 1.7 percent in 2008 and 0.7 percent in 2009. With tax
revenue projections showing lower growth and the federal government trying to rein in budget
deficits, the outlook is for mild growth. The Air National Guard base in Klamath Falls is
recruiting for about 90 positions. The Transportation and Security Administration will hire up to
100 part-time security officers at Portland International Airport and the Department of
Homeland Security will hire part-time Transportation Security Officers at Roberts Field in
Redmond. Several county and city planning and development offices are laying off workers due
to decreased construction permits and fees. Lane County may lay off 120 employees due to the
loss of federal timber payments. State government employment is expected to increase by 1.0
percent in 2008 and 0.2 percent in 2009. Local government employment is expected to increase
by 1.8 percent in 2008 and 1.0 percent in 2009.

Personal Income Components

OEA forecasts that personal income will grow 5.3 percent in 2008, followed by growth of 4.4 percent
in 2009. The growth rate has slowed along with the economy. The growth rate for personal income
does not pick up again until the fourth quarter of 2009.




                                                40
Wage and salary income will grow 4.7 in 2008, and 4.3 percent in 2009. This income component
follows the employment forecast and starts to improve in the latter part of 2009. Although OEA
forecasts inflation to be somewhat lower this year than in 2007, some pressure on wages may show
up in the latter part of 2009.

Appendix A provides the forecast of various personal income components. Nonfarm proprietors'
income, which includes income of small businesses, will grow 4.4 percent in 2008, followed by
4.4 percent in 2009. The Federal Stimulus tax rebate checks may support this income component
this year. Other personal income components follow the national forecast with slower growth in
2008 and improvements in 2009.
Per capita income in Oregon will stay slightly below the U.S. average throughout the forecast
horizon. Oregon’s economy is expected to grow faster than the U.S. economy, with Oregon’s total
personal income growing faster than the nation’s. Most job gains will come from the
nonmanufacturing sector of the private economy. But Oregon’s population growth will also be
higher than the nation’s. As a result, per capita income in Oregon will not appreciatively gain or lose
ground compared to the U.S. average.

Forecast Changes Relative to the March 2008 Forecast

OEA’s June 2008 Oregon economic forecast now incorporates the recession baseline forecast from
Global Insight. Table O.4 provides a summary of these forecast changes.

The Bureau of Economic Analysis (BAE) lowered the state personal income for 2007. Further,
Global Insight lowered their measures for Gross Domestic Product and national personal income to
reflect their recession scenario. This is reflected in the lower personal income forecast in 2008 thru
2011.

Oregon real personal income is lower due to changes in personal income and higher inflation
forecast.

OEA revised nonfarm employment down a slight 0.1 percent in 2008, down 1.0 percent in 2009 and
1.1 percent in 2010. This reflects the lowering of the national forecast and revised lower fourth
quarter job numbers for Oregon.

OEA has significantly lowered housing start projections in 2008 through 2010. The main reason is a
substantial downward revision at the national level for the same years. The extent of the downturn is
deeper than previously forecast and the correction period is lasting longer. OEA still expects housing
starts to improve slightly in 2009 on an annual average basis.

OEA has revised manufacturing down in 2008 and through the end of the forecast horizon. The revision
is mainly due lower projections at the national level and revised job numbers for Oregon. Durable goods
manufacturing reflects the lower national outlook for industrial production. This revision does not change
the trend for manufacturing, with relatively weak growth through the outer years.

Private nonmanufacturing is little changed for 2008 but lowered for 2009 and 2010. Most notable of the
revisions are wholesale trades and information. OEA revised these sectors down mainly due to lower
national projections.

There is virtually no change to the outlook for the government sector.


                                                   41
Table O.4




            42
43
 Graph O.2




Alternative Scenarios

The baseline forecast is our projection of the most likely outcome for the Oregon economy. As with
any forecast, however, other scenarios are possible. The economy could either under- or over-
perform relative to our baseline forecast. We broadly call these forecasts the Optimistic and
Pessimistic scenarios. While we attach the highest probability to the baseline forecast, these other
outcomes are within the realm of possibility. Table O.5 shows the annual summary of alternative
scenarios. Figure O.3 shows the quarterly details of alternative scenarios for total nonfarm
employment, personal income, manufacturing employment, and private nonmanufacturing
employment.

The outlook for the U.S. economy has a direct influence on the outlook for the Oregon economy.
Global Insight provides alternative forecasts to their baseline forecast that we label “Optimistic” and
“Pessimistic.” Essentially, the optimistic forecast has stronger growth in the next few years while the
pessimistic forecast has weaker growth for the same period. The Governor’s Council of Economic
Advisors (GCEA) met with OEA to discuss the outlook for the U.S. economy. Members were asked
to compare their outlook with that of forecaster Global Insight, whose forecast forms the basis for
OEA’s Oregon economic model.

GCEA believes the Baseline Scenario has a greater chance of occurrence, with more downside risks
than upside. This heightened view of risks in the next few years is reflected in OEA’s forecast for
the Oregon economy.

Optimistic Scenario: The spread of the credit crunch is limited and the financial market stabilizes
quickly. The housing sector bottoms out sooner than expected. High productivity helps economic
growth, leads to employment gains, lowers budget deficits, brings down inflation, and promotes a
stronger dollar. Business investment spending is strong. Foreign growth boosts stronger exports,
helping the manufacturing sector. Residential construction rebounds due to better job growth, lower
interest rates, lower mortgage rates, and higher consumer confidence. Energy prices are substantially
lower.

In this scenario, Oregon continues to grow above trend. Employment will grow 1.2 percent in 2008,
stronger than the baseline forecast of 0.6 percent. Job growth gets even stronger in 2009 and 2010.



                                                  44
Personal income also grows strongly at 6.2 percent in 2008 compared to the baseline forecast of
5.3 percent. Its growth will moderate to around 5.5 percent in 2009 and 2010.
 Table O.5




Pessimistic Scenario: The subprime mortgage problem spreads to other segments of the financial
market. There are widespread credit problems, and the financial market is in turmoil. Financial
market instability spreads over to the real sector of the economy. Productivity is weaker, and oil and
gasoline prices are much higher. There is a deeper housing downturn and decline in house prices.
Business capital spending stays flat or declines. The U.S. dollar weakens as foreign investors lose
confidence in the dollar. Higher inflation causes the Fed to hike interest rates. Consumer confidence
suffers, and consumers rein in their spending. The global economy slows down substantially. A
sluggish China does not work as the engine of growth for Asian countries.

Under this economic environment, Oregon’s economy worsens with job losses for the rest of 2008.
2009 continues will slight job losses during the first half of the year. Manufacturing sheds jobs
through 2009 and no rebound in jobs in 2010. Personal income growth suffers, and weak consumer
spending does not support jobs in the retail and service sectors. Employment growth stays well
below the baseline scenario through 2009.
  Figure O.3




                                                 45
Forecast Risks

The forecast projects a slowing Oregon economy in 2008 which continues into the first half of 2009
with mild growth in the second half. This outlook faces heightened risks for a much deeper
downturn in 2008 and 2009.

With the national economy going through a slowdown in the first quarter of 2008, the risks are
higher from any disturbances that could throw the economy off track. The same major drag for the
slowdown, a slowing housing market, could hurt the economy further when it is most susceptible.
The credit crunch and the ensuing instability in the global financial market bring added uncertainty.
Businesses are nervous about potential repercussions from the turmoil in the financial markets across
the world. Any geopolitical disruptions during this time would be more harmful than when the
economy is stronger.

Despite good headline inflation numbers, inflation pressures still exist. The Fed continues to warn
about a potential flare-up in inflation pressure. The expectation is that the softening economy will
ease inflation pressures. However, sharply higher oil and gasoline prices coupled with a sharp rise in
food prices will add inflationary pressure. A weaker dollar may contribute to price pressure through
a run-up in import prices.

The housing market in Oregon and the U.S. continue to work off excesses accumulated in the past
housing boom. Building permits and housing starts are sharply down. In fact, both have declined
more than expected. With declining sales, home prices are coming down at the national level. While
house price appreciation has continued in Oregon, some parts of the country have seen house prices
drop substantially. House prices will continue to soften in most regions. Negative wealth effect
from lower house values and less mortgage equity withdrawal will dampen consumer spending.
There is a risk that the housing market may deteriorate worse than expected.

The subprime mortgage problem has led to bankruptcies and huge write-offs in the financial industry.
While the credit squeeze continues for some borrowers, short-term financing through the commercial
paper market has begun to stabilize. Stricter lending standards also limit credit access, but qualified
borrowers continue to enjoy stable financing.

Record oil prices remain a substantial risk. So far, the world economy has withstood the attack of
high oil prices remarkably well. Still, there is no question that high oil prices are a significant threat
to the already soft U.S. economy.

A variety of factors could disrupt oil supplies, and higher energy prices cannot be ruled out. Crude
oil prices continue to hover around record levels. The global supply is still tight, and demand is still
strong, particularly from China and the rest of Asia. Geopolitical tensions continue to exist, and
there is always room for speculative attacks. There is an indication that current oil prices are being
partly supported by speculators.

The federal stimulus checks should mildly boost growth in the second half of 2008. But risks remain
that once the stimulus checks are over, the economy will sink back into very low growth or recession
in 2009.

We will continue to monitor and recognize the potential impacts of these risk factors on the Oregon
economy. We have identified the major risks now facing the Oregon economy in the list below:


                                                   46
•   Contagion of the credit crunch and financial market instability. The current instability in the
    financial market is weighing on business confidence, which may lead businesses to change their
    capital spending plans. The central banks are ready to inject more money to alleviate short-term
    credit problems, and their measures have been successful so far. At the same time, the Fed has
    lowered interest rates to stimulate the economy.

•   A further worsening in the housing market. Low interest rates and easy lending standards have
    aided a boom in home purchases and mortgage refinancing. With the subprime mortgage
    problem spreading and tighter lending standards in place, the mortgage market is not as
    conducive to residential real estate activity as in the past. Any drop in house price appreciation
    coupled with a large drop in mortgage equity withdrawal will slow down consumer spending.
    The Oregon housing market could be adversely impacted by a major housing correction in
    California and the rest of the nation. Continued gains in employment and personal income will
    be needed to keep consumer spending from falling. The federal fiscal stimulus package should
    help alleviate the slower consumer spending.

•   Loss of federal timber payments to Oregon counties. A one year extension of federal timber
    payments will expire at the end of fiscal year 2007. Thirty-one counties would be affected by the
    loss of $282 million in funding, especially impacting Douglas and Lane counties. Loss of public
    services could have adverse impacts on economic activity.

•   A major deceleration in the U.S economy and a global downturn triggered by the U.S. slowdown.
    The U.S. economy has been an important engine of growth for the global economy. Thanks to a
    strong global economy, the chances are lower that the U.S. slowdown will set off a global
    downturn. The rest of the world is growing nicely even with a soft U.S. economy, but if the U.S.
    economy falters even more, the whole world will surely feel the impact. Asia in particular will
    be severely affected due to its large exposure to the U.S. economy.

•   A sharp fall of the U.S. dollar. Depreciation of the dollar against foreign currencies promotes
    U.S. exports as U.S. products become more price-competitive (or less expensive). Oregon’s
    manufacturing sector has a large dependency on international markets. If the U.S. dollar falls too
    quickly, this could harm Oregon’s trading partners because the lower dollar makes imports more
    expensive to U.S. consumers. As U.S. trading partners export less to the U.S., their economies
    may weaken and lower their demand for Oregon products. In the end, a controlled lowering of
    the U.S. dollar is most beneficial to the Oregon economy.

•   A sharp and major stock market correction. This would slow consumer spending. Lower stock
    prices could also limit the ability of businesses to raise necessary capital in the equity markets.

•   A hard landing in China. The Chinese economy is growing very fast. Building construction and
    other business investments are largely responsible for this economic growth. Inflationary
    pressure is strong. The central government’s efforts to curb growth have produced minimal
    success. Limited experience in macro policymaking may result in an undesirable set of policy
    measures. A major slowdown in China will hurt most Asian economies, along with commodity-
    exporting countries, including Canada. Given that Canada and Asian countries are the major
    destinations of Oregon’s manufacturing exports, the manufacturing sector would be negatively
    impacted.


                                                  47
•   Geopolitical risks. Uncertainty still abounds in Iraq. Tensions with Iran and heightened security
    risks weigh on businesses and consumers. Disruptions in travel, oil supplies, and consumer
    confidence could be severe. The drop in business activity could deepen if this uncertainty
    persists or if the transition out of the Iraq war goes badly for the U.S. The winding down of
    military expenses will not greatly impact Oregon. There is also an upside risk that the transition
    will go more smoothly than anticipated, and stability in the Mideast will provide a stronger than
    forecasted stimulus to the economy.

•   Inflation and Federal Reserve Bank reactions. A growing economy with surging energy costs is
    a formula for inflation. Even with a slowing economy, higher inflation than forecasted may force
    the Federal Reserve to raise interest rates more quickly and to higher levels. This action could
    further slow the U.S. economy and in turn slow down the Oregon economy as higher interest
    rates hurt consumers and businesses.

•   Rising regional energy prices. More businesses may slow production and lay off workers. A
    geopolitical incident could dramatically disrupt gasoline and natural gas prices. Regionally,
    electricity generation is subject to weather patterns and natural gas prices. As demand surpasses
    the available capacity of hydro generation, electric generation may move towards natural gas-
    powered turbine engines. Higher electricity prices could result because they are pegged to
    natural gas prices.

•   Initiatives, referendums, and referrals. Generally, the ballot box brings a number of unknowns
    that could have sweeping impacts on the Oregon economy.

Extended Outlook

The Oregon economy grew slower than the U.S. economy from 1998 through 2003. This has not
occurred since 1985. It outpaced the nation in growth in 2004 through 2006. Between 2007 and
2013, employment growth in Oregon will be slower than in the mid-1990s. However, the U.S.
economy is expected to have even slower growth than that expected in Oregon.

The slower economic growth of 1998 through 2003 also slowed the growth of Oregon’s per capita
income and average wages. The devastating 1980-82 recession slowed the growth of incomes and
wages until 1986. In the 1990s, as the Oregon economy became more industrially diversified, per
capita income and wages grew faster than the nation’s as a whole. Going forward, the Oregon
economy is projected to grow faster than the nation’s. However, it will take some time for per capita
income and average wages to catch up with the national averages.

The key factors that will fuel the state’s long-term growth are listed below:

•   Steady in-migration and population growth: High population growth is an opportunity for
    economic growth as the state creates jobs to serve a growing population. At the same time, it
    presents a challenge for the state as the demand for services increases.

•   Pacific Rim orientation: The economies in the Pacific Rim, including Canada and Asian
    countries, are growing very rapidly.




                                                  48
•   Export growth and high commodity prices: Global economic expansion will increase demand for
    Oregon commodities, both finished and capital goods. Oregon is well positioned for trade with
    Asian countries. High commodity prices will benefit agricultural and timber producers in the
    state.

•   Continued strength in domestic markets: Continued economic growth in California and other
    major domestic markets will fuel demand for Oregon products.

•   Business costs advantages: The Oregon economy will benefit from a comprehensive energy
    plan. Efforts which have long been in place for electricity planning should extend to all energy
    sources. If the plan can assure businesses of an abundant, reliable, and relatively inexpensive
    supply of electricity and other sources of energy, the state (and the Pacific Northwest) will
    continue to have a relative energy cost advantage over other regions. Oregon has other business
    cost advantages, such as lower workers’ compensation rates and multi-modal transportation
    options compared to other states. Equally important is an educated work force that contributes to
    productivity.

•   Environmental issues: Salmon protection measures, the Portland Super Fund, and other issues
    could change the economic landscape.

•   Affordable housing: For most of the late 1990s and the early part of this decade, California,
    Washington, and the nation as a whole have experienced more rapidly rising housing costs than
    Oregon. Oregon’s house price appreciation is finally picking up. If housing costs rise faster in
    Oregon than in the rest of the nation, companies will face increased difficulties recruiting
    workers. If Oregon can maintain a relative cost advantage in housing, this factor will be
    attractive for firm location.

•   Biotechnology and Clean Technology: These sectors are seen by many as the next growth
    industries. Portland and the State have launched funding plans to promote the biotechnology
    sector. The platform for the Oregon Business Plan includes nanotechnology as an emerging field
    for Oregon. It is too early to tell if these are indeed the next growth industries and what returns
    they may bring.

•   Sustainable development: Centered in the Portland area, this movement in sustainable building
    practices is spreading throughout the U.S. Uncertainty surrounds the number of new jobs
    associated with this movement, but it may allow gains in market shares for construction and
    consulting firms in Oregon.

•   Quality of life: Oregon will continue to attract financially secure retirees. Companies that place a
    high premium on quality of life will also want to locate in Oregon.

Oregon Regional Profile

The accompanying tables provide data on regional and county population levels within the state.
This section will be a regular feature following the Oregon Economic Review and Forecast. The
tables (Table O.6 through O.9) highlight the social, economic, and demographic diversity in the state.
Please review these tables in each quarterly issue as they will include updated data every quarter.



                                                  49
Table O. 6
                        Oregon's Economic Profile b y County and Region

                                      2007*                2007*                        2005                  20 07
                            Total Employment     Unemployment Rate        Per capita personal   Average wage per job
Ge ogr aph y                                                                          income
O rego n                        1,828,924                       5.3%             $32 ,2 89              $38,070
P ortla nd 5-C ou nty             887,667                  4.8%                  $37 ,0 32              $43,313
 Clacka mas                         190,918                   4.6%                 $ 39,729               $39,1 76
 Columbia                            22,847                   5.8%                 $ 29,111               $32,2 63
 M ultno mah                        359,603                   5.0%                 $ 37,798               $43,0 40
 W ashington                        270,356                   4.4%                 $ 34,626               $48,1 29
 Y amhill                            43,943                   5.2%                 $ 28,713               $32,7 96
W illamette V alley               442,951                  5.5%                  $29 ,9 77              $33,745
 Benton                              41,610                   4.2%                 $ 36,685               $40,5 53
 Lane                               170,614                   5.4%                 $ 29,841               $33,2 40
 Linn                                50,161                   6.5%                 $ 26,870               $33,4 86
 M ari on                           145,295                   5.6%                 $ 28,826               $33,3 54
 P olk                               35,271                   5.2%                 $ 28,030               $28,3 09
C oast                             87,756                  5.9%                  $28 ,4 60              $28,346
 Clatso p                            18,829                   4.9%                 $ 28,854               $29,3 94
 Coos                                27,014                   6.8%                 $ 26,953               $28,1 01
 Curry                                8,863                   6.9%                 $ 27,010               $26,9 25
 Lincoln                             21,034                   5.8%                 $ 29,445               $27,8 83
 Tilla mook                          12,016                   5.2%                 $ 28,449               $29,1 32
So uth ern                        174,689                  6.6%                  $28 ,6 51              $31,064
 D ouglas                            44,699                   7.8%                 $ 27,237               $31,4 06
 Jacks on                            97,031                   5.8%                 $ 30,239               $31,6 93
 Jose phine                          32,959                   7.2%                 $ 25,198               $28,4 69
C entral                          156,152                  5.6%                  $29 ,3 85              $31,476
 Crook                                 9,161                  6.5%                 $ 23,802               $32,7 10
 D eschutes                          78,616                   5.0%                 $ 32,094               $33,3 24
 G illia m                               965                  5.0%                 $ 26,911               $31,2 21
 H oo d River                        12,355                   4.7%                 $ 27,173               $25,3 49
 Jefferson                             8,680                  7.0%                 $ 23,514               $29,7 36
 K lam ath                           28,950                   7.1%                 $ 25,997               $31,1 14
 Lake                                  3,419                  7.5%                 $ 26,508               $28,9 69
 S herm an                               854                  5.4%                 $ 23,120               $31,3 68
 W asco                              12,556                   5.3%                 $ 26,537               $28,3 95
 W hee ler                               596                  5.9%                 $ 25,923               $22,6 13
Easter n                           79,711                  6.2%                  $24 ,9 49              $29,238
 Bake r                                6,800                  6.2%                 $ 24,199               $27,0 87
 G rant                                3,249                  8.3%                 $ 27,975               $28,6 97
 H arney                               3,095                  7.7%                 $ 26,620               $28,4 90
 M alhe ur                           12,135                   6.0%                 $ 21,609               $27,2 03
 M orrow                               5,190                  5.6%                 $ 25,108               $32,5 84
 U matilla                           34,332                   6.1%                 $ 25,322               $30,5 34
 U nion                              11,493                   5.8%                 $ 27,522               $29,1 64
 W all ow a                            3,417                  6.6%                 $ 28,300               $25,1 96

* 2007 em ployme nt an d une mp lo ym en t rate d ata a re pre lim ina ry an d subj ect t o cha n ge.
S ourc es: T otal em plo yme nt and une mp lo ym en t rate: Oreg on Em plo yme nt De pa rtm ent;
p er c apita p erso na l inc ome : U .S . Burea u of Eco no mic An a lysis;
a vera g e wag e pe r jo b: O rego n Emp loymen t D e partme nt.




                                                           50
Table O. 7
        Oregon's Gross Farm & Ranch Sales By County and Region for 2006 and 2007

                                   Year 2007                                   Year 2006                      Change
                                                                                                          in total sales
                                    All Animal                                  All Animal                  from 06 to
STATE/C OU NTY         All Crops     Products     Total S ales     All Crops     Pr oducts    Total Sales            07
OREGON              3,520,923      1,371,359     4,892,282       3,269,266     1,162,776     4,432,040          10.4%
Portland PMSA       1,046,208       125,618   1,171,828           993,464       107,706   1,101,171              6.4%
  Clackamas             353,421        56,492     409,914           340,817        51,521     392,338            4.5%
  Columbia               28,323         4,002      32,325            29,801         3,898      33,700           -4.1%
  Multnomah              79,321         2,855      82,176            76,575         2,654      79,229            3.7%
  Washington            330,470        20,837     351,307           302,779        16,155     318,934           10.2%
  Yamhill               254,673        41,432     296,106           243,492        33,478     276,970            6.9%
Willamette Valley   1,039,285       281,067   1,320,352   1,021,712             238,580   1,260,291              4.8%
  Benton                 97,801        13,789     111,590      96,069              13,188     109,257            2.1%
  Lane                  107,020        31,984     139,004     101,402              32,325     133,727            3.9%
  Linn                  237,549        57,466     295,015     230,578              51,465     282,043            4.6%
  Marion                479,784       134,944     614,728     478,592             108,020     586,611            4.8%
  Polk                  117,131        42,884     160,015     115,071              33,582     148,653            7.6%
Coast                  88,289       148,723       237,012          76,648       134,995       211,643           12.0%
  Clatsop                  5,567       11,184        16,752           6,234        10,034        16,267           3.0%
  Coos                   38,366        16,890        55,256          30,189        16,304        46,493         18.8%
  Curry                  28,889         3,500        32,388          23,606         3,479        27,086         19.6%
  Lincoln                10,474         1,833        12,307          10,823         1,823        12,646          -2.7%
  Tillamook               4,993       115,316       120,309           5,796       103,355       109,151         10.2%
Southern              137,533        55,826       193,359         125,157        65,264       190,422            1.5%
  Douglas                59,622        21,979        81,601          51,145        25,862        77,007           6.0%
  Jackson                59,444        22,574        82,018          55,641        26,415        82,056           0.0%
  Josephine              18,467        11,273        29,740          18,371        12,987        31,359          -5.2%
Central               484,170       242,104       726,274         407,552       201,004       608,555           19.3%
  Crook                  18,602        21,702        40,305          16,394        24,882        41,276          -2.4%
  Deschutes              15,092        10,441        25,533          14,360        13,168        27,528          -7.2%
  Gilliam                27,558        10,022        37,580          15,594        10,027        25,621         46.7%
  Hood River             67,679         1,200        68,879          69,830         1,200        71,030          -3.0%
  Jefferson              44,586         9,855        54,441          38,756        13,934        52,690           3.3%
  Klamath               157,497       140,824       298,321         115,099        89,982       205,081         45.5%
  Lake                   36,327        28,864        65,191          29,838        28,854        58,692         11.1%
  Sherman                43,416         2,974        46,390          28,379         1,809        30,187         53.7%
  Wasco                  69,622         6,998        76,619          77,566         7,174        84,741          -9.6%
  Wheeler                  3,791        9,224        13,015           1,736         9,974        11,709         11.2%
Eastern               725,438       518,021   1,243,457           644,733       415,227   1,059,958             17.3%
  Baker                  17,869        49,279      67,148            20,482        44,194      64,675            3.8%
  Grant                    6,913       40,397      47,310             7,074        35,878      42,952           10.1%
  Harney                 19,408        50,884      70,291            17,445        50,248      67,692            3.8%
  Malheur               129,634       131,639     261,273           158,785        90,652     249,437            4.7%
  Morrow                177,419       144,974     322,393           144,820       105,051     249,871           29.0%
  Umatilla              292,039        66,389     358,428           232,014        54,160     286,174           25.2%
  Union                  56,534        16,563      73,096            41,905        16,490      58,395           25.2%
  Wallowa                25,622        17,896      43,518            22,208        18,554      40,762            6.8%

Source: O regon State University’s Oregon Agricultural Information Network (OAIN),
         Extension Economic Information Offic e.




                                                        51
Table O. 8
        O regon's Publ ic Elementary and Secondary School Enrollment Statistics

                              Oct. 1, 2007         Oct. 1 , 2000          20 00-2 007               2006 -2007

                                                                                        % of st udents e ligib le
ST ATE/COUNTY                   enr ollment          enrollment           % chan ge             for free lunc h
OREGON                           565,565             545,680                3.6%                     33.5%
P ortland P MSA                  259,555             245,255                5.8%                     29.8%
   Clackamas                        59,085              54,691                  8.0%                    2 0.3%
   Columbia                           8,586               8,600                -0.2%                    2 6.0%
   Multno mah                       91,835              93,296                 -1.6%                    3 9.4%
   Washington                       83,465              73,195                14.0%                     2 5.5%
   Yamhill                          16,584              15,473                  7.2%                    3 4.1%
W illamette Valley               142,878             134,717                6.1%                     36.5%
   Benton                             9,064               9,996                -9.3%                    2 4.0%
   Lane                             47,464              48,144                 -1.4%                    3 2.8%
   Linn                             20,441              17,798                14.8%                     3 4.1%
   Marion                           59,144              52,271                13.1%                     4 2.0%
   Polk                               6,765              6,508                  3.9%                    3 8.8%
Coast                             24,717               28,293             -12.6%                     36.4%
  Clatsop                             5,127               5,555                -7.7%                    3 1.0%
  Coos                                8,218               9,404              -12.6%                     3 7.3%
  Curry                               2,673               3,072              -13.0%                     3 3.7%
  Lincoln                             5,367               6,496              -17.4%                     3 9.6%
  Tilla mook                          3,332               3,766              -11.5%                     3 9.6%
So uthe rn                        55,878               57,338              -2.5%                     35.2%
   Dougla s                         15,565               16,646                -6.5%                    3 6.6%
   Jackson                          28,891               29,188                -1.0%                    3 2.4%
   Josephine                        11,422               11,504                -0.7%                    4 0.5%
Central                           51,376               47,645               7.8%                     34.6%
  Crook                               3,247               3,198                 1.5%                    3 4.4%
  Deschutes                         24,395               19,867                22.8%                    2 4.3%
  Gilliam                               250                  353              -29.2%                    2 9.9%
  Hood R iver                         3,968                3,777                5.1%                    4 0.7%
  Jefferson                           3,787               3,722                 1.7%                    5 9.2%
  Klamath                           10,602               11,048                -4.0%                    4 3.4%
  Lake                                1,124                1,383              -18.7%                    3 9.2%
  Sherman                               271                  364              -25.5%                    3 7.1%
  Wasc o                              3,521               3,678                -4.3%                    4 2.5%
  Whee ler                              211                  255              -17.3%                    5 4.6%
Eastern                           30,792               31,716              -2.9%                     42.6%
  Baker                               2,294               2,826              -18.8%                     4 1.2%
  Grant                               1,059               1,352              -21.7%                     3 2.9%
  Harne y                             1,299               1,426                -8.9%                    3 4.6%
  Malheur                             5,372               5,609                -4.2%                    5 1.6%
  Morrow                              2,383               2,250                 5.9%                    5 1.1%
  Umatilla                          13,601               12,878                 5.6%                    4 3.8%
  Union                               3,901               4,177                -6.6%                    3 0.4%
  Wallowa                               883               1,198              -26.3%                     2 5.2%

So urce: Oregon Departmen t o f Educa tion, O ffice of Analysis a nd Reporting




                                                       52
Table O. 9
2006 Annual Average Covered Employment by NAICS Division and by Region


                                                                                           Re gion
                                                      Portland 5-   Willamette
Employment                                 Oregon         County        Valle y         Co ast       Southern   Central   Eastern

Natural Re sourc es & Mining               50,015         13,844        16,768          2,757          4,974      6,024    5,563
Construction                               99,899         50,184        20,696          4,065          9,583     10,783    2,395
M anufacturing                            206,741        112,231        48,914          6,902         16,284     13,809    8,525
T rade, Transportation, & Utilities       332,922        176,802        66,652         13,461         32,203     24,730   13,354
Information                                34,853         20,869         6,519            841          2,409      2,313      739
Financial Activities                       89,233         55,870        15,831          2,484          6,247      5,544    1,996
Professional & Business Services          194,300        119,636        35,688          5,464         12,396     11,150    3,762
E ducation & Health Service s             198,682        102,005        46,644          6,907         20,178     15,204    6,608
Le isure & Hospitality                    164,693         80,469        32,891         12,797         15,696     16,571    5,584
Other Services                             61,994         32,812        13,761          2,563          5,393      4,230    1,862
Governme nt                               266,569        110,245        77,926         15,894         23,188     21,360   17,934

T otal                                   1,700,609       875,270       382,400         74,159        148,581    131,778   68,339


                                                                                           Re gion
                                                      Portland 5-   Willamette
Distribution                               Oregon         County        Valle y         Co ast       Southern   Central   Eastern

Natural Re sourc es & Mining                 2.9%           1.6%          4.4%          3.7%            3.3%      4.6%      8.1%
Construction                                 5.9%           5.7%          5.4%          5.5%            6.4%      8.2%      3.5%
M anufacturing                              12.2%          12.8%         12.8%          9.3%          1 1.0%     10.5%     12.5%
T rade, Transportation, & Utilities         19.6%          20.2%         17.4%         18.2%          2 1.7%     18.8%     19.5%
Information                                  2.0%           2.4%          1.7%          1.1%            1.6%      1.8%      1.1%
Financial Activities                         5.2%           6.4%          4.1%          3.3%            4.2%      4.2%      2.9%
Professional & Business Services            11.4%          13.7%          9.3%          7.4%            8.3%      8.5%      5.5%
E ducation & Health Service s               11.7%          11.7%         12.2%          9.3%          1 3.6%     11.5%      9.7%
Le isure & Hospitality                       9.7%           9.2%          8.6%         17.3%          1 0.6%     12.6%      8.2%
Other Services                               3.6%           3.7%          3.6%          3.5%            3.6%      3.2%      2.7%
Governme nt                                 15.7%          12.6%         20.4%         21.4%          1 5.6%     16.2%     26.2%

T otal                                     100.0%        100.0%         100.0%        100.0%         10 0.0%    100.0%    100.0%

So urce: O regon Employment Department
Note: Employment includes only covered employment.
      Oregon total includes multi-county employment not shown in individ ual regions.
      Total includes a small number of non-classifiable job s not shown in individual industries.

Definition of regions:
Portla nd 5-County: Clacka mas, Columbia, Multnomah, Wa shington, and Yamhill counties.
Willamette Valle y: Benton, Lane, Linn, Marion, an d Polk counties.
Coast: Clatsop, Coos, Curry, Lincoln, a nd Tilla mook counties.
So uther n: Dougla s, Jackson, and Josephine counties.
Central: Crook, Desc hutes, Gilliam, Hood River, Jefferson, Klamath, Lake, Sherman, Wasco, and Whee ler counties.
E astern: Baker, Gra nt, Harney, Malheur, Morrow, Unio n, Umatilla, and Wallowa counties.




                                                                      53
54
II.         REVENUE FORECAST

A.     2007-09 General Fund Revenues
The forecast for General Fund revenues for the 2007-09 biennium is $13,016.7 million, an
increase of $91.2 million from the March 2008 forecast. The increase is the product of unique
circumstances in personal income taxes, rather than an indication of stronger-than-expected
economic conditions. In the absence of these countervailing receipts, the forecast would be
down slightly. Including the beginning balance of $1,436.7 million, total available resources
amount to $14,091.9 million, a decline of $46.9 million from the Close of Session forecast.

The projected ending balance for 2007-09 equals $143.0 million, $114.2 million above the
March 2008 forecast. Falling interest rates have reduced projected borrowing costs related to
cash flow management by $15.2 million. In addition, the legislature reduced General Fund
appropriations for 2007-09 by $7.7 million during the February 2008 Special Session. Table B.1
in Appendix B presents detailed revenue information for the 2007-09 biennium.

The latest revenue forecast for the current biennium represents the most probable outcome given
available information. OEA feels that it is important that anyone using this forecast for decision-
making purposes recognize the potential for actual revenues to depart significantly from this
projection. Actual revenues are likely to fall within 2.7 percent of the forecast produced at this
point in the biennium, and are highly unlikely to deviate more than 5.4 percent. Table R.1
presents the June forecast for the 2007-09 biennium, including guidelines for budgetary
purposes. Section D discusses explicit risks that might cause actual revenues to differ
substantially from the forecast.
 Table R.1

  2007-09 General Fund Forecast Summary
                                                      2007 COS              March 2008        June 2008   Change from Change from
  (Millions)                                           Forecast               Forecast         Forecast   Prior Forecast COS Forecast

  Beginning Balance                                     $1,513.0                $1,436.7       $1,436.7            $0.0         -$76.3

  Structural Revenues
     Personal Income Tax                              $12,347.9               $12,277.8       $12,388.8          $110.9            $40.9

      Corporate Income Tax                                $920.9                     $858.3      $808.3           -$49.9       -$112.6

      All Other Revenues                                  $888.5                     $873.5      $903.8           $30.2            $15.2

  Gross GF Revenues                                   $14,157.3               $14,009.6       $14,100.9           $91.2         -$56.5

      Total Kicker Refunds/Credits                     -$1,164.7               -$1,084.2      -$1,084.2            $0.0            $80.5
  Net GF Revenues                                     $12,992.6               $12,925.4       $13,016.7           $91.2            $24.0

  Administrative Actions1                                 -$57.3                     -$57.3      -$42.1           $15.2            $15.2
                        2
  Legislative Actions                                    -$309.4                 -$319.3        -$319.3            $0.0            -$9.9
  Net Available Resources                             $14,138.9               $13,985.5       $14,091.9          $106.4         -$46.9

  Confidence Intervals
  67% Confidence                                +/- 2.7%                                        $351.4        $12.67B to $13.37B
  95% Confidence                                +/- 5.4%                                        $702.9        $12.31B to $13.72B

  1 Reflects cost of cashflow management actions, exclusive of internal borrowing.
  2. Equals portion of 2005-07 corporate surplus designated for Rainy Day Fund.


                                                                                        55
Personal Income Tax

Personal income tax collections totaled $1,192.9 million for the third quarter of fiscal year 2008,
$44.2 million below the latest forecast. Withholding receipts of $1,196.5 million fell short of
forecast by $34.5 million. The March forecast assumed that wage-earning taxpayers would
eventually increase their withholding in response to the change in the withholding tables in 2007.
Subsequent research indicates that this adjustment has not yet taken place. As such, the shortfall
represents a timing issue for collections rather than weaker-than-expected wage and salary
income growth.

Estimated payments equal to $281.4 million were $6.5 million above forecast. Compared to the
year-ago level, estimated payments were up 5.3 percent. Final payments exceeded forecast by
$3.5 million while refunds were $19.7 million more than expected. Refunds were 12.3 percent
below the prior year level, in part a product of the change in the withholding tables for 2007.
Table B.8 in Appendix B presents a comparison of actual and projected personal income tax
revenues for the third quarter of fiscal year 2008.

The forecast for total personal income tax receipts during the current biennium is $12,388.8
million, an increase of $110.9 million from the prior forecast. The revision reflects two factors
not related to the general economic situation. The first is a unique realization of capital gains
income at the upper end of the income distribution. The second is an increase in Oregon tax
liability for 2008 resulting from the reduction in federal tax subtractions for some taxpayers
receiving federal rebates as part of the Economic Stimulus Act of 2008. This forecast assumes
an economic recovery in the latter half of 2009, which is somewhat later than in recent forecasts.
The result is a decline in structural receipts that is masked by the aforementioned positive
factors.

Corporate Income Tax

Corporate income taxes equaled $63.0 million for the third quarter of fiscal year 2008, a shortfall
of $10.1 million relative to the December forecast. The third fiscal quarter is a low volume
quarter in terms of collections, and is thus subject to significant fluctuations in percentage terms.
Quarterly advanced payments were $64.3 million for the quarter, $3.6 million below forecast.
Payments accompanying a filed tax return totaled $35.1 million, exceeding the latest forecast by
$3.9 million. Refunds account for the overall deviation in corporate tax collections, exceed
projections by $10.1 million. On a year-over-year basis, corporate receipts were up 35.4 percent.
Table B.8 in Appendix B presents a comparison of actual and projected corporate income tax
revenues for the third quarter of fiscal year 2008.

The forecast for corporate tax collections for the 2007-09 biennium is $808.3 million, a reduction
of $49.9 million from the March 2008 forecast. The decline is attributable to the impact of the
Economic Stimulus Act of 2008, which allows for accelerated depreciation on investments made
prior to December 31st, 2008. In turn, lower depreciation allowances in future tax years produce
increased tax liabilities and collection after the current biennium. Corporate income taxes are
$112.6 million below the Close of Session forecast.




                                                 56
Non-income Tax Sources of Revenue

All other revenues will total $903.8 million for the biennium, an increase of $30.2 million from
the prior forecast. Estate taxes continue to exceed historical trends, although this source exhibits
considerable volatility. The forecast for estate taxes for the biennium has been revised up $20.7
million. Interested earnings have been increased $16.8 million. Insurance taxes are off by $5.0
million. All other revisions are negligible.

   B.          Extended General Fund Revenue Outlook

Table R.2 exhibits the long-run forecast for General Fund revenues through the 2011-13
biennium. Total General Fund revenues will increase 20.7 percent to $15,706.3 million in 2009-
11. Personal income tax growth of 23.4 percent, which will raise collections to $13,952.1
million, is due in part to the $1.084 billion kicker rebate distributed in the prior biennium. In
addition, the sunset of the Bush tax cuts in 2011 are expected to have a short-run positive impact
on personal income taxes, particularly through capital gains realizations. Corporate income taxes
will grow 9.1 percent to $881.8 million, an inflated rate of growth due to the accelerated
depreciation allowed by the Economic Stimulus Act of 2008. All other revenues will reach
$872.3 million, mildly below the prior biennium’s level.

General Fund revenues will total $17,708.1 million in 2011-13, an increase of 12.7 percent from
the prior period. The growth is fueled primarily by a 13.6 percent increase in personal income
tax collections to $15,854.3 million. Corporate income taxes will reach $955.3 million, while all
other revenues will total $898.5 million.
     Table R.2
     General Fund Revenue Forecast Summary (Millions of Dollars, Current Law)

                                         Forecast                Forecast                 Forecast                 Forecast                  Forecast
                                         2005-07         %       2007-09          %       2009-11          %       2011-13         %         2013-15     %
     Revenue Source                     Biennium        Chg      Biennium       Chg      Biennium        Chg      Biennium        Chg        Biennium   Chg


     Personal Income Taxes              11,040.3       22.8% 11,304.6            2.4% 13,952.1          23.4% 15,854.3           13.6% 18,078.4         14.0%

     Corporate Income Taxes                 844.1      31.7%         808.3      -4.2%         881.8       9.1%        955.3       8.3%        1,014.4   6.2%

     All Others                             857.6       6.4%         903.8       5.4%         872.3      -3.5%        898.5       3.0%         920.3    2.4%

     Total General Fund                 12,742.0       22.1% 13,016.7            2.2% 15,706.3          20.7% 17,708.1           12.7% 20,013.1         13.0%

     Other taxes include General Fund portions of the Eastern Oregon Severance Tax, Western Oregon Severance Tax and Amusement Device Tax.
     Commercial Fish Licenses & Fees and Pari-mutual Receipts are included in Other Revenues



For the 2013-15 biennium, General Fund revenues will equal $20,013.1 million, a 13.0 percent
increase from the prior biennium. Personal income tax collections rise 14.0 percent to $18,078.4
million, driven by broad-based gains in both wage and non-wage incomes. Corporate income
taxes will experience modest 6.2 percent growth, just eclipsing the billion dollar mark for the
first time. Remaining sources of revenue will equal $920.3 million, a 2.4 percent increase over
the prior biennium. Table B.2 in Appendix presents a more detailed look at the long-term
General Fund revenue forecast.



                                                                                 57
C.       Tax Law Assumptions

The revenue forecast is based on existing law, including actions signed into law during the 2007
Oregon Legislative Session and recent federal legislation. OEAE makes routine adjustments to
the forecast to account for legislative and other actions not factored into the personal and
corporate income tax models. These adjustments can include expected kicker refunds, when
applicable, as well as any tax law changes not yet present in the historical data. A summary of
these items can be found in Appendix B Table B.3b.

Beginning with the May 2003 forecast, OEA altered the manner in which it factors tax law
changes into the revenue forecast. In the past, legislative impact estimates were characterized at
the point of collections. However, tax laws are directly related to tax liability for given tax years.
In fact, the original tax law impacts developed by the Legislative Revenue Office are
characterized at the point of liability and irrespective of the timing of receipt. Given the focus on
taxable income and liability in the personal and corporate income tax models, incorporating tax
law changes as adjustments to the liability forecast proved far easier to administer and more
intuitively accessible.

A rough rule of thumb for personal income tax is that nearly all collections activity on a given
tax year occurs between the start of the tax year and June of the following year. Modest payment
and refund activity continues for years thereafter, but with only a marginal net impact on
revenues. Therefore, when interpreting the timing of personal income tax impacts presented in
Appendix B Table B.3, this 18-month window is suitable for all but the most technical purposes.

Corporate income tax is more difficult in that corporations do not have a standardized tax year.
A corporate tax year is signified by the calendar year in which the corporation’s fiscal year
begins. The rule of thumb is that the majority of corporate collections on a given tax year will be
received in the State fiscal year that begins July 1 of that year, i.e. the corporate tax impact
specified in Appendix B Table B.3 for tax year 2007 will be realized primarily in state fiscal year
2007-08. Contact the Office of Economic Analysis at (503) 378-3455 with questions regarding
tax law impacts.

D.       Forecast Risks

The revenue forecast presented herein constitutes a guideline for budgetary purposes. Variation
above or below this forecast is to be expected, although OEA strives to minimize the magnitude
of this variation by investigating new data resources and methodological approaches, as well as
regularly consulting with experts from the economics, financial, and accounting communities.

The following are major factors that could cause actual revenues to deviate from this forecast by
a significant degree:

     •   Personal income tax is expected to account for nearly ninety percent of General Fund
         revenues in the 2007-09 biennium. The income tax forecast is based on OEA’s outlook
         regarding general economic conditions. To the extent that actual economic performance
         departs from this outlook, particularly with respect to factors that influence more volatile



                                                 58
         forms of non-wage income, so too will the personal income tax, and thus the General
         Fund forecast.

     •   The future of capital gains income remains highly uncertain. Equity prices are quite
         volatile, and the realization of potential gains depends on behavioral factors that often
         defy precise prediction. Capital gains have recovered fully since the 2001 stock market
         crash and are expected to grow steadily into the future. As seen in recent years, financial
         decisions on the part of a few individuals can have a significant impact on the aggregate
         levels. The concentration of gains at the high end of the income distribution exacerbates
         the inherent volatility in this source of income.

     •   Numerous changes have been made to Oregon’s corporate income tax code in recent
         years. The most significant is in how multi-state corporations apportion federal taxable
         income to compute income taxable in Oregon. As of tax year 2006, apportionment is
         based solely of the fraction of a corporation’s sales that occur in Oregon. While payment
         and refund activity related to tax year 2006 continues, the approximate impact of the
         change is evident. More recently, the Economic Stimulus Act of 2008 provides for
         accelerated depreciation on equipment and structures purchased before December 31st.
         The eventual impact will depend on a variety of factors, adding additional uncertainty to
         an already volatile source of revenue.

     •   Growth in revenues is partly due to inflation. Wage inflation contributes to rising wage
         and salary income, and consequently personal income tax collections. Price inflation
         raises gross corporate revenues and, potentially, corporate income tax revenue. Rental
         and small business income exhibit similar growth factors. The magnitude of actual
         revenue growth will depend on actual inflation rates. Currently, OEA expects inflation to
         remain low for the coming years, contributing to slower than expected revenue growth
         compared to that experienced in the previous two decades. Should inflation be stronger
         than expected, revenue growth could also exceed forecast.

E.       Lottery Earnings Forecast

Table R.3 presents a summary of lottery earnings and distribution for the 2007-09 biennium.
Projected lottery earnings will total $1,339.3 million, an increase of $9.0 million from the prior
forecast. The gain was split evenly between traditional projects and video lottery. Including the
beginning balance and other earnings, total available resources equal $1,417.5 million. Total
projected resources have increased $25.3 million from the Close of 2007 Session.

During the Special Session in February 2008, the legislature increased the lottery fund allocation
to the State School Fund by $20.0 million. Increased earnings resulted in a $3.0 million rise in
dedicated distributions, including the Education Stability Fund and County Economic
Development programs. The current forecast for the ending balance in the Economic
Development Fund is $11.7 million.

The extended outlook for lottery earnings can be found in Table B.9 in Appendix B. Lottery
earnings are expected to grow 2.6 percent to $1,374.5 million for the 2009-11 biennium. The



                                                 59
weak growth is the result of an absence of administrative savings for the biennium, compared
with $60.9 million in the current biennium. Video lottery earnings will increase 8.8 percent,
while traditional products will decline slightly. Total available resources will amount to
$1,390.7.

 Table R.3
        2007-09 Lottery Fund Forecast Summary
                                                                                                                                           Changes from:
                                                                 Close of 2007          March 2008            June 2008             March 2008         Close of 2007
                                                                      Session             Forecast             Forecast               Forecast              Session
        Transfers of Lottery Earnings
            Traditional Games                                           $129.3               $130.6              $134.9                      $4.3              $5.6
            Video Lottery                                              $1,151.9             $1,138.9            $1,143.6                     $4.7             -$8.3
            Administrative Savings                                        $35.0                $60.9               $60.9                     $0.0             $25.9
            Total Transfers                                            $1,316.1             $1,330.4            $1,339.3                     $9.0             $23.2

        Economic Development Fund
           Beginning Balance                                              $66.3                $64.1               $64.1                     $0.0             -$2.2
           Transfers from Lottery                                      $1,316.1             $1,330.4            $1,339.3                     $9.0             $23.2
                          1                                                $9.8                $14.1               $14.1                     $0.0              $4.3
           Other earnings
           Total Available Resources                                   $1,392.2             $1,408.6            $1,417.5                     $9.0             $25.3

                                         2                              $675.4               $679.1              $682.2                      $3.0              $6.8
             Dedicated Distributions
             Other Legislatively Adopted Allocations                    $703.7               $703.7              $723.7                     $20.0             $20.0
             Total Distributions                                       $1,379.0             $1,382.8            $1,405.8                    $23.0             $26.8

             Ending Balance                                                $13.2               $25.8                $11.7                  -$14.1              -$1.5

        Footnotes:
        1. Includes interest earnings and reversions.
        2. Includes the Education Stability Fund (18%), the Parks and Natural Resources Fund (15%), and Debt Service. See Table B.9 for more information.


Lottery earnings will amount to $1,553.8 million in 2011-13, a 13.0 percent increase over the
previous biennium. Including interest earnings, available resources will total $1,559.8 million.
For the 2013-15 biennium, lottery earnings will climb to $1,740.9 million while available
resources will equal $1,746.9 million.

F.     Overview of Budgetary Reserves

The state currently administers two general reserve accounts, the Oregon Rainy Day Fund
(ORDF) and the Education Stability Fund (ESF). This section, new to the Economic and
Revenue Forecast, will update balances in and the outlook for these funds.

Oregon Rainy Day Fund

Established by the 2007 Legislature, the ORDF is funded from ending balances each biennium,
up to one percent of appropriations. The Legislature can deposit additional funds, as it did in
first populating the ORDF with surplus corporate income tax revenues from the 2005-07
biennium. The ORDF also retains interest earnings. Withdrawals from the ORDF require one of
three triggers, including a decline in employment, a projected budgetary shortfall, or declaration
of a state of emergency, plus a three-fifths vote. Withdrawals are capped at two-thirds of the
balance as of the beginning of the biennium in question. Fund balances are capped at 7.5 percent
of General Fund revenues in the prior biennium.



                                                                                     60
Education Stability Fund

The ESF gained its current reserve structure and mechanics via constitutional amendment in
2002. The ESF receives 18 percent of lottery earnings1, deposited on a quarterly basis. The
ESF does not retain interest earnings. The ESF has similar triggers as the ORDF (in fact, the
ORDF was modeled on the ESF), but does not have the two-thirds cap on withdrawals. The ESF
balance is capped at five percent of General Fund revenues collected in the prior biennium.

Budgetary Reserve Outlook

Table R.4 presents current and projected balances for the ORDF and ESF. As of the third quarter
of fiscal year 2008, the balance in the ORDF equaled $328.0 million. As indicated above, none
of this balance is available this biennium without additional legislation. The ORDF is projected
to reach $340.9 million by the end of 2007-09, and to total $515.7 million by the end of next
biennium.

The ESF balance stood at $264.9 million as of March 31st, with the full amount available to the
legislature if economic and fiscal conditions are met. The projected ending balance in the ESF
for the current biennium is $396.0 million. By the end of the 2009-11 biennium, available ESF
funds will total $560.3 million. Table B.10 in Appendix B provides detailed information for
Oregon’s budgetary reserves.

    Table R.4
                    Oregon's Budgetary Reserves
                                                               Actuals through                         2007-09                     2009-11
                    (Millions)                                       3/31/2008                       Biennium                    Biennium
                    Rainy Day Fund
                        Beginning Balance                                     $0.0                         $0.0                     $340.9
                        Deposits                                            $319.3                       $319.3                      $35.3
                        Interest                                              $8.7                        $21.6                     $139.5
                        Triggered Withdrawals                                 $0.0                         $0.0                       $0.0
                        Ending Balance1                                     $328.0                       $340.9                     $515.7

                    Education Stability Fund
                       Beginning Balance                                    $178.9                       $178.9                     $396.0
                       Deposits                                              $85.2                       $217.1                     $164.3
                       Interest2                                              $8.1                        $25.4                      $52.0
                       Triggered Withdrawals                                 -$7.2                       -$25.4                     -$52.0
                       Ending Balance                                       $264.9                       $396.0                     $560.3

                    Total Reserves                                          $592.9                       $736.9                   $1,076.0

                    Footnotes:
                    1. Under current law, only 2/3rds of the beginning balance is available for withdrawal. Withdrawal subject to economic
                    and financial triggers.
                    2. Education Stability Fund interest is distributed to the Oregon Education Fund (75%) and the State Scholarship
                    Commission (25%).




1
 Ten percent of these transfers are deposited to the Oregon Growth sub-account. Due to the illiquid nature of this
sub-account, only funds in the main account are included in the figures presented here.



                                                                              61
62
                 APPENDIX A:                       ECONOMIC FORECAST DETAIL




Table A.1   Annual Forecast ..................................................................................................65

Table A.2   Quarterly Forecast...............................................................................................70




                                                            63
64
Table A.1




            65
Table A.1




            66
Table A.1




            67
Table A.1




            68
Table A.1




            69
Table A.2




            70
Table A.2




            71
Table A.2




            72
Table A.2




            73
Table A.2




            74
Table A.2




            75
Table A.2




            76
Table A.2




            77
Table A.2




            78
Table A.2




            79
Table A.2




            80
Table A.2




            81
Table A.2




            82
Table A.2




            83
Table A.2




            84
Table A.2




            85
Table A.2




            86
Table A.2




            87
Table A.2




            88
Table A.2




            89
90
                   APPENDIX B:                    REVENUE FORECAST DETAIL



Table B.1    General Fund Revenue Statement 2007-09 ................................................................ 93
Table B.2    General Fund Revenue Forecast by Fiscal Year......................................................... 94
Table B.3    Summary of Tax Model Adjustments......................................................................... 95
Table B.4    Oregon Personal Income Tax Revenue Forecast ....................................................... 96
Table B.5    Oregon Corporate Income Tax Revenue Forecast...................................................... 98
Table B.6    Cigarette and Tobacco Tax Distribution................................................................... 100
Table B.7    Revenue Distribution to Local Governments............................................................ 101
Table B.8    Track Record for the March 2008 Forecast .............................................................. 102
Table B.9    Lottery Forecast Statement 2007-09 ......................................................................... 103
Table B.10   Budgetary Reserve Summary and Outlook……………………………….…….…..104




                                                         91
92
     Table B.1
     General Fund Revenue Statement -- 2007-09

                                                                                                            Forecasts Dated: 3/1/2008                               Forecasts Dated: 6/1/2008                               Difference
                                                         Estimate at      Actuals through                                                Total                                                   Total          06/1/2008 Less     06/1/2008 Less
                                                          COS 2007           3/31/2008            2007-08           2008-09             2007-09           2007-08           2008-09             2007-09            3/1/2008             COS

     Taxes
      Personal Income Taxes (Before Kicker)             12,347,910,000       2,674,627,200      6,001,400,000      6,276,449,000   12,277,849,000        6,120,099,000     6,268,684,000   12,388,783,000          110,934,000             40,873,000
        Implicit Kicker Offset                          (1,164,712,000)                        (1,084,201,000)                     (1,084,201,000)      (1,084,201,000)                    (1,084,201,000)                   0             80,511,000
      Corporate Income Taxes (Before Kicker)               920,897,000        272,700,020         439,298,000       418,952,000       858,250,000          432,922,000      375,385,000       808,307,000          (49,943,000)          (112,590,000)
      Insurance Taxes                                      157,060,000         24,745,994          56,987,000        58,869,000       115,856,000           54,366,000       55,750,000       110,116,000           (5,740,000)           (46,944,000)
      Estate Taxes                                         141,000,000         82,371,825          87,425,000        86,892,000       174,317,000          105,000,000       90,000,000       195,000,000           20,683,000             54,000,000
      Cigarette Taxes                                       86,073,000         31,338,644          43,761,000        42,170,000        85,931,000           43,414,000       40,789,000        84,203,000           (1,728,000)            (1,870,000)
      Other Tobacco Products Taxes                          33,860,000         13,072,196          16,856,000        16,762,000        33,618,000           16,856,000       16,762,000        33,618,000                    0               (242,000)
      Other Taxes                                            1,900,000            385,185             842,000           700,000         1,542,000              842,000          700,000         1,542,000                    0               (358,000)

     Fines and Fees
       State Court Fees                                     61,794,000         18,896,523          29,679,000        29,679,000          59,358,000        29,983,000        29,983,000          59,966,000             608,000            (1,828,000)
       Secretary of State Fees                              20,692,000          8,974,918          11,126,000        11,957,000          23,083,000        11,389,000        12,325,000          23,714,000             631,000             3,022,000
       Criminal Fines & Assessments                         82,756,000         25,158,060          37,855,000        39,007,000          76,862,000        36,795,000        37,916,000          74,711,000          (2,151,000)           (8,045,000)
       Securities Fees                                      19,404,000          7,632,752           8,898,000         9,235,000          18,133,000        10,159,000         9,119,000          19,278,000           1,145,000              (126,000)

     Central Service Charges                                 8,666,000           3,091,040          4,333,000          4,333,000          8,666,000         4,333,000          4,333,000           8,666,000                  0                     0




93
     Liquor Apportionment                                  179,549,000         63,994,685          88,766,000        92,390,000         181,156,000        88,766,000        92,390,000         181,156,000                   0             1,607,000

     Interest Earnings                                      78,000,000         57,750,668          48,200,000        25,800,000          74,000,000        65,000,000        25,800,000          90,800,000         16,800,000            12,800,000

     Miscellaneous Revenues                                 15,480,000           9,568,016         11,000,000        10,000,000          21,000,000        11,000,000        10,000,000          21,000,000                   0             5,520,000
     One-time Transfers                                      2,300,000            200,311                    0                 0                   0                 0                 0                   0                  0            (2,300,000)
     Gross General Fund Revenues                        14,157,341,000       3,294,508,036      6,886,426,000      7,123,195,000   14,009,621,000       7,030,924,000      7,069,936,000   14,100,860,000           91,239,000            (56,481,000)
      Total Kicker Refunds/Credits                      (1,164,712,000)                  0     (1,084,201,000)                 0    (1,084,201,000)     (1,084,201,000)                0    (1,084,201,000)                   0           80,511,000

     Net General Fund Revenues                          12,992,629,000       3,294,508,036      5,802,225,000      7,123,195,000   12,925,420,000       5,946,723,000      7,069,936,000   13,016,659,000           91,239,000            24,030,000

     Plus Beginning Balance                              1,513,010,424                                                              1,436,710,360                                           1,436,710,360                     0           (76,300,064)
     Less Anticipated Administrative Actions*              (57,332,917)                                                                  (57,332,917)                                            (42,140,255)       15,192,662            15,192,662
     Less Legislatively Adopted Actions**                 (309,418,000)                                                                 (319,287,000)                                           (319,288,368)            (1,368)           (9,870,368)
     Available Resources                                14,138,888,507                                                             13,985,510,443                                          14,091,940,737          106,430,294            (46,947,770)

     Projected Expenditures                             13,954,705,033                                                             13,956,706,190                                          13,948,967,482            (7,738,708)           (5,737,551)

     Estimated Ending Balance                              184,183,474                                                                   28,804,253                                             142,973,255        114,169,002            (41,210,219)

     Notes: Corporate income tax figure includes Corporate Multistate taxes.
            Other taxes include General Fund portions of the Eastern Oregon Severance Tax, Western Oregon Severance Tax and Amusement Device Tax.
            Kickers generated in 2005-07 are accounted as revenue offsets in 2007-09.
            Detailed entries may not add to totals due to rounding.
            * Administrative Actions equal expenses associated with cashflow management, exclusive of internal borrowing.
            ** Equals 2005-07 portion of corporate surplus designated for Rainy Day Fund.
     TABLE B.2
     General Fund Revenue Forecast                                                                                                                                                                            June 2008
     ($Millions)

                                                2005-06            2006-07            2007-08             2008-09            2009-10            2010-11              2011-12           2012-13          2013-14           2014-15
                                              Fiscal Year        Fiscal Year        Fiscal Year         Fiscal Year        Fiscal Year        Fiscal Year          Fiscal Year       Fiscal Year      Fiscal Year       Fiscal Year
     Fiscal Years
     Taxes

       Personal Income                               5,443.6             5,596.7            5,035.9            6,268.7            6,638.1             7,314.0             7,687.2           8,167.1          8,734.2           9,344.2
       Corporate Excise & Income                       438.2               405.9              432.9              375.4              425.1               456.8               468.5             486.8            502.5             511.9
       Insurance                                        60.9                53.8               54.4               55.8               56.0                60.1                63.5              66.4             63.8              66.8
       Estate                                           89.3                79.6              105.0               90.0               97.5                94.7                98.6             102.5            106.4             110.2
       Cigarette                                        44.3                44.5               43.4               40.8               39.1                37.9                38.0              38.1             38.3              38.4
       Other Tobacco Products                           16.3                16.2               16.9               16.8               16.4                16.3                16.5              16.7             16.9              17.1
       Other Taxes                                       1.5                 1.0                0.8                0.7                0.6                 0.4                 0.3               0.2              0.1               0.0

     Other Revenues

       Licenses and Fees                                91.6                83.8               88.3               89.3               90.8                   92.9            92.6               94.6            94.4               96.5
       Charges for Services                              3.4                 3.3                4.3                4.3                4.3                    4.3             4.3                4.3             4.3                4.3
       Liquor Apportionment                             78.8                67.3               88.8               92.4               88.8                   92.4            88.8               92.4            88.8               92.4
       Interest Earnings                                32.2                69.2               65.0               25.8               32.0                   27.0            32.0               27.0            32.0               27.0
       Others                                           11.7                 8.9               11.0               10.0               10.3                   10.5            10.8               11.0            11.3               11.5

     Total General Fund                              6,311.8             6,430.2            5,946.7            7,069.9            7,499.0             8,207.3             8,601.1           9,107.0          9,692.8          10,320.3




94
                                                2005-07                               2007-09                                2009-11                                2011-13                            2013-15
                                                               Percent Change                         Percent Change                        Percent Change                          Percent Change                     Percent Change
     Biennial Totals                           Biennium                              Biennium                               Biennium                               Biennium                           Biennium
     Taxes

       Personal Income                              11,040.3              22.8%            11,304.6              2.4%            13,952.1              23.4%            15,854.3             13.6%         18,078.4             14.0%
       Corporate Excise & Income                       844.1              31.7%               808.3             -4.2%               881.8               9.1%               955.3              8.3%          1,014.4              6.2%
       Insurance                                       114.7               7.5%               110.1             -4.0%               116.2               5.5%               129.9             11.8%            130.5              0.5%
       Estate Taxes                                    168.9              29.5%               195.0             15.4%               192.2              -1.5%               201.0              4.6%            216.6              7.8%
       Cigarette                                        88.8               7.4%                84.2             -5.2%                77.0              -8.5%                76.2             -1.1%             76.6              0.6%
       Other Tobacco Products                           32.6              48.5%                33.6              3.3%                32.7              -2.7%                33.2              1.7%             34.0              2.3%
       Other Taxes                                       2.5             -10.2%                 1.5            -38.4%                 1.0             -38.4%                 0.5            -47.4%              0.1            -80.0%

     Other Revenues

       Licenses and Fees                               175.4             29.7%                177.7              1.3%               183.7               3.4%               187.1              1.9%            190.8              2.0%
       Charges for Services                              6.7              6.5%                  8.7             29.6%                 8.7               0.0%                 8.7              0.0%              8.7              0.0%
       Liquor Apportionment                            146.1             18.5%                181.2             24.0%               181.2               0.0%               181.2              0.0%            181.2              0.0%
       Interest Earnings                               101.4            233.2%                 90.8            -10.4%                59.0             -35.0%                59.0              0.0%             59.0              0.0%
       Others                                           20.5            -87.6%                 21.0              2.3%                20.8              -1.2%                21.8              4.8%             22.8              4.6%

     Total General Fund                             12,742.0              22.1%            13,016.7              2.2%            15,706.3              20.7%            17,708.1             12.7%         20,013.1             13.0%

     Note: Detailed entries may not add to totals due to rounding. Other taxes include General Fund portions of the Eastern Oregon Severance Tax, Western
     Oregon Severance Tax and Amusement Device Tax. Commercial Fish Licenses & Fees and Pari-mutual Receipts are included in Other Revenues
     Table B.3 Summary of Tax Model Adjustments                                                                                                                                                                             June 2008
     Personal Income Tax (Thousands)                                                               2006               2007                2008                2009      2010       2011       2012       2013       2014         2015
     Federal Law Changes
           Working Families Tax Relief Act of 2004                                                9,912             11,130               7,492              5,265           0          0          0          0          0            0
           Tax Increase Prevention and Reconcilation Act of 2005                                    500              2,600             -14,700            -11,000       6,300     24,200     19,700      6,500          0            0
           Pension Protection Act of 2006                                                          -500             -1,900              -1,500             -1,500      -2,500    -19,300    -21,400    -25,700    -32,000      -37,000
           Economic Stimulus Act of 2008                                                              0                  0              41,520              2,810       2,300      1,730      1,460        950        670          290
           Other Federal Legislation                                                            -12,300            -14,200              -2,200             -2,400     -17,700      6,100      4,400      3,400      2,300        1,600
     Measure 88 (Federal Tax Subraction Increase)                                             -117,198            -149,500           -152,000            -154,500    -157,000   -159,500   -162,000   -164,500   -167,000     -169,500
     Multnomah County Income Tax
     2005 Session
           Total Tax Law Changes                                                                -13,786            -16,572             -20,460            -18,872     -26,058    -17,143    -13,571    -13,846    -14,127      -14,406
           Additional Audit and Compliance Efforts                                               12,000             13,200              13,200             13,200      13,200     13,200     13,200     13,200     13,200       13,200
     2007 Session (Regular & Special 1*)
           Total Tax Law Changes                                                                                      6,279             -2,601              -7,307    -12,713    -30,629    -25,286    -23,961    22,737        23,726
           Additional Audit and Compliance Efforts                                                                    9,264              1,990               2,060      2,240      2,340      2,440      2,540     2,640         2,740
     Projected Kicker                                                                            -1,084
     Personal IncomeTax Law Adjustments                                                       -122,456            -139,699           -129,259            -172,244    -191,931   -179,002   -181,057   -201,417   -171,580     -179,350




95
     Corporate Income Tax (Thousands)                                                              2006               2007                2008                2009      2010       2011       2012       2013       2014         2015
     Federal Law Changes
           Job Creation Act of 2004                                                             -12,637              -4,210               5,952              5,967      3,822          0          0          0          0            0
           Tax Increase Prevention and Reconcilation Act of 2005                                 -1,700              -5,400              -5,700             -1,400        500        500        400        300          0            0
           Economic Stimulus Act of 2008                                                              0                   0             -85300              17600      15260      12800      10400       6960       4400         2600
           Other Federal Legislation                                                             -2,000              -2,400              -2,000             -2,370     -2,660     -2,150     -2,150     -2,470     -1,870       -2,080
     2005 Session
           Total Tax Law Changes                                                                  3,757               6,886              8,213               7,045     6,914      6,450      7,045      6,914      6,783         6,652
           Additional Audit and Compliance Efforts                                                2,000               2,500              2,500               2,500     2,500      2,500      2,500      2,500      2,500         2,500
     2007 Session (Regular & Special 1)
           H.B. 2031 (Small Business Tax Credit)                                                      0            -24,800                   0                   0          0          0          0          0          0            0
           Other Tax Law Changes                                                                      0            -19,002               1,581              -1,480     -5,891    -10,373    -14,025    -11,401    -11,484      -11,392
           Additional Audit and Compliance Efforts                                                4,536              1,210               1,240               1,360      1,460      1,560      1,660      1,760      1,860        1,960
           Affordable Housing Lenders Credit                                                          0                  0                   0              -1,000     -2,000     -3,000     -3,000     -3,500     -4,000       -4,000
     Projected Kicker
     Corporate Income Tax Law Adjustments                                                        -6,044            -45,217             -73,515             28,222     19,905      8,287      2,830      1,063      -1,812       -3,761
     Notes: Adjustments factored into model results beginning with first forecast observation. Impacts phased out as impact becomes present in historical data.
            * 2007 Special Session 1 did not result in adjustments to personal income tax.
     TABLE B.4                                      OREGON PERSONAL INCOME TAX REVENUE FORECAST - QUARTERLY COLLECTIONS
                                                                     Thousands of Dollars - Not Seasonally Adjusted                                                  June 2008
                                      2003:3           2003:4           2004:1          2004:2          FY 2004          2004:3       2004:4       2005:1       2005:2      FY 2005
     WITHHOLDING                         933,137         983,211          996,751          962,199       3,875,297         982,063    1,022,832    1,065,596    1,014,547    4,085,037
      %CHYA                                 4.7%            4.6%             7.9%             6.2%            5.9%            5.2%         4.0%         6.9%         5.4%         5.4%
     EST. PAYMENTS                       145,084         116,621          168,334          233,037         663,076         159,213      136,815      201,521      269,882        767,431
      %CHYA                                -4.5%            6.0%            -0.2%             8.3%            2.7%            9.7%        17.3%        19.7%        15.8%          15.7%
     FINAL PAYMENTS                       40,743           45,029          56,825          403,032         545,630          44,363       53,304       78,178      527,249        703,094
      %CHYA                                 8.1%            -3.9%           13.2%            11.2%            9.7%            8.9%        18.4%        37.6%        30.8%          28.9%
     REFUNDS                              74,032           78,971         292,880          366,839         812,722          69,112       80,463      343,067      363,923        856,565
      %CHYA                                -3.1%            -4.8%           -3.9%            16.2%            4.2%           -6.6%         1.9%        17.1%        -0.8%           5.4%
     OTHER                              (128,394)               -                -         125,686             (2,708)    (125,686)            -            -     149,733        24,047
     TOTAL                               916,537       1,065,890          929,030        1,357,116       4,268,573         990,841    1,132,488    1,002,228    1,597,487    4,723,045
      %CHYA                                 4.8%            5.2%            10.9%             4.7%            6.1%            8.1%         6.2%         7.9%        17.7%        10.6%
                                      2005:3           2005:4           2006:1          2006:2          FY 2006          2006:3       2006:4       2007:1       2007:2      FY 2007
     WITHHOLDING                       1,064,107       1,087,942        1,177,488        1,075,476       4,405,013       1,118,878    1,172,656    1,182,336    1,088,108    4,561,977
      %CHYA                                 8.4%            6.4%            10.5%             6.0%            7.8%            5.1%         7.8%         0.4%         1.2%         3.6%
     EST. PAYMENTS                       194,848         186,648          224,403          270,754         876,653         231,720      177,026      267,345      363,055    1,039,146
      %CHYA                                22.4%           36.4%            11.4%             0.3%           14.2%           18.9%        -5.2%        19.1%        34.1%        18.5%
     FINAL PAYMENTS                       51,797           68,000          88,998          787,622         996,416          55,408       89,432      100,476      779,577    1,024,893




96
      %CHYA                                16.8%            27.6%           13.8%            49.4%           41.7%            7.0%        31.5%        12.9%        -1.0%         2.9%
     REFUNDS                              62,638           94,755         345,524          358,699         861,617          89,254      126,707      444,768      369,456    1,030,186
      %CHYA                                -9.4%            17.8%            0.7%            -1.4%            0.6%           42.5%        33.7%        28.7%         3.0%        19.6%
     OTHER                              (149,733)               -                -         176,911             27,178     (176,911)            -            -     177,781           870
     TOTAL                             1,098,381       1,247,835        1,145,365        1,952,063       5,443,644       1,139,841    1,312,406    1,105,388    2,039,066    5,596,701
      %CHYA                                10.9%           10.2%            14.3%            22.2%           15.3%            3.8%         5.2%        -3.5%         4.5%         2.8%
                                      2007:3           2007:4           2008:1          2008:2          FY 2008          2008:3       2008:4       2009:1       2009:2      FY 2009
     WITHHOLDING                       1,115,359       1,200,822        1,196,532        1,131,539       4,644,252       1,168,625    1,226,139    1,260,538    1,180,668    4,835,970
      %CHYA                                -0.3%            2.4%             1.2%             4.0%            1.8%            4.8%         2.1%         5.3%         4.3%         4.1%
     EST. PAYMENTS                       250,749         217,163          281,441          382,047       1,131,400         275,875      234,052      320,351      403,104    1,233,382
      %CHYA                                 8.2%           22.7%             5.3%             5.2%            8.9%           10.0%         7.8%        13.8%         5.5%         9.0%
     FINAL PAYMENTS                       57,503         129,817          104,841          998,456       1,290,617          83,052       97,831      108,715      943,287    1,232,885
      %CHYA                                 3.8%           45.2%             4.3%            28.1%           25.9%           44.4%       -24.6%         3.7%        -5.5%        -4.5%
     REFUNDS                              71,372         155,912          389,876          340,913         958,073         111,314       94,919      447,103      396,068    1,049,404
      %CHYA                               -20.0%           23.0%           -12.3%            -7.7%           -7.0%           56.0%       -39.1%        14.7%        16.2%         9.5%
     OTHER                              (177,781)      (1,084,201)               -         189,685      (1,072,298)       (189,685)            -            -     205,536        15,852
     TOTAL                             1,174,457         307,689        1,192,938        2,360,814       5,035,898       1,226,554    1,463,103    1,242,501    2,336,526    6,268,684
      %CHYA                                 3.0%          -76.6%             7.9%            15.8%          -10.0%            4.4%       375.5%         4.2%        -1.0%        24.5%
     Note: "Other" includes kicker and federal pension refunds, as well as July withholding accrued to June.
     Tax law impacts are reflected in the collections numbers to produce more meaningful projections.
     TABLE B.4                                      OREGON PERSONAL INCOME TAX REVENUE FORECAST - QUARTERLY COLLECTIONS
                                                                     Thousands of Dollars - Not Seasonally Adjusted                                                               June 2008
                                      2009:3           2009:4             2010:1             2010:2      FY 2010         2010:3        2010:4             2011:1             2011:2      FY 2011
     WITHHOLDING                       1,220,261       1,280,316          1,351,484          1,272,080    5,124,140      1,314,738     1,379,442          1,444,934          1,358,114    5,497,227
      %CHYA                                 4.4%            4.4%               7.2%               7.7%         6.0%           7.7%          7.7%               6.9%               6.8%         7.3%
     EST. PAYMENTS                       291,081         246,952            339,628            467,464    1,345,125        337,555       286,381            392,019            494,386    1,510,341
      %CHYA                                 5.5%            5.5%               6.0%              16.0%         9.1%          16.0%         16.0%              15.4%               5.8%        12.3%
     FINAL PAYMENTS                       85,048           98,022           111,950            980,694    1,275,714         88,110       102,132            119,871          1,054,052    1,364,165
      %CHYA                                 2.4%             0.2%              3.0%               4.0%         3.5%           3.6%          4.2%               7.1%               7.5%         6.9%
     REFUNDS                             127,537         108,214            471,597            416,873    1,124,221        134,193       113,529            440,293            388,338    1,076,353
      %CHYA                                14.6%           14.0%               5.5%               5.3%         7.1%           5.2%          4.9%              -6.6%              -6.8%        -4.3%
     OTHER                              (205,536)               -                  -           222,909         17,372     (222,909)             -                  -           241,489         18,581
     TOTAL                             1,263,316       1,517,076          1,331,465          2,526,273    6,638,131      1,383,301     1,654,426          1,516,530          2,759,704    7,313,960
      %CHYA                                 3.0%            3.7%               7.2%               8.1%         5.9%           9.5%          9.1%              13.9%               9.2%        10.2%
                                      2011:3           2011:4             2012:1             2012:2      FY 2012         2012:3        2012:4             2013:1             2013:2      FY 2013
     WITHHOLDING                       1,403,656       1,472,737          1,533,774          1,440,075    5,850,243      1,488,367     1,561,616          1,625,777          1,526,361    6,202,121
      %CHYA                                 6.8%            6.8%               6.1%               6.0%         6.4%           6.0%          6.0%               6.0%               6.0%         6.0%
     EST. PAYMENTS                       356,996         302,874            414,807            528,360    1,603,037        381,528       323,687            443,334            565,222    1,713,771
      %CHYA                                 5.8%            5.8%               5.8%               6.9%         6.1%           6.9%          6.9%               6.9%               7.0%         6.9%
     FINAL PAYMENTS                       94,431         108,798            123,439          1,091,945    1,418,614         97,231       112,377            130,278          1,159,493    1,499,379




97
      %CHYA                                 7.2%            6.5%               3.0%               3.6%         4.0%           3.0%          3.3%               5.5%               6.2%         5.7%
     REFUNDS                             126,216         107,573            514,732            456,116    1,204,637        146,533       124,103            530,096            468,552    1,269,285
      %CHYA                                -5.9%           -5.2%              16.9%              17.5%        11.9%          16.1%         15.4%               3.0%               2.7%         5.4%
     OTHER                              (241,489)               -                  -           261,433         19,944     (261,433)             -                  -           282,523         21,089
     TOTAL                             1,487,378       1,776,837          1,557,288          2,865,698    7,687,201      1,559,159     1,873,578          1,669,293          3,065,047    8,167,076
      %CHYA                                 7.5%            7.4%               2.7%               3.8%         5.1%           4.8%          5.4%               7.2%               7.0%         6.2%
                                      2013:3           2013:4             2014:1             2014:2      FY 2014         2014:3        2014:4             2015:1             2015:2      FY 2015
     WITHHOLDING                     $1,577,546       $1,655,184         $1,725,379         $1,620,254   $6,578,363     $1,674,587    $1,757,002         $1,834,119         $1,722,822   $6,988,530
      %CHYA                                6.0%             6.0%               6.1%               6.2%         6.1%           6.2%          6.2%               6.3%               6.3%         6.2%
     EST. PAYMENTS                     $408,146         $346,270          $474,301           $605,620    $1,834,337      $437,317      $371,019           $508,245           $650,056    $1,966,636
      %CHYA                                7.0%             7.0%              7.0%               7.1%          7.0%          7.1%          7.1%               7.2%               7.3%          7.2%
     FINAL PAYMENTS                    $102,795         $119,001          $138,401          $1,233,036   $1,593,233      $109,223      $126,338           $146,823          $1,312,851   $1,695,235
      %CHYA                                5.7%             5.9%              6.2%                6.3%         6.3%          6.3%          6.2%               6.1%                6.5%         6.4%
     REFUNDS                           $150,886         $127,751          $539,130           $476,736    $1,294,503      $153,935      $130,815           $555,349           $490,564    $1,330,663
      %CHYA                                3.0%             2.9%              1.7%               1.7%          2.0%          2.0%          2.4%               3.0%               2.9%          2.8%
     OTHER                            -$282,523                     $0                 $0    $305,255      $22,732       -$305,255                  $0                 $0    $329,754         $24,499
     TOTAL                             1,655,078       1,992,704          1,798,952          3,287,428    8,734,161      1,761,937     2,123,544          1,933,837          3,524,918    9,344,237
      %CHYA                                 6.2%            6.4%               7.8%               7.3%         6.9%           6.5%          6.6%               7.5%               7.2%         7.0%

     Note: "Other" includes kicker and federal pension refunds, as well as July withholding accrued to June.
     Tax law impacts are reflected in the collections numbers to produce more meaningful projections.
     TABLE B.5                   OREGON CORPORATE INCOME TAX REVENUE FORECAST - QUARTERLY COLLECTIONS
                                                   Thousands of Dollars - Not Seasonally Adjusted                            June 2008
                                                                       FY                                                      FY
                        2003:3       2003:4     2004:1     2004:2     2004       2004:3     2004:4     2005:1     2005:2      2005
     ADVANCE PAYMENTS     91,425      151,227     28,619    120,004    391,275     92,089    143,362     40,464    146,093     422,009
      %CHYA                35.0%        20.3%     -26.8%      -3.9%       9.4%       0.7%      -5.2%      41.4%      21.7%        7.9%
     FINAL PAYMENTS       10,068       14,962     22,643     34,694     82,368     16,583     16,464     20,117     45,967      99,132
      %CHYA                16.0%        39.9%     152.7%     203.8%     107.1%      64.7%      10.0%     -11.2%      32.5%       20.4%
     REFUNDS              17,431       94,587     19,329     24,791    156,137     18,617    130,324     15,204     33,721     197,866
      %CHYA                -6.8%       -13.5%       0.0%      -0.5%      -9.4%       6.8%      37.8%     -21.3%      36.0%       26.7%
     TOTAL                84,062       71,603     31,934    129,907    317,506     90,056     29,503     45,378    158,340     323,276
      %CHYA                45.6%       163.9%      11.1%      16.6%      41.1%       7.1%     -58.8%      42.1%      21.9%        1.8%

                                                                       FY                                                      FY
                        2005:3       2005:4     2006:1     2006:2     2006       2006:3     2006:4     2007:1     2007:2      2007
     ADVANCE PAYMENTS    119,391      183,280     59,091    163,812    525,573    129,737    236,441     59,754    162,465     588,396
      %CHYA                29.6%        27.8%      46.0%      12.1%      24.5%       8.7%      29.0%       1.1%      -0.8%       12.0%
     FINAL PAYMENTS       14,985       17,619     24,327     39,526     96,457     19,718     17,154     25,440     65,628     127,941




98
      %CHYA                -9.6%         7.0%      20.9%     -14.0%      -2.7%      31.6%      -2.6%       4.6%      66.0%       32.6%

     REFUNDS              16,350      108,723     19,140     39,592    183,805     22,481    199,419     38,715     49,865     310,480
      %CHYA               -12.2%       -16.6%      25.9%      17.4%      -7.1%      37.5%      83.4%     102.3%      25.9%       68.9%
     TOTAL               118,026       92,177     64,278    163,745    438,225    126,975     54,176     46,478    178,228     405,857
      %CHYA                31.1%       212.4%      41.6%       3.4%      35.6%       7.6%     -41.2%     -27.7%       8.8%       -7.4%

                                                                       FY                                                      FY
                        2007:3       2007:4     2008:1     2008:2     2008       2008:3     2008:4     2009:1     2009:2      2009
     ADVANCE PAYMENTS    133,408      205,375     64,256    159,675    562,715    109,940    164,576     70,099    167,225     511,839
      %CHYA                 2.8%       -13.1%       7.5%      -1.7%      -4.4%     -17.6%     -19.9%       9.1%       4.7%       -9.0%
     FINAL PAYMENTS       23,631       45,064     35,076     41,112    144,882     16,281     13,939     28,448     29,121      87,789
      %CHYA                19.8%       162.7%      37.9%     -37.4%      13.2%     -31.1%     -69.1%     -18.9%     -29.2%      -39.4%
     REFUNDS              39,623      158,106     36,380     40,565    274,675     24,055    137,255     25,435     37,497     224,242
      %CHYA                76.3%       -20.7%      -6.0%     -18.6%     -11.5%     -39.3%     -13.2%     -30.1%      -7.6%      -18.4%
     TOTAL               117,416       92,333     62,951    160,222    432,922    102,166     41,259     73,112    158,849     375,385
      %CHYA                -7.5%        70.4%      35.4%     -10.1%       6.7%     -13.0%     -55.3%      16.1%      -0.9%      -13.3%
     TABLE B.5                   OREGON CORPORATE INCOME TAX REVENUE FORECAST - QUARTERLY COLLECTIONS
                                                   Thousands of Dollars - Not Seasonally Adjusted                            June 2008
                                                                       FY                                                      FY
                        2009:3       2009:4     2010:1     2010:2     2010       2010:3     2010:4     2011:1     2011:2      2011
     ADVANCE PAYMENTS    121,137      192,227     82,759    180,282    576,406    128,804    198,461     84,677    182,793     594,735
      %CHYA                10.2%        16.8%      18.1%       7.8%      12.6%       6.3%       3.2%       2.3%       1.4%        3.2%
     FINAL PAYMENTS       17,781       15,396     26,380     29,274     88,832     17,447     15,313     27,457     31,036      91,253
      %CHYA                 9.2%        10.5%      -7.3%       0.5%       1.2%      -1.9%      -0.5%       4.1%       6.0%        2.7%
     REFUNDS              22,258      149,395     27,684     40,813    240,150     24,227    140,555     26,046     38,398     229,226
      %CHYA                -7.5%         8.8%       8.8%       8.8%       7.1%       8.8%      -5.9%      -5.9%      -5.9%       -4.5%
     TOTAL               116,660       58,229     81,455    168,743    425,088    122,023     73,220     86,088    175,431     456,761
      %CHYA                14.2%        41.1%      11.4%       6.2%      13.2%       4.6%      25.7%       5.7%       4.0%        7.5%

                                                                       FY                                                      FY
                        2011:3       2011:4     2012:1     2012:2     2012       2012:3     2012:4     2013:1     2013:2      2013
     ADVANCE PAYMENTS    130,407      200,291     85,395    184,889    600,981    131,966    202,898     86,573    188,771    610,207
      %CHYA                 1.2%         0.9%       0.8%       1.1%       1.1%       1.2%       1.3%       1.4%       2.1%       1.5%
     FINAL PAYMENTS       16,811       15,365     30,668     32,999     95,843     18,274     16,442     31,974     34,577    101,268




99
      %CHYA                -3.6%         0.3%      11.7%       6.3%       5.0%       8.7%       7.0%       4.3%       4.8%       5.7%
     REFUNDS              22,793      140,887     26,108     38,489    228,277     22,847    138,401     25,647     37,810    224,705
      %CHYA                -5.9%         0.2%       0.2%       0.2%      -0.4%       0.2%      -1.8%      -1.8%      -1.8%      -1.6%
     TOTAL               124,424       74,769     89,955    179,399    468,547    127,392     80,938     92,900    185,538     486,769
      %CHYA                 2.0%         2.1%       4.5%       2.3%       2.6%       2.4%       8.3%       3.3%       3.4%        3.9%

                                                                       FY                                                      FY
                        2013:3       2013:4     2014:1     2014:2     2014       2014:3     2014:4     2015:1     2015:2      2015
     ADVANCE PAYMENTS    134,889      207,908     88,755    192,893    624,446    137,763    212,092     90,516    196,875    637,246
      %CHYA                 2.2%         2.5%       2.5%       2.2%       2.3%       2.1%       2.0%       2.0%       2.1%       2.0%
     FINAL PAYMENTS       19,587       17,466     32,575     35,385    105,013     20,025     17,868     33,265     36,035    107,193
      %CHYA                 7.2%         6.2%       1.9%       2.3%       3.7%       2.2%       2.3%       2.1%       1.8%       2.1%
     REFUNDS              22,444      140,246     25,989     38,314    226,992     22,743    143,813     26,650     39,288    232,494
      %CHYA                -1.8%         1.3%       1.3%       1.3%       1.0%       1.3%       2.5%       2.5%       2.5%       2.4%
     TOTAL               132,033       85,128     95,342    189,965    502,467    135,045     86,147     97,131    193,622     511,945
      %CHYA                 3.6%         5.2%       2.6%       2.4%       3.2%       2.3%       1.2%       1.9%       1.9%        1.9%
      TABLE B.6                                                                                                                                                                                                                                                      June 2008
      Cigarette & Tobacco Tax Distribution (Millions of $)*
                                                                                                                 Cigarette Tax Distribution                                                                                                 Other Tobacco Tax Distribution
                                                                                                             Tobacco Use
                                                                                    Health Plan               Reduction                                                    Cities,                                                                             Tobacco Use
                                                             State GF              (Measure 44)                  Account                                               Counties &                                                              Health Plan4     Reduction
                                                           (22 cents) 1              (87 cents) 1              (3 cents) 2              State Total                Public Transit 3                  Total                State GF            (Measure 44)      Account 4     State Total


      Gross Receipts
      2007-08                                                       43.414                  169.198                      6.749                  219.361                   13.498                     232.859                    16.856                13.005          1.446       31.307
      2008-09                                                       40.789                  158.964                      6.341                  206.094                   12.682                     218.775                    16.762                12.933          1.438       31.133
      2007-09 Biennium                                              84.203                  328.162                     13.090                  425.454                   26.179                     451.634                    33.618                25.938          2.885       62.440
      Net Distributions*
      2007-08                                                       43.061                  167.822                      6.694                  217.578                   13.388                     230.966                    16.419                12.668          1.409       30.496
      2008-09                                                       40.436                  157.589                      6.286                  204.310                   12.572                     216.882                    16.325                12.596          1.401       30.322
      2007-09 Biennium                                              83.497                  325.411                     12.980                  421.888                   25.960                     447.848                    32.744                25.264          2.810       60.818

      Distribution Forecast*
      2009-10                                                       39.140                  152.538                      6.084                  197.762                   12.169                     209.931                    16.364                12.625          1.404       30.393




100
      2010-11                                                       37.909                  147.743                      5.893                  191.546                   11.786                     203.332                    16.334                12.602          1.402       30.338
      2009-11 Biennium                                              77.049                  300.281                     11.978                  389.308                   23.955                     413.263                    32.698                25.228          2.806       60.731

      2011-12                                                       38.028                  148.204                      5.912                  192.143                   11.823                     203.966                    16.530                12.754          1.418       30.702
      2012-13                                                       38.141                  148.646                      5.929                  192.716                   11.858                     204.574                    16.714                12.896          1.434       31.044
      2011-13 Biennium                                              76.168                  296.849                     11.841                  384.858                   23.681                     408.540                    33.244                25.649          2.853       61.746

      2013-14                                                       38.257                  149.100                      5.947                  193.305                   11.895                     205.199                    16.906                13.044          1.451       31.401
      2014-15                                                       38.373                  149.551                      5.965                  193.889                   11.931                     205.820                    17.097                13.191          1.467       31.755
      2013-15 Biennium                                              76.631                  298.651                     11.913                  387.194                   23.825                     411.019                    34.003                26.235          2.918       63.156
      * "Net Distributions" receipts net of Tobacco Task Force expense of $5.409 million for 2007-09 biennium. These expenses are not determined for future biennia, and thus are not incorporated into the forecast.
      1. The 1997 Legislature specified that the temporary 10 cent tax be counted as other funds starting July 1, 1997. As a result the Health Plan received 37 cents per pack as of July 1, 1997. The 10 cent tax has expired on January 1, 2004.
        Voters approved 60 cents per pack tax increase dedicated to the Health Plan, effective November 1, 2002.
      2. Measure 44 created the TURA and funded it with a 3 cents per pack tax effective February 1, 1997.
      3. Cities, Counties and Public Transit each receive revenue from a 2 cent per pack tax. The total amount shown equals the total 6 cents per pack dedicated to these entities.
      4. Measure 44 increased the other tobacco taxes from 35% to 65% of the wholesale price, effective February 1, 1997. House Bill 3433, enacted by the 2001 Legislature, limits this tax to 50 cents per cigar.
        The Health Plan receives 41.54% of the revenue from the other tobacco tax collections. The TURA receives 4.62 % of collections. The remainder goes to the General Fund.


      Note: Tobacco Settlement Payment Forecast ($millions)                                                         Year                      2007                          2008                      2009
      Source:
            Bear Stearns                                                                                           Amount                     75.1                          97.4                      98.9
      TABLE B.7                                                                                                                             June 2008
      Revenue Distribution to Local Governments (Millions of $)

                                                                  Liquor Apportionment Distribution
                                                                                                                                    Cigarette Tax
                                  Total Liquor           Available for      City Revenue                                           Distribution to
                                    Revenue Less General Cities and Revenue                                                       Cities, Counties &
                                    Available        Fund 56%          Counties        Sharing    Regular    Total     Counties    Public Transit 1

      2007-08                           158.512             88.766            69.745     22.192     31.702    53.894     15.851        13.388
      2008-09                           164.981             92.390            72.592     23.097     32.996    56.094     16.498        12.572
      2007-09 Biennium                  323.493           181.156            142.337     45.289     64.699   109.988     32.349        25.960


      2009-10                           158.512             88.766            69.745     22.192     31.702    53.894     15.851        12.169




101
      2010-11                           164.981             92.390            72.592     23.097     32.996    56.094     16.498        11.786
      2009-11 Biennium                  323.493           181.156            142.337     45.289     64.699   109.988     32.349        23.955


      2011-12                           158.512             88.766            69.745     22.192     31.702    53.894     15.851        11.823
      2012-13                           164.981             92.390            72.592     23.097     32.996    56.094     16.498        11.858
      2011-13 Biennium                  323.493           181.156            142.337     45.289     64.699   109.988     32.349        23.681


      2013-14                           158.512             88.766            69.745     22.192     31.702    53.894     15.851        11.895
      2014-15                           164.981             92.390            72.592     23.097     32.996    56.094     16.498        11.931
      2013-15 Biennium                  323.493           181.156            142.337     45.289     64.699   109.988     32.349        23.825
      1
          For details on cigarette revenues see TABLE B.6 on previous page
      Table B.8 Track Record for the March 2008 Forecast
      (Quarter ending March 31, 2008)
      Personal Income Tax                          Forecast Comparison                   Year/Year Change
                                         Actual           Latest        Percent        Prior          Percent
         (Millions of dollars)          Revenues         Forecast      Difference      Year           Change
         Withholding                        $1,196.5        $1,231.1           -2.8%     $1,182.3           1.2%
             Dollar difference                                -$34.5                        $14.2
         Estimated Payments                   $281.4          $274.9           2.4%       $267.3            5.3%
             Dollar difference                                  $6.5                       $14.1
         Final Payments                       $104.8          $101.4           3.4%       $100.5            4.3%
             Dollar difference                                  $3.5                        $4.4
         Refunds                             -$389.9         -$370.2           5.3%       -$444.8          -12.3%
            Dollar difference                                 -$19.7                        $54.9
         Total Personal Income Tax          $1,192.9        $1,237.2           -3.6%     $1,105.4           7.9%
            Dollar difference                                 -$44.2                        $87.5




102
      Corporate Income Tax                         Forecast Comparison                   Year/Year Change
                                         Actual           Latest        Percent        Prior          Percent
         (Millions of dollars)          Revenues         Forecast      Difference      Year           Change
         Advanced Payments                      $64.3            $67.9         -5.4%         $59.8           7.5%
             Dollar difference                                   -$3.6                        $4.5
         Final Payments                        $35.1           $31.1          12.6%        $25.4           37.9%
            Dollar difference                                   $3.9                        $9.6
         Refunds                              -$36.4          -$25.9          40.2%        -$38.7           -6.0%
            Dollar difference                                 -$10.4                         $2.3

         Total Corporate Income Tax            $63.0            $73.1         -13.9%       $46.5           35.4%
            Dollar difference                                  -$10.1                      $16.5

      Total Income Tax                             Forecast Comparison                   Year/Year Change
                                         Actual           Latest        Percent        Prior          Percent
         (Millions of dollars)          Revenues         Forecast      Difference      Year           Change
         Corporate and Personal Tax         $1,255.9         $1,310.3          -4.1%     $1,151.9           9.0%
            Dollar difference                                  -$54.4                     $104.0
      TABLE B.9                                                                                                                                                                                                                       June 2008
      Summary of Lottery Resources
                                                                                             2007-09                                             2009-11                                          2011-13                      2013-15

                                                                          Current           Change from Change from                    Current          Change from                   Current            Change from    Current       Change from
      (in millions of dollars)                                            Forecast            Mar-08       COS                         Forecast           Mar-08                      Forecast             Mar-08       Forecast        Mar-08
      LOTTERY EARNINGS
           Traditional Lottery                                                    134.9                 4.3            5.6                     130.6                3.3                          130.4           3.3         129.9
           Video Lottery                                                        1,143.6                 4.7           (8.3)                  1,243.8               (5.5)                    1,423.4              7.8        1,611.0
          Admin. Savings                                                          60.9                  0.0          25.9                        0.0                0.0                         0.0              0.0            0.0
        Total Available to Transfer                                            1,339.3                  9.0          23.2                    1,374.5               (2.2)                    1,553.8             11.0        1,740.9

      ECONOMIC DEVELOPMENT FUND
           Beginning Balance                                                       64.1                 0.0           (2.2)                     11.7              11.7                             0.0           0.0            0.0
           Transfers from Lottery                                               1,339.3                 9.0          23.2                    1,374.5               (2.2)                    1,553.8             11.0        1,740.9
                                  1
          Other Resources                                                         14.1                  0.0           4.3                        4.5                0.0                         6.0              0.0            6.0
        Total Available Resources                                              1,417.5                  9.0          25.3                    1,390.7                9.5                     1,559.8             11.0        1,746.9

      ALLOCATION OF RESOURCES




103
         County Economic Development                                               43.9                (0.1)          (1.3)                     49.8              (0.2)                           57.0           0.3          64.5
                                  2
         Education Stability Fund                                                 241.1                 1.6            4.2                     182.6             (65.2)                          135.7        (142.0)        113.3
                                           2
         Oregon Capital Matching Account                                                                                                        54.0                                             120.0                       166.7
                                             3
         Parks and Natural Resources Fund                                         200.9                1.3            3.5                      206.2               (0.3)                         233.1           1.7         261.1
                              4
         Collegiate Athletics                                                      11.9                0.1            0.2                       13.7               (0.0)                          15.5           0.1          17.4
                              4
         Gambling Addiction                                                        13.4                0.1            0.2                       13.7               (0.0)                          15.5           0.1          17.4
         County Fairs                                                               3.6                0.0            0.0                        3.3                0.0                            3.3           0.0           3.3
                                        5
         Debt Service on Lottery Bonds                                            167.5                0.0            0.0                      166.3                0.0                          166.3           0.0         166.3
         Other Legislatively Adopted Allocations                                  723.7               20.0           20.0
       Total Distributions                                                      1,405.8               23.0           26.8                      689.7             (65.8)                          746.5        (139.8)        810.1

      Ending Balance/Discretionary Resources                                       11.7              (14.1)           (1.5)                    701.0              21.3                           813.3          30.9         936.8

      Note: Some totals may not foot due to rounding.
      1. Includes interest earnings on Economic Development Fund and reversions.
      2. Eighteen percent of proceeds accrue to the Ed. Stability Fund, until the balance equals 5% of GF Revenues. Thereafter, 15% of proceeds accrue to the Oregon Capital Matching Account.
      3. The Parks and Natural Resources Fund Constitutional amendment requires 15% of net proceeds be transferred to this fund.
      4. One percent of net lottery proceeds are dedicated to Collegiate Athletics and Gambling Addiction programs, respectively.
      5. 2007-11 figures reflect gross debt service on lottery bonds. Figures do not include future issuance.
      Table B.10: Budgetary Reserve Summary and Outlook                                                                                                                                                       June 2008

      Rainy Day Fund
          (Millions)                                                            2007-09 Biennium                       2009-11 Biennium                        2011-13 Biennium                        2013-15 Biennium
          Beginning Balance                                                                       $0.0                                 $340.9                                 $515.7                              $729.8
          Interest Earnings                                                                     $21.6                                   $35.3                                   $59.0                              $80.5
                     1
          Deposits                                                                             $319.3                                  $139.5                                 $155.1                              $175.3
          Triggered Withdrawals                                                                   $0.0                                    $0.0                                   $0.0                                $0.0
          Ending Balance2                                                                      $340.9                                  $515.7                                 $729.8                              $985.6


                                                          3
      Education Stability Fund
          (Millions)                                                            2007-09 Biennium                       2009-11 Biennium                        2011-13 Biennium                        2013-15 Biennium
          Beginning Balance                                                                    $178.9                                  $396.0                                 $560.3                              $682.5

          Interest Earnings4                                                                    $25.4                                   $52.0                                   $68.7                              $80.6




104
          Deposits5                                                                            $217.1                                  $164.3                                 $122.2                              $102.0
          Distributions
            Oregon Education Fund                                                              -$19.0                                  -$39.0                                  -$51.5                              -$60.5
            State Scholarship Commission                                                        -$6.3                                  -$13.0                                  -$17.2                              -$20.2
            Triggered Withdrawals
          Ending Balance                                                                       $396.0                                  $560.3                                 $682.5                              $784.5


      Total Reserves
          (Millions)                                                            2007-09 Biennium                       2009-11 Biennium                        2011-13 Biennium                        2013-15 Biennium
          Ending Balances                                                                      $736.9                               $1,076.0                                $1,412.3                             $1,770.1
          Percent of GF Revenues                                                                 5.7%                                    6.9%                                   8.0%                                8.9%

      Footnotes:
      1. Includes transfer of ending General Fund balances, up to 1% of budgeted appropriations, as well as private donations. Assumes future appropriations equal to 98.75 percent of available resources.
      2. Available funds in a given biennium equal 2/3rds of the beginning balance under current law.
      3. Excludes funds in the Oregon Growth and the Oregon Resource and Technology Development subaccounts.
      4. Interest earnings are distributed to the Oregon Education Funds (75%) and the State Scholarship Fund (25%).
      5. Contributions to the ESF are capped at 5% of the prior biennium's General Fund revenue total. Quarterly contributions are made until the balance exceeds the cap.
              APPENDIX C:                   POPULATION FORECASTS BY AGE AND SEX


                                                STATE OF OREGON



Table C. 1      Population Forecasts Components of Change 1980-2013 ........................................ 108
Table C. 2      Population Forecasts by Age and Sex: 2000-2013 ................................................... 109
Table C. 3      Population of Oregon: 1980-2013............................................................................. 110
Table C. 4      Children: Ages 0-4.................................................................................................... 110
Table C. 5      School Age Population: Ages 5-17........................................................................... 110
Table C. 6      Young Adult Population: Ages 18-24....................................................................... 110
Table C. 7      Criminally “At Risk” Population: Males Ages 15-39............................................... 111
Table C. 8      Prime Wage Earners: Ages 25-44............................................................................. 111
Table C. 9      Older Wage Earners: Ages 45-64 ............................................................................. 111
Table C. 10     Elderly Population by Age Group............................................................................. 111




                                                               105
106
OREGON'S POPULATION FORECASTS BY AGE AND SEX

Procedure and Assumptions

Population forecasts by age and sex are developed using the cohort-component projection
procedure. The population by single year of age and sex is projected based on the assumption of
specific assumptions of vital events and migrations. Oregon’s population as of July 1, 2000 is the
base population for the forecasting model. The total base population by age-sex detail is derived
from the U.S. Census Bureau.

To explain the cohort-component projection procedure very briefly, the forecasting model
"survives" the initial population distribution by age and sex to the next age-sex category in the
following year, and then applies age-sex-specific birth and migration rates to the mid-year
population. Further iterations subject the in-and-out migrants to the same vital rates.

Total populations for the years 2001 through 2007 in the following tables are annual estimates
from Center for Population Research, Portland State University. The numbers of births and
deaths through 2006-07 are from Oregon's Center for Health Statistics. The total populations for
the period 2008 to 2015 are generated as part of the economic and revenue forecast of OEA. The
numbers of births and deaths are projected based on the assumptions of fertility and mortality
rates derived from historical trend and forecast for the United States..

Age-specific fertility rates are projected based on Oregon's past trends and past and projected
national trends. Oregon's total fertility rate is assumed to remain slightly below 2.0 children per
woman during the forecast period, tracking at slightly lower than the national rate.

Life Table survival rates are developed for the year 2000. Male and female life expectancies for
the 2000-2015 period are projected based on the past three decades of trends and national
projected life expectancies. Gradual improvements in life expectancies are expected over the
forecast period. At the same time, the difference between the male and female life expectancies
will continue to shrink. The male life expectancy of 75.7 and the female life expectancy of 80.2
in 2000 are projected to improve to 78.8 years for males and 83.0 years for females by the year
2015.

Estimates and forecasts of the number of net migrations are based on the residuals from the
difference between population change and natural increase (births minus deaths) in a given
forecast period. The annual net migration between 2007 and 2015 is expected to remain in the
range of 30,900 to 34,500, averaging 32,800 persons annually. When Oregon’s economy slowed
down during the early years of this decade so did the net migration component of population
change. Population growth and net migration rates in 2000 through 2004 were the lowest in over
a decade. However, improving Oregon’s economy has led to higher levels of net migration and
population growth.




                                               107
Table C. 1
                                                             STATE OF OREGON
                                                          POPULATION FORECASTS
                                                      COMPONENTS OF CHANGE 1980 -2015
 Year                        Population Change                   Births                     Deaths               Natural         Net Migration
 (July 1)    Population        Number     Percent         Number Rate/1000           Number Rate/1000           Increase       Number     Rate/1000
 ------        -----------    -----------  --------      -----------    --------    -----------    --------    -----------    -----------   --------
 1980         2,641,200              ---       ---              ---         ---            ---         ---            ---            ---       ---
 1981         2,668,000          26,800       1.01          43,196       16.27         21,870         8.24        21,326          5,474        2.06
 1982         2,664,900          -3,100      -0.12          42,261       15.85         21,548         8.08        20,713        -23,813       -8.93
 1983         2,653,100         -11,800      -0.44          40,378       15.19         22,039         8.29        18,339        -30,139      -11.33
 1984         2,666,600          13,500       0.51          39,611       14.89         22,702         8.54        16,909         -3,409       -1.28
 1985         2,672,600           6,000       0.23          39,296       14.72         23,531         8.81        15,765         -9,765       -3.66
1980-1985                       31,400                    204,742                    111,690                     93,052        -61,652
 1986        2,683,500          10,900        0.41        39,332         14.69       23,403           8.74       15,929         -5,029          -1.88
 1987        2,701,000          17,500        0.65        38,702         14.38       23,695           8.80       15,007          2,493           0.93
 1988        2,741,300          40,300        1.49        39,120         14.38       24,752           9.10       14,368         25,932           9.53
 1989        2,790,600          49,300        1.80        40,648         14.70       24,705           8.93       15,943         33,357          12.06
 1990        2,860,400          69,800        2.50        42,008         14.87       24,763           8.76       17,245         52,555          18.60
1985-1990                      187,800                    199,810                    121,318                     78,492        109,308
 1991        2,928,500          68,100        2.38        42,682         14.75       24,944           8.62       17,738         50,362          17.40
 1992        2,991,800          63,300        2.16        42,427         14.33       25,166           8.50       17,261         46,039          15.55
 1993        3,060,400          68,600        2.29        41,442         13.69       26,543           8.77       14,899         53,701          17.75
 1994        3,121,300          60,900        1.99        41,487         13.42       27,564           8.92       13,923         46,977          15.20
 1995        3,184,400          63,100        2.02        42,426         13.46       27,552           8.74       14,874         48,226          15.30
1990-1995                      324,000                    210,464                    131,769                     78,695        245,305
 1996        3,247,100          62,700        1.97        43,196         13.43       28,768           8.95       14,428         48,272          15.01
 1997        3,304,300          57,200        1.76        43,625         13.32       29,201           8.91       14,424         42,776          13.06
 1998        3,352,400          48,100        1.46        44,696         13.43       28,705           8.62       15,991         32,109           9.65
 1999        3,393,900          41,500        1.24        45,188         13.40       29,848           8.85       15,340         26,160           7.76
 2000        3,431,530          37,630        1.11        45,534         13.34       28,909           8.47       16,625         21,005           6.15
1995-2000                      247,130                    222,239                    145,431                     76,808        170,322
 2001        3,471,700          40,170        1.17        45,536         13.19       29,934           8.67       15,602         24,568           7.12
 2002        3,504,700          33,000        0.95        44,995         12.90       30,828           8.84       14,167         18,833           5.40
 2003        3,541,500          36,800        1.05        45,686         12.97       30,604           8.69       15,082         21,718           6.16
 2004        3,582,600          41,099        1.16        45,599         12.80       30,721           8.62       14,878         26,221           7.36
 2005        3,631,440          48,841        1.36        45,892         12.72       30,723           8.52       15,169         33,672           9.33
2000-2005                      199,910                    227,708                    152,810                     74,898        125,012
 2006        3,690,505          59,065        1.63        46,471         12.69       30,328           8.28       16,143         42,922          11.72
 2007        3,745,500          54,995        1.49        48,503         13.05       30,471           8.20       18,032         36,963           9.94
 2008        3,798,000          52,500        1.40        49,039         13.00       30,508           8.09       18,531         33,969           9.01
 2009        3,850,300          52,300        1.38        49,555         12.96       30,790           8.05       18,765         33,535           8.77
 2010        3,904,000          53,700        1.39        50,321         12.98       31,079           8.02       19,242         34,458           8.89
2005-2010                      272,560                    243,889                    153,175                     90,713        181,847
 2011        3,957,000          53,000        1.36        50,902         12.95       31,380           7.98       19,522         33,478           8.52
 2012        4,010,100          53,100        1.34        51,627         12.96       31,703           7.96       19,924         33,175           8.33
 2013        4,062,200          52,101        1.30        52,256         12.95       32,053           7.94       20,203         31,897           7.90
 2014        4,113,700          51,500        1.27        52,809         12.92       32,419           7.93       20,391         31,109           7.61
 2015        4,165,100          51,400        1.25        53,296         12.88       32,803           7.92       20,494         30,906           7.47
2010-2015                      261,100                    260,891                    160,357                    100,534        160,566
1980-1990                      219,200                    404,552                    233,008                    171,544         47,656
1990-2000                      571,130                    432,703                    277,200                    155,503        415,627
2000-2010                      472,470                    471,597                    305,985                    165,611        306,859

Sources: 1980-2000 population - U.S. Bureau of the Census; 2001-2007 population - Population Research Center, PSU;
         2008-2015 - Office of Economic Analysis; 1980-07 births, and 1980-06 deaths: vital statistics - Oregon Center for Health Statistics.




                                                                        108
Table C. 2
                                                                          Oregon's Population Forecasts by Age and Sex: 2000-2015 (July 1 population)
                                            2000                                                         2001                                                       2002                                                       2003
    Age                   Male             Female               Total                  Male             Female               Total                Male             Female               Total                Male             Female               Total
-------------- ------------------ ------------------ ------------------     ------------------ ------------------ ------------------   ------------------ ------------------ ------------------   ------------------ ------------------ ------------------
     0-4              114,089            109,109            223,198                114,659            109,885           224,544               115,065           109,830             224,895             115,889             110,479           226,368
     5- 9             119,728            114,005            233,733                118,993            113,315           232,307               118,103           112,750             230,853             117,869             112,700           230,570
   10-14              124,731            118,373            243,104                125,947            119,558           245,505               126,463           120,499             246,963             126,988             120,635           247,622
   15-19              125,941            119,230            245,171                126,971            119,674           246,644               126,631           119,486             246,117             125,593             119,690           245,282
   20-24              119,362            113,342            232,704                121,099            115,890           236,989               123,441           118,175             241,616             126,189             120,175           246,364
   25-29              120,609            112,253            232,862                119,719            111,704           231,423               119,730           112,740             232,470             121,438             114,557           235,995
   30-34              122,510            114,776            237,286                126,215            117,835           244,050               128,438           119,539             247,977             129,262             120,677           249,940
   35-39              128,828            126,293            255,121                126,068            123,161           249,229               124,081           119,818             243,899             122,730             117,464           240,194
   40-44              134,552            137,191            271,743                135,208            136,998           272,207               134,206           135,536             269,742             133,448             134,053           267,501
   45-49              135,715            137,448            273,163                136,538            139,007           275,545               137,569           140,403             277,971             137,161             140,481           277,642
   50-54              118,674            119,617            238,291                125,869            127,223           253,092               126,620           128,221             254,840             129,646             132,014           261,660
   55-59               85,986             88,165            174,151                 89,402             91,625           181,028                98,401           100,700             199,101             104,124             106,201           210,325
   60-64               64,549             67,444            131,993                 67,398             70,444           137,842                70,683             73,992            144,675               75,518             78,824           154,342
   65-69               53,078             59,230            112,308                 53,720             59,268           112,988                54,735             59,983            114,718               56,496             61,615           118,111
   70-74               48,503             58,073            106,576                 48,093             57,134           105,227                47,509             56,256            103,766               47,046             55,542           102,588
   75-79               40,447             54,757             95,204                 40,355             54,200             94,555               40,241             53,341             93,582               40,238             52,409             92,647
   80-84               26,452             40,414             66,866                 27,369             41,320             68,689               28,218             42,149             70,366               28,535             42,794             71,329
     85+               18,528             39,528             58,056                 19,345             40,489             59,834               19,947             41,200             61,147               20,866             42,152             63,018
   Total          1,702,282           1,729,248          3,431,530              1,722,970          1,748,729          3,471,700            1,740,082          1,764,618          3,504,700            1,759,037          1,782,463          3,541,500
Mdn. Age                  35.2               37.6               36.4                   35.3               37.8               36.6                 35.5               38.0               36.8                 35.7               38.2               36.9

                                            2004                                                         2005                                                       2006                                                       2007
    Age                   Male             Female               Total                  Male             Female               Total                Male             Female               Total                Male             Female               Total
-------------- ------------------ ------------------ ------------------     ------------------ ------------------ ------------------   ------------------ ------------------ ------------------   ------------------ ------------------ ------------------
     0-4              116,733            111,248            227,981                117,472            112,080           229,552               118,367           112,937             231,304              120,283            114,759            235,042
     5- 9             118,416            113,224            231,640                119,188            114,155           233,343               120,469           115,652             236,121              121,513            116,201            237,714
   10-14              126,151            120,031            246,182                124,709            118,975           243,685               124,345           118,656             243,001              123,948            118,614            242,562
   15-19              126,310            120,509            246,819                128,176            122,094           250,270               129,889           123,801             253,690              130,921            125,284            256,205
   20-24              127,998            122,284            250,283                129,345            123,196           252,541               131,104           124,340             255,444              131,198            124,593            255,791
   25-29              123,787            117,101            240,888                126,462            120,639           247,102               129,613           124,601             254,214              133,227            128,134            261,361
   30-34              128,821            120,228            249,049                127,601            119,645           247,247               127,671           120,105             247,776              128,809            122,335            251,144
   35-39              123,467            117,324            240,791                127,326            120,259           247,585               131,883           124,208             256,091              135,067            126,883            261,950
   40-44              133,141            132,773            265,914                131,886            130,347           262,233               129,607           127,711             257,317              128,213            124,934            253,147
   45-49              135,935            139,566            275,501                135,632            139,553           275,185               136,710           139,803             276,513              136,182            138,841            275,024
   50-54              132,902            136,064            268,966                135,198            138,572           273,770               136,394           140,578             276,972              137,833            142,440            280,273
   55-59              110,295            112,331            222,625                117,552            120,023           237,575               125,202           128,183             253,385              126,417            129,669            256,086
   60-64               80,122             83,333            163,455                 84,084             87,757           171,842                87,885             91,673            179,558               97,265            101,268            198,533
   65-69               58,549             63,639            122,188                 60,958             65,580           126,538                64,007             68,847            132,854               67,551             72,736            140,287
   70-74               46,997             54,975            101,972                 47,595             55,013           102,608                48,431             55,249            103,680               49,676             56,210            105,886
   75-79               39,892             51,358             91,250                 39,739             50,721             90,460               39,638             50,115             89,753               39,439             49,593             89,033
   80-84               28,915             43,453             72,368                 29,283             43,589             72,873               29,496             43,384             72,880               29,734             42,970             72,704
     85+               21,632             43,096             64,728                 22,640             44,394             67,034               23,908             46,044             69,953               25,123             47,637             72,760
   Total          1,780,063           1,802,537          3,582,600              1,804,847          1,826,593          3,631,440            1,834,618          1,855,887          3,690,505            1,862,398          1,883,102          3,745,500
Mdn. Age                  35.8               38.3               37.0                   36.0               38.4               37.1                 36.3               38.4               37.3                 36.5               38.5               37.5

                                            2008                                                         2009                                                       2010                                                       2011
    Age                   Male             Female               Total                  Male             Female               Total                Male             Female               Total                Male             Female               Total
-------------- ------------------ ------------------ ------------------     ------------------ ------------------ ------------------   ------------------ ------------------ ------------------   ------------------ ------------------ ------------------
     0-4              121,933            116,325            238,257                123,875            118,173           242,049               126,118           120,308             246,426             128,395             122,476           250,871
     5- 9             122,872            117,362            240,235                123,958            118,360           242,318               124,611           119,113             243,723             124,962             119,438           244,400
   10-14              124,283            119,148            243,430                125,266            120,107           245,373               126,180           121,178             247,359             127,000             122,222           249,222
   15-19              131,766            125,733            257,499                131,034            125,244           256,277               129,512           124,111             253,624             128,931             123,560           252,490
   20-24              130,281            124,977            255,258                131,109            125,905           257,013               132,993           127,496             260,488             134,442             128,935           263,377
   25-29              136,734            130,840            267,574                138,843            133,289           272,131               140,063           134,045             274,108             141,292             134,605           275,897
   30-34              131,365            124,999            256,365                134,297            128,124           262,421               137,115           131,876             268,991             139,692             135,357           275,049
   35-39              136,498            128,681            265,179                136,375            128,546           264,921               135,085           127,902             262,987             134,563             127,764           262,327
   40-44              127,259            122,941            250,200                128,290            123,065           251,356               132,297           126,123             258,419             136,586             129,785           266,371
   45-49              135,743            137,684            273,427                135,632            136,586           272,218               134,367           134,078             268,444             131,762             131,028           262,789
   50-54              137,703            142,807            280,510                136,650            142,041           278,691               136,382           142,023             278,405             137,270             142,014           279,284
   55-59              129,707            133,782            263,488                133,111            138,027           271,138               135,426           140,557             275,983             136,442             142,337           278,779
   60-64              103,273            107,121            210,394                109,594            113,482           223,075               116,837           121,249             238,086             124,175             129,184           253,359
   65-69               72,523             77,823            150,345                 77,174             82,483           159,657                81,081             86,897            167,978               84,592             90,552           175,145
   70-74               51,556             58,008            109,564                 53,637             60,120           113,757                55,999             62,069            118,068               58,789             65,105           123,893
   75-79               39,298             49,174             88,472                 39,458             48,847             88,305               40,157             49,032             89,189               40,957             49,300             90,257
   80-84               29,990             42,466             72,456                 29,935             41,845             71,780               30,015             41,524             71,539               30,058             41,137             71,195
     85+               26,153             49,192             75,345                 27,115             50,704             77,820               28,191             51,994             80,185               29,201             53,093             82,294
   Total          1,888,938           1,909,062          3,798,000              1,915,353          1,934,947          3,850,300            1,942,429          1,961,571          3,904,000            1,969,109          1,987,891          3,957,000
Mdn. Age                  36.7               38.7               37.7                   36.9               38.9               37.9                 37.1               39.1               38.1                 37.2               39.2               38.2

                                            2012                                                         2013                                                        2014                                                      2015
    Age                   Male             Female               Total                  Male             Female               Total                Male             Female               Total                Male             Female               Total
-------------- ------------------ ------------------ ------------------     ------------------ ------------------ ------------------   ------------------ ------------------ ------------------   ------------------ ------------------ ------------------
     0-4              129,961            123,966            253,927                131,572            125,498           257,070               133,204           127,051             260,255             134,715             128,489           263,204
     5- 9             126,597            120,985            247,581                128,103            122,410           250,513               129,944           124,159             254,103             132,106             126,216           258,321
   10-14              127,675            122,381            250,056                128,594            123,104           251,698               129,295           123,722             253,017             129,612             124,148           253,760
   15-19              128,494            123,479            251,973                128,611            123,788           252,399               129,309           124,453             253,761             129,947             125,246           255,193
   20-24              135,303            130,266            265,569                136,084            130,620           266,704               135,244           130,011             265,255             133,543             128,698           262,241
   25-29              140,973            134,459            275,432                139,750            134,629           274,379               140,373           135,373             275,746             142,086             136,794           278,880
   30-34              143,101            138,689            281,790                146,638            141,370           288,008               148,667           143,766             292,433             149,672             144,269           293,941
   35-39              135,429            129,768            265,197                137,964            132,433           270,397               140,897           135,572             276,469             143,657             139,325           282,982
   40-44              139,618            132,285            271,903                140,961            134,012           274,973               140,713           133,738             274,450             139,257             132,919           272,175
   45-49              130,333            128,135            258,468                129,345            126,056           255,402               130,327           126,102             256,430             134,251             129,065           263,316
   50-54              136,832            141,092            277,924                136,457            139,956           276,413               136,369           138,840             275,209             135,036             136,200           271,236
   55-59              137,913            144,248            282,162                137,813            144,632           282,445               136,763           143,825             280,588             136,445             143,698           280,143
   60-64              125,408            130,701            256,109                128,702            134,854           263,556               132,067           139,090             271,157             134,280             141,503           275,783
   65-69               93,648             99,994            193,642                 99,507            105,817           205,324               105,643           112,120             217,762             112,628             119,765           232,392
   70-74               62,088             68,801            130,889                 66,770             73,701           140,471                71,112             78,160            149,272               74,751             82,337           157,088
   75-79               42,119             50,240             92,359                 43,826             51,942             95,768               45,686             53,914             99,600               47,822             55,742           103,564
   80-84               30,040             40,818             70,858                 30,057             40,582             70,638               30,278             40,417             70,695               30,957             40,696             71,654
     85+               30,221             54,041             84,262                 31,131             54,913             86,044               31,792             55,703             87,496               32,646             56,582             89,228
   Total          1,995,752           2,014,347          4,010,100              2,021,883          2,040,317          4,062,200            2,047,684          2,066,016          4,113,700            2,073,411          2,091,690          4,165,100
Mdn. Age                  37.4               39.3               38.3                   37.6               39.5               38.5                 37.7               39.6               38.6                 37.9               39.7               38.8




                                                                                                                                                               109
Table C. 3
         Population of Oregon: 1980-2015

  Year                 Total Change from previous year
 (July 1)        Population            Number              Percent
----------- ------------------ ------------------ ------------------
   1980          2,641,200                    ---
   1981          2,668,000               26,800             1.01%
   1982          2,664,900               -3,100            -0.12%                                 Oregon's Population and Annual Percent Change, 1980-2013
   1983          2,653,100             -11,800             -0.44%
   1984          2,666,600               13,500             0.51%                   4,500,000                                                                                                  4.0
   1985          2,672,600                6,000             0.23%                                                        Annual Percent Change
   1986          2,683,500               10,900             0.41%                   4,000,000                                 (right scale)
                                                                                                                                                                                               3.0
   1987          2,701,000               17,500             0.65%
   1988          2,741,300               40,300             1.49%
                                                                                    3,500,000
   1989          2,790,600               49,300             1.80%                                                                                                                              2.0
   1990          2,860,400               69,800             2.50%




                                                                                                                                                                                                      Percent Change
   1991          2,928,500               68,100             2.38%      Population   3,000,000
   1992          2,991,800               63,300             2.16%                                                                                                                              1.0

   1993          3,060,400               68,600             2.29%                   2,500,000
   1994          3,121,300               60,900             1.99%
                                                                                                                                                                                               0.0
   1995          3,184,400               63,100             2.02%                   2,000,000
   1996          3,247,100               62,700             1.97%                                                        Total Population
                                                                                                                         (left scale)
   1997          3,304,300               57,200             1.76%                                                                                                                              -1.0
                                                                                    1,500,000
   1998          3,352,400               48,100             1.46%
                                                                                                                                                                                 Forecast
   1999          3,393,900               41,500             1.24%
   2000          3,431,530               37,630             1.11%                   1,000,000                                                                                                  -2.0

   2001          3,471,700               40,170             1.17%                            1950   1955   1960   1965   1970   1975   1980   1985   1990   1995   2000   2005    2010      2015
   2002          3,504,700               33,000             0.95%                                                                           Year
   2003          3,541,500               36,800             1.05%
   2004          3,582,600               41,099             1.16%
   2005          3,631,440               48,841             1.36%
   2006          3,690,505               59,065             1.63%
   2007          3,745,500               54,995             1.49%
   2008          3,798,000               52,500             1.40%
   2009          3,850,300               52,300             1.38%
   2010          3,904,000               53,700             1.39%
   2011          3,957,000               53,000             1.36%
   2012          4,010,100               53,100             1.34%
   2013          4,062,200               52,101             1.30%
   2014          4,113,700               51,500             1.27%
   2015          4,165,100               51,400             1.25%




Table C. 4                                                                                 Table C. 5                                                 Table C. 6
                                Children: Ages 0-4                                              School Age Population: Ages 5-17                     Young Adult Population: Ages 18-24

   Year                            Change from previous decade/yr.                                         Change from previous decade/yr.                          Change from previous decade/yr.
  (July 1)       Population            Number              Percent        Population            Number              Percent        Population            Number              Percent
----------- ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
   1980            199,525                    ---                ---        524,446                    ---                ---        329,407                    ---                ---
   1990            209,638               10,113             5.07%           532,727                8,281             1.58%           268,134             -61,273            -18.60%
   2000            223,198               13,560             6.47%           624,354               91,627           17.20%            330,358               62,224            23.21%
   2001            224,544                1,346             0.60%           624,712                  358             0.06%           336,733                6,375             1.93%
   2002            224,895                  351             0.16%           624,644                   -68           -0.01%           340,905                4,171             1.24%
   2003            226,368                1,473             0.66%           624,381                 -263            -0.04%           345,458                4,553             1.34%
   2004            227,981                1,612             0.71%           625,526                1,145             0.18%           349,398                3,940             1.14%
   2005            229,552                1,571             0.69%           628,404                2,878             0.46%           351,435                2,037             0.58%
   2006            231,304                1,752             0.76%           633,564                5,161             0.82%           354,691                3,256             0.93%
   2007            235,042                3,738             1.62%           635,576                2,012             0.32%           356,695                2,004             0.57%
   2008            238,257                3,215             1.37%           636,472                  896             0.14%           359,951                3,256             0.91%
   2009            242,049                3,791             1.59%           638,190                1,718             0.27%           362,791                2,840             0.79%
   2010            246,426                4,377             1.81%           640,367                2,176             0.34%           364,828                2,036             0.56%
   2011            250,871                4,446             1.80%           643,256                2,889             0.45%           366,234                1,406             0.39%
   2012            253,927                3,056             1.22%           648,748                5,493             0.85%           366,430                  197             0.05%
   2013            257,070                3,143             1.24%           653,967                5,219             0.80%           367,346                  916             0.25%
   2014            260,255                3,185             1.24%           659,102                5,135             0.79%           367,034                 -312            -0.09%
   2015            263,204                2,949             1.13%           664,708                5,606             0.85%           364,808               -2,227            -0.61%




                                                                                                           110
Table C. 7                                                           Table C. 8                                              Table C. 9
                  Criminally "At Risk" Population:                         Prime Wage Earners: Ages 25-44                           Older Wage Earners: Ages 45-64
                         Males Ages 15-39
  Year                          Change from previous decade/yr.                          Change from previous decade/yr.                          Change from previous decade/yr.
 (July 1)        Population            Number              Percent        Population            Number              Percent        Population            Number              Percent
----------- ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
   1980            561,931                    ---                ---        790,750                    ---                ---        491,249                    ---                ---
   1990            544,738             -17,193             -3.06%           926,326             135,576            17.15%            531,181               39,932             8.13%
   2000            617,250               72,512            13.31%           997,012               70,686             7.63%           817,598             286,417            53.92%
   2001            620,072                2,822             0.46%           996,909                 -103            -0.01%           847,507               29,909             3.66%
   2002            622,321                2,248             0.36%           994,088               -2,820            -0.28%           876,588               29,081             3.43%
   2003            625,212                2,891             0.46%           993,630                 -458            -0.05%           903,969               27,381             3.12%
   2004            630,384                5,171             0.83%           996,642                3,012             0.30%           930,548               26,579             2.94%
   2005            638,911                8,527             1.35%         1,004,166                7,524             0.75%           958,371               27,823             2.99%
   2006            650,160               11,249             1.76%         1,015,399               11,233             1.12%           986,427               28,056             2.93%
   2007            659,222                9,062             1.39%         1,027,601               12,203             1.20%         1,009,915               23,488             2.38%
   2008            666,645                7,423             1.13%         1,039,318               11,717             1.14%         1,027,820               17,905             1.77%
   2009            671,657                5,012             0.75%         1,050,829               11,511             1.11%         1,045,123               17,302             1.68%
   2010            674,769                3,112             0.46%         1,064,505               13,676             1.30%         1,060,918               15,795             1.51%
   2011            678,920                4,152             0.62%         1,079,644               15,139             1.42%         1,074,211               13,293             1.25%
   2012            683,300                4,380             0.65%         1,094,322               14,677             1.36%         1,074,662                  451             0.04%
   2013            689,047                5,747             0.84%         1,107,757               13,435             1.23%         1,077,814                3,152             0.29%
   2014            694,490                5,443             0.79%         1,119,099               11,342             1.02%         1,083,384                5,570             0.52%
   2015            698,905                4,415             0.64%         1,127,977                8,879             0.79%         1,090,478                7,094             0.65%




Table C. 10
                                                                      Elderly Population by Age Group

                                 Change from                           Change from                           Change from                           Change from
   Year                                previous                              previous                              previous                              previous
 (July 1)         Ages 65+           decade/yr.       Ages 65-74           decade/yr.       Ages 75-84           decade/yr.         Ages 85+           decade/yr.
----------- ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
   1980            305,841                    ---        185,863                    ---          91,137                   ---          28,841                   ---
   1990            392,369              28.29%           224,772              20.93%           128,813              41.34%             38,784             34.48%
   2000            439,010              11.89%           218,884              -2.62%           162,070              25.82%             58,056             49.69%
   2001            441,294               0.52%           218,216              -0.31%           163,244               0.72%             59,834              3.06%
   2002            443,579               0.52%           218,484               0.12%           163,948               0.43%             61,147              2.19%
   2003            447,694               0.93%           220,699               1.01%           163,976               0.02%             63,018              3.06%
   2004            452,505               1.07%           224,160               1.57%           163,618              -0.22%             64,728              2.71%
   2005            459,513               1.55%           229,146               2.22%           163,333              -0.17%             67,034              3.56%
   2006            469,120               2.09%           236,534               3.22%           162,633              -0.43%             69,953              4.35%
   2007            480,670               2.46%           246,173               4.08%           161,736              -0.55%             72,760              4.01%
   2008            496,182               3.23%           259,909               5.58%           160,928              -0.50%             75,345              3.55%
   2009            511,319               3.05%           273,415               5.20%           160,084              -0.52%             77,820              3.28%
   2010            526,958               3.06%           286,045               4.62%           160,728               0.40%             80,185              3.04%
   2011            542,784               3.00%           299,038               4.54%           161,452               0.45%             82,294              2.63%
   2012            572,010               5.38%           324,531               8.52%           163,217               1.09%             84,262              2.39%
   2013            598,245               4.59%           345,794               6.55%           166,407               1.95%             86,044              2.11%
   2014            624,826               4.44%           367,035               6.14%           170,296               2.34%             87,496              1.69%
   2015            653,925               4.66%           389,480               6.12%           175,218               2.89%             89,228              1.98%




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