State Economic & Revenue Outlook Greg Albrecht Chief Economist Legislative Fiscal Office Louisiana Society of Association Executives Lunch & Learn Program June 20, 2017

State Unemployment Rate: Improving, but back to normal vs U. S State Unemployment Rate: Improving, but back to normal vs U.S. and South Source: LA Legislative Fiscal Office

State Employment Levels: Finally turning around Source: LA Legislative Fiscal Office

Here is what employment growth looked liked as of Dec’16 Here is what employment growth looked liked as of Dec’16. Before benchmarking revisions. Source: LA Legislative Fiscal Office

Here is what employment growth looks like after benchmarking revisions, to date. Source: LA Legislative Fiscal Office

Job growth decomposed. At the worst point Job growth decomposed. At the worst point. Losing in high wage sectors, gaining in lower wage sectors. Source: LA Legislative Fiscal Office

Job growth decomposed now Job growth decomposed now. Still losing in high wage sectors, gaining in lower wage sectors. Source: LA Legislative Fiscal Office

The culprit for our latest problem has been oil prices (again). FY18 $51.41 FY18 $3.22 Source: LA Legislative Fiscal Office

Our latest problems are our problems; not reflected in national and regional economies. Source: LA Legislative Fiscal Office

Our latest problems are our problems; not reflected in national and regional economies. Source: LA Legislative Fiscal Office

Oil basis confirmed by our metro areas. 59.7% > 1 % of Dec’14 3.2% 20.0% 2.2% 5.1% 11.1% 3.9% 28.6% 9.3% 11.6% 40.3% < 1 But Laf & Hma fell a lot farther Source: LA Legislative Fiscal Office

Job growth momentum improving: 2/3 expanding/improving vs 1/3 contracting Source: LA Legislative Fiscal Office

Broaden the indicators to more than just employment Broaden the indicators to more than just employment. Here a combination of non-farm employment, manu hours worked, unemp rate, and real wages/salaries. Louisiana divergence from nation and region path as oil prices began to decline in 2014 is exhibited in various indicators. Darn Yay! Source: LA Legislative Fiscal Office

So what has all this meant for state tax revenue? Source: LA Legislative Fiscal Office

The state budget gap for FY17/18 has been closed in the budget just adopted. But… FISCAL CLIFF YEAR Source: LA Legislative Fiscal Office This has been closed in the Budget adopted for FY17/18 This works to reduce the gap for FY18/19 and beyond, but other actions will work to increase the gap

The admn proposed funding additions. New revenue was not generated. Not Funded Fully Funded Not Funded Partially Funded, $34.8M Not Funded Not Funded Partially Funded, $17.9M Partially Funded, $7.2M Not Funded Not Funded Not Funded Fully Funded Source: Executive Budget Proposal

Here, the final pieces of the puzzle. What the gov proposed for FY17/18 and what was actually done are not the same thing. Here, the final pieces of the puzzle. Note that of the $220M of resources generated, $146M (66%) is a continued deferral of payment. Some reductions were made (400+ gap but less than 200 funded), and some FY18 issues were moved to FY17. Source: LA Legislative Fiscal Office Source: LA Senate Fiscal Staff

Also realize that often it is a 2-FY fix being worked simultaneously Also realize that often it is a 2-FY fix being worked simultaneously. Budget resources are being moved around to resolve open issues in the budget year we are still in (FY16/17) , as well as resolve the issues for the ensuing year (FY17/18). Here the current year ending plan. Source: LA Senate Fiscal Staff

The next special session deals with a $1B - $1.5B gap in FY18/19. At the end of the day, both days actually – June 8 & June 16, it all boiled down to agreement on the following addition to the general appropriation bill:  The governor of Louisiana is hereby authorized, urged, and requested, acting  through the commissioner of administration, to instruct all departments and agencies of the  executive branch to implement a deficit avoidance plan which shall be in the aggregate  amount of at least $60,000,000. The commissioner of administration shall report monthly  to the Joint Legislative Committee on the Budget on the deficit avoidance plan. The House originally wanted $200+M of available revenue forecast not appropriated. That means cut from budgets, but wanted the governor to do the actual specific cutting. The Senate and the admn wanted all available revenue forecast appropriated. Negotiations occurred around appropriating vs not appropriating, and then around how much to be part of the above “deficit avoidance plan”, $50M - $200M. Settled on appropriating and a $60M plan, for FY17/18, beginning July 1, 2017. The next special session deals with a $1B - $1.5B gap in FY18/19. Source: LA Legislative Fiscal Office