1. Presented by Economic and Tax Revenue Outlook Mark Zandi Economy.com, Inc.

2. Jobs, Millions Source: BLS

3. Prolonged Suffering Previous Cycles Current Cycle Early ‘90s Cycle Sources: BLS, Economy.com

4. States In Recession Recession Flat Expanding

5. State and Local Government Deficit Source: BEA Billions $ (L) Share of GDP (R)

6. Business Confidence Survey January 2003 = 100 4 week Moving Average Source: Economy.com Businesses Confidence Rebounds

7. State Government Tax Revenues Billions $, 4- Quarter Moving Sum Source: Census

8. Source: BEA Tax Payments Billions $ (L) Effective Tax Rate (R)

9. Real GDP Growth % Change Year Ago Sources: BEA, Economy.com Actual Without Housing

10. Nonfinancial Productivity Growth % Change Year Ago, 4-Quarter Moving Average Source: BLS

11. Real Wage Growth % Change Year Ago, 4-Quarter Moving Average Sources: BLS, BEA

12. Profit Margins of Nonfinancial Businesses 4-Quarter Moving Average Source: BEA

13. Near-Term Outlook Real GDP Year over Year Growth Potential Growth

14. Raleigh Orange County Riverside Las Vegas Miami Baltimore Road to Recovery Stable Economies San Antonio San Diego Ft. Lauderdale West Palm Beach Tampa Philadelphi a Washington, D.C. Albuquerque

15. Los Angeles Orange County Riverside Las Vegas Miami Baltimore Road to Recovery 2003 H2 Computer Hardware, Distribution San Antonio Philadelphi a Washington, D.C. San Diego Ft. Lauderdale West Palm Beach Tampa Austin Phoenix Norfolk Memphis SacramentoOakland Raleigh Orlando Central NJ Jacksonville Albuquerque Atlanta

16. Los Angeles Orange County Riverside Las Vegas Miami Baltimore Road to Recovery 2004 H1 Software, Travel San Antonio Philadelphi a Washington, D.C. San Diego Ft. Lauderdale West Palm Beach Tampa Portland Austin Phoenix Norfolk Memphis SacramentoOakland Raleigh Orlando Central NJ San Jose Atlanta Charlotte Minneapolis Chicago Houston Indianapolis Salt Lake City Jacksonville New Orleans Albuquerque

17. Los Angeles Orange County Riverside Las Vegas Miami Baltimore Road to Recovery 2004 H2 Telecom, Money Management San Antonio Philadelphi a Washington, D.C. San Diego Ft. Lauderdale West Palm Beach Tampa Portland Austin Phoenix Norfolk Memphis SacramentoOakland Raleigh Orlando Central NJ San Jose Atlanta Charlotte Minneapolis Chicago Houston Indianapolis Salt Lake City San Francisco Boston Dallas Jacksonville Denver Kansas CIty Pittsburgh New Orleans Albuquerque

18. Los Angeles Orange County Riverside Las Vegas Miami Baltimore Road to Recovery 2005 H1 Traditional Manufacturing San Antonio Philadelphi a Washington, D.C. San Diego Ft. Lauderdale West Palm Beach Tampa Portland Austin Phoenix Norfolk Memphis SacramentoOakland Raleigh Orlando Central NJ San Jose Atlanta Charlotte Minneapolis Chicago Houston Indianapolis Salt Lake City San Francisco Boston Dallas Jacksonville Denver Kansas CIty Detroit Pittsburgh OH MSAs Milwaukee New Orleans Albuquerque

19. Los Angeles Orange County Riverside Las Vegas Miami Baltimore Road to Recovery 2006 H1 Investment Banking, Commercial Aircraft San Antonio Philadelphi a Washington, D.C. San Diego Ft. Lauderdale West Palm Beach Tampa Portland Austin Phoenix Norfolk Memphis SacramentoOakland Raleigh Orlando Central NJ San Jose Atlanta Charlotte Minneapolis Chicago Houston Indianapolis Salt Lake City San Francisco Boston Dallas Jacksonville Denver Kansas CIty Detroit Pittsburgh OH MSAs Milwaukee Seattle Broad NYC Region New Orleans Albuquerque

20. State Tax Revenue Growth Outlook % Change Long-Run Growth

21. Tax Revenues Billions $ Source: Economy.com

22. China (R) Ballooning Trade Deficit Total x OPEC (L) Trade Deficit Billions $ Source: Census

23. Erosion in Sales Tax Efficacy Sales Taxes as a Share of Consumer Spending Sources: BEA, Economy.com