Latest news with #Riccadonna
Yahoo
14-05-2025
- Business
- Yahoo
Federal chaos leaves Oregon's economic outlook sluggish, uncertain, short hundreds of millions
Oregon lawmakers are facing a two-year budget cycle with hundreds of millions of dollars less than anticipated due to slow economic growth expected as a consequence of President Donald Trump's tariffs. (Julia Shumway/Oregon Capital Chronicle) Uncertainty from President Donald Trump's tariffs have thrown a wrench in state revenues previously expected to grow by hundreds of millions of dollars, state economists report. Forecasted growth in the national and state economy has deteriorated in the last few months, leaving Oregon lawmakers to craft a two-year state budget with nearly $756 million less than they anticipated, according to the latest revenue forecast from the state's Office of Economic Analysis. This comes on top of uncertainty around the federal budget and as Congressional Republicans debate cutting hundreds of billions that states rely on to provide healthcare and social services. State economist Carl Riccadonna and senior economist Michael Kennedy, presented the quarterly forecast Wednesday to House and Senate revenue committees, and previewed some of their findings on a call with reporters Tuesday evening. Riccadonna said the rest of 2025 will be characterized by sluggish economic growth due to existing tariffs and uncertainty around the future of tariffs, especially in the manufacturing and construction sectors. Tariffs disproportionately hurt coastal states and states with large ports like Oregon, he added. Senate Majority Leader Kayse Jama, D-Portland, said in a news release that the forecast shows reckless federal actions are harming Oregon's economy. 'Tariffs amount to a sales tax on shoppers here and act as headwinds against shipping products overseas. These policies threaten to push our state and the nation into an economic recession,' he said. Oregon Republicans said state Democrats are to blame. 'It's no surprise that Democrats who've spent years passing policies that weaken our economy are quick to blame anyone but themselves,' Senate Republican Leader Daniel Bonham, R-The Dalles, said in a news release. 'What's needed now isn't higher taxes, but smarter budgeting, real accountability, and a renewed focus on growing the private sector,' he said. At the beginning of the year, economists expected the national economy would grow by about 2% in 2025. The consensus now among economic forecasters is that it's likely to be less than half that — about 0.8%. Slower economic growth leads to higher unemployment, lower wages and consequently the state taking in less corporate and personal income tax revenue, which make up the bulk of the state's general fund. 'It is a sluggish growth period, which will lead to instability in the labor market,' Riccadonna said. He and other economists do not yet forecast a recession, though he said the risk is 'certainly elevated.' The state's Office of Economic Analysis puts the risk of a recession in the next 12 months at about 25%. In a typical year, the risk is 10% to 15%. 'You will see the unemployment rate drifting higher over the course of the next several quarters,' Riccadonna said. Gov. Tina Kotek in a news release said she would, 'refuse to let Oregon be knocked off of our game.' 'We know the problems we need to solve here at home regardless of the chaos coming out of Washington, D.C.,' she said. 'There are still too many people sleeping outside. There are not enough houses. There are not enough places to go for care or people to provide that care. Our kids must be served better by our schools. The cost of living is on the rise. These crises don't take an intermission, so neither can we.' The quarterly revenue forecasts take into account all of Oregon's major revenue sources, including personal and corporate income taxes — which make up the bulk of the state's general fund — as well as lottery revenues and the Corporate Activity Tax. In February, Riccadonna and Kennedy told Oregon lawmakers they could expect to have about $38.2 billion to spend in the state's next two-year budget. That was $350 million more than they thought they would have at the last forecast in November 2024. Now, Oregon lawmakers can expect to have about $37.4 billion to spend in the state's next two-year budget. That's the result of both a reduction in expected revenue, mostly from income taxes, and additional spending in the current budget cycle, primarily on higher-than-expected caseloads for Medicaid and the state department that provides services to seniors and people with disabilities. House Majority Leader Ben Bowman, D-Tigard, said in a news release the latest forecast shows lawmakers will need to make 'hard choices.' 'This forecast means we will have fewer resources available in order to support our education priorities, human services, and the many other priorities throughout the state,' he said. The state's 'kicker' tax refund is also expected to be about $87.5 million lower than expected. The refund, now projected to return about $1.64 billion to Oregon taxpayers, is triggered when actual revenues come in at least 2% higher than lawmakers projected. Riccadonna was more optimistic about growth and revenues in 2026 and the first half of 2027 than the current fiscal year, assuming tariffs are lower, the Federal Reserve reduces interest rates and Congress passes a budget that includes extending the 2017 Tax Cuts and Jobs Act — which reduced personal and corporate income taxes intending to stimulate spending and economic growth. He said hard economic statistics impacted by tariffs, like unemployment or the nation's GDP outlook, are not likely to show up in federal reports until June and July, leaving forecasters at the moment with heightened uncertainty in terms of understanding how all of Trump's tariffs and cuts to federal agencies and the workforce plays out. Trump cuts to the federal workforce have so far not caused the state's unemployment rate to tick up, but have hit local economies, Riccadonna said, mostly in eastern Oregon. 'We should make no bones about it. This is a very dynamic situation that is very sensitive to policy being set at the federal level, policies which are not clearly defined at this point in time, in terms of where the end point or the ultimate consequence will be, where that effective tariff rate will ultimately settle, how the restructuring at the federal level ultimately pans out,' Riccadonna said. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Yahoo
26-02-2025
- Business
- Yahoo
Latest Oregon economic forecast shows more money, but federal government leaves future murky
The Oregon State Capitol closed on Thursday, Feb. 13, 2025, due to the snowy weather. (Photo by Ben Botkin/Oregon Capital Chronicle) Chaotic federal announcements about taxes, tariffs, mass firings of federal employees and spending cuts haven't yet affected Oregon's economic forecast, the state's chief economist reported Wednesday. For now, according to chief economist Carl Riccadonna and senior economist Michael Kennedy, Oregon lawmakers can expect to have about $38.2 billion to spend in the state's next two-year budget. That's $350 million more than they thought they would have at the last forecast in November. But Gov. Tina Kotek and legislative budget-writers have advocated for caution and reiterated those calls on Wednesday. The forecast arrived the day after congressional Republicans voted for a spending plan that included $2 trillion in not-yet-specified spending cuts. 'Our state's available resources for the coming years are projected to be slightly higher than previously expected, which is good news, but we must continue to budget responsibly,' said House Speaker Julie Fahey, D-Eugene. 'We need to be prepared for economic headwinds created by the federal administration's actions and for potential cuts to federal programs that Oregonians rely on, like Medicaid.' Riccadonna said tariffs could have a particularly acute effect on Oregon. The state's economy relies more on manufacturing and trade than most states, and it's especially sensitive to trade with Asia. When President Donald Trump installed tariffs in 2018, Oregon's economy slowed down, Riccadonna said, but the Tax Cuts and Jobs Act also provided a fiscal stimulus that softened the sting of the trade war. 'That may very well be the case again this year, as you know that the one big, beautiful bill is being worked on, and the expectation is that Trump tax cuts will be extended, and maybe even corporate income taxes lowered further,' he said during a briefing with reporters on Tuesday. 'That's a very significant positive macroeconomic narrative that will offset some of the negative from the trade side.' It's too early to know the economic impact of other changes, such as the federal government firing tens of thousands of workers in recent weeks. That's because those workers' unemployment claims haven't yet been reflected in state-level data. 'Most of the DOGE cuts started around President's Day weekend, so it's really going to be the first two weeks in March where we start to see a quantifiable measure of these job cuts in the state economic data,' Riccadonna said. The $350 million more available for the next budget cycle reflects $550 million in higher expected income tax revenues tied to higher wages during the next two years, minus $200 million lost to extra state spending to address wildfire costs in December and some late tax refunds. Oregon paid out a record high kicker — the tax credit that takes effect when the state collects more tax revenue than forecasted — of $5.6 billion last year. Since Riccadonna started as chief economist last fall, his top task has been to create more accurate forecasts to reduce the growing kicker payouts. But Oregonians can still expect a large kicker in 2026: The latest forecast pegs it at $1.726 billion, slightly lower than the $1.8 billion predicted in November. Higher-income Oregonians who pay more in taxes get higher kicker payments. Lawmakers will craft the budget for the next two years based on the next economic forecast, expected in late April. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
