The panel of financial experts that predicts state tax revenue believes the state’s economy is still on the upswing. Legislative Services Agency director Dennis Prouty says recent reports showing the housing sector of the economy is cooling aren’t enough to dampen the overall momentum. “We have taken some of that into account but it’s not going in the opposite direction because the economy’s a little stronger than that right now.”
Prouty is on the committee which estimates state tax revenue and the group’s estimate is used by lawmakers to draft the state budget. The Revenue Estimating Conference on Friday said the state will take in about 30 million more from the Iowa Lottery’s TouchPlay machines before they’re shut down, and there’s another 20-million in unexpected taxes being paid to the state.
So what would a business do with that unexpected cash? David Underwood, a Mason City business accountant, serves with Prouty on the panel that predicts state tax revenue, and Underwood says unexpected profits would be used in different ways by different businesses. If you have additional profits, you have to decide: should you invest those back into the business or do you pass those onto the stakeholders?”
Underwood says,”Quite often what happens is we do a combination of both.” In this case, state law stipulates that the newly-discovered cash cannot be spent and must be deposited in the state’s cash reserve. However, legislators often choose to ignore that rule and spend the money anyway.