STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2002 Janet Napolitano GOVERNOR PREPARED BY Arizona Department of Administration Financial Services Division General Accounting Office Photographs taken by Greg Dillard and Ron Gag STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS Page INTRODUCTORY SECTION (Not Covered by the Independent Auditors’ Report) Letter of Transmittal............................................................................................................................................................ Arizona State Government Organization............................................................................................................................. Principal State Officials....................................................................................................................................................... 1 7 8 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT........................................................................................................................ 12 MANAGEMENT’S DISCUSSION AND ANALYSIS.................................................................................................... 16 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Assets ............................................................................................................................................ Statement of Activities.............................................................................................................................................. Governmental Fund Financial Statements: Balance Sheet............................................................................................................................................................ Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ...................................... Statement of Revenues, Expenditures and Changes in Fund Balances ..................................................................... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities................................................................................................ 30 32 34 35 36 38 Proprietary Fund Financial Statements: Statement of Net Assets ............................................................................................................................................ Statement of Revenues, Expenses and Changes in Fund Net Assets......................................................................... Statement of Cash Flows........................................................................................................................................... 40 44 46 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets ............................................................................................................................ Statement of Changes in Fiduciary Net Assets ......................................................................................................... 50 51 Component Unit Financial Statements: Combining Statement of Net Assets ......................................................................................................................... Combining Statement of Activities ........................................................................................................................... 53 54 Notes to the Financial Statements............................................................................................................................... 56 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule, Expenditures – General Fund................................................................................... Budgetary Comparison Schedule, Expenditures – Transportation and Aviation Fund .................................................. Notes to Required Supplementary Information – Budgetary Comparison Schedules .................................................... Infrastructure Assets....................................................................................................................................................... Retirement Plans Funding Progress................................................................................................................................ i 106 126 128 131 136 STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONTINUED) Page FINANCIAL SECTION - CONCLUDED COMBINING FINANCIAL STATEMENTS AND SCHEDULES – NON-MAJOR FUNDS Governmental Funds: Combining Balance Sheet......................................................................................................................................... Combining Statement of Revenue, Expenditures and Changes in Fund Balances .................................................... 140 141 Special Revenue Funds: Combining Balance Sheet.................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................... 144 146 Debt Service Funds: Combining Balance Sheet.................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................... 150 152 Capital Projects Funds: Combining Balance Sheet.................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................... 156 158 Proprietary Funds: Enterprise Funds: Combining Statement of Net Assets .................................................................................................................. Combining Statement of Revenues, Expenses and Changes in Fund Net Assets............................................... Combining Statement of Cash Flows................................................................................................................. 162 164 166 Internal Service Funds: Combining Statement of Net Assets .................................................................................................................. Combining Statement of Revenues, Expenses and Changes in Fund Net Assets............................................... Combining Statement of Cash Flows................................................................................................................. 170 172 174 Fiduciary Funds: Pension Trust Funds: Combining Statement of Fiduciary Net Assets .................................................................................................. Combining Statement of Changes in Fiduciary Net Assets................................................................................ 180 181 Investment Trust Funds: Combining Statement of Fiduciary Net Assets .................................................................................................. Combining Statement of Changes in Fiduciary Net Assets................................................................................ 184 185 Agency Funds: Combining Statement of Assets and Liabilities ................................................................................................. Combining Statement of Changes in Assets and Liabilities............................................................................... 189 190 Budgetary Comparison Schedule, Expenditures - Other Governmental Funds.............................................................. 194 ii STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONCLUDED) Page STATISTICAL SECTION (Not Covered by the Independent Auditors' Report) Revenues by Source – All Governmental Fund Types for the Last Ten Fiscal Years ......................................................... Expenditures by Function – All Governmental Fund Types for the Last Ten Fiscal Years................................................. Property Tax Levies, Collections, Taxable Property Assessed and Estimated Actual Value, and Property Tax Rates for the Last Ten Fiscal Years .................................................................................................................................................. Highway Construction Revenue Bond Coverage for the Last Ten Fiscal Years.................................................................. Arizona State University Revenue Bond Coverage for the Last Ten Fiscal Years .............................................................. Northern Arizona University Revenue Bond Coverage for the Last Ten Fiscal Years........................................................ University of Arizona Revenue Bond Coverage for the Last Ten Fiscal Years................................................................... Economic Indicators for the Last Ten Calendar Years ........................................................................................................ Major Private Employers for the Fiscal Year Ended June 30, 2002.................................................................................... Population by County for the Last Ten Years...................................................................................................................... Schedule of Bank and Savings and Loan Deposits for the Last Ten Fiscal Years............................................................... Assessed Value of New Commercial and Residential Construction for the Last Ten Years ............................................... Public School Enrollment - Grades K-12 for the Last Ten Academic Years....................................................................... Average State Prison Adult Inmate Population for the Last Ten Fiscal Years .................................................................... Public Higher Education Institutions’ Full-Time Equivalent Fall Enrollment for the Last Ten Years ................................ iii 206 206 207 207 208 208 209 210 210 211 211 212 212 213 213 STATE CAPITAL EXECUTIVE TOWER INTRODUCTORY SECTION JANET NAPOLITANO BETSEY BAYLESS GOVERNOR DIRECTOR ARIZONA DEPARTMENT OF ADMINISTRATION OFFICE OF THE DIRECTOR 100 NORTH 15th AVENUE • SUITE 401 PHOENIX, ARIZONA 85007 Phone: (602) 542-1500 February 11, 2003 The Honorable Janet Napolitano Governor of the State of Arizona, Members of the Legislature, Chief Justice of the Supreme Court and Citizens and Taxpayers of the State of Arizona Ladies and Gentlemen: comparison schedules, infrastructure condition and maintenance data, and retirement plans funding progress. In addition, the financial section includes other supplemental financial data, which includes combining financial statements. It is our pleasure to transmit to you the Comprehensive Annual Financial Report (CAFR) of the State of Arizona for the fiscal year ended June 30, 2002. The CAFR has been presented in conformance with the Governmental Accounting Standards Board (GASB) statements 34 and 35. The objective of this new reporting model is to provide a clear picture of the government as a single, unified entity as well as providing traditional fund-based financial statements. The Statistical Section includes economic, and demographic data. selected financial, Generally accepted accounting principles require that management provides a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of the MD&A. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The State’s MD&A can be found immediately following the independent auditors’ report. Responsibility for the accuracy of data, completeness and fairness of presentation, including all disclosures, rests with the State's management. The data presented in this report, to the best of our knowledge and belief, is accurate in all material respects and is reported in a manner which fairly presents the financial position and results of operations of the major and non-major funds of the State. All disclosures needed for the reader to gain a reasonable understanding of the State's financial activities have been included. FINANCIAL REPORTING ENTITY The accompanying CAFR includes all funds of the State of The report is presented in three sections: Introductory, Financial and Statistical. Arizona (primary government), as well as its component units. Component units are legally separate entities for which the primary government is financially accountable. The Introductory Section includes this Letter of Transmittal, the State's organizational chart and a list of principal State officials. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the primary government and to differentiate their financial position and results of operations from those of the primary government. The Financial Section includes the State Auditor General's independent auditors’ report, Management’s Discussion and Analysis (MD&A) and the basic financial statements (which include the government-wide financial statements, the fund financial statements and the notes to the financial statements). The financial section also includes Required Supplementary Information (RSI), which includes budgetary The criteria for inclusion in the reporting entity and its presentation are defined by the Codification of Governmental Accounting and Financial Reporting -1- expected (by shareholders, investors, and responsible management) to be very deliberate, yet cautious, while working through these slower, difficult times toward profitability. Standards, issued by the Governmental Accounting Standards Board, (Section 2100). Note 1.B of the Notes to the Financial Statements explains which units are included in the Financial Reporting Entity of the State. Arizona’s goods-producing industries are anticipated to shed nearly 23,000 jobs over the 2002-03 period. Meanwhile, service-producing industries are projected to add slightly more than 42,000 jobs. ECONOMIC CONDITION AND OUTLOOK The following economic summary, is excerpted from the Arizona Department of Economic Security’s Arizona’s Workforce, August 29, 2002. Recent figures for manufacturing have only hinted at the industry leveling off from the losses that began nearly two years ago. However, announcements made this week suggest additional layoffs may yet come in the near future as national and global manufacturing companies continue to grapple with costs and projections of slower demand. RA expects manufacturing jobs will decline by more than 12,000 over the two-year forecast horizon. Most of these losses are expected in 2002 as the industry pares down nearly 6 percent of its workforce. The forecast for 2003 is for some improvement, as levels simply remain flat. A little more than two-and-a-half years into this bold new millennium, “irrational exuberance” has been starkly replaced by goals focused on profitability instead of promises, pressures of financial prudence and accountability, and realistic rather than speculative business models. Many bold, aggressive companies once deemed high achievers have been rendered “bottomed out” and their business models and goals discarded, respectfully, as obsolete and misguided. It seems we are humbled to realizing that the new millennium is as real as it ever was. In retrospect, it all seems all so clear, and so we go forward. Fueled with low interest rate financing and relatively vibrant demand for housing, Arizona’s construction industry has endured a decade of strong growth. Between 1991 and 2001, annual average figures show that Arizona’s economy added more than 87,000 construction jobs. RA’s forecast calls for a slow decline of 9,500 construction jobs over the two-year period. About 80 percent of these losses are anticipated to occur in 2002. During this time of near euphoric optimism and growth, Arizona’s economy charged into the new millennium with great zeal. As one of the fastest job growing states in 2000, Arizona faced such economic pressures as how to find enough workers to meet business demand. It was poignant enough to capture the attention of Lenita Jacob-Simmons, Deputy Assistant Secretary of Employment and Training with the U.S Department of Labor, who flew to Arizona to discuss some of the major issues of a fast-growing economy confronting the State. Just two years ago, for example, Phoenix-Mesa and Tucson MSAs (metropolitan statistical areas) were showing incredibly low unemployment rates of about 2.6 percent. Mining is forecast to lose 1,000 jobs, nearly an 11 percent industry decline in employment. As earlier cited, extended downward pressure on this industry is expected beyond 2003. Arizona’s trade industry is forecast to add 17,000 jobs in the 2002-03 period. Despite being a rough year for consumers who dealt with unrelenting news of corporate scandals, job losses, and terrorist threats, they kept spending. However, as the events of the year proceeded, it was becoming clearer that consumers were growing increasingly concerned. Additionally, Arizona’s economy was dealt a series of economic blows as the drought sharply curtailed winter and summer activity in trade and services (of which many are tourism industries). This only worsened as fires ravaged several areas of the State, resulting in park closures and the loss of homes and businesses. And if all that wasn’t bad enough, weather forecasts into this coming 2002-03 season strongly suggest another drought-stricken period awaits. In all, RA’s forecast calls for an increase of slightly more than 2,000 trade jobs in 2002 and nearly 15,000 in 2003. The most recent (July) jobless figures, however, show the Phoenix-Mesa MSA at 5.4 percent and Tucson at 4.7 percent. Additionally, Arizona’s businesses slowed job growth from an annual average of nearly 4 percent in 2000 to only 1 percent in 2001. Moreover, Arizona’s economy is expected to slow even further in 2002. The Arizona Department of Economic Security, Research Administration (RA) expects a loss of almost 1 percent of jobs for 2002 in its 2002-03 employment forecast update. After 20 years of employment growth, represented by growth of more than 1,215,000 non-farm jobs, Arizona is expected to show a loss of nearly 21,000 jobs in 2002. A modest economic upturn is expected to begin building momentum in the second half of 2002 and into the following year, with jobs growing at an annual average pace of almost 2 percent in 2003. This represents a gain of almost 40,000 jobs in 2003. Thus, RA’s forecast update sees Arizona’s businesses adding slightly more than 19,000 jobs over the two-year period. Services is another industry largely affected by tourism, but as well by business activity. One of the most devastated of sectors has been that of hotels and lodging. Not only was the slowing economy braking employment growth, the events that followed the September 11th terrorist attacks crippled consumer travel. As earlier mentioned, all of this was adversely compounded with the drought, fires, and park closures. This comes especially hard to an industry that, for several earlier years, invested in remodeling, expansions, and building new facilities across the State. One sector that remains strong through the forecast horizon is health services. It is one of the fastest job-growing sectors. Generally, the major difference with this forecast update and RA’s March forecast is that Arizona’s economy has continued to slow in 2002, slightly more than earlier expected, and it seems clearer now that 2003 will not likely recover as fast or robustly as earlier predicted. This economic recovery job growth is one in which businesses are -2- and individual subtraction for dividends received from corporations that do the principle portion of their business in Arizona. This law continued to exist in the individual income tax statutes until 1990 when it was repealed as part of the massive rewrite of those laws. However, it continued to exist as a subtraction in the corporate income tax statute. An estimated $22 million revenue gain will be generated. Services is forecast to shed 5,000 jobs in 2002 and gain slightly more than 14,000 in 2003. Thus, for the 2002-03 forecast period, better than 9,000 jobs are expected. The transportation, communications, and public utilities group is forecast to lose more than 4,000 jobs in the two-year period. Job losses are expected in 2002, with a slight improvement of modest gains in 2003. Transportation and communication sectors are expected to face continued pressure to control costs in the wake of retracted or, at best, tepid demand. Airlines, through competitive pricing, have struggled to achieve profitability, but it hasn’t come easily. Public utility jobs have been fueled by the relative strong growth in the State’s population and housing development. The other tax change relates to previous Truth in Taxation provisions. Pursuant to the law, the qualifying tax rate is reduced annually to account for the statewide appreciation of existing property. The effect of reducing the qualifying tax rate is estimated to be $38.3 million in 2002 and $25.3 million in 2003. Health and Welfare. The phase-in of Proposition 204, which expanded AHCCCS eligibility to 100% of the federal poverty level, was completed in FY 2002. The caseload growth was immediate; during FY 2002 Proposition 204 related caseloads grew 200%. Traditional Medicaid caseloads also experienced rapid growth in FY 2002, increasing 21% during the year. The Administration and AHCCCS negotiated a second waiver with the Federal government, which provides enhanced federal participation for a specific segment of the Proposition 204 population. This second waiver also requires the expansion of health care coverage to the parents of KidsCare participants. As a result of the growth of these entitlement programs, all funds from the Tobacco Settlement, Budget Neutrality Compliance Fund, and Medical Services Stabilization Fund were exhausted. This resulted in the requirement to transfer from the General Fund and other Funds to support the program. Arizona’s finance, insurance, and real estate group is forecast to show a slight loss of nearly 1,000 jobs. A slight increase of nearly 1,500 jobs is forecast for 2003, or growth of about 1 percent. Financial sectors have been digesting the increased risks that often come with a slowing economy. As well, financial and investment sectors are grappling with controlling their own costs amidst public scrutiny and scorn. As reported by the latest figures from the American Bankruptcy Institute, bankruptcies in Arizona achieved a record level in 2001 and the trends through the second quarter of 2002 are not looking better. Real estate buying and investment has spurred mortgage financing and refinancing, but this also comes with consumers struggling to consolidate debt. In conclusion, Arizona’s economy has continued to weaken in 2002. While RA’s earlier forecast showed similar trends of a loss of jobs in 2002 and a recovery in 2003, this update has reasoned a more modest economic recovery in 2003 is likely to follow the slightly increased layoffs of 2002. With respect to behavioral health, numerous accomplishments were achieved during FY 2002. The State celebrated the grand opening of the juvenile and civil portions of the State Hospital, a modern archetype that reflects a homelike, neighborhood environment. Expenditures from the Serious Mental Illness fund were catalysts for significant improvements in housing and vocational and educational training. Additional Title XIX services, such as particular room and board services, which were not previously federally reimbursable, were negotiated into the new capitation rates in order to free up state-only funding for other requirements. A $19.6 million Title XIX supplemental for behavioral health generated a total of $57.6 million when combined with federal funds. MAJOR INITIATIVES Tax Policy. Laws 2001, Chapter 2 adjusted the State’s withholding rates to compensate for changes at the federal level and created an amnesty program for vehicle title registration and individual income taxes. Arizona withholding rates are tied to the federal withholding rates, which were due to change on January 1, 2002. The reduction to the federal rates would have changed the timing of Arizona collections and would have meant a one-time impact of decreasing FY 2002 revenues by approximately $60 million had the Legislature not acted. Education. K-12 Education – In FY 2002, K-12 education continued to comprise the largest component of the State’s budget. In FY 2002, the State’s obligation to fund public schools totaled $2.3 billion. In addition, $232 million was distributed through the Homeowner’s Rebate program and 1% constitutional cap (known as “Additional State Aid”), which subsidizes local property taxes assessed by school districts for maintenance and operations of public schools. Aside from these entitlement programs, approximately $57 million in discretionary grants were allocated to Arizona public schools and $24 million in special education funding was provided to public institutions such as the Arizona School for the Deaf and the Blind and children housed in the Arizona State Hospital and residential placements. The amnesty period established by Laws 2001, Chapter 2 ran from January 1, 2002 until March 31, 2002 for vehicle title and registration taxes and fees. During this period, no penalties or interest would be charged. The program was estimated to yield approximately $6 million in FY 2002. The law also established a tax amnesty program for any taxpayer with an outstanding individual income tax liability prior to November 1, 2000. The program eliminated penalties due on any past due tax liability; however, interest charges would still be applied. Estimates predict a gain in revenue of approximately $10 million per year for FY 2002 and FY 2003. Laws 2002, Chapter 50 eliminates the corporate income tax subtraction for dividends received from Arizona corporations. In 1973, the Legislature enacted a corporate -3- million in expendable revenue that was sent to the beneficiaries, mainly education, for their immediate use. In total, $153 million was generated by the Trust in FY 2002. In November 2000, Arizona voters approved Proposition 301 that provided much needed financial resources to Arizona elementary and secondary public schools. Through a dedicated funding source, consisting of a 6/10th of a percent increase in the transaction privilege tax, school districts and charter schools recognized additional funding for increased school days, school safety, character education, and school accountability programs. In its first year of implementation, $439 million in FY 2002 dedicated tax revenue was collected and allocated to higher education and K-12 schools. Of this amount, $251 million, or $260 per pupil, was distributed to school districts and charter schools specifically for teacher base and performance pay increases and supplementary funding for maintenance and operations of schools. In addition to the financial windfall, AZLearns, the State’s comprehensive academic accountability program, went into effect. Public Safety. The mission to “protect and serve” continues to be a priority to the Executive to ensure that government has the resources necessary to provide for the safety of citizens of Arizona. With respect to the safety of our highways, the Department of Public Safety (DPS) continues to experience an increase in traffic and accidents on state highways. To handle some of the increases, the Legislature passed Laws 2001, Chapter 1 enabling DPS to hire 116 additional officers, replace 200 patrol cars and increase officer overtime pay in FY 2002 and FY 2003. Of additional interest, DNA testing was expanded in January 2002 to include all felons convicted of offenses involving the use of a deadly weapon or the infliction of serious physical injury. Laws 2002, Chapter 226 expands the list of offenses requiring DNA testing to include all felony drug offenses in January 2003, and to include all felonies in January 2004. To support this endeavor, an additional 3% surcharge on fines and penalties was passed, along with an additional annual appropriation of $2 million from this surcharge money to provide additional personnel and equipment. While the significant fiscal impacts of the Flores v. State lawsuit were not fully realized in FY 2002, it is important to note the legislation to remedy the lawsuit was enacted. To meet the Court’s demands, the Legislature committed over $45 million in FY 2003 to support supplementary funding for non-English speaking pupils. In the area of corrections, the Department of Corrections inmate population increased during FY 2002 by 2,010 to 29,273. Notwithstanding this growth, new facilities will not be available until FY 2003. Over the next three years another 4,500 beds are planned to be added to the prison system. School Construction – As part of Proposition 301, the voters also authorized up to $800 million in revenue bonding authority to cover the estimated $1.2 billion cost of correcting school building deficiencies as required by Students FIRST legislation. Of this amount, $500 million in bonds were issued in May 2001, and in August 2002, the remaining $300 million were issued to positive investor response. Arizona law requires that all deficiencies in existing public school buildings (excluding public charter schools) be corrected prior to July 2004. As of June 2002, 35% of all deficiencies corrections projects (6,103 in total) were under construction or complete. Although in FY 2002 new school construction was still financed on a cash-basis, new legislation passed that established the lease purchase program, a new long-term financing scheme for new school construction. Approximately $400 million in lease purchase agreements were authorized for FY 2003 and FY 2004. With respect to juvenile corrections, the number of juvenile offenders housed in secure care facilities by the Department of Juvenile Corrections decreased from an average of 936 in FY 2001 to 839 in FY 2002. Some of the decline can be attributed to a new program for parole violators that has reduced their incarceration time. The Department continues to enhance public protection by changing the delinquent thinking and behavior of juvenile offenders. SERVICES PROVIDED BY THE STATE The services provided by the State are administered through various agencies, departments, boards, commissions and institutions of higher learning. These services include: (1) General Government, (2) Health and Welfare, (3) Inspection and Regulation, (4) Education, (5) Protection and Safety, (6) Transportation and (7) Natural Resources. Finally, the State Land Department had another record year for State Trust land revenues in many areas. The Sales Section held 28 successful land sale auctions for a total of $128 million. The Department also generated a record $35 -4- GENERAL FUND BALANCE BUDGETARY CONTROLS Graph udgetary control is maintained through legislative appropriation and the executive branch allotment process. The Governor is required to submit an annual budget to the Legislature. The budget is legally required to be adopted through passage of appropriation bills by the Legislature and approval by the Governor. The appropriated funds are controlled by the executive branch through an allotment process. This process allocates the appropriation into quarterly allotments by legal appropriation level. The State also maintains an encumbrance accounting system to further enhance budgetary control. Encumbered amounts generally lapse as of the end of the fiscal year, with the exception of capital outlay items. Capital outlay appropriations and their encumbrances continue from year to year. The State's budgetary policies are explained in detail in the Required Supplementary Information (RSI). B 1 details the General Fund Revenues and Expenditures for the last five fiscal years. This graph does not include transfer amounts relating to other fund types and other financing sources (uses), which affect the ending fund balance. Graph 1 General Fund Revenues and Expenditures for last 5 fiscal years (Dollars in billions) $12 $10 $8 INTERNAL CONTROLS $6 The State is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the State are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. Internal accounting controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. In the opinion of management, the State's internal controls are adequate to provide reasonable assurance that these objectives are met. $4 $2 $0 1998 1999 2000 Revenues 2001 2002 Expenditures The General Fund ended the June 30, 2002, fiscal year with $560.478 million in unreserved fund balance and a $152.338 million reserved fund balance for a total fund balance of $712.816 million. This compares to the previous year total fund balance of $1.309 billion. Included in the $152.338 million reserved fund balance is $67.7 million for the Budget Stabilization Fund. The Budget Stabilization Fund is a form of "Rainy Day Fund" established by the Legislature in 1991. CASH MANAGEMENT The responsibility for cash management of the State is shared by the Office of the Treasurer (Treasurer) and the General Accounting Office of the Department of Administration, Financial Services Division (GAO). The Treasurer is responsible for the depository, custodial and investment functions of cash. The GAO is responsible for drawing down monies available for State functions and the expenditure or disbursement of those monies. Graph 2 details the General Fund Balance for the last five fiscal years: The State requires that Treasurer's deposits and investments with financial institutions be entirely covered by Federal depository insurance or alternatively collateralized with surety equal to 102% of the deposit or investment. Component units may have collateralization policies that differ from those of the Treasurer. Graph 2 General Fund Balance for last 5 fiscal years (Dollars in millions) $1,500 The Legislature has passed statutes authorizing State investments. Note 2.A. in the Notes to the Financial Statements describes these investments. $1,000 $500 The Treasurer deposits receipts in accordance with applicable statutes and invests excess cash of the General Fund and various other funds. All interest, not otherwise apportioned by law, is deposited in the General Fund. Investment earnings for the General Fund totaled $61.2 million for the fiscal year ended June 30, 2002. $0 1998 1999 2000 2001 2002 -5- ARIZONA STATE GOVERNMENT ORGANIZATION ELECTORATE LEGISLATIVE BRANCH STATE HOUSE OF REPRESENTATIVES* STATE SENATE* LEGISLATIVE COUNCIL AUDITOR GENERAL JOINT LEGISLATIVE BUDGET COMM. BD. OF LIBRARY, ARCHIVES AND PUBLIC RECORDS SECRETARY OF STATE* JUDICIAL BRANCH EXECUTIVE BRANCH ATTORNEY GENERAL* GOVERNOR* SUPREME COURT COURT OF APPEALS SUPERIOR COURT MUNICIPAL COURTS JUSTICE OF THE PEACE COURTS* SUPERINTENDENT OF PUBLIC INSTRUCTION* STATE TREASURER* DEPARTMENT OF LAW CORPORATION COMMISSION* STATE MINE INSPECTOR* DEPARTMENT OF EDUCATION . DEPARTMENT OF ADMINISTRATION DEPARTMENT OF CORRECTIONS DEPARTMENT OF TRANSPORTATION AHCCCS DEPARTMENT OF REVENUE DEPARTMENT OF PUBLIC SAFETY DEPARTMENT OF HEALTH SERVICES DEPARTMENT OF ECONOMIC SECURITY OTHER BOARDS, COMMISIONS, AND AGENCIES BOARD OF REGENTS COMMUNITY COLLEGE BOARD ARIZONA STATE UNIVERSITY NORTHERN ARIZONA UNIVERSITY UNIVERSITY OF ARIZONA * ELECTED OFFICIALS -7- STATE OF ARIZONA PRINCIPAL STATE OFFICIALS JUNE 30, 2002 ELECTED OFFICIALS – as of June 30, 2002 Jane Dee Hull, Governor Senator Randall Gnant, President of the Senate Representative Jim Weiers, Speaker of the House Charles E. Jones, Chief Justice Betsey Bayless, Secretary of State Janet Napolitano, Attorney General Carol Springer, State Treasurer Jaime A. Molera, Superintendent of Public Instruction William A. Mundell, Chairman - Corporation Commission Marc Spitzer, Commissioner - Corporation Commission Jim Irvin, Commissioner - Corporation Commission Douglas K. Martin, State Mine Inspector APPOINTED OFFICIALS – as of June 30, 2002 Executive Officials J. Elliott Hibbs, Director – Department of Administration Terry L. Stewart, Director – Department of Corrections John L. Clayton, Director – Department of Economic Security Catherine R. Eden, Ph.D., Director – Department of Health Services Dennis A. Garrett, Director – Department of Public Safety Mark Killian, Director – Department of Revenue Phyllis Biedess, Director – AHCCCS Victor Mendez, Director – Department of Transportation Legislative Officials Michael E. Braun, Executive Director – Legislative Council Richard Stavneak, Director – Joint Legislative Budget Committee Debra K. Davenport, CPA, Auditor General Gladys Ann Wells, Director – Board of Library, Archives and Public Records University Officials Lattie F. Coor, Ph.D., President – Arizona State University Dr. John Denis Haeger, President – Northern Arizona University Peter Likins, President – University of Arizona ELECTED OFFICIALS – as of January 6, 2003 Janet Napolitano, Governor Senator Ken Bennett, President of the Senate Representative Jake Flake, Speaker of the House Charles E. Jones, Chief Justice Janice K. Brewer, Secretary of State Terry Goddard, Attorney General Douglas K. Martin, State Mine Inspector David Petersen, State Treasurer Tom Horne, Superintendent of Public Instruction Marc Spitzer, Chairman – Corporation Commission William A. Mundell, Commissioner – Corporation Commission Jim Irvin, Commissioner – Corporation Commission Mike Gleason, Commissioner – Corporation Commission Jeff Hatch-Miller, Commissioner – Corporation Commission APPOINTED OFFICIALS – as of January 6, 2003 Executive Officials Betsey Bayless, Director - Department of Administration Charles Ryan, Acting Director - Department of Corrections John L. Clayton, Director - Department of Economic Security J. Elliot Hibbs, Director - Department of Revenue Dennis A. Garrett, Director - Department of Public Safety Catherine R. Eden, Ph.D., Director - Department of Health Services Phyllis Biedess, Director - AHCCCS Victor Mendez, Director - Department of Transportation Legislative Officials Michael E. Braun, Executive Director - Legislative Council Richard Stavneak, Director - Joint Legislative Budget Committee Debra K. Davenport, CPA, Auditor General Gladys Ann Wells, Director - Board of Library, Archives and Public Records University Officials Michael Crow, President - Arizona State University Dr. John Denis Haeger, President - Northern Arizona University Peter Likins, President - University of Arizona -8- DEPARTMENT OF ADMINISTRATION FINANCIAL SECTION STATE SENATE INDEPENDENT AUDITORS’ REPORT STATE OF ARIZONA DEBRA K. DAVENPORT, CPA AUDITOR GENERAL OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report The Honorable Janet Napolitano, Governor State of Arizona The Honorable Ken Bennett, President Arizona State Senate The Honorable Franklin L. “Jake” Flake, Speaker Arizona House of Representatives The Honorable Charles E. Jones, Chief Justice Arizona Supreme Court We have audited the accompanying financial statements of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and aggregate remaining fund information of the State of Arizona as of and for the year ended June 30, 2002, as listed in the table of contents, which collectively comprise the State’s basic financial statements. These financial statements are the responsibility of the State’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of certain departments and the component units, which account for the following percentages of the assets and revenues of the opinion units affected. Opinion Unit/Department Government-Wide Statements Governmental activities: Arizona Health Care Cost Containment System Department of Transportation Business-type activities: Lottery Department Arizona Health Care Cost Containment System Department of Transportation 2910 NORTH 44 th Assets Revenues 2.27% 68.85% 15.57% 17.10% .89% 13.79% .18% 5.27% .99% .79% STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 Opinion Unit/Department Component Units: Arizona Power Authority State Compensation Fund University Medical Center Water Infrastructure Finance Authority Fund Statements General Fund: Arizona Health Care Cost Containment System Transportation and Aviation Fund: Department of Transportation Lottery Fund: Lottery Department Aggregate Remaining Fund Information: Arizona Health Care Cost Containment System Department of Transportation Arizona State Retirement System Public Safety Personnel Retirement System Corrections Officer Retirement Plan Elected Officials' Retirement Plan Assets Revenues 2.21% 77.43% 6.24% 14.12% 3.51% 53.84% 37.48% 5.17% 11.15% 18.51% 100.00% 100.00% 100.00% 100.00% 0.22% 1.17% 59.71% 13.18% 2.12% 0.98% 3.98% 6.69% 32.66% 12.55% 1.50% .96% Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the reports of the other auditors. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Public Safety Personnel Retirement System, Elected Officials’ Retirement Plan, and Corrections Officer Retirement Plan, included in the Fiduciary statements; and the University Medical Center, Arizona Power Authority, and State Compensation Fund, included in the Component Units statements were not audited by the other auditors in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and aggregate remaining fund information of the State of Arizona as of June 30, 2002, and the changes in financial position and cash flows, where applicable, of those activities, units, and funds for the year then ended in conformity with U.S. generally accepted accounting principles. As described in Notes 1 and 8, the State adopted the provisions of GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments and GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities for the year ended June 30, 2002, to implement a new financial reporting model. Management’s Discussion and Analysis on pages 16 through 27, the Budgetary Comparison Schedules on pages 106 through 130, the Infrastructure Assets information on pages 131 through 135, and the Schedule of Agent Retirement Plans’ Funding Progress on page 136, is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we and the other auditors, did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements of the activities, component units, and funds that collectively comprise the State’s basic financial statements. The combining and individual fund statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, in our opinion, based on our audit and the reports of the other auditors, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The information included in the introductory and statistical sections listed in the table of contents has not been subjected to the auditing procedures applied in our audit of the basic financial statements and, accordingly, we express no opinion on such information. In accordance with Government Auditing Standards, we will also issue our report on our consideration of the State’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants at a future date. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Debbie Davenport Auditor General February 11, 2003 DEPARTMENT OF REVENUE MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS The following is a discussion and analysis of the State of Arizona’s (the State’s) financial performance, providing an overview of the activities for the fiscal year ended June 30, 2002. Please read it in conjunction with the transmittal letter at the front of this report and with the State’s financial statements, which follow this section. Because fiscal year 2001-2002 represents the first year in which the State implemented the provisions of Governmental Accounting Standards Board (GASB) Statement 34, this discussion and analysis provides few comparisons with the previous year. Future reports are required to include extensive comparisons. The completeness and fairness of the following information is the responsibility of the State’s officials and management. FINANCIAL HIGHLIGHTS Government-Wide: • The assets of the State exceeded liabilities at the close of the fiscal year by $15.5 billion (reported as net assets). Of this amount, $700.8 million (unrestricted net assets) may be used to meet ongoing obligations to citizens and creditors, $3.6 billion is restricted for specific purposes (restricted net assets), and $11.2 billion is invested in capital assets, net of related debt. • The State’s total net assets decreased in fiscal year 2002 by $257.9 million. Net assets of governmental activities decreased by $273.2 million, while net assets of the business-type activities showed an increase of $15.3 million. Fund Level: • As of the close of the fiscal year, the State’s governmental funds reported combined ending fund balances of $3.3 billion, a decrease of $1.0 billion from the beginning of the year. Approximately thirty-seven percent of the combined fund balances, $1.2 billion is available to meet the State’s current and future needs (unreserved fund balance). • As of the close of the fiscal year, unreserved fund balance for the General Fund was $560.5 million or five percent of total General Fund expenditures. • The enterprise funds reported net assets at year-end of $3.0 billion, an increase of $12.8 million during the year. • The Land Endowments Fund reported fund balance at year-end of $1.1 billion, an increase of $2.1 million during the year. The Land Endowments Fund is used to help finance public education within the State as required by the federal government and the State’s Constitution. Long-term Debt: • The State’s total long-term debt rose during the fiscal year to $4.3 billion, an increase of $1.0 billion (or 32%). The Department of Transportation issued revenue bonds for $216.3 million, School Facilities Board issued revenue bonds for $6.4 million, the University of Arizona issued revenue bonds for $93.1 million and Arizona State University issued revenue bonds for $226.4 million. The Department of Administration issued certificates of participation for $63.2 million, the University Arizona issued certificates of participation for $98.4 million and Arizona State University issued certificates of participation for $103.8 million. Compensated absences totaled $186.5 million at year-end, an increase of $22.2 million for the year. More detailed information regarding these activities and funds begins on page 30. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is an introduction to the State’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Required Supplementary Information and other supplementary information are included in addition to the basic financial statements. 16 Government-Wide Statements (Reporting the State as a Whole) The government-wide financial statements provide a broad overview of the State of Arizona’s finances in a manner similar to private sector business. The financial statements report information about the State, as a whole, and about its activities that should help answer this question: Is the State, as a whole, better or worse off as a result of this year’s activities? These statements include all non-fiduciary assets and liabilities using the accrual basis of accounting. The current year’s revenues and expenses are taken into account regardless of when cash is received or paid. The government-wide financial statements include the following two statements: The Statement of Net Assets (pages 30 and 31) presents all of the State’s assets and liabilities, with the difference between the two reported as “net assets”. Over time, increases and decreases in net assets measure whether the State’s financial position is improving or deteriorating. The Statement of Activities (pages 32 and 33) presents information showing how the State’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying events giving rise to the change occur, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). Both government-wide statements report three activities: • Governmental Activities – Most of the State’s basic services are reported under this category. Taxes and intergovernmental revenues generally fund these services. The Legislature, the Judiciary and the general operations of the Executive departments fall within the governmental activities. • Business-type Activities – The State charges fees to customers to help it cover all or most of the cost of certain services it provides. Lottery tickets, the State’s unemployment compensation services, Industrial Commission rehabilitation services, and the State’s three universities are examples of business-type activities. • Discretely Presented Component Units – Component units are legally separate organizations for which the elected officials of the State are financially accountable. The State Compensation Fund, the University Medical Center, the Arizona Power Authority, and the Water Infrastructure Finance Authority are the State’s four organizations reported as discretely presented component units. See Note 1 for more information on discretely presented component units. Fund Financial Statements (Reporting the State’s Major Funds) The fund financial statements begin on page 34 and provide detailed information about the major individual funds. A fund is a fiscal and accounting entity with a self-balancing set of accounts that the State uses to keep track of specific sources of funding and spending for a particular purpose. In addition to the major funds, page 140 begins the individual fund data for the non-major funds. The State’s funds are divided into three categories – governmental, proprietary, and fiduciary – each category uses different accounting approaches. • Governmental funds – Most of the State’s basic services are reported in the governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for future spending. The governmental fund financial statements provide a detailed short-term view of the State’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the State’s programs. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. Governmental funds include the general, special revenue, capital projects, debt service, and permanent funds. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the 17 government’s near-term financing decisions. This report includes two schedules (pages 35, 38 and 39) that reconcile the amounts reported on the governmental fund financial statements (modified accrual accounting) with governmental activities (accrual accounting) of the appropriate government-wide statement. Governmental fund financial statements can be found on pages 34 and 36 of this report. • Proprietary funds – When the State charges customers for the services it provides, whether to outside customers or to other agencies within the State, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service) utilize accrual accounting; the same method used by private sector businesses. Enterprise funds report activities that provide supplies and services to the general public – such as the State Lottery Fund and Universities. Internal service funds report activities that provide supplies and services for the State’s other programs and activities – such as the State’s Risk Management Fund. Internal service fund operations primarily benefit governmental funds and are reported as governmental activities on the government-wide statements. The reconciliation between the government-wide financial statement business-type activities and the proprietary fund financial statements is presented on pages 42-43. Proprietary fund financial statements can be found on pages 40-49 of this report. • Fiduciary funds – The State acts as a trustee or fiduciary, for its employee pension plans. It is also responsible for other assets that, because of a trust arrangement can be used only for the trust beneficiaries. The State’s fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets beginning on page 50. These funds, which include pension, investment trust and agency funds are reported using accrual accounting. The government-wide statements exclude fiduciary fund activities and balances because these assets are restricted in purpose and do not represent discretionary assets of the State to finance its operations. Fiduciary fund financial statements can be found on pages 50-51 of this report. Notes to the Financial Statements The Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found beginning on page 56 of this report. Required Supplementary Information Following the basic financial statements is additional Required Supplementary Information that further explains and supports the information in the financial statements. The Required Supplementary Information includes budgetary comparison schedules, reconciling schedules of statutory and generally accepted accounting principles (GAAP) expenditures for the fiscal year. This section also includes schedules of condition and maintenance data regarding certain portions of the State’s infrastructure. Required supplementary information begins on page 106 of this report. Other Supplementary Information Other supplementary information includes combining financial statements for non-major governmental, non-major enterprise, all internal service funds, and all fiduciary funds. These funds are added together, by fund type, and presented in single columns in the basic financial statements, but are not reported individually, as with major funds, on the governmental fund financial statements. Budgetary expenditure comparison schedules for the non-major governmental funds are also included. Other supplementary information begins on page 140 of this report. 18 GOVERNMENT-WIDE FINANCIAL ANALYSIS The State’s overall financial position and operation for the past year for the primary government are summarized as follows based on the information included in the government-wide financial statements. State of Arizona-Primary Government Assets, Liabilities and Net Assets as of June 30, 2002 (expressed in thousands) Current assets Noncurrent assets Capital assets Total assets Governmental Activities $ 3,179,143 1,746,159 11,941,119 16,866,421 Business-type Activities $ 1,716,647 1,062,101 2,092,763 4,871,511 Primary Government Total $ 4,895,790 2,808,260 14,033,882 21,737,932 1,523,216 2,773,625 4,296,841 483,803 1,421,520 1,905,323 2,007,019 4,195,145 6,202,164 10,042,962 2,124,499 402,119 12,569,580 1,194,191 1,473,311 298,686 2,966,188 11,237,153 3,597,810 700,805 15,535,768 Current liabilities Noncurrent liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted net assets Unrestricted net assets Total net assets $ $ $ The amount of total net assets is one measure of the health of the State’s finances, and the state reports significant positive balances in all categories of net assets. However, this measure must be used with care because large portions of the balances relate to capital assets or restricted assets that may be unavailable to meet the day-to-day payments of the State. The largest portion of the State’s net assets (72 percent) represents capital assets, net of related debt of $11.2 billion. The State uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the State’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Another significant portion of the State’s net assets of $3.6 billion (23 percent) represents resources that are subject to external restrictions on how they may be used. The largest restrictions are by the federal government and State constitution for basic education funded by the Land Endowment Earnings of the Permanent Funds and Unemployment Insurance Premiums from employers for funding the Unemployment Compensation Fund. Another major restriction is unspent debt instrument proceeds for the construction of additional capital assets. The remaining balance of the State’s net assets of $700.8 million (5 percent) represents unrestricted net assets that may be used to meet the State’s ongoing obligations to citizens and creditors. The State’s net assets decreased by $257.9 million during the current fiscal year. This decrease is primarily attributable to litigation claims, Medicaid income eligibility level increases, and a decrease of income tax collections. 19 State of Arizona-Primary Government Changes in Net Assets for Fiscal Year Ended June 30, 2002 (expressed in thousands) Governmental Activities Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions $ 577,786 4,996,539 471,020 Primary Government Total Business-type Activities $ 1,188,882 737,170 48,180 $ 1,766,668 5,733,709 519,200 General revenues: Sales taxes Income taxes Property taxes Motor vehicle and fuel taxes Other taxes Unrestricted investment earnings Unrestricted grants and contributions Miscellaneous revenue Contributions to permanent endowments Gain on sale of trust land Total revenues 4,450,691 2,442,320 49,611 1,493,259 544,514 116,376 8,518 186,917 137,565 15,475,116 41,367 29,327 83,108 12,447 2,723 2,143,204 4,492,058 2,442,320 49,611 1,493,259 544,514 145,703 91,626 199,364 2,723 137,565 17,618,320 Expenses: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental Revenue Sharing Interest on long-term debt Universities Unemployment compensation Industrial commission Lottery Other business-type activities Total expenses 852,417 5,960,399 131,363 4,277,635 931,292 411,108 152,772 2,190,160 131,206 15,038,352 2,039,110 406,406 57,503 239,648 95,164 2,837,831 852,417 5,960,399 131,363 4,277,635 931,292 411,108 152,772 2,190,160 131,206 2,039,110 406,406 57,503 239,648 95,164 17,876,183 Excess (deficiency) before transfers Transfers Change in net assets Net assets - July 1, 2001, as restated Net assets - June 30, 2002 436,764 (709,916) (273,152) 12,842,732 12,569,580 (694,627) 709,916 15,289 2,950,899 2,966,188 (257,863) (257,863) 15,793,631 15,535,768 $ 20 $ $ Change in Net Assets Governmental activities – Net assets decreased by $273.2 million or 2.1%. Four revenue sources contribute approximately 90% of total revenues. The total taxes on sales (29%), income (16%), and motor vehicles and fuel (10%) contribute approximately 55%. Operating and capital grants and contributions combined account for 35% of total revenues. Governmental activities decreased the State’s net assets by $273.2 million, accounting for more than the State’s total decrease in net assets of $257.9 million. The difference of $15.3 million is the net increase in assets from business-type activities. The net cost of services by function is shown on page 22. Revenues by Source Governmental Activities Miscellaneous Revenue 3% Motor Vehicle and Fuel Taxes 10% Other Taxes 4% Charges for Services 3% Grants and Contributions 35% Income Taxes 16% Sales Taxes 29% Expenditures by Function Governmental Activities Intergovernmental Other Expenditures 3% Revenue Sharing General 15% Government Transportation 6% 3% Health and Welfare 39% Protection and Safety 6% Education 28% 21 Governmental Activities (in thousands) Expenses Net of Program Revenues: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Interest expense $ Total Governmental Activities Expenses (710,810) (1,620,216) (8,409) (3,737,181) (744,198) 228,870 (79,697) (2,190,160) (131,206) (8,993,007) General Revenues: Taxes Unrestricted investment earnings Other Gain on sale of trust land Transfers to Business-Type Activities 8,980,395 116,376 195,435 137,565 (709,916) Decrease in Governmental Activities Net Assets $ (273,152) Expenses and Program Revenues Governmental Activities (in millions of dollars) 7,000 6,000 5,000 Expenses 4,000 3,000 Program Revenues 2,000 1,000 Ed uc at io te n ct io n & Sa fe ty Tr an sp or N ta at tio u In n r al te rg R es ov ou t. R rc ev es In en te ue re st Sh on ar in Lo g ng -te rm D eb t Pr o e R eg ul at io n & W el fa r & H ea lth In sp ec tio n G en er al G ov er nm en t 0 22 Business-type activities – The net assets increased by $15.3 million or 0.5%. The sum of the change in net assets for the Unemployment Compensation, Lottery, and Other Enterprise funds remained relatively unchanged for the fiscal year ($4.4 million increase). The Universities’ net assets increased $59.3 million primarily from normal operations. The Industrial Commission’s net assets decreased by $50.8 million primarily due to seven medical insurance carriers becoming insolvent during the year and contributing to the $37.2 million increase of the commission’s long term insurance liability. FINANCIAL ANALYSIS OF THE STATE’S FUNDS As noted earlier, the State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds – The general government functions are contained in the General, Special Revenue, Debt Service, Capital Projects and Permanent Funds. The focus of the State’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the State’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. General Fund The general fund is the chief operating fund of the State. At June 30, 2002, unreserved fund balance of the general fund was $560.5 million while total fund balance closed the year at $712.8 million. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures and other financing uses. Unreserved fund balance represents four percent of total expenditures and other financing uses, while total fund balance represents six percent of the same amount. The fund balance of the State’s general fund decreased by $596.1 million during the fiscal year. Most of the decline in fund balance is due to the decrease in income tax collections as a result of the declining Arizona economy and an increase in the Medicaid income eligibility limit approved by a voter initiative approved in November 2000. The initiative increased the indigent health care maximum income eligibility limit from $5,500 a year to $16,500 a year (100% of the Federal Poverty Level). Income tax revenue comes from three major sources: withholding from wages, individual income tax and corporate income tax. In fiscal 2002, 94.4% of revenue came from withholding from wages and 14.2% from corporate income taxes. Refunds exceeded collections for individual income taxes, contributing a negative 8.6% of total net revenues. A comparison of fiscal year 2002 to 2001 income tax collection data indicates reduced cash receipts in all three areas. Net corporate income tax collections decreased $194.9 million, net withholding from wages decreased $56.4 million, and the amount by which individual income tax refunds exceeded individual income tax receipts increased $156.9 million in comparison to 2001. Refunds and chargeoff items for all sources of income tax collections totaled $1.091 billion in fiscal year 2002 and $1.055 billion in fiscal year 2001. The only major increase in income tax refunds for fiscal year 2002 was for corporations. Corporation income tax refunds increased $29.1 million from fiscal year 2001. The preceding comparisons suggest that taxable wages earned by workers and taxable profits generated by corporations decreased approximately $5.9 billion and $2.8 billion, respectively during fiscal year 2002. The tax rates used to calculate the State’s reduced economic activity are 3.6% for individuals and 6.9% for corporations. Cash collections and modified accrual basis of accounting both indicate that income tax resources declined approximately $425 million in 2002 in comparison to 2001. The increase of the State’s Medicaid population, due to passage of the November 2000 initiative, created initial year general fund expenditures of approximately $210 million. General tax revenues of $70 million were appropriated and $140 million came from Tobacco Litigation Settlement receipts. Voters identified the Tobacco Litigation Settlement receipts as the funding source for expanded Medicaid coverage authorized by 23 an initiative passed in the November 2000 general election. If litigation receipts do not cover the State’s share of the expanded coverage the initiative requires the general tax dollars to provide the remaining resources. Transportation and Aviation Fund The transportation and aviation fund is responsible for repair and maintenance of existing roads, paying the debt service for roads that are being or were built from the issuing of revenue bonds, and providing technical assistance with current road construction financed by the issuing of revenue bonds. For fiscal year 2001 and 2002, the annual revenue earned and sum of operating and debt service expenditures have averaged $2 billion each year. Total fund balance declined approximately $25 million during fiscal year 2002. The fund balance decrease is due to expenditure increase of approximately $11 million for debt service transfers, $10 million for engineering and construction, and $4 million for administration. Land Endowments Fund The fund was established when the federal government granted Statehood. Both the State constitution and the federal government require that the land grants given to the State are maintained indefinitely and the earnings from the land are used for public education, primarily kindergarten through twelfth grade. The land endowments fund total fund balance increased $2 million during fiscal year 2002. Declining rental fees from land uses and an unrealized loss of $38 million on the carrying value of investments precluded an increase in fund value as was realized in recent years. Proprietary funds – The State’s enterprise funds provide the same type of information found in the government-wide financial statements, but in more detail. The universities’ transfer from the general fund represents approximately 36 percent of the resources received by the universities during the fiscal year and 28 percent of all funding for the enterprise funds. GENERAL FUND BUDGETARY HIGHLIGHTS During the fiscal year, the original budget was amended by various supplemental appropriations and appropriation revisions. Budgetary Comparison Schedules for the major governmental funds are in the Required Supplementary Information section beginning on page 106. Differences between the original budget and the final amended budget resulted in a $470.8 million increase in appropriations for the General Fund and can be briefly summarized as follows: • • • • • • • The School Facilities Board reverted $209 million for current and future operations. Funds to be used for new construction and building renewal were $83 million and $70 million respectively. The remaining $56 million was allocated for school deficiencies. The School Accountability Fund – Proposition 301 Account appropriations were increased by $23 million. Payments during fiscal year 2002 from fiscal year 2001 reverting appropriations, which are allowed by ARS 35-191, totaled approximately $63 million. Department of Economic Security Temporary Assistance for Needy Families appropriations increased $37 million. A $98 million increase for AHCCCS indigent payment to counties and private hospitals. A $30 million increase for reversions from Public Safety, Economic Security, Commerce and AHCCCS. A $70 million increase to AHCCCS for indigent health care at federal poverty level. The General Fund final budget exceeded actual expenditures by $672 million. 24 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets The State’s investment in capital assets for its governmental and business-type activities as of June 30, 2002 totaled $14.0 billion, net of accumulated depreciation. The total primary government increase in capital assets for the current period was 9.1 percent, with an 9.4 percent increase in capital assets used for governmental activities and a 6.9 percent increase for business-type activities. Depreciation charges of the governmental and business-type activities for the fiscal year totaled $257.9 million. Major capital assets activity during the current fiscal year included the following: • • The universities’ additions to capital assets totaled $292.9 million. Some of the capital asset additions were for equipment purchases of $104.8 million and construction of new facilities totaling $91.1 million. The department of transportation completed roads and bridges totaling $280.7 million during the fiscal year. For government-wide financial statement presentation, all depreciable assets, except infrastructure using the modified approach, were depreciated from acquisition date to the end of the current fiscal year. Governmental fund financial statements record capital asset purchases as expenditures. Capital assets for the governmental and business-type activities as of June 30, 2002 are presented below (amounts in thousands): Land Buildings Improvements Other than Buildings Equipment Collections (non-depreciable) Infrastructure Construction in Progress Less Accumulated Depreciation Total Governmental Activities $ 1,814,708 1,063,937 115,837 586,061 0 7,468,539 1,676,519 (784,482) $ 11,941,119 Business-type Activities $ 133,523 2,100,782 36,920 1,136,111 12,298 213,301 98,572 (1,638,744) $ 2,092,763 Primary Government Total $ 1,948,231 3,164,719 152,757 1,722,172 12,298 7,681,840 1,775,091 (2,423,226) $ 14,033,882 As provided by GASB 34, the State has elected to record its infrastructure assets using the modified approach. Assets accounted for under the modified approach include approximately 6,650 center lane miles (17,807 travel lane miles) and 4,378 bridges that the State is responsible for maintaining. The State manages its roads using the Present Serviceability Rating (PSR), which measures the condition of the pavement and its ability to serve the traveling public. The PSR uses a five-point scale (5 excellent, 0 poor) to characterize the condition of the roadway. The State’s serviceability rating goal is 3.23 for the overall system. The most recent assessment indicated that an overall rating of 3.6 was achieved for fiscal year 2002. 25 The State manages its bridges using the Arizona Bridge Information and Storage System (ABISS). The State determines the condition rating based on standards developed by the Federal Highway Administration and additional internal criteria. It is the policy of the State to Maintain a Condition Rating Index (CRI) of 92.5 percent or better. In fiscal year 2002 a CRI of 93.6 percent was obtained. In addition to many smaller projects, the following major highway construction projects in excess of $20 million were started during the fiscal year 2002 (amounts in thousands): Project Description Contract Start Contract Amount Construction of Pima Loop 101 from Scottsdale Road to Pima Road Construction of the Red Mountain Loop 202 from Gilbert Road to Higley Road Widening of a 5.5 mile section of State Route 260 near Christopher Creek Construction of US 60 (Grand Avenue) Ramps at 27th Avenue and 91st Avenue Reconstruction of the Interstate 10 and Interstate 19 Interchange Construction of the Price Loop 101 and Santan Loop 202 Interchange Construction of the Santan Loop 202 from 56th Street to McClintock Drive 07/18/2001 08/21/2001 09/27/2001 09/27/2001 04/15/2002 04/22/2002 06/24/2002 $ 24,538 46,835 32,500 24,210 54,272 48,375 38,377 Long-term debt The State issues no general obligation debt instruments. The Arizona Constitution, under Article 9 Section 5, provides that the State may contract debts not to exceed $350 thousand. This provision has been interpreted to restrict the State from pledging its credit as a sole payment for debts incurred for the operation of the State government. As a result, the State pledges either dedicated revenue streams or the constructed building or equipment acquired as security for the repayment of long-term debt instruments. State of Arizona-Primary Government Outstanding Long Term Debt as of June 30, 2002 (expressed in thousands) Governmental Activities Revenue Bonds Grant Anticipation Notes Certificates of Participation Capital Leases Installment Purchase Contracts Total $ $ 1,782,510 182,295 231,904 8,517 10,228 2,215,454 Business Type Activities $ $ 596,403 422,010 37,758 3,832 1,060,003 Total Primary Government $ 2,378,913 182,295 653,914 46,275 14,060 $ 3,275,457 Department of Transportation Debt Instrument Ratings – The senior lien Highway Revenue Bonds have been rated AAA/Aa1 by Standard & Poor’s Rating Services Group and Moody’s Investors Service, respectively. The agency’s subordinate lien Highway Revenue Bonds are rated AA/Aa2. Senior lien Transportation Excise Tax Revenue Bonds are rated AA/Aa2, while the subordinate lien Transportation Excise 26 Tax Revenue Bonds are rated A/Aa3. additional rating provided by Fitch, Inc. The Grant Anticipation Notes are rated AA-/Aa3/AA with the ECONOMIC CONDITION AND OUTLOOK Budget Stabilization Fund – The Budget Stabilization Fund’s 2002 fiscal year end cash balance was $67.7 million after required legislative transfers were completed. The transfers out to the general fund totaled $250.5 million and were needed to cover a general fund deficit caused by income tax revenues being less than forecasted amounts. University financing changes – The legislature passed new debt limits for the universities that take effect in fiscal year 2003. An individual university may issue new debt as long as its annual total debt instrument funding does not exceed eight percent of the sum of debt service and operating expenses. Based on fiscal year 2002 financial statements, the debt service ratios of each university is approximately two percent. Revenue increases - The only major fund level revenue increase for fiscal year 2002 was intergovernmental revenue for economic security federal grants and the AHCCCS Medicaid program. The revenue increases totaled approximately $850 million but are offset by an equal amount of direct and administrative grant and program expenditures. CONTACTING THE STATE COMPTROLLER’S OFFICE This financial report is designed to provide citizens, taxpayers, customers, investors, and creditors with a general overview of the State’s finances and to demonstrate the State’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Department of Administration, General Accounting Office, Financial Reporting Section at (602) 542-5405. The State’s component units issue their own separately issued audited financial statements. These statements may be obtained by directly contacting the component unit. To obtain their phone numbers, you may contact the General Accounting Office at (602) 542-5405. 27 DEPARTMENT OF AGRICULTURE BASIC FINANCIAL STATEMENTS STATE OF ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2002 (Expressed in Thousands) PRIMARY GOVERNMENT TOTAL PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES ASSETS Current Assets: Cash and investments Collateral investment pool Receivables, net of allowances: Taxes Interest Loans and notes Other Internal balances Reinsurance recoverables Due from U.S. Government Due from local governments Due from others Inventory of food stamps Inventories, at cost Other current assets Total Current Assets $ Noncurrent Assets: Restricted assets: Cash and cash equivalents Cash held by trustee Investments held by trustee Loans and notes receivable, net of allowances Investments Endowment investments Other noncurrent assets Capital assets: Infrastructure, land and other non-depreciable Depreciable buildings, property and equipment Less: accumulated depreciation Total Noncurrent Assets Total Assets 2,164,950 - $ $ 3,544,017 134,945 $ 412,248 - 502,791 19,561 86,395 27,568 299,251 53,618 45 100 17,833 7,031 3,179,143 38,069 3,736 55,767 46,909 (27,568) 51,249 27,217 7,256 1,716,647 540,860 23,297 55,767 133,304 350,500 53,618 45 100 45,050 14,287 4,895,790 22,715 15,178 79,201 38,545 2,287 9,403 17,617 597,194 423,105 66,235 204,586 1,052,233 - 275,901 200,402 82,577 289,890 199,826 13,505 699,006 66,235 200,402 287,163 289,890 1,252,059 13,505 10,463 19,158 262,223 2,311,258 58,819 11,199,516 5,257,592 (2,423,226) 16,842,142 14,852 330,019 (211,727) 2,795,065 10,955,123 1,770,478 (784,482) 13,687,278 $ 1,379,067 134,945 COMPONENT UNITS 16,866,421 244,393 3,487,114 (1,638,744) 3,154,864 $ 4,871,511 The Notes to the Financial Statements are an integral part of this statement. $ 21,737,932 $ 3,392,259 (Continued) - 30 - STATE OF ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2002 (Expressed in Thousands) PRIMARY GOVERNMENT TOTAL PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligation under securities loan agreements Tax refunds payable Due to U.S. Government Due to local governments Due to others Deferred revenue Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities $ 331,622 280,476 17,960 307 65,739 226,251 91,913 19,243 357,232 132,473 1,523,216 $ 66,621 31,018 134,945 20 990 46,537 92,894 13,735 50,900 46,143 483,803 $ 398,243 311,494 152,905 307 65,759 227,241 138,450 112,137 13,735 408,132 178,616 2,007,019 COMPONENT UNITS $ 24,872 18,877 193,027 46,014 5,649 15,740 3,506 307,685 Noncurrent Liabilities: Deferred revenue Accrued insurance losses NCCI assigned risk pool liability Policyholders' dividends Funds held for others Long-term debt Other long-term liabilities Total Noncurrent Liabilities 9,822 234,331 2,083,771 445,701 2,773,625 54,371 173,930 29,657 1,163,390 172 1,421,520 64,193 408,261 29,657 3,247,161 445,873 4,195,145 1,803,292 21,483 19,341 369,079 4,412 2,217,607 Total Liabilities 4,296,841 1,905,323 6,202,164 2,525,292 10,042,962 1,194,191 11,237,153 62,826 158,424 589,996 51,861 33,515 1,055,543 30,153 158,424 623,511 1,055,543 82,014 - 56,697 1,243,389 24,132 402,119 258,954 95,146 298,686 56,697 1,243,389 258,954 119,278 700,805 193,971 514,970 95,200 NET ASSETS Invested in capital assets, net of related debt Restricted for: Federal grants Capital projects Unemployment compensation Debt service Permanent funds: Expendable Nonexpendable Loans and other financial assistance Workers' compensation Other purposes Unrestricted Total Net Assets $ 12,569,580 $ 2,966,188 The Notes to the Financial Statements are an integral part of this statement. - 31 - $ 15,535,768 $ 866,967 STATE OF ARIZONA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) PROGRAM REVENUES CHARGES FOR SERVICES EXPENSES FUNCTIONS/PROGRAMS PRIMARY GOVERNMENT: Governmental Activities: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Interest on long-term debt Total Governmental Activities $ Business-type Activities: Universities Unemployment compensation Industrial Commission Lottery Other Total Business-type Activities Total Primary Government COMPONENT UNITS: University Medical Center Arizona Power Authority State Compensation Fund Water Infrastructure Finance Authority Total Component Units 852,417 5,960,399 131,363 4,277,635 931,292 411,108 152,772 2,190,160 131,206 15,038,352 $ 120,514 70,502 114,138 27,719 80,647 112,725 51,541 577,786 2,039,110 406,406 57,503 239,648 95,164 2,837,831 OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS $ 639,050 163,647 5,270 294,848 86,067 1,188,882 21,093 4,269,681 8,816 512,735 106,199 56,481 21,534 4,996,539 $ 488,489 248,127 554 737,170 248 470,772 471,020 48,180 48,180 $ 17,876,183 $ 1,766,668 $ 5,733,709 $ 519,200 $ 257,045 24,168 315,256 12,627 $ 257,306 23,018 227,075 10,772 $ 137,381 17,422 $ - $ 609,096 $ 518,171 $ 154,803 $ - General Revenues: Taxes: Sales Income Property Motor vehicle and fuel Other Unrestricted investment earnings Unrestricted grants and contributions Miscellaneous Contributions to permanent endowments Gain on sale of trust land Transfers Total General Revenues, Contributions, Gains and Transfers Change in Net Assets Net Assets - Beginning, as restated Net Assets - Ending The Notes to the Financial Statements are an integral part of this statement. - 32 - NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS PRIMARY GOVERNMENT TOTAL GOVERNMENTAL BUSINESS - TYPE PRIMARY COMPONENT ACTIVITIES ACTIVITIES GOVERNMENT UNITS $ (710,810) (1,620,216) (8,409) (3,737,181) (744,198) 228,870 (79,697) (2,190,160) (131,206) (8,993,007) $ $ (8,993,007) (710,810) (1,620,216) (8,409) (3,737,181) (744,198) 228,870 (79,697) (2,190,160) (131,206) (8,993,007) (863,391) 5,368 (52,233) 55,200 (8,543) (863,599) (863,391) 5,368 (52,233) 55,200 (8,543) (863,599) (863,599) (9,856,606) $ 261 (1,150) 49,200 15,567 63,878 $ 4,450,691 2,442,320 49,611 1,493,259 544,514 116,376 8,518 186,917 137,565 (709,916) 41,367 29,327 83,108 12,447 2,723 709,916 8,719,855 (273,152) 12,842,732 878,888 15,289 2,950,899 12,569,580 $ 2,966,188 4,492,058 2,442,320 49,611 1,493,259 544,514 145,703 91,626 199,364 2,723 137,565 - 3,934 2 - 9,598,743 (257,863) 15,793,631 $ 15,535,768 3,936 67,814 799,153 $ 866,967 - 33 - STATE OF ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2002 (Expressed in Thousands) ASSETS Cash and investments Receivables, net of allowances: Taxes Interest Loans and notes Other Due from U.S. Government Due from local governments Due from others Due from other Funds Inventory of food stamps Inventories, at cost Restricted assets: Cash and cash equivalents Cash held by trustee Endowment investments Other Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Tax refunds payable Due to U.S. Government Due to local governments Due to others Due to other Funds Deferred revenue Notes payable Total Liabilities GENERAL FUND $ $ 227,912 $ 53,616 $ 1,000,259 TOTAL $ 2,063,175 393,838 10,820 23,720 130,028 3,288 6,028 100 8,355 102,619 2,854 16,503 57,593 42,129 4,083 1,335 204,586 18,187 --1,390 - 6,334 4,696 17,005 150 6,335 45 15,638 2,670 502,791 19,705 204,586 75,415 187,771 9,623 45 65,185 100 15,108 3,102 342 305,136 - 1,052,233 - 114,867 66,235 28 423,105 66,235 1,052,233 370 $ 1,361,009 $ 758,829 $ 1,331,347 $ 1,234,262 $ 4,685,447 $ 144,079 128,454 $ 103,791 6,002 $ 4,921 79 $ 32,541 3,041 $ 285,332 137,576 Fund Balances: Reserved for: Budget stabilization fund Highway construction Other construction School facilities improvements Permanent funds Continuing appropriations Debt service Other fund balance reservations Unreserved Unreserved reported in: Nonmajor special revenue funds Nonmajor capital projects funds Total Fund Balances Total Liabilities and Fund Balances 781,388 TRANSPORTATION LAND OTHER & AVIATION ENDOWMENTS GOVERNMENTAL FUND FUND FUNDS $ 307 58,976 70,588 91,633 33,162 120,994 648,193 91,537 986 739 11,571 187,156 401,782 17,960 225,636 248,596 3,455 64,126 300 2,830 2,210 108,503 17,960 307 62,431 226,251 92,919 36,731 360,411 187,156 1,407,074 67,700 84,027 611 560,478 199,924 71,511 2,196 20,000 63,416 1,082,018 733 - 77,397 53,088 262,654 52,450 58,927 18,382 - 67,700 277,321 53,088 262,654 1,082,018 208,721 61,123 38,993 623,894 712,816 357,047 1,082,751 569,499 33,362 1,125,759 569,499 33,362 3,278,373 1,361,009 $ 758,829 The Notes to the Financial Statements are an integral part of this statement. - 34 - $ 1,331,347 $ 1,234,262 $ 4,685,447 STATE OF ARIZONA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2002 (Expressed in Thousands) Total fund balances - governmental funds $ 3,278,373 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 11,867,696 Long-term receivables are not available to pay for current period expenditures and, therefore, are deferred in the funds. 331,346 Internal service funds are used by management to charge the costs of fleet management, risk management and telecommunications to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Assets. (95,961) The allocation of internal service fund net income results in an amount due to business-type activites, which is not reported in the funds. (2,480) Long-term debt is not due and payable from current financial resources and, therefore, is not reported in the funds. These amounts consist of: Revenue bonds Premium on revenue bonds Grant anticipation notes Certificates of participation Premium on certificates of participation Capital leases Installment contracts (1,782,510) (28,026) (182,295) (231,904) (4,674) (8,517) (8,740) (2,246,666) (127,162) (438,000) (565,162) Other long-term liabilities are not due and payable from current financial resources and, therefore, are not reported in the funds. Those liabilities consist of: Compensated absences Claims and judgements Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Net assets of governmental activities 2,434 $ The Notes to the Financial Statements are an integral part of this statement. - 35 - 12,569,580 STATE OF ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) GENERAL REVENUES Taxes: Sales Income Property Motor vehicle and fuel Other Intergovernmental Licenses, fees and permits Earnings on investments Sales and charges for services Fines, forfeitures and penalties Other Total Revenues $ EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Proceeds from sale of trust land Capital lease and installment purchase contracts Refunding bonds issued Payment to refunded bond escrow agent Bonds issued Premium on bonds issued Refunding certificates of participation issued Payment to refunded certificate of participation escrow agent Certificates of participation issued Premium on certificates of participation issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning, as restated Fund Balances - Ending $ 3,800,270 2,410,342 40,823 11,324 358,590 4,573,647 72,847 61,153 80,977 16,627 228,823 11,655,423 TRANSPORTATION LAND OTHER & AVIATION ENDOWMENTS GOVERNMENTAL FUND FUND FUNDS $ 267,563 6,528 1,446,221 534,382 104,407 22,167 941 26,784 2,408,993 $ - $ 153 (5,054) 25,879 12,587 33,565 356,695 2,260 35,714 184,465 74,588 149,752 58,247 32,771 81,722 52,676 1,028,890 TOTAL $ 4,424,528 2,410,342 49,611 1,493,259 543,055 5,182,770 327,006 136,513 140,568 98,349 320,870 15,126,871 401,389 5,512,341 49,152 3,599,432 822,952 56 54,375 1,205,039 400,744 985,121 932 5,565 73,428 1,897 928 - 83,833 270,868 80,074 515,641 68,137 572 85,297 - 486,154 5,788,774 129,226 4,188,501 892,986 401,372 140,600 2,190,160 6,316 1,270 50,239 11,702,561 1,228 685,921 2,073,014 139 161 83,050 264,395 123,096 391,395 1,883,308 270,850 125,594 1,127,716 15,741,933 (47,138) 335,979 (49,485) (854,418) (615,062) 293,957 (846,194) 3,308 - 7,425 (370,064) 859 - 349 51,265 - 546,521 (326,702) 74,250 (77,135) 148,350 10,142 71,051 848,252 (1,542,960) 51,265 4,167 74,250 (77,135) 148,350 10,142 71,051 (548,929) (596,067) 1,308,883 (361,780) (25,801) 382,848 51,614 2,129 1,080,622 (65,087) 68,203 4,674 454,267 (400,151) 1,525,910 (65,087) 68,203 4,674 (404,828) (1,019,890) 4,298,263 712,816 $ 357,047 The Notes to the Financial Statements are an integral part of this statement. - 36 - $ 1,082,751 $ 1,125,759 $ 3,278,373 (This page intentionally left blank) STATE OF ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Net change in fund balances - total governmental funds $ (1,019,890) Capital outlays are reported as expenditures in governmental funds. However, in the Statement of Activities, the cost of assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlay 1,127,716 Depreciation expense (86,184) 1,041,532 The portion of expenses of internal service funds is included with governmental activities in the Statement of Activities. (7,664) Some revenues reported in the statement of activities are not currently available at year-end and are not reported as revenue in the governmental funds. Sales and use taxes 26,163 Income taxes 31,978 Other taxes 1,459 Gain on sale of trust land 84,393 Other revenue 256 144,249 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Litigation (438,000) Compensated absences (10,170) Other non-current expenses (9,052) (457,222) Bond proceeds provide current financial resources to the governmental funds; however, issuing debt increases long term liabilities in the Statement of Net Assets. In the current period, proceeds were received from: New bonds issued (148,350) Refunding bonds issued (74,250) Premium on bonds Issued (10,142) Bond premium amortization 1,787 New certificates of participation issued (68,203) Premium on COPs issued (4,674) Refunding certificates of participation issued (71,051) The Notes to the Financial Statements are an integral part of this statement. (374,883) (Continued) - 38 - STATE OF ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces noncurrent liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Debt service principal 270,850 Payment to refunding bond agent 71,000 Payment to refunding certificates of participation escrow agent 61,995 Bond issuance costs 1,048 404,893 Some capital asset additions were financed through capital leases and installment purchase contracts. Such financing arrangements are reported as an other financing source in governmental funds, however, these amounts are reported as liabilities in the Statement of Net Assets. (4,167) Change in net assets of governmental activities $ The Notes to the Financial Statements are an integral part of this statement. - 39 - (273,152) STATE OF ARIZONA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2002 (Expressed in Thousands) BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS UNIVERSITIES ASSETS Current Assets: Cash and investments Collateral investment pool Receivables, net of allowances: Taxes Interest Loans and notes Other Due from U.S. Government Due from local governments Due from other Funds Inventories, at cost Other current assets Total Current Assets Noncurrent Assets: Restricted assets: Cash and cash equivalents Investments held by trustee Loans and notes receivable, net of allowances Investments Endowment investments Other long-term assets Capital assets: Infrastructure, land and other non-depreciable Depreciable buildings, property and equipment Less: accumulated depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligation under securities loan agreements Due to U.S. Government Due to local governments Due to others Due to other Funds Deferred revenue Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities Noncurrent Liabilities: Deferred revenue Accrued insurance losses Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities $ 289,799 101,730 UNEMPLOYMENT COMPENSATION $ 1,033,312 - INDUSTRIAL COMMISSION $ 9,055 33,215 LOTTERY $ 28,392 - OTHER $ 18,509 - 586 4,748 32,295 51,199 16,177 6,398 502,932 38,069 7,026 1,078,407 2,387 17 44,674 2,934 1,852 33,178 763 51,019 4,637 50 2,651 9,188 858 87,675 131,225 197,038 27,477 102,913 199,826 6,795 - 3,364 186,977 - 6,710 144,676 55,100 - 238,025 3,399,086 (1,596,031) 2,706,354 3,209,286 1,078,407 2,997 25,638 (4,502) 214,474 259,148 938 7,253 (4,486) 10,415 43,593 2,433 55,137 (33,725) 223,621 311,296 60,489 19,870 101,730 12,559 85,642 49,500 45,165 374,955 9,943 20 12,688 213 22,864 1,629 33,215 13,735 1,400 49,979 2,149 990 21,125 9,477 391 34,132 2,354 1,205 165 23,009 7,252 587 34,572 54,371 1,011,854 29,657 1,095,882 1,470,837 22,864 173,930 6,000 179,930 229,909 34,132 145,536 172 145,708 180,280 The Notes to the Financial Statements are an integral part of this statement. - 40 - TOTAL ENTERPRISE FUNDS $ 1,379,067 134,945 GOVERNMENTAL ACTIVITIES INTERNAL SERVICE $ 101,775 - 38,069 3,736 55,767 46,909 51,249 2,651 27,217 7,256 1,746,866 25 10,810 38 2,113 2,725 5,708 123,194 275,901 200,402 82,577 289,890 199,826 13,505 - 244,393 3,487,114 (1,638,744) 3,154,864 4,901,730 873 197,334 (124,784) 73,423 196,617 66,621 31,018 134,945 20 990 46,537 32,699 92,894 13,735 50,900 46,143 516,502 37,551 693 838 113 519 2,841 6,251 48,806 54,371 173,930 1,163,390 29,829 1,421,520 1,938,022 234,331 4,340 5,101 243,772 292,578 (Continued) - 41 - STATE OF ARIZONA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2002 (Expressed in Thousands) BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital projects Unemployment compensation Debt service Loans and other financial assistance Other purposes Unrestricted Total Net Assets $ UNIVERSITIES UNEMPLOYMENT COMPENSATION 1,161,336 - 16,733 3,705 12,417 33,515 26,789 175,661 92,928 248,220 1,055,543 - 3,364 36 9,106 5,756 83,293 2,182 33,124 1,738,449 $ 1,055,543 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Net assets of business-type activities The Notes to the Financial Statements are an integral part of this statement. - 42 - INDUSTRIAL COMMISSION $ 29,239 LOTTERY $ 9,461 OTHER $ 131,016 TOTAL ENTERPRISE FUNDS $ GOVERNMENTAL ACTIVITIES INTERNAL SERVICE 1,194,191 66,242 33,515 1,055,543 30,153 258,954 95,146 296,206 (162,203) 2,963,708 $ (95,961) 2,480 $ 2,966,188 - 43 - STATE OF ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS UNIVERSITIES OPERATING REVENUES Sales and charges for services: Student tuition and fees, net of scholarship allowances of $115,000 Auxilary enterprises, net of scholarship allowances of $5,400 Lottery Other Unemployment assessments Intergovernmental Nongovernmental grants and contracts Licenses, fees and permits Earnings on investments Fines, forfeitures and penalties Other Total Operating Revenues $ OPERATING EXPENSES Cost of sales and benefits Scholarships and fellowships Personal services Contractual services Aid to local governments Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) 379,260 UNEMPLOYMENT INDUSTRIAL COMPENSATION COMMISSION $ - $ LOTTERY - $ OTHER - $ - 202,981 56,809 448,036 55,831 1,142,917 162,157 184,484 1,490 23 348,154 5,270 2,709 7,979 294,824 24 746 295,594 84,121 554 700 1,246 1,536 88,157 460,529 85,666 1,297,804 149,493 1,993,492 (850,575) 406,406 406,406 (58,252) 52,892 1,082 714 2,596 57,284 (49,305) 192,448 4,967 7,918 305 36 2,334 208,008 87,586 57,827 19,673 4,293 2,945 776 9,650 95,164 (7,007) NON-OPERATING REVENUES (EXPENSES) Share of State sales tax revenues Gain (loss) on sale of capital assets Interest income Endowment earnings on investments Other non-operating revenue Distributions to local governments Interest expense Other non-operating expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers 41,367 (345) 22,957 (15,378) 9,165 (38,416) (9,682) 9,668 63,643 63,643 (3,258) 76 1,872 (219) (1,529) 13 (31,640) (31,627) (1) 6,281 6,280 (840,907) 5,391 (50,834) 55,959 (727) CONTRIBUTIONS AND TRANSFERS Gifts and donations Capital grants and contributions Contributions to permanent endowments Transfers in Transfers out Total Contributions and Transfers 83,100 48,180 2,723 766,185 900,188 (1,506) (1,506) Change in Net Assets Total Net Assets - Beginning, as restated Total Net Assets - Ending 59,281 1,679,168 $ 1,738,449 - 3,885 1,051,658 $ 1,055,543 Change in net assets of enterprise funds Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Change in net assets of business-type activities The Notes to the Financial Statements are an integral part of this statement. - 44 - (55,173) (55,173) (50,834) 80,073 $ 29,239 8 5,433 (5,023) 418 786 8,675 $ 9,461 (309) 131,325 $ 131,016 GOVERNMENTAL TOTAL $ ENTERPRISE ACTIVITIES INTERNAL FUNDS SERVICE 379,260 $ - 202,981 294,824 140,930 162,157 633,074 55,831 724 6,516 1,490 5,014 1,882,801 524,768 5,231 529,999 1,170,102 85,666 1,322,444 13,293 153,457 812 14,580 2,760,354 (877,553) 377,327 33,667 31,505 51 18,291 51,795 7,790 520,426 9,573 41,367 (3,604) 92,970 (15,378) 11,037 (31,640) (38,635) (9,682) 46,435 143 186 (330) (1) (831,118) 9,572 83,108 48,180 2,723 771,618 (61,702) 843,927 452 6 (15,214) (14,756) 12,809 2,950,899 $ 2,963,708 $ 12,809 2,480 $ 15,289 (5,184) (90,777) $ (95,961) - 45 - STATE OF ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS UNIVERSITIES CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ Receipts from assessments Sales and services of auxilary enterprises Receipts from program loans Receipts from interfund services / premiums Receipts from student tuition and fees Receipts from federal and local governments Receipts from uninsured claims Receipts from other operating activities Program loans made to local governments Payments to employees Payments to retirees Payments for scholarships and fellowships Payments to suppliers, prize winners, claimants or unemployment insurance beneficiaries Payments to federal and local governments Payments for other operating activities Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Custodial funds received Office rental income Share of State sales tax receipts Grants and contributions received Transfers from other Funds Interest paid Custodial funds disbursed Grants and contributions disbursed Transfers to other Funds Distributions to local governments Net Cash Provided (Used) by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets Proceeds from capital debt Capital grants and contributions received Transfers from other Funds Acquisition and construction of capital assets Interest paid on capital debt, intallment purchase contracts and capital leases Principal paid on capital debt, installment purchase contracts and capital leases Net Cash (Used) by Capital and Related Financing Activities UNEMPLOYMENT COMPENSATION - $ 214,675 374,952 495,276 58,452 (1,292,943) (85,666) 331,175 23 - (459,509) (8,788) (703,551) (398,247) (67,049) 79,073 39,583 350,271 760,685 (74,392) (271,036) 884,184 INDUSTRIAL COMMISSION $ 2,673 38 - LOTTERY $ OTHER 294,745 $ 746 (4,949) - 84,837 45,889 1,505 (74,337) (23,973) - (19,453) (16,742) (204,059) 86,483 (63,954) (30,033) (1,463) - 1,874 - (53,221) (32,209) 3,512 (2,014) - (1,463) 1,874 (85,430) 1,498 8,066 304,385 11,636 5,500 (249,509) - (12,703) (261) (3,410) (42,614) - (203) - - (45,434) - (1,300) - - (7,970) - (14,206) (261) (3,410) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments Interest and dividends from investments Change in cash collateral received from securities lending transactions Purchase of investments Net Cash Provided (Used) by Investing Activities 425,157 24,037 63,643 107,469 12,087 13 6,467 (524,863) (75,669) 63,643 (1,564) (89,824) 28,168 13 6,467 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning, as restated 96,994 263,840 (4,869) 1,038,181 (906) 43,176 805 27,587 (25,478) 188,663 Cash and Cash Equivalents - Ending $ 360,834 $ 1,033,312 The Notes to the Financial Statements are an integral part of this statement. - 46 - $ 42,270 $ 28,392 $ 163,185 TOTAL ENTERPRISE FUNDS $ GOVERNMENTAL ACTIVITIES INTERNAL SERVICE 379,582 $ 331,175 214,675 45,889 374,952 495,276 2,673 60,764 (74,337) (1,321,865) (85,666) 529,699 4,935 (33,971) (7,607) - (1,145,222) (8,788) (730,892) (455,707) (51) (17) 37,281 79,073 1,874 39,583 350,271 764,197 (74,392) (271,036) (56,698) (32,209) 452 6 (330) (15,214) - 800,663 (15,086) 8,066 304,385 11,636 5,500 (265,883) 1,850 (14,293) (42,817) - (46,734) (2,160) (25,847) (14,603) 532,626 106,247 220 (1,564) (614,687) 22,622 220 66,546 1,561,447 $ 1,627,993 7,812 93,963 $ 101,775 (Continued) - 47 - STATE OF ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS UNIVERSITIES RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation and amortization Other non-cash expenses Investment income from investing activities Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances Decrease in due from local governments (Increase) decrease in due from other Funds (Increase) decrease in inventories, at cost (Increase) decrease in other current assets (Increase) in other noncurrent assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase in due to U.S. Government (Decrease) in due to local governments Increase in due to others (Decrease) in due to other Funds (Decrease) in deferred revenue Increase in accrued insurance losses Increase (decrease) in other current liabilities Increase in long-term debt Increase in long-term accrued insurance losses Increase in other long-term liabilities Net Cash Provided (Used) by Operating Activities $ UNEMPLOYMENT COMPENSATION (850,575) $ INDUSTRIAL COMMISSION (58,252) $ LOTTERY (49,305) $ OTHER 87,586 $ (7,007) 149,493 - - 714 (5,270) 305 - 2,945 1,156 - (3,181) (973) (876) (1,941) 8 (1,109) 5,603 (1,534) 3,370 4,789 (15,422) - (14) (62) 2,209 34,986 - (103) (978) (48) (297) 18 (69,400) (109) (588) (72) (992) (389) 53 (100,715) (561) (125) 145,536 235 (67,049) $ (16,742) $ 86,483 $ (30,033) 42,270 $ (33,215) 28,392 - $ 163,185 (144,676) - $ (703,551) $ RECONCILIATION OF CASH AND CASH EQUIVALENTS TO CASH AND INVESTMENTS Cash and cash equivalents - ending $ Restricted cash and cash equivalents Short-term investments Collateral investment pool Cash and investments - Proprietary Fund Statement of Net Assets $ 360,834 $ (131,225) 60,190 - 1,033,312 - $ 289,799 $ 1,033,312 $ 9,055 $ 28,392 $ 18,509 36,264 1,689 $ - $ - $ - $ 8 - SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Donated equipment Gifts and conveyances of capital assets Assets acquired under capital leases Unrealized net (loss) from change in fair value of investments Refinancing long-term debt Amortization of bond discount and issuance costs Amortization of bond premium Gains (losses) on disposal of capital assets, net Amortization of deferred rent Total noncash investing, capital and financing activities $ (20,485) 292,148 (552) 231 1,522 4,900 $ 315,717 $ - The Notes to the Financial Statements are an integral part of this statement. - 48 - $ (6,479) (3,258) - - (9,737) $ - $ 8 TOTAL ENTERPRISE FUNDS $ GOVERNMENTAL ACTIVITIES INTERNAL SERVICE (877,553) $ 9,573 153,457 1,156 (5,270) 18,291 - (74,232) (109) (2,539) (948) (48) (3,292) 2,981 4,850 (100,715) (17,092) 2,209 (125) 145,536 34,986 5,856 1,361 496 1,944 309 186 3,031 (390) 838 (7) 113 (1,380) (4) 1,287 654 979 $ (730,892) $ 37,281 $ 1,627,993 $ (275,901) 60,190 (33,215) 101,775 - $ 1,379,067 $ 101,775 $ 8 36,264 1,689 $ 1,571 (26,964) 292,148 (552) 231 (1,736) 4,900 $ 305,988 - $ 1,571 - 49 - STATE OF ARIZONA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2002 (Expressed in Thousands) ASSETS Cash and investments $ Receivables, net of allowances: Accrued interest and dividends Securities sold Forward contract receivable Contributions Court fees Miscellaneous receivables Total receivables Investments, at fair value: Temporary investments United States Government securities Corporate bonds Corporate notes Corporate stocks Real estate mortgages and contracts Collateral investment pool Other investments Money market fund Total investments Custodial securities in safekeeping Property and equipment, net of accumulated depreciation Other assets Total Assets LIABILITIES Accounts payable Accrued liabilities Obligation under securities loan agreements Due to local governments Due to others Other liabilities Total Liabilities NET ASSETS Held in trust for: Pension benefits Pool participants Total Net Assets $ PENSION INVESTMENT AGENCY TRUSTS TRUSTS FUNDS 13,012 $ - $ TOTAL 252,234 $ 265,246 103,639 188,868 37,659 17,290 288 998 348,742 8,749 8,749 169 876 1,045 112,557 188,868 37,659 17,290 288 1,874 358,536 2,304,740 4,572,560 2,428,582 175,411 15,821,630 30,213 1,281,416 228,900 2,467 26,845,919 448,952 3,127,673 3,576,625 - 2,304,740 5,021,512 5,556,255 175,411 15,821,630 30,213 1,281,416 228,900 2,467 30,422,544 - - 3,013,547 3,013,547 457 - - 2,215 457 2,215 27,208,130 3,585,374 3,269,041 34,062,545 39,898 - - 13 31,995 39,911 31,995 2,954,940 455,270 11,554 - 2,732 3,101,900 132,401 2,954,940 14,286 3,101,900 587,671 3,450,108 11,554 3,269,041 6,730,703 23,758,022 - 3,573,820 - 23,758,022 3,573,820 23,758,022 $ 3,573,820 $ The Notes to the Financial Statements are an integral part of this statement. - 50 - - $ 27,331,842 STATE OF ARIZONA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) ADDITIONS: Member contributions Employer contributions Member reimbursements Court fees $ Investment income: Net (decrease) in fair value of investments Interest income Dividends Real estate Other investment income Securities lending income Total investment income (loss) Less investment expenses: Investment activity expenses Security lending expenses: Interest expense Net investment income (loss) INVESTMENT TRUSTS TRUSTS 263,828 227,469 49,365 3,485 $ (3,179,589) 437,274 168,673 5,885 11,689 46,298 (2,509,770) Total Deductions Change in net assets held in trust for: Pension benefits Pool participants Net Assets - Beginning 28,473 36,335 (2,476,413) 4,828,327 109,730 (4,828,853) - 109,204 109,204 8,085 - 8,085 204,641 (1,814,977) 1,277,107 14,078 - 1,277,107 14,078 63,088 19,735 10,308 95,437 - 63,088 19,735 95,437 10,308 1,384,316 95,437 1,479,753 (3,403,934) 27,161,956 $ 263,828 227,469 49,365 3,485 (3,181,068) 536,918 168,673 5,885 11,689 46,298 (2,411,605) 4,828,327 109,730 (4,828,853) (2,019,618) DEDUCTIONS: Retirement and disability benefits Death benefits Refunds to withdrawing members, including interest Administrative expense Dividends to investors Other deductions $ 95,437 - Total Additions - 2,728 36,335 (2,571,850) Other additions TOTAL (1,479) 99,644 98,165 25,745 Capital share and individual account transactions: Shares sold Reinvested interest income Shares redeemed Net capital share and individual account transactions Net Assets - Ending PENSION 23,758,022 109,204 3,464,616 $ 3,573,820 The Notes to the Financial Statements are an integral part of this statement. - 51 - (3,403,934) 109,204 30,626,572 $ 27,331,842 (This page intentionally left blank) STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS COMPONENT UNITS JUNE 30, 2002 STATE (Expressed in Thousands) COMPENSATION UNIVERSITY MEDICAL CENTER FUND ASSETS Current Assets: Cash and investments Receivables, net of allowances: Interest Loans and notes Other Reinsurance recoverables Due from U.S. Government Inventories, at cost Other current assets Total Current Assets $ Noncurrent Assets: Restricted assets: Cash held by trustee Investments held by trustee Loans and notes receivable, net of allowances Investments Other noncurrent assets Capital assets: Land and other nondepreciable Depreciable buildings, property and equipment Less: accumulated depreciation Total Noncurrent Assets 259,310 $ 41,788 WATER INFRASTRUCTURE FINANCE AUTHORITY ARIZONA POWER AUTHORITY $ 6,862 $ 104,288 TOTAL $ 412,248 19,311 39,258 38,545 12,287 368,711 37,323 9,403 3,801 92,315 153 1,864 1,529 10,408 3,251 15,178 756 2,287 125,760 22,715 15,178 79,201 38,545 2,287 9,403 17,617 597,194 - 6,748 12,410 10,463 - 10,463 19,158 2,226,048 - 7,530 4,094 51,833 262,223 77,680 2,892 262,223 2,311,258 58,819 3,975 10,877 - - 14,852 54,569 (26,591) 2,258,001 274,238 (184,106) 119,381 1,212 (1,030) 64,425 353,258 330,019 (211,727) 2,795,065 2,626,712 211,696 74,833 479,018 3,392,259 8,895 21,757 5,038 3,115 912 4,032 24,872 18,877 193,027 44,505 - 5,649 2,715 1,450 1,509 11,575 193,027 46,014 5,649 15,740 246,427 3,506 38,665 5,477 17,116 3,506 307,685 Noncurrent Liabilities: Accrued insurance losses Long-term debt NCCI assigned risk pool liability Policyholders' dividends Other long-term liabilities Total Noncurrent Liabilities 1,792,538 21,483 19,341 1,833,362 10,754 67,603 4,412 82,769 66,232 66,232 235,244 235,244 1,803,292 369,079 21,483 19,341 4,412 2,217,607 Total Liabilities 2,079,789 121,434 71,709 252,360 2,525,292 31,953 30,691 182 - 62,826 514,970 - 59,571 2,942 193,971 32,687 193,971 514,970 95,200 Total Assets LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Deferred revenue Current portion of insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities NET ASSETS Investment in capital assets, net of related debt Restricted for: Loans and other financial assistance Workers' compensation Unrestricted Total Net Assets $ 546,923 $ 90,262 The Notes to the Financial Statements are an integral part of this statement. - 53 - $ 3,124 $ 226,658 $ 866,967 STATE OF ARIZONA COMBINING STATEMENT OF ACTIVITIES COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) PROGRAM REVENUES CHARGES FOR EXPENSES FUNCTIONS/PROGRAMS University Medical Center $ Arizona Power Authority State Compensation Fund Water Infrastructure Finance Authority Total $ SERVICES OPERATING CAPITAL NET GRANTS AND GRANTS AND (EXPENSE) CONTRIBUTIONS CONTRIBUTIONS 257,045 24,168 315,256 12,627 $ 257,306 23,018 227,075 10,772 $ 137,381 17,422 $ - 609,096 $ 518,171 $ 154,803 $ - The Notes to the Financial Statements are an integral part of this statement. - 54 - REVENUE $ $ 261 (1,150) 49,200 15,567 63,878 GENERAL REVENUES UNRESTRICTED INVESTMENT EARNINGS $ $ MISCELLANEOUS (3,615) $ 747 6,802 3,934 $ TOTAL TOTAL CHANGE IN NET ASSETS NET ASSETS NET ASSETS - BEGINNING - ENDING 2 - $ (3,354) $ (401) 49,200 22,369 93,616 3,525 497,723 204,289 $ 90,262 3,124 546,923 226,658 2 $ 67,814 799,153 $ 866,967 $ - 55 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS INDEX Page Page Note 1. Summary of Significant Accounting Policies----------57 A. Reporting Entity --------------------------------------57 B. Basis of Presentation ---------------------------------59 C. Measurement Focus and Basis of Accounting------------------------------------------61 D. Cash and Investments --------------------------------61 E. Taxes Receivable -------------------------------------61 F. Inventories ---------------------------------------------61 G. Property Tax Calendar -------------------------------62 H. Capital Assets -----------------------------------------62 I. Investment Income -----------------------------------62 J. Scholarship Allowances -----------------------------63 K. Deferred Revenue ------------------------------------63 L. Compensated Absences------------------------------63 M. Long-Term Obligations------------------------------63 N. State Compensation Fund ---------------------------64 Note 2. Cash and Investments--------------------------------------64 A. Cash and Investment Policies ----------------------64 B. Unemployment Compensation ---------------------66 C. Collateral and Insurance ----------------------------66 D. Deposits Collateralization---------------------------66 E. Investments Custodial Risk-------------------------66 F. Securities Lending -----------------------------------68 G. Derivatives --------------------------------------------71 H. Custodial Securities ----------------------------------71 I. State Treasurer’s Separately Issued Financial Statements------------------------------------------72 J. Audited Financial Statements ----------------------72 Note 3. Receivables/Deferred Revenue --------------------------72 A. Taxes Receivable-------------------------------------72 B. Deferred Revenue ------------------------------------73 Note 4. Capital Assets -----------------------------------------------74 Note 5. Retirement Plans--------------------------------------------76 A. Plan Descriptions-------------------------------------76 B. Summary of Significant Accounting Policies ---77 C. Investment Restrictions -----------------------------77 D. Funding Policy----------------------------------------77 E. Annual Pension Cost---------------------------------78 - 56 - F. Trend Information ------------------------------- 79 G. Universities’ Defined Contribution Plans---- 79 H. University Medical Center Defined Contribution Plan ------------------------------ 80 I. Post-employment Benefits --------------------- 80 Note 6. Long-Term Obligations ------------------------------ 80 A. Revenue Bonds----------------------------------- 80 B. Grant Anticipation Notes ----------------------- 85 C. Certificates of Participation -------------------- 85 D. Leases and Installment Purchases------------- 89 E. Notes Payable ------------------------------------ 91 F. Litigation ------------------------------------------ 91 G. Changes in Long-Term Obligations ---------- 92 Note 7. Interfund Transactions -------------------------------- 93 Note 8. Accounting Changes and Restatements ------------ 94 Note 9. Fund Deficit--------------------------------------------- 96 Note 10. Related Party Transactions ------------------------- 96 A. Arizona State University------------------------ 96 B. Northern Arizona University------------------- 97 C. University of Arizona --------------------------- 97 D. University Medical Center --------------------- 98 Note 11. Joint Venture ------------------------------------------ 98 Note 12. Commitments, Contingencies and Compliance - 99 A. Risk Management Insurance Losses---------- 99 B. Litigation -----------------------------------------100 C. Accumulated Sick Leave ----------------------101 D. Unclaimed Property ----------------------------101 E. Construction Commitments -------------------102 F. Arizona State Lottery --------------------------102 Note 13. Tobacco Settlement ---------------------------------102 Note 14. Conduit Debt -----------------------------------------102 Note 15. Subsequent Events ----------------------------------103 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the State of Arizona (the State) conform to generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). During the year ended June 30, 2002, the State implemented GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, as amended by GASB Statement No. 37, which prescribes a new reporting model consisting of both government-wide and fund financial statements. The State also implemented GASB Statement No. 35, Basic Financial Statements-and Management’s Discussion and Analysis-for Public Colleges and Universities-an amendment of GASB Statement No. 34 and GASB Statement No. 38, Certain Financial Statement Note Disclosures, which prescribes new and revised note disclosures. A. REPORTING ENTITY The State of Arizona is a general purpose government. The accompanying financial statements present the activities of the State (the primary government) and its component units. Component units are legally separate entities for which the State is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of a government’s operations. Therefore, data from these units is combined with data of the primary government. The State has no blended component units. Discretely presented component units, however, are reported in a separate column in the government-wide statements to emphasize they are legally separate from the State. Each discretely presented component unit discussed below has a June 30 year-end, with the exception of the State Compensation Fund. The State Compensation Fund’s financial information is for the calendar year ended December 31, 2001. The GASB has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization’s governing body and (1) the ability of the State to impose its will on that organization or (2) the potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the State. Discretely Presented Component Units State Compensation Fund – The State Compensation Fund provides insurance to employers for workers’ compensation, occupational disease compensation, and medical, surgical and hospital benefits. The Fund is governed by a board of directors that consists of five members appointed by the Governor for staggered terms of five years. Annually, the Governor appoints a chairman from among the board members. The State is required by statute to review and approve the operating and capital outlay budget of the Fund. Complete financial statements may be obtained from the State Compensation Fund’s administrative offices. State Compensation Fund 3031 North 2nd Street Phoenix, Arizona 85012 (602) 631-2000 University Medical Center (UMC) – The UMC is the primary teaching hospital for the College of Medicine, College of Nursing and the College of Pharmacy of the University of Arizona. UMC was created in 1984 when the State Legislature passed a bill that allowed the Arizona Board of Regents (ABOR) to convey the UMC to a not-for-profit corporation. Although an autonomous entity was created, the teaching missions and research alliances with the University of Arizona and the State of Arizona remained. The ABOR confirms all members of UMC’s Board of Directors, and must approve all amendments to the UMC’s articles of incorporation and bylaws. Complete financial statements may be obtained from the University Medical Center’s administrative offices. The University Medical Center 655 East River Road Tucson, Arizona 85704 (520) 694-2700 Arizona Power Authority (APA) – The APA purchases the State’s allocation of power produced at the federally owned Boulder Canyon Project hydroelectric power plant and resells it to Arizona entities that are eligible purchasers under federal and state laws. The APA is governed by a commission of five electors appointed by the Governor and approved by the Senate. The term of office - 57 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of each member is six years and the members select a chairman and vice-chairman from among their membership for a term of two years. All revenue bonds issued by the APA must be approved by the State Certification Board. Complete financial statements may be obtained from the Arizona Power Authority’s administrative offices. The Arizona Power Authority 1810 West Adams Street Phoenix, Arizona 85007-2697 (602) 542-4263 Water Infrastructure Finance Authority (WIFA) – The WIFA is authorized to administer the Clean Water Revolving Fund. The Clean Water Revolving Fund was created pursuant to the Federal Water Pollution Control Act, which required the State to establish the Clean Water Revolving Fund to accept federal capitalization grants for publicly owned wastewater treatment projects. The WIFA has also entered into an agreement with the Environmental Protection Agency to administer the Drinking Water Revolving Fund pursuant to the Safe Drinking Water Act. The WIFA is governed by a twelve-member board of directors appointed by the Governor. Directors serve staggered terms of five years and serve at the pleasure of the Governor. Complete financial statements may be obtained from the Water Infrastructure Finance Authority’s administrative offices. The Water Infrastructure Finance Authority 1100 West Washington, Suite 290 Phoenix, Arizona 85007 (602) 364-1310 Related Organizations Related organizations are legally separate entities for which the State is not considered to be financially accountable. As a result, financial activity for the organizations described below is not included in the State’s financial statements. Arizona Health Facilities Authority (the Authority) – The Authority issues tax-exempt bonds and loans for the purpose of reducing health care costs and improving health care for Arizona residents by providing less expensive financing for health care institutions. Proceeds from bond issues are loaned to various qualifying nonprofit health care institutions. The health care institutions reimburse the Authority for expenses for issuance of the bonds, pay fees of the Authority, and make payments under the loans for the benefit of the holders of the bonds. The Authority is governed by a seven-member board of directors that is appointed by the Governor and approved by the Senate. The directors serve staggered terms of seven years, and can be removed only for cause. Arizona International Development Authority (the Authority) – The Authority was established to facilitate the development of international trade or commerce between Arizona and other countries. The Authority is governed by a seven-member board of directors appointed by the Governor for five-year terms, and can be removed only for cause. Arizona Tourism and Sports Authority – Arizona Revised Statues §5-802 established the Tourism and Sports Authority to construct, finance, maintain, improve, operate, market and promote the use of a multipurpose facility and do all things necessary to accomplish those purposes. The Tourism and Sports Authority may issue revenue bonds in such principal amounts to accomplish the above stated purposes. The Authority is governed by a five-member board of directors that is appointed by the Governor and approved by the Senate. The directors serve terms of five years, and may be re-appointed for one full subsequent term, and can be removed only for cause. Arizona Housing Finance Authority –Arizona Revised Statutes §41-3902 established the Housing Finance Authority to issue bonds for residential dwelling units and multifamily residential rental projects in rural areas. The Housing and Finance Authority may also establish mortgage credit certificate programs to finance residential dwelling units in rural areas. The Authority is required to notify, and obtain written consent from the governing bodies of any city, town, county, tribal government, or existing corporation for any multifamily residential rental projects planned for their jurisdiction. The Authority is governed by a sevenmember board of directors that is appointed by the Governor and approved by the Senate. The directors serve terms of seven years, and can be removed only for cause. - 58 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Joint Venture As described in Note 11, the University of Arizona participates in a joint venture. In accordance with generally accepted accounting principles, the financial activity of this joint venture is not included in the State’s financial statements. B. BASIS OF PRESENTATION The basic financial statements include both government-wide statements and fund financial statements. The government-wide statements focus on the State as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the usefulness of the information. Government-wide statements - provide information about the primary government (the State) and its component units. The statements include a statement of net assets and a statement of activities. These statements report the financial activities of the overall government, except for fiduciary activities. They also distinguish between the governmental and business-type activities of the State and between the State and its discretely presented component units. Governmental activities generally are financed through taxes and intergovernmental revenues. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Net Assets presents the State’s non-fiduciary assets and liabilities, with the difference reported as net assets. Net assets are reported in three categories: Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions, enabling legislation, or voter initiative. Unrestricted net assets consist of net assets which do not meet the definition of the two preceding categories. Unrestricted net assets often have constraints on resources, which are imposed by management, but can be removed or modified. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the State’s governmental activities, and its different business-type activities. Direct expenses are those that are specifically associated with a program or function and therefore are clearly identifiable to a particular program or function. The State does not allocate indirect expenses to programs or functions. Program revenue includes: • • • charges to customers or applicants for goods, services, privileges provided and fines or forfeitures, operating grants and contributions, and capital grants and contributions, including special assessments. Revenues that are not classified as program revenues, including internally dedicated resources and all taxes, are reported as general revenues. Generally the effect of interfund activity has been eliminated from the government-wide financial statements to minimize the double counting of internal activities. However, charges for interfund services provided and used are not eliminated. - 59 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund financial statements - provide information about the State’s funds, including fiduciary funds. Separate statements are presented for the governmental, proprietary, and fiduciary fund categories. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Fiduciary funds are aggregated and reported by fund type. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The State reports the following major governmental funds: The General Fund - is the State’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Transportation and Aviation Fund - accounts for all financial transactions applicable to the general operations of the Arizona Department of Transportation. The Department builds and maintains the State’s highway system and the Grand Canyon airport. The Land Endowments Fund - holds lands granted to the State by the Federal government for the benefit of public schools and other public institutions. Principal is maintained intact and investment earnings and lease revenues are distributed to beneficiaries in accordance with State statute. The State reports the following major enterprise funds: The Universities - account for transactions of the State’s three universities, which comprise the State’s university system. The Unemployment Compensation Fund - pays claims for unemployment to eligible recipients from employer contributions and reimbursements. The Industrial Commission Fund – accounts for deposits not to exceed 1½% of all premiums received by the State Compensation Fund and private insurance carriers during the preceding calendar year. These monies are used to provide additional awards as necessary to enable injured employees to accept the benefits of any law for promotion of vocational rehabilitation of persons disabled in industry. The Lottery Fund - accounts for the activities of the Arizona State Lottery. Additionally, the state reports the following fund types: Internal Service Funds - account for insurance coverage, automotive maintenance and operation, highway equipment rentals, and data processing and telecommunication services provided to State agencies on a cost-reimbursement basis. Pension Trust Funds - account for the activities of the Arizona State Retirement System, the Public Safety Personnel Retirement System, the Elected Officials’ Retirement Plan, and the Correction Officer Retirement Plan, for which the State acts as a trustee. These retirement plans accumulate resources to pay pension benefits of State employees and employees of other governmental entities participating in the plans. Investment Trust Funds - account for transactions by local governments and political subdivisions that elect to participate in the State Treasurer’s investment pools. The Treasurer acts as Trustee for the original deposits made into the investment pools. Agency Funds - account for the receipt and disbursement of various taxes, deposits, deductions, and property collected by the State, where the State acts as an agent for distribution to other governments and organizations. - 60 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The government-wide, proprietary fund, fiduciary fund and component units financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Grants and donations are recognized as revenues as soon as all eligibility requirements the provider imposed have been met. Governmental funds in the fund-based financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The State considers all revenues reported in the governmental funds to be available if the revenues are collected within 31 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Under the terms of grant agreements, the State funds certain programs through a combination of grants and general revenues. Therefore, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. The State’s policy regarding whether to first apply restricted or unrestricted resources is made on a case-by-case basis. The State’s business-type activities and enterprise funds follow FASB Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. D. CASH AND INVESTMENTS Cash and cash equivalents – cash and cash equivalents include undeposited receipts, petty cash, bank accounts, non-negotiable certificates of deposit, and other highly liquid debt instruments with an original maturity of ninety days or less. Cash and cash equivalents are reported as cash and investments in the accompanying financial statements. Investments – investments are stated at fair value or amortized cost which approximates fair value, except for mortgages held by the State Compensation Fund, which are stated at amortized cost, and the Treasurer’s Custodial Securities of the Agency Funds, which are reported at par value. E. TAXES RECEIVABLE Taxes receivable represent amounts owed by taxpayers for the 2001 and prior calendar years including assessments for underpayments, penalties and interest. In the government-wide financial statements, a corresponding amount is recorded as revenue using the accrual basis of accounting. In the governmental fund financial statements, revenue is recorded using the modified accrual basis of accounting. The remainder is recorded as deferred revenues. The income tax receivable is composed of individual and corporate estimated payments, withholding payments, and payments with final returns and assessments that relate to income earned through June 30, 2002. Sales and motor vehicle and fuel tax receivable represent amounts that are earned by the State in the fiscal period ended June 30, 2002, but not collected until the following month. F. INVENTORIES Inventories consist of expendable supplies held for consumption in all funds and merchandise intended for sale to customers in the Proprietary Funds and Universities. Inventories are stated at cost using the first-in, first-out method. In the Governmental Funds, inventories are accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. - 61 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. PROPERTY TAX CALENDAR Real property taxes are levied on or before the third Monday in August and become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. A lien attaches on the first day of January preceding assessment and levy. H. CAPITAL ASSETS Capital assets are stated at cost at the date of acquisition or, if donated, at the estimated fair market value at the date received. Interest incurred during the construction of capital assets is only capitalized in the proprietary funds. Infrastructure, such as roads and bridges, is capitalized for the first time in fiscal year 2001-2002. Most capital assets are depreciated over their useful lives using the straight-line depreciation method. However, infrastructure assets constructed and maintained by the Arizona Department of Transportation will utilize an alternative accounting treatment in which costs to maintain and preserve these assets are expensed and no depreciation expense is recorded. This approach is discussed further in the Required Supplementary Information portion of this report. Depreciable capital assets are depreciated on a straight-line basis. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets being depreciated in the government-wide financial statements and the proprietary funds are as follows. Asset Category Land Buildings Improvements other than buildings Equipment Infrastructure General State Policy Capitalization Estimated Useful Threshold Life (yrs) All capitalized Not depreciated All capitalized 25-40 5,000 15 5,000 3-15 All capitalized Not depreciated Other Authorized Agency Policies Capitalization Estimated Useful Threshold Life (yrs) All capitalized Not depreciated 5,000-100,000 5-50 5,000 1-40 0-5,000 3-25 5,000-100,000 10-100 The State is trustee for approximately 9.3 million acres of land acquired through U.S. Government land grants in the early 1900’s. The State acquired a substantial portion of this land at no cost and its fair market value has not been reliably estimated. Accordingly, this land is not reported in the accompanying financial statements. A portion of the land that the State is trustee for has been sold and the buyers of the land have defaulted on the loans. The value of this land has been recorded at the sales price and properly included in the financial statements. The State has interest in, and maintains significant special collections, works of art, and historical treasures. All special collections, works of art, and historical treasures which are held for financial gain, are capitalized at fair market value at the date of acquisition or donation. Those special collections, works of art, and historical treasures which are held for educational, research, or public exhibition purposes are not capitalized, as they are not subject to disposal for financial gain or encumbrance. Such items are inventoried for property control purposes. Additional disclosures related to capital assets and assets acquired through capital leases are provided in Notes 4 and 6, respectively. I. INVESTMENT INCOME Investment income is composed of interest, dividends, and net changes in fair value of applicable investments. - 62 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues earned by the three State Universities are reported net of scholarship discounts and allowances in the statement of revenues, expenses, and changes in fund net assets. A scholarship discount and allowance is the difference between the stated charge for goods and services provided and the amount that is paid by the student or third party making payment on behalf of the student. Accordingly, some types of student financial aid such as Pell grants and scholarships awarded by the Universities are considered to be scholarship allowances. These allowances are netted against applicable revenues in the statement of revenues, expenses, and changes in fund net assets. K. DEFERRED REVENUE Deferred revenue consists of payments to the State for goods and services, not yet rendered, or taxes, grants, and other nonexchange transactions for which related resources are not available to pay current liabilities. In the government-wide and proprietary fund financial statements revenue is deferred when cash, receivables, or other assets are received prior to their being earned. In the governmental fund financial statements revenue is deferred when that revenue is unearned or unavailable. L. COMPENSATED ABSENCES In the government-wide and proprietary fund financial statements, the State accrues liabilities for compensated absences as required by GASB. In the governmental fund financial statements, liabilities for compensated absences are not accrued, because they are not considered “due and payable”. In general, State employees accrue vested annual leave at a variable rate based on years of service. Except for University employees, an employee forfeits accumulated annual leave in excess of 240 hours at the end of a calendar year, unless the Director of the Department of Administration authorizes an exception. University employees may accumulate up to 264 hours of vacation, and any vacation hours in excess of the maximum amount that are unused at December 31 are forfeited. Except for University employees, an employee who separates from State service is paid for all unused and unforfeited annual leave at the employee’s rate of pay at the time of separation. University employees, upon termination of employment, are paid all unused vacation benefits not exceeding 176 hours (annual accrual amount), depending on years of service and full-time equivalent employment status. Some employees accumulate compensatory leave for time worked over 40 hours per week. Compensatory leave is treated like annual leave except that the employee must use any compensatory leave before using annual leave. Sick leave includes any approved period of paid absence granted an employee due to illness, injury or disability. Most State employees accrue sick leave at the rate of eight hours per month without an accumulation limit. Because sick leave benefits do not vest with employees, a liability for sick leave is not accrued in the financial statements. However, State employees are eligible to receive payment for an accumulated sick leave balance of 500 hours or more, with a maximum of 1500 hours, upon retirement directly from State service (See Note 12.C) M. LONG-TERM OBLIGATIONS In the government-wide and proprietary fund financial statements, long-term debt and long-term liabilities are reported as liabilities. Amounts due within one year are reported as current liabilities, and amounts due thereafter are reported as non-current liabilities. Premiums and discounts on revenue bonds and certificates of participation are deferred and amortized over the life of the debt instrument using the straight-line method. Bonds and certificates of participation are reported net of the applicable premium or discount. Bond issuance costs are immaterial and are charged to expense in the period incurred. In the fund financial statements, governmental fund types recognize proceeds from revenue bonds, certificates of participation, and premiums and discounts on revenue bonds and certificates of participation as other financing sources and uses in the current period. Long-term liabilities are more fully described in Note 6. - 63 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED) N. STATE COMPENSATION FUND Significant accounting policies relating to the State Compensation Fund include: 1. Policyholders’ Dividends The Board of Directors of the State Compensation Fund makes provisions for dividends to policyholders based on the Fund’s overall experience. Dividends are paid to policyholders that meet premium volume and loss experience criteria established by the Board. Dividends of $50.0 million were declared as of December 31, 2001. 2. Reinsurance The State Compensation Fund is assigned certain policyholders that participate in the National Council on Compensation Insurance (NCCI) assigned risk pool. All premiums collected on such policies are ceded to NCCI. All losses incurred by the Fund on such policies are recoverable from NCCI. In addition, the Fund is assigned a pro rata allocation of the liability for loss and loss expenses incurred by all NCCI policyholders in the State. Losses of other policyholders in excess of specified amounts are recoverable from other reinsurers. Contracts with these reinsurers do not relieve the Fund of its obligation to policyholders. NOTE 2. CASH AND INVESTMENTS A. CASH AND INVESTMENT POLICIES Cash and cash equivalents are under the control of the State Treasurer, the retirement systems or other administrative bodies. Arizona Revised Statutes §35-312, §35-313 and §35-314 authorize the Treasurer to invest operating, trust and permanent endowment fund monies. Therefore, surplus cash deposited with the State Treasurer by State agencies with a statutory authorization to invest and all General Fund monies are invested by the Treasurer in a pooled fund. Any interest earned is allocated monthly into each respective fund based on average daily cash balances. There is no income from investments associated with one fund that is assigned to another fund. The State Treasurer invests in short-term securities and other investments. Provisions of Arizona law restrict these investments to obligations of the U.S. Government and its agencies, obligations of the State and certain local government subdivisions, interestbearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The State Treasurer also invests in various mortgage-backed securities for seventeen of the twenty-two investment pools it manages. These securities are reported at fair value on the Statement of Fiduciary Net Assets. In addition, they are reported in aggregate, as U.S. Government securities. The securities are purchased to diversify the State’s exposure to maturity and credit risks while providing for enhanced yields. The credit risk associated with holding these securities is reduced since all securities are rated AAA by Standard and Poor’s and/or Moody’s rating service. The market risk associated with holding these securities is linked to maturity risk in that as interest rates rise, the fair value of these securities will fall and prepayment of principal balances will decelerate. When interest rates fall, the fair value of these securities will rise and prepayment of principal balances will accelerate. The mortgage-backed securities are authorized under ARS §35-313. Statutes enacted by the Legislature authorize the retirement systems to make investments in accordance with the “Prudent Person” rule. This rule imposes the responsibility of making investments with the judgment and care that persons of ordinary prudence would exercise in the management of their own affairs when considering both the probable safety of their capital and the probable income from that capital. Within this broad framework, the retirement systems have chosen to invest in short-term securities and repurchase agreements, obligations of the U.S. Government and its agencies, corporate bonds, common and preferred stocks and mortgages. The Statutes also place certain restrictions on the investment fund portfolios of the retirement systems. Investments maintained by the State Treasurer are reported at fair value based upon an independent outside pricing service. Investments with a maturity of 91 days or more and all investments with a maturity of 90 days or less that were held at the beginning of the current fiscal year end, not valued by the pricing service, are valued using a market price solicited from the selling broker or a second outside pricing service. All investments with a remaining maturity of 90 days or less, that have no - 64 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) available market price, and were not held at the beginning of the current fiscal year, are valued using amortized cost. If different amortized cost values exist, the weighted average amortized cost is given to like investments. The State Treasurer also maintains external investment pools [(the Local Government Investment Pool (LGIP) and Local Government Investment Pool-Government)] with no regulatory oversight. The pools are not required to register (and are not registered) with the Securities and Exchange Commission under the 1940 Investment Advisors Act. The activity and performance of the pools are reviewed monthly by the State Board of Investment in accordance with ARS §35-311. The fair value of investments is measured on a monthly basis. Participant shares are purchased and sold based on the Net Asset Value (NAV) of the shares. The NAV is determined by dividing the fair value of the portfolio by the total shares outstanding. The State Treasurer does not contract with an outside insurer in order to guarantee the value of the portfolio or the price of shares redeemed. Before the end of the fiscal year, the Central Arizona Water Conservation District (CAWCD) transferred all of their money from Pool 3 (State Agencies Investment Pool) to Pool 5 (LGIP). CAWCD was the only external reporting entity that was invested in Pool 3. As a result of this transfer, there are no “external” balances at year-end in Pool 3. The State Treasurer makes investments only in external investment pools that are registered with the Securities and Exchange Commission. The State Treasurer is not an involuntary participant in another entity’s external investment pool. The State Treasurer is not aware of any involuntary participation of local governments in the State’s external investment pools. Participants meeting the criteria established under ARS §35-316 are eligible to participate in the pools and are not required to disclose the reason for requesting the account. The investments of the State Treasurer’s Custodial Securities, an Agency Fund, are recorded at par value. The investments are held by the State Treasurer for state agencies that perform a business compliance function. The investments of the Arizona Exposition and State Fair are reported at the fair value. The Arizona State Retirement System investments are reported at fair value and cost. Investments, other than real estate and commercial mortgages, are reported at fair values determined by the custodial agents. The agent’s determination of fair values includes, among other things, using pricing services or prices quoted by independent brokers at current exchange rates. Commercial mortgages have been valued on an amortized cost basis, which approximates fair value. Short-term investments are reported at cost plus accrued interest which approximates fair value. For investments where no readily ascertainable fair value exists, management, in consultation with its investment advisors, has determined the fair values for the individual investments based on anticipated maturity dates and current interest rates commensurate with the investment’s degree of risk. The Public Safety Personnel, Elected Officials’ and Corrections Officer Retirement Systems investments are reported at fair value and cost. Fair values are determined as follows: Short-term investments are reported at fair value, which approximates cost. Equity securities are valued at the last reported sales price. Fixed-income securities are valued using the last reported sales price or the estimated fair market value as determined by an outside pricing service. Investments that do not have an established market are reported at estimated fair value. The investments of the Universities are reported at fair value. Fair value is determined from quoted market prices. Nonparticipating interest bearing contracts are valued at cost. The University Medical Center’s short-term investments are reported at cost, which approximates fair value. investments are reported at fair value as determined by quoted market prices. Long-term The investments of the Arizona Power Authority are reported at amortized cost, which approximates fair value. The investments of the Water Infrastructure Finance Authority in Guaranteed Investment Contracts are stated at cost, since they are non-participating contracts. The other investments are stated at fair value, which approximates cost. The investments of the State Compensation Fund in bonds, certificates of participation and equity securities are reported at fair value. Investments in mortgages are reported at amortized cost. - 65 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) B. UNEMPLOYMENT COMPENSATION ARS §23-703 requires that unemployment compensation contributions from Arizona employers be deposited in an unemployment trust fund account with the Secretary of the Treasury of the United States that is established and maintained pursuant to Section 1104 of the Social Security Act. The cash on deposit in the trust fund account is pooled and invested. Interest earned from investments purchased with such pooled monies is deposited in the trust fund account. The Unemployment Compensation Fund, reported as a major proprietary fund, has been established for this purpose. C. COLLATERAL AND INSURANCE The State requires that deposits and investments with financial institutions be entirely covered by Federal depository insurance or, alternatively, collateralized with surety equal to at least 100% (102% for the Treasurer) of the deposits so collateralized. Cash deposited with banks is collateralized based on bank balances. Surety collateralized includes U.S. Government obligations, State obligations, obligations of counties and municipalities within the State, and certain other securities. D. DEPOSITS COLLATERALIZATION At June 30, 2002, the carrying amount of the State’s deposits for the Primary Government was $114.809 million, $82.651million for Fiduciary funds, and $6.669 million for the Component Units. At June 30, 2002, the bank balance was $188.176 million for the Primary Government, $83.573 million for Fiduciary funds, and $6.669 million for the Component Units. For the Primary Government bank balances, $945 thousand was collateralized by Federal depository insurance. Of the remaining balance, $173.124 million was collateralized by securities held by the bank’s trust division or agent in the State’s name in book-entry form, and $14.107 million was either not collateralized or was collateralized with securities held in the bank’s custodial account with the Federal Reserve in the bank’s name in book-entry form. For the Fiduciary funds, $8.923 million was collateralized by Federal depository insurance. Of the remaining balance, $35.507 million was collateralized by securities held by the bank’s trust division or agent in the State’s name in book-entry form, and $39.143 million was either not collateralized or was collateralized with securities held in the bank’s custodial account with the Federal Reserve in the bank’s name in book-entry form. For the Component Units bank balances, $6.669 million was either not collateralized or was collateralized with securities held in the bank’s custodial account with the Federal Reserve in the bank’s name in book-entry form. E. INVESTMENTS CUSTODIAL RISK The following tables summarize the credit risk of the State’s investments (expressed in thousands). Category A includes investments that are insured or registered, or for which securities are held by the State or the State’s agent in the State’s name. Category B includes uninsured and unregistered investments for which securities are held by the counterparty’s agent or trust department in the State’s name. Category C includes uninsured and unregistered investments for which securities are held by the counterparty, or by its agent or trust department but not in the State’s name. - 66 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) Type of Deposit or Investment U.S. Government securities Repurchase agreements Corporate stocks Corporate debt State and local government securities Other investments Subtotal Investments Not Subject to Custodial Risk: Guaranteed Investment Contracts Money Market Mutual Funds Mutual Funds-Benchmark Portfolio Mortgages Joint Venture Collateral Investment Pool Investments held by brokers/dealers under Security Loan Program: U.S. Government securities Corporate stocks Corporate debt United States Treasury Pooled Investment Repurchase agreements Total Investments Deposits Total Cash and Investments Primary Government Category A B $ 1,182,262 $ 14,746 332,503 461,705 2,045,143 171,495 7,687 $ 4,200,795 $ 14,746 $ $ C 199,569 112,658 312,227 Reported Amount $ 1,396,577 332,503 461,705 2,045,143 171,495 120,345 4,527,768 7,396 204,588 8,482 1,190 14,000 134,945 95,469 22,146 14,854 1,033,276 7,631 6,071,745 114,809 $ 6,186,554 Fiduciary Funds Type of Deposit or Investment US Government Securities Corporate stocks Corporate debt State and local government securities Repurchase agreements Other investments Subtotal Investments Not Subject to Custodial Risk: Other investment-not categorized Short-Term Investment Fund Real estate Collateral Investment Pool Investments held by brokers/dealers under Security loan program: U.S. Government securities Corporate stocks Corporate debt Repurchase agreements Total Investments Deposits Total Cash and Investments A $ 5,223,420 12,111,038 5,895,812 489,866 18,790 164,396 $ 23,903,322 Category B $ $ 2,873,498 18,752 2,892,250 C $ $ 449 449 Reported Amount $ 5,223,420 14,984,536 5,895,812 489,866 18,790 183,597 26,796,021 228,900 2,285,988 30,213 1,281,416 1,778,217 837,930 370,606 9,395 33,618,686 82,651 $ 33,701,337 - 67 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) Component Units Type of Deposit or Investment U.S. Government securities Corporate stocks Corporate debt State and local government securities Repurchase agreements Other investments Subtotal Category B $ 802,195 171,606 775,192 238,893 11,017 652 $ 15,230 1,198 1,722 37,916 $ 2,695 76,746 Reported Amount $ 804,890 186,836 776,390 240,615 11,017 115,314 $ 1,999,555 $ 56,066 $ 79,441 2,135,062 A C Investments Not Subject to Custodial Risk: Mortgages Guaranteed Investment Contract Collateral Investment Pool Investments held by brokers/dealers Under Security Loan Program: U.S. Government securities Corporate stocks Repurchase agreements Total Investments 150,725 77,680 193,027 162,373 27,359 232 2,746,458 Deposits Total Cash and Investments $ 6,669 2,753,127 At June 30, 2002, the State had no commitments to resell securities under yield maintenance agreements. During the year ended June 30, 2002, the State did not make significant investments in types of investments beyond those enumerated in the preceding tables. F. SECURITIES LENDING Cash received as collateral on securities lending transactions and investments made with that cash are reported as assets. A corresponding liability is also recorded for such securities lending transactions. 1. State Treasurer The State Treasurer (Treasurer) is permitted by Title 35, Chapter 2, Article 2 of the Arizona Revised Statutes to enter into securities lending transactions. The custodial bank, Credit Suisse First Boston (CSFB), manages the securities lending transactions through a contractual agreement with the Treasurer. CSFB enters into securities lending contracts only from an approved list of borrowers provided by the Treasurer. There was no credit risk (i.e., lender’s exposure to the borrowers of its securities related to the securities lending transactions at June 30, 2002). As of June 30, 2002, the amounts owed by the Treasurer exceeded the amounts owed by the borrowers. During the fiscal year ended June 30, 2002, there were no violations of legal or contractual provisions, and there were no borrower or lending agent default losses to the securities lending agent. U.S. Government bonds and domestic equities are loaned for cash as collateral and there are no restrictions on the amount of loans that can be made. The treasurer requires at least 102% of the market value of the loaned securities on the date of the loan, and no less than 100% for the duration of the loan. The Treasurer does not have the ability to pledge or sell collateral securities unless the borrower defaults. Additionally, CSFB provides indemnification to the extent of borrower default. The fair value at June 30, 2002, for loaned securities collateralized by cash was $17.17 million. As part of the securities lending transactions, CSFB received cash collateral valued at $17.96 million. Investments are held by CSFB in the Treasurer’s name. The maturities of investments match the maturities of securities on loan. On June 30, 2002, both the cash collateral reinvestment and the term of all loans outstanding were one day. During the same period, there were no losses on securities lending transactions resulting from borrower or lending agent default. Investments made with cash collateral received are classified as an asset at fair value on the Statement of Fiduciary Net Assets. A corresponding liability is recorded as the Treasurer must return the - 68 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) cash collateral to the borrower upon expiration of the loan. At June 30, 2002, the Treasurer had $17.96 million outstanding as payable for securities lending. 2. Industrial Commission State statutes and Industrial Commission (the Commission) policies permit the Commission to enter into securities lending transactions with its custodial bank. There were no significant violations of legal or contractual provisions, and there were no borrower or lending agent default losses to the securities lending agent. The custodial bank, Northern Trust, manages the securities lending operations through a contractual agreement with the Commission and splits the fees received with the Commission. There was no credit risk (i.e. lender’s exposure to the borrowers of its securities) related to the securities lending transactions at June 30, 2002. Northern Trust’s indemnification responsibilities include performing appropriate borrower and collateral investment credit analysis, demanding adequate types and levels of collateral, and complying with applicable Department of Labor and Federal Financial Institutions Examinations Council regulations concerning securities lending. Securities are loaned for collateral that may include cash, U.S. Government securities and irrevocable letters of credit. Domestic securities are loaned for collateral valued at 102% of the market value of securities loaned plus accrued interest. International securities are loaned for collateral valued at 105% of the market value of securities loaned plus accrued interest. The market value at June 30, 2002 for loaned securities collateralized by cash and non-cash collateral was $32.352 million and $3.599 million, respectively. As part of the securities lending transactions, Northern Trust received cash and non-cash collateral valued at $33.215 million and $3.681 million, respectively at June 30, 2002. Non-cash collateral cannot be pledged or sold unless the borrower defaults. Securities lent at year-end for cash collateral are presented as unclassified in the preceding schedule of custodial credit risk; securities lent for securities collateral are classified according to the category for the collateral received on the securities lent. All securities loans can be terminated on demand by either the lender or the borrower. The average terms of the loans are 97 days and cash open collateral is invested in a short-term investment pool, the Core USA Collateral Section, which had an average weighted maturity of 30 days as of June 30, 2002. Cash collateral may also be invested separately in “term loans”, in which case the investments match the loan term. Cash open loans can be terminated on demand by either lender or borrower and there were no dividends or coupon payments owing on securities lent. Securities lending earnings are credited to participating clients on approximately the fifteenth day of the following month. Investments made with cash collateral received are classified as an asset on the Statement of Net Assets. A corresponding liability is recorded as the Commission must return the cash collateral to the borrower upon expiration of the loan. At June 30, 2002, the Commission had $33.215 million outstanding as payable for securities lending. 3. Arizona State Retirement System The Arizona State Retirement System (ASRS) is permitted by Arizona Revised Statutes §38-715(D)(3), to enter into securities lending transactions. The ASRS enters into agreements with brokers to loan securities and have the same securities redelivered at a later date. All securities are eligible for loan (U.S. fixed income securities, U.S equities, international equities) with a higher percentage of U.S. Treasuries on loan than most other security types. It is the policy of the ASRS to receive as collateral at least 102% of the market value of the loaned securities and maintain collateral at no less than 100% for the duration of the loan. At year-end, the ASRS has no credit risk exposure to borrowers because the amount the ASRS owes the borrowers exceeds the amount the borrowers owe the ASRS. During fiscal year 1998, statutes were amended to allow for other than cash collateral. The ASRS records the collateral received as an asset and the same amount as an obligation for securities on loan. Any cash collateral received is invested in short-term investments. The ASRS receives a spread for its lending activities. Investments made with cash collateral received are classified as an asset on the Statement of Fiduciary Net Assets. A corresponding liability is recorded as the ASRS must return the cash collateral to the borrower upon expiration of the loan. At June 30, 2002, the ASRS had $1.674 billion outstanding as payable for securities on loan. Due to the flow of securities to and from transfer agents and the security loan program, securities occasionally cannot be delivered for a sale or received for a purchase, resulting in a “failed” transaction. Securities with trade dates in June and settlement dates in - 69 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) July result in “outstanding” transactions. Since these securities have contractually changed ownership, receivables and payables result from these transactions. Such transactions resulted in a receivable for securities sold of $188.868 million and a payable for securities purchased of $455.270 million at June 30, 2002. 4. Public Safety Personnel Retirement System, Elected Officials’ Retirement Plan and Corrections Officer Retirement Plan The Public Safety Personnel Retirement System (PSPRS), the Elected Officials’ Retirement Plan (EORP) and the Corrections Officer Retirement Plan (CORP) are permitted by Title 38, Chapter 5, Articles 3, 4, and 6 of the Arizona Revised Statutes to enter into securities lending transactions. The PSPRS, EORP and CORP are parties to securities lending agreements with a bank. The bank, on behalf of the PSPRS, EORP and CORP, enters into agreements with brokers to loan securities and have the same securities returned at a later date. The loans are fully collateralized, primarily by cash. Collateral is marked-to-market on a daily basis. Non-cash collateral can be sold only upon borrower default. The PSPRS, EORP and CORP require collateral of at least 102% of the fair value of the loaned U.S. Government or corporate security. Securities on loan are carried at fair value. As of June 30, 2002, the fair value of securities on loan were (expressed in millions): PSPRS EORP CORP $ 995,802 81,493 168,900 The PSPRS, EORP and CORP receive a negotiated fee for their loan activities and are indemnified for broker default by the securities lending agent. The PSPRS, EORP and CORP participate in a collateral investment pool. All security loans can be terminated on demand by either the pool participants or the borrower. All term loans have a matched collateral investment. The total cash collateral received for unmatched loans (any loan for which the cash collateral has not been invested for a specific maturity) will have a maximum average maturity, using the reset date as the maturity date, of not more than 45 days. And, at least 20% of total collateral investments must be invested on an overnight basis and at least 30% of total collateral investments must be invested with a maturity of 7 days or less. Additionally, no more than 20% of the total collateral investments will be invested in instruments maturing in over 91 days. In lending securities, investments of cash collateral for open loans as of June 30, 2002 are not matched in maturity and have a weighted average maturity of 17 days. The Systems have no credit risk because the amounts owed to borrowers exceed the amounts borrowers owe to the Systems. Under this program, the Systems have not experienced any defaults or losses on these loans. 5. State Compensation Fund The State Compensation Fund (the Fund) participates in a securities lending program in which securities are loaned to approved brokers/dealers for specified periods of time. All securities on loan are collateralized by cash or cash equivalents of at least 102% of their fair market value. The collateral is maintained by the Fund’s investment trustee who is not a party to the security lending agreement. The Fund has invested securities on loan with a market value of approximately $189.732 million and a book value of $175.350 million at December 31, 2001. The collateral held and the corresponding obligation for its return have been recorded in short-term investments and liabilities, respectively. 6. University of Arizona During the fiscal year, the University engaged in securities lending transactions. The University entered into an agreement with Wells Fargo, the University’s custodian, to carry out these transactions. The custodian enters into agreements with brokers to loan securities and have the same securities returned at a later date. It is the policy of the University to receive as collateral at least 102% of the market value of the loaned securities and accrued interest, and maintain collateral at no less than 100% for the duration of the loan. At year-end, the University has no credit risk to borrowers because the University was holding more collateral than the amount of loaned securities outstanding. - 70 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONTINUED) The University records the collateral received as an asset, which is offset by an obligation recorded under securities lending. During the fiscal year ended June 30, 2002, there were no violations of legal or contractual provisions, and there were no borrower or lending agent default losses. Wells Fargo does not indemnify the University to the extent of borrower defaults. Collateral can be received in the form of U.S. Government securities, letters of credit, or cash. As of June 30, 2002, the custodian has received only cash and letter of credit collateral. Cash collateral received from the borrowers is invested in a short-term cash collateral investment pool, which, on average, has a weighted maturity of 55 days. The relationship between the maturities of the cash collateral investment pool and the University’s loans is affected by the maturities of the securities loans made by other entities that use the custodian’s pool, which the University cannot determine. This pool consists of investments in domestic and foreign bank obligations, commercial paper and participations, mortgage backed and pass-through securities, corporate notes, bonds, debentures, and tri-party repurchase agreements. At June 30, 2002, cash collateral investments totaled $101.730 million with a corresponding market value of securities on loan of $100.117 million. Securities lent for cash collateral included corporate stocks, corporate bonds, government notes, and government bonds. The University or the borrower can terminate all securities loans on demand. The University cannot sell or pledge securities received as collateral unless the borrower defaults. The University earns a negotiated fee for participating in loan activities. G. DERIVATIVES Derivatives are financial instruments (securities or contracts) whose value is dependent on reference rates or indices such as stock or bond prices, interest rates or currency exchange rates. ASRS internal investment managers use derivatives to hedge currency risk, reduce transaction costs, obtain market exposure, and enhance returns. The principal categories of derivatives employed and their uses during the year were as follows: Category Foreign exchange forward contracts Futures SWAPS Purpose Hedge currency risk of investment denominated in foreign currencies. Reduce transaction costs; obtain market exposure; enhance returns. Interest rate risk management; enhance returns. Generally, derivatives are subject to both market risk and counterparty risk. The derivatives utilized by ASRS internal investment managers typically have no greater market risk than their physical counterparts, and in many cases are offset by exposure elsewhere in the portfolio. The ASRS believes that it is unlikely that any of the derivatives used by its internal investment managers could have a material adverse effect on the financial conditions of the System. H. CUSTODIAL SECURITIES In accordance with Arizona Revised Statutes, various State agencies deposit securities with the Treasurer for safekeeping. The State agencies have securities in safekeeping with the Treasurer in the form of U.S. government and agency securities, certificates of deposit, municipal and corporate bonds, and surety bonds at June 30, 2002. - 71 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 2. CASH AND INVESTMENTS (CONCLUDED) I. STATE TREASURER’S SEPARATELY ISSUED FINANCIAL STATEMENTS The State Treasurer issues a separately published Annual Financial Report. The report provides additional information relating to the State Treasurer’s total investing activities and the internal and external participants of the Investment Trust Funds. The Investment Trust Funds report on the activities of the Local Government Investment Pools and Central Arizona Water Conservation District Investment Account. A copy of the State Treasurer’s Office Annual Financial Report can be obtained from their office at: State Treasurer’s Office 1700 W. Washington Phoenix, Arizona 85007-2812 The Treasurer’s financial statements are audited by the Office of the Auditor General. J. AUDITED FINANCIAL STATEMENTS The four State pension plans and certain State agencies, commissions and authorities are audited by independent public accountants. Copies of these audits, as well as audits performed by the State Auditor General, are available from the State Library, Archives and Public Records. NOTE 3. RECEIVABLES/DEFERRED REVENUE A. TAXES RECEIVABLE The following table summarizes taxes receivable at June 30, 2002 (expressed in thousands). million for underpayments, penalties, and interest: General Fund Type of Tax Sales Income – individual and corporate Insurance premium Motor vehicle and fuel Luxury Unemployment $ Gross taxes receivable Allowance for uncollectible taxes Net Taxes Receivable $ 245,851 221,598 28,790 5,074 - Transportation & Aviation Fund $ 102,619 - Unemployment Compensation Fund $ 38,069 These amounts include $99.766 Non-Major Funds Government Wide Total $ $ 1,375 4,959 - 501,313 102,619 38,069 6,334 (107,475) - - - 393,838 $ 102,619 - 72 - $ 38,069 $ 6,334 247,226 221,598 28,790 102,619 10,033 38,069 648,335 (107,475) $ 540,860 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 3. RECEIVABLES/DEFERRED REVENUE (CONCLUDED) B. DEFERRED REVENUE At June 30, 2002, the components of deferred revenue, in terms of revenue unavailable and unearned, were as follows (expressed in thousands): Unavailable Current Deferred Revenue for Governmental Funds: General Fund: Delinquent sales tax Delinquent income tax Advance insurance premiums Advance land lease payments Food stamps Vaccine & commodity food supplement Transportation and Aviation Fund: Notes receivable for real estate mortgage loans Land Endowments Fund: Land sales receivable Advance land sales payments Advance land lease payments Non-Major Funds: Public assistance overpayments Other Total current deferred revenue for governmental funds $ Non-current Deferred Revenue for Governmental Funds Land Endowments Fund: Advance land lease payments Total current and non-current deferred revenue for governmental funds $ Total Deferred Revenue Unearned 46,755 58,188 - $ 1,468 7,460 100 7,023 - 11,571 213,186 - 1,430 1,198 213,186 1,430 1,198 1,646 331,346 564 19,243 1,646 564 350,589 - 9,822 9,822 331,346 $ 29,065 Unearned $ 2,841 4,411 92,894 Non-current Deferred Revenue for Proprietary Funds: Universities: IBM lease related to acquisition of research park Total non-current deferred revenue for proprietary funds $ $ 54,371 54,371 $ 44,505 $ 35,600 6,262 4,900 36,533 830 1,517 1,509 Total current deferred revenue for component units $ - 73 - 46,755 58,188 1,468 7,460 100 7,023 11,571 Current Deferred Revenue for Proprietary Funds: Universities: Unexpended cash advances received for sponsored programs Auxiliary sales and services IBM lease related to acquisition of research park Student tuition and fees Other deferred revenue Deposits Non-Major Funds: Policyholders’ advance premiums Magazine subscriptions Total current deferred revenue for proprietary funds Current Deferred Revenue for Component Units: State Compensation Fund: Policyholders’ advance premiums Water Infrastructure Finance Authority: Unearned loan revenue $ 46,014 $ 360,411 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 4. CAPITAL ASSETS Capital asset activities for the fiscal year ended June 30, 2002 were as follows (expressed in thousands): Primary Government Beginning Balance Governmental activities: Capital assets, not being depreciated: Land Construction in progress Infrastructure Total capital assets, not being depreciated $ 1,648,859 1,193,368 7,190,405 10,032,632 Additions $ Retirements 665,054 830,071 280,656 1,775,781 $ (490,709) (349,517) (7,165) (847,391) Adjustments & Reclassifications $ Ending Balance (8,496) 2,597 (5,899) $ 1,814,708 1,676,519 7,463,896 10,955,123 Capital assets being depreciated: Buildings Improvements other than buildings Equipment Infrastructure Total capital assets, being depreciated 906,259 112,071 517,941 1,536,271 26,134 2,676 51,566 4,643 85,019 (2,628) (10,165) (35,330) (48,123) 134,172 11,255 51,884 197,311 1,063,937 115,837 586,061 4,643 1,770,478 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Infrastructure Total accumulated depreciation (261,638) (46,430) (347,637) (1,414) (657,119) (27,222) (12,368) (64,783) (102) (104,475) 243 21,719 21,962 (38,498) 7,292 (13,644) (44,850) (327,115) (51,506) (404,345) (1,516) (784,482) Total capital assets, being depreciated, net 879,152 (19,456) (26,161) 152,461 985,996 Governmental activities capital assets, net $ 10,911,784 $ 1,756,325 $ (873,552) $ 146,562 $ 11,941,119 Beginning Balance Additions Retirements Adjustments & Reclassifications Business-type activities: Capital assets, not being depreciated: Land Construction in progress Collections Total capital assets, not being depreciated $ 137,191 126,414 15,791 279,396 $ 780 91,221 1,049 93,050 $ (520) (119,063) (4,542) (124,125) $ (3,928) (3,928) Ending Balance $ 133,523 98,572 12,298 244,393 Capital assets being depreciated: Buildings Improvements other than buildings Equipment Infrastructure Total capital assets, being depreciated 1,982,264 36,354 1,032,550 151,931 3,203,099 147,763 784 127,884 58,359 334,790 (29,233) (21,652) (50,885) (12) (218) (2,671) 3,011 110 2,100,782 36,920 1,136,111 213,301 3,487,114 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Infrastructure Total accumulated depreciation (760,603) (16,867) (690,601) (57,547) (1,525,618) (60,462) (1,206) (82,633) (9,156) (153,457) 9,837 29,898 39,735 6,232 961 (6,597) 596 (804,996) (18,073) (742,375) (73,300) (1,638,744) 181,333 274,383 (11,150) $ (135,275) 706 (3,222) 1,848,370 $ 2,092,763 Total capital assets, being depreciated, net Business-type activities capital assets, net 1,677,481 $ 1,956,877 $ - 74 - $ STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 4. CAPITAL ASSETS (CONTINUED) Depreciation expense was charged to governmental functions as follows (expressed in thousands): General government Health & welfare Inspection & regulation Education Protection & safety Transportation Natural resources Total governmental activities $ 21,874 15,531 2,240 1,050 29,829 15,784 18,167 104,475 $ Depreciation expense was charged to business-type activities as follows (expressed in thousands): Arizona Lottery Industrial Commission Universities Non-major Funds Total business-type activities $ 305 714 149,493 2,945 153,457 $ Discretely presented component units capital asset activities for the fiscal year ended June 30, 2002 were as follows (expressed in thousands): Component Units Beginning Balance Component Units: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated $ 9,558 4,381 13,939 Additions $ 194 6,561 6,755 Ending Balance Retirements $ (43) (5,799) (5,842) $ 9,709 5,143 14,852 Capital assets being depreciated: Buildings Improvements other than buildings Equipment Total capital assets, being depreciated 176,038 6,108 138,287 320,433 2,209 1,666 8,233 12,108 (197) (1,393) (932) (2,522) 178,050 6,381 145,588 330,019 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Total accumulated depreciation (77,041) (3,461) (112,868) (193,370) (6,368) (478) (13,226) (20,072) 107 59 1,549 1,715 (83,302) (3,880) (124,545) (211,727) 127,063 (7,964) (807) 118,292 Total capital assets, being depreciated, net Component Units capital assets, net $ 141,002 $ - 75 - (1,209) $ (6,649) $ 133,144 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 4. CAPITAL ASSETS (CONCLUDED) Depreciation expense was charged to component units as follows (expressed in thousands): University Medical Center Arizona Power Authority State Compensation Fund Total component units $ $ 17,825 29 2,218 20,072 NOTE 5. RETIREMENT PLANS The State contributes to the four plans described below. The four plans are considered part of the State’s financial reporting entity and are included in the State’s financial statements as Pension Trust Funds. A. PLAN DESCRIPTIONS The State participates in the Arizona State Retirement System (ASRS), the Public Safety Personnel Retirement System (PSPRS), the Elected Officials’ Retirement Plan (EORP) and the Corrections Officer Retirement Plan (CORP). Benefits are established by state statutes and provide retirement, death, long-term disability, survivor and health insurance premium benefits to State employees, public school employees and employees of counties, municipalities and certain other State political subdivisions. The ASRS is a cost-sharing, multiple-employer defined benefit pension plan that benefits employees of the State, its political subdivisions and public schools. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of ARS Title 38, Chapter 5, Article 2. The PSPRS is an agent, multiple-employer defined benefit pension plan that benefits fire fighters and police officers employed by the State or certain local governments. The PSPRS, acting as a common investment and administrative agent, is governed by a five-member board, known as the Fund Manager, and 185 local boards according to the provisions of ARS Title 38, Chapter 5, Article 4. The EORP is a cost-sharing, multiple-employer defined benefit pension plan that benefits all elected State and county officials and judges and certain elected city officials. The EORP is governed by the Fund Manager of the PSPRS according to the provisions of ARS Title 38, Chapter 5, Article 3. The CORP is an agent, multiple-employer defined benefit pension plan that benefits town, city and county detention officers and certain employees of the Arizona Department of Corrections and the Arizona Department of Juvenile Corrections. The CORP is governed by the Fund Manager of the PSPRS and 11 local boards according to the provisions of ARS Title 38, Chapter 5, Article 6. Each plan issues a publicly available financial report that includes its financial statements and required supplementary information. A report may be obtained by writing or calling the applicable plan. Arizona State Retirement System 3300 North Central Avenue P.O. Box 33910 Phoenix, Arizona 85067-3910 (602) 240-2000 or (800) 621-3778 Public Safety Personnel Retirement System, Elected Officials’ Retirement Plan or the Corrections Officer Retirement Plan 1020 East Missouri Avenue Phoenix, Arizona 85014 (602) 255-5575 - 76 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 5. RETIREMENT PLANS (CONTINUED) The number of participating government employers as of June 30, 2002, are shown below: Employer Cities and towns Counties and county agencies State Special districts School districts Charter schools Community college districts ASRS PSPRS EORP CORP 65 14 1 59 226 138 10 118 21 1 45 - 16 15 1 - 10 1 - B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES As part of the Pension Trust Funds, the financial statements are prepared using the accrual basis of accounting under which expenses are recorded when the liability is incurred and revenues are recorded in the accounting period in which they are earned and become measurable. Employee contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Contributions from employees and employers for service through June 30 are accrued. These contributions are considered to be fully collectible and, accordingly, no allowance for uncollectible receivables is reflected in the financial statements. For the ASRS, investments are reported at fair value and at cost. Security transactions and any resulting gains or losses are accounted for on a trade-date basis. Investments, other than real estate and commercial mortgages, are reported at fair values determined by the custodial agents. The agent’s determination of fair values includes, among other things, using pricing services or prices quoted by independent brokers at current exchange rates. Commercial mortgages have been valued on an amortized cost basis, which approximates fair value. No allowance for loan loss has been provided as all loans and bonds are considered by management to be fully collectible. Short-term investments are reported at cost, which approximates fair value. For investments where no readily ascertainable fair value exists, management, in consultation with its investment advisors, has determined the fair values for the individual investments based on anticipated maturity dates and current interest rates commensurate with the investment degree of risk. Net investment income includes net decrease in fair value of investments, interest income, dividend income and total investment expense, which includes investment management and custodial fees and all other significant investment related costs. For the PSPRS, EORP and the CORP, investments are reported at fair value and at cost. Fair values are determined as follows: Short-term investments are reported at fair value, which approximates cost. Equity securities are valued at the last reported sales price. Fixed-income securities are valued using the last reported sales price or the estimated fair market value as determined by one of the world’s largest and most prominent fixed-income broker/dealers. Investments that do not have an established market are reported at estimated fair value. Investment income is recognized as earned. C. INVESTMENT RESTRICTIONS Statutes enacted by the Arizona State Legislature restrict the four retirement plans from investing more than five percent of each plan’s total assets in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the U.S. Government. As of June 30, 2002, the four retirement plans are in compliance with the state statutes. D. FUNDING POLICY The contribution requirements of plan members and the State are established by Title 38, Chapter 5 of the Arizona Revised Statutes. These contribution requirements may be amended by the Arizona State Legislature. - 77 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 5. RETIREMENT PLANS (CONTINUED) Cost-sharing plans – For the year ended June 30, 2002, active ASRS members and the State were each required by statute to contribute at the actuarially determined rate of 2.49 percent (2.0 percent retirement and 0.49 percent long-term disability) of the members’ annual payroll. The State’s contributions to ASRS for the years ended June 30, 2002, 2001 and 2000 were $36.605, $36.832, and $35.147 million, respectively, for the primary government and $565, $298, and $617 thousand, respectively, for the component units, which were equal to the required contributions for the year. In addition, active EORP members were required by statute to contribute 7.00 percent of the members’ annual covered payroll. The State was required to contribute a designated portion of certain fees collected by the Supreme Court plus additional contributions of 6.97 percent of the members’ annual covered payroll, as determined by actuarial valuation. The State’s contributions to EORP for the years ended June 30, 2002, 2001 and 2000 were $77, $183, and $184 thousand, respectively, which were equal to the required contributions for the year. Agent plans – For the year ended June 30, 2002, active PSPRS members were required by statute to contribute 7.65 percent of the members’ annual covered payroll and the participating State agencies were required to contribute at actuarially determined rates of 3.31 – 16.27 percent. Active CORP members were required by statute to contribute 8.50 percent of the members’ annual covered payroll and the participating State agencies were required to contribute at actuarially determined rates of 4.01 - 5.08 percent. E. ANNUAL PENSION COST The State’s annual pension cost and related actuarial data for each of the agent, multiple-employer defined benefit pension plans for the year ended June 30, 2002, is as follows (expressed in thousands): Contribution rates: State Plan members Annual pension cost Contributions made Actuarial valuation date Actuarial cost method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at Cost-of-living adjustments Amortization method Remaining amortization Asset valuation method PSPRS CORP 3.31% - 16.27% 7.65% $4,799 $4,799 6/30/00 entry age 4.01% - 5.08% 8.50% $5,775 $5,775 6/30/00 entry age 9% 6.5% - 9.5% 5.5% none level percent open 20 years 4 year smoothed market value 9% 6.5% - 9.5% 5.5% none level percent open 20 years 4 year smoothed market value - 78 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 5. RETIREMENT PLANS (CONTINUED) F. TREND INFORMATION Information for each of the agent, multiple-employer defined benefit plans as of the most recent actuarial valuations is as follows (expressed in thousands): Contributions Required and Contributions Made PSPRS CORP Fiscal Year Ended 6/30/02 6/30/01 6/30/00 Annual Pension Cost (APC) $ 4,799 4,510 4,106 Percentage of APC Contributed 100% 100% 100% 6/30/02 6/30/01 6/30/00 5,775 14,209 13,840 100% 100% 100% Net Pension Obligation $ 0 0 0 0 0 0 G. UNIVERSITIES’ DEFINED CONTRIBUTION PLANS Faculty, academic professional and administrative officers at the three universities (Arizona State University, Northern Arizona University, and University of Arizona) may select one of six retirement plans: the Teachers Insurance Annuity Association/College Retirement Equities Fund (TIAA/CREF), Variable Annuity Life Insurance Company (VALIC), Fidelity Investments Tax-Exempt Services Company (Fidelity), Aetna Life Insurance and Annuity Company (Aetna), The Vanguard Group (Vanguard) or the Arizona State Retirement System (ASRS). The ASRS is a defined benefit plan (described above) and the other five plans are defined contribution plans. The five defined contribution plans are administered by independent insurance and annuity companies approved by the Arizona Board of Regents. In addition, University of Arizona employees hired before July 1, 1972, have the option to participate in the defined contribution plan administered by the ASRS. Eligible classified staff belong to the Arizona State Retirement System. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The Arizona State Legislature establishes and may amend active plan members’ and the Universities’ contribution rates. For the year ended June 30, 2002, plan members and the three Universities were each required by statute to contribute an amount equal to seven percent of an employee’s compensation, except for a 7.06 percent contribution for the ASRS plan. Contributions to these plans for the year ended June 30, 2002, were as follows (expressed in thousands): Plan TIAA/CREF VALIC Fidelity Aetna Vanguard ASRS University Contributions $ 23,015 2,951 3,685 1,186 719 161 Employee Contributions $ 23,015 2,951 3,685 1,186 719 159 - 79 - Total Contributions $ 46,030 5,902 7,370 2,372 1,438 320 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 5. RETIREMENT PLANS (CONCLUDED) H. UNIVERSITY MEDICAL CENTER DEFINED CONTRIBUTION PLAN The University Medical Center (UMC) has an Employee Pension Plan (the Plan) for its employees. The Plan is a defined contribution plan covering all UMC employees who are subject to minimum employment requirements, as defined in the Plan Agreement. The UMC makes contributions to the Plan in amounts equal to (a) 5.5 percent of total compensation plus (b) 5.4 percent of compensation in excess of 80 percent of the FICA wage base. Such contributions are allocated to each participant as defined in the Plan Agreement. Retirement plan expense, net of participant forfeitures, was approximately $4.44 million for the year ended June 30, 2002. I. POSTEMPLOYMENT BENEFITS In addition to the pension benefits described, the ASRS offers the Retiree Group Insurance Program and the Health Insurance Premium Benefit Program to eligible retired and disabled members. A retired member is defined as a member actively receiving an annuity benefit and a disabled member is defined as a member receiving a Long-Term Disability (“LTD”) benefit through the LTD program administered by the ASRS or through their former member employer’s group LTD plan. Pursuant to A.R.S. 38-782, the Retiree Group Insurance Program makes available group health insurance coverage to eligible retired and disabled members and their dependents. Retired and disabled members of the ASRS, the Public Safety Personnel Retirement System, the Elected Officials Retirement Plan, and the Corrections Officer Retirement Plan may participate if they are no longer eligible for health insurance benefits through their former employer. More than 38,000 coverage agreements currently exist for retired and disabled members and their dependents. Pursuant to A.R.S. 38-783, retired and disabled members with at least five years of credited service are eligible to participate in the Health Insurance Premium Benefit (subsidy) Program. This assistance is provided to those members that elect group coverage through either the Retiree Group Insurance Program or their former member employer. The maximum amount of the monthly available benefit for eligible members and their dependents ranges from $50 to $600. The ASRS reimbursed approximately $76.0 million and $40.5 million towards the cost of group health insurance coverage for the years ended June 30, 2002 and June 30, 2001, respectively. NOTE 6. LONG-TERM OBLIGATIONS A. REVENUE BONDS Governmental Activities 1. Arizona Department of Transportation The Arizona Department of Transportation (ADOT) issued Senior and Subordinated Highway Revenue Bonds to provide funds for acquisition of right-of-way and construction of federal, state and local highways. The original amount of Highway Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $700.280 million. During the year, Highway Revenue Bonds totaling $150.240 million were issued to (i) finance portions of the Transportation Board’s Five Year Transportation Facilities Construction Program, (ii) pay costs of issuing the Bonds, and (iii) refund in advance of maturity portions of ADOT’s outstanding Senior and Subordinated Bonds in the aggregate principal amount of $71 million. The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes of the General Fund. Arizona Revised Statutes prohibit the total principal amount of Arizona Highway Revenue Bonds, excluding refunded bonds, from exceeding $1.3 billion. The Maricopa County Regional Area Road Bond Fund is used to record all payments of principal and interest for Transportation Excise Tax Revenue Bonds issued by ADOT. The Bonds are secured by transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. The original amount of Transportation Excise Tax Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $700.335 million. During the year, Transportation Excise Tax Revenue Bonds totaling $66.010 million were issued to (i) finance the acquisition of land and the design and construction of certain controlled access highways within Maricopa County, Arizona and (ii) pay costs of issuing the Bonds. - 80 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) The Bond Resolution adopted by the Transportation Board on July 25, 1986 established a debt service reserve requirement equal to the maximum annual interest due in the current year or future years on any series of outstanding Transportation Excise Tax Revenue Bonds. The Second Supplemental Transaction Exercise Revenue Bond Resolution adopted by the Board on September 22, 1988, gives the Board the option, which it has elected, of acquiring debt service reserve insurance policies in lieu of the debt service reserve requirement. Accordingly, no debt service reserve is reported in the accompanying financial statements. The policies (aggregating $70.064 million at June 30, 2002) were issued by Financial Guaranty Insurance Company, except for the 1993 Series Subordinated Bonds policies, which were issued by MBIA Insurance Corporation, and the 1995 Series A and Series B Subordinated Bonds policies, which were issued by AMBAC Assurance Corporation. These policies are noncancelable and insure payment, up to the policy amount, of the bond interest on their respective payment dates. The policies shall terminate on the earlier of July 1, 2005, or the date when no respective bonds are outstanding under the bond resolution. The premiums on these insurance policies are recorded as expenditures in the year of payment. The carrying basis of the 1988 Series A Capital Appreciation Bonds increases as a result of accretion of the original issuance discount. At June 30, 2002, the carrying basis was $ 45.410 million. At maturity on July 1, 2005, the carrying basis will equal the maturity amount of $51.5 million. In prior years ($61.346 million) and fiscal year 2002 ($71 million), the ADOT refinanced various bond issues through advance refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the accompanying financial statements. Refunded bonds for the ADOT at June 30, 2002 totaled $132.346 million. The ADOT advance refunded the Highway Revenue Subordinated Series 1992B bonds ($6.870 million) and Senior Series 1999 Bonds ($64.130 million) to reduce its total debt service payments by $2.821 million and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $2.473 million. 2. School Facilities Board On December 20, 2001, the Arizona School Facilities Board issued $6.350 million in State School Improvement Revenue Bonds, Series 2001A (Qualified Zone Academy Bonds) to fund eligible school projects. It is estimated that at least 95% of the funds will be used for the purpose of renovating, rehabilitating, and equipping of school facilities within Federal Empowerment Zones, Enterprise Zones, or schools where 35% or more students are eligible for Free and Reduced Price Meals. The Series 2001A Bonds are due in December 2002 through December 2006. The Series 2001A Bonds do not carry interest, but eligible bondholders are entitled to a credit against their Federal income tax equal to the product of the outstanding principal amount of the Series 2001A Bonds on said date multiplied by the credit rate as of the date of issuance of the Series 2001A Bonds. Business Type Activities 3. Universities a. University of Arizona The University’s bonded debt consists of various issues of system revenue bonds that are generally callable with interest payable semi-annually. Bond proceeds are used to pay for acquiring or constructing capital facilities and infrastructure. Bond proceeds are also used for refunding obligations from previously issued bonds. Principal and interest on bonds are secured by a pledge of tuition, fees, rentals, and other charges. On February 6, 2002, the University sold System Revenue Refunding Bonds Series 2002 for $93.080 million dated March 1, 2002, with interest rates ranging from 3% to 5.25% and maturity dates ranging from 2003 to 2011. The bonds are not subject to redemption prior to their stated maturity. The Series 2002 bonds were sold at a premium of $4.692 million. The University realized net proceeds of $97.135 million after payment of $637 thousand for issuance costs, underwriter discounts - 81 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) and bond insurance. The net proceeds were used to pay off higher interest rate System Revenue Bonds Series 1992, with an outstanding principal balance of $92.750 million. The Series 1992 bonds were called June 1, 2002. The current refunding decreased the University’s total debt service requirements by $7.971 million and the University received an economic gain of $7.930 million (difference between the present values of the old debt and new debt service payments). The refunded debt is defeased and is not included in the accompanying financial statements. Restricted cash and investments are held in trust for capital projects by various commercial banks. $2.655 million is held for debt requirements and $104.274 million is available for future construction costs. Trust funds are invested by the trustee in accordance with the Board’s authorizing resolutions. In fiscal year 1998, the University refunded, in advance of maturity, a portion of outstanding system revenue bonds Series 1994. At June 30, 2002, the outstanding principal balance of the refunded bonds was $15.740 million, which will be paid by investments held in trust with a carrying value of $17.287 million. These amounts are not included in the accompanying financial statements. b. Northern Arizona University The University’s bonded debt consists of various issues of student housing and system revenue bonds that are generally callable with interest payable semiannually. Bond proceeds primarily pay for acquiring, constructing or renovating of capital facilities. System revenue bonds are repaid from pledged gross revenues that primarily consist of student tuition and fees, and certain auxiliary revenues. During the year ended June 30, 2002, the University issued $43.945 million in system revenue refunding bonds with an average interest rate of 3.63% to advance refund $42.6 million of outstanding System Revenue Bonds, Series 1991, 1992 and 1992A, with an average interest rate of 5.95%. The Series 2002 bonds were issued at a premium of $795 thousand. The net proceeds of $44.332 million (after payment of $409 thousand in underwriting fees, insurance and other issuance costs) were used to purchase U.S. government obligations. Those securities were deposited in an irrevocable trust with a trustee to provide for all future debt service payments on the refunded bonds. As a result, the refunded debt is considered to be defeased, and the liability for those bond payments has been removed from the financial statements. On June 1, 2002, the monies in the depository trust were used to call the refunded bonds. In prior years, the University defeased certain revenue bonds by either placing the proceeds of new bonds, or cash and investments accumulated in the sinking fund, in an irrevocable trust to provide for all future debt service payments on the refunded bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the accompanying financial statements. At June 30, 2002, $360 thousand of such bonds outstanding are considered defeased. c. Arizona State University The Housing Revenue Bonds are payable from housing revenues as defined in the bond indentures. The Series 1992A, 1993 and 2002 System Revenue Refunding Bonds, and the outstanding Series 1989, 1991, 2000 and 2002 System Revenue Bonds are payable from Main Campus tuition, fees, certain auxiliary enterprise revenues, and certain other revenues as defined in the bond indentures. The University has pledged portions of its gross revenues towards the payment of debt related to various system revenue bonds outstanding at June 30, 2002. These pledged revenues include student tuition and fees, auxiliary enterprises revenue, investment income, and indirect cost recovery revenue. Pledged revenues do not include state appropriations, gifts, endowment income, or other restricted revenues. In June 2002, the University issued $85 million of system revenue bonds for the financing of construction and utility infrastructure improvement projects at the ASU main campus. In March 2002, the University issued $141.4 million of system revenue refunding bonds, with an average interest rate of 4.16%, to refund the outstanding higher interest rate 1992 and 1992A system revenue refunding bonds totaling $144.9 million with an average interest rate of 5.72%.. The net proceeds of $149.9 million, after the net addition of $8.5 million for bond premium, underwriting fees, and other issuance costs, were used to purchase U.S. Government securities which were - 82 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) deposited to an irrevocable trust in order to retire all remaining maturities of the 1992 and 1992A bonds on July 1, 2002. The refunded debt is considered defeased and related liabilities are not included in the accompanying financial statements. The issuance of the refunding bonds at a lower interest rate than the rate for the refunded debt resulted in a $13 million reduction in future debt service payments, with an economic gain of $12.2 million based upon the present value savings. In prior years, certain system revenue bonds of the University were defeased through advance refunding by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, liabilities for these defeased bonds are not included in the accompanying financial statements. The principal amount of all such bonds outstanding at June 30, 2002, was $193.9 million. Securities and cash restricted for bond retirement funds and maintenance and replacement reserves held by trustees at June 30, 2002 totaled $16.4 million. Component Units 4. Arizona Power Authority In prior years, Arizona Power Authority (APA) defeased various issues of bonds by purchasing United States government securities which were deposited in an irrevocable trust with an escrow agent to provide future debt service until the call dates. As a result, those bonds are considered to be defeased and the liability has been removed from the Hoover Uprating Fund. Accordingly, these trust account asset and related liabilities are not included in the accompanying financial statements. The remaining bonds, totaling $68.945 million, bear interest rates from 4.9% to 5.4% and are due from 2003 through 2017. These bonds are secured by the pledged property, as defined by the resolution, which includes the proceeds from the sale of the bonds, rights and interests in various contracts and revenues of the APA. 5. University Medical Center In March 1992, the University Medical Center (UMC) issued $28.405 million of Hospital Revenue Bonds (the Series 1992 Bonds) and in May 1993, the UMC issued $54.750 million of Hospital Revenue Refunding Bonds (the Series 1993 Bonds). The proceeds of the Series 1992 Bonds and the Series 1993 Bonds were used to advance refund a portion of prior bonds. The UMC is subject to certain financial covenants under the Master Trust Indenture (the Indenture), with which the Center is in compliance as of and for the year ended June 30, 2002. In addition, the Indenture places certain restrictions on the incurrence of additional indebtedness and the sale or acquisition of property. The UMC has established and maintains separate funds for borrowings not yet expended for construction. These funds are held by the trustee and are reflected in investments held by trustee in the accompanying financial statements, and consist principally of guaranteed investment contracts. The bonds or other obligations of the UMC do not constitute general obligations of the Arizona Board Regents, the University of Arizona, the State of Arizona or any political subdivision thereof. 6. Water Infrastructure Finance Authority The Water Infrastructure Finance Authority (WIFA) issued Financial Assistance Revenue Bonds in 1992, 1995, 1996, 1997 and 1998. The WIFA also issued Capitalization Revenue Bonds in 1992, 1995, 1996, 1997, and in 1999, WIFA also issued Water Quality Refunding Bonds. The bonds are callable and interest is payable semiannually. The bonds are special obligations of the WIFA payable solely from and secured by the WIFA’s assets. The bonds are not obligations, general, specific or otherwise, of the State or any other political subdivision thereof other than the WIFA. The $1.688 million deferred loss on retirement of bonds is being amortized over the lives of the defeased bonds on the straightline basis. The amortization for the year ended June 30, 2002, is $142 thousand and has been included in interest expense. - 83 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) Bond premiums are being amortized over the life of the bonds. The amortization for the year ended June 30, 2002, is $193 thousand and is offset against interest expense. On September 8, 1999 the WIFA issued $64.000 million of Water Quality Refunding Bonds to advance refund all of the 1991A bonds, and part of the 1992A, 1995A, and 1996A bonds. Under the terms of the refunding issue, sufficient assets to pay all the principal and interest on the refunded bonds have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with the interest earned thereon, will provide amounts sufficient for future debt service requirements of the refunded bonds. The amount outstanding on the refunded bonds as of June 30, 2002 is $53.225 million. These bonds have been fully defeased, and, therefore, the corresponding liability has been removed from the accompanying financial statements. On December 12, 2001, the Water Infrastructure Finance Authority (WIFA) issued $110.000 million of water quality revenue bonds (the "Series 2001A Bonds") with interest rates ranging from 4.0% to 5.375% to (1) fund certain loans made by the WIFA to finance water quality projects and to reimburse the WIFA monies previously loaned for those purposes, (2) make a deposit to the reserve account and (3) pay issuance costs of the Series 2001A bonds. The bonds are due October 1, 2002 through 2021. Net proceeds totaled $102.577 million (after receipt of $4.823 million of original issue premium, deposit of $11.458 million to the reserve account, and payment of $788 thousand bond issuance costs). 7. Summary of Revenue Bonds The following schedule summarizes revenue bonds outstanding at June 30, 2002 (expressed in thousands): Revenue Bonds Outstanding Governmental Activities: Department of Transportation School Facilities Board Business Type Activities: University Revenue Bonds Component Units: Arizona Power Authority University Medical Center Water Infrastructure Finance Authority Interest Rates Amount Authorized Amount Issued Outstanding Balance at June 30, 2002 Dates Issued Maturity Dates 1988-2002 2001-2002 2003-2020 2002-2019 2.0-8.8% 3.25-5.5% $2,496,580 800,000 $2,496,580 488,500 $1,337,045 445,465 1961-2002 2001-2027 2.7-7.1% 1,097,456 1,024,356 596,403 1993 1992-1993 2003-2017 2003-2021 4.9-5.4% 5.53-6.11% 68,945 83,155 68,945 83,155 68,945 73,615 1992-2002 2005-2022 3.7-6.1% 253,715 253,715 241,855 Principal and interest debt service payments on revenue bonds outstanding at June 30, 2002 for the Primary Government are as follows (expressed in thousands): Annual Debt Service Fiscal Year Governmental Activities Total Total Principal Interest 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032 Total $ 238,050 268,865 280,995 75,300 77,435 400,180 271,380 170,305 $1,782,510 $ 67,392 79,617 66,811 52,160 48,331 178,107 87,908 17,488 $597,814 Total $ 305,442 348,482 347,806 127,460 125,766 578,287 359,288 187,793 $ 2,380,324 - 84 - Total Principal $ $ 30,980 31,907 37,046 41,960 41,595 191,955 147,760 34,525 32,725 5,950 596,403 Business-Type Activities Total Interest $ 30,890 28,235 26,692 24,847 22,925 84,060 37,635 14,442 5,112 $ 274,838 Total $ 61,870 60,142 63,738 66,807 64,520 276,015 185,395 48,967 37,837 5,950 $ 871,241 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) Principal and interest debt service payments on revenue bonds outstanding at June 30, 2002 for the Component Units are as follows (expressed in thousands): Total Principal Fiscal Year 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 Total $ $ Component Units Total Interest 15,740 15,695 17,165 19,000 20,365 113,700 120,545 62,205 384,415 $ $ Total 18,866 19,262 19,072 18,928 18,355 71,556 35,301 6,956 208,296 $ $ 34,606 34,957 36,237 37,928 38,720 185,256 155,846 69,161 592,711 B. GRANT ANTICIPATION NOTES The Grant Anticipation Notes Fund administers all payments of principal and interest for notes issued by the Transportation Board and is secured by revenues received from the Federal Highway Administration under a grant agreement and certain other federal-aid revenues. The original amount of grant anticipation notes issued was $182.295 million. The following schedule summarizes grant anticipation notes outstanding at June 30, 2002 (expressed in thousands): Grant Anticipation Notes Outstanding Governmental Activities: Department of Transportation Dates Issued Maturity Dates Interest Rates Amount Authorized Amount Issued Outstanding Balances at June 30, 2002 2000-2001 2004-2008 4.0-5.3% $ 182,295 $ 182,295 $ 182,295 Future debt service principal and interest payments on grant anticipation notes issues for fiscal years ended June 30 are summarized below (expressed in thousands): Fiscal Year 2003 2004 2005 2006 2007 2008-2012 Total Annual Debt Service Governmental Activities Total Total Principal Interest $ 13,150 $ 8,683 36,755 7,488 49,000 5,401 38,540 3,209 37,000 1,308 7,850 196 $ 182,295 $ 26,285 $ $ Total 21,833 44,243 54,401 41,749 38,308 8,046 208,580 C. CERTIFICATES OF PARTICIPATION 1. Department of Administration The State has issued Certificates of Participation (COPs) to finance construction or improvements of office buildings that are primarily leased to State agencies. The State’s obligation to make lease payments and any other obligations of the State under the lease are subject to, and dependent upon, annual appropriations made by the State Legislature and annual allocations of such - 85 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) appropriations being made by the Department of Administration for such purpose. The Department of Administration agrees to use its best efforts to budget, obtain, allocate and maintain sufficient appropriated monies to make lease payments. In the event any such appropriation and allocation is not made, the Lease will terminate and there can be no assurance that the proceeds for the re-leasing or sale of the project will be sufficient to pay principal and interest with respect to the then outstanding Certificates. The scheduled payments of principal and interest with respect to the Certificates of Participation are guaranteed under certificate insurance policies. The State’s obligation to make lease payments does not constitute a debt or liability of the State within the meaning of any constitutional or statutory limitation. Neither the full faith and credit nor the general taxing power of the State is pledged to make payments of principal or interest due with respect to the Certificates of Participation. Such payments will be made solely from amounts derived under the terms of the lease, including lease payments, and amounts from time to time on deposit under the terms of the declaration of trust. Capitalized interest costs include interest incurred during the construction of an asset. The December 1993 COPs for the Department of Administration were issued to refund the December 1989 and October 1990 certificates. Sufficient assets were deposited in an irrevocable trust to provide for all future debt service requirements of the refunded COP’s. The total amount refunded was $31.815 million. This amount is considered defeased and is not included in the accompanying financial statements. On November 1, 2001, the State issued the 2001A Certificates of Participation in the amount of $56.480 million, and the 2001B Certificates of Participation in the amount of $1.450 million to: (i) refund all of the Series 1991 Certificates of Participation currently outstanding in the amount of $36.025 million, (ii) refund all of the Series 1992A Certificates of Participation currently outstanding in the amount of $15.640 million, and (iii) refund all the Series 1992C Certificates of Participation currently outstanding in the amount of $10.330 million. Sufficient assets were deposited in an irrevocable trusts at commercial banks to provide for all future debt service requirements of the refunded COP’s The above refunding reduced the State’s debt service requirements by $13.258 million, which resulted in an economic gain (difference between the present values of the old and new debt service payments) of $13.294 million. The Series 2002A Certificates of Participation for the Department of Administration were issued for $63.270 million to finance a portion of the costs of acquisition, construction and improvement of a new laboratory facility (the “State Health Lab”) for the State Department of Health Services, Bureau of State Laboratory Services and the acquisition, design, and implementation of a new human resources information system for the State (the HRIS), and to pay the costs of issuing the Series 2002A certificates. 2. Industrial Commission The 1985 COPs for the Industrial Commission were issued to refund the 1984 certificates that were issued to finance the cost of acquiring and constructing a building. Sufficient assets were deposited in an irrevocable trust to provide for all future debt service requirements of the refunded COPs. The lease agreement provides that the title will pass to the Industrial Commission at the end of the lease term, once the COPs are completely redeemed. The refunded amount was $17.500 million. This amount is considered paid and is not included in the outstanding amounts. 3. University of Arizona On December 12, 2001, the University of Arizona issued Certificates of Participation, Series 2001B for $21.425 million. The 2001B Certificates have an optional redemption date of June 1, 2012. There are also extraordinary redemption dates pursuant to the debt documents. The 2001B Certificates include $13.915 million of serial certificates with interest rates ranging from 3.0% to 5.0% and maturity dates ranging from 2003 to 2017. The 2001B Certificates also include $7.510 million of term certificates due June 1, 2022 with an interest rate of 5.125%. The 2001B Certificates were issued at a discount of $99 thousand. The proceeds are being used to construct the Highland District Residence Life Infrastructure, reconfigure the Arizona Health Sciences Center Animal Facility, and expand the Gittings Dance Hall. On April 4, 2002, the University of Arizona issued Certificates of Participation, Series 2002A in the amount of $76.965 million with interest rates ranging from 3.75% to 5.5% and maturity dates ranging from 2003 to 2022. The certificates have an optional - 86 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) redemption date of June 1, 2012. The Certificates of Participation, Series 2002A were sold at a premium of $1.439 million. The University realized net proceeds of $77.318 million after payment of $1.086 million for issuance costs, underwriters discount and bond insurance. The net proceeds for the sale of these certificates are being used to finance the construction of a new Highland District Student Residential Hall, a new Campus Health Facility, and the University North Building located northwest of Tucson. In addition, a portion of the proceeds were used to advance-refund two certificates of participation Series 1991 and 1992 with a total outstanding principal balance of $16.735 million, and a call date of July 15, 2002. The advance refunding reduced the University’s total debt service requirements for the two certificates of participation by $319 thousand, and provided a net present value cash flow benefit of $1.169 million. The refunded Certificates of Participation Series 1991 and 1992 will be paid by investments held in an irrevocable trust with a combined carrying value of $17.509 million. The refunded debt is considered defeased and is not included in the accompanying financial statements. The University of Arizona had outstanding at June 30, 2002, two Variable Rate Certificates of Participation Series 1999B and 2000A totaling $64.2 million. Both certificates bear interest at a weekly rate determined by Paine Webber, as remarketing agent, with final maturity dates of June 1, 2024 and June 1, 2025, respectively. These certificates are subject to conversion, at the option of the Arizona Board of Regents, to an adjustable rate, an annual rate, or a term rate pursuant to the debt documents. If not converted, the 1999B and 2000A certificates will bear interest at a weekly rate not to exceed 12 percent per annum determined under prevailing market conditions by the remarketing agent. 4. Arizona State University In June 2002, Arizona State University issued $103.8 million of certificates of participation for the financing of construction and renovation projects at the ASU Main, ASU West, and ASU East Campuses. - 87 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) A summary of the COPs issued as of June 30, 2002, is as follows (expressed in thousands): Project Governmental Activities: Arizona Municipal Financing Program School for the Deaf and Blind/Game and Fish Refunding Certificates of 92A, 92C, & 1091 Health Lab/HRIS AHCCCS Issue Date Maturity Date 1992 1993 2001 2002 1994 2010 2011 2011 2022 2005 Total Governmental Activities: Business-Type Activities: Industrial Commission Special Fund Arizona State University: Towers Project West Campus - Refunding Downtown Center – A Downtown Center – B 2002 Certificates of Participation University of Arizona: Residence Life Maingate Admin Alumni Foundation Fixed Student Union A Student Union B Parking Garage/Residence Hall McKale/UAPD/Mt. Graham Park Student Union/Ln Svcs/6th St Gar Gittings Bldg. Highland Infra. Life Sci. Student Housing, Health Bldg., UA North Amount Authorized And Issued Outstanding Balance $ 129,640 31,250 57,930 63,270 12,642 $ $ 294,732 $ 231,904 $ 88,645 19,815 57,930 60,820 4,694 7,400 Interest Rates 3.4 – 6.25% 2.75 – 5.0 3.25 – 5.25 3.0 – 5.5 6.66 1985 2005 $17,500 1991 1993 1999 1999 2002 2010 2009 2024 2024 2026 4,500 46,905 5,620 5,165 103,800 2,885 33,675 5,495 5,085 103,800 6.89 5.18 5.75 8.00 4.75 1994 1994 1997 1999 1999 1999 2000 2001 2001 2002 2014 2024 2008 2024 2024 2024 2025 2025 2022 2022 16,725 16,170 2,965 21,607 36,500 18,635 28,300 31,695 21,425 76,965 12,775 14,470 1,920 21,980 36,500 18,380 27,700 31,555 21,425 76,965 4.1 – 5.8 4.25 – 6.0 3.8 – 4.5 5.0 – 5.3 Variable not to exceed 12 4.2 – 5.75 Variable not to exceed 12 3.4 – 5.5 3.0 – 5.125 3.75 – 5.5 Total Business Type Activities: $ 454,477 $ 422,010 Total Certificates of Participation: $ 749,209 $ 653,914 - 88 - 1.90 – 3.40% STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) Principal and interest debt service requirements on COPs outstanding at June 30, 2002, are as follows (expressed in thousands): Annual Debt Service Governmental Activities Fiscal Year Total Principal Business-Type Activities Total Amount Required Total Interest Total Principal Total Amount Required Total Interest 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 $ 15,103 17,242 19,022 19,191 21,230 115,820 12,275 9,745 2,276 $ 11,350 11,475 10,535 9,519 8,465 22,753 4,247 1,852 58 $ 26,453 28,717 29,557 28,710 29,695 138,573 16,522 11,597 2,334 $ 9,950 15,705 15,300 17,585 15,100 81,935 93,574 119,821 53,040 $ 19,851 17,768 17,207 16,522 15,848 68,576 53,298 24,893 4,062 $ 29,801 33,473 32,507 34,107 30,948 150,511 146,872 144,714 57,102 Total $ 231,904 $ 80,254 $ 312,158 $ 422,010 $ 238,025 $ 660,035 D. LEASES AND INSTALLMENT PURCHASES 1. Leases The total operating lease expenditures for the fiscal year ended June 30, 2002, were $43.291 million for governmental activities, $17.052 million for business-type activities, and $1.256 million for the Component Units. The future minimum lease payments for long-term operating leases as of June 30, 2002, are summarized below (expressed in thousands): Fiscal Year 2003 2004 2005 2006 2007 2008-2012 Total Future Minimum Payments Primary Government Governmental Business-Type Activities Activities $ 30,840 $ 2,592 24,074 2,144 18,225 851 11,632 652 6,372 365 718 372 Component Units $ 1,718 639 488 465 110 269 $ $ 91,861 $ 6,976 3,689 $ $ Total 35,150 26,857 19,564 12,749 6,847 1,359 102,526 Many operating leases are for buildings and land leased by State agencies. Although these leases are considered to be long-term, they are cancelable under certain circumstances. * An agency must be able to cancel the lease if monies are not appropriated to cover the lease expenditures. * If an agency is ordered to move into State-owned property and a 60-day notice is given, the lease can be canceled without penalty. * In situations where the use of the leased property is dependent on the use of Federal monies, the lease must be cancelable in the event Federal monies are no longer available. - 89 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) The State has entered into capital lease agreements for the acquisition of telephone systems, copy machines and other equipment. The future minimum lease payments for long-term capital leases (all primary government) as of June 30, 2002 are summarized below (expressed in thousands): Fiscal Year 2003 2004 2005 2006 2007 2008-2012 2013-2017 Totals 2. Annual Debt Service Governmental Activities Business-Type Activities Principal Interest Total Principal Interest $ 1,384 $ 422 $ 1,806 $ 9,323 $ 1,327 $ 1,191 365 1,556 8,898 1,218 1,132 305 1,437 6,612 819 1,042 247 1,289 5,987 524 918 194 1,112 4,750 272 2,850 280 3,130 1,966 229 0 0 0 222 12 $ 8,517 $ 1,813 $ 10,330 $ 37,758 $ 4,401 $ Total 10,650 10,116 7,431 6,511 5,022 2,195 234 42,159 Installment Purchases The State has installment purchase contracts payable for acquisitions of computer and other equipment. Installment purchases assets and liabilities are reported in the government wide Statement of Net Assets. The future minimum payments for long-term installment purchases (all primary government) as of June 30, 2002, are summarized below (expressed in thousands): Fiscal Year 2003 2004 2005 2006 2007 2008-2012 Total future Minimum payments Annual Debt Service Governmental Activities Business-Type Activities Principal Interest Total Principal Interest Total $ 4,665 $ 389 $ 5,054 $ 797 $ 216 $ 1,013 4,116 165 4,281 459 169 628 1,020 38 1,058 379 142 521 276 14 290 382 120 502 151 2 153 294 98 392 1,521 270 1,791 $ 10,228 $ 608 $ 10,836 - 90 - $ 3,832 $ 1,015 $ 4,847 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) 3. Capital Assets Financed through Capital Leases and Certificates of Participation The following table summarizes historical cost of assets acquired under capital leases and certificates of participation: Land Construction in Progress Buildings Improvement other than Building Equipment Accumulated Depreciation Net Certificates of Participation and Capital Lease Assets Governmental Activities $ 6,078 12,049 198,457 3,653 12,394 232,631 65,461 $ 167,170 Business-Type Activities $ 237,824 237,824 31,093 $ 206,731 E. NOTES PAYABLE The Arizona Department of Transportation (ADOT) notes payable as of June 30, 2002 was $338.386 million. The governmental activities notes payable was $192.849 million, and the business-type activities notes payable was $145.536 million. The notes payable represent the State Highway Fund loan payable to the Highway Expansion and Loan Program Fund (H.E.L.P.) for $93.980 million, the Maricopa Regional Area Road Construction Fund loan payable to the City of Mesa for $33.166 million, the Equipment Fund loan payable to creditors for $5.693 million, and the Board Funding Obligations for loans from the State Treasurer for $205.547 million. The total outstanding for Board Funding Obligations is as follows: 1. Laws 1999, Chapter 189 (SB 1201) authorized a Board Funding Obligation (BFO) of $100 million to the H.E.L.P. fund in fiscal year 2000. Both the principal and interest of the BFO are due on March 14, 2004 ($43.115 million) and June 27, 2004 ($62.315 million), respectively. 2. Laws 2001, Chapter 238 (HB 2636) authorized a Board Funding Obligation (BFO) of $40 million to the H.E.L.P. fund in fiscal year 2002. Interest accrued to date is $107 thousand. Both principal and interest of the BFO are due no later than May 31, 2004. 3. Laws 2001, Chapter 238 (HB 2636) authorized a Board Funding Obligation (BFO) of $60 million to the State Highway Fund in fiscal year 2002. Interest accrued to date is $10 thousand. Both principal and interest of the BFO are due no later than May 31, 2004. F. LITIGATION The amounts shown for the Ladewig vs. Waddell case and the Roosevelt Elementary School District No. 66 vs. State of Arizona case are further discussed in Note 12 – Commitments, Contingencies, and Compliance. - 91 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONTINUED) G. CHANGES IN LONG-TERM OBLIGATIONS The following is a summary of changes in Long-Term Obligations (expressed in thousands): Retirements Balance June 30, 2002 Due Within One Year Due Thereafter $ 222,600 139,254 904 4,834 204,707 10,142 4,674 $ (322,855) (75,608) (1,777) (4,373) (11,858) (1,882) - $ 1,782,510 182,295 231,904 8,517 10,228 192,849 28,026 4,674 $ 238,050 13,150 15,103 1,384 4,665 82,172 2,358 350 $ 1,544,460 169,145 216,801 7,133 5,563 110,677 25,668 4,324 2,272,241 587,115 (418,353) 2,441,003 357,232 2,083,771 Other Long-term Liabilities: Compensated Absences Ladewig vs. Waddell Settlement Roosevelt School District Settlement 123,646 - 147,227 350,000 88,000 (130,699) - 140,174 350,000 88,000 132,473 - 7,701 350,000 88,000 Total other Long-term Liabilities 123,646 585,227 (130,699) 578,174 132,473 445,701 $ 2,395,887 $ 1,172,342 $ (549,052) $ 3,019,177 $ 489,705 $ 2,529,472 $ 540,019 244,934 29,259 1,634 - $ 363,405 202,326 13,951 3,229 145,536 11,674 (6,759) 2,682 $ (307,021) (25,250) (5,452) (1,031) (289) 1,445 (2) $ 596,403 422,010 37,758 3,832 145,536 11,385 (5,314) 2,680 $ 30,980 9,950 9,323 797 (150) - $ 565,423 412,060 28,435 3,035 145,536 11,385 (5,164) 2,680 815,846 736,044 (337,600) 1,214,290 50,900 1,163,390 Other Long-term Liabilities: Compensated Absences 40,611 46,295 (40,591) 46,315 46,143 172 Total other Long-term Liabilities 40,611 46,295 (40,591) 46,315 46,143 172 $ 856,457 $ 782,339 $ (378,191) $ 1,260,605 $ 97,043 $ 1,163,562 $ $ 384,415 (4,560) 4,964 $ 15,740 - $ 368,675 (4,560) 4,964 Governmental Activities: Long-term Debt: Revenue Bonds Grant Anticipation Notes Certificates of Participation Capital Leases Installment Purchase Contracts Notes Payable Revenue Bond Premium Certificates of Participation Premium Restated Balance July 1, 2001 Additions $ 1,882,765 182,295 168,258 9,390 9,767 19,766 - Total Long-term Debt Total Long-term Obligations Business Type Activities: Revenue Bonds Certificates of Participation Capital Leases Installment Purchase Contracts Notes Payable Revenue Bond Premium Deferred Amount on Refundings Certificates of Participation Premium Total Long-term Debt Total Long-term Obligations Component Units: Revenue Bonds Revenue Bond Discount Revenue Bond Premium $ 282,730 (4,816) 335 $ 110,000 4,822 278,249 114,822 (8,252) 384,819 15,740 369,079 Other Long-term Liabilities: Compensated Absences 3,161 12,831 (8,074) 7,918 3,506 4,412 Total other Long-term Liabilities 3,161 12,831 (8,074) 7,918 3,506 4,412 281,410 $ 127,653 $ (16,326) 392,737 $ 19,246 $ 373,491 Total Long-term Debt Total Long-term Obligations $ - 92 - (8,315) 256 (193) $ STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 6. LONG-TERM OBLIGATIONS (CONCLUDED) The above long-term obligations relating to governmental activities include internal service funds. Amounts for installment contracts and compensated absences differ from those in the Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets because liabilities of $1.488 million of installment contracts and $11.352 million of compensated absences are attributable to internal service funds. These amounts are included in the reconciliation as part of internal service fund net assets and liabilities. An additional $1.660 million in compensated absences was recorded as a current liability in the fund financial statements; however, this amount was reclassified in the government wide statement of net assets to current portion of other long-term liabilities. Therefore, this amount is included in the Long-Term Obligation footnote, but is not a reconciling item between the governmental funds balance sheet and the government-wide statement of net assets. NOTE 7. INTERFUND TRANSACTIONS INTERFUND BALANCES AND TRANSFERS Interfund Receivables/Payables Interfund balances as of June 30, 2002 are as follows (expressed in thousands): Transportation & Aviation Fund General Fund Due From Due To Non-Major Governmental Funds Land Endowments Fund General Fund Transportation & Aviation Fund Non-Major Governmental Funds Unemployment Compensation Fund Lottery Non-Major Enterprise Funds Internal Service Funds $ 517 19 2,239 3,009 244 $ 22,127 20,000 2 $ 1,390 - $ Total Due From $ 6,028 $ 42,129 $ 1,390 $ Non-Major Enterprise Funds 7,929 277 194 7,238 - $ 15,638 $ Internal Service Funds Total Due To 166 $ 571 1,914 - 1,550 $ 168 122 273 33,162 739 2,830 213 9,477 23,009 519 2,651 $ 2,113 $ 69,949 Interfund balances represent (1) amounts due to and from the internal service funds for goods and services rendered, and (2) Cash transferred between funds subsequent to the balance sheet date. The cash is recorded in the fund, which initiated the transfer, and a corresponding liability is recorded. The receiving fund records an interfund receivable. Interfund Transfers Transfers for the year ended June 30, 2002 are as follows (expressed in thousands): Transportation Transferred From General Fund Transportation & Aviation Fund Non-Major Governmental Funds Unemployment Compensation Lottery Non-Major Enterprise Funds Internal Service Funds Total Transfers In General Fund $ & Aviation Fund - $ 52,174 194,962 3,526 Land Endowments Fund $ 3,899 349 - Transferred To Non-Major University Governmental Funds Funds $ Enterprise Funds Internal Service Funds Total Transfers Out $ $ 4 $ 846,194 2 370,064 326,702 Non-Major 75,878 $ 766,185 317,890 122,783 - 252 5,056 212 - - 1,169 - 125 - 1,506 33,498 - - 21,675 - - - 55,173 3,023 - - 2,000 - - - 5,023 10,088 - - 5,126 - - - 15,214 349 $ 546,521 $ 766,185 6 $1,619,876 $ 293,957 $ 7,425 $ - 93 - $ 5,433 $ STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 7. INTERFUND TRANSACTIONS (CONCLUDED) Interfund transfers represent legally authorized non-exchange transfers of funds. These transfers include: (1) Legislative appropriations from the general fund, (2) other legislative transfers, (3) Statutorily required transfers, (4) transfers related to the elimination of funds, and (5) transfers for debt service. NOTE 8. ACCOUNTING CHANGES AND RESTATEMENTS During fiscal year 2002, the State implemented several new accounting standards issued by GASB: No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities, No. 37, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments: Omnibus, and No. 38, Certain Financial Statement Note Disclosures. Statement No. 34, as amended by Statement No. 37, establishes new financial reporting standards for state and local governments. This statement’s requirements represent a significant change in the financial reporting model used by state governments, including statement formats and changes in fund types and account groups. In addition to fund financial statements, governments are required to report government-wide financial statements, prepared using the accrual basis of accounting and the economic resources measurement focus. As a result, fund reclassifications and adjustments to the fund equities reported in the prior year financial statement balances were required. Statement No. 35 establishes accounting and financial reporting standards for public colleges and universities within the financial reporting guidelines of Statement No. 34. The State universities, reported as major proprietary funds, adopted the requirements of Statement No. 35. Statement No. 38 requires certain footnote disclosures when Statement No. 34 is implemented. The Land Endowment Fund beginning fund balance was restated due to GASB 34 to reflect (1) the removal of capital assets, net of accumulated depreciation in the amount of ($12.585) million at the fund level because the Land Endowment Fund was reported using the full accrual basis of accounting in prior years, and (2) the net effect of earned revenue which was not recorded in prior years in the amount of $9.880 million. In addition to the GASB Statement implementations, four corrections of errors were made. The General Fund beginning fund balance was restated by $134.888 million to correct income tax revenue recorded in the prior year that were not earned. The Transportation and Aviation Fund fund balance was restated by $36.817 million. This restatement is due to the ADOT incorrectly excluding funds received from the General Fund in prior years. Non-Major governmental funds beginning fund balance was restated by $13.759 million to reflect an unrecorded liability at June 30, 2001. Other funds were reclassified to the Enterprise funds and internal service funds due to review of proper fund type. These reclassifications are unrelated to GASB 34 implementation. The provisions of these new standards have been incorporated into the financial statements and notes. The following table summarizes (in thousands) changes to fund equities as previously reported in the Combined Balance Sheet. These changes resulted primarily from implementation of these GASB statements, except as noted above. - 94 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 8. ACCOUNTING CHANGES AND RESTATEMENTS (CONCLUDED) Fund Balances and Net Assets at June 30, 2001 have been restated as follows (expressed in thousands): June 30, 2001 as Previously Reported Governmental Funds and Activities General fund Transportation & Aviation Land Endowments Non-Major Funds $ Total Governmental Funds Fund Balances 1,380,364 26,444 1,942,122 $ $ 63,407 319,587 1,083,327 (402,633) Adoption of GASB 34 Corrections of Errors $ (134,888) 36,817 (13,579) July 1, 2001 As Restated $ (2,705) - $ 1,308,883 382,848 1,080,622 1,525,910 3,348,930 1,063,688 (111,650) (2,705) 4,298,263 - 125,071 1,895,189 (90,777) 58,373 8,938,663 (1,882,765) (182,295) (167,012) (9,390) (9,759) (19,766) (1,246) (123,646) - 183,444 10,833,852 (1,882,765) (182,295) (167,012) (9,390) (9,759) (19,766) (1,246) (123,646) (90,777) - 1,929,483 - 8,844 4,985 6,614,986 8,844 4,985 8,544,469 6,612,281 $ 12,842,732 Adoption of GASB No. 34: Revenue Recognition Capital assets, net depreciation Revenue Bonds Grant Anticipation Notes Certificates of Participation Capital Leases Installment Purchases Revenue Bond Premium Certificates of Participation Premium Compensated Absences Internal Service Fund consolidation Compensated Absences reclassified to Internal Service Funds Other Restatements Adoption of GASB No. 34 Total Governmental Funds Net Assets GASB 34 Fund Reclassifications 3,348,930 $ 2,993,171 $ June 30, 2001 as Previously Reported GASB 34/35 Fund Reclassifications Other Fund Reclassifications $ $ $ (111,650) $ July 1, 2001 As Restated Adoption of GASB 35 Proprietary Funds and Business-Type Activities Lottery Industrial Commission Universities Unemployment Compensation Non-major Enterprise funds 8,675 80,073 52,090 Total Proprietary Funds and Business-type Activities $ 140,838 Internal Service Funds $ 3,246,629 $ - $ (1,567,461) - 1,051,658 - $ - 8,675 80,073 1,679,168 1,051,658 131,325 79,235 4,298,287 $ 79,235 $ (1,567,461) $ 2,950,899 (96,922) - $ 6,145 $ - $ (90,777) Fiduciary Funds Account Groups $ 32,989,607 $ (2,363,035) $ - $ - $ 30,626,572 General Fixed Assets General Long-term Debt $ 1,895,189 - $ (1,895,189) - $ - $ - $ - Total Account Groups $ 1,895,189 $ (1,895,189) $ - $ - $ - Universities $ 3,246,629 $ (3,246,629) $ - $ - $ - - 95 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 9. FUND DEFICIT The Internal Service Funds deficit results from the Risk Management Fund net losses in prior years. The Risk Management Fund deficit of $207.039 million is primarily due to the State’s policy of funding 50% of the actuarially determined liability. However, 100% of the liability is recorded for financial statement purposes. The Risk Management Fund accumulated deficit at June 30, 2002, should be recovered through annual adjustments to insurance billings. The entire liability is reflected in the Internal Service Funds. Current period losses are allocated to functions of government in the government-wide statement of activities. NOTE 10. RELATED PARTY TRANSACTIONS A. ARIZONA STATE UNIVERSITY Not included in the accompanying financial statements are six financially interrelated organizations that are nonprofit corporations controlled by separate Boards of Directors whose goals are to support Arizona State University. Financial statements of these organizations are audited by independent auditors. Four of these financially interrelated organizations (the Arizona State University Alumni Association, Arizona State University Foundation, Sun Angel Foundation and the Sun Angel Endowment) receive funds primarily through donations and dues, and contribute funds to the University for support of various programs. A fifth financially interrelated organization, Price-Elliott Research Park, Inc. (Park), is developing a research park to promote and support research activities, in coordination with the University. In developing the research park, the Park has issued bonds guaranteed by the University. As of June 30, 2002, the Park had $18.0 million of revenue bonds outstanding at an average interest rate of 5.26%. The debt service on the bonds is secured by a subordinated lien on University Main Campus revenues. Park revenues are not pledged in order to provide development flexibility to the Park. Annual debt service on the Park bonds will be $1.0 million in fiscal year 2003 and varies from a low of $900 thousand in fiscal year 2004 to a high of $1.7 million in fiscal year 2006. The University is obligated to pay the annual debt service, if not paid by the Park, under a debt service assurance agreement. Beginning in fiscal year 1990, the University provided operating cash advances to the Park repayable with interest to the University (1) upon the Park’s total gross receipts for a fiscal year exceeding its total disbursements for the fiscal year and (2) before any Park surpluses are transferred to the Arizona State University Foundation, for the benefit of Arizona State University. The last year for cash transfers to the Park was fiscal year 1998. Since the Park’s repayment to the University was dependent upon successful future operations and entering into additional land leases, the transfers to the Park were recorded by the University as current year expenditures when made and not as an asset on the University’s balance sheet. Total cash advances repayable to the University at June 30, 2002, including the accrued interest, totaled $6.5 million. During fiscal year 2002, the Park repaid $1.3 million to the University, with this amount being recorded as other revenues with the timetable for future repayments dependent upon the Park entering into additional land leases. A sixth financially interrelated organization, the Collegiate Golf Foundation, operates a University-owned golf course. Assets, net assets, and revenues for these organizations for the most recent fiscal year for which audits have been completed aggregated $293.5, $231.3 and $31.5 million, respectively, with substantially all of the net assets being donor restricted or endowment funds. The University has, or is in the process of entering into several privatized arrangements for on-campus student housing and campus energy management where an independent management company is responsible for providing services to the University - 96 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 10. RELATED PARTY TRANSACTIONS (CONTINUED) and/or students served by the University. In conjunction with these privatized arrangements, the independent management companies, with the approval and assistance of the University have obtained, or are in the process of obtaining, tax-exempt financing in order to maximize the overall financial benefits to the University and its students. As of June 30, 2002, two taxexempt financings had been completed by an independent management company through separately incorporated non-profit entities formed by the independent companies to do the tax-exempt financings. The University is not legally responsible for repayment of the tax-exempt debt, and there is no pledge or guarantee by the University for repayment of the debt. On June 20, 2002, there was $32.1 million of bonds outstanding for these two privatized arrangements with approximately $50.0 million of financings for two other privatized arrangements being in process. Upon final principal repayment of the financings, title to the student housing and energy management equipment transfers to the University. B. NORTHERN ARIZONA UNIVERSITY The financial activities of the Northern Arizona University Foundation, Inc., (Foundation) and the Northern Arizona Capital Facilities Finance Corporation (NACFFC) are not included in the accompanying financial statements. The Foundation and the NACFFC are nonprofit corporations controlled by separate Boards of Directors. The goals of the Foundation are to promote the cause of education and the objectives of the University. The NACFFC was formed for the purpose of building on-campus student housing. The NACFFC, with the approval and assistance of the University, has obtained tax-exempt financing to construct a student housing facility. The University is not legally responsible for repayment of the tax-exempt debt, and there is no pledge or guarantee by the University for repayment. The housing facility was opened in the fall of 2002 and daily operations are managed by the University. On June 20, 2002, there were $15.4 million of bonds outstanding for this privatized arrangement. Upon final principal repayment of the financing, title to the student housing transfers to the University. This housing is built on University property that is leased to the NACFFC for the term of the bond issue. C. UNIVERSITY OF ARIZONA The accompanying financial statements do not include the operations of the University of Arizona Foundation, Inc., the University Physicians, Inc., the Arizona Research Park Authority, and the Campus Research Corporation. The University of Arizona Foundation, Inc. (Foundation) is a nonprofit corporation controlled by a separate Board of Directors. The principal goals of the Foundation are to support the University of Arizona through various fund-raising activities, and to contribute funds to the University for support of various programs. According to the audited financial statements of the Foundation for the year ended June 30, 2001, assets, liabilities, revenues, and expenditures totaled $299, $29, $72 and $45 million, respectively. The University Physicians, Inc. (UPI) is a nonprofit corporation established to support the University of Arizona in achieving its teaching and research missions through the provision of patient care. The UPI is controlled by a Board of Directors, comprised of the Dean, three faculty physicians, a representative of the twelve clinical department heads and three community members. According to the audited financial statements of the UPI for the year ended June 30, 2001, assets, liabilities, revenues and expenditures totaled $104, $53, $145 and $135 million, respectively. The Arizona Research Park Authority (ARPA) is a nonprofit corporation created under the auspices of the Arizona Board of Regents (ABOR) and designated by Arizona law as a political subdivision of the State, governed by a separate board of directors, which by law may not include officers or employees of ABOR. The ARPA was established under the State’s industrial development authority statute to assist in the acquisition, improvement, and operation of university research parks and related properties. In August 1994, ARPA, with approval of ABOR, sold $98 million of nontransferable special revenue bonds to International Business Machines Corporation (IBM) to enable the University to acquire from IBM a 345-acre developed industrial site near Tucson, Arizona, together with 1,000 acres of adjacent unimproved land (collectively, the University of Arizona Science and Technology Park or the “Park”). The bonds are payable solely from lease rentals paid by IBM. If IBM defaults or cancels its - 97 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 10. RELATED PARTY TRANSACTIONS (CONCLUDED) lease, the bonds must be surrendered and discharged. Title to the entire Park resides in the University and neither the Park nor any payments by the University secures ARPA’s bonds. Since the original transaction, IBM has reduced its leasehold to 70% of the building space for periods up to the remaining term of 22 years. Audited financial statements are not available. The Campus Research Corporation (CRC) is a nonprofit corporation governed by a separate Board of Directors and was established to assist the University in the acquisition, improvement, and operation of the Park and related properties. The CRC currently leases from the University the remaining 30% of the building space of the Park that is not leased to ARPA (see preceding paragraph). The CRC is responsible for assisting in the development of the presently undeveloped portions of the Park and for subleasing unoccupied space, newly developed space, and space now occupied by IBM or its subtenants once the current subleases expire. The University is responsible for payment of operational expenses associated with the space occupied by the University departments, offices, and programs. All income received by the CRC from its activities, after payment of expenses and financial reserves, will be distributed to the University. During fiscal year 2002, $300 thousand was distributed to the University of Arizona. The CRC’s June 30, 2002, audited financial statements disclosed: • • • • • $12.805 million total assets, including $5.277 million in net property and equipment and $5.195 million of net intangible assets, the major components of which relate to leasehold interest and deferred leasing costs. $4.778 million total liabilities, including $2.951 million long-term debt in the form of two collateralized notes payable to Wells Fargo, Arizona. $6.422 million total revenues, primarily consisting of rental income from the Park and related properties. $4.660 million total expenses, including $2.115 million of project operating costs and $683 thousand amortization of intangible assets. During fiscal year 2002 cash and cash equivalents decreased by $152 thousand. The CRC’s audited financial statements may be obtained by writing to P.O. Box 210066, Tucson, Arizona 85721-0066. D. UNIVERSITY MEDICAL CENTER The University Medical Center (UMC) and the University of Arizona (the University) both provide and receive services from each other under various contracts. Payments to the University by the UMC include resident and intern salaries, utilities, ground maintenance, mailroom operations and various administrative functions. Amounts paid to the University for these services were $14.264 million for the year ended June 30, 2002. The UMC has entered into contractual agreements with the University to provide support for the academic mission of the University. Charges to the University for such services and facilities provided by the UMC were $10.136 million for the year ended June 30, 2002. These amounts are included in other operating revenue in the accompanying financial statements. University Physicians, Inc. (UPI) is a not-for-profit corporation whose members are physicians employed by the University and who practice at the UMC. The UMC has agreements with UPI whereby the UPI provides physician and other services to UMC. Additionally, the UMC provides various services to the UPI. NOTE 11. JOINT VENTURE UNIVERSITY OF ARIZONA The University of Arizona (the University) is a participant in the Large Binocular Telescope Corporation (LBT). The LBT was formally incorporated as a not-for-profit corporation in August 1992, pursuant to a Memorandum of Understanding, as amended, executed on February 24, 1989, between the University and the Arcetri Astrophysical Observatory in Florence, Italy (Arcetri). The purpose of the joint venture is to design, develop, construct, own, operate and maintain a binocular telescope currently being - 98 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 11. JOINT VENTURE (CONCLUDED) constructed in Arizona. The current members of the LBT are the University, Arcetri Research Corporation, Ohio State University and the LBT Beteiligungsgesellschaft. The University has committed resources equivalent to 25% of the project’s construction costs and the LBT’s annual operating costs. As of June 30, 2002, the University has made cash contributions of $14.0 million toward the project’s construction costs. The University’s financial interest represents its future viewing/observation rights. Upon completion of construction, viewing rights will be divided among the participants in proportion to their contributions. According to the audited financial statements of the LBT for the year ended December 31, 2001, assets liabilities, revenues and expenditures totaled $78.0 million, $2.0 million, $9.0 million and $1 million, respectively. The LBT’s separate audited financial statements can be obtained from LBT Project Office, Steward Observatory, University of Arizona, Tucson, AZ 85721-0065. NOTE 12. COMMITMENTS, CONTINGENCIES AND COMPLIANCE A. RISK MANAGEMENT INSURANCE LOSSES The Department of Administration – Risk Management Section manages the State’s property, environmental, liability and workers’ compensation losses. The State has determined that the management of these losses can be performed effectively and efficiently through the Risk Management Section. Consequently, all agencies and the State’s three universities are required to participate in this program. The State’s Risk Management Section evaluates the proper mix of purchased commercial insurance and self-insurance annually. The Industrial Commission provides payment of workers’ compensation losses which are not covered by the State Compensation Fund, the Department of Administration –Risk Management Section, private insurance carriers, or self-insured employers. The workers’ compensation claims paid by the Industrial Commission encompass losses against uninsured or underinsured employers, insolvent insurance carriers’ payments for vocational rehabilitation, medical conditions incurred prior to 1973, apportionment claims for pre-existing industrial and non-industrial related physical impairments and compensation for loss of earnings associated with the disability. The Industrial Commission is totally self-insured. The management and payment of these losses is accomplished through the funding mechanism of the Risk Management Fund (Internal Service Fund) and the Industrial Commission Fund (Enterprise Fund). As discussed in the following paragraph, an independent annual actuarial analysis is performed to evaluate the needed funding. The Risk Management Section will assess each agency an annual portion of the necessary funding for the Risk Management Fund based on their exposures and prior loss experience. Interest and dividend earnings of investments currently fund the Industrial Commission Fund. To provide funding for workers’ compensation claims, the Industrial Commission could direct payment to the State Treasurer an amount not to exceed one and one-half percent of all premiums received by the State Compensation Fund, private carriers and selfinsured plans during the immediately preceding calendar year. No such assessments have been made by the Commission since January 1992. The State records claims liability when the reported loss is probable and reasonably estimated. On an annual basis, independent actuarial firms are engaged to estimate the State’s total year-end outstanding claims liability, which takes into account recorded claims and related allocated claims adjustment expenditures, salvage, subrogation, loss development factors and an estimate for incurred but not reported claims. The Industrial Commission Fund discounts all benefit reserves at three and one-half percent, except for medical. Medical benefits are discounted at an assumed inflation rate equal to the investment rate of return earned by the Industrial Commission Fund. During fiscal year 2002, claims for seven new insolvent medical insurance companies were assigned to the State Compensation Fund and were included in the Industrial Commission’s June 30, 2002 actuarial study. The State Compensation Fund, on behalf of the Industrial Commission, has filed proof of claim requests with ancillary receivers, liquidators holding deposits and surety bonds on these insolvent companies totaling $28 million. Since the actual amount that will ultimately be received cannot be determined, the Industrial Commission will continue to recognize receipt of insolvent carrier deposits (no insurance settlement income) as revenue at the time received rather than recording a receivable. - 99 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 12. COMMITMENTS, CONTINGENCIES AND COMPLIANCE (CONTINUED) Occasionally, the Risk Management Section agrees with claimants to purchase an annuity contract to settle these specific claims when it is determined that it is in the best interest of the State to do so. In these instances, the State requires the claimant to sign an agreement releasing the State from any further obligation. In addition, the State requires that a third party assignment company be named in the contract should the annuity company fail to perform its obligations under the annuity contract. As a result of these requirements, the likelihood that the State will be required to make future payments on these claims is remote. There have been no significant reductions in the current fiscal year insurance coverage. There have been no settlements that have exceeded insurance premium coverage in the last three years. The following table presents the changes in claims liabilities balances (short- and long-term combined) during fiscal years ended June 30, 2001and June 30, 2002 (expressed in thousands): Fiscal Year Risk Management Fund: 2001 2002 Industrial Commission Fund: 2001 2002 Beginning Balance $ Current Year Claims and Changes in Estimates 213,076 233,677 $ 157,659 150,470 86,652 56,306 5,241 52,892 Claims Payments $ 66,051 55,652 12,430 15,697 Ending Balance $ 233,677 234,331 150,470 187,665 B. LITIGATION In Ladewig vs. Waddell, Ladewig is a class action tax refund case. The class members are seeking refunds for Arizona income tax paid on dividends received from corporations doing less than 50% of their business in Arizona during the years 1986 through 1989. The trial court held that such taxes violated the Commerce clause of the U.S. Constitution and certified the class. The class certification was upheld by the Arizona Supreme Court in 2001. The Tax Court preliminarily approved a proposed settlement on September 23, 2002. Accordingly the State has recorded a long-term liability in its financial statements in the amount of $350 million. In Kerr vs. Waddell, federal employees claim an income tax refund on taxes paid on federal employee contributions. The Board of Tax Appeals granted these claims for the years before 1991, but has denied the claim for later years. The State did not appeal. The plaintiffs appealed for years after 1990. The Tax Court awarded attorneys fees from refunds the State is paying, and this ruling was upheld on appeal. The State has filed a petition for review. The attorneys’ fees will be paid from funds otherwise due to taxpayers, so there will be little monetary effect on the State if the fees are awarded. The Tax Court has denied class certification, and ruled for the Plaintiffs on the merits regarding entitlement to refunds for years after 1990. The potential outcome is uncertain at this time. If this case were to have an unfavorable outcome, the State could incur losses ranging from $20 million to $100 million. In Hurley Trucking vs. Arizona Department of Transportation, claimants allege that travel on state, county and city roads built on right-of-ways that cross federal land is not taxable. The Court of Appeals ruled in the State’s favor. The Arizona Supreme Court denied a Petition for Review, but ordered the Court of Appeals’ decision depublished. The Arizona Department of Transportation has issued a denial of the remaining administrative claims, and the deadline for the claimants to protest further has not run. The potential outcome is uncertain at this time. If the case were to have an unfavorable outcome, the State could incur losses ranging from $72 to $250 million. In Roosevelt Elementary School District No. 66 vs. State of Arizona, the plaintiffs allege the State failed to fully fund the Building Renewal Fund established by the Students FIRST legislation. On October 13, 2000, the court held that the State did - 100 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 12. COMMITMENTS, CONTINGENCIES AND COMPLIANCE (CONTINUED) not violate the statutory provisions regarding funding of the Building Renewal Fund for fiscal year 1998-99. However, the court held that neither part was entitled to summary judgement regarding funding for fiscal year 1999-00, and that in order to prevail on that claim, the plaintiffs would have to demonstrate that they were injured by the alleged underfunding. On February 21, 2002, the court granted the plaintiffs’ motion to file an amended complaint, which included similar allegations regarding funding for fiscal year 2001-02. The parties both moved for summary judgment once again regarding the remaining claims in the case (fiscal years 1999-2000 and 2001-02), and on May 7, 2002, the trial court granted the plaintiffs’ motion for summary judgment as to both years. The State timely appealed the decision to the Arizona Court of Appeals. The appeal has been fully briefed, but oral argument has not yet been scheduled. It is probable that the State will be required to provide approximately $88 million in additional funding. Accordingly the State has recorded a long-term liability for this amount. In Amcore LLC v. Hull, et al, a class action brought on behalf of individuals and business entities allegedly damaged by the passage of SB 1004 in December 2000, which reduced benefits available to Taxpayers under SB 1504 passed in April 2000. Plaintiffs claim divestiture of vested rights, denial of due process, impairment of contract, violation of equal protection, and equitable estoppel. Plaintiffs are requesting an order declaring SB 1004 unconstitutional, injunctive relief to stop the state from providing benefits under SB 1004, compensatory damages, pre and post-judgment interest and attorneys’ fees and costs. The court has conditionally certified the class. The State has filed a motion to dismiss for failure to exhaust administrative remedies and objection to proposed form of notice to class members. A hearing is set for both motions on November 15, 2002. The potential outcome is uncertain at this time. If this case were to have an unfavorable outcome, the State could incur losses ranging from $30 million to $330 million. The State has a variety of claims pending against it that arose during the normal course of its activities. Management believes, based on advice of legal counsel, that losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the State. All losses for any unsettled litigation or contingencies involving workers compensation, medical malpractice, construction and design, highway operations, employment practices, criminal justice, fidelity and surety, environmental property damage, general liability, environmental liability, building and contracts, auto liability, or auto physical damage are determined on an actuarial basis and included in the Accrued Insurance Losses of the Internal Service Funds. C. ACCUMULATED SICK LEAVE State employees are eligible to receive payment for an accumulated sick leave balance of 500 hours or more with a maximum of 1500 hours upon retirement directly from State service. The benefit value is calculated by taking the State employee’s hourly rate of pay at the retirement date, multiplied by the number of sick hours at the retirement date times the eligibility percentage. The eligibility percentage varies based upon the number of accumulated sick hours from 25 percent for 500 hours to a maximum of 50 percent for 1500 hours. The maximum benefit value is $30,000. The benefit is paid out in annual installments over three years. The Retiree Accumulated Sick Leave Fund is accounted for on the financial statements as an Internal Service Fund and accounts for the retiree accumulated sick leave. Unused accumulated sick leave of employees of the State, excluding Universities, at June 30, 2002, totaled $292.750 million. D. UNCLAIMED PROPERTY The State of Arizona’s Uniform Unclaimed Property Act requires deposit of certain unclaimed assets into a managed Agency Fund. ARS §44-313 requires a separate trust fund of not less than $100 thousand to be retained for prompt payment of claims. The excess amount, above that which is required to be retained, is required to be deposited to the General Fund where it is included as other revenue. Under a statute that took effect July 1, 1990, up to $1.0 million in unclaimed utility deposits is deposited in the Utility Assistance Fund to help low income and elderly people make utility deposits and repairs. Fifty-five and twenty percent of the remaining net cash collected, after refunds, is transferred to the Department of Commerce Housing Fund to be used for low-cost housing and the State Treasurer for distribution as provided for in ARS §5-113, respectively. The balance is to be deposited in the General Fund. For fiscal year 2002, $868 thousand was deposited in the Utility Assistance Fund, $19.762 million was deposited in the Housing Fund, $7.186 million was deposited with the State Treasurer and $7.656 million was deposited in the General Fund. A total of approximately $222.794 million has been remitted since inception of the fund. In addition, the State is also holding stock valued at $20.082 million. The remittances to the General Fund and the holdings by the - 101 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 12. COMMITMENTS, CONTINGENCIES AND COMPLIANCE (CONCLUDED) State represent contingencies, as claims for refunds can be made by the owners of the property. The Governmental Accounting Standards Board requires that a liability be reported to the extent that it is probable that escheat property will be reclaimed and paid to claimants. This liability is also reported as a reduction of revenue. This liability is reported in the General Fund because it is the fund to which the property ultimately escheats in Arizona. At June 30, 2002, this amount, reported as Due to Others in the General Fund, is $89.136 million. E. CONSTRUCTION COMMITMENTS The Arizona Department of Transportation had outstanding commitments under construction contracts of approximately $686.200 million at June 30, 2002. F. ARIZONA STATE LOTTERY Annuities are purchased for all prizes over $400 thousand for which winners will receive the jackpot in annual installments for the Pick on-line game. These annuities are purchased from qualifying insurance companies which have the highest ratings from among A.M. Best Company, Standard & Poor’s, Moody, Duff & Phelps or Weiss. The Lottery remains contingently liable on all annuities. Aggregate future payments to prize winners on existing annuities totaled approximately $352.56 million at June30, 2002. Approximately $251.27 million of the total aggregate future payments relate to annuities purchased from five separate insurance companies, of which approximately $105.09 million relates to a single insurance company. In 1994, an insurance company from which the Lottery purchased annuities during the period 1983 through 1989 was placed under State supervision. At June 30, 2002, remaining aggregate minimum future payments on such purchased annuities approximated $13.744 million. In 1997, an insurance company from which the Lottery purchased annuities in 1986 was placed under State supervision. At June 30, 2002, remaining aggregate minimum future payments on such purchased annuities approximated $2.854 million. During 1999, an insurance company from which the Lottery purchased annuities in 1984 was placed under State supervision but as of June 30, 2000 was removed from State supervision. At June 30, 2002 remaining aggregate minimum future payments on such purchased annuities approximated $569 thousand. As of September 30, 2002, all three insurance companies were current in their required annuity payments. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the operations or financial position of the Lottery. NOTE 13. TOBACCO SETTLEMENT The State is one of many states participating in the settlement of litigation with the tobacco industry over the reimbursement of healthcare costs. The settlement money is intended to compensate the State for costs it has incurred in providing health and other services to its citizens that were necessitated by the use of tobacco products. The State expects to receive settlement payments through 2025. The State received $111.955 million in fiscal year 2002. Future settlement payments are subject to several adjustments, but the amounts are not presently determinable. These adjustments include a “volume adjustment,” which could reflect any decreasing cigarette production under a formula that also takes into account increased operating income from sales. Other factors that might affect the amounts of future payments include ongoing and future litigation against the tobacco industry and the future financial health of the tobacco manufacturers. Because the net realizable value of the future settlement payments is not measurable, the State did not record a receivable for the future payments at June 30, 2002. NOTE 14. CONDUIT DEBT In December 2001, the Greater Arizona Development Authority (GADA) issued $3.1 million Infrastructure Revenue Bonds, Series 2001B for a public infrastructure project in the City of Flagstaff. GADA’s bond structure provides lower borrowing costs for Arizona’s communities by diversifying the risk to investors and by sharing financing costs among several borrowers. The GADA Fund is leveraged when GADA issues its bonds, which maximizes loan capacity for communities. An intercept - 102 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 14. CONDUIT DEBT (CONCLUDED) mechanism for intercepting state-shared revenues for loans to political subdivisions enhances the security of the GADA bonds even further. The State appropriated $20 million to GADA for the express purpose of securing bonds issued by the GADA. The Series 2001B bonds were issued by GADA to make loans to the participant listed above and constitute special and limited obligations of GADA. The principal of and interest on the bonds are payable solely from the funds which are held in Trust by the Trustee (the “Trust Estate”). The Trust Estate includes debt service payments required to be made by the participants in the Series 2001B bond issue. The principal of and interest premium, if any, on the Series 2001B bonds shall not constitute or give rise to a pecuniary liability on the par of the directors and officers of GADA. The Series 2001B bonds do not constitute a legal debt of the State of Arizona and are not enforceable against the State of Arizona. At June 30, 2002 the outstanding face value of the Series 2001B bonds was $3.1 million and the total outstanding face value of all bonds issued by the GADA was $36.3 million. NOTE 15. SUBSEQUENT EVENTS On December 1, 2000, the State of Arizona entered into a lease-to-own agreement with Capitol Mall, L.L.C. for the purpose of construction, occupancy and ownership of two office buildings and related parking facilities located on the capital mall. The State began occupying the buildings on July 1, 2002. The State began making lease payments on October 1, 2002. The scheduled lease payments for fiscal year 2003 will total $3.805 million. In addition, the State will pay to Capital Mall, L.L.C., on a monthly basis, all estimated operating costs as additional rent. The estimated operating costs for the 2003 fiscal period is $1.513 million. The lease is not a general obligation or indebtedness of the State. The State shall have the right to cancel and terminate the lease only at the end of its fiscal period in the event that funds are not appropriated by the Arizona State Legislature or the Department of Administration fails to allocate monies for any subsequent fiscal period with respect to this lease. The State shall have the right, during the lease term, to purchase the Capital Mall, L.L.C.’s right, title, and interest in this project. On July 1, 2002, the State issued the Series 2002B Certificates of Participation to (i) refund all outstanding Certificates of Participation, Series 1992B, dated as of June 1, 1992, originally issued in the amount of $129,640 million and currently outstanding in the amount of $88,645 million, and (ii) to pay the costs of issuing the 2002B Certificates. Northern Arizona University issued $31.7 million of System Revenue Bonds in August 2002 for various capital projects and renovations on the main campus. These bonds are secured by a first lien on certain gross revenues and are on parity with the Series 1992A, 1997 and 2002 system revenue and system revenue refunding bonds. On August 15, 2002, the School Facilities Board issued $278.6 million in State School Improvement Revenue Bonds (Series 2002) to (i) pay the costs of correcting existing deficiencies in school facilities throughout the State and (ii) to pay certain Bond Related Expenses. The Series 2002 Bonds are due July 1, 2003 through 2020. Net proceeds totaled $293.6 million (after receipt of $15.5 million in original issue premium and payment of $570 thousand in underwriting fees and cost of issuance). On August 22, 2002, the Department of Transportation issued $80.5 million in Excise Tax Revenue Bonds (2002 Series) to (i) finance the costs of design, right-of-way purchase, or construction of certain controlled-access highways within Maricopa County, Arizona, (ii) refund in advance of maturity portions of the Department’s outstanding Senior Bonds in the aggregate principal amount of $4.550 million and (iii) pay costs of issuing the Bonds. The 2002 Series Bonds are due July 1, 2005 and December 31, 2005. Net proceeds totaled $84.784 million (after receipt of $4.781 million of reoffering premium and payment of $472 thousand in underwriting fees and cost of issuance). On November 13, 2002, the Department of Transportation issued $156.475 million in Arizona Transportation Board Highway Revenue Bonds, Series 2002B to (i) finance portions of the Board’s Five Year Transportation Facilities Construction Program, (ii) advance refund portions of the Board’s outstanding Senior Bonds in the aggregate principal amount of $20.405 million and (iii) pay costs of issuing the Series 2002B Bonds. The Series 2002B Bonds are due July 1, 2007 through July 1, 2022. Net proceeds totaled $165 million (after receipt of $9.462 million reoffering premium and payment of $936 thousand in underwriting fees and cost of issuance). - 103 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 NOTE 15. SUBSEQUENT EVENTS (CONCLUDED) In December 2002, the State Treasurer announced that the Local Government Investment Pool (LGIP) currently holds $130.986 million of asset-backed securities issued by NPF-12 trust that are serviced by National Century Financial Enterprises (NCFE). Recently, NCFE has come under investigation by the Federal Bureau of Investigation, the Securities and Exchange Commission and various state authorities for possible fraud and violations of federal and state laws. NCFE has since declared bankruptcy and the trustee for the bonds has informed the State Treasurer that the interest payment due December 1, 2002 was not received. It is likely that the LGIP will incur a loss on the total securities held of $130.986 million. Of the resulting loss to the LGIP, the State would be allocated $14.338 million of its proportional share as a pool participant. The State is pursuing legal action to the fullest extent possible to protect the interests of the LGIP participants. On January 1, 2003, the School Facilities Board issued $372.730 million in State School Certificates of Participation to (i) to finance the costs of acquiring leasehold interests in the School Sites and constructing and equipping thereon certain school facilities, which will be subleased to various school districts within the State of Arizona, and (ii) to pay the costs of issuing the 2003A Certificates. The 2003A Certificates are due September 1, 2004 through 2017. Net proceeds will total $400 million (after receipt of $29.480 million in original issue premium and payment of $2.210 million in underwriting fees and cost of issuance). In Somerton Elementary School District No. 66 V. State of Arizona, the issues raised in this case are identical to those raised in the Roosevelt Elementary School District case and it was assigned to the same trial court judge. Therefore, on October 17, 2002, the trial court entered an order concluding that the current level of funding provided by the State for the Building Renewal Fund for fiscal year 2002-03 was unconstitutional, and also requiring the State to “restore the $90 million to the Building Renewal Fund for 2002-03 school year by June 20, 2003.” On November 1, 2002, the State filed a Motion for Reconsideration, contending that it was a violation of the separation of powers doctrine for the court to require the State to appropriate monies by a certain date. That Motion has not yet been fully briefed by the parties. The potential outcome is uncertain at this time. If the case were to have an unfavorable outcome, the State may be required to provide approximately $90 million in additional funding. - 104 - SUPREME COURT REQUIRED SUPPLEMENTARY INFORMATION STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) GENERAL FUND General Accounting Office Classification Salary Adjustments General Relief Salary Adjustments Woolsey Flood District Military Airport Preservation Committee Military Airport Preservation Committee Boxing Commission Administrative Adjustments Operating Lump Sum Appropriation Department of Administration Administrative Adjustments Arizona Financial Information System ASDB Phoenix Transportation Building ASPC Douglas Wastewater Improvements ASPC Perryville Security Improvements Building Renewal FY00 - 01 Building Renewal FY96 - 97 Building Renewal FY97 - 98 Building Renewal FY98 - 99 Building Renewal FY99 - 00 Capitol Land Exchange Capitol Mall Maintenance Compound FY98 - 99 Consumer Loss Recovery Program Operating Costs DOC Fire and Life Safety FY95 - 96 DOC Reappropriation Prison Lock Replace FY97 - 98 DYTR 400 Bed High Security DYTR 48 New Beds Black Canyon DYTR Asbestos Abatement DYTR Renovation and Furnishings Residential Cottages ENSCO High Security Juvenile Facility FY96 - 97 High Security Juvenile Facility FY97 - 98 Operating Lump Sum Appropriation Performance Based Incentives PLTO 1 Capital Improvements Sexually Violent Persons Facility State Electronic Commerce General Fund Appropriation State Hospital Study and Design FY95 - 96 State Lab Design and Land Acquisition Administrative Adjustment Administrative Adjustment Administrative Adjustment Building Renewal FY00 - 01 Building Renewal FY01 - 02 Building Renewal FY97 - 98 Building Renewal FY98 - 99 Executive Tower Renovations Land Acquisition and Planning FY86 - 87 Operating Lump Sum Appropriation FY01 - 02 ORIGINAL (Appropriation) $ The Notes to Required Supplementary Information are an integral part of this schedule. - 106 - 4,497,400 0 4,076,700 0 FINAL (Appropriation) $ 0 184,305 105,200 46,138 ACTUAL AMOUNTS $ 0 184,305 0 46,138 107,500 107,500 0 0 82,100 830 78,024 830 76,696 0 1,906,100 427,700 40,440 24,483 23,325 2,503 3,894 271,651 178,546 58 10,411 781,197 84,000 42,617 7,855 2,374 46,945 5,350 4,586,700 11,084 29,528 20,464,200 200,000 889,700 167,942 0 113,013 6,991 0 0 0 1,219,540 3,304,000 1,352 148,750 3,387 12,979 2,873,800 980,398 1,906,100 427,700 21,259 24,483 22,125 2,503 7,831 271,599 186,913 0 10,411 781,197 1,654 42,617 0 0 0 0 4,586,700 0 10,665 19,477,328 200,000 0 167,942 0 113,013 0 43,497 41,507 8,304 1,254,748 2,328,801 1,352 124,750 3,387 12,979 2,890,300 980,398 1,551,814 390,055 21,259 17,800 20,035 2,503 6,717 268,669 172,918 0 2,242 37,774 1,654 0 0 0 0 0 4,585,700 0 5,297 18,434,431 5 0 56,570 0 18,640 0 43,497 41,507 8,304 1,005,354 1,165,150 1,352 117,138 0 0 2,674,377 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 213,700 60,000 60,000 320 553 7,609 52,936 719,714 6,100,000 0 1,357,900 213,700 60,000 60,000 320 553 7,609 52,936 719,714 6,100,000 15,542 1,363,600 157,913 0 0 320 538 7,609 4,526 557,023 5,712,372 15,542 1,297,090 0 0 1,305,400 14,918 451,600 1,218,549 14,918 451,600 1,190,123 0 238,400 58,388 238,900 58,388 182,609 0 397,400 35 26,712,100 301 158,300 505,000 119,505 58,200 35 25,755,224 301 158,400 0 119,505 58,200 0 25,681,020 0 158,219 0 0 23,300 65,000 12,578,200 355,500 40,303 23,300 65,000 11,795,427 140,000 40,303 10,495 65,000 11,734,164 140,000 1,500,000 13,604,500 281,238,700 39,869,700 1,500,000 12,971,200 268,213,087 37,991,000 1,500,000 12,971,200 268,213,087 37,991,000 651,651 13,140,900 17,718 365,533 651,651 12,521,800 17,718 365,533 251,580 11,969,955 11,704 2,756 0 2,877,500 2,019 2,736,966 2,019 2,695,439 90,198 134,400 90,198 133,510 0 125,545 0 95,000 1,954 90,000 1,954 90,000 PLTO 1 Backfill Space Renovations Relocation FY00 - 01 Relocation FY01 - 02 Relocation FY96 - 97 Relocation FY97 - 98 Relocation FY98 - 99 Relocation FY99 - 00 Sexually Violent Persons Facility Utilities Administrative Adjustments Operating Lump Sum Appropriation Radiation Regulatory Administrative Adjustments Off-Site Nuclear Emergency Response Plan Operating Lump Sum Appropriation Office of Equal Opportunity Administrative Adjustments Governor's Office of Equal Opportunity Attorney General Administrative Adjustments Alternative Fuel Program Capitol Center Expansion Operating Lump Sum Appropriation Property Tax Supplemental State Grand Jury Victims Rights Implementation Department of Agriculture Administrative Adjustments Agricultural Employment Relations Board Animal Damage Control Operating Lump Sum Appropriation FY01 - 02 Red Imported Fire Ant Arizona State University Capital Outlay - Digital Television Conversion East Campus - Operating Lump Sum Appropriation Main Campus - Operating Lump Sum Appropriation West Campus - Operating Lump Sum Appropriation Auditor General Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY98 - 99 Operating Lump Sum Appropriation FY99 - 00 Banking Department Administrative Adjustments Operating Lump Sum Appropriation Board of Nursing Fingerprinting Nursing Assistants Operating Lump Sum Appropriation Board of Regents Administrative Adjustments Arizona Teacher Incentive Plan for the Deaf and Blind The Notes to Required Supplementary Information are an integral part of this schedule. - 107 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 2,224,000 2,260,200 99,000 3,282,400 2,197,639 2,260,200 99,000 2,934,700 2,197,638 2,260,200 99,000 2,934,700 0 5,765,800 192,000 177,616 36,500 47,571 5,420,089 192,000 177,616 36,600 47,571 5,269,574 0 58,430 36,600 225,700 743,400 336,800 638,800 8,581,300 499,400 439,300 2,850,900 682,900 605,900 741,900 2,113,500 7,655,900 1,270,300 96,000 781,500 6,321,400 3,259,700 5,821,700 49,973,900 4,142,000 4,434,500 20,439,600 6,276,700 5,177,400 5,746,600 224,000 743,400 336,800 638,800 8,581,300 499,400 439,300 2,850,900 682,900 605,900 741,900 2,113,500 7,655,900 1,270,300 96,000 743,705 6,013,200 3,101,000 5,537,900 47,538,000 3,940,200 4,218,400 19,443,300 5,970,800 4,925,100 5,466,500 224,000 743,400 336,800 638,800 8,581,300 499,400 439,300 2,850,900 682,900 605,900 741,900 2,113,500 7,655,900 1,270,300 96,000 711,731 5,976,700 3,082,300 5,504,400 47,249,000 3,916,200 4,192,800 19,325,100 5,934,400 4,895,200 5,433,200 0 7,291,800 12,048 7,234,800 12,048 7,234,716 0 687,900 2,073 651,116 2,073 561,689 0 3,462,400 5,545 3,437,400 5,545 3,437,362 32,819,400 0 56,627 2,103 24,517,749 3,236,900 56,627 2,103 23,954,518 3,236,900 27,029 0 Operating Lump Sum Appropriation Student Financial Aid Trust Fund Western Interstate Commission Office WICHE Student Subsidies Corporation Commission Administrative Adjustments Operating Lump Sum Appropriation Railroad Warning Systems FY00 - 01 Railroad Warning Systems FY99 - 00 Operating Lump Sum Appropriation Community Colleges Board Arizona Transfer Articulation Support System Capital Outlay - Cochise Capital Outlay - Coconino Capital Outlay - Graham Capital Outlay - Maricopa Capital Outlay - Mohave Capital Outlay - Navajo Capital Outlay - Pima Capital Outlay - Pinal Capital Outlay - Yavapai Capital Outlay - Yuma/LaPaz Equalization Aid - Cochise Equalization Aid - Graham Equalization Aid - Navajo Equalization Aid - Pinal Operating Lump Sum Appropriation Operating State Aid - Cochise Operating State Aid - Coconino Operating State Aid - Graham Operating State Aid - Maricopa Operating State Aid - Mohave Operating State Aid - Navajo Operating State Aid - Pima Operating State Aid - Pinal Operating State Aid - Yavapai Operating State Aid - Yuma/LaPaz Court of Appeals Division I Division I - Administrative Adjustments Division I - Operating Lump Sum Appropriation Charter Schools Board Administrative Adjustments Operating Lump Sum Appropriation Court of Appeals Division II Division II - Administrative Adjustments Division II - Operating Lump Sum Appropriation Department of Corrections Administration Administrative Adjustments ASPC-D - Mohave Door and Lock Replace FY98 - 99 ASPC-D - Mohave Improve Control Room FY97 - 98 The Notes to Required Supplementary Information are an integral part of this schedule. - 108 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 5,725 4,210 8,961,300 5,725 0 8,777,171 5,046 0 8,614,231 40,168,800 73,848,900 38,875,885 71,298,000 37,723,829 69,261,535 5,974,800 7,390,500 7,347,916 131,002,500 20,085,000 261,292,800 0 104,236,316 21,405,850 273,723,329 5,646 101,446,323 20,184,679 272,560,291 5,646 1,879,700 2,080,300 2,035,747 345,600 572,900 1,855,100 31,729,000 0 4,948 11,496,300 983,500 1,155,400 1,286,600 0 2,257,900 152,392 0 73,268 0 50,000 115,400 359,500 0 49,995 65,000 65,000 45,000 10,000 30,000 65,000 30,000 5,385,600 314 4,260,800 266,400 24,502,200 250,000 51,410,700 436,500 573,000 1,855,100 30,389,000 3,897,860 4,948 10,991,300 983,500 1,155,400 1,286,600 200,000 2,007,900 152,392 300,000 73,268 285,700 50,000 0 359,500 714,300 49,995 65,000 65,000 45,000 10,000 30,000 65,000 30,000 5,115,900 0 5,586,000 199,400 25,252,100 85,000 51,410,700 436,500 572,900 1,855,100 29,890,400 3,897,860 0 10,137,070 871,468 1,060,810 1,234,808 175,496 1,930,234 78,601 290,581 73,268 26,510 27,903 0 329,963 0 (5) 0 0 0 0 0 63,039 0 5,107,800 0 5,423,989 182,905 25,252,100 85,000 49,388,806 ASPC-D - Papago Housing Renovation FY98 - 99 ASPC-F - North U I Quonset Hut Improvement FY98 - 99 Community Corrections Prison Operations and Services Education, Treatment, Work Program Prison Operations and Services - Healthcare Prison Operations and Services Inspections and Investigations Prison Operations and Services Prison Management and Support Prison Operations and Services - Private Prisons Prison Operations and Services - Security Administrative Adjustments Inmate Education, Treatment and Work Programs Operating Lump Sum Appropriation Department of Economic Security ADM Attorney General Legal Services ADM Finger Imaging ADM Lease Purchase Equipment ADM Operating Lump Sum Appropriation Administrative Adjustments Coolidge Environmental Impact Study DACS Adult Services DACS Community and Emergency Services DACS Coordinated Homeless Program DACS Coordinated Hunger Program DACS Domestic Violence Legal Assistance DACS Domestic Violence Prevention DACS Domestic Violence Shelter Program FY00 - 01 DACS Domestic Violence Shelter Program FY01 - 02 DACS Domestic Violence Shelter Program FY99 - 00 DACS Hopi Senior Center DACS Hopi Senior Center Kykotsmovi DACS Information and Referral DACS Long Term Care Ombudsman DACS Navajo Senior Center FY01 - 02 DACS Navajo Senior Center Services DACS Navajo Senior Centers - Fort Defiance DACS Navajo Senior Centers - Birdsprings DACS Navajo Senior Centers - Chilchenbento DACS Navajo Senior Centers - Chinle DACS Navajo Senior Centers - Dilcon DACS Navajo Senior Centers - St Michael's DACS Navajo Senior Centers - White Cone DACS Operating Lump Sum Appropriation DACS/CSAA Food Bank DBME General Assistance FY01 - 02 DBME Institutional Support Payments DBME Operating Lump Sum Appropriation DBME Outreach and Naturalization DBME TANF Cash Benefits The Notes to Required Supplementary Information are an integral part of this schedule. - 109 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 4,212,800 32,200 59,300 444,700 72,400 4,285,100 21,734,800 4,246,400 146,500 31,012,200 2,779,900 597,800 240,000 224,500 334,312 1,802,800 66,568 686,300 3,035,600 0 27,588,400 124,000 5,548,200 3,055,600 28,531,500 294,900 4,897,100 20,481,900 7,093,600 902,300 93,900 2,885,100 4,758,100 1,000,000 1,000,000 22,828 1,000,000 1,000,000 1,000,000 1,000,000 3,285,100 3,032,500 5,742,800 106,086,600 3,388,100 16,770,100 5,250,800 3,459,000 20 211 1,770 4,212,800 22,200 56,900 444,700 36,000 4,210,500 21,579,200 4,037,400 0 33,655,100 2,779,900 517,800 115,200 224,500 334,312 173,803 66,568 300,300 3,035,600 0 32,185,100 124,000 5,023,700 3,888,200 24,297,300 294,900 4,910,700 20,481,900 4,993,600 902,300 19,000 3,595,500 4,578,900 1,000,000 0 22,828 1,000,000 1,000,000 0 1,000,000 3,285,100 2,970,800 5,662,000 106,076,200 3,379,000 16,758,200 5,189,600 4,614,700 20 211 1,770 DBME Tribal Pass-Through Funding DBME Tuberculosis Control DCSE Attorney General Legal Services DCSE Central Payment Processing DCSE Genetic Testing DCSE Operating Lump Sum Appropriation DCYF Adoption Services DCYF Attorney General Legal Services DCYF Child Severance Project DCYF Children Service FY01 - 02 DCYF Comprehensive Medical and Dental Program DCYF CPS Appeals DCYF CPS Incentive Pay Program DCYF CPS Substance Abuse Treatment DCYF Family Builders Pilot FY00 - 01 DCYF Family Builders Pilot FY01 - 02 DCYF Healthy Families Pilot DCYF High Risk Infant Service DCYF Intensive Family Service DCYF IV-E Cost Allocation Contingency DCYF Operating Lump Sum Appropriation DCYF Permanent Guardianship Subsidy DDD Arizona Training Program at Coolidge DDD Case Management DDD Home and Community Based Services DDD Institutional Services DDD Operating Lump Sum Appropriation DERS Daycare Subsidy DERS Employment Support Services DERS Independent Living Rehabilitation Services DERS Job Search Stipends DERS JOBS DERS Operating Lump Sum Appropriation DERS Project Intervention FY00 - 01 DERS Project Intervention FY01 - 02 DERS Project Intervention FY99 - 00 DERS Summer Youth Employment and Training DERS Summer Youth Program FY00 - 01 DERS Summer Youth Program FY01 - 02 DERS Summer Youth Program FY99 - 00 DERS Vocational Rehabilitation Services LTC Arizona Training Program at Coolidge LTC Case Management LTC Home and Community Based Services LTC Institutional Services LTC Medical Services LTC Operating Lump Sum Appropriation State Funded LTC Services Statewide Building Renewal FY92 - 93 Statewide Building Renewal FY95 - 96 Statewide Building Renewal FY96 - 97 The Notes to Required Supplementary Information are an integral part of this schedule. - 110 - ACTUAL AMOUNTS 4,091,574 20,862 56,900 444,700 36,000 4,207,800 20,893,052 4,037,400 0 32,362,160 2,329,900 517,800 0 224,500 303,470 172,303 66,568 257,774 2,729,110 0 30,910,900 124,000 4,976,545 3,888,200 22,686,208 103,934 4,910,700 20,481,900 4,122,981 853,814 19,000 3,595,500 4,578,900 1,000,000 0 0 1,000,000 1,000,000 0 1,000,000 3,285,100 2,970,800 5,662,000 106,076,200 3,379,000 16,758,200 5,189,600 4,461,400 0 0 0 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 0 132,300 14,300 287,300 1,630,023 645,100 5,807,900 1,036,000 200,000 168,000 28,871 0 0 5,996,000 1,583,200 500,000 4,865,900 859,374 1,000,000 71,892 74,032 236,800 173,174 447,902 1,292,800 1,267,200 17,815 200,000 0 9,917,400 44,775,200 1,000,000 0 47,000 10,174,300 6,200,000 4,750,000 400,000 400,000 16,406,100 210,803 859,300 9,945,613 3,333,300 32,066,500 14,492,400 500,000 356,000 166,664 3,159,554 70,381,400 3,116 132,500 14,300 287,400 1,630,023 645,100 7,005,500 1,536,300 200,000 168,200 28,871 20,241,154 359,925 5,761,035 1,649,475 500,000 5,284,590 859,374 1,000,000 71,892 74,032 237,300 173,174 447,902 1,292,800 808,900 17,815 50,000 398,000 9,342,300 81,452,400 920,400 1,300,000 747,000 10,174,300 6,197,000 0 400,000 400,000 15,738,500 210,803 1,159,300 9,945,613 333,300 32,066,500 14,492,600 500,000 356,000 166,664 3,159,554 70,331,400 Statewide Building Renewal FY98 - 99 ADM Attorney General Legal Services ADM Attorney General Legal Services ADM Finger Imaging ADM High Performance Bonus ADM Lease Purchase Equipment ADM Operating Lump Sum Appropriation ADM Operating Lump Sum Appropriation ADM Perinatal Substance Abuse Treatment ADM Public Assistance Collections ADM Teen Pregnancy Prevention Administrative Adjustments Administrative Adjustments DACS Community and Emergency Services DACS Coordinated Homeless Program DACS Coordinated Hunger Program DACS Domestic Violence Prevention DACS Emergency Domestic Violence Shelter Services DACS Marriage and Communication Skills DACS Marriage Handbook DACS Marriage Skills Training DACS Operating Lump Sum Appropriation DACS Short Term Crisis Services FY00 - 01 DACS Short Term Crisis Services FY99 - 00 DBME Arizona Works Incentive DBME FLSA Supplemental DBME Food Stamp Outreach and Education FY00 - 01 DBME Food Stamp Outreach and Education FY01 - 02 DBME Hopi TANF Start-Up DBME Operating Lump Sum Appropriation DBME TANF Cash Benefits DBME Tribal Welfare Reform DCYF Adoption Services DCYF Attorney General Legal Services DCYF Children Services DCYF Family Builders DCYF Healthy Families DCYF Homeless Youth Intervention FY00 - 01 DCYF Homeless Youth Intervention FY01 - 02 DCYF Operating Lump Sum Appropriation DCYF Permanent Guardianship Subsidy FY00 - 01 DCYF Permanent Guardianship Subsidy FY01 - 02 DCYF Substance Abuse Treatment FY00 - 01 DCYF Substance Abuse Treatment FY01 - 02 DCYF TANF to SSBG DDD State Funded Long Term Care Services DERS Accreditation Rates FY00 - 01 DERS Accreditation Rates FY99 - 00 DERS Character Training DERS Child Care Sliding Fee Scales FY98 - 99 DERS Day Care Subsidy The Notes to Required Supplementary Information are an integral part of this schedule. - 111 - ACTUAL AMOUNTS 3,116 97,893 7,308 72,808 504,365 311,579 5,506,600 1,035,969 57,143 142,949 11,874 20,241,154 359,925 4,945,789 1,464,432 488,711 4,492,819 824,163 142,116 30,294 (818) 100,585 125,021 447,900 761,096 752,789 16,872 43,529 0 6,754,771 79,638,729 186,658 0 747,000 9,106,635 6,084,443 0 379,100 327,850 15,738,500 204,061 800,623 4,402,867 0 29,783,343 12,015,463 345,320 356,000 140,138 0 66,441,242 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 922,356 500,000 20,316,600 82,617 23,635 1,637,492 6,038,700 7,159,400 0 9,972 51,508 630 245,160 3,578,000 500,000 356,000 22,599,300 28,383,700 2,044,300 408,134 93,130 1,817,900 46,070,600 3,302,200 719,806 0 11,216,600 19,355,100 287,792,900 11,411,200 54,794,200 18,554,900 0 0 0 0 5,204,200 3,088,600 10,066,300 723,600 31,024,600 922,356 0 15,506,200 82,617 23,635 1,637,492 5,399,700 8,770,400 4,000,000 9,972 51,508 630 245,160 3,578,000 500,000 356,000 25,568,300 24,483,100 0 408,134 93,130 1,821,300 45,770,600 3,302,200 719,806 9,394,000 11,847,500 19,404,200 273,869,900 13,619,300 59,298,100 19,584,700 300,000 24,000 255,700 6,639,029 5,215,700 3,288,600 10,446,300 343,600 30,888,900 190,447 0 15,073,563 46,500 14,523 0 5,335,906 7,984,516 0 (355) 10,302 (282) 28,761 0 345,320 356,000 20,420,705 22,740,989 0 11,685 92,010 0 42,450,152 2,191,849 358,750 9,394,000 0 0 0 0 0 0 0 24,000 255,700 6,639,029 4,640,556 2,296,036 8,163,448 193,281 26,201,107 0 1,200 3,794 67,624,600 97 209 0 0 778,565 1,200 3,794 64,341,786 97 209 9,619 18,000 778,565 0 0 62,949,725 0 0 0 0 DERS Employment Retention and Job Skills FY98 - 99 DERS Enhanced Quality Reimbursement DERS JOBS DERS JOBS Transportation Projects FY98 - 99 DERS JOBS Work Participation FY98 - 99 DERS JTPA Welfare to Work Block Grant DERS Operating Lump Sum Appropriation DERS Operating Lump Sum Appropriation DERS Out of School Programs DERS Parenting Training FY00 - 01 DERS Parenting Training FY99 - 00 DERS Post-Shelter Training FY00 - 01 DERS Post-Shelter Training FY99 - 00 DERS Reed Act Operating Lump Sum DERS TANF Accreditation Rates FY00 - 01 DERS TANF Accreditation Rates FY99 - 00 DERS TANF Day Care Subsidy Care DERS TANF Transitional Child Care DERS Transitional Child Care DERS Vocational Education Grants FY98 - 99 DERS Wheels to Work Program FY98 - 99 DERS Workforce Investment Act Operating Lump Sum DERS Workforce Investment Act Programs DERS Work-Related Transportation DERS Young Father Mentoring FY98 - 99 General Fund Transfer 2nd Special Session Chapter 4 LTC Arizona Training Program at Coolidge LTC Case Management LTC Home and Community Based Services LTC Institutional Services LTC Medical Services LTC Operating Lump Sum Appropriation Workforce Investment Act Grant Operating Lump Sum Building Renewal FY98 - 99 Statewide Building Renewal FY01 - 02 Administrative Adjustments DCSE Attorney General Legal Services DCSE Central Payment Processing DCSE County Participation DCSE Genetic Testing DCSE Operating Lump Sum Appropriation Department of Juvenile Corrections Administrative Adjustments BCS Electrical Repair Building Renewal FY94 - 95 Operating Lump Sum Appropriation FY01 - 02 Renovation Construction FY94 - 95 Renovation Construction FY95 - 96 Administrative Adjustments Adobe Mountain Kitchen Building Renewal The Notes to Required Supplementary Information are an integral part of this schedule. - 112 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 39 3,706,000 39 3,712,500 0 2,708,594 0 7,138,800 2,557 3,585,713 2,557 3,582,025 50 5,479,000 219,581,000 0 4,593,600 550,000 202,000 35,200 2,288,120,700 85,500 859,700 227,000 206,900 151,200 865,300 0 0 500,000 1,000,000 1,000,500 1,373 1,297,700 250,000 281,583 6,848,617 120,000 1,000,000 100,000 5,856,000 492,400 743,283 7,917,300 34,178 11,848 581,600 322,200 22,849,200 19,495,400 11,133,900 1,017,500 600,000 50 6,579,000 231,723,700 1,472,370 4,542,575 550,000 193,920 107,500 2,289,692,700 82,080 859,700 217,920 198,624 145,152 843,870 158,080 3,080,000 500,000 0 1,000,500 1,373 1,297,700 250,000 270,483 6,507,742 120,000 1,000,000 10,000 29,161,900 472,704 743,283 6,703,215 34,178 11,848 581,600 287,200 25,178,700 19,476,805 11,093,810 1,019,700 600,000 0 5,461,269 230,896,372 1,472,370 4,366,113 510,165 150,768 99,459 2,285,949,250 79,422 269,862 217,920 181,331 126,286 768,666 27,233 0 498,241 0 982,241 0 1,291,642 0 266,164 6,246,692 120,000 992,526 10,000 26,416,681 288,524 737,441 6,659,167 0 11,848 581,600 207,582 23,965,700 19,386,727 11,093,810 1,001,383 528,801 0 0 0 18,607 500,000 750,000 18,607 32,115 31,350 Building Renewal FY91 - 92 Operating Lump Sum Appropriation Department of Transportation Administrative Adjustments Operating Lump Sum Appropriation Department of Education Accountability Measures Achievement Testing Additional State Aid to Schools Administrative Adjustments Adult Education Assistance AIMS Intervention and Dropout Prevention Program Arizona Teacher Evaluation Program Assistance to School Districts for Children of State Employees Basic State Aid Entitlement Career Ladder Administration Certificates of Educational Convenience Certification Investigations Charter Schools - State Board Charter Schools Administration Chemical Abuse English Learner English Learner Instruction Extended School Year Extraordinary Special Education Needs Family Literacy Program FY01 - 02 Family Literacy Program FY98 - 99 Gifted Support Joint Technological Education Districts Operating Lump Sum Appropriation Operating Lump Sum Appropriation Optional Performance Incentive Programs Research Based Systematic Phonics Instruction Residential Placement School Accountability Fund - Proposition 301 Account School Report Cards School Safety Program FY00 - 01 School Safety Program FY01 - 02 School Safety Program FY98 - 99 School Safety Program FY99 - 00 Small Pass-Through Programs Special Education Audit Special Education Fund State Block Grant for Early Childhood Education State Block Grant for Vocational Education Teacher Certification Vocational Education Extended Year Department of Commerce Administrative Adjustments Agriculture Preservation District APNE The Notes to Required Supplementary Information are an integral part of this schedule. - 113 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 152,900 36 640,400 38,042 19,874 4,169,100 0 0 0 0 0 500,000 500,000 115,700 152,818 36 589,524 38,042 19,874 3,725,363 0 3,909 20,895 10,000,000 4,700,000 500,000 243,385 115,800 134,585 0 559,866 265 0 3,561,237 0 3,909 20,895 10,000,000 4,700,000 500,000 243,385 103,047 0 644,300 1,522 611,325 1,522 591,738 0 2,024,100 783,700 25,000 15,889 1,443,200 1,877,300 101,958 250,000 100,000 9,122,200 1,551,900 1,994 126,800 16,556 3,225,313 783,700 25,000 15,889 1,443,200 1,823,160 101,958 250,000 100,000 6,924,840 1,551,900 1,994 126,800 16,556 2,926,892 775,959 0 0 1,443,200 1,823,160 0 0 0 6,924,840 1,551,900 1,994 126,800 0 924,700 4,125 881,340 4,125 878,084 232,700 0 232,700 0 0 0 10,200 37,631 74,888 1,602,200 1,962,900 504 7,783 287,840 6,351,400 461 1,311 1 10,200 37,631 74,888 1,520,560 1,863,700 504 7,783 287,840 6,056,829 461 1,311 1 Apprenticeship Services Office High Technology Clusters Motion Picture Development NAFTA Agreement Projects NAFTA Projects - Initial Phase Operating Lump Sum Appropriation Special Needs Housing Administrative Adjustments Administrative Adjustments General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 Housing Development Fund FY97 - 98 Housing Development Fund FY98 - 99 Operating Lump Sum Appropriation Board of Tax Equalization Administrative Adjustments Operating Lump Sum Appropriation Department of Environmental Quality Administrative Adjustments All Other Operating Expenditures Aquifer Protection Permit Program Banking/Trading Study Catalytic Converter Replacement Program Clean Water Revolving Fund Employee Related Expenditures Environmental Health Reserve FY94 - 95 Environmental Health Reserve FY95 - 96 Environmental Health Reserve FY96 - 97 Personal Services Safe Drinking Water Revolving Fund Underground Storage Tank Policy Commission Used Oil Geological Survey Administrative Adjustments Operating Lump Sum Appropriation Government Information Technology No Wrong Door Year 2000 - Agency Projects Governor's Office Arizona - Sonora Study Implementation FY00 - 01 Border Volunteer Corps FY94 - 95 Border Volunteer Corps FY95 - 96 Governor's Office for Excellence in Government Governor's Office of Strategic Planning and Budgeting Governor's Telecommunication Office of Sonora Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY91 - 92 Operating Lump Sum Appropriation FY94 - 95 Operating Lump Sum Appropriation FY96 - 97 The Notes to Required Supplementary Information are an integral part of this schedule. - 114 - ACTUAL AMOUNTS 5,000 2,926 3,343 1,289,490 1,808,203 0 0 (54,830) 5,761,621 461 1,311 0 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 85,559 123,782 254,993 9,220 25,000 85,559 123,782 254,993 9,220 25,000 85,559 123,782 27,368 9,220 14,029 0 681,296 0 0 0 231,844,300 0 0 22,615,200 130,000 942,000 0 1,760,000 30,283,700 950,000 0 6,508,500 114,100 1,879,280 681,296 52,730 1,247,270 70,055,900 229,144,644 5,432,500 128,991 22,669,400 130,200 943,500 37,777,440 1,623,000 29,695,500 200,000 0 6,508,500 109,600 1,879,280 478,275 0 3,677 69,331,100 228,070,261 5,432,500 65,153 22,615,200 130,000 547,975 30,685,890 1,376,895 23,542,406 200,000 0 9,315,500 42,763 561,290 31,879,800 48,318,100 18,553,100 0 0 0 0 0 698,923,600 0 22,532,500 174,800 752,600 0 23,369,800 3,774,100 281,217,900 0 0 15,174,700 110,900 24,138,600 13,405,600 9,515,500 42,763 561,290 30,240,800 49,623,400 18,260,769 8,421,593 1,100,000 1,269,312 52,730 756,470 768,146,300 1,108,100 22,532,500 174,800 752,600 2,822,700 70,096,500 3,911,100 235,287,300 346,400 3,000,000 15,174,700 106,300 24,138,600 13,405,600 9,487,520 0 544,847 28,544,517 44,903,374 15,225,614 8,421,593 0 1,269,312 0 10,609 765,750,987 120,891 19,981,905 88,022 541,525 1,267,092 56,938,010 3,301,007 224,717,117 0 3,000,000 12,076,533 87,156 19,606,340 Operating Lump Sum Appropriation FY97 - 98 Operating Lump Sum Appropriation FY98 - 99 Operating Lump Sum Appropriation FY99 - 00 Protocol Operating Lump Sum Appropriation Arizona Health Care Cost Containment System Administrative Adjustments Apache County Claims for Tribal Members Breast and Cervical Cancer Treatment Breast and Cervical Cancer Treatment Program Budget Neutrality Compliance Deposit Capitation County Net Loss Offset Critical Access Hospitals DES Eligibility DES Title XIX Pass Through DHS Title XIX Pass Through Disproportionate Share Payments DOA Data Center Charges Fee for Service Finger Imaging Freedom to Work Program Expense General Graduate Medical Education Indian Advisory Council Medical Services Stabilization Fund Reimbursement for Decreased FY01 Disproportionate Share Revenue Medicare Premiums Mental Health - Adults Navajo County Claims for Tribal Members Operating Lump Sum Appropriation Operating Lump Sum Appropriation Reinsurance State Emergency Services State Emergency Services Administrative Adjustments Breast and Cervical Cancer Treatment Fed Administration Breast and Cervical Cancer Treatment Fed Program Capitation Critical Access Hospitals DES Eligibility DES Title XIX Pass Through DHS Title XIX Pass Through Dialysis Chemotherapy Treatment Expense Disproportion Share Payments DOA Data Center Charges Fee for Service Freedom to Work Program Expense Federal General Fund Transfer 2nd Special Session Chapter 4 Graduate Medical Education Indian Advisory Council Medicare Premiums The Notes to Required Supplementary Information are an integral part of this schedule. - 115 - ACTUAL AMOUNTS 6,508,467 92,474 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 45,368 174,200 36,644,300 34,670,200 0 209,700 584,650,800 45,368 325,200 38,530,600 37,641,200 11,255,016 209,700 586,310,300 0 238,757 33,128,509 33,218,390 11,255,016 209,700 578,970,922 77,800 0 0 501,930 0 0 0 1,251,100 1,118,600 13,800 6,119 1,193,538 1,120,200 13,800 6,119 1,193,538 936,124 8,803 5,000 0 80,000 2,309,585 2,325,115 5,000 3,296 80,000 2,222,838 2,195,031 0 3,296 80,000 2,222,838 2,195,031 908,342 12,147,600 250 183 33,238 120,465 381,522 908,342 11,408,116 250 183 33,238 120,465 381,522 52,103 10,978,382 250 0 0 183 21,147 8,849 986 0 223,600 70,100 10,646,600 125,000 4,759,600 1,310,900 788,100 1,732,700 8,851,700 1,000,000 19,500,000 4,700 325 77 517 1 83,231 38,816 8,849 986 5,064,748 210,400 65,900 10,646,600 125,000 4,733,200 1,310,900 711,100 1,707,700 10,126,600 1,000,000 19,500,000 4,700 325 77 517 0 18,231 38,816 0 0 5,064,748 205,928 64,498 10,646,600 93,756 4,354,721 1,098,047 576,372 1,526,143 9,230,667 1,000,000 19,500,000 0 0 0 0 0 9,437 0 Mental Health - Adults FY91 - 92 Office of Administrative Hearings Operating Lump Sum Appropriation Reinsurance Administrative Adjustments Board of Nursing Program Lump Sum Appropriation Housing Development Board Special Needs Housing Operating Lump Sum Appropriation Office of Administrative Hearings Administrative Adjustments Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Historical Society ADA Survey FY94 - 95 Administrative Adjustments Historical Society Grants Operating Lump Sum Appropriation Papago Park Museum House of Representatives Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY95 - 96 Operating Lump Sum Appropriation FY96 - 97 Operating Lump Sum Appropriation FY97 - 98 Operating Lump Sum Appropriation FY98 - 99 Operating Lump Sum Appropriation FY99 - 00 Department of Health Services 90/91 Environmental Assessment Phoenix ADA Compliance Administrative Adjustments Adult Cystic Fibrosis Adult Sickle Cell Anemia AHCCCS - Children's Rehabilitative Services AIDS Reporting and Treatment All Other Operating Expenditures All Other Operating Expenditures All Other Operating Expenditures All Other Operating Expenditures All Other Operating Expenditures Alzheimer's Disease Research Arnold v. Sarn ASH - Condensate Receiver ASH - Granada Hall Windows ASH - JCAHO Accreditation Phase II ASH - Juniper/Wickenburg Fire Life Safety Improvements ASH - Juniper/Wickenburg Roofs ASH - Juniper/Wickenburg Windows ASH Information System The Notes to Required Supplementary Information are an integral part of this schedule. - 116 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 6,280,600 30 10,137,700 33,384,400 0 3,693,800 11,655 388 100,000 0 250,000 1,281,100 205,700 578,000 1,605,200 1,012,800 572,000 516,400 5,140,000 2,369 131,314 1,205,000 64,135 3,379,000 101,000 3,149,300 100,000 510,797 8,726,200 9,862,100 390,100 2,900 7,089,800 4,135,800 2,441,600 2,006,700 20,700,200 25,747 86,100 1,848,900 396,300 183,024 4,375,300 57,308,800 34,671,700 52,500 9,049,500 13,635,400 0 250,000 1,082,000 6,321,300 30 9,351,800 37,939,200 0 3,587,000 11,655 388 0 5,609,200 125,000 1,208,500 197,500 578,000 1,521,400 998,700 554,700 489,500 4,639,200 2,369 131,314 5,700 64,135 3,180,600 101,000 3,032,900 100,000 510,797 11,871,600 4,423,644 367,000 2,900 6,424,700 4,026,600 2,308,700 1,904,600 18,190,700 25,747 82,800 0 357,400 183,024 4,200,300 36,164,000 38,563,000 52,500 9,459,600 12,616,800 140,000 0 1,082,000 Assurance and Licensure Building Renewal FY96 - 97 Children's Behavioral Health Services Children's Behavioral Health State Match for Title XIX Children's Physical Activities Program Children's Rehabilitative Services Cholla - Sexual Predator Clean HVAC Ducts - Juniper/Wickenburg Client Satisfaction Incentive Program Community Placement Treatment Computer Hardware Lease County Prenatal Services Grant Court Monitoring Direct Grants Employee Related Expenditures Employee Related Expenditures Employee Related Expenditures Employee Related Expenditures Employee Related Expenditures Environmental Assessment Phoenix Health Start Program FY00 - 01 Health Start Program FY01 - 02 Health Start Program FY99 - 00 High Risk Perinatal Services Kidney Program Laboratory Services Loan Repayment Services Male Restoration to Competency Program Mental Health and Substance Abuse State Match Mental Health Non-Title XIX Nutrition Services FY01 - 02 Obstetrics Malpractice Premium Personal Services Personal Services Personal Services Personal Services Personal Services Provider Loan Repayment Program Psychiatric Review Board RBHA Client Encounter Reports Reimbursement to Counties Self - Care Unit Seriously Emotionally Handicapped Children Seriously Mentally Ill Non-Title XIX Seriously Mentally Ill State Match for Title XIX Sexually Transmitted Disease Control Sexually Violent Persons Substance Abuse Non-Title XIX Suicide Prevention Program Teenage Pregnancy Prevention Task Force Tuberculosis Provider Care and Control The Notes to Required Supplementary Information are an integral part of this schedule. - 117 - ACTUAL AMOUNTS 6,035,192 0 9,304,033 37,939,200 0 3,513,124 0 0 0 5,608,600 125,000 1,208,378 197,500 578,000 1,521,400 998,699 550,797 478,406 4,634,949 0 79,338 0 50,077 2,279,656 92,583 2,936,965 65,861 445,248 11,871,600 4,423,600 299,952 0 6,424,700 3,982,619 2,308,490 1,826,708 18,182,828 15,000 76,317 0 357,400 72,837 3,322,119 36,105,456 38,563,000 43,983 9,054,190 12,614,200 0 0 872,000 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 3,415,100 271,201 0 2,513,300 450,000 48,782 0 3,140 0 0 0 36,539 75,800 2,221 47,373 7,764,400 0 0 0 2,351,800 271,201 175,821 6,300 275,274 48,782 2,818,917 3,140 1,095,600 657,000 4,818,000 36,539 75,800 2,221 47,373 7,773,600 51,457 2,397,700 225,000 2,350,101 176,740 175,821 0 187,500 1,525 2,818,917 0 0 654,430 4,716,377 30,429 544 0 4,611 4,852,607 0 1,454,301 225,000 15,840,279 15,840,279 4,382,367 2,000,000 1,775,000 618,100 0 1,775,000 597,243 0 1,775,000 597,243 0 100 235,200 937 100 224,537 937 0 222,430 75 1,000 7,000 1,059 9,000 1,000 53 75 1,000 6,947 1,059 9,000 1,000 53 0 0 0 960 0 0 0 0 0 163,548 633,000 9,592 5,706,700 12,206 93,000 163,548 491,577 9,592 5,528,800 12,206 43,095 1,602 466,415 0 5,335,076 75,000 850,000 250,000 66,000 21,959 250,000 75,000 850,000 250,000 66,000 21,959 250,000 50,669 850,000 250,000 33,640 0 206,641 Vaccines Vital Records Administrative Adjustments Family Health - Out of Wedlock Pregnancy Prevention TANF Perinatal Services FY01 - 02 TANF Perinatal Services FY99 - 00 Administrative Adjustments Arizona State Hospital Accreditation ASH Community Placement Treatment ASH Employee Related Expenditures ASH Personal Services Building Renewal - Tucson FY00 - 01 Building Renewal - Tucson FY01 - 02 Building Renewal - Tucson FY98 - 99 Building Renewal - Tucson FY99 - 00 Administration - Indirect Cost Fund Administrative Adjustments General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 Children's Behavioral Health Services Tobacco Settlement Account Commission on the Arts Arts Endowment Fund Community Service Projects Operating Lump Sum Appropriation Indian Affairs Commission Administrative Adjustments Indian Town Hall FY96 - 97 Operating Lump Sum Appropriation Occupational Safety and Health Employee Related Expenditure FY91 - 92 Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY97 - 98 Operating Lump Sum Appropriation FY98 - 99 Operating Lump Sum Appropriation FY99 - 00 Personal Services FY91 - 92 Insurance Department Administrative Adjustments Captive Insurer Managed Care Oversight FY00 - 01 Managed Care Oversight FY01 - 02 Managed Care; Health Care Appeals FY97 - 98 Operating Lump Sum Appropriation Arizona Criminal Justice Commission Child Pornography Prosecution County Jail Juvenile Improvement Crime Victim Compensation Domestic Violence Prosecution Obscenity Crimes Prosecution FY00 - 01 Obscenity Crimes Prosecution FY01 - 02 The Notes to Required Supplementary Information are an integral part of this schedule. - 118 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 648,300 615,900 1,000,000 648,300 615,900 862,111 648,300 615,900 777,058 1,027,827 2,469,500 1,027,827 2,299,700 1,027,827 1,148,048 651,400 2,372 252,055 7,197,700 2,034 97,000 22,904 651,400 2,372 252,055 6,813,700 2,034 97,000 22,904 522,743 0 146,451 6,730,224 2,034 97,000 22,904 19,520 356,900 43,000 95,169 98,000 660,501 5,021,200 1,070,092 19,520 356,900 43,000 95,169 18,345 660,501 4,737,955 1,070,092 0 327,362 0 0 18,345 196,786 4,593,059 179,772 0 480 71,350 0 1,489 0 490,000 14,547,400 1,004,400 96,590 480 71,350 125,000 1,489 5,700,000 490,000 13,617,695 1,300 96,590 480 71,350 0 1,489 5,700,000 482,432 13,488,539 0 0 2,587,400 17,328 2,468,708 17,328 2,439,113 56,900 56,575 56,332 5 0 0 61,500 0 275,078 0 114,661 0 14,850 30,253 0 5 237,401 8,111 58,625 650,000 275,078 376,459 114,661 0 14,850 30,253 25,000 0 237,401 8,111 58,625 650,000 261,018 0 114,661 0 14,843 13,018 328 State Aid to County Attorneys Fund State Aid to Indigent Defense Fund Street Gang Prosecution Joint Legislative Budget Committee Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Department of Library and Archives Grants-In-Aid Museum Furnishings FY90 - 91 Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY99 - 00 Statewide Radio Reading Service for the Blind Supplemental - State Grants-In-Aid Legislative Council Juvenile Study Ombudsman Citizens Aid Office Ombudsman FY93 - 94 Ombudsman FY94 - 95 Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY99 - 00 Land Department Administrative Adjustments Dust Abatement Environmental Programs to Counties FY00 - 01 Environmental Programs to Counties FY01 - 02 Growing Smarter In-State Fire Costs Natural Resource Conservation Districts Operating Lump Sum Appropriation Operating Lump Sum Appropriation Liquor Licensing Department Administrative Adjustments Operating Lump Sum Appropriation Law Enforcement Merit System Operating Lump Sum Appropriation Emergency Management and Military Affairs 977-DR Buy-Out of Flooded Residences Administrative Adjustments Airport Security Terrorist Emergency Civil Air Patrol Clifton Flood Control Project Cochise County Monsoon FY00 - 01 Cochise County Monsoon FY01 - 02 Cochise County Monsoon FY99 - 00 Douglas Armory Roof Lighting Fire Alarm EUZ701 Search and Rescue FY00 - 01 EUZHAZ - Hazard Material Contingency FY00 - 01 EUZHAZ - Hazard Material Contingency FY01 - 02 The Notes to Required Supplementary Information are an integral part of this schedule. - 119 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 138,404 1,151 24,528 284,649 0 18,753 0 1,325 726,800 0 0 0 844,315 3,668,774 96 87,090 0 521,295 1,513,611 4,130 1,509 0 10,978 811,076 40,960 0 0 361,780 852,300 2,453 16 480,104 53,000 0 0 1,708 0 0 42,565 138,404 1,151 16,639 284,649 127,613 18,753 14,238 1,325 625,233 100,000 283,379 189,799 772,488 3,482,454 0 87,090 250,000 521,295 1,484,461 4,130 1,509 129,105 10,978 811,076 40,960 100,000 2,845,928 361,780 852,300 2,453 16 480,104 0 200,000 50,000 1,708 140,988 160,000 43,844 125,085 0 16,639 108,865 173 0 14,238 0 392,827 27,940 283,379 189,799 771,269 3,476,299 0 80,564 69,966 521,295 1,472,886 0 0 129,105 0 705,304 40,960 94,021 2,411,088 361,780 731,554 1,470 0 (54,059) 0 24,257 0 0 82,792 159,859 42,453 30,000 0 516 1,224,600 0 8,743 516 1,189,941 0 8,743 0 1,180,840 0 3,671,100 35,146 3,501,570 35,146 3,400,585 0 770,300 1,153 735,386 1,153 734,894 Fire Alarm Systems - 8 Armories Flagstaff Furnace Replacement Gila County Water Emergency La Paz/Maricopa Counties Storm Emergency FY00 - 01 La Paz/Maricopa Counties Storm Emergency FY01 - 02 Marana Tactical Equipment Park FY90 - 91 Maricopa County/Southwest Arizona Monsoon Mesa Armory Re-roofing National Guard Tuition Reimbursement Navajo, Gila and Coconino Counties Rodeo Fire Nuclear Emergency Management Fund Nuclear Emergency Management Fund Maricopa Operating Lump Sum Appropriation Operating Lump Sum Appropriation Prescott Armory Roof Repair FY98 - 99 Project Challenge Construction FY00 - 01 Project Challenge Construction FY01 - 02 Project Challenge Construction FY99 - 00 Project Challenge Program FY01 - 02 Project Challenge Program FY97 - 98 Project Challenge Program FY98 - 99 Queen Creek Fire Emergency Safford Armory Building Renewal FY94 - 95 Santa Cruz County Monsoon Santa Cruz County Monsoon FY99 - 00 Search and Rescue FY01 - 02 September Terrorism Incident Emergency Service Contracts FY00 - 01 Service Contracts FY01 - 02 Silverlake Armory Fire Alarm Installation STARC Armory Addition FY91 - 92 Tropical Winter Storm Vehicle Maintenance Construction FY95 - 96 Yavapai Indian Fire Emergency Nogales and 52nd Street Building Renewal Off-Site Nuclear Emergency FY89-90 Roosevelt Building Renewal Safford and Sunnyslope Building Renewal STARC HVAC Replacement Mine Inspector Abandoned Mines Safety Fund Administrative Adjustments Mined Land Reclamation Operating Lump Sum Appropriation Department of Building and Fire Safety Administrative Adjustments Operating Lump Sum Appropriation Mines and Mineral Resources Administrative Adjustments Operating Lump Sum Appropriation The Notes to Required Supplementary Information are an integral part of this schedule. - 120 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 285,500 64,900 283,358 64,900 283,358 64,900 115,093,100 2,320,000 500,000 446,563 109,654,939 2,320,000 230,000 446,563 109,654,939 2,320,000 209,464 13,107 1,033 187,300 1,033 178,662 252 155,862 0 0 0 0 400,300 738 381,646 738 291,985 46,000 9,800 48,000 400,000 1,220,800 46,000 9,800 48,000 318,789 1,220,800 45,958 9,800 48,000 318,589 1,220,800 0 766,900 3,987 732,294 3,987 723,118 0 3,538 483,500 231,800 1,644,400 165,300 162,700 19,200 3,245 3,538 33,000 0 16,200 0 0 0 3,245 0 33,000 0 1,553 0 0 0 0 1,345,500 3,574 1,283,123 3,574 1,281,826 0 87,344 0 596,600 7,461,700 74,500 0 2,368,612 0 0 787,300 3,328,800 7,831 86,005 20,000,000 117,500 7,377,625 74,500 1,250,000 2,368,612 13,467 30,000 1,266,400 3,265,900 7,831 86,005 20,000,000 117,500 7,237,842 0 1,249,500 1,322,014 13,467 0 1,167,193 2,605,873 Medical Student Loans Board Medical Student Loans Medical Student Loans Northern Arizona University Main Campus - Operating Lump Sum Appropriation NAU - Yuma Campus K-12 Center Character Education Program Temporary Assistance for Needy Families Navigable Streams Adjudication Commission Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Osteopathic Examiners Board Operating Lump Sum Appropriation Personnel Board Administrative Adjustments Operating Lump Sum Appropriation Commission for Postsecondary Education All Other Operating Expenditures Employee Related Expenditures Personal Services Postsecondary Voucher Program State Student Incentive Grant Prescott Historical Society Administrative Adjustments Operating Lump Sum Appropriation Pioneer's Home Administrative Adjustments Building Renewal FY94 - 95 Employee Related Expenditures Food Personal Services Prescription Drugs Professional and Outside Services Travel In-State Board of Executive Clemency Administrative Adjustments Operating Lump Sum Appropriation Parks Board Administrative Adjustments Building Renewal - McFarland Courthouse Roof Growing Smarter - Land Conservation Fund Kartchner Caverns Operating Operating Lump Sum Appropriation Spur Cross Ranch Acquisition FY00 - 01 Spur Cross Ranch Acquisition FY01 - 02 Acquisition and Development Administrative Adjustments Building Renewal - Yuma Prison Museum Roof Kartchner Caverns Operating Operating Lump Sum Appropriation The Notes to Required Supplementary Information are an integral part of this schedule. - 121 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 0 21,128,400 61,700 2,205 32,192 47,764 15,505,600 21,225,900 45,235 0 4,321 12,598,500 6,172,400 158,135 6,288 98 0 0 0 0 0 0 0 0 62,200 0 96,503 11,852,739 61,900 2,205 32,192 47,764 15,126,000 11,348,100 45,235 10,600 4,321 4,799,500 5,712,678 158,135 6,288 0 26,500 36,000 39,139 24,500 30,000 28,068 4,305 5,500 62,400 156,000 96,503 11,852,739 61,900 2,205 31,828 47,764 15,126,000 11,348,100 45,235 10,600 4,321 4,799,500 5,676,196 85,091 0 0 19,157 36,000 39,139 24,355 24,402 28,068 4,305 5,275 61,900 156,000 0 2,822,800 10,608 2,668,422 10,608 2,625,876 5,753,685 5,753,685 3,339,002 0 3,265,800 3,800 3,115,065 3,800 3,110,815 11,800 11,800 11,800 0 578,266 6,300,000 578,266 2,819,181 578,266 0 545,300 339,100 61,139,100 1,426 5,220 0 0 1,402,200 362,500 291,297 520,300 0 59,200,229 1,426 5,220 126,250 571 1,403,600 363,100 291,297 454,891 0 57,655,254 0 0 126,250 571 1,324,593 347,263 Department of Public Safety Administrative Adjustments Agency Support Program Board of Fingerprinting General Fund Transfer Building Renewal - Project 91-1017 Building Renewal - Project 91-1018 Computer Crimes Criminal Investigation Program Criminal Justice Support Program DNA Testing Governor's Office of Highway Safety Program Highway Patrol Officers Highway Patrol Program Project G.I.T.E.M. Sex Offender Web Site Sex Offenders Notification Employees Building Renewal - Project 91-1036 Building Renewal - Project 91-2057 Building Renewal - Project 91-2058 Building Renewal - Project 91-2059 Building Renewal - Project 91-2060 Building Renewal - Project 91-2061 Building Renewal - Project 91-2066 Building Renewal - Project 91-2072 Building Renewal - Project 91-2074 Fingerprinting Division General Fund Transfer 2nd Special Session Chapter 4 Racing Department Administrative Adjustments Operating Commercial Racing Independent Redistricting Commission Operating Lump Sum Appropriation Real Estate Department Administrative Adjustments Operating Lump Sum Appropriation Ranger's Pension Operating Lump Sum Appropriation Retirement System James J. Burke v. ASRS, Attorney Fees and Costs FY00 - 01 James J. Burke v. ASRS, Attorney Fees and Costs FY99 - 00 Department of Revenue Administrative Adjustments Alternative Fuel Computer Project Operating Lump Sum Appropriation Property Class Consolidation FY00 - 01 Property Class Consolidation FY99 - 00 Refund Offset Program Administrative Adjustments Operating Lump Sum Appropriation Operating Lump Sum Appropriation The Notes to Required Supplementary Information are an integral part of this schedule. - 122 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 0 357 0 69 504 395 5,000 18,868,100 2,563 1,624 282 808,962 357 1,200 0 0 395 5,000 17,332,600 2,563 1,624 282 808,962 0 1,200 0 0 0 0 16,478,147 0 0 0 1,715,100 0 15,000,000 0 0 0 1,635,571 15,102 15,000,000 56,000,000 83,250,000 69,934,700 1,591,801 15,102 0 56,000,000 83,250,000 69,934,700 707,236 7,086,500 5,903 579,901 484,773 420,125 422,031 422,916 525,743 1,005,948 707,236 6,761,100 5,903 579,901 484,773 420,125 422,031 422,916 525,743 1,005,948 689,969 6,750,334 5,903 571,230 0 0 0 0 0 195,113 0 0 21,148,400 27,628,100 1,012,600 341,000 3,907,000 795 7,657 660,400 1,447,100 87,400 243,800 357,300 13,381,200 8,677,100 24,946,200 528,400 11,332,000 2,160,700 93,450 136,499 19,769,000 26,501,100 997,100 339,100 3,306,700 795 6,442 660,400 1,306,200 87,300 230,400 351,100 13,009,300 7,870,600 23,295,100 514,300 11,213,800 2,099,800 79,608 136,499 19,624,247 26,414,239 910,907 337,336 3,278,303 0 6,442 656,252 1,305,189 85,718 201,926 348,576 12,916,383 7,859,342 23,028,561 514,266 11,117,609 2,092,823 Schools for the Deaf and the Blind Administrative Adjustments ADTEC Remodel FY91 - 92 Building Renewal - Emergency Water Line Repair Building Renewal - Tucson Gym FY98 - 99 Building Renewal FY93 - 94 Building Renewal FY94 - 95 Master Plan FY95 - 96 Operating Lump Sum Appropriation Security Fencing Telecommunication Cabling FY91 - 92 Temporary Facilities FY91 - 92 School Facilities Board Operating Lump Sum Appropriation Administrative Adjustments Deficiencies Correction Appropriation General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 Senate Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY92 - 93 Operating Lump Sum Appropriation FY93 - 94 Operating Lump Sum Appropriation FY94 - 95 Operating Lump Sum Appropriation FY95 - 96 Operating Lump Sum Appropriation FY96 - 97 Operating Lump Sum Appropriation FY97 - 98 Operating Lump Sum Appropriation FY98 - 99 Operating Lump Sum Appropriation FY99 - 00 Supreme Court Administrative Adjustments Administrative Adjustments Adult Intensive Probation Adult Probation Enhancement Child Support Enforcement Commission on Judicial Conduct Community Punishment Elder Law Representation Energy Management System - Courts Building Family Counseling Interstate Compact Adult Probation Judicial Assistance Judicial Education Judicial Performance Review Juvenile Intensive Probation Juvenile Probation State Aid Juvenile Treatment Services Model Court Operating Lump Sum Appropriation Operating Lump Sum Appropriation The Notes to Required Supplementary Information are an integral part of this schedule. - 123 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 12,407,300 150,000 9,724,400 1,721,100 440,000 0 0 0 4,840 0 383,347 9,882,600 2,308,053 12,407,300 242,800 9,099,700 1,721,100 236,356 25,000 43,000 25,000 4,840 489,264 383,847 9,882,600 2,308,053 12,377,355 240,975 9,099,700 1,720,773 132,958 16,876 26,447 1,440 1,806 489,264 30,639 5,956,386 2,063,097 0 903,700 2,291,700 19,122 860,038 2,204,866 19,122 805,917 2,161,116 37 37 0 0 2,900 2,900 11,420,800 1,002,700 4,000,000 6,044,900 442,000 2,326,000 241,500 1,363,700 10,332,421 1,366,600 4,000,000 4,226,000 762,800 2,461,121 505,900 1,010,000 10,332,421 1,366,548 3,828,662 4,132,854 762,787 2,461,100 505,865 1,009,951 0 0 0 2,921,000 2,517,600 200,000 70,751 3,538,665 5,000,000 2,782,581 2,395,624 190,522 70,751 3,538,665 5,000,000 2,334,985 2,389,929 70,427 0 316,000 40 301,541 40 231,504 41,319,000 2,500,000 477,000 9,673,600 522,100 239,360,800 46,711,500 1,459,000 2,229,000 40,062,900 2,500,000 477,700 9,673,100 505,400 227,524,198 44,045,800 1,393,200 2,152,200 40,062,900 2,500,000 477,700 9,673,100 505,400 227,524,198 44,045,800 1,393,200 2,152,200 Operating Lump Sum Appropriation Post Conviction Relief Progressively Increasing Consequences State Aid to the Courts Fund State Grand Jury Expenses 4th Floor Chiller HVAC Ductwork Replacement HVAC Storage Tank Replace Security Cameras - Courts Building Administrative Adjustments Court Assistance JCEF Arizona Court Automation Project JCEF Assistance to Courts Secretary of State Administrative Adjustments Elections Operating Lump Sum Appropriation Technical Registration Board Greenfields Pilot Program Appropriation Office of Tourism Administrative Adjustments Transfer to Tourism Fund (Laws 2001,Chapter 236, Section 97) International and Domestic Marketing Maricopa County Tourism Promotion Media Advertising Media Communication Operating Lump Sum Appropriation Research and Data Repository Travel Counseling and Direct Marketing State Treasurer Administrative Adjustments Community College Reimbursements Corporate Income Tax Transfer to WQARF Justice of the Peace Salaries Operating Lump Sum Appropriation Property Tax Refund Tax Appeals Board Administrative Adjustments Operating Lump Sum Appropriation University of Arizona Agriculture Capital Outlay - Digital Television Conversion Clinical Rural Rotation Clinical Teaching Support Liver Research Institute Operating Lump Sum Appropriation Operating Lump Sum Appropriation Pima County Campus - Arizona International College Sierra Vista Campus The Notes to Required Supplementary Information are an integral part of this schedule. - 124 - ACTUAL AMOUNTS (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL (Appropriation) FINAL (Appropriation) 0 1,284,700 1,500,000 1,228,000 1,500,000 1,228,000 44,900 41,410 41,410 0 3,605 18,934 13,284 939,001 211,100 0 426,233 29,200 843,366 0 3,098 3,605 18,934 13,284 921,479 110,200 10,000 427,233 29,200 844,566 6,500 3,098 0 0 0 878,127 83,486 1,017 427,233 29,200 829,952 6,500 0 2,000,000 400,000 14,884,700 191 419,249 500,000 250,130 50,118 1,000,000 400,000 14,209,674 191 419,249 500,000 250,130 50,118 1,000,000 0 14,191,970 0 305,835 438,750 241,470 0 1,568,400 367,000 19,159 1,468,280 0 19,159 1,459,826 0 Sierra Vista Campus Building Telemedicine Network Uniform State Law Commission Operating Lump Sum Appropriation Veteran's Service Department Administrative Adjustments Nursing Home Project Nursing Home Project Nursing Home Project Operating Lump Sum Appropriation Southern Arizona Veterans' Cemetery State Veterans' Home - Operating Lump Sum Appropriation Veterans' Conservatorship Veterans' Organizations Contracts Veterans' Services ASVH - Water Line Leak Water Resources Administrative Adjustments Arizona Water Banking Authority Cochise-Wilcox County Flood Control Operating Lump Sum Appropriation Riparian Bill Rural Water Studies FY00 - 01 Rural Water Studies FY01 - 02 Rural Water Studies FY99 - 00 Weights and Measures Administrative Adjustments Operating Lump Sum Appropriation Vapor Recovery Total of General Fund Budgetary Expenditures ACTUAL AMOUNTS $ 8,697,103,826 $ 9,167,900,999 $ 8,495,628,235 $ 6,023,791,381 $ 6,104,852,100 $ 5,989,093,702 General Fund Budgetary Expenditures Summary: Statutory General Fund Expenditures authorized by Legislature Other General Fund Programs Supported by Taxes and Federal Grants Total General Fund Budgetary Expenditures 2,673,312,445 $ The Notes to Required Supplementary Information are an integral part of this schedule. - 125 - 8,697,103,826 3,063,048,899 $ 9,167,900,999 2,506,534,533 $ 8,495,628,235 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES TRANSPORTATION AND AVIATION FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) TRANSPORTATION AND AVIATION FUND Department of Transportation Administration - Operating Lump Sum Appropriation Administrative Adjustments Administrative Adjustments Administrative Adjustments Aeronautics Division - Operating Lump Sum Appropriation Airport Planning and Development FY00 - 01 Airport Planning and Development FY01 - 02 Arizona - Mexico Border Points FY97 - 98 Asbestos and Lead Inspections Asphalt Tank Replacement FY00 - 01 Asphalt Tank Replacement FY99 - 00 Building Renewal FY00 - 01 Building Renewal FY00 - 01 Building Renewal FY01 - 02 Cottonwood Motor Vehicle Department Svc Ctr FY00 - 01 Cottonwood Motor Vehicle Department Svc Ctr FY99 - 00 De-Icer Buildings FY00 - 01 De-Icer Buildings FY01- 02 Department of Public Safety Fund Shift from HURF Department of Public Safety Transfer Douglas Maintenance Yard Admin Adjustment FY90 - 91 Douglas Motor Vehicle Department Svc Center FY00 - 01 Equipment Racks Fire System Upgrades Glendale Motor Vehicle Department Svc Center FY00 - 01 Glendale Motor Vehicle Department Svc Center FY99 - 00 Highway Construction FY00 - 01 Highway Construction FY01 - 02 Highway Maintenance - Operating Lump Sum Appropriation Highway Maintenance Lump Sum Appropriation Highway Maintenance Lump Sum Appropriation Highways - Operating Lump Sum Appropriation Holbrook Maintenance Yard Sewer System HURF Transfer to DPS for Highway Patrol Vehicles HURF Transfer to DPS for Overtime HURF Transfer to DPS for Personnel and Operating Liquid De-Icer Storage Tanks FY00 - 01 Marana Motor Vehicle Division Service Center Methane Extraction Unit Modular Trailer Operating Expenses Motor Vehicle Division - Operating Lump Sum Appropriation Motor Vehicle Division - Operating Lump Sum Appropriation Motor Vehicle Division - Operating Lump Sum Appropriation Motor Vehicle Division Central Arizona Port New Trailers Motor Vehicle Division Electronic Certificate of Title System Motor Vehicle Division Fuel Dispenser Labels Motor Vehicle Division Lump Sum Appropriation ORIGINAL BUDGET (Appropriation) $ The Notes to Required Supplementary Information are an integral part of this schedule. - 126 - 57,677,300 0 0 0 1,793,100 2,254,554 10,667,000 100,841 700,000 136,100 4,514 56,100 1,461,261 2,740,900 1,000,000 84,902 432 800,000 0 0 2,000 1,117,752 280,000 124,778 2,099,875 56,185 38,920,482 278,020,800 0 2,398,708 94,198,100 45,792,100 257,000 0 0 0 124,353 1,092,000 104,784 31,219 1,252,800 1,020,700 980,300 14,706 0 0 77,227,600 FINAL BUDGET (Appropriation) $ 56,331,300 47,946 1,189,615 67,322 1,738,500 2,254,554 10,667,000 100,841 700,000 136,100 4,514 56,100 1,461,261 1,576,400 1,000,000 84,902 0 200,000 25,981,800 25,017,100 2,000 1,117,752 0 124,778 2,099,875 56,185 38,920,482 347,963,000 500,000 2,398,708 90,375,900 44,181,200 257,000 5,442,200 850,100 4,791,500 124,353 0 104,784 31,219 1,754,800 1,022,400 982,100 14,706 277,950 5,000 75,805,600 ACTUAL EXPENDITURE AMOUNTS $ 55,666,671 47,946 1,189,615 67,322 1,729,670 2,254,554 7,257,898 100,272 0 136,100 4,513 35,580 1,080,738 663,441 933,485 80,710 0 10,926 25,981,800 25,017,100 0 382,517 0 78,591 1,741,403 37,725 38,920,482 295,171,986 500,000 2,398,451 86,854,031 43,462,040 18,701 5,442,200 850,100 4,791,500 122,872 0 41,669 8,684 1,438,435 559,617 882,868 13,890 17,838 4,903 75,348,687 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES TRANSPORTATION AND AVIATION FUND FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Dollars) ORIGINAL BUDGET (Appropriation) FINAL BUDGET (Appropriation) 998,676 1,509,931 0 2,750,400 2,702,574 1 570,625 6,852 1,573,575 0 48,000 47,871 856,000 706,727 42,521 0 708,000 78 30,868 23,236 2,253,000 200,000 160,000 2,977 554,000 3,285 1,331,000 998,676 1,509,931 180,000 2,250,400 2,702,574 0 570,625 5,565 1,573,575 232,500 48,100 47,871 856,000 706,727 39,783 1,014,600 0 0 30,868 7,534 0 0 0 2,977 0 0 1,331,000 Motor Vehicle Division Nogales Port Facility FY00 - 01 Motor Vehicle Division Nogales Port Facility FY99 - 00 Motor Vehicle Division One Time Trailer Fees Implementation Motor Vehicle Division Security Enhancement Issues MVD - Operating Lump Sum Appropriation FY00 - 01 Needle Mountain Maintenance Yard Nogales Port of Entry North Central Regional Motor Vehicle Div Svc Ctr FY98 - 99 North Phoenix Maintenance Yard Office of Highway Safety Transfer Operating Lump Sum Appropriation Payson Motor Vehicle Department Svc Center FY00 - 01 Payson Motor Vehicle Department Svc Center FY01 - 02 Plate To Owner Safety Barrier Wall Safety Enforcement and Infrastructure Fund Transfer to DPS Sign and Supply Warehouses Southeast Regional Motor Vehicle Div Svc Ctr FY98 - 99 Special Projects FY98 - 99 Spreader Racks Surprise Motor Vehicle Division Service Center Transportation Research FY98 - 99 Tucson Lab Expansion Underground Storage Tanks Upgrades FY98 - 99 Vehicle Wash Buildings Vehicle Wash Racks West Phoenix Motor Vehicle Division Service Center Total Transportation and Aviation Fund Budgetary Expenditures $ The Notes to Required Supplementary Information are an integral part of this schedule. - 127 - 641,673,443 $ 761,928,153 ACTUAL EXPENDITURE AMOUNTS 6,379 110,203 135,715 75,938 798,954 0 552,993 5,565 1,423,655 232,500 48,000 3,733 0 631,657 39,783 1,014,600 0 0 0 7,534 0 0 0 2,977 0 0 47,973 $ 686,485,690 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2002 A. RECONCILIATION OF BUDGETARY TO GAAP EXPENDITURES The accompanying Budgetary Comparison Schedules for the General Fund and Transportation and Aviation Fund present comparisons of the legally adopted budget with actual expenditure data on the budgetary basis. The original budget represents any appropriation bills passed by June 30, 2001 that affect available appropriations during fiscal year 2002. The final budget represents any appropriation bills during fiscal year 2002 for fiscal year 2002 plus the original budget. Appropriation bills passed after the end of fiscal year 2002 for fiscal year 2002 would also be included in the final budget. The Budgetary Comparison Schedules present actual amounts on the State’s budgetary basis for expenditures only. The Schedules include appropriations authorized in one fund and transferred, by legislation, to another fund. The State does not have a legally adopted budget for revenues; therefore, only expenditures are presented on the Budgetary Comparison Schedule, Expenditures for the General Fund and Transportation and Aviation Fund. As the budgetary and GAAP presentations of actual data differ, a reconciliation of the two follows (amounts expressed in thousands): Transportation and Aviation Fund General Fund Uses/outflows of resources Actual expenditure amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedules $ 8,495,628 $ 686,486 Differences - budget to GAAP: Increase (Decrease) in unpaid incurred expenditures from fiscal year end 2001 to fiscal year end 2002 (4,174) 287,217 Increase in unpaid payroll expenditures from fiscal year end 2001 to fiscal year end 2002. For budgetary reporting, final June 2002 payroll expenditures were charged to fiscal year 2003 budget. 1,013 - 713,086 - 421,877 - Distributions to counties and cities, of sales taxes, are recognized as expenditures on the modified accrual basis, but have no effect on budgetary expenditures. Distribution to counties and cities for Urban Revenue Sharing, derived from the State's income tax collections, is recognized as an expenditure on the modified accrual basis, but has no effect on budgetary expenditures. Capital leases and installment purchase contracts initiated during the fiscal year, which are not reported in budgetary expenditures 3,308 859 2,918,017 1,468,516 (846,194) (370,064) Programs which are not controlled by legislative appropriations but have disbursed cash or incurred obligations during fiscal year 2002 Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes Total expenditures, as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances $ 11,702,561 $ There were no expenditures in excess of appropriations or allotments in the individual budget accounts for the year. - 128 - 2,073,014 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2002 B. BUDGETARY BASIS OF ACCOUNTING Formulation of the budget begins with the preparation of estimates of expenditure requirements by the head of each budgeted agency and institution. These estimates are submitted no later than September 1 of each year to the Governor’s Office of Strategic Planning and Budgeting. The budget is prepared by line item and/or program elements for each agency. The budget document, as finally developed by the Governor, must be submitted to the Legislature no later than five days after the regular session convenes. The Legislature must approve the budget by passing a general and a capital outlay appropriation bill. The Governor may veto any item in an appropriation bill. Such vetoes are subject to legislative overrides. The budget can be amended throughout the year by special legislative appropriations and/or budget transfers. The State’s Constitution prohibits budgeted expenditures from exceeding 7.41 percent of aggregate personal income as estimated by the Economic Estimates Commission. The State prepares its operating budget on the cash basis of accounting. Encumbrances as of June 30 can be liquidated during a three-week administrative period known as the 13th month. At the time of appropriation bills passage, estimates prepared by legislative and executive branch professional staff assure the legislature that adequate revenues will be available to meet the level of appropriations approved. Anticipated revenue is estimated on the cash basis but is not part of the legally adopted budget. Consequently, the accompanying Budgetary Comparison Schedules only present budget to actual expenditure comparisons. The Budgetary Comparison Schedules present all appropriation line items as passed by the State Legislature in order to demonstrate compliance with the legal level of budgetary control. The State budgets on both an annual and biennial basis. Laws 2001, Chapter 236 appropriated biennial budgets for all state agencies. In biennial budgets, an agency receives a separate appropriation for each of two fiscal years. For “small” regulatory agencies, comprised of five to ten people, whose budgets were merely amended for technical adjustments in Laws 2002, Chapter 327, the first year (FY 2002) appropriations do not lapse until the end of the second year (FY 2003). Except where specifically noted by the appropriation bills, the appropriations for all other agencies lapse at the end of each fiscal year. For the “large” fifteen state agencies, Laws 2002, Chapter 210 returned their budgets to a “one” year cycle beginning with the 2003 Legislative Session (fiscal year 2004 budget request). In prior years the “large” agencies have accounted for approximately ninety percent or more of the appropriations for the General Fund. The budget format used by the State legislature determines how an agency’s appropriation appears in the General Appropriations Act. A less detailed format provides an agency with more discretion in implementing the budget. Conversely, a more detailed format may require an agency to use formal processes for redirecting appropriated funding. Among the possible format choices are the following: Lump Sum – The appropriation of an agency for each fiscal year consists of a single dollar amount, thereby allowing the agency to shift funds among line items, programs and subprograms without further Legislative or Executive Branch review. Within this format, any programs or Special Line Items may be listed separately. Modified Lump Sum – The appropriation of an agency for each fiscal year consists of at least three lines: Personal Services, Employee Related Expenditures and All Other Operating Expenditures. Any Special Line Items would be listed separately. Under this format, pursuant to A.R.S. § 35-173, an agency must seek approval of the Joint Legislative Budget Committee before moving any funding into or out of the Personal Services and Employee Related Expenditures line items. Any other funding transfers would require approval by the Department of Administration (ADOA), but not the Joint Legislative Budget Committee. Detailed Line Item – The agency appropriation for each fiscal year consists of each line item listed in the Appropriation Report including: Professional and Outside Services, Travel, Other Operating Expenditures, Equipment, Food and any Special Line Items. The same rules govern Personal Services and Employee Related Expenditures funding transfers as noted in the Modified Lump Sum description. This appropriation format requires an agency to seek ADOA approval before initiating funding transfer between all line items. During the fiscal year, $743.790 million in supplemental appropriations net of adjustments and reversions were provided to enhance various programs. The General Fund and Transportation and Aviation Fund received $470.797 and $120.255 million, respectively, and those amounts are included in the Budgetary Comparison Schedules. The remaining supplemental appropriations of $152.738 million are reported in Budgetary Comparison Schedules – Other Governmental Funds beginning on page 194. - 129 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2002 State agencies are responsible for exercising budgetary control and ensuring that expenditures do not exceed appropriations. The State Department of Administration – Financial Services Division exercises oversight and does not disburse funds in excess of appropriations. Both the Arizona Constitution and statutes require a balanced budget for annual financial operations. If the Governor decides there will be a shortfall of cash revenues for a fiscal year, the Governor can call the Legislature into Special Session so that the executive and legislative branches can deal with the revenue decline. - 130 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2002 Information About Infrastructure Assets Reported Using the Modified Approach As allowed by Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments (GASB 34), the State of Arizona reports its roads and bridges using the modified approach. Substantially all infrastructure is maintained by the Arizona Department of Transportation (ADOT). Assets accounted for under the modified approach include approximately 6,650 center lane miles (17,807 travel lane miles) of roads and 4,378 bridges that the State is responsible to maintain. In order to utilize the modified approach, the State is required to: • Maintain an asset management system that includes an up to date inventory of eligible infrastructure assets. • Perform condition assessments of eligible assets and summarize the results using a measurement scale. • Estimate, each year, the annual amount to maintain and preserve the assets at the condition level established and disclosed by the State. • Document that the assets are being preserved approximately at, or above, the established condition level. As adopted by the State Transportation Board on an annual basis, the Five Year Transportation Facilities Construction Program contains estimated expenditures for highway system improvements and the preservation of existing roadways and bridges. The Five Year Transportation Facilities Construction Program, in effect for fiscal year 2002 and beyond, was adopted by the Transportation Board on June 15, 2001. The following information pertains to the condition assessment and maintenance of those infrastructure assets. Roads The mission of the ADOT Pavement Management Section (PMS) is to develop and provide a cost effective pavement rehabilitation construction program that preserves the State’s investment in its highway system and enhances public transportation and safety. The requirements of GASB 34 and the ADOT PMS both work toward the same basic goal: the efficient, effective management of the State’s assets to produce long term benefits, while minimizing expenditures. The PMS has developed performance goals for the condition level of the pavement in the state highway system. These goals require periodic assessment of pavement conditions and the budget level needed to meet that goal. The goal is expressed as a measure called “Serviceability” which can be defined as the ability of a pavement to serve the travelling public (as documented in 1961, after AASHTO Road Test, 1956-1961). Serviceability was originally based on detailed measurements of objective features of the pavement, but many surveys since the original road test have shown that such measurements closely track the subjective opinion of the travelling public. Because of that close tracking, it is possible to substitute panel rating measurements by road users as a subjective assessment to determine Serviceability ratings and then use those ratings to track performance from year to year. Most commonly, this number is called “Present Serviceability Rating” (PSR). PSR is a five-point scale (5 excellent, 0 impassable), similar to the Weaver/AASHTO Scale, shown as follows: Numerical Rating 5 4 3 2 1 0 PSR Excellent Good Fair Poor Very Poor Impassable - 131 - Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2002 Information About Infrastructure Assets Reported Using the Modified Approach - Continued The Serviceability rating method, in its most common form, is shown in Figure 1, below: PERFECT 5 EXCELLENT VERY GOOD 4 SMOOTH 3 GOOD SO SMOOTH THAT NO IMPROVEMENT WOULD PRODUCE NOTICEABLE RESULTS STABLE 2 FAIR SO ROUGH THAT CONTINUED DRIVING WOULD RISK DAMAGE TO VEHICLE OR INJURY TO OCCUPANTS UNSTEADY 1 POOR VERY POOR 0 IMPASSABLE UNBEARABLE Weaver/AASHTO Scale Nonsegmented Scale Figure 1 The goal of the State is to maintain a condition level (PSR) rating of 3.23 or better for all roads in the state highway system. Annually, Transportation Material Technicians drive over the system with inertial profiling equipment and measure the roughness of the pavement. This process is continuous throughout the year in order to assess the condition level of all pavements on an annual basis. As of the end of fiscal year 2002, an overall rating of 3.6 was achieved, as shown in the following graph: C o n d itio n L e v e ls - R o a d s 5 4 P S R 3 D e s ire d L e v e l A c tu a l L e v e l 2 1 0 2002 2003 2004 2005 2006 F is c a l Y e a r Figure 2 - 132 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2002 Information About Infrastructure Assets Reported Using the Modified Approach - Continued Preservation of the roads is accomplished through programs managed by the ADOT Pavement Management Section. The estimated and actual expenditures for fiscal year 2002 were as follows: Fiscal Year 2002 Estimated Expenditures (in millions) $227.4 Actual Expenditures (in millions) $234.8 Bridges Bridges constitute a significant portion of all infrastructure assets in Arizona. As of June 30, 2002, the State owns and maintains 4,378 bridges, with an approximate total deck area of 39,422,410 square feet. Bridges, for purposes of this report, include all structures erected over an opening or depression with a centerline of 20 feet or more. Information related to these bridges is stored and updated in the Arizona Bridge Information and Storage System (ABISS). This system is used to efficiently manage the bridge inventory through storing all bridge-related data and assisting bridge engineers in arriving at appropriate bridge preservation decisions. Also, ABISS is used for reporting bridge inventory and condition, on a biennial basis, to the Federal Highway Administration (FHWA). A Condition Rating Index (CRI) is used to track the condition of the bridge network. The CRI is based on four selected bridge inspection condition ratings which, in turn, are based on standards established in the FHWA’s “Recording and Coding Guide for the Structural Inventory of the Nation’s Bridges”. The four selected element condition ratings that are included in the CRI computation are: the bridge joints condition, the deck condition, the superstructure condition, and the substructure condition. The bridge joints condition rating is an Arizona specific rating item not included in the FHWA condition rating guidelines, whereas the three other condition ratings are federally mandated condition ratings. The CRI is computed by subtracting, from one, the ratio of the sum of the deck areas of all bridges with a condition rating of four or less (which indicates that the rated element is at best in a poor condition) to the total sum of the deck areas. The rating system in this guide is as follows: Numerical Rating 9 8 7 6 5 4 3 2 1 Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure - 133 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2002 Information About Infrastructure Assets Reported Using the Modified Approach - Continued Management of the bridge inventory is a major function of ADOT’s Bridge Group, and regularly scheduled biennial inspections are made of all bridges. A civil or structural engineer, licensed to practice in Arizona, performs these inspections. It is the policy of the State to maintain state highway bridges so that the CRI exceeds 92.5%. In fiscal year 2002, the CRI was computed at 93.6%. Condition Levels - Bridges 94% CRI Desired Level Actual Level 92% 90% 2002 2003 2004 2005 2006 Fiscal Year Figure 3 Bridges represent a major public investment and their inspection and maintenance is an essential function of the State in its mission of providing a safe and efficient transportation system. Figure 4, below, indicates that approximately 66% of the bridges in the state were constructed prior to the 1970s, while only 20% have been constructed in the last two decades. Age of the State of Arizona's Bridge Population 35 % of bridges built in corresponding decade 30 25 20 15 10 5 0 < 1930 30s 40s 50s 60s Figure 4 - 134 - 70s 80s 90s 2000s STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2002 Information About Infrastructure Assets Reported Using the Modified Approach - Concluded Preservation of the bridges is accomplished through programs managed by the Bridge Group. expenditures for fiscal year 2002 were as follows: Fiscal Year 2002 Estimated Expenditures (in millions) $14.4 - 135 - Actual Expenditures (in millions) $18.2 The estimated and actual STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION RETIREMENT PLANS FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2002 Analysis of the funding progress for each of the agent, multiple-employer defined benefit plans, as of the most recent actuarial valuations, is as follows (expressed in thousands): Plan PSPRS CORP Actuarial Valuation Date 6/30/02 6/30/01 6/30/00 6/30/02 6/30/01 6/30/00 Actuarial Value of Plan Assets $ 614,615 625,933 584,825 Actuarial Accrued Liability $ 530,497 464,891 446,225 Funding Excess $ 84,118 161,042 138,600 Funded Ratio 115.9% 134.6% 131.1% Annual Covered Payroll $ 68,334 70,439 68,563 613,427 608,165 547,149 495,124 434,945 394,319 118,303 173,220 152,830 123.9% 139.8% 138.8% 266,189 277,591 278,819 - 136 - Funding Excess as Percentage of Covered Payroll 123.1% 228.6% 202.1% 44.4% 62.4% 54.8% STATE HEALTH LABORATORY COMBINING FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Debt Service Funds The Debt Service Funds account for the accumulation of resources for, and the payment of, general longterm debt principal, interest and related costs. Capital Projects Funds Capital Projects Funds account for financial resources used to acquire or construct major capital facilities (other than those financed by Proprietary Funds, Pension Trust Funds or Component Units). STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2002 (Expressed in Thousands) SPECIAL REVENUE FUNDS ASSETS Cash and investments Receivables, net of allowances: Taxes Interest Other Due from U.S. Government Due from local governments Due from others Due from other Funds Inventories, at cost Restricted assets: Cash and cash equivalents Cash held by trustee Other Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to U.S. Government Due to local governments Due to others Due to other Funds Deferred revenue Total Liabilities $ $ CAPITAL PROJECTS FUNDS 22,978 $ 66,514 TOTAL $ 1,000,259 4,379 2,742 17,002 150 6,335 45 15,638 2,670 971 - 1,955 983 3 - 6,334 4,696 17,005 150 6,335 45 15,638 2,670 3,461 28 21,992 13,147 - 89,414 53,088 - 114,867 66,235 28 $ 963,217 $ 59,088 $ 211,957 $ 1,234,262 $ 18,561 2,999 3,455 64,126 300 2,828 2,210 94,479 $ 3 3 $ 13,977 42 2 14,021 $ 32,541 3,041 3,455 64,126 300 2,830 2,210 108,503 Fund Balances: Reserved for: Highway construction Other construction School facilities improvements Continuing appropriations Debt service Other fund balance reservations Unreserved Total Fund Balances Total Liabilities and Fund Balances 910,767 DEBT SERVICE FUNDS 262,654 18,203 18,382 569,499 868,738 $ 963,217 158 58,927 59,085 $ 59,088 - 140 - 77,397 53,088 34,089 33,362 197,936 $ 211,957 77,397 53,088 262,654 52,450 58,927 18,382 602,861 1,125,759 $ 1,234,262 STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) SPECIAL REVENUE FUNDS REVENUES Taxes: Sales Property Motor vehicle and fuel Other Intergovernmental Licenses, fees and permits Earnings on investments Sales and charges for services Fines, forfeitures and penalties Other Total Revenues $ EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Refunding bonds issued Payment to refunded bond escrow agent Bonds issued Premium on bonds issued Refunding certificates of participation issued Payment to refunded certificate of participation escrow agent Certificates of participation issued Premium on certificates of participation issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning, as restated Fund Balances - Ending $ 280,908 2,074 27,720 159,543 74,588 149,632 41,072 32,771 81,722 52,207 902,237 DEBT SERVICE FUNDS $ 75,787 7,617 469 83,873 CAPITAL PROJECTS FUNDS $ TOTAL 186 7,994 24,922 120 9,558 42,780 $ 356,695 2,260 35,714 184,465 74,588 149,752 58,247 32,771 81,722 52,676 1,028,890 83,833 270,868 80,074 515,641 68,137 85,297 572 - - 83,833 270,868 80,074 515,641 68,137 572 85,297 80 9 17,052 1,120,991 264,315 122,580 387,467 507 374,343 374,850 264,395 123,096 391,395 1,883,308 (218,754) (303,594) (332,070) (854,418) 193,253 (251,723) 6,350 - 329,668 (3,730) 74,250 (77,135) 3,378 71,051 23,600 (71,249) 142,000 6,764 - 546,521 (326,702) 74,250 (77,135) 148,350 10,142 71,051 (52,120) (270,874) 1,139,612 (65,087) 4,933 2,429 339,757 36,163 22,922 63,270 2,245 166,630 (165,440) 363,376 (65,087) 68,203 4,674 454,267 (400,151) 1,525,910 868,738 $ 59,085 - 141 - $ 197,936 $ 1,125,759 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The School Facilities Revenue Bond Proceeds Fund accounts for the receipt of the Education Transaction Privilege Revenue Bond proceeds. Funds are restricted to be expended to (1) pay the costs of correcting existing deficiencies in public school facilities for grades K-12, (2) pay bond related expenses, and (3) fully or partially fund any reserves or sinking fund accounts established by the bond resolution. Protection and Safety Fund accounts for law enforcement, military, custody, and related services provided to the general public. Environmental Protection Fund accounts for the protection of the State’s public health by administering the State’s environmental quality laws and delegating federal programs to prevent, control, and abate pollution of our air, water, and land resources. Health and Welfare Fund accounts for health and welfare services provided to the general public. The Tobacco Tax and Healthcare Fund accounts for the receipt of monies levied on tobacco products. The monies are used for health education programs; research, prevention and treatment of tobacco related diseases; and medically needy healthcare programs. The Children’s Health Insurance Program Fund accounts for receipt of monies from Federal grants, Tobacco Tax appropriations, donations, and other sources. Monies are used for administration and operation of the Children’s Health Insurance Program, which provides health insurance coverage to eligible children according to Federal and State requirements. Inspection and Regulation Fund accounts for inspection and regulatory services provided to the general public. Game and Fish Fund accounts for the receipt of monies collected by the Department of Game and Fish for various hunting and fishing licenses, for the purpose of conserving, enhancing, and restoring Arizona’s diverse wildlife resources and habitats, as well as providing safe watercraft and off-highway vehicle recreation. Parks Fund accounts for the receipt of monies collected by the State Parks Fund for the purpose of acquiring and developing state park lands, sites and facilities. Commerce Fund accounts for the promotion of statewide economic and community development, which supports a globally competitive Arizona. Other Special Revenue Funds consists of 83 other funds, for various purposes. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2002 (Expressed in Thousands) SCHOOL FACILITIES BOND PROCEEDS ASSETS Cash and investments Receivables, net of allowances: Taxes Interest Other Due from U.S. Government Due from local governments Due from others Due from other Funds Inventories, at cost Restricted cash and cash equivalents Other Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to U.S. Government Due to local governments Due to others Due to other Funds Deferred revenue Total Liabilities $ 261,003 $ 1,651 - 27,916 ENVIRONMENTAL PROTECTION $ 20 111 44 1,790 2,670 - 87,190 TOBACCO TAX & HEALTHCARE HEALTH & WELFARE $ 247 5,999 3,107 - 44,574 $ 699 33 1,833 74-1,990 3,461 - 56,644 3,004 32 6,260 - $ 262,654 $ 32,551 $ 96,543 $ 52,664 $ 65,940 $ - $ 2,019 149 92 3 6 2,269 $ 4,822 3 4,825 $ 2,146 450 2,374 536 2,200 7,706 $ 2,271 34 268 1,962 4,535 Fund Balances: Reserved for: School facilities improvements Continuing appropriations Other fund balance reservations Unreserved Total Fund Balances Total Liabilities and Fund Balances PROTECTION & SAFETY 262,654 262,654 $ 262,654 676 52 29,554 30,282 $ 32,551 - 144 - 1,218 6,001 84,499 91,718 $ 96,543 3,082 3,461 38,415 44,958 $ 52,664 60 61,345 61,405 $ 65,940 CHILDREN'S HEALTH INSURANCE $ 6,493 INSPECTION & REGULATION $ 150 316 28 90,297 GAME & FISH $ 58 66 1 - 38,279 PARKS $ 120 202 3,403 - 34,097 OTHER SPECIAL REVENUE COMMERCE $ 106 3,402 - 69,140 $ 147 8,789 -1404 - 195,134 TOTAL $ 676 328 2 1,226 - 910,767 4,379 2,742 17,002 150 6,335 45 15,638 2,670 3,461 28 $ 6,987 $ 90,422 $ 42,004 $ 37,605 $ 78,481 $ 197,366 $ 963,217 $ 405 813 1,218 $ 1,507 981 205 306 2,999 $ 861 580 4 1,445 $ 1,093 39 3 1,135 $ 220 57 2 4 283 $ 3,622 301 64,126 3 12 68,064 $ 18,561 2,999 3,455 64,126 300 2,828 2,210 94,479 5,769 5,769 $ 6,987 4,969 23 82,431 87,423 $ 90,422 2,140 45 38,374 40,559 $ 42,004 5 36,465 36,470 $ 37,605 - 145 - 4,015 8,765 65,418 78,198 $ 78,481 2,043 30 127,229 129,302 $ 197,366 262,654 18,203 18,382 569,499 868,738 $ 963,217 STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) SCHOOL FACILITIES BOND PROCEEDS REVENUES Taxes: Sales Property Motor vehicle and fuel Other Intergovernmental Licenses, fees and permits Earnings on investments Sales and charges for services Fines, forfeitures and penalties Other Total Revenues EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Natural resources Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Bonds issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning, as restated Fund Balances - Ending $ $ 11,181 11,181 PROTECTION & SAFETY $ 15,449 108 10,360 461 29,425 32,551 3,275 91,629 ENVIRONMENTAL PROTECTION $ 25,480 2,213 32,868 2,940 68 830 109 64,508 TOBACCO TAX & HEALTHCARE HEALTH & WELFARE $ 8,704 4,474 203 3,709 13,067 390 10,316 1,960 42,823 $ 102,499 2,408 473 105,380 244,411 - 4 68,137 - 40,188 103 103,650 - 410 57,832 225 - 244,411 6 1 7,266 75,414 77 40,368 1 175 103,826 12 58,479 (233,230) 16,215 24,140 (61,003) 46,901 247 (9,768) 6,350 (3,171) (236,401) 499,055 68,304 (80,417) (12,113) 4,102 26,180 10,462 (3,117) 7,345 31,485 60,233 40,681 (25,204) 15,477 (45,526) 90,484 26,292 (107,413) (81,121) (34,220) 95,625 262,654 $ 30,282 - 146 - $ 91,718 $ 44,958 $ 61,405 CHILDREN'S HEALTH INSURANCE $ $ 54,947 2,045 56,992 INSPECTION & REGULATION $ 27,787 748 56,882 628 531 1,494 928 88,998 GAME & FISH $ 1,017 672 12,186 22,382 1,391 306 169 1,411 39,534 PARKS $ 1,057 1,568 215 1,134 188 4,162 OTHER SPECIAL REVENUE COMMERCE $ 1,920 1,779 8 20,960 24,667 $ 272,204 7,121 6,396 21,296 4,038 2,043 36,362 22,903 372,363 TOTAL $ 280,908 2,074 27,720 159,543 74,588 149,632 41,072 32,771 81,722 52,207 902,237 69,198 - 79,171 - 40,298 10,880 17,659 - 65,760 903 271,005 34,016 83,833 270,868 80,074 515,641 68,137 85,297 69,198 25 568 79,764 26 4 6,297 46,625 1,746 12,626 6 29 17,694 16 4 882 372,586 80 9 17,052 1,120,991 (12,206) 9,234 (7,091) (8,464) 6,973 10,700 (267) 10,433 (1,773) 7,542 782 (6,468) (5,686) 3,548 83,875 9,217 (600) 8,617 1,526 39,033 8,769 (528) 8,241 (223) 36,693 2,180 (3,061) (881) 6,092 72,106 5,769 $ 87,423 $ 40,559 $ 36,470 - 147 - $ 78,198 $ (223) (218,754) 15,619 (14,880) 739 516 128,786 193,253 (251,723) 6,350 (52,120) (270,874) 1,139,612 129,302 $ 868,738 NON-MAJOR GOVERNMENTAL FUNDS DEBT SERVICE FUNDS The Department of Transportation Fund administers the payment of principal and interest on the 1991 Series A and 1992 Series B State of Arizona Subordinated Highway Revenue Bond issues, the 1993 Series State of Arizona Highway Revenue Refunding Bond issue, the 1993 Series A and 1993 Series B State of Arizona Subordinated Highway Revenue Refunding Bond issues, and the Series 1999 and 2001 State of Arizona Highway Revenue Bond issues. The Maricopa Regional Area Road Fund administers the payment of principal and interest on the 1988 Series A, 1992 Series A Refunding, 1992 Series B, 1998 Series A and 2000 Series Transportation Board of the State of Arizona Transportation Excise Tax Revenue Bond issues, the 1995 Series A and 1999 Series Transportation Board of the State of Arizona Subordinated Transportation Excise Tax Revenue Bond issues, and the 1993 Series and 1995 Series B Transportation Board of the State of Arizona Subordinated Transportation Excise Tax Revenue Refunding Bond issues. The Certificates of Participation Fund administers the payment of principal and interest on the State of Arizona Certificates of Participation series 92B, 93B, 2001A & B, 2002A and AHCCCS Certificates. The School Facilities Debt Instrument Fund administers the payment of principal and interest on the State of Arizona School Facilities Board Education Transaction Privilege Series 2001 Revenue Bonds. The Grant Anticipation Notes Fund administers the payment of principal and interest on Series 2000A and Series 2001A Arizona Transportation Board Grant Anticipation Notes. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR DEBT SERVICE FUNDS JUNE 30, 2002 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION ASSETS Cash and investments Interest receivable Restricted assets: Cash and cash equivalents Cash held by trustee Total Assets $ $ 2,492 $ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Total Liabilities Fund Balances: Reserved for: Continuing appropriations Debt service Total Fund Balances Total Liabilities and Fund Balances 533 MARICOPA RARF $ 3,025 CERTIFICATES OF PARTICIPATION 268 $ 19,500 $ SCHOOL FACILITIES DEBT INSTRUMENT 19,768 5,183 - $ 13,147 $ 18,330 GRANT ANTICIPATION NOTES 17,795 170 $ $ 17,965 - $ - - 3 3 - - - 3,025 3,025 19,765 19,765 158 18,172 18,330 17,965 17,965 - 3,025 $ 19,768 - 150 - $ 18,330 $ 17,965 $ - TOTAL $ 22,978 971 21,992 13,147 $ 59,088 3 3 158 58,927 59,085 $ 59,088 - 151 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR DEBT SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION REVENUES Taxes: Sales Earnings on investments Other Total Revenues EXPENDITURES Current: Transportation Debt service: Principal Interest and other fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Refunding bonds issued Payment to refunded bond escrow agent Premium on bonds issued Refunding certificates of participation issued Payment to refunded certificate of participation escrow agent Certificates of participation issued Premium on certificates of participation issued Total Other Financing Sources Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ MARICOPA RARF SCHOOL FACILITIES DEBT INSTRUMENT CERTIFICATES OF PARTICIPATION GRANT ANTICIPATION NOTES 1,379 1,379 2,527 2,527 1,681 92 1,773 75,787 2,030 377 78,194 - 488 83 - - 1 45,365 38,534 84,387 163,455 35,445 198,983 12,460 11,458 23,918 43,035 26,962 69,997 10,181 10,182 (83,008) (196,456) (22,145) 8,197 (10,182) 83,617 74,250 (77,135) 3,378 - 198,056 - 28,046 (3,730) 71,051 9,768 - 10,181 - 84,110 1,102 1,923 198,056 1,600 18,165 (65,087) 4,933 2,429 37,642 15,497 2,833 9,768 17,965 - 10,181 (1) 1 3,025 $ - 152 - 19,765 $ 18,330 $ 17,965 $ - TOTAL 75,787 7,617 469 83,873 572 264,315 122,580 387,467 (303,594) 329,668 (3,730) 74,250 (77,135) 3,378 71,051 (65,087) 4,933 2,429 339,757 36,163 22,922 $ 59,085 - 153 - NON-MAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUNDS The Department of Transportation Financed Fund administers the bond proceeds from the State of Arizona Highway Revenue Bond Series 2001 and 2002. These monies are expended for the construction of Federal, State and local highways. The Maricopa Regional Area Road Financed Fund administers the bond proceeds from the Transportation Board of the State of Arizona Transportation Excise Tax Revenue Bond Series 2000 and 2001. These monies are spent on the construction of State highways within Maricopa County. The Grant Anticipation Notes Financed Fund administers proceeds from the Series 2000A and Series 2001A Arizona Transportation Board Grant Anticipation Notes. These monies are expended for the acquisition of right-of-way purchase, or construction of certain controlled access highways within Maricopa County. Certificates of Participation Financed Fund administers the proceeds for the State’s Certificates of Participation series 2002A. These monies are expended on various projects including new building construction, development of the Human Resource Information System, and the retiring of former Certificates of Participation. General Fund Financed Fund administers proceeds from the Arizona State Hospital Capital Fund. These monies are expended for demolition, renovation and construction projects of the Arizona State Hospital. Special Revenue Funds Financed Fund administers some of the proceeds from the Luxury Tax on cigarettes, other tobacco products, and alcoholic beverages. These monies are expended for capital improvements to existing prisons. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2002 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION FINANCED ASSETS Cash and investments Receivables, net of allowances: Taxes Interest Other Restricted assets: Cash and cash equivalents Cash held by trustee Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to other Funds Total Liabilities $ $ - $ GENERAL FUND FINANCED CERTIFICATES OF PARTICIPATION FINANCED - $ - $ 24,337 607 - 15 - 153 - - 102 - 64,292 - 4,674 - 20,448 - 53,088 - $ 64,899 $ 4,689 $ 20,601 $ 53,088 $ 24,439 $ 6,912 6,912 $ 3,234 3,234 $ 2,646 2,646 $ - $ 38 22 60 Fund Balances: Reserved for: Highway construction Other construction Continuing appropriations Unreserved Total Fund Balances Total Liabilities and Fund Balances - GRANT ANTICIPATION NOTES FINANCED MARICOPA RARF FINANCED 57,987 57,987 $ 64,899 1,455 1,455 $ 4,689 - 156 - 17,955 17,955 $ 20,601 53,088 53,088 $ 53,088 20,678 3,701 24,379 $ 24,439 SPECIAL REVENUE FUNDS FINANCED $ TOTAL 42,177 $ 66,514 1,955 106 3 1,955 983 3 - 89,414 53,088 $ 44,241 $ 211,957 $ 1,147 20 2 1,169 $ 13,977 42 2 14,021 13,411 29,661 43,072 $ 44,241 77,397 53,088 34,089 33,362 197,936 $ 211,957 - 157 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR CAPITAL PROJECTS FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION FINANCED REVENUES Taxes: Property Motor vehicle and fuel Other Licenses, fees and permits Earnings on investments Total Revenues GRANT ANTICIPATION NOTES FINANCED MARICOPA RARF FINANCED CERTIFICATES OF PARTICIPATION FINANCED GENERAL FUND FINANCED 2,842 2,842 604 604 3,173 3,173 - 1,632 1,632 EXPENDITURES Debt service: Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures 134,585 134,585 75,264 75,264 115,129 115,129 507 11,920 12,427 29,872 29,872 (131,743) (74,660) (111,956) (12,427) (28,240) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Bonds issued Premium on bonds issued Certificates of participation issued Premium on certificates of participation issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning, as restated (834) 75,990 3,958 79,114 (52,629) 110,616 (183) 66,010 2,806 68,633 (6,027) 7,482 (2,881) (2,881) (114,837) 132,792 63,270 2,245 65,515 53,088 - 20,000 20,000 (8,240) 32,619 Fund Balances - Ending $ 57,987 $ 1,455 - 158 - $ 17,955 $ 53,088 $ 24,379 SPECIAL REVENUE FUNDS FINANCED $ TOTAL 186 7,994 24,922 120 1,307 34,529 186 7,994 24,922 120 9,558 42,780 7,573 7,573 507 374,343 374,850 26,956 (332,070) 3,600 (67,351) (63,751) (36,795) 79,867 23,600 (71,249) 142,000 6,764 63,270 2,245 166,630 (165,440) 363,376 43,072 $ 197,936 - 159 - NON-MAJOR ENTERPRISE FUNDS Enterprise Funds account for operations (a) financed and operated in a manner similar to private business enterprises, where the State intends that the cost of providing goods or services to the general public be financed or recovered primarily through service charges, or (b) where the State decides that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Arizona Industries for the Blind Fund accounts for the manufacturing, sale, distribution and marketing of products manufactured by employees at training centers, workshops, business enterprises and home industries programs for the training and employment of adaptable visually impaired persons. The Arizona Correctional Industries Fund employs prison inmates in its manufacturing, service and agricultural operations for the sale of goods and services primarily to other State agencies (including the Arizona Department of Corrections) and political subdivisions. The Arizona Highways Magazine Fund publishes and markets the Arizona Highways Magazine and various other products that promote the State of Arizona. The Coliseum & Exposition Center Fund provides rental space to a variety of entertainment and promotional lessees, and sponsors the annual State Fair. Highway Expansion & Extension Loan Program provides the state and communities in Arizona a new financing mechanism to stretch limited transportation dollars and bridge the gap between needs and available revenues. The Healthcare Group of Arizona administers prepaid medical coverage primarily to small, uninsured businesses with 2 to 50 employees and employees of political subdivisions. The HCGA processes premium billing, collections and fund disbursement, and data analysis and is responsible for the regulatory oversight of the health plans. The Other Enterprise Funds consist of the Arizona Historical Society Revolving Fund, State Hospital Revolving Fund, and the State Home for Veterans Trust Fund. STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS JUNE 30, 2002 (Expressed in Thousands) ASSETS Current Assets: Cash and investments Receivables, net of allowances: Interest Loan and note Other Due from U.S. Government Due from other Funds Inventories, at cost Other current assets Total Current Assets ARIZONA ARIZONA COLISEUM & INDUSTRIES CORRECTIONAL HIGHWAYS EXPOSITION & EXTENSION FOR THE BLIND INDUSTRIES MAGAZINE CENTER LOAN PROGRAM $ Noncurrent Assets: Restricted cash and cash equivalents Loan and note receivables, net of allowances Capital assets: Land, construction in progress and collections Depreciable buildings, property and equipment Less: accumulated depreciation Total Noncurrent Assets Total Assets 302 $ Noncurrent Liabilities: Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Loans and other financial assistance Other purposes Unrestricted $ 4,801 $ 2,301 $ 5,442 $ - 814 50 7 3,639 4,812 29 2,260 2,632 52 9,774 8 504 2,810 773 6,396 58 137 33 5,670 666 51,019 730 52,415 - - - 333 - 141,335 55,100 182 6,452 (4,575) 2,059 6,871 LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to others Due to other Funds Deferred revenue Current portion of other long-term liabilities Total Current Liabilities Total Net Assets HIGHWAY EXPANSION ARIZONA 1,098 8,092 (6,151) 3,039 12,813 8 3,406 (1,975) 1,439 7,835 165 24,421 (18,727) 6,192 11,862 196,435 248,850 1,423 96 7 1,526 438 126 232 796 286 60 4,411 117 4,874 93 53 177 323 4 20,000 17 20,021 172 172 1,698 796 4,874 323 145,536 145,536 165,557 2,059 3,039 1,439 5,859 - 3,114 8,978 1,522 5,680 83,293 - 5,173 $ - 162 - 12,017 $ 2,961 $ 11,539 $ 83,293 HEALTHCARE GROUP OF ARIZONA $ OTHER 4,032 $ 1,631 $ 18,509 21 1,914 5,967 2 901 107 2,641 763 51,019 4,637 50 2,651 9,188 858 87,675 3,008 - - 144,676 55,100 76 (63) 3,021 8,988 $ TOTAL 980 12,690 (2,234) 11,436 14,077 2,433 55,137 (33,725) 223,621 311,296 30 866 3,009 2,841 37 6,783 84 165 249 2,354 1,205 165 23,009 7,252 587 34,572 6,783 249 145,536 172 145,708 180,280 13 8 12,417 2,182 10 13,820 83,293 2,182 33,124 2,205 $ 13,828 $ 131,016 - 163 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NON-MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) HIGHWAY ARIZONA ARIZONA ARIZONA COLISEUM & INDUSTRIES CORRECTIONAL HIGHWAYS EXPOSITION & EXTENSION FOR THE BLIND INDUSTRIES MAGAZINE CENTER LOAN PROGRAM EXPANSION OPERATING REVENUES Sales and charges for services Intergovernmental Licenses, fees and permits Earnings on investments Other Total Operating Revenues 15,237 554 3 15,794 17,192 17,192 9,605 381 9,986 10,159 1,088 11,247 1,246 1,246 OPERATING EXPENSES Cost of sales and benefits Personal services Contractual services Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) 11,122 2,406 840 464 248 446 15,526 268 14,737 1,025 36 720 481 16,999 193 6,640 2,805 433 322 501 10,701 (715) 1,696 4,420 2,248 1,091 369 1,185 11,009 238 251 140 4,874 5,265 (4,019) NON-OPERATING REVENUES (EXPENSES) Interest income (Loss) on sale of fixed assets Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers 1 1 232 232 84 (1) 83 172 172 5,540 5,540 269 425 (632) 410 1,521 CONTRIBUTIONS AND TRANSFERS Gifts and donations Transfers in Transfers out Total Transfers 125 125 8 (2,000) (1,992) - - 394 4,779 (1,567) 13,584 410 11,129 1,521 81,772 Change in Net Assets Total Net Assets - Beginning, as restated Total Net Assets - Ending $ 5,173 $ 12,017 - 164 - (632) 3,593 $ 2,961 $ 11,539 $ 83,293 HEALTHCARE GROUP OF ARIZONA OTHER 21,019 21,019 10,909 700 64 11,673 84,121 554 700 1,246 1,536 88,157 23,264 624 209 7 169 24,273 (3,254) 368 8,142 387 341 159 1,994 11,391 282 57,827 19,673 4,293 2,945 776 9,650 95,164 (7,007) 17 17 6,281 (1) 6,280 (3,019) 299 (727) 5,055 (3,023) 2,032 253 253 8 5,433 (5,023) 418 (987) 3,192 552 13,276 (309) 131,325 235 235 $ TOTAL 2,205 $ 13,828 $ 131,016 - 165 - STATE OF ARIZONA COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) ARIZONA ARIZONA CORRECTIONAL INDUSTRIES INDUSTRIES FOR THE BLIND CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Receipts from program loans Receipts from other operating activities Program loans made to local governments Payments to employees Payments to suppliers Net cash provided (used) by operating activities $ 15,785 $ 3 (2,301) (13,326) 161 ARIZONA HIGHWAYS MAGAZINE 17,608 $ (946) (16,746) (84) HIGHWAY EXPANSION & EXTENSION LOAN PROGRAM COLISEUM & EXPOSITION CENTER 9,612 $ 381 (7,352) (2,812) (171) 10,250 $ 1,088 (4,407) (5,494) 1,437 45,889 (74,337) (238) (28,686) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other Funds Transfers to other Funds Net Cash Provided (Used) by Non-capital Financing Activities 118 - (2,000) - - - 118 (2,000) - - - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets Net Cash (Used) by Capital and Related Financing Activities (27) (370) (6) (2,027) - (2,027) - (27) (370) (6) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends from investments Net Cash Provided by Investing Activities 1 1 248 248 82 82 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning, as restated 253 49 Cash and Cash Equivalents - Ending Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation and amortization Other non-cash expenses Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances (Increase) decrease in due from other Funds (Increase) decrease in inventories, at cost (Increase) decrease in other current assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase in due to others (Decrease) in due to other Funds (Decrease) in deferred revenue Increase (decrease) in other current liabilities Increase in long-term debt Increase in other long-term liabilities Net Cash Provided (Used) by Operating Activities (2,206) 7,007 (95) 2,396 $ 302 $ 4,801 $ $ 268 $ 193 $ 2,301 (352) 6,127 (23,061) 164,396 5,775 $ (715) $ 238 $ 720 - 322 - (75) 69 (361) (309) 96 9 416 (427) (2) (905) 57 (158) 22 17 115 (51) 158 (124) (10) 117 (84) $ 5,625 5,625 $ 464 - $ 161 $ SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Donated equipment $ Total noncash investing, capital and financing activities $ - $ 8 $ - - $ 8 $ - - 166 - 238 238 1,091 - (4,019) - 91 (29) (20) 33 33 (171) $ 141,335 (69,323) (178) (4) (100,715) 145,536 17 1,437 $ (28,686) $ - $ - $ - $ - HEALTHCARE GROUP OF ARIZONA $ $ $ OTHER 20,449 $ (587) (24,006) (4,144) 11,133 $ 33 (8,142) (1,570) 1,454 84,837 45,889 1,505 (74,337) (23,973) (63,954) (30,033) 3,141 (14) 253 - 3,512 (2,014) 3,127 253 1,498 - (980) (3,410) - (980) (3,410) 257 257 16 16 6,467 6,467 (760) 7,800 743 888 7,040 (25,478) 188,663 $ 1,631 $ (3,254) $ 282 $ 7 - 341 1,156 (19) 30 (394) (551) 37 $ TOTAL (7,007) 2,945 1,156 (507) 85 10 34 53 - (4,144) $ 163,185 (69,400) (109) (588) (72) (992) (389) 53 (100,715) (561) (125) 145,536 235 1,454 $ (30,033) $ - $ - $ 8 $ - $ - $ 8 - 167 - INTERNAL SERVICE FUNDS Internal Service Funds account for the financing of goods and services provided by one State department or agency to other State departments or agencies on a cost-reimbursement basis. The Risk Management Fund provides insurance coverage to all State agencies using an optimal combination of self-insurance and private excess insurance. It includes the Workers' Compensation section that receives monies from State agencies and uses these monies to pay for insurance and risk management services including loss control services and self-insured liability losses. The Transportation Equipment Fund administers the purchase, storage and distribution of supplies, equipment and furniture for other Department of Transportation Funds. The Employee Benefits Fund (HITF) administers the State’s benefits program available to State employees and retirees. The Technologies and Telecommunications Fund receives monies from State agencies for services related to the operation of the data processing and telecommunications programs. The Sick Leave Liability Fund (RASL) accounts for monies paid out to retirees for their accumulated sick leave. The Motor Pool Fund receives monies from State agencies for use of State vehicles and uses these monies for operation of the State Motor Pool. The Other Internal Service Fund consists of the Department of Administration’s Special Services Revolving Fund, State Surplus Property Fund, Federal Surplus Property Fund, Personnel Division Fund, and Construction Insurance Fund; and the Government Information Technology Agency’s Information Technology Fund. STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2002 (Expressed in Thousands) TECHNOLOGIES ASSETS Current Assets: Cash and investments Receivables, net of allowances: Interest Other Due from local governments Due from other Funds Inventories, at cost Other current assets Total Current Assets RISK TRANSPORTATION EMPLOYEE & TELE- SICK LEAVE MANAGEMENT EQUIPMENT BENEFITS COMMUNICATIONS LIABILITY $ $ 3,711 57 1,387 30,526 Noncurrent Assets: Capital assets: Land, construction in progress and collections Depreciable buildings, property and equipment Less: accumulated depreciation Total Noncurrent Assets Total Assets Noncurrent Liabilities: Accrued insurance losses Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted $ $ 23 38 168 2,309 6,249 435 (179) 256 30,782 LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to U.S. Government Due to others Due to other Funds Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities Total Net Assets 29,082 115,111 (72,001) 43,110 49,359 45,445 $ 8,618 $ 3,333 6,340 51,785 2,708 1,279 35 12,640 2 1,514 4,849 51,785 873 36,967 (27,404) 10,436 23,076 4,849 3,148 82 10 250 3,490 278 225 2 2,332 464 3,301 29,413 244 29,657 2,577 193 2 509 742 4,023 1,287 838 4,759 6,884 234,331 234,331 237,821 3,361 155 3,516 6,817 29,657 979 979 5,002 4,823 4,823 11,707 256 (207,295) 37,417 5,125 22,128 8,948 9,126 (6,858) (207,039) $ 42,542 - 170 - $ 22,128 $ 18,074 $ (6,858) MOTOR POOL $ $ OTHER 7,817 $ TOTAL 3,769 $ 101,775 1,416 605 20 4 9,862 2 287 61 396 2,768 7,283 25 10,810 38 2,113 2,725 5,708 123,194 41,370 (22,673) 18,697 28,559 3,451 (2,527) 924 8,207 873 197,334 (124,784) 73,423 196,617 497 11 1 26 535 351 182 113 260 10 916 37,551 693 838 113 519 2,841 6,251 48,806 535 123 123 1,039 234,331 4,340 5,101 243,772 292,578 18,697 9,327 924 6,244 66,242 (162,203) 28,024 $ 7,168 $ (95,961) - 171 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) TECHNOLOGIES RISK TRANSPORTATION EMPLOYEE & TELE- SICK LEAVE MANAGEMENT EQUIPMENT BENEFITS COMMUNICATIONS LIABILITY OPERATING REVENUES Sales and charges for services Other Total Operating Revenues 77,148 296 77,444 29,721 907 30,628 345,703 345,703 32,137 414 32,551 9,360 9,360 OPERATING EXPENSES Cost of sales and benefits Personal services Contractual services Aid to local governments Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) 4,224 26,410 60 43,653 1,369 75,716 1,728 10,792 10,140 603 8,274 605 952 31,366 (738) 340,424 340,424 5,279 11,273 10,172 805 4,417 245 1,959 28,871 3,680 7,994 7,994 1,366 - 166 (330) (164) - - - 1,728 (902) 5,279 3,680 1,366 6 (545) (539) (1,089) (1,089) - 1,189 (208,228) (1,991) 44,533 5,279 16,849 (207,039) $ 42,542 NON-OPERATING REVENUES (EXPENSES) Gain on sale of fixed assets Interest income Interest expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers CONTRIBUTIONS AND TRANSFERS Gifts and donations Transfers in Transfers out Total Contributions and Transfers Change in Net Assets Total Net Assets - Beginning, as restated Total Net Assets - Ending $ - 172 - $ 22,128 (233) (233) (3,464) (3,464) 3,447 14,627 $ 18,074 (2,098) (4,760) $ (6,858) MOTOR POOL OTHER 13,355 51 13,406 17,344 3,563 20,907 524,768 5,231 529,999 3,386 568 134 5,275 928 1,005 11,296 2,110 3,458 8,563 3,553 51 265 6,364 2,505 24,759 (3,852) 377,327 33,667 31,505 51 18,291 51,795 7,790 520,426 9,573 143 143 $ TOTAL 20 20 143 186 (330) (1) 2,253 (3,832) 9,572 452 (3,010) (2,558) (6,873) (6,873) 452 6 (15,214) (14,756) (305) 28,329 (10,705) 17,873 (5,184) (90,777) 28,024 $ 7,168 $ (95,961) - 173 - STATE OF ARIZONA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from interfund services / premiums Receipts from other operating activities Payments to suppliers and insurance companies Payments to retirees Payments to employees Payments to local governments Payments for other operating activities RISK TRANSPORTATION EMPLOYEE MANAGEMENT EQUIPMENT BENEFITS $ Net Cash Provided (Used) by Operating Activities 1,198 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Grants and gifts received Transfers from other Funds Interest Paid Transfers to other Funds Net Cash (Used) by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt, installment purchase contracts and capital leases Acquisition and construction of capital assets Principal paid on capital debt, installment purchase contracts and capital leases Net Cash (Used) by Capital and Related Financing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning, as restated 346,520 $ (335,478) 11,042 33,687 414 (16,813) (10,114) (17) 7,157 (330) (1,089) - (233) (539) (1,419) - (233) (183) 362 (7,172) - 1,488 (4,438) (2,152) - (8,962) - (2,950) - 198 - - - 198 - - 11,042 34,403 3,974 4,644 476 28,606 $ COMMUNICATIONS 6 (545) (183) Net Cash Provided by Investing Activities 30,364 $ 907 (12,581) (10,236) 8,454 - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends from investments Cash and Cash Equivalents - Ending 77,441 $ (72,043) (4,200) - TECHNOLOGIES & TELE- 29,082 - 174 - (1,729) 5,440 $ 3,711 $ 45,445 $ 8,618 $ SICK LEAVE MOTOR LIABILITY POOL 10,196 $ (7,607) (166) - 14,085 $ 51 (5,786) (564) - TOTAL 17,406 $ 3,563 (13,006) (8,691) (51) - 529,699 4,935 (455,707) (7,607) (33,971) (51) (17) (779) 37,281 2,423 7,786 (3,464) 452 (3,010) (6,873) 452 6 (330) (15,214) (3,464) (2,558) (6,873) (15,086) (2,288) (212) 1,850 (14,293) (8) (2,160) (220) (14,603) - - - (2,288) - - 22 220 - - 22 220 (1,041) 4,374 $ OTHER 3,333 2,940 4,877 $ 7,817 (7,850) 11,619 $ 3,769 7,812 93,963 $ 101,775 (Continued) - 175 - STATE OF ARIZONA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation and amortization Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances Decrease in due from local governments Decrease in due from other Funds Decrease in inventories, at cost (Increase) decrease in other current assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase in due to U.S. Government (Decrease) in due to local governments Increase in due to others Increase (decrease) in due to other Funds (Decrease) in deferred revenue Increase in other current liabilities Increase in long-term accrued insurance losses Increase in other long-term liabilities Net Cash Provided (Used) by Operating Activities SCHEDULE OF NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Assets acquired under capital leases Total noncash investing, capital and financing activities RISK TRANSPORTATION EMPLOYEE MANAGEMENT EQUIPMENT BENEFITS $ 1,728 $ 60 (738) $ 8,274 (3) (610) (368) 7 (287) 654 17 5,279 TECHNOLOGIES & TELECOMMUNICATIONS $ - 49 496 98 140 81 (96) (7) 2 155 3,680 4,417 401 416 5,975 (1,029) - 600 950 (19) (2,520) 2 (9) 56 $ 1,198 $ 8,454 $ 11,042 $ 7,157 $ - $ - $ - $ 1,571 $ - $ - $ - $ 1,571 - 176 - $ SICK LEAVE MOTOR LIABILITY POOL 1,366 $ - OTHER 2,110 $ 5,275 (2) (1,514) (124) (166) 838 1,287 738 360 370 (4) (329) 1 3 TOTAL (3,852) $ 9,573 265 18,291 (44) 110 169 2,333 316 (138) 113 (57) (4) 10 1,361 496 1,944 309 186 3,031 (390) 838 (7) 113 (1,380) (4) 1,287 654 979 $ 2,423 $ 7,786 $ (779) $ 37,281 $ - $ - $ - $ 1,571 $ - $ - $ - $ 1,571 - 177 - PENSION TRUST FUNDS Pension Trust Funds account for transactions of the four public employee retirement systems for which the State acts as trustee. The Arizona State Retirement System is a cost-sharing, multiple-employer pension system that benefits employees of public schools, the State and its political subdivisions. The Public Safety Personnel Retirement System is an agent multiple-employer pension system that benefits fire fighters and police officers employed by the State and its political subdivisions. The Elected Officials' Retirement Plan is a cost-sharing, multiple-employer pension plan that benefits all elected State and county officials and judges and certain elected city officials. The Corrections Officer Retirement Plan is an agent multiple-employer pension plan that benefits town, city and county detention officers and certain employees of the State’s Department of Corrections and Department of Juvenile Corrections. STATE OF ARIZONA COMBINING STATEMENT OF FIDUCIARY NET ASSETS PENSION TRUST FUNDS JUNE 30, 2002 (Expressed in Thousands) STATE PUBLIC ELECTED RETIREMENT SAFETY OFFICIALS' CORRECTIONS OFFICER TOTAL ASSETS Cash and cash equivalents $ 13,012 $ - $ - $ - $ 13,012 Receivables, net of allowances: Accrued interest and dividends Securities sold Forward contract receivable Contributions Court fees Miscellaneous receivables Total receivables 74,050 24,778 1,437 3,374 103,639 188,868 - - - 188,868 37,659 - - - 37,659 9,210 7,727 89 264 17,290 - - 288 - 288 998 - - - 998 310,785 32,505 1,814 3,638 348,742 Investments, at fair value: Temporary investments 2,304,740 - - - 2,304,740 United States Government securities 3,992,595 458,710 37,487 83,768 4,572,560 Corporate bonds 1,620,530 659,356 45,294 103,402 2,428,582 - 135,430 10,495 29,486 175,411 13,106,626 2,210,717 162,638 341,649 15,821,630 Corporate notes Corporate stocks Real estate mortgages and contracts 30,213 - - - 30,213 Collateral investment pool - 1,024,097 83,769 173,550 1,281,416 Other investments - 198,471 7,612 22,817 228,900 Money market fund - 672 227 1,568 2,467 Total investments 21,054,704 4,687,453 347,522 756,240 26,845,919 - 457 - 21,378,501 4,720,415 349,336 759,878 27,208,130 39,898 - - - 39,898 1,673,524 1,024,097 83,769 173,550 2,954,940 455,270 - - - 455,270 2,168,692 1,024,097 83,769 173,550 3,450,108 Property and equipment, net of accumulated depreciation Total Assets - 457 LIABILITIES Accounts payable Obligation under securities loan agreements Other Total Liabilities NET ASSETS Held in Trust for Pension Benefits $ 19,209,809 $ 3,696,318 - 180 - $ 265,567 $ 586,328 $ 23,758,022 STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS PENSION TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) STATE RETIREMENT ADDITIONS: Member contributions Employer contributions Member reimbursements Court fees $ Investment income: Net (decrease) in fair value of investments Interest income Dividends Real estate $ (2,228,394) 311,212 149,442 5,885 Other investment income ELECTED OFFICIALS' 62,487 51,983 - Other additions Total Additions DEDUCTIONS: Retirement and disability benefits Death benefits Refunds to withdrawing members, including interest Administrative expense Other deductions Total Deductions Change in net assets held in trust for pension benefits Net Assets - Beginning $ $ - 11,689 46,298 (2,509,770) 66 25,745 (100,518) 434 263,828 227,469 49,365 3,485 (3,179,589) 437,274 168,673 5,885 340 (100,452) (48,685) 6,184 29,532 7,101 - TOTAL (118,847) 15,650 2,405 - 29 (654,570) 1,467 $ 167 (48,656) 432 36,335 (1,768,077) 3,596 172 3,485 - 2,149 (654,138) 25,218 CORRECTIONS OFFICER (57,508) 7,541 1,144 - - 43,642 (1,706,524) Less investment expenses: Investment activity expenses Security lending expenses: Interest expense Net investment income (loss) $ (774,840) 102,871 15,682 - 11,689 Securities lending income Total investment income (loss) Net Assets - Ending 168,213 168,213 49,365 - PUBLIC SAFETY 36,335 (2,571,850) - 8,085 (1,380,819) (533,916) (40,998) (63,885) (2,019,618) 1,054,967 14,078 185,035 - 19,529 - 17,576 - 1,277,107 14,078 42,765 18,532 9,573 6,058 735 - 14,271 397 735 63,088 19,735 10,308 1,139,915 191,828 19,594 32,979 1,384,316 (2,520,734) 21,730,543 (725,744) 4,422,062 (60,592) 326,159 (96,864) 683,192 (3,403,934) 27,161,956 19,209,809 $ 3,696,318 - 181 - (6) 71 - $ 265,567 $ 586,328 $ 23,758,022 INVESTMENT TRUST FUNDS Investment Trust Funds account for assets held by the State in a trustee capacity for local governments and political subdivisions, of the State of Arizona, which have elected to invest idle cash with the State Treasurer’s Office. The Treasurer acts as trustee for the deposits made by participants. Central Arizona Water Conservation District was an Investment Trust Account composed of corporate debt and United States Government securities. The Central Arizona Water Conservation District was the only participant in the account. As of June 30, 2002, all assets had been transferred to the Local Government Investment Pool. Local Government Investment Pool is an Investment Trust Account composed of corporate debt, negotiable certificates of deposit and United States Government securities. Local Government Investment Pool-Government is an Investment Trust Account composed of repurchase agreements and United States Government securities. All investments of the fund are backed by the full faith and credit of the United States Government. STATE OF ARIZONA COMBINING STATEMENT OF FIDUCIARY NET ASSETS INVESTMENT TRUST FUNDS JUNE 30, 2002 (Expressed in Thousands) LOCAL CENTRAL ARIZONA WATER ASSETS Receivables, net of allowances: Accrued interest and dividends Total receivables Total Assets LIABILITIES Due to local governments Total Liabilities GOVERNMENT GOVERNMENT INVESTMENT CONSERVATION INVESTMENT POOL- DISTRICT POOL GOVERNMENT - Investments, at fair value: United States Government securities $ Corporate bonds Total investments LOCAL - 8,640 8,640 $ 231,637 3,127,673 3,359,310 TOTAL 109 109 $ 217,315 217,315 8,749 8,749 $ 448,952 3,127,673 3,576,625 - 3,367,950 217,424 3,585,374 - 11,550 4 11,554 - 11,550 4 11,554 NET ASSETS Held in trust for pool participants $ Net assets consist of: Participant shares outstanding Participants' net asset value (net assets/shares outstanding) - $ - $ - 3,356,400 $ 3,356,400 $ 1.00 $ - 184 - 217,420 217,420 1.00 $ 3,573,820 3,573,820 STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS INVESTMENT TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) LOCAL ADDITIONS: Investment income: Net (decrease) in fair value of investments Interest income Total investment income $ Less: Investment activity expenses Net investment income Capital share and individual account transactions: Shares sold Reinvested interest income Shares redeemed Net capital share and individual account transactions LOCAL GOVERNMENT INVESTMENT WATER GOVERNMENT CONSERVATION INVESTMENT POOL- DISTRICT POOL GOVERNMENT DEDUCTIONS: Dividends to investors Total Deductions Change in net assets held in trust for pool participants Net Assets - Beginning (797) $ 85,967 85,170 (90) $ 5,722 5,632 (1,479) 99,644 98,165 152 7,211 2,383 82,787 193 5,439 2,728 95,437 4,488,304 95,031 (4,286,523) 258,450 6,219 (252,078) 4,828,327 109,730 (4,828,853) (200,199) 296,812 12,591 109,204 (192,988) 379,599 18,030 204,641 7,211 82,787 5,439 95,437 7,211 82,787 5,439 95,437 296,812 3,059,588 12,591 204,829 109,204 3,464,616 (200,199) 200,199 $ TOTAL (592) $ 7,955 7,363 81,573 8,480 (290,252) Total Additions Net Assets - Ending CENTRAL ARIZONA - $ - 185 - 3,356,400 $ 217,420 $ 3,573,820 AGENCY FUNDS Agency Funds account for the receipt and disbursement of various taxes, deposits, deductions, and property collected by the State, where the State acts as an agent for distribution to other governmental units or organizations. The Treasurer Custodial Securities Fund consists of securities held by the State Treasurer for various State agencies as required by statute. The Other Treasurer Funds account for other various deposits made with the State Treasurer for investment purposes. The Other Funds consists of various funds where the State acts as an agent for distribution to other governmental units or organizations. STATE OF ARIZONA COMBINING STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2002 (Expressed in Thousands) TREASURER CUSTODIAL SECURITIES ASSETS Cash and investments $ Receivables, net of allowances: Interest Other Custodial securities in safekeeping Other assets Total Assets LIABILITIES Accounts payable Accrued liabilities Due to local governments Due to others Other liabilities Total Liabilities OTHER TREASURER FUNDS - $ 3,013,547 - 13,591 OTHER $ 39 - 238,643 TOTAL $ 130 876 2,215 252,234 169 876 3,013,547 2,215 $ 3,013,547 $ 13,630 $ 241,864 $ 3,269,041 $ 3,013,547 - $ 1,369 11,923 338 $ 13 31,995 1,363 76,430 132,063 $ 13 31,995 2,732 3,101,900 132,401 $ 3,013,547 $ 13,630 $ 241,864 $ 3,269,041 - 189 - STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) RESTATED BALANCE JULY 1, 2001 TREASURER CUSTODIAL SECURITIES Assets: Custodial securities in safekeeping Total Assets Liabilities: Due to others Total Liabilities ADDITIONS BALANCE JUNE 30, 2002 DELETIONS $ $ 3,018,291 3,018,291 $ $ 974,714 974,714 $ $ 979,458 979,458 $ $ 3,013,547 3,013,547 $ $ 3,018,291 3,018,291 $ $ 974,714 974,714 $ $ 979,458 979,458 $ $ 3,013,547 3,013,547 $ 44,984 $ 384,345 $ 415,738 $ 13,591 OTHER TREASURER FUNDS Assets: Cash and investments Interest receivable Total Assets Liabilities: Accounts payable Due to local governments Due to others Due to other Funds Other liabilities Total Liabilities 67 39 67 39 $ 45,051 $ 384,384 $ 415,805 $ 13,630 $ 7,078 11,716 26,069 188 45,051 $ 52,284 333,318 17,682 217 403,501 $ 52,284 339,027 17,475 26,069 67 434,922 $ 1,369 11,923 338 13,630 $ $ $ $ (Continued) - 190 - STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) RESTATED BALANCE JULY 1, 2001 OTHER AGENCY FUNDS Assets: Cash and investments Receivables, net of allowances: Interest Other Due from other Funds Other assets Total Assets Liabilities: Accounts payable Accrued liabilities Due to local governments Due to others Due to other Funds Other liabilities Total Liabilities COMBINED TOTAL ALL AGENCY FUNDS Assets: Cash and investments Receivables, net of allowances: Interest Other Due from other Funds Custodial securities in safekeeping Other assets Total Assets Liabilities: Accounts payable Accrued liabilities Due to local governments Due to others Due to other Funds Other liabilities Total Liabilities $ 117,182 $ 47 12,232 153 129,614 $ $ 1,789 26,686 1,434 73,445 1,824 24,436 129,614 $ 162,166 $ 114 12,232 153 3,018,291 3,192,956 $ $ 1,789 26,686 8,512 3,103,452 27,893 24,624 3,192,956 ADDITIONS $ 774,452 $ 130 882 2,215 777,679 $ $ 55,238 31,995 1,998 94,474 3,680 578,087 765,472 $ 1,158,797 $ 169 882 974,714 2,215 2,136,777 $ $ - 191 - 107,522 31,995 335,316 1,086,870 3,680 578,304 2,143,687 BALANCE JUNE 30, 2002 DELETIONS $ 652,991 $ 47 12,238 153 665,429 $ $ 238,643 $ 130 876 2,215 241,864 $ 57,014 26,686 2,069 91,489 5,504 470,460 653,222 $ 13 31,995 1,363 76,430 132,063 241,864 $ 1,068,729 $ 252,234 $ 114 12,238 153 979,458 2,060,692 $ 169 876 3,013,547 2,215 3,269,041 $ $ 109,298 26,686 341,096 1,088,422 31,573 470,527 2,067,602 $ $ $ 13 31,995 2,732 3,101,900 132,401 3,269,041 ARIZONA MINING AND MINERAL MUSEUM BUDGETARY COMPARISON SCHEDULE OTHER GOVERNMENTAL FUNDS STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) OTHER GOVERNMENTAL FUNDS Certificates of Deposit Debt Service General Fund Transfer 2nd Special Session Chapter 4 Accountancy Board Administrative Adjustments Operating Lump Sum Appropriation Department of Administration Employee Bus Subsidy Government Building Defibrillators Arizona State Hospital Construction FY00 - 01 Arizona State Hospital Construction FY01 - 02 Arizona State Hospital Construction FY99 - 00 ADJC HVAC Replacements/Renovations Administrative Adjustments ASPC at Douglas Wastewater Treatment ASPC Perryville Security Improvements ASPC Prison Beds - Globe Aspen Facility FY95 Build-Out New DJC Secure Care Complex Department of Corrections Building Renewal Department of Corrections Lock Replacement Department of Corrections Safety Improvements Department of Juvenile Corrections Building Renewal Department of Juvenile Corrections Medical Unit Florence - 400 Modular and Tent Beds FY96 - 97 Fort Grant Landfill Closure General Fund Transfer 1st Regular Session Chapter 232 General Fund Transfer 2nd Special Session Chapter 4 High Security Juvenile Facility New Prison Complex FY00 - 01 New Prison Complex FY99 - 00 New Prison Complex Planning Site Acquisition FY95 - 96 Operating Lump Sum Appropriation Prison Planning and Siting FY98 - 99 Southwest Regional Prison Complex FY96 - 97 Southwest Regional Prison Complex FY97 - 98 Southwest Regional Prison Complex FY98 - 99 Yuma Complex - 800 Male Beds FY95 - 96 Yuma Complex - 800 Male Beds FY96 - 97 PLTO 1 Backfill Agency Relocations PLTO 1 Project Management Sexually Violent Persons Facility Arizona Pioneers' Home Fire and Life Safety Arizona Pioneers' Home Plumbing Renovations Building Renewal Pioneers' Home Statewide Prison Maintenance FY93 - 94 Radiation Regulatory Agency Administrative Adjustments Medical Radiological Technology Board Attorney General Administrative Adjustments Administrative Adjustments Administrative Adjustments General Fund Transfer 2nd Special Session Chapter 4 $ - 194 - 0 FINAL BUDGET (Appropriation) $ 3,600,000 ACTUAL EXPENDITURE AMOUNTS $ 3,600,000 0 2,116,600 2,527 2,118,300 2,527 1,607,307 475,400 0 17,786,623 0 12,689,939 1,482,000 0 240,994 30,720 351,579 25,290 364,678 5,518,800 18,538,600 1,379,400 440,800 785,000 90 555,300 0 0 275,061 21,904,446 14,608,416 197,940 580,900 613,291 792 111,926 1,535,923 297,516 143,759 50,000 162,400 148,173 240,935 325,200 180,600 9,724 475,400 50,000 17,786,623 20,000,000 12,689,939 50,000 6,476 240,994 30,720 351,579 0 364,678 2,705,400 1,000,000 1,379,400 400 185,000 90 555,300 15,000,000 34,500,000 275,061 2 2,574,660 197,940 584,400 613,291 792 111,926 1,535,923 297,516 143,759 50,000 162,400 148,173 240,935 325,200 111,600 9,724 396,264 0 16,879,337 2,646,161 10,273,328 34,772 6,476 87,854 18,772 0 0 33,846 1,470,621 513,969 16,857 0 43,149 0 6,019 15,000,000 34,500,000 0 0 74,992 0 561,434 12,045 0 9,979 461,997 97 60,376 0 120,955 81,889 174,972 196,257 21,545 0 0 193,800 166 194,300 166 183,041 0 0 0 0 1,872 6,315 32,090 1,250,000 1,872 6,315 32,090 1,250,000 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Victims' Rights Implementation Fund Victims' Rights/Non Revert - HB 2427 Administrative Adjustments Administrative Adjustments Operating Lump Sum Appropriation Operating Lump Sum Appropriation Department of Agriculture Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Aquaculture Citrus, Fruit and Vegetable Standardization Commercial Feed Program Consulting and Training Dangerous Plants, Pests and Diseases Egg Inspection Fertilizer Materials Program General Fund Transfer 2nd Special Session Chapter 4 Livestock Custody Program Native Plant Program Organic Food Certification Pesticide Program Ratite Control Program Ratite General Fund FY98 - 99 Seed Law Program Wine Promotion Acupuncture Board of Examiners Operating Lump Sum Appropriation Appraisal Board Administrative Adjustments Operating Lump Sum Appropriation Arizona State University Drug and Gang Prevention Resource Center Automobile Theft Authority Administrative Adjustments Auto Theft Authority Grants Operating Lump Sum Appropriation Barber Examiners Board Administrative Adjustments Operating Lump Sum Appropriation Board of Behavioral Health Examiners Administrative Adjustments Operating Lump Sum Appropriation Board of Nursing Administrative Adjustments Operating Lump Sum Appropriation - 195 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 2,021,800 16,744,000 0 2,639,100 1,278,850 0 0 1,714,000 378,100 2,025,400 16,768,100 100,000 3,145,000 1,278,850 4,448 2,895 1,717,200 379,000 1,990,369 15,533,536 0 3,109,974 568,254 4,448 2,895 1,050,389 362,427 0 0 0 0 0 0 0 9,200 930,000 199,300 61,700 21,400 467,400 257,600 0 79,400 238,100 12,500 234,700 8,900 71,786 50,900 54,858 65 752 6,511 3,384 40,025 692 154 9,200 932,200 199,600 61,800 21,400 468,400 258,000 92,900 79,400 238,700 0 235,200 0 71,786 50,900 54,858 0 752 6,511 3,384 40,025 0 154 4,247 675,880 192,234 61,790 14,108 334,413 252,177 92,900 70,760 187,751 0 228,319 0 0 23,694 0 51,400 58,400 54,455 0 449,000 1,052 449,600 1,052 449,596 4,769,000 4,769,000 0 0 3,464,600 422,600 1,774 3,465,200 422,600 1,774 3,453,000 419,077 0 194,700 1,292 195,000 1,292 190,642 0 667,000 3,498 668,200 3,498 585,392 0 2,892,300 4,545 2,897,300 4,545 2,896,703 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Cosmetology Board Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Corporation Commission Administrative Adjustments Administrative Adjustments Administrative Adjustments General Fund Transfer 2nd Special Session Chapter 4 Hearing Division Salary Correction Investigation and Prosecution of Security Fraud Investment Management Act Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Pipeline Safety Inspection and Training Securities Revolving Fund Supplemental - Utility Audits 44th Leg 2nd RS Supplemental - Utility Audits 45th Leg 1st RS Utility Audits, Studies, Investigations and Rate Hearings FY00 - 01 Utility Audits, Studies, Investigations and Rate Hearings FY01 - 02 Utility Audits, Studies, Investigations and Rate Hearings FY97 - 98 Utility Audits, Studies, Investigations and Rate Hearings FY98 - 99 Chiropractic Examiners Board Administrative Adjustments Operating Lump Sum Appropriation Community Colleges Board Operating Lump Sum Appropriation Department of Corrections Administrative Adjustments General Fund Transfer 2nd Special Session Chapter 4 Inmate Education, Treatment and Work Programs Operating Lump Sum Appropriation Administration ASPC Yuma - Shingle Cocopah Dorms/Reseal Roof Health Care - Contingency Bed Openings Inspections and Investigations - Contingency Bed Openings Prison Management and Support Operating Lump Sum Appropriation Private Prisons - Contingency Bed Openings Security - Contingency Bed Openings Administrative Adjustments Administrative Adjustments Prison Management and Support Operating Lump Sum Appropriation Prison Operations and Services - Security Operating Lump Sum Appropriation Prison Operations and Services - Security Operating Lump Sum Appropriation State Charitable Penal and Reformatory Land Earnings - 196 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 56,992 1,604,500 56,992 1,607,100 8,460 1,242,057 0 0 0 0 1,036,600 165,599 739,100 9,498,900 1,785,700 36,000 73,000 3,147,800 4,498 380,270 131,556 12,776 14,943 1,000,000 1,037,600 165,599 740,000 9,506,000 1,786,400 36,000 73,000 3,149,500 4,498 380,270 131,556 12,776 14,943 1,000,000 738,638 0 732,951 8,991,771 1,733,969 0 73,000 2,847,051 0 0 62,500 62,500 380,000 380,000 0 38,000 38,000 0 8,000 8,000 0 0 346,900 2,441 377,500 2,441 336,196 167,700 168,000 160,473 0 0 5,829 1,000,000 5,829 1,000,000 449,300 155,700 0 626,400 88,700 449,300 0 54,000 8,500,000 0 369,923 0 0 7,677,583 0 1,113,800 5,719,300 4,519,000 0 0 1,083,500 0 0 14,020 56,677 1,043,700 0 0 14,020 56,677 1,375,000 0 0 0 1,375,000 1,366,823 270,000 0 270,000 262,260 105,241 26,924 (68,111) STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Department of Economic Security ADM Attorney General Legal Services ADM Operating Lump Sum ADM Operating Lump Sum Appropriation ADM Public Assistance Collections Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments DACS Domestic Violence Prevention DCYF Child Abuse Prevention DCYF Healthy Families DCYF Operating Lump Sum Appropriation DERS Independent Living Rehabilitation Services DERS JOBS DERS Operating Lump Sum Appropriation DERS Operating Lump Sum Appropriation FY01 - 02 DERS Vocational Rehabilitation Services Commission for the Deaf and Hard of Hearing Administrative Adjustments Operating Lump Sum Appropriation Relief Bill Department of Juvenile Corrections Administrative Adjustments Operating Lump Sum Appropriation Adobe Mountain - Repair Subfloor, Floor and Walls Adobe Mountain - Upgrade Fire Booster Pump Black Canyon Institution - Electrical System Repairs Catalina Mountain Institution - Replace Kitchen Floor Operating Lump Sum Appropriation Dispensing Opticians Board Operating Lump Sum Appropriation Board of Dental Examiners Administrative Adjustments Operating Lump Sum Appropriation Department of Education Basic State Aid Entitlement Department of Commerce CEDC Commission Administrative Adjustments Administrative Adjustments Advertising and Promotion Arizona Sonora Economic Development Study Economic Development Matching Funds International Trade Offices Lottery 1989 Main Street Minority and Women Owned Business National Law Center/Free Trade Oil Overcharge Administration Operating Lump Sum Appropriation Operating Lump Sum Appropriation - 197 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 80,700 0 85,000 217,300 0 0 0 0 0 0 1,700,000 812,400 250,000 209,600 1,301,200 2,500,000 329,900 523,600 628,300 80,900 72,000 85,000 217,800 39,557 95,279 40,376 354 357,152 153,180 1,700,000 812,500 0 209,600 1,462,800 3,500,000 420,700 524,400 304,700 17,307 0 4,570 150,265 39,557 95,279 40,376 0 282,153 51,555 1,500,000 86,995 0 99,212 1,005,636 2,102,003 358,952 200,000 260,044 0 5,712,400 0 14,584 5,713,600 10,227 14,584 5,070,993 10,227 0 719,700 0 0 0 0 300,000 1,792 721,100 40,000 20,000 110,000 50,000 300,000 0 695,175 0 0 37,310 0 300,000 95,600 95,700 84,593 0 757,500 829 758,500 829 746,084 74,898,300 72,263,000 72,263,000 249,700 0 0 659,200 10,000 104,000 976,000 5,001 130,000 111,000 250,000 144,300 232,400 347,500 250,000 121,494 183 659,200 10,000 104,000 976,000 5,001 130,000 111,000 250,000 144,500 538,900 137,313 237,729 121,194 183 496,875 0 90,000 760,874 0 129,118 104,569 250,000 117,008 514,784 137,313 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) REDI Matching Grants Small Business Advocate Special Needs Housing Williams Gateway Airport Authority Department of Environmental Quality Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Air Quality Program Air Quality Program - Continuing All Other Operating Expenditures Department of Administration Bus Subsidy Department of Administration Travel Reduction Transfer Department of Transportation Administration Transfer Emissions Cap and Trading Program Employee Related Expenditures Personal Services Pima County Air Quality Program Political Subdivisions Assistance Roadside Diesel Emissions Testing Program Solid Waste - New Used Oil Fund Solid Waste Program Visibility Index Development Waste Tire Fund Water Quality Program Weights and Measures Oxygenated Fuel Transfer Administrative Adjustments Administrative Adjustments Air Permits Administration Program Recycling Fund SAF - Actuarial Study - Maricopa County SAF - Actuarial Study - Non Maricopa County UST Assurance Acct - Policy Comm FY00 - 01 UST Assurance Acct - Policy Comm FY01 - 02 UST Assurance Acct - Policy Comm FY99 - 00 UST Assurance Acct - Technical Appeals Panel FY00 - 01 UST Assurance Acct - Technical Appeals Panel FY01 - 02 UST Program Administrative Adjustments Administrative Adjustments Emissions Contractor Payments Emissions Control - Clean Air Fund Subsidy Emissions Control Program Hazardous Waste Program Hazardous Waste Reserve FY94 - 95 Hazardous Waste Reserve FY95 - 96 Hazardous Waste Reserve FY96 - 97 Funeral Directors and Embalmers Administrative Adjustments Operating Lump Sum Appropriation - 198 - FINAL BUDGET (Appropriation) 45,000 110,000 0 4,000,000 45,000 110,000 24,971 4,000,000 0 0 0 0 0 4,065,100 0 5,486,500 0 0 0 0 792,200 3,547,200 230,000 0 0 127,400 1,031,300 0 195,700 3,541,500 0 0 0 5,112,300 2,043,100 0 0 10,000 10,000 500,000 7,500 10,000 2,000 0 0 15,869,800 3,600,000 3,858,600 555,700 64,000 29,273 31,908 106,050 530,610 15 8,222 15 4,068,000 250,000 5,486,500 475,400 400,000 48,000 300,000 793,500 3,557,500 230,000 125,000 200,000 127,500 1,033,000 450,000 195,700 3,544,600 778,400 14,278 149,572 5,119,000 2,044,000 45,170 54,830 10,000 10,000 500,000 7,500 10,000 2,000 41,051 417 15,869,800 3,600,000 3,862,700 756,800 64,000 29,273 31,908 0 254,000 506 254,500 ACTUAL EXPENDITURE AMOUNTS 29,741 109,018 24,971 0 106,050 530,610 0 8,222 15 3,225,856 25,000 (2,447,886) 475,400 400,000 48,000 19,879 675,356 3,129,239 230,000 59,445 0 85,376 634,057 2,237 32,679 1,407,651 778,400 14,278 149,572 5,077,238 1,485,087 45,170 54,830 3,469 0 152,979 0 0 0 41,051 417 13,803,802 1,411,688 2,998,284 446,956 0 0 0 506 230,434 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Game and Fish Department Administrative Adjustments Administrative Adjustments Building Renewal FY00 - 01 Building Renewal FY01 - 02 Building Renewal FY96 - 97 Building Renewal FY99 - 00 Early Repayment 1993 COP Facilities Improvements FY00 - 01 Facilities Improvements FY01 - 02 Facilities Improvements FY98 - 99 Facilities Improvements FY99 - 00 Flagstaff Shooting Range Development FY00 - 01 Flagstaff Shooting Range Development FY99 - 00 Flagstaff Shooting Range Planning FY98 - 99 Lease Purchase Payoff FY96 - 97 Lease Purchase Payoff FY98 - 99 Migration Waterfowl Habitat FY93 - 94 Migration Waterfowl Habitat FY95 - 96 Migration Waterfowl Habitat FY96 - 97 Migratory Waterfowl Development FY00 - 01 Migratory Waterfowl Development FY01 - 02 Migratory Waterfowl Development FY97 - 98 Migratory Waterfowl Development FY98 - 99 Migratory Waterfowl Development FY99 - 00 Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Performance Based Incentives Program FY00 - 01 Performance Based Incentives Program FY01 - 02 Performance Based Incentives Program FY97 - 98 Pittman - Robertson/Dingell - Johnson Act Shooting Range Development FY00 - 01 Shooting Range Development FY01 - 02 Shooting Range Development FY96 - 97 Shooting Range Development FY97 - 98 Shooting Range Development FY98 - 99 Shooting Range Development FY99 - 00 W.C. Performance Based Incentives Program Watercraft Reimbursement to Game and Fish Fund Waterfowl Conservation Wildlife Endowment Deer Valley North Office Renovation FY95 - 96 Expansion and Renovation Game and Fish Headquarters Expansion and Renovation Game and Fish Headquarters Flagstaff Shooting Range Planning FY01 - 02 Mesa Office Expansion FY96 - 97 Pinetop Regional Office Expansion FY01 - 02 Pinetop Regional Office Expansion FY99 - 00 Department of Gaming Administrative Adjustments Operating Lump Sum Appropriation - 199 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 0 0 265,117 307,600 1 9,067 247,106 143,267 170,000 10,788 82,633 74,000 57,080 14,260 268,301 304,530 1,302 36,250 94,700 100,000 100,000 89,700 89,312 100,000 17,377,400 1,811,700 279,400 13 300,000 6,571 2,708,000 44,600 100,000 10 2,048 11,930 50,000 46,800 500,000 43,500 16,000 13,977 500,000 248,454 500,000 1,286 300,000 496,831 21,300 755 265,117 307,600 0 9,067 247,106 143,267 170,000 10,788 82,633 74,000 57,080 14,260 268,301 304,530 1,302 36,250 94,700 100,000 100,000 89,700 89,312 100,000 17,402,700 1,814,400 279,900 13 300,000 6,571 2,708,000 44,600 100,000 10 2,048 11,930 50,000 46,800 500,000 43,500 16,000 13,977 500,000 248,454 500,000 1,286 300,000 496,831 21,300 755 160,989 55,765 0 9,067 0 136,519 658 10,788 57,200 0 41,740 14,260 0 0 0 35,036 0 0 0 0 0 0 16,735,353 1,601,352 158,567 0 300,000 0 2,708,000 13,662 52,878 10 0 6,000 45,495 46,798 500,000 18,098 0 13,758 0 36,121 5,694 1,286 300,000 496,831 0 5,145,800 29,407 5,153,800 29,407 5,115,732 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Arizona Health Care Cost Containment System Capitation Stabilization Fee for Service Stabilization General Fund Transfer 2nd Special Session Chapter 4 Long-Term Care Stabilization Reinsurance Stabilization State Emergency Services Freedom to Work Program Expense Administrative Adjustments Children's Health Insurance Program - Administration Children's Health Insurance Program - Administration Children's Health Insurance Program - Services Department of Housing Operating Lump Sum Appropriation Special Needs Housing Homeopathic Medical Examiners Operating Lump Sum Appropriation Department of Health Services Administration - All Other Operating Expenditures Administration - Employee Related Expenditures Administration - Indirect Costs Administration - Personal Services Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Assurance and Licensure Assurance and Licensure Behavioral Health - Substance Abuse Non-Title XIX Family Health - Child Fatality Review Team Family Health - High Risk Perinatal Services Family Health - Newborn Screening Program Mental Health Research Institute Grant Public Health - Central Medical Direction Contract for EMS Public Health - EMS Operations Public Health - Laboratory Services Public Health - Poison Control Center Public Health - Rural Emergency Medical Services Public Health - Trauma Advisory Board Public Health - University of Arizona Poison Control Center Reimbursement for Level I Trauma Centers Reimbursement for Level I Trauma Centers Relief Bill Rural Ambulance Services Rural Medical Services Seriously Mentally Ill State Match for Title XIX University of Arizona Poison Control - Transfer Administrative Adjustments ASH - Juniper/Wickenburg Windows ASH - Repair Cooling Towers #1-2 Behavioral Health - Seriously Mentally Ill Non-Title XIX Building Renewal FY91 - 92 Hepatitis C Virus Surveillance - 200 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 0 0 0 0 0 0 0 0 5,831,400 2,871,600 62,131,200 21,399,800 14,390,200 2,400,000 304,200 1,245,600 7,777,600 91,000 1,039,446 5,831,400 2,887,700 73,313,300 21,399,800 14,390,200 2,400,000 304,200 1,245,600 7,777,600 0 50,045 5,531,607 1,850,221 63,126,128 345,600 0 213,887 52,929 211,145 50,877 72,900 73,000 53,224 3,000 3,300 478,600 13,300 0 0 0 0 0 394,700 38,000 1,850,000 100,000 450,000 2,327,200 0 100,000 2,812,000 772,600 800,000 32,093 250,000 1,050,000 0 0 0 0 0 0 0 0 0 0 8,000,000 3,548 350,000 3,000 3,300 478,600 13,300 116,643 525 210,596 462,500 45,871 395,200 38,000 1,850,000 100,000 450,000 2,328,100 2,500,000 100,000 2,815,600 774,100 800,000 32,093 250,000 1,050,000 1,300,000 3,000,000 1,816 200,000 1,500,000 8,000,000 92,000 445,938 29,950 27,000 10,790,000 3,548 350,000 2,743 3,300 244,727 13,300 116,643 525 210,596 462,500 0 344,091 0 1,850,000 89,818 142,250 2,025,837 0 0 2,541,363 585,736 600,000 32,093 191,376 787,500 1,300,000 3,000,000 1,816 200,000 918,071 8,000,000 0 445,938 0 0 10,790,000 0 260,315 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Immunization Information System Local Health Departments Mental Health Medications - SMI Non-Title XIX Public Health - AIDS Reporting and Treatment Public Health - Community Health Centers Public Health - Emergency Vaccines Administrative Adjustments ASH All Other Operating Expenditures Alzheimer's Grants Industrial Commission Administrative Adjustments Operating Lump Sum Appropriation Criminal Justice Commission Administrative Adjustments Crime Victim Assistance Crime Victim Compensation Crime Victim Compensation Special AG Transfer FY00 - 01 Crime Victim Compensation Special AG Transfer FY01 - 02 Drug and Gang Prevention Resource Center Operating Lump Sum Appropriation State Aid to County Attorneys State Aid to Indigent Defense Department of Library and Archives Operating Lump Sum Appropriation FY00 - 01 Operating Lump Sum Appropriation FY01 - 02 Operating Lump Sum Appropriation FY99 - 00 Legislative Council Old Capitol Building Repairs FY00 - 01 Old Capitol Building Repairs FY97 - 98 Old Capitol Building Repairs FY98 - 99 Old Capitol Building Repairs FY99 - 00 Land Department Administrative Adjustments Administrative Adjustments Operating Lump Sum Appropriation General Fund Transfer 2nd Special Session Chapter 4 Emergency Management and Military Affairs Administrative Adjustments Emergency Response Commission Medical Examiners Board Administrative Adjustments Document Imaging/Web Site Development/Maintenance Operating Lump Sum Appropriation Performance Based Incentive Program Naturopathic Board Administrative Adjustments All Other Operating Expenditures Inspections Required Operating Lump Sum Appropriation Nursing Care Examiners Board Administrative Adjustments Operating Lump Sum Appropriation - 201 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 477,000 0 1 1,000,000 1,000,000 500,000 0 400,000 0 477,000 200,000 1 1,000,000 1,000,000 0 166 400,000 1,000,000 404,307 200,000 0 1,000,000 852,466 0 166 389,001 1,000,000 0 15,483,500 128,626 15,512,700 128,626 14,592,127 0 900,000 2,000,000 140,213 0 263,000 457,900 1,341,100 1,273,700 1,250 900,000 2,000,000 140,213 0 263,300 458,400 1,341,100 1,273,700 1,250 882,770 1,987,990 0 124,255 263,300 418,418 1,228,575 1,166,955 189,093 310,800 416,320 189,093 311,400 416,320 0 212,996 0 507,886 9,449 5,015 42,663 507,886 9,449 5,015 42,663 478,172 9,449 5,015 42,663 0 0 674,800 0 228 10,291 675,000 500,000 228 10,291 564,011 500,000 0 132,700 4,000 132,700 4,000 132,700 0 225,000 4,572,800 0 34,116 225,000 4,639,600 259,819 15,390 149,792 4,289,402 19,426 0 53,400 50,000 105,500 429 53,400 50,087 105,713 429 35,232 49,904 86,482 0 356,100 374 356,800 0 272,804 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Optometry Board Administrative Adjustments IT Programs Operating Lump Sum Appropriation Osteopathic Examiners Board Administrative Adjustments Health Crisis Fund Repayment Operating Lump Sum Appropriation Occupational Therapy Examiners Board Administrative Adjustments Operating Lump Sum Appropriation Commission for Postsecondary Education Administrative Adjustments All Other Operating Expenditures Arizona College and Career Guide Arizona Minority Education Policy Analysis Center Employee Related Expenditures Family College Savings Program Personal Services State Student Incentive Grant Twelve Plus Partnership Pioneer's Home Building Renewal Capital Equipment Employee Related Expenditure Food Non-Capital Equipment Other Operating Expenditures Personal Services Prescription Drugs Prescription Drugs Professional and Outside Services Travel - In State Pharmacy Board Administrative Adjustments Operating Lump Sum Appropriation Podiatry Board Operating Lump Sum Appropriation Parks Board Administrative Adjustments Law Enforcement and Boat Safety Reservation Surcharge Revolving Fund FY 89 Pass Through Grants FY 90 Pass Through Grants FY 91 Pass Through Grants General Fund Transfer 2nd Special Session Chapter 4 Land, Buildings and Improvement Control FY89 - 90 Land, Buildings and Improvement Control FY89 - 90 Land, Buildings and Improvement Control FY90 - 91 Land, Buildings and Improvement Control FY90 - 91 Land, Buildings and Improvement Control FY90 - 91 Department of Public Safety Administrative Adjustments Agency Support Program - 202 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 0 8,100 158,900 155 8,100 159,100 155 8,031 150,418 0 85,000 382,800 164 85,000 412,600 164 60,000 411,900 0 210,900 867 211,200 867 160,282 0 58,200 25,000 74,500 26,800 85,100 132,000 2,143,700 231,200 500 58,200 25,000 74,500 26,800 85,100 132,400 2,143,700 231,200 0 55,173 21,784 45,048 22,356 54,369 131,802 1,592,705 105,350 0 0 390,400 0 234,300 443,800 1,342,300 271,100 0 0 0 69,000 67,007 891,332 231,800 65,686 443,800 3,033,675 271,100 165,300 162,700 19,200 60,457 67,007 879,705 222,849 59,850 443,800 3,033,675 271,100 165,300 160,246 19,200 0 1,260,500 10,381 1,262,300 10,381 1,029,849 96,000 96,100 86,490 0 1,060,900 250,000 10,436 40,191 2,067,639 0 4,388 258,697 1,500 19,258 32,684 24,521 1,107,000 250,600 10,436 40,191 2,067,639 6,000,000 4,388 258,697 1,500 19,258 32,684 0 1,061,787 175,588 0 0 0 6,000,000 0 0 0 0 0 0 0 79,079 7,507,100 79,079 7,507,100 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Agency Support Program Agency Support Program Agency Support Program Automated Fingerprinting Identification Network Board of Fingerprinting - Clearance Fund Crime Laboratory Assessment Fund Pass Through Criminal Investigation Program Criminal Investigation Program Criminal Justice Support Program Criminal Justice Support Program Criminal Justice Support Program Criminal Justice Support Program Governor's Office of Highway Safety Program Highway Patrol Program Highway Patrol Program Highway Patrol Program Highway Patrol Program Highway Patrol Program Licensing - Below the Line Operating Lump Sum Appropriation Patrol Officers Pioneer Park Transportation Svc Ctr - Prescott FY00 - 01 Pioneer Park Transportation Svc Ctr - Prescott FY99 - 00 Physical Therapy Examiners Board Operating Lump Sum Appropriation Private Post-Secondary Education Administrative Adjustments Operating Lump Sum Appropriation Board of Respiratory Care Examiners Administrative Adjustments Operating Lump Sum Appropriation Racing Examiners Administrative Adjustments Operating Lump Sum Appropriation Operating Lump Sum Appropriation Registrar of Contractors Administrative Adjustments Incentive Pay Office of Administrative Hearing Registrar of Contractors Fund Department of Revenue Administrative Adjustments Operating Lump Sum Appropriation Structural Pest Control Board Administrative Adjustments Operating Lump Sum Appropriation Schools for the Deaf and the Blind Telephone System - Phoenix Campus Operating Lump Sum Appropriation School Facilities Board Building Inspections Senate Public Buildings Land Earnings - 203 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 93,400 0 0 2,159,700 35,900 366,700 0 0 0 3,269,700 1,948,900 0 234,400 16,108,500 87,800 11,060,200 755,400 12,832,900 526,300 418,700 0 945,978 34,961 93,500 171,600 2,001,900 2,160,200 35,900 366,700 1,122,300 690,900 7,513,200 3,273,900 1,951,900 2,002,600 234,900 10,008,100 87,800 12,007,300 1,014,600 21,010,200 527,100 419,200 10,914,900 945,978 34,961 93,500 171,600 2,001,900 1,848,791 35,900 366,700 1,122,300 690,900 7,513,200 3,273,900 1,951,900 2,002,600 234,900 10,008,100 87,800 12,007,300 1,014,600 21,010,200 392,207 419,200 10,271,469 934,886 29,366 226,200 226,600 209,107 0 246,900 692 247,400 692 234,595 0 170,500 2,304 171,000 2,304 153,516 0 61,500 327,500 20,935 61,700 328,100 20,935 52,404 263,593 0 113,500 832,500 8,666,600 51,508 113,500 832,500 8,682,500 51,508 113,500 832,500 7,470,742 0 396,700 511 397,500 511 388,714 0 1,740,700 7,823 1,744,100 7,823 1,722,295 55 11,031,300 0 12,147,800 0 10,065,764 400,000 400,000 0 7,681 7,681 7,681 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2002 ORIGINAL (Expressed in Dollars) BUDGET (Appropriation) Supreme Court Administrative Adjustments Administrative Adjustments Administrative Adjustments Case Processing Assistance Community Punishment Confidential Intermediary FY00 - 01 Confidential Intermediary FY01 - 02 Confidential Intermediary FY99 - 00 Court Appointed Special Advocate Defensive Driving Fund Juvenile Crime Reduction Private Fiduciary FY00 - 01 Private Fiduciary FY01 - 02 Private Fiduciary FY98 - 99 Private Fiduciary FY99 - 00 State Aid to the Courts Drug Study Psychologist Examiners Board Administrative Adjustments Operating Lump Sum Appropriation Technical Registration Board Administrative Adjustments All Other Operating Expenditures Employee Related Expenditures Personal Services University of Arizona Teratogen Information Program Telemed - Behavioral Health Telemed - Public School Pilot Residential Utilities Consumer's Office Administrative Adjustments Operating Lump Sum Appropriation Professional Witnesses FY00 - 01 Professional Witnesses FY01 - 02 Professional Witnesses FY94 - 95 Professional Witnesses FY95 - 96 Professional Witnesses FY97 - 98 Professional Witnesses FY98 - 99 Professional Witnesses FY99 - 00 Veteran's Service Administrative Adjustments Operating Lump Sum Appropriation Veterinary Medical Examiner's Board Operating Lump Sum Appropriation Water Resources General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 General Fund Transfer 2nd Special Session Chapter 4 Weights and Measures Administrative Adjustments Oxygenated Fuel Total of Other Governmental Funds Budgetary Expenditures $ - 204 - FINAL BUDGET (Appropriation) ACTUAL EXPENDITURE AMOUNTS 0 0 0 3,010,800 1,830,400 194,013 195,750 30,336 2,523,700 5,150,900 5,055,800 195,939 199,650 726 118,199 3,560,100 38,514 13,522 292,114 41,182 3,011,100 1,830,400 194,013 195,900 30,336 2,526,400 5,153,800 5,056,400 195,939 199,800 726 118,199 3,560,100 38,514 13,522 56,884 41,182 1,610,864 829,000 76,161 12,484 30,336 2,203,584 2,400,768 4,549,110 49,508 19,278 726 118,199 0 0 0 304,000 596 304,500 596 229,769 0 390,000 155,300 593,900 9,478 390,000 155,300 595,800 9,478 381,362 121,707 544,751 92,000 0 0 92,000 125,000 100,000 92,000 125,000 100,000 0 930,600 87,330 145,000 4,921 1,129 18,763 11,977 55,359 2,658 931,800 87,330 145,000 4,921 1,129 18,763 11,977 55,359 2,658 874,268 23,994 13,285 4,921 1,129 5,706 0 6,035 0 462,200 1,350 462,800 1,350 425,878 371,600 372,300 306,785 0 0 0 1,000,000 1,000,000 199,800 1,000,000 1,000,000 199,800 0 778,400 4,089 1,152,700 4,089 976,262 598,119,739 $ 750,857,746 $ 632,362,607 EVANS HOUSE IN FRONT OF DEPARTMENT OF ENVIRONMENTAL QUALITY STATISTICAL SECTION (Not Covered by the Independent Auditors’ Report) STATE OF ARIZONA REVENUES BY SOURCE ALL GOVERNMENTAL FUND TYPES FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) SOURCE 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 $2,868,455 Taxes: Sales $4,424,528 $4,019,574 3,854,075 3,508,327 3,210,019 $3,060,258 $2,681,756 $2,497,763 $2,254,022 Income 2,410,342 2,879,011 2,820,067 2,648,271 2,460,630 2,289,563 1,933,554 1,904,250 1,728,225 1,581,287 Motor vehicle and fuel 1,493,259 1,332,917 1,360,117 1,412,052 1,332,059 1,287,636 1,196,683 972,276 912,337 858,315 49,611 47,987 50,490 52,785 55,354 51,185 198,035 193,625 201,011 201,758 - 175,733 177,607 191,327 223,517 225,102 239,481 235,800 200,742 124,568 543,055 508,499 491,379 493,760 443,999 487,921 445,526 390,564 337,480 298,841 5,182,770 4,421,940 3,987,414 3,758,126 3,362,720 3,444,011 3,211,114 3,087,353 2,629,549 2,345,782 Licenses, fees and permits 327,006 221,063 204,976 189,657 175,335 194,410 173,311 159,890 140,083 134,377 Earnings on investments 136,513 266,400 232,849 205,875 217,620 179,276 152,795 118,767 69,552 62,639 140,568 78,684 58,203 47,910 56,662 28,111 24,096 13,105 15,082 11,827 Property Unemployment Other Intergovernmental Sales and charges for services Fines, forfeitures and penalties Other Total Revenues 98,349 87,620 80,466 80,210 63,425 57,000 56,702 59,271 38,782 45,260 320,870 397,017 323,888 191,446 169,685 215,337 205,691 165,231 159,500 139,508 $15,126,871 $14,436,445 $13,641,531 $12,779,746 $11,771,025 $11,519,810 $9,981,888 $8,930,106 $8,058,184 $10,705,443 STATE OF ARIZONA EXPENDITURES BY FUNCTION ALL GOVERNMENTAL FUND TYPES FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) FUNCTION 1997 1996 1995 1994 1993 General government $486,154 1,970,048 1,762,922 1,605,452 1,445,878 $1,336,854 $1,277,101 $1,189,562 $1,096,909 $954,950 Health and welfare 5,788,774 5,131,426 4,556,141 4,304,739 4,005,762 4,057,734 3,790,039 3,644,541 3,208,547 3,101,338 129,226 119,643 117,034 109,154 102,032 98,445 95,675 91,954 95,374 87,253 4,188,501 3,473,005 3,188,645 2,829,105 2,591,121 2,400,212 2,220,246 2,033,675 1,841,961 1,733,768 Inspection and regulation Education 2002 2001 2000 1999 1998 Protection and safety 892,986 855,421 845,645 777,636 687,696 627,322 571,325 533,166 476,346 406,068 Transportation 401,372 1,829,350 1,811,957 1,748,482 1,499,551 1,307,624 1,287,309 1,008,472 1,011,600 908,800 Natural resources 140,600 116,732 100,718 94,399 97,377 90,417 87,252 81,629 91,227 60,480 Intergovernmental revenue sharing Capital outlay 2,190,160 - - - - - - - - - 1,127,716 339,421 302,790 320,621 237,698 250,144 253,753 192,337 232,654 221,565 270,850 227,408 192,563 180,157 167,590 168,815 151,652 118,869 100,754 81,000 125,594 91,364 91,222 89,323 89,272 99,150 103,562 107,750 111,123 112,091 $15,741,933 $14,153,818 $12,969,637 $12,059,068 $10,923,977 $10,436,717 $9,001,955 $8,266,495 $7,667,313 Debt service: Principal Interest and other fiscal charges Total Expenditures $9,837,914 Note: During fiscal year 2002, the State implemented GASB Statement No. 34-Basic Financial Statements and Management Discussion and Analysis. This statement required the reclassification of certain funds to other fund types. During fiscal 2002, the State reclassified the Unemployment Compensation Fund to a Proprietary Fund Type. This resulted in a reduction in Governmental Fund Revenue of approximately $348 million, and a corresponding reduction in Governmental Fund Expenditures of approximately $406 million reported in the above schedules during the year. This fund is reported as a major fund in the Proprietary Fund Financial Statements, included herein. Additionally, the Land Endowments major fund was reclassified from a Non-Expendable Trust Fund to a Governmental Fund Type during fiscal year 2002, as a result of GASB 34 implementation. This resulted in an increase in Governmental Fund Revenue of approximately $34 million, and a corresponding increase in Governmental Fund Expenditures of approximately $83 million during fiscal year 2002. Also, during fiscal year 2002, $1,205,039 of general governmental expenditures were reclassified as intergovernmental revenue sharing. Furthermore, $985,121 of transportation expenditures were reclassified as intergovernmental revenue sharing during fiscal year 2002. - 206 - STATE OF ARIZONA PROPERTY TAX LEVIES, COLLECTIONS, TAXABLE PROPERTY ASSESSED AND ESTIMATED ACTUAL VALUE, AND PROPERTY TAX RATES FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Collections Property Tax Year 2002 2001 2000 Property Related to Taxable Property Taxable Property Tax Levies Property Tax Year Assessed Value $ 13,802 17,905 22,532 $ 13,802 17,905 22,532 $ 34,854,286 32,528,311 29,944,135 $ Estimated Property Actual Value Tax Rate 294,684,679 273,788,720 246,615,904 12 13 13 1999 1998 24,059 27,129 24,059 27,129 27,483,100 25,682,910 227,796,396 210,603,642 12 10 1997 28,650 28,650 24,277,784 198,555,996 12 1996 32,759 28,828 22,811,159 179,907,771 14 1995 1994 1993 174,706 176,972 177,757 169,992 171,251 169,023 22,109,869 21,688,439 21,381,932 175,683,517 164,689,671 158,908,671 7.9 8.2 8.3 Source: % Department of Revenue Annual Financial Report STATE OF ARIZONA HIGHWAY CONSTRUCTION REVENUE BOND COVERAGE FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) (1) Pledged Fiscal Year 2002 2001 2000 1999 1998 1997 Principal $ 45,365 52,055 46,270 43,805 43,405 40,970 Interest $ 38,534 36,581 33,994 31,090 33,266 36,148 Total $ 83,899 88,636 80,264 74,895 76,671 77,118 Revenue $ Coverage 523,326 513,890 528,721 509,935 468,240 468,542 6.2 5.8 6.6 6.8 6.1 6.1 1996 38,430 38,770 77,200 429,825 5.6 1995 1994 1993 36,330 33,425 27,865 40,974 44,037 48,289 77,304 77,462 76,154 399,605 385,844 355,304 5.2 5.0 4.7 (1) For fiscal year 1993 through 1996, net of 7% distributed to cities with a population greater than 300,000 persons. For fiscal years 1997 and after, includes vehicle license tax revenues distributed directly to the State Highway Fund. Source: The Arizona Department of Transportation Annual Financial Report statistical section. - 207 - STATE OF ARIZONA ARIZONA STATE UNIVERSITY REVENUE BOND COVERAGE FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Debt Service Requirements (1) Fiscal Year Gross Revenues 2002 2001 2000 1999 1998 $ 280,531 257,477 247,792 232,699 226,112 1997 210,397 8,780 1996 196,143 8,330 1995 1994 1993 183,167 165,736 149,895 7,750 7,085 5,865 (1) Principal $ 9,695 9,785 8,995 9,640 9,205 Interest $ 9,574 12,139 11,766 12,245 12,685 Total $ Coverage 19,269 21,924 20,761 21,885 21,890 14.56 11.74 11.94 10.63 10.33 13,113 21,893 9.61 13,563 21,893 8.96 14,144 14,807 13,815 21,894 21,892 19,680 8.37 7.57 7.62 "Gross Revenues" consist of pledged revenues for the bond issued. Source: Arizona State University STATE OF ARIZONA NORTHERN ARIZONA UNIVERSITY REVENUE BOND COVERAGE FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) Debt Service Requirements (1) Fiscal Year 2002 2001 2000 1999 1998 Gross Revenues $ 82,839 78,907 75,852 73,467 71,743 Principal $ 6,932 6,214 6,119 6,075 5,743 Interest $ 3,949 5,246 5,488 5,810 6,145 Total $ Coverage 10,881 11,460 11,607 11,885 11,888 7.61 6.89 6.54 6.18 6.03 1997 70,036 5,677 4,859 10,536 6.65 1996 68,336 5,372 5,207 10,579 6.46 1995 1994 1993 61,526 56,313 50,734 4,675 3,905 3,415 5,525 5,802 5,718 10,200 9,707 9,133 6.03 5.80 5.56 (1) "Gross Revenues" includes only revenues that are pledged for debt service payments under the System Revenue Bond Indenture. Source: Northern Arizona University - 208 - STATE OF ARIZONA UNIVERSITY OF ARIZONA REVENUE BOND COVERAGE FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Thousands) (1), (2) (1), (2) Direct Net Revenue Fiscal Gross Year Revenues Expenses Debt Service 2002 2001 2000 1999 1998 $ 670,326 710,423 674,330 650,201 605,197 $ 625,664 663,284 625,318 580,292 555,733 $ 44,662 47,139 49,012 69,909 49,464 1997 577,412 535,178 1996 563,623 513,444 1995 1994 1993 537,891 511,315 487,387 486,926 467,291 448,834 Debt Service Requirements Operating Available for Principal Interest Total Coverage 9,946 12,415 11,700 10,714 9,830 $ 15,500 16,359 13,081 14,869 14,463 $ 25,446 28,774 24,781 25,583 24,293 1.76 1.64 1.98 2.73 2.04 42,234 9,360 14,935 24,295 1.74 50,179 9,491 15,421 24,912 2.01 50,965 44,024 38,553 8,147 6,450 6,567 15,334 13,813 14,651 23,481 20,263 21,218 2.17 2.17 1.82 $ (1) "Gross Revenues" and "Direct Operating Expenses" include Current Operating Unrestricted Funds only since these are the Funds that are pledged for debt service payments under the System Revenue Bond Indentures. Also excluded from expenses is interest, depreciation, and amortization. (2) Fiscal Year 2002 "Gross Revenues" and "Direct Operating Expenses" include accounting changes applied to Scholarship and Allowance due to implementation of GASB 34/35. Source: University of Arizona - 209 - STATE OF ARIZONA ECONOMIC INDICATORS FOR THE LAST TEN CALENDAR YEARS Calendar (1), (2) Year Ended Unemployment Rate December 31 Arizona Per Capita Personal Income U.S. $ N/A 24,988 23,755 US 2001 2000 1999 4.70 % 3.90 4.40 1998 4.10 4.50 23,118 26,893 1997 4.60 5.00 21,892 25,412 1996 5.50 5.40 20,883 24,270 1995 5.10 5.60 20,050 23,255 1994 6.40 6.10 19,320 22,340 1993 6.30 6.80 18,424 21,539 1992 7.60 7.40 17,907 20,960 (1) 4.80 % 4.00 4.20 Arizona $ N/A 29,469 27,843 Information for 2001 is not yet available, there is a two year lag for income (2) Arizona & US Income for 1992-1999 has been updated with June 30, 2002 revised data Source: Arizona Department of Economic Security STATE OF ARIZONA MAJOR PRIVATE EMPLOYERS FISCAL YEAR ENDED JUNE 30, 2002 Number of Employer Employees Wal-Mart Stores Inc 15,335 Banner Health Systems 14,845 Honeywell Aerospace 14,100 Raytheon Company 10,200 Intel Corporation 10,000 Motorola Inc 9,750 Safeway Inc 9,750 Albertsons Inc 9,500 America West Airlines 9,095 Wells Fargo & Co 8,900 Source: Phoenix Newspapers, Inc. - 210 - STATE OF ARIZONA POPULATION BY COUNTY FOR LAST TEN YEARS COUNTY 1992 MARICOPA 1993 1994 1995 1996 1997 1998 1999 2000 2001 2,233,700 2,291,200 2,355,900 2,528,700 2,634,625 2,720,525 2,806,100 2,913,475 3,072,149 3,192,125 PIMA 700,265 712,600 728,425 758,575 780,750 789,650 823,900 845,775 843,746 870,610 PINAL 122,600 127,225 132,225 139,000 144,150 150,375 157,675 165,400 179,727 186,795 YAVAPAI 114,110 118,400 123,500 130,300 134,600 142,075 148,500 155,900 167,517 175,305 MOHAVE 105,725 114,000 120,325 125,150 127,700 133,550 138,625 142,925 155,032 161,580 YUMA 112,825 116,450 119,650 121,975 124,950 129,275 135,200 139,650 160,895 165,280 COCHISE 101,175 103,325 108,225 112,000 114,925 119,650 123,750 124,575 117,755 121,435 COCONINO 101,350 104,700 107,500 110,750 113,475 117,475 121,625 122,825 116,320 122,770 NAVAJO 80,480 80,675 81,750 82,875 84,300 89,225 92,500 93,400 97,470 99,780 APACHE 62,950 63,050 63,275 63,750 64,475 55,500 66,350 66,950 69,423 69,880 GILA 41,700 42,400 43,350 44,525 45,300 47,450 49,175 50,150 51,335 52,420 GRAHAM 27,700 29,400 30,625 30,050 31,150 32,575 34,700 35,750 33,489 34,065 8,350 8,375 8,425 8,525 8,650 8,875 9,125 9,225 8,547 8,590 LA PAZ 14,825 15,550 16,075 16,700 18,200 17,625 19,000 19,250 19,715 19,935 SANTA CRUZ 31,050 31,525 32,400 34,275 35,050 36,350 37,800 39,100 38,381 39,325 GREENLEE TOTAL Source: 3,858,805 3,958,875 4,071,650 4,307,150 4,462,300 4,590,175 4,764,025 4,924,350 5,131,501 5,319,895 Arizona Department of Economic Security STATE OF ARIZONA SCHEDULE OF BANK AND SAVINGS AND LOAN DEPOSITS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 (Expressed in Millions) Banks Fiscal Year 2001 2000 1999 1998 Savings and Loans Total State Deposits 4,518 4,454 4,031 3,331 39,673 36,000 33,660 32,844 44,191 40,454 37,691 36,175 1997 2,724 31,611 1996 9,746 23,912 1995 1994 1993 1992 9,403 10,357 12,656 13,775 23,984 21,014 16,673 16,015 (1) Source: $ Federal State (1) Total Federal Deposits 0 0 0 0 3,129 2,768 2,480 2,138 3,129 2,768 2,480 2,138 34,335 0 1,738 1,738 33,658 22 1,289 1,311 33,387 31,371 29,329 29,790 86 79 74 63 1,496 1,109 0 0 1,582 1,188 74 63 Missing information is not available as only Federal Savings and Loans are required to report to the Federal Deposit Insurance Corporation. Information on State Savings and Loans is no longer reported by the Arizona Banking Department. Federal Deposit Insurance Corporation - 211 - STATE OF ARIZONA ASSESSED VALUE OF NEW COMMERCIAL AND RESIDENTIAL CONSTRUCTION FOR THE LAST TEN YEARS COMMERCIAL CONSTRUCTION Calendar Number of RESIDENTIAL CONSTRUCTION Value Number of Value Year Ended Permits Percent (Expressed Percent Permits Percent (Expressed Percent December 31 Issued Change in Thousands) Change Issued Change in Thousands) Change 2001 2000 1999 54,785 53,877 48,536 1998 1997 43,303 39,717 1996 1995 5,038,963 4,784,452 4,107,783 5.32 % 16.47 (9.49) 75,863 74,629 80,432 1.65 % (7.21) 3.66 9.03 9.69 4,538,720 4,004,022 13.35 1.41 77,594 69,613 36,209 10.87 3,948,490 33.15 32,659 8.04 2,965,456 30.15 1994 30,228 6.30 2,278,460 1993 28,436 1.67 1,548,420 1992 27,969 7.61 1,495,012 Source: 1.69 % 11.00 12.08 $ $ 7,508,550 6,863,290 7,263,997 9.40 % (5.52) 8.83 11.46 5.17 6,674,574 5,460,787 22.23 11.19 66,194 3.93 4,911,269 22.77 63,688 (0.59) 4,000,436 (15.26) 47.15 64,065 21.08 4,720,754 30.09 3.57 52,910 6.31 3,628,710 15.71 17.10 49,771 17.65 3,136,169 33.41 College of Business, Arizona State University Center for Business Research STATE OF ARIZONA PUBLIC SCHOOL ENROLLMENT - GRADES K-12 FOR THE LAST TEN ACADEMIC YEARS Total High School Dropouts Academic Grades Grades Grades Grades All Year K-3 4-6 7-9 10-12 Grades Total Percent 9.50 % 2001-02 292,229 223,130 217,671 182,626 915,656 28,375 2000-01 288,421 215,648 206,838 168,080 878,987 28,862 9.80 1999-00 283,378 207,899 206,639 168,710 866,626 26,097 11.10 1998-99 278,746 199,017 198,083 157,455 833,301 31,844 12.20 1997-98 238,769 192,714 187,959 146,710 766,152 27,999 11.50 1996-97 264,925 188,959 187,220 145,723 786,827 30,294 12.80 1995-96 248,295 179,154 179,021 137,975 744,445 26,401 12.20 1994-95 243,608 177,402 176,942 135,932 733,884 25,369 12.10 1993-94 236,519 172,891 167,598 129,089 706,097 25,450 13.83 1992-93 245,292 175,886 171,648 134,698 727,524 24,248 12.40 (1) (2) (3) (4) Includes ungraded elementary enrollment, except for academic years 1997-98 and 1998-99. Includes ungraded secondary enrollment, except for academic years 1997-98 and 1998-99. The high school dropout totals for Academic Years (AY) 1993-94 is based on a nine month school year. The total for AY 1992-1993 is based on dropouts in a twelve month period. Percent of total high school enrollment (Grades 9-12). Note: 2002 enrollments were provided at the school level and do not eliminate concurrent enrollments. Overstatement estimated at 100,000 over all grade levels. Source: Arizona Department of Education - 212 - STATE OF ARIZONA AVERAGE STATE PRISON ADULT INMATE POPULATION FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2002 Incarceration Institution Florence Complex Lewis Complex Perryville Complex Phoenix Complex Tucson Complex Douglas Complex Winslow Complex Safford Complex Yuma Complex Misc Prison No Private Prisons Total 2002 8,468 4,058 2,165 940 3,874 2,154 1,824 1,797 2,159 170 1,664 29,273 Repeat Offenders Admitted Source: 2001 2000 1999 1998 1997 1996 1995 1994 1993 8,176 3,656 1,885 957 3,607 2,130 1,791 1,624 2,048 154 1,423 7,723 2,151 1,564 1,325 3,898 2,190 1,768 1,839 2,241 292 1,411 7,794 978 2,653 1,256 4,016 2,183 1,635 1,778 2,226 240 1,410 8,145 0 2,403 1,804 4,071 2,214 1,671 1,804 1,328 0 444 7,693 0 2,581 1,275 3,966 1,944 1,736 1,979 764 0 445 7,205 0 2,432 1,407 3,677 2,214 1,741 1,749 303 0 0 6,988 0 2,375 1,331 3,483 2,053 1,522 1,493 297 0 0 6,083 0 2,342 1,267 2,888 2,064 1,353 1,476 264 0 0 5,275 0 2,237 1,176 2,692 1,987 1,290 1,395 241 0 0 27,451 26,402 26,169 23,884 22,383 20,728 19,542 17,737 16,293 2,271 2,090 1,825 N/A N/A N/A N/A N/A 2,581 2,248 Arizona Department of Corrections STATE OF ARIZONA PUBLIC HIGHER EDUCATION INSTITUTIONS' FULL-TIME EQUIVALENT FALL ENROLLMENT FOR THE LAST TEN YEARS Fall 2001 Fall 2000 Fall 1999 Fall 1998 Fall 1997 Fall 1996 Fall 1995 Fall 1994 Fall 1993 Universities: Arizona State University 49,980 Northern Arizona University 17,189 University of Arizona 33,089 Total 100,258 47,086 17,057 32,460 96,603 44,637 17,107 30,981 92,725 43,910 17,293 31,008 92,211 42,946 17,484 30,733 91,163 43,105 17,183 30,403 90,691 40,910 17,193 29,724 87,827 39,552 17,592 31,042 88,186 39,147 16,875 31,314 87,336 37,985 16,387 31,381 85,753 Community Colleges: Cochise County Coconino County Graham County Maricopa County Mohave County Navajo County Pima County Pinal County Yavapai County Yuma County Total 2,303 1,459 2,064 48,678 1,922 2,119 14,832 2,407 2,503 3,179 81,466 2,387 1,378 2,869 44,693 1,856 2,095 13,469 2,436 2,403 3,120 76,706 2,141 1,449 2,828 42,320 1,763 1,875 12,656 2,220 2,272 2,922 72,446 2,173 1,454 2,762 41,104 1,876 1,444 13,281 2,213 2,343 2,889 71,539 2,453 1,308 2,623 39,435 1,788 1,624 13,061 2,011 2,322 2,773 69,398 2,419 1,364 2,300 37,265 1,671 1,711 12,898 2,032 2,348 2,762 66,770 2,267 1,485 2,279 37,064 1,805 1,744 12,526 2,071 2,254 2,759 66,254 2,270 1,387 2,235 35,903 1,731 1,723 13,080 2,138 2,382 2,708 65,557 2,529 1,295 2,094 35,762 1,708 1,741 13,128 2,042 2,258 2,691 65,248 2,591 1,114 2,196 35,907 1,732 1,747 13,416 2,154 2,260 2,580 65,697 Total All Institutions 181,724 173,309 165,171 163,750 160,561 157,461 153,743 152,584 151,450 Institution Fall 2002 154,081 Sources: Arizona Board of Regents State Board of Directors for Community Colleges Note: University enrollments were corrected, for 1993 to 2002, from a total head count to a full-time-equivalent enrollment. - 213- ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by the Department of Administration, Financial Services Division, Financial Reporting Section: Ron Santa Cruz Jacqueline Barclay Evan Chang James Fagan, CPA Chris Freitag Michael Kallaur Mary Kirchmann Nanette Nunez-Mendez John Schutter Special acknowledgment goes to: All fiscal and accounting personnel throughout the Arizona State government, whose dedicated efforts and cooperation contributed to the compilation of financial information that appears in the report.