ARIZONA MONTHLY FISCAL HIGHLIGHTS March 2005 March General Fund revenue collections were $567.5 million, which was an increase of 30.7% above the same month a year ago. The March 18th Legislative budget proposal increased the January JLBC Baseline revenue forecast by $100 million. March actual collections are $20.7 million higher than the revised March estimate for the month. Year-to-date, collections are $26.6 million over the March 18th budget proposal forecast. Sales tax collections were once again strong, with March collections up 10.4% compared to last year. Individual income tax withholding collections were up 5.3% after adjusting for the revised withholding rates. Corporate income tax collections also continue to be strong, with March collections up 133%, more than double the same month last year. March Year-to Date ____________ General Fund Revenues Compared to Adopted Forecast and FY 2004 Collections ($ in Millions) FY 2005 Difference From Difference From Collections May 2004 Forecast 1/ Mar 2005 Forecast 2/ $ 567.5 $ 50.9 $ 20.7 $ 5,318.5 $ 411.5 $ 26.6 Difference From FY 2004 $ 133.4 $ 748.3 3/ 1/ Originally enacted FY 2005 budget (May 2004). 2/ March 18th Legislative budget proposal. 3/ Including the receipt of $87.2 million federal cash assistance grant in October, 2003. Sales Tax revenue increased by 10.4% on a year-over-year basis in March and was $5.5 million above the forecast for the month. Year-to-date, collections are 10.2% over the first 9 months of last fiscal year. The following is based on year-todate collections through March: • Retail sales tax receipts have increased by 8.6% • Contracting continues to exhibit the large increases begun last year, with a year-to-date increase of 18.8%. • Restaurants and bars collections are up 9.6%. • Use tax receipts (all of which is retained by the state) are up 13.6%. However, use tax receipts for the month of March were up only 5.6% compared to last year. Individual Income Tax collections for March were 21.4% above last year. Withholding tax collections increased by 11.1% compared to last year. This growth includes the increase in withholding rates which went into effect on January 1st. Adjusting for the rate increase, withholding tax collections were an estimated 5.3% greater than last March. Estimated and final payments were up 8.5% over last year’s payments, although March is not a large collection month for payments. Refunds were 5.0% greater than last year due to the continued usage of electronic state tax filing, which speeds up the refund process. March individual income tax collections were down $(15.0) million below the forecast for the month due primarily to the increased refunds noted above. Year-to-date, however, individual income tax collections are up 18.3% over the first 9 months of last fiscal year. Corporate Income Tax revenue of $63.8 million was $36.4 million over March collections last year. Year-to-date corporate collections are 62.4% over the previous year. The General Fund portion of Luxury Tax collections for March was 19.6% greater than last March, increasing the yearto-date total to 4.8% over the first 9 months of last year. The liquor categories of the luxury tax increased by 31.1% compared to March of last year. However, the Tobacco Tax component was down by almost (6.0)% for the month. Yearto-date, tobacco tax collections are up 2.9% over the prior year. Recent Economic Indicators: More evidence of rising inflation unsettled the financial markets. The U.S. Consumer Price Index (CPI) rose 0.6% in March, while the three-month moving average climbed 0.5% and stood 3.0% above its level JLBC This report has been prepared for the Arizona Legislature by the Joint Legislative Budget Committee Staff April 26, 2005 This report can also be found on our Website at http://www.azleg.state.az.us/jlbc.htm Page 1 Joint Legislative Budget Committee Monthly Fiscal Highlights – March 2005 from a year ago. Excluding food and energy prices, the core CPI increased 0.4% in March. employment component of the index made the strongest contribution, rising 16.1% from February. Higher prices contributed to a drop in consumer confidence. The Conference Board’s Consumer Confidence Index dipped (1.9)% in March. Even so, expectations for the labor market improved, and the index remains 15.7% above its level from a year ago. The U.S. Index of Leading Economic Indicators also fell in March, with eight of the ten components losing ground. The University of Arizona’s Business Leaders Confidence Index was less sanguine. Although the overall index increased 0.8% from the first quarter’s survey results, the respondents were less confident about the future prospects for the state and national economies. U.S. semiconductor billings (three-month moving average) decreased (0.8)% in February. The Semiconductor Industry Association mentioned in its report that February is normally a weak month for microchip sales. Sales were 9.2% higher than the same period one year ago. Arizona’s unemployment rate jumped to 4.7% in March, but the increase was attributed to a surge in the number of job seekers rather than declining employment. More than 91,000 jobs were added during the last 12 months, a 3.9% increase. The Arizona Business Conditions Index (BCI), which is derived from a survey of supply chain managers, continued to improve in March. The latest reading of 70.4 was up 5.6% from the prior month and 11.2% from a year ago. The Preliminary estimates indicated that Arizona personal income finished 2004 with increasing momentum. The state’s yearover-year increase of 8.3% in 2004’s fourth quarter was significantly stronger than the 6.7% gain reported for the nation as a whole. The number of TANF recipients decreased to 101,936 in February, a (2.0)% decline from January and a (15.6)% drop from February 2004. The AHCCCS caseload increased in March. Enrollment was 1.4% higher than February and stood 10.4% above the level from one year ago. The Department of Corrections’ inmate population grew by an average of 21 inmates per month from January through March. This was well below the budgeted growth rate of 115 net new inmates per month. RECENT ECONOMIC INDICATORS Indicator Arizona - Unemployment Rate - Jobs - Contracting Tax Receipts (3-month average) - Retail Sales Tax Receipts (3-month average) - Residential Building Permits - (3-month moving average) Single-unit Multi-unit - Arizona Tourism Barometer - Phoenix Sky Harbor Air Passengers - Arizona Average Natural Gas Price ($ per thousand cubic feet) - Leading Indicators Index - Business Conditions Index (>50 signifies expansion) - Consumer Confidence Index - Business Leaders Confidence Index - Arizona Personal Income - Arizona Population - AHCCCS Recipients - TANF Recipients - DOC Inmate Growth (3-month average) United States Gross Domestic Product - (seasonally adjusted annual growth rate) - Consumer Confidence Index - Leading Indicators Index - U.S. Semiconductor Billings -(3-month moving average) - Consumer Price Index - (3-month moving average) Time Period Current Value Change From Prior Period Change From Prior Year March March Jan-Mar Jan-Mar 4.7% 2.45 million $55.5 million $151.1 million 0.3% 0.5% (0.4)% 12.2% (0.4)% 3.9% 20.7% 9.4% February February January February January 5,614 966 100.7 3.04 million $5.45 2.6% 26.3% 1.4% (3.7)% (11.7)% 11.8% 33.7% 6.4% 1.8% 0.2% (0.3)% 5.6% 1.8% 11.2% January March 120.4 70.4 1st Quarter 2005 2nd Quarter 2005 4th Quarter 2004 July 1, 2004 March February Jan-Mar 104.3 62.8 $168.6 billion 5.74 million 811,656 101,936 32,633 4th Quarter 2004 $11.0 trillion 3.8% 3.9% March March Dec-Feb Jan-Mar 102.4 115.1 $3.2 billion 191.9 (1.9)% (0.4)% (0.8)% 0.5% 15.7% (0.5)% 9.1% 3.0% 3.2% 0.8% 2.6% 3.0% 1.4% (2.0)% 21 inmates 13.1% (7.2)% 8.3% 3.0% 10.4% (15.6)% 1,005 inmates Page 2 State of Arizona General Fund Revenue: Change from Previous Year and March Forecast March 2005 Current Month FY 2005 YTD (Nine Months) Change From Actual March 2004 March 2005 Amount Change from Actual Revised Forecast Percent Amount Percent March 2004 March 2005 Amount Revised Forecast Percent Amount Percent Taxes Sales and Use $291,854,753 $27,450,555 Income - Individual 108,697,181 19,182,415 21.4 (15,012,783) - Corporate 63,828,617 36,395,771 132.7 19,852,352 79,787 Property Luxury Insurance Premium Estate Other Taxes Sub-Total Taxes 465,611 10.4 % (186,006) (28.5) $5,520,760 1.9 % $2,679,184,366 $248,540,856 1,927,053,682 297,961,162 45.1 435,303,288 167,195,718 20.7 15,161,078 (12.1) (6,796,260) 10.2 % 62.4 20,157,643 4.9 83,322 0.6 (702,128) (1.5) (31.0) 6,025,205 987,851 19.6 578,784 10.6 47,304,875 2,163,411 4.8 30,776,267 49.1 5,752,844 6.6 222,882,225 65,139,430 41.3 2,171,723 756,896 53.5 146,723 7.2 26,983,105 (2,376,548) (122,876) (16.1) 442,491 221.2 2,384,036 (213,156) $567,181,972 $115,240,873 25.5 % $17,360,958 3.2 % $5,356,256,655 $771,614,613 0.3 % (11,414,236) 93,496,391 642,491 $8,405,844 18.3 (0.6) 3,968,880 1.8 (8.1) 545,618 2.1 (8.2) 305,713 14.7 16.8 % $21,350,656 0.4 % Other Revenue Lottery 1,862,400 (39.9) 22,328,400 (7,113,400) (24.2) License, Fees and Permits 3,520,138 1,398,271 65.9 939,728 36.4 20,605,741 2,989,898 17.0 Interest 2,471,595 1,531,642 162.9 1,470,316 146.8 16,682,055 (3,901,526) Sales and Services 6,108,757 2,590,754 73.6 Other Miscellaneous 2,823,852 Disproportionate Share Transfers and Reimbursements Sub-Total Other Revenue TOTAL BASE REVENUE 0 120,669 (574,900) (498,439) 0 (121,032) (23.6) (1,237,600) (2,330,600) (9.5) 658,425 3.3 (19.0) 3,097,261 22.8 2,633,457 75.8 33,340,166 (3,087,827) (8.5) 1,953,784 6.2 (15.0) 863,355 44.0 15,857,609 (12,754,966) (44.6) 678,574 4.5 -- 0 -- 0 (5,625,187) (100.0) 0 (91.7) 22,407,213 (79,039,790) (77.9) 1,157,848 5.4 (108,532,798) (45.3) % 5,215,292 4.1 % $663,081,815 13.7 % $26,565,948 0.5 % (50.1) (1,341,831) 16,907,411 4,326,296 34.4 % 3,327,425 24.5 % 131,221,184 $584,089,383 $119,567,169 25.7 % $20,688,383 3.7 % $5,487,477,839 -- One-Time Revenue Urban Revenue Sharing (31,089,382) Budget Balancing Transfers VLT Transfer Sub-Total Transfers In TOTAL REVENUE 2.2 0 0.0 0 -- 0 14,458,374 14,458,374 -- 0 0 0 -- 0 45,000 45,000 -- 0 0.0 13,836,089 (45.5) % 0 0.0 % $133,403,258 30.7 % $20,688,383 3.8 % Tax Amnesty Judicial Enhancement (667,285) 0 (16,586,008) $567,503,375 (279,804,434) -0.0 (6,005,561) 2.2 0 0 0 -- 0 108,516,868 108,516,868 -- 0 -- 0.0 -0.0 0 (15,080,406) (100.0) 0 2,331,600 (2,253,125) (49.1) 0 0.0 85,177,776 (33.5) % 0 0.0 % $748,259,591 16.4 % $26,565,948 0.5 % (168,955,966) $5,318,521,873 VP% = Percent change from comparable period in prior year VF% = Variance from forecast F% = Forecast percent change for the fiscal year. R% = Average percent change from comparable period in prior year which must be attained over remaining months to realize the forecast for year. --