ARIZONA

MONTHLY FISCAL HIGHLIGHTS
April 2005
Summary
April General Fund revenue collections were $1.02 billion, which was an increase of 33.5% above April 2004. This is the largest
single month revenue collection in the state’s history and only the second time monthly collections have exceeded $1 billion. The
April collections are $160.8 million above the forecast for the recently enacted state budget.
Most of this gain was due to a 77% increase in individual income tax collections in April compared to a year ago as taxpayers filed
their individual income tax returns by April 15. We speculate that this increase is due to the higher profitability of small businesses
(which sometimes pay individual rather than corporate income taxes), real estate investment gains and, to a lesser extent, stock
market gains.
While Arizona’s April revenue growth is among the highest in the country, collections were much greater than expected throughout
the nation. At the high end, New Jersey individual income tax final payments grew by 100%. Of 16 states surveyed, 8 had final
payments grow by 30% or more.
This Monthly Fiscal Highlights includes a summary of the May JCCR and JLBC meetings. This report also contains information on
recent federal funding issues, including the congressional budget resolution, new federally-mandated drivers license requirements
and federal assistance to hospitals.
We have also expanded this edition of the Monthly Fiscal Highlights to include a summary of recent reports submitted to the JLBC.
The Committee receives numerous reports each year from state agencies. While a summary of these reports is periodically provided
to Committee members, we thought that these reports would be of interest to other legislators as well. For example, the JLBC
recently received reports on the implementation of self-insurance for state employee health costs. Other material addressed the
Community Colleges annual reports, the Executive’s federal revenue maximization efforts and the Department of Revenue’s new
automation system.

Table of Contents
Page #

Page #
April Revenues.........................................................................2
Recent Economic Indicators ....................................................3
May JCCR Meeting ................................................................5
May JLBC Meeting..................................................................5
Federal Funding Issues
- Congressional Budget Resolution..........................................6
- Federal Hospital Assistance...................................................6
- Drivers License......................................................................6
Summary of Recent Agency Reports
- ADOA – External Defibrillators............................................7
- ADOA – Self Insurance Implementation...............................7
- ADOA – Health Insurance Performance Standards ..............7
- ADOA/GITA – HRIS Project Progress .................................8
- AG – Crane Lawsuit ..............................................................8
- Banking Dept. FY 2005 General Fund Revenues..................8
- Community Colleges – Dual Enrollment Courses .................9

- Community Colleges – Annual Report ..............................9
- Community Colleges – Workforce Development
Expenditures ..............................................................10
- ACJC – State Aid to Counties .........................................11
- DES – AZ Works Pilot Program ......................................11
- DEQ – Alternative Testing & Compliance Study ...........11
- OSPB – Fed. Rev. Maximization Initiative......................11
- Racing – Boxing Events and Revenue .............................12
- ASRS – Information Technology Plan.............................12
- DOR – Tobacco Tax Revenue Collections.......................12
- DOR – Ladewig Expenditures .........................................12
- DOR – Business Re-engineering/Integrated Tax
System (BRITS) ........................................................13
- Supreme Court – Arizona Lengthy Trial Fund.................13
- U of A – Report on Final Pay Plan...................................14
- Weights & Measures – FY 2005 GF Revenues................14

JLBC
This report has been prepared for the Arizona Legislature by the Joint Legislative Budget Committee Staff May 27, 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 – April 2005

APRIL REVENUES
Arizona is not alone in experiencing revenue collections above
forecasted levels. Based on an April 2005 report from the
National Conference of State Legislatures (NCSL), FY 2005
revenue collections in most states are performing better than
expected. The report notes that 34 states have revised their
FY 2005 estimates to reflect increased collections. It also
notes that in many states, collections are exceeding even the
revised forecasts.
Sales and use tax collections are above estimates in 21 states,
and individual income tax collections are above forecast in 29
states. Corporate income tax collections were above forecast
in 37 states.
As transmitted to the Governor, FY 2005 General Fund
revenues above forecast would have been transferred to the
Budget Stabilization Fund. The Governor line item vetoed that
provision, so any “excess” revenues will remain in the General
Fund.
Sales Tax revenue increased by 10.7% on a year-over-year
basis in April and was $5.1 million above the forecast for the
month. Year-to-date collections are 10.3% over last fiscal
year. The following is based on year-to-date collections
through April:
• Retail sales tax receipts have increased by 8.7%.
• Contracting continues to exhibit the large increases begun
last year, with a year-to-date increase of 19.5%.
• Restaurants and bars collections are up 9.1%.
• Use tax receipts (all of which are retained by the state) are
up 12.7%. However, use tax receipts for the month of April
were up only 5.4% compared to last year.
Individual Income Tax collections for April were 76.9%
above last year, due largely to growth in final payments.
Furthermore, April final collections exceeded the forecast by
$166 million.
As noted earlier, increased small business profitability and
capital gains are thought to be the primary reasons for this
unexpectedly large gain. Current individual income tax reports
do not disaggregate small business filings nor do they list
capital gains. As a result, the reasons for the large surge in

April
Year-to Date
____________

April final payments are not yet fully understood. The sources
of this year’s “April Surprise” will be better understood once
tax year 2004 state income tax data is released by the Internal
Revenue Service (IRS) in the fall of 2006.
Arizona was not the only place to experience a rapid growth in
April final payments. Federal income tax payments are
reported to have increased by 40%. According to information
provided by the Department of Revenue (DOR), the average
growth in April payments was 30% for 16 states that
participated in an informal survey. The result of this survey is
summarized in the table below.
April Final Payment Growth by State
State
Arizona
Connecticut
Delaware
Iowa
Kentucky
Maine
Massachusetts
Michigan

61%
24%
35%
3%
7%
35%
25%
15%

N. Carolina
Nebraska
New Jersey
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Vermont

19%
30%
100%
12%
35%
18%
31%
38%
54%

In terms of total liability (withholding, payments, refunds),
individual income tax collections are up 27.5% for the fiscal
year to date.
Corporate Income Tax revenue of $101.1 million was only
3.8% over April 2004 collections. Corporate income tax
collections begin to increase rapidly last April, which probably
accounts for the small growth in April 2005 collections. The
$101.1 million in April revenues still represents a very healthy
collection level. Despite April’s “slow” growth, year-to-date
corporate collections are 46.8% over the previous year.
The General Fund portion of Luxury Tax collections for April
was (18.2)% less than last April, decreasing the year-to-date
total to 2.2% over the first 10 months of last year. The liquor
categories of the luxury tax decreased by (36.1)% compared to
April of last year. However, the tobacco tax component was
up by 5.7% for the month. Year-to-date, tobacco tax
collections are up 3.3% over the prior year.

General Fund Revenues
Compared to Adopted Forecast and FY 2004 Collections
($ in Millions)
FY 2005
Difference From
Difference From
Collections
May 2004 Forecast 1/
May 2005 Forecast 2/
$ 1,015.9
$ 189.5
$ 160.8
$ 6,336.0
$ 602.5
$ 160.8

Difference
From FY 2004
$ 255.1
$ 1,004.9 3/

1/ Originally enacted FY 2005 budget (May 2004).
2/ May 2005 Enacted Budget.
3/ Including the receipt of $87.2 million federal cash assistance grant in October, 2003.

Page 2

Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

RECENT ECONOMIC INDICATORS

of the index improved, consumer expectations, interest rates,
and vendor performance made negative contributions.

Preliminary estimates showed U.S. economic growth slowed
earlier this year. Real Gross Domestic Product (GDP)
advanced at a 3.5% annual rate in 2005’s first quarter, down
from 3.8% in the prior quarter. Increased exports and strong
consumer spending were among the factors bolstering the
growth rate.

Arizona’s non-farm employment increased 3.8% during the
last 12 months, while construction jobs increased by more than
10%.
The Behavior Research Center’s Arizona Consumer
Confidence Index slipped (6.6)% in second quarter 2005, but
remains 8.1% above last year’s level.

The technology sector continued to perform well. U.S.
semiconductor billings (three-month moving average)
increased 4.0% in March. The Semiconductor Industry
Association said that sales have continued to exceed
expectations and that they would be releasing a revised
industry forecast June 3. Sales were 7.7% above the level from
a year ago.

Air traffic reached record levels in March. Phoenix Sky
Harbor airport passenger traffic, (enplanements and
deplanements combined) totaled 3.8 million, a 6.2% gain from
March 2004. A strong tourism season and an early Easter
holiday were among the factors fueling the increase.

The U.S. Consumer Price Index (CPI) climbed 0.5% in
April, while the three-month moving average increased 0.7%
and was 3.2% higher than a year ago. Excluding food and fuel
costs, the core CPI was unchanged in April.

The number of TANF recipients decreased to 101,029 in
March, a (0.9%) decline from February and a (16.1)% drop
from March 2004. The AHCCCS caseload increased in April.
Enrollment was 0.6% higher than March and stood 11.8%
above the level from one year ago.

While the national economy is growing, consumer sentiment
is less optimistic. The Conference Board’s Consumer
Confidence Index dropped (5.1)% in April, with the future
expectations component of the index reaching its lowest level
since July 2003. Meanwhile, the U.S. Index of Leading
Economic Indicators declined for the fourth consecutive
month in April. Although the production-related components

The Department of Corrections’ inmate population
increased by an average of 46 inmates per month from
February through April. With a population change of 878
inmates from a year ago, the department’s average population
growth reached its lowest point in more than two years.

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)

Change From
Prior Period

Change From
Prior Year

Time Period

Current Value

April
April
Feb-Apr
Feb-Apr

5.0%
2.46 million
$55.5 million
$141.6 million

0.3%
0.5%
(4.5)%
(6.9)%

(0.2)%
3.8%
21.5%
9.0%

Jan-Mar
Jan-Mar
January
March
February

6,053
903
100.7
3.80 million
$6.18

7.8%
(6.6)%
1.4%
25.1%
13.4%

8.5%
70.0%
6.4%
6.2%
16.4%

0.1%
(5.2)%

1.5%
1.1%

February
April

120.3
66.7

2nd Quarter 2005
2nd Quarter 2005
4th Quarter 2004
July 1, 2004
April
March
Feb-Apr

97.4
62.8
$168.6 billion
5.74 million
816,141
101,029
32,617

1st Quarter 2005

$11.1 trillion

3.5%

3.7%

April
April
Jan-Mar
Feb-Apr

97.7
114.5
$3.3 billion
193.2

(5.1)%
(0.2)%
4.0%
0.7%

5.1%
(1.1)%
7.7%
3.2%

(6.6)%
0.8%
2.6%
3.0%
0.6%
(0.9)%
46 inmates

8.1%
(7.2)%
8.3%
3.0%
11.8%
(16.1)%
878 inmates

Page 3

State of Arizona

General Fund Revenue: Change from Previous Year and May Forecast
April 2005

Current Month

FY 2005 YTD (Ten Months)

Change From
Actual

April 2004

April 2005

Amount

Change from
Actual

Revised Forecast
Percent

Amount

Percent

April 2004

April 2005

Amount

Revised Forecast
Percent

Amount

Percent

Taxes
Sales and Use

$332,806,103

$32,058,922

10.7 %

Income - Individual

534,861,186

232,539,445

76.9

- Corporate

101,103,751

3,735,277

3.8

Property

1,581,596

(342,124)

(17.8)

Luxury

4,743,596

(1,053,894)

(18.2)

39,342,700

(25,166,502)

(39.0)

1,324,239

(1,489,041)

(52.9)

Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

99,887

9,946

$1,015,863,058

$240,292,029

11.1
31.0 %

$5,125,700
166,050,901
(8,961,403)
151,579
(1,089,825)
0

1.6 %
45.0
(8.1)

$3,013,501,676

$282,110,985

2,461,914,869

530,500,608

10.3 %
27.5

536,407,040

170,930,996

46.8

10.6

16,742,674

(7,138,384)

(29.9)

(18.7)

52,048,471

1,109,517

2.2

$5,125,700
166,050,901
(8,961,403)
151,579
(1,089,825)

7.2
(1.6)
0.9
(2.1)

0.0

262,224,925

39,972,928

18.0

(700,761)

(34.6)

28,307,344

(3,865,589)

(12.0)

(700,761)

(2.4)

(113)

(0.1)

2,483,924

(203,209)

(7.6)

(113)

(0.0)

$160,576,078

18.8 %

$6,373,630,923

$1,013,417,852

18.9 %

0

0.2 %

$160,576,078

0.0

2.6 %

Other Revenue
Lottery

1,942,800

384,600

24.7

License, Fees and Permits

3,206,492

(466,093)

(12.7)

Interest

2,756,407

Sales and Services

2,776,598

(511,445)

(15.6)

(1,384,381)

(33.3)

36,116,764

Other Miscellaneous

1,012,855

(3,752,850)

(78.7)

(3,619,478)

(78.1)

16,870,463

Disproportionate Share
Transfers and Reimbursements
Sub-Total Other Revenue
TOTAL BASE REVENUE

1,285,320

87.4

(1,157,200)

(37.3)

24,271,200

(6,728,800)

(21.7)

(338,505)

(9.5)

23,812,233

2,523,805

11.9

--

19,438,463

(2,616,205)

(11.9)

2,510,832

(3,599,272)

(9.1)

(1,384,381)

(3.7)

(16,507,818)

(49.5)

(3,619,478)

(17.7)

2,510,832

0

0

--

0

5,270,207

5,195,793

--

4,193,707

16,965,359

2,135,325

14.4 %

204,975

$1,032,828,417

$242,427,354

30.7 %

$160,781,053

--

(1,157,200)
(338,505)

(4.6)
(1.4)
14.8

0

(5,625,187)

(100.0)

0

44,220,011

(57,301,406)

(56.4)

4,193,707

1.2 %

164,729,134

(89,854,883)

(35.3) %

204,975

0.1 %

18.4 %

$6,538,360,057

16.4 %

$160,781,053

2.5 %

389.6

$923,562,969

-10.5

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

14,114,889

14,114,889

--

0

Tax Amnesty
Judicial Enhancement

(667,285)

0
0
78,000
(16,896,493)
$1,015,931,924

0

0.0
0.0

--

0

(90.3)

0

0.0

12,721,029

(43.0) %

0

0.0 %

$255,148,383

33.5 %

$160,781,053

18.8 %

(726,575)

(310,893,815)

--

(6,672,845)

2.2

0

0

0

--

0

106,089,168

106,089,168

--

0

--

0.0
-0.0

0

(15,080,406)

(100.0)

0

2,409,600

(2,979,700)

(55.3)

0

0.0

81,356,217

(28.7) %

0

0.0 %

$1,004,919,186

18.9 %

$160,781,053

2.6 %

(202,395,047)
$6,335,965,010

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.

--

Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

JCCR MEETING

JLBC MEETING

At its May 10 meeting, the Joint Committee on Capital Review
considered the following issues:

At its May 11th meeting, the Joint Legislative Budget
Committee considered the following issues:

Pinal Community College District Bond Proposal – The
Committee gave a favorable review to a $435.2 million general
obligation (GO) bond issuance scheduled for a May 17
election, with the provision that the Pinal Community College
District return to the Committee for review prior to each actual
bond issuance. The district plans to have 4 issuances, with an
issuance occurring every 5 years. The first issuance is
scheduled for FY 2006. Overall, the issuances would increase
the secondary property tax rate by an average of $0.54,
peaking at $0.94 in FY 2018 when the 5th and final issuance
occurs. The major projects related to the bonding authority
include 2 new campuses (San Tan and Maricopa) and
renovation and expansion of the Superstition campus.

Attorney General – Review of the Allocation of Settlement
Monies and the Use of Antitrust Enforcement Revolving Fund
Monies – The Committee gave a favorable review to an
allocation plan of settlement monies received by the state from
2 court cases. The first case involved violations of antitrust
laws by Sempra Energy Company. The AG alleged that
Sempra manipulated the supply of natural gas resulting in
increased cost to Arizona consumers. Under the settlement,
the company agreed to pay $150,000. Of that total, $90,500
will be deposited in the General Fund, $49,400 will be utilized
for legal counsel and $10,100 will be deposited into the
Antitrust Enforcement Revolving Fund.

Yuma-La Paz Community College District Bond Proposal
– The Committee gave a favorable review to the $20 million
GO bond issuance with the provision that the Yuma-La Paz
Community College District submit the projects for the
remaining $53.9 million in bonding authority prior to the
issuance. The Committee favorably reviewed the entire $73.9
million proposal at its August 2004 meeting. The $20 million
issuance will be repaid over a 25-year period and is estimated
to increase the secondary property tax rate by an average of
$0.13 over the life of the bond. The major projects related to
the bonding authority include Science and Agriculture
Complex buildings, Community Center buildings and campus
infrastructure.
State Fair Building Renewal – The Committee gave a
favorable review to the Arizona Exposition and State Fair
(AESF) FY 2005 Building Renewal Allocation Plan of
$1,007,000, with the provisions that the AESF be able to use
up to $100,000 of the remaining $240,400 as a contingency
amount to complete submitted projects, and that AESF submit
for committee review an allocation plan for the remaining
$140,400 if funds are allocated to new projects. The plan
includes projects related to fencing, paving, roofing, light
fixtures and cabling infrastructure.
ADOA Building Renewal – The Committee gave a favorable
review to the Arizona Department of Administration’s Revised
FY 2005 Building Renewal Allocation Plan, which revised the
cost of a Department of Corrections air handlers project from
$300,000 to $100,000, and allocated $812,000 for 6 new
projects. The Committee has now reviewed the entire $3.5
million building renewal allocation plan.
ABOR Office Leases – The Committee received the biennial
report from the Arizona Board of Regents on all leases which
exceed the average lease cost per square foot as determined by
the Lease Cost Review Board (LCRB). The report noted that
30 of 168, or 17.8%, of FY 2003 and 32 of 186, or 17.2% of
FY 2004 private leases approved by ABOR exceeded the
LCRB rates of $17.25 and $18.25 per square foot, respectively.

The second case involved violations of the Arizona Consumer
Fraud Act and Telephone Solicitation statutes by the Institute
for Financial Advantage (IFA), who the AG alleges failed to
deliver on promises of low-rate credit cards for consumers. As
part of the settlement, IFA paid $142,000 -- $42,700 for
restitution to 120 consumers and $99,300 in fines to be
deposited into the Consumer Revolving Fund.
In addition to the review of settlement cases, the Committee
also gave a favorable review of an expenditure plan from the
AG’s Antitrust Fund. Statute requires that expenditures from
the fund in excess of $183,600 cannot be spent without a
review by the Joint Legislative Budget Committee. The AG
intends to spend $126,400 above this cap -- $55,400 for
personnel costs, $46,000 for operating costs and $25,000 for
Arizona’s share of multi-state antitrust cases.
Department of Public Safety – Quarterly Review of the
Arizona Public Safety Communication Advisory Commission
– DPS submitted to the Committee for review FY 2005 third
quarter expenditures by the Public Safety Communication
Advisory Commission (PSCC) as well as a report on the state’s
progress towards a statewide interoperability project. Laws
2004, Chapter 275 appropriated $5 million to DPS for the
design costs of a statewide radio interoperability
communications system and the use of Homeland Security
monies. Of the $5 million appropriation, $2 million reverts to
the General Fund if unexpended by June 30, 2005.
Third quarter expenses totaled approximately $358,500. The
Commission also entered into a $150,000 agreement with an
information technology firm to develop a document identifying
the mission and objectives of a statewide interoperability
communication system.
The project has fallen behind schedule according to DPS’
original timeline submitted to the Committee in June 2004. As
a result, the Committee requested that the next DPS quarterly
report include an updated design timeline with specific goals
and objectives for completion during FY 2006.

Page 5

Joint Legislative Budget Committee

Department of Health Services (DHS) – Review of
Expenditure Plan from the Vital Records Electronic Systems
Fund – The Committee gave a favorable review to DHS’ $1.4
million expenditure plan from the Vital Records Electronic
Systems Fund. The fund was established in 2002 to improve
the state’s vital records system. The monies from the fund will
be used to digitize 5.2 million birth and death certificates
currently in the state’s vault of vital records. The digitization
of birth and death certificates represents the final phase of the
agency’s Digital Record System (DRS) Project. In March
2004, the Committee favorably reviewed Phase I of the plan,
which involved automating the state’s vital records system.
FEDERAL FUNDS UPDATE
FY 2006 Budget Resolution – Congress recently passed its
Federal Fiscal Year (FFY) 2006 budget resolution. This
concurrent resolution provides the general structure for
congressional consideration of its FFY 2006 appropriations,
tax, and mandatory spending legislation. Although the
resolution projects total spending to increase by 3.4%,
domestic discretionary spending is projected to increase by
1.7%. After the passage of the resolution, Appropriations
Committees in both chambers report subcommittee allocations.
The House has passed its resolution and the Labor, Health and
Human Services, and Education subcommittee would be
virtually flat-funded. Because this subcommittee appropriates
the bulk of state grants, increases for other non-state purposes
(e.g., federal employee pay raises, increased health-research
financing) would likely mean decreased state grants.
In addition to the potential decline in discretionary spending
and states' grants, the resolution also includes a $10 billion
total reduction over 5 years generally assumed to be associated
with Medicaid changes. The statement of managers for the
resolution is clear that no Medicaid savings are assumed for
FFY 2006. The Medicaid changes could be changes that
reduce costs for both the federal government and the states or
they could result in cost shifts to the states.
Federal Emergency Medical Assistance – Under the
Emergency Medical Treatment and Labor Act (EMTALA),
hospitals participating in Medicare must provide treatment to
individuals that have an emergency condition, regardless of
payment method and insurance status. A provision in the
Medicare Modernization Act (MMA) sets aside $1 billion
through FY 2008 to recoup the uncompensated care costs of
hospitals and other emergency providers that provide service to
unauthorized immigrants. Two-thirds of the $1 billion increase
is distributed based on the relative percentages of the total
number of unauthorized immigrants. The remaining one-third
is allocated to the six states with the largest number of
immigrant apprehensions for each fiscal year (of which
Arizona ranks first).
For FY 2005, Arizona will receive $45 million for these
uncompensated care costs, which represents 18% of the total
national distribution. Only California ($70.8 million) and
Texas ($46 million) will receive more federal reimbursement

Monthly Fiscal Highlights – April 2005

for emergency health services. These monies will be used to
pay hospitals, certain physicians, and ambulance providers for
the costs of providing services under EMTALA. Providers
apply for the funding by documenting costs and sending
invoices to the federal government on a quarterly basis.
Adjustments will be made if the reimbursable costs exceed the
state’s $45 million allocation. The state does not receive any
of the money directly.
Because hospitals are not able to ask a patient if they are an
unauthorized immigrant, “indirect” methods will be utilized,
such as a foreign birth certificate or an identification card. The
cost of providing emergency care to unauthorized immigrants
in Arizona has been estimated to be between $150 million to
$400 million annually.
Driver License Requirements – The Arizona Department of
Transportation (ADOT) reports that the President signed
federal H.R. 1268, the Emergency Supplemental
Appropriations Act for Defense, the Global War on Terror, and
Tsunami Relief, 2005 Act, on May 11, 2005. The Act includes
federal requirements regarding state issued drivers' licenses
and identification cards. Federal requirements include the
content and security features of the license, verifying
documentation of an applicant's identity and lawful status, and
issuing temporary licenses for certain lawful statuses. The Act
also requires states to adopt the following practices in issuing
licenses:
1. Capture and electronically store digital images of identity
source documents,
2. Retain paper copies of source documents for at least 7 years
or images for at least 10 years.
3. Photograph each applicant for a license.
4. Confirm or verify a renewing applicant's information.
5. Confirm an applicant's social security number with the
Social Security Administration, resolve any discrepancy
and take appropriate action.
6. Confirm that a person with a license from another state is
terminating or has terminated that license, before issuing a
new license.
7. Ensure the physical security of license production and of
production materials and papers.
8. Subject all persons authorized to produce licenses to
appropriate security clearance requirements.
9. Establish fraudulent document recognition training
programs for appropriate employees engaged in issuing
licenses.
10. Limit the period of validity of all non-temporary licenses to
not more than 8 years.
11. Ensure that any license that does not satisfy these
requirements clearly states on its face that it may not be
accepted by any federal agency for federal identification or
any other official purpose, and that uses a unique design or
color.
12. Provide electronic access to all other states to information
contained in the motor vehicle database of the state.
13. Maintain a state motor vehicle database that contains at a
minimum all data fields printed on the license, and drivers'
histories, including motor vehicle violations, suspensions,
and points on licenses.
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Joint Legislative Budget Committee

In general the requirements are effective beginning 3 years
after the date of enactment. However, the Secretary of
Homeland Security may grant an extension of the 3-year time,
if the state provides adequate justification for noncompliance.
States are required to enter into a memorandum of
understanding with the Secretary of Homeland Security by
September 11, 2005 to routinely use their automated
Systematic Alien Verification for Entitlements system to verify
the legal presence status of a non-United States citizen
applying for a license.
ADOT reports that they are evaluating the requirements, but do
not yet have an estimate of the implementation cost. The Act
states that the Secretary of Homeland Security may make
grants to a state to assist the state in conforming to the
minimum standards.
SUMMARY OF RECENT AGENCY REPORTS
Arizona Department of Administration - Report on
Automated External Defibrillators – A.R.S. § 34-401 requires
the placement of an automated external defibrillator (AED) in
all new and newly renovated state buildings. An AED is a
medical device that can restore a patient’s normal heartbeat by
applying a brief electric shock. Laws 2001, Chapter 308
appropriated a non-lapsing $100,000 over the course of two
years to install AED in state and local government buildings.
The session law charged the Arizona Department of
Administration (ADOA) with the installation of the AED and
required the department to submit an implementation report by
November 2001. The department completed the report on
time, but took no action to install the equipment.
Staff brought the matter to the attention of ADOA in a letter
dated September 27, 2004. In its response from October 5,
2004, the department stated its intention to create a Grant
Review Committee, establish evaluation criteria, distribute
information to state and local government agencies, and install
the AED, with project completion no later than June 30, 2005.
The letter also stated that the Grant Review Committee would
provide quarterly reports.
Therefore, ADOA is reporting on the status of the AED
project. The department received requests from 13 different
government entities and agreed to provide 42 AED as follows:
1 to the Arizona State Lottery Commission, 5 to the Arizona
State Hospital, 4 to the Arizona Game and Fish Department, 5
to county governments, 23 to city governments, and 4 to
Yavapai Community College.
ADOA intends to use any monies remaining from the
$100,000 appropriation and up to an additional $50,000 from
the Risk Management Fund to fill the AED needs of the
Capitol Mall and Capitol Police. Planned locations for these
AED include the Executive Tower, the ADOA building, and
each Capitol Police patrol car.
ADOA completed a solicitation for the AED order on April 29.
The department will award a contract on May 6. The
department reports that project completion is on schedule for
June 30.

Monthly Fiscal Highlights – April 2005

Arizona Department of Administration - Quarterly Report
on Self-Insurance Regarding Health Coverage – At its May 25,
2004 meeting, the Committee gave the issue of self-insuring
state employee health benefits a favorable review with the
stipulation that the Arizona Department of Administration
(ADOA) report to the Committee quarterly on the
implementation of self-insurance including feedback from state
employees and retirees. ADOA has provided its second
quarterly report. The report covers October 1, 2004 through
December 31, 2004, the first quarter of self-insurance
operations. While the first quarterly report dealt primarily with
open enrollment issues, this quarterly report focuses on
demographic information.
Enrollment
As of February 28, 2005, there are 59,910 enrollees in the
program. Of these 59,910 enrollees:
• 51,074 (85.3%) are employees and 8,836 (14.7%) are
retirees
• 55,086 (91.9%) of the enrollees selected the Exclusive
Provider Option (EPO) membership.
• 29,939 (50.0%) of the enrollees are in integrated plans
The membership by vendor is as follows:
Vendor
United Healthcare
Schaller Anderson
RAN+AMN (HMA)
Arizona Foundation
PacifiCare (retirees only)
Beech Street (out-of-state)

Total

Enrollment
27,801
14,716
11,699
3,029
2,138
527

Percent
46.4%
24.6%
19.5%
5.1%
3.6%
0.9%

59,910

100.0%

Administrative Fees
ADOA reports they paid premiums and administrative fees in
the following amounts for both November and December
2004.
Vendor
PacifiCare (Medicare premiums)
Symetra/Safeco (reinsurance)
Harrington Benefits
UHC
Networks
Disease Management
Total

Fees
$ 456,000
255,000
385,000
680,000
120,000
360,000
$2,256,000

Arizona Department of Administration - Semi-Annual
Report on Health Insurance Performance Standards – Pursuant
to A.R.S. § 38-658(B) the Arizona Department of
Administration (ADOA) is required to report semi-annually on
the performance standards for state employee health plans,
including dental plans. ADOA’s report contains vendor
performance based on contractual measures and customer
satisfaction as identified by complaints received by the ADOA
Benefits Office. The annual customer satisfaction survey is
scheduled for fall 2005. It should be noted, however, that
ADOA did not conduct a customer satisfaction survey in 2004.
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Joint Legislative Budget Committee

For the period of October 1, 2004 to February 28, 2005,
ADOA measured performance on several different standards
for its health insurance contractors: United Healthcare,
Harrington
Benefits,
Walgreens
Health
Initiatives,
RAN+AMN Network, Arizona Foundation Network, Schaller
Anderson Network, and Schaller Anderson-Disease
Management.
•

•

•

•

•

•

•

United Healthcare: United Healthcare received 2,704
written appeals, of which 1,729 (63.9%) were resolved
within 30 days. The time United took to answer calls to
its telephone hotline varied from under 2 seconds in
December to over 71 seconds in November. United
exceeded its procedural and financial accuracy targets.
Harrington Benefits: Harrington received 99 written
appeals. For the 39 appeals they received through January
2005, they responded to more than 99% within 30 days.
Harrington’s time to answer telephone calls varied from
18 seconds in November to 80 seconds in October.
Harrington missed its accuracy targets in December and
January but exceeded them in February.
Walgreens Health Initiatives: Walgreens’ time to answer
telephone calls was 18 seconds for the first quarter.
Walgreens exceeded its claims accuracy target in the first
quarter but did not meet its targets in turnaround time for
retail paper processing and for the mail order pharmacy.
RAN+AMN Network: The network does not have
measures regarding appeals or telephone response time.
They met their goals regarding maintaining their network
and responding to ADOA inquiries.
Arizona Foundation Network: The network does not have
measures regarding appeals or telephone response time.
They met their goals regarding maintaining their network
and responding to ADOA and member inquiries.
Schaller Anderson Network: The network does not have
measures regarding appeals or telephone response time.
They met their goals regarding maintaining their network
and responding to ADOA and member inquiries.
Schaller Anderson - Disease Management: The program
does not have measures regarding appeals or payment
accuracy.
Anderson’s self-reported time to answer
telephone calls was less than 1 second.

Arizona Department of Administration/Government
Information Technology Agency - Quarterly Report on HRIS
Implementation – The favorable review of the expenditure
plans for the Human Resources / Payroll System, formally
known as the Human Resources Information Solution (HRIS),
requires the Arizona Department of Administration (ADOA)
and the Government Information Technology Agency (GITA)
to report quarterly on project progress.
The contractor has concluded development of the HRIS
system.
While the contractor achieved all contractual
milestones by May 2004, ADOA was withholding a portion of
its payment pending the completion of certain system
components. With one exception, the contractor finished
programming these final HRIS modules. These systems

Monthly Fiscal Highlights – April 2005

include employee self-service, project management, employee
performance appraisal, a data warehouse, and a hiring gateway.
The contractor did not deliver the ad-hoc reporting service for
HRIS. By mutual agreement, ADOA and the contractor
revised the contract to eliminate this requirement and the
associated payments to the contractor. Instead, the department
will use the recovered $2.9 million to develop this
functionality in-house.
ADOA is continuing to test and systematically deploy various
features to increasing numbers of users. GITA believes this
process is progressing smoothly.
Concerning HRIS development, this quarterly report is the
final one. GITA will require ADOA to demonstrate the
savings described by the HRIS project justification through
quarterly reports on state agencies’ use of the system. JLBC
Staff also continues to work with ADOA to identify savings.
Any further HRIS upgrades will require a new project
justification from ADOA to GITA.
Attorney General - Quarterly Report on Expenditures from
Appropriation for Crane Lawsuit – In September 2001, 7
school districts filed the Crane lawsuit, which claimed that the
current Arizona school finance system is unconstitutional
because it does not provide at-risk students with programs and
funding needed in order to meet state academic standards. In
FY 2004, the Legislature appropriated $500,000 to the
Attorney General for legal fees incurred by outside counsel in
defending the state.
Pursuant to Laws 2003, Second Special Session, Chapter 4, the
Office of the Attorney General is required to report on a
quarterly basis to the JLBC the amount expended from the
appropriation for the Crane lawsuit. As of March 31, 2005, a
total of $466,047 has been spent. Of this amount, $457,072
was spent on outside legal services, $4,525 was spent on expert
witnesses, and $4,450 was spent on external printing. The
agency spent a total of $27,023 since last quarter’s report. The
remaining unexpended amount is $33,953.
State Banking Department - Report on FY 2005 General
Fund Revenues – According to a footnote in the General
Appropriation Act, the State Banking Department is required
to submit a report to JLBC by March 1, 2005 that compares
General Fund revenues generated in FY 2005 through
February 1, 2005 to the comparable period in FY 2004. The
report is also required to include the additional revenues
generated by the new FTE Positions appropriated by the
Legislature.
In the FY 2005 General Appropriation Act, the State Banking
Department received $82,000 to fill two vacant FTE Positions
in the Examinations Department, and it was expected that the
department would generate an additional $220,000 in General
Fund revenue from examinations. The following table displays
the information provided in the report from the State Banking
Department:

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

Banking Department
FY 2004 and FY 2005 General Fund Revenues Thru February 1

Exam Fees
$509,575
497,205
$12,370

Exam
Penalties
$71,700
34,100
$37,600

Total
$581,275
531,305
$ 49,970 1/

FY2005
FY2004
Change in GF
Revenue
____________
1/ The department reports that the General Fund revenue generated by
the new FTE Positions is $14,235.

To date, the department has generated an average of $72,700 in
General Fund revenue per month from examinations in FY
2005. If this average holds, the department should generate
approximately $872,400 in General Fund revenue from
examinations and penalties during FY 2005. During FY 2004,
the department generated a total of $764,600 in General Fund
revenue from examinations and penalties. Based on these
numbers it is estimated the department will generate $107,800
more General Fund revenue from examinations and penalties
than in FY 2004. The estimated increase in General Fund
revenue is $112,200 lower than the estimated amount.
The department reports that the lower than expected General
Fund revenues are a result of the inability to hire one additional
Examiner FTE Position and personnel issues that required
Examiners fill vacancies in other departments. The department
expects revenues to continue to increase as personnel issues are
remedied and when they are successful in hiring the additional
Examiner.
Arizona Community Colleges - Report on Dual Enrollment
Courses – Pursuant to A.R.S. § 15-1821.01, the Arizona
Community Colleges are required to report on dual enrollment
programs offered in the prior fiscal year. The FY 2004 report
includes the following highlights:
•
•
•
•
•
•

31,971 students were dual enrolled
770 courses were offered, of which 287 courses were
classified as Academic and 483 were Occupational
Courses were offered at 191 locations in 9 community
college districts
30,775 students, or 96% of those enrolled, completed the
course
29,410 students earned a C or better, qualifying those
students for both high school and community college
credit
2,926 freshman and sophomore students were dual
enrolled

Arizona Community Colleges - Annual Report – Pursuant to
A.R.S. § 15-1427, the Arizona Community Colleges are
required to report on their progress during the previous year.
The FY 2004 report includes the following summary
information on the state system:

•
•
•
•

193,556 students (headcount) were enrolled for credit,
resulting in a Full-Time Student Equivalent count of
115,600
91% of enrolled students resided within the district, while
9% did not reside within the district
Total number of instructors employed was 9,508, of which
2,185 (23%) were full-time and 7,323 (77%) were parttime
Total revenues were $790.5 million, and total expenditures
were $760.3 million

In addition, each district has provided a description of their
major accomplishments in FY 2004.
Cochise
• Received $777,000 nursing workforce diversity grant
• With UA-South, received a $3 million grant to improve
baccalaureate degree achievement
• Created Center for Southwest Studies
• New Nogales Center, with services in Santa Cruz Cty
Coconino
• With Navajo, received a $2.5 million grant to enhance
internet/instructional television services
• Implemented Forensics Certificate Program
• Launched 32 web courses
• Dine College IGA, with services in Tuba City
Graham
• Began development of on-line courses
• Began construction on High-Tech building
Maricopa
Chandler-Gilbert
• With ASU, received $400,000 engineering grant
• Received $47,000 grant from Intel
Estrella Mountain
• Implemented e-learning courses
Gateway
• Established Gateway Early College
• Nursing program partnership with Banner Health
• Launched web site
Glendale
• Received $396,000 grant for Math and Science scholarships
• Built Biotechnology lab
Mesa
• Expanded distance learning offerings
• Created ESL Student Service Center
Paradise Valley
• Established Nursing Program
Phoenix
• Established Histology Technician Program
Rio Salado
• Launched online Nursing Program
• Completed Conference Center
Scottsdale
• Received $780,000 mathematics grant

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

• Established Nursing Program
South Mountain
• Opened Performing Arts Center
• Established Small Business Entrepreneur Program

Arizona Community Colleges - Report on Workforce
Development Expenditures – The Arizona Community
Colleges are reporting on their previous year’s workforce
development plan activities and expenditures.
A.R.S. § 15-1472 requires each community college district to
establish a workforce development account. Monies in the
account are derived from Proposition 301 sales tax revenues
and shall be used for workforce development and job training,
including expenditures for: 1) partnerships with businesses
and educational institutions; 2) additional faculty; 3)
technology and equipment; 4) student services for new and
expanded job opportunities; and 5) property and new
construction, remodeling, or repair of facilities.

Mohave
• Dental Hygiene Program accredited
• Completed Allied Health building
Navajo
• Began development of on-line student services
• Implemented Critical Care Paramedic Program
• With NAVIT, created pilot Fire Science Program
Pima
• Received $1 million donation for healthcare programs
• Approved 5 new programs

The table below presents total FY 2004 workforce
development revenues and expenditures and a brief description
of key expenditures by district. Total revenues in FY 2004
were $11,560,300 and total expenditures in the same year were
$10,468,400. The table does not include $1 million in
revenues received by the Coconino County Community
College District to provide matching capital funds for the Page
campus pursuant to A.R.S. § 15-1463. In addition, the table
does not include revenues or expenditures for Dine College or
Tohono O’odham Community College. Revenue figures are as
reported on the State Treasurer’s Web site.

Pinal
• Established 8 new certificate or degree programs
• Dietetic Technician Program accredited
• Began construction of University Center
Yavapai
• Completed projects as part of $69.5 million master plan
• Received the following grants: $8.1 million federal,
$795,000 state, $4.2 million private
Yuma/La Paz
• Launched third district television channel
• Received $480,000 grant for distance learning
• With NAU, received $5.3 million grant to improve minority
and low-income student education

District

Arizona Community Colleges
FY 2004 Workforce Development Revenues and Expenditures
FY 2004
FY 2004
Revenues
Expenditures Key Expenditures (Over $100 K)

Cochise
Coconino

$ 578,500
347,600

$ 451,400
347,600

Graham
Maricopa

411,400
5,847,700

258,300
5,465,100

404,100
443,200

385,900
455,000

Pima

1,989,600

1,658,300

Pinal

495,000

480,200

483,700
559,500
$11,560,300

423,800
542,800
$10,468,400

Mohave
Navajo

Yavapai
Yuma/La Paz
TOTAL

The table also provides information on contributions the
community college districts received from the private sector to
promote workforce development.
Total private sector
contributions in FY 2004 were estimated to be $9,585,600.

Avionics faculty – $124 K
Nursing faculty and administration – $111 K
Vocational faculty and administration – $104 K
Interactive television technology – $139 K
Faculty – $2.8 M
Rapid response to new economy – $2.5 M
Development of small business – $200 K
Upgrade computer technology – $244 K
Cosmetology faculty – $113 K
Nursing assistant faculty – $112 K
Aviation faculty and equipment – $311 K
Teacher education program startup – $203 K
Dean of Workforce and Economic Development;
Three Workforce Development offices – $262 K
Office of Economic Development – $169 K
Workforce skill development – $424 K

Private Sector
Contributions
$

0
177,900
0
3,013,600

1,157,400
546,500
4,398,900
89,600
43,900
157,800
$9,585,600

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Joint Legislative Budget Committee

Arizona Criminal Justice Commission - Report on State Aid
to County Attorneys Fund and the State Aid to Indigent
Defense Fund – Pursuant to A.R.S. § 41-2409E, the Arizona
Criminal Justice Commission (ACJC) is required to report on
the expenditures of monies in the State Aid to County
Attorneys Fund and State Aid to Indigent Defense Fund by
January 8, 2005. Monies in the funds are distributed to
counties based on a statutory formula that uses population and
criminal case filings. ACJC reports that counties used the
monies in three main areas: additional staffing to process more
cases, equipment purchases to improve case management, and
contracts for outside services to improve criminal case
processing. The legislation establishing the funds and the
reporting requirement included a legislative intent section that
set timelines for criminal case processing. The ACJC report
states that many agencies have been able to decrease case
processing times as a result of the Fill the Gap funding;
however, due to increasing caseloads and recent Supreme
Court rulings, the report indicates that these funds are
insufficient to meet case processing time guidelines. Progress
in criminal case processing times could not be established due
to incongruent definitions and reporting standards between the
agencies.
Department of Economic Security - Report on Arizona
Works Pilot Program – Pursuant to A.R.S. § 46-342, DES has
provided reports submitted by MAXIMUS, the program
contractor for the Arizona Works program, along with
comparable DES data, for December 2004 and January 2005.
This job placement pilot serves clients in District I-E, which
generally covers the eastern part of Maricopa County.
In January 2005, MAXIMUS placed a total of 136 Arizona
Works clients in full-time paid employment in District I-E, an
increase of 14% from the January 2004 figure of 119. (Over
the same time period, the total number of District I-E Arizona
Works clients placed by MAXIMUS in all new employment
placements, including unpaid work experience and community
service positions, increased 12%.) In January 2005, the
number of DES JOBS clients placed in full-time paid
employment in the rest of Maricopa County decreased by 31%
from the January 2004 figure, to 255 from 367 clients. (Over
the same time period, total DES JOBS clients placed in all new
employment placements in the rest of Maricopa County,
including unpaid work experience and community service
positions, decreased 20%.) As we have noted previously,
because of potential differences in the demographic and
economic makeup of both regions, one cannot necessarily draw
conclusions about the relative effectiveness of both programs
from this data.
Arizona Department of Environmental Quality - Report on
Arizona Alternative Testing and Compliance Study – Pursuant
to Laws 2000, Chapter 404, the Department of Environmental
Quality has submitted the final progress report for the Arizona
Alternative Testing and Compliance Study (AZTACS). The
purpose of this study is to research and evaluate the feasibility
and effectiveness of alternative technologies to identifying
high pollutant vehicles and requiring their repair prior to

Monthly Fiscal Highlights – April 2005

entrance into the Phoenix or Tucson metropolitan areas.
AZTACS is also required to evaluate and identify methods to
improve motorist compliance with existing and alternative
emissions inspection programs.
The progress report submitted by the Eastern Research Group
provides an update on study activities performed by the
contractor during the last year. However, it does not include
any findings or recommendations. Statute requires that the
final report containing findings and recommendations be
submitted by September 30, 2005.
Governor’s Office of Strategic Planning and Budgeting Report on Federal Revenue Maximization Initiative – Pursuant
to a General Appropriation Act footnote, the Governor’s Office
of Strategic Planning and Budgeting (OSPB) has submitted its
quarterly report on the status of a Federal Revenue
Maximization Initiative. To date, there are 7 projects
completed, all designed to increase federal Title XIX Medicaid
reimbursement. This includes 1 project completed since the
last report, an AHCCCS project drawing down about $5.3
million in enhanced administration funding. The total $9.3
million in estimated savings does not include currently
unknown savings for Arizona State Hospital (ASH) inpatient
hospitalization or Medicaid in the Public Schools (MIPS)
audiology services.
In addition to these projects, the summary lists 12 ongoing
projects. Included in these numbers are 3 DES projects with
new developments from the prior report:
• Increased Title IV-E Administrative Claiming and
Targeted Case Management: The report notes that the
savings estimate associated with the Title IV-E portion is
now $1.8 million; the vendor is attempting to submit a
claim at the end of FY 2005 for retroactive claims. The
enacted budget incorporates half of these $1.8 million of
savings into the FY 2006 DES budget.
• Title IV-E Funding for Out of Home Placement: The
report notes that the savings estimate is now $1 million;
the vendor is attempting to submit a claim at the end of
FY 2005 for retroactive claims. The enacted budget
incorporates half of these $1 million of savings into the
FY 2006 DES budget.
• Program for Children With Special Needs Ages 0-5: The
report notes that AHCCCS and DES are exploring the
feasibility of developing a waiver for children ages 0-5
meeting special needs requirements in which all services
would be provided through one agency. There is no other
detail provided in the report, other than a final report is
due in October 2005.
In a related development, in December 2004 the Executive
Branch awarded a contract to the auditing firm PRG Schultz as
part of the Efficiency Review process. The contract is for
“recovery auditing,” in which PRG Schultz will audit state
contracts for overpayments and contract oversights. The state
will pay PRG Schultz 15% of all disbursement errors
recouped, 25% of savings from contract compliance issues,
and 15% of all Medicaid-related savings.

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Joint Legislative Budget Committee

Department of Racing - Semi-Annual Report on Boxing
Events and Revenue – Pursuant to a General Appropriation Act
footnote, the Department of Racing is required to report semiannually on the number of boxing events, gross receipts, state
revenues, and license fee collections.
The department
submitted its latest report on February 15, 2005.
Between June 30, 2004 and December 31, 2004, a total of 21
boxing events have been held in Arizona. During that time
period the total gross tax receipts and license fee collections
were $30,021, and the state received $12,000 of additional
revenue by way of an Intergovernmental Agreement with
Indian tribes.
Arizona State Retirement System - Semi-Annual Report on
the ASRS Information Technology Plan – Pursuant to a
footnote in the General Appropriation Act, the Arizona State
Retirement System (ASRS) is submitting its semi-annual
report on the ASRS Information Technology (IT) project.
ASRS received a FY 2005 appropriation of $9,051,900 from
the State Retirement System Administration Account to
continue implementing the ASRS IT Plan. Through December
31, 2004, ASRS has spent $637,917 of this appropriation.
ASRS also received appropriations in FY 2002, FY 2003, FY
2004 totaling $27,100,600, and through December 31, 2004,
ASRS has spent a total of $18,735,900. Therefore, as of
December 31, 2004, ASRS has $16,778,700 in unspent
appropriations from FY 2002 through FY 2005 for the ASRS
IT plan.
Recently, there have been some concerns raised as to the
progress of the IT plan. An Independent Advisory Consultant
(IAC) raised concerns on two of the projects, the Public
Employees Retirement Information System (PERIS) and the
Financial Management System (FMS). These concerns caused
GITA to change the project status from “green,” indicating the
project is expected to be completed as planned, to “red,”
indicating a serious risk to project phase completion by the
planned date.
The concern with PERIS revolved around the difficulty
implementing the Service Purchase application and ASRS was
asked to consider the elimination of in-house development in
favor of buying the products. ASRS has indicated that they
have since fully implemented the application and intend to
continue with in-house development. The issue with the FMS
was a misunderstanding with a vendor that has been resolved.
The Information Technology Authorization Committee (ITAC)
is working with an internal ASRS review team to monitor the
project status and a new IAC is evaluating the project. On
April 27, 2005, ITAC decided to reconsider the project status
after a 4-week review by the new IAC.
Department of Revenue - Report on Tobacco Tax Revenue
Collections – The Department of Revenue (DOR) received an
additional $900,000 from the General Fund and 14 FTE
Positions in the FY 2005 General Appropriation Act for
tobacco tax enforcement. DOR estimated that the 14 FTE
Positions would increase annual revenue by $1.8 million. In
June 2004 the Appropriations Chairmen asked DOR to provide
an interim progress report with regard to their revenue

Monthly Fiscal Highlights – April 2005

collection efforts by March 1, 2005 and a final report by July
31, 2005. The reports were to include the actual increased
revenue collected as a result of the 14 new FTE Positions, as
well as the actual revenue collected due to the 7 base budget
FTE Positions.
On April 26, 2005 DOR reported that they filled and trained
the 14 new FTE Positions in August and September 2004, and
that 5 of the 7 base budget FTE Positions are filled. DOR
reports $888,000 of combined tobacco tax enforcement
revenue in the first 8 months of FY 2005, which includes both
the base budget FTE Positions and new FTE Positions. The
$888,000 includes $638,000 to the General Fund from
penalties on seized tobacco products and $250,000 paid
through March 1, 2005 on $3 million of tobacco tax audit
assessments. DOR reports that on average 95% of tobacco tax
audit assessments are collected. The following table shows the
results for the first 8 months of FY 2005 compared to FY 2004.
Summary of Tobacco Tax Enforcement Revenue –
Through 3/1/05
FY 2004
FY 2005
Penalties to General Fund
$ 54,000
$638,000
Audit Payments 1/
0
250,000
$ 54,000
$888,000
Total
____________
1/ Approximately 13.56% to the General Fund, 1.69% to the Corrections
Fund, and 84.75% to the Tobacco Tax and Health Care Fund.

In addition, DOR reports that overall tobacco tax collections
increased $7.6 million through March 1, 2005 due to increased
public awareness of enforcement activities, from $179.9
million in FY 2004 to $187.5 million in FY 2005. The $187.5
million in FY 2005 includes the $250,000 of audit payments,
but does not include the $638,000 of penalties to the General
Fund. DOR does not have data on cigarette purchases by
Arizona residents over the Internet. DOR reports that since
about March 2005 national credit card companies no longer
handle transactions with Internet tobacco sellers. As a result,
DOR expects the significance of Internet tobacco sales to
decline.
Department of Revenue (DOR) - Report on Ladewig
Expenditures – In March, DOR mailed 413 warrants totaling
$281,800 as a result of taxpayer mail or referrals from
unclaimed property. DOR’s monthly status report shows
expenditures of $23,700 for Ladewig in March 2005 for
administrative costs. Expenditures totaled $131.6 million for
the first 9 months of FY 2005, out of DOR’s estimated total of
$134.7 million for FY 2005. The following table summarizes
these items.
DOR’s Ladewig Expenditures in FY 2005
DOR Administration
Plaintiff Attorneys
Taxpayer Payments
Total Expenditures

DOR’s Estimate 1/
$ 3,000,000 2/
6,000,000
125,700,000
$134,700,000

Through March 2005
$
1,513,700
6,121,500
123,984,100
$131,619,300

____________
1/ Reported by DOR at the August 17, 2004 JLBC meeting.

2/ JLBC favorably reviewed $3,000,000 to fully fund DOR’s estimated
administrative costs in FY 2005 at the June 29, 2004 JLBC meeting.

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

The Ladewig Settlement Budget Reconciliation Bill (Laws
2004, Chapter 285) allocates $120 million in FY 2005 to the
department for payments and costs associated with the case of
Ladewig v. State of Arizona, with any unused amount to be
held in reserve for future payments. DOR has made those
payments above $120 million from the tax refund account in
the General Fund. This is based on the provision of Laws
2004, Chapter 285 which states that “DOR shall draw all
amounts necessary pursuant to the authority prescribed in
A.R.S. § 42-1117 for the payments and costs.”
Department of Revenue - Report on Business Reengineering/Integrated Tax System (BRITS) – BRITS is the
new computer system being implemented by the Department
of Revenue (DOR) to integrate their separate tax systems,
improve enforcement, and increase revenues to the state.
Given the importance of this issue, in April 2003 the
Appropriations Chairmen asked DOR to provide quarterly
reports on the additional revenue received from implementing
BRITS. The implementation of BRITS began in FY 2003 with
the awarding of the contract to Accenture, LLP on August 20,
2002. BRITS is expected to be completed in FY 2007, for a
total cost of $133,664,700 including an estimated $11,000,000
in interest. Accenture will finance the cost of BRITS, and will
be paid from the increased revenues generated by BRITS.
DOR had problems with the transaction privilege tax (TPT)
conversion to BRITS in January 2004, which delayed other
BRITS conversions as shown in the following table. DOR
reports that they have addressed the major TPT conversion
issues, but that collection tasks are not fully functional and
billings are still being checked before they are sent out. DOR
reports that the withholding tax was converted in October 2004
with no significant issues.

General Fund
County/City
Education
Subtotal
Accenture
Total

FY 2003
$ 73,600
26,200
9,800
$ 109,600
620,900
$ 730,500

FY 2004
$ 1,855,000
146,700
44,200
$ 2,045,900
11,593,700
$13,639,600

FY 2005
$ 1,995,200
273,300
77,700
$ 2,346,200
13,295,200
$15,641,400

Projected Tax System Conversion Dates for BRITS
Tax System
Projected Date
Revised Date
Corporate Income Tax
September 2004 September 2005
Individual Income Tax
September 2006
Late 2006

The department expects the delays to have no impact on total
cost, since BRITS is a fixed price contract. However, DOR
states that any enhancements that the department may want
that are different than the original contract will be reviewed for
both impact and potential cost. DOR reports that BRITS
delays and resource reallocations for correcting BRITS
problems have adversely impacted the revenue generating
program.
Summary of BRITS Costs
Through 3/31/05
Total Project
$55,830,900
$101,250,700
Consulting Services
11,870,800
21,414,000
Hardware/Software
11,000,000 1/
3,726,700
Interest
$71,428,400
$133,664,700
Total
____________
1/ DOR estimates interest will cost from $9 million to $13 million.
Summary of BRITS Additional Revenues – Through 3/31/05

BRITS has generated additional revenue, but not as much as
projected. Accenture has been paid $25.5 million through
March 31, 2005 for increased collections. This amount is
$12.1 million below the projected payment at this point in the
contract. The state/county/city have received $4.5 million,
$2.1 million less than projected. BRITS revenues are further
behind the goals than they were as of December 31, 2004,
when payments to Accenture were $8 million below the
projected amount and the state/county/city had received $1.4
million less than projected. The following tables summarize
BRITS costs and additional revenues through March 31, 2005.
Total
$ 3,923,800
446,200
131,700
$ 4,501,700
25,509,800
$30,011,500

Projected
Total

Over/(Under)
Projection

$ 6,641,800
37,636,400
$44,278,200

$(2,140,100)
(12,126,600)
$(14,266,700)

Supreme Court - Report on Arizona Lengthy Trial Fund –
Pursuant to A.R.S. § 21-222(E), the Supreme Court is required
to report annually on the amount of monies collected and
expended as well as the number of jurors receiving monies
from the Lengthy Trial Fund (LTF). Eligibility of funding is
limited to jurors serving on trials lasting in excess of 10 days.
Reimbursement of funds is limited to not more than: $100 per
day for trial days 4 through 10 and $300 for trial days 11 and
above. The minimum juror reimbursement is $40 per day.
Effective January 1, 2004, the Administrative Office of the
Courts (AOC) established a $15 filing fee for civil complaints,
answers and requests to intervene. Monies from the filing fee
are deposited into the LTF. Due to the effective date of the
imposed fees, expenditures of monies to eligible jurors
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Joint Legislative Budget Committee

Monthly Fiscal Highlights – April 2005

requesting reimbursement was delayed to lengthy trials
occurring after July 1, 2004. Revenues for the 12 months
ended December 2004 totaled $613,600, while reimbursement
requests for 8 months ended February 2005 amounted to
$75,400. Of the $75,400 expended from the LTF, $73,964.43
reimbursed jurors and $1,452 was paid to jury Commissioners.
In total, 23 LTF-eligible trials existed and 80 (or 29%) of the
276 eligible jurors sought payment.
Requests for
reimbursement were made by 30 jurors serving on criminal
trials and 50 jurors serving on civil trials totaling $40,708.07
and $33,256.36, respectively. Jury Commissioners are paid
$18 from the LTF for each juror who files claim on LTF
monies within their county.
University of Arizona - Report on Final Pay Plan – A footnote
in the FY 2005 General Appropriations Act required the
Arizona Board of Regents (ABOR) to report on the distribution
of $16.1 million appropriated for university pay increases in
FY 2005. ABOR reported in October 2004 that it allocated
monies among the universities by providing $1,000 for each
full-time equivalent staff position.
The University of Arizona (UA) received $6.4 million to allot
among its faculty and staff. UA chose to give a $1,000 salary
increase to classified staff and service professionals, as well as
to use the remaining monies for merit adjustments among its
other employees. However, the university was not able to
report the final allocation of its pay plan monies at that time.
UA is now reporting the final distribution of its $6.4 million.
The university set aside $5.6 million for personal services and
$0.8 million for employee related expenditures. Faculty and
other academic professionals received $2.0 million, while other
staff received the remaining $4.4 million. All salary increases
took effect on July 1, 2004. The following table details the
final UA pay plan.

Department of Weights & Measures - Report on FY 2005
General Fund Revenues – Pursuant to a footnote in the General
Appropriation Act, the Department of Weights and Measures is
required to submit a report to JLBC by March 1, 2005
comparing General Fund revenues generated in FY 2005
through February 1, 2005 from civil penalties and the licensing
of timing devices and meters compared to the comparable
period in FY 2004. The report is also required to include the
additional revenues generated by the three additional FTE
Positions appropriated by the Legislature in FY 2005.
In the FY 2005 General Appropriation Act, the department
received $123,200 from the General Fund to fill three vacant
inspector positions. The 3 positions were projected to generate
an additional $630,000 in General Fund revenue from civil
penalties and the licensure of timing devices and meters. The
table below displays the information provided by the
department.
The department has generated an average of $217,250 in
General Fund revenue each month. Based on this average, it is
estimated that the department will generate $2,607,000 in
General Fund revenue. During FY 2004, the department
generated $2,073,400 in General Fund revenue. If revenues
continue to be collected at this rate, the department will
generate $533,600 more General Fund revenue in FY 2005
than in FY 2004.
The department believes, however, that it will still meet its
$630,000 revenue goal by the end of the fiscal year. This is
mainly due to an increase in licenses from timing devices and
meters. The department has been in the process of developing
licensing guidelines for certain types of timing devices and
meters and has recently began licensing some of these devices.

University of Arizona Pay Allocation

Eligible Employee Categories
Classified Staff
Administrative
Faculty
Service Professional
TOTAL

# of FTE
Positions in
Category
$2,645.6
346.4
1,953.3
519.9
249.1
$5,714.2

# of
Receiving
FTE Positions
$2,273.9
319.7
1,373.7
495.9
220.5
$4,683.7

PS per FTE
Position
$1,063.81
1,397.25
1,104.97
2,011.70
1,000.00
$1,196.00

PS
Allocation

ERE
Allocation

TOTAL
Allocation

$2,419,000
446,700
1,517,900
997,600
220,500
$5,601,700

$362,800
67,000
227,700
149,600
33,100
$840,200

$2,781,800
513,700
1,745,600
1,147,200
253,600
$6,441,900

Department of Weights and Measures
FY 2004 and FY 2005 General Fund Revenues thru February 1

FY2005
FY2004
Change in General Fund Revenue

Civil Penalties
$339,100
184,500
$154,600

License Revenue
$1,398,900
1,291,300
$ 107,600

Total
$1,738,000
1,475,800
$ 262,200 1/

____________
1/ The department reports that the General Fund revenue generated by the new FTE Positions is $89,850.

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