SUMMARY The Executive Budget FISCAL YEARS 2008 AND 2009 Janet Napolitano GOVERNOR SUMMARY The Executive Budget FISCAL YEARS 2007 AND 2008 Janet Napolitano GOVERNOR Provisions for Individuals with Disabilities Individuals who have a disability that require reasonable accommodation in order to use this document are encouraged to contact the Governor’s Office of Strategic Planning and Budgeting at 602-542-5381. STATE OF ARIZONA JANET NAPOLITANO GOVERNOR OFFICE OF THE GOVERNOR 1700 WEST WASHINGTON STREET, PHOENIX, ARIZONA 85007 MAIN PHONE: 602-542-4331 FACSIMILE: 602-542-7601 January 2007 To the Honorable Members of the Forty-Eighth Arizona Legislature: As we continue our work together, toward an exciting and prosperous future for our state, we should be both mindful of our common values and grateful to the Arizonans who, during the past 95 years, made our state what it is today. In this Legislative session, the responsibility rests with us to demonstrate leadership and wisdom that will, in turn, benefit future generations. It is with this perspective that the Executive Budget Recommendation for Fiscal Years 2008 and 2009 has been developed for your consideration. Many of the challenges that we face are summed up in last month’s announcement that Arizona had recaptured its ranking as the nation’s fastest growing state. Arizona’s population has grown by 65% since 1990, and today’s population total will double before a baby born this year graduates from college. As our population grows, so will the number of children in our classrooms, the number of inmates in our prisons, the number of vehicles on our roads, and the number of families seeking jobs and health care. The Arizona I envision will be prepared to accommodate it all. Our breathtaking growth dictates that we plan now to meet the needs of our children, our seniors, our families, and the private sector, which will create the jobs of today and tomorrow. Our preparation for a bright tomorrow demands that we take decisive, well-defined action today. Meeting the needs of the nation’s fastest growing state requires excellence in education. The Executive Budget Recommendation provides resources for a higher level of training for students, teachers and our education system at large, particularly in math and science. At the K12 levels, this recommendation increases teacher base pay to $33,000, adds salary initiatives and financial incentives crafted to attract, train and retain excellent teachers, and provides for construction of new schoools. It provides more than $100 million to help our universities improve student retention; fund enrollment growth; develop a biomedical campus in Phoenix; recruit, retain and build upon world-class faculty; and provide capital financing for research infrastructure necessary to educate future generations. The Recommendation also proposes the highest General Fund contribution ever to State financial aid. Meeting the needs of the nation’s fastest growing state requires excellence in job creation and transportation. The Executive Budget Recommendation enhances the State’s capacity for innovation investment and breathes new life into the Commerce and Economic Development January 2007 Page 2 Commission Fund. It provides $40 million for medical and bioscience initiatives that will further spur economic growth. It provides $30 million over the next three years to expand the funding capacity of the Greater Arizona Development Authority to help Arizona’s rural communities address their infrastructure needs. It accelerates highway construction by extending bond repayment periods, making available more than $400 million. Meeting the needs of the nation’s fastest growing state requires excellence in public safety, law enforcement and human services. The Executive Budget Recommendation enhances the public safety by expanding the prison system’s ability to accommodate a growing inmate population. It increases the number of officers patrolling our highways. In close cooperation with the federal government, it strengthens our border security against illegal immigration, agricultural threats, and hazardous materials. The Recommendation ensures that every Arizona child in a lower-income household has affordable health insurance and that their parents are made aware of its availability. It eliminates barriers to employers who wish to offer more affordable health insurance to their workers. It helps Arizona enhance the skills of its medical professionals through an additional $9 million for graduate medical education. It increases funding, by 50%, for financial assistance to first-time homebuyers in rural Arizona and doubles the investment in homebuyer education to reduce the risk of foreclosure, to build family stability, and to strengthen neighborhoods and communities. Meeting the critical needs of Arizona’s citizens while balancing the state’s budget in any year requires excellence in fiscal management. In FY 2006, the state experienced explosive revenue growth of greater than 19%. Together we were able to make investments in our core priorities and reduce both business taxes and individual income taxes. While this has resulted in an excellent and sustainable environment for business growth, it has yielded a much more modest revenue growth for FY 2007 (5.3%) and FY 2008 (3.7%). As in any other business, my budget follows fundamental business principles that include the cautious use of capital financing for some of our building and infrastructure needs. This wise and discerning approach will continue to keep our budget in balance, as it has been for the past four years. The need to pursue these and other initiatives contained in this Executive Budget Recommendation is undeniable, if we are to be faithful in our mission to secure Arizona’s future in an era of rapid growth. As elected officials, we must recognize the magnitude of the challenges before us and reaffirm our commitment to meeting them. Very truly yours, Janet Napolitano Governor JN/neh TABLE OF CONTENTS BUDGET HIGHLIGHTS ....................................................................................... 1 BUDGET SUMMARY General Fund Sources and Uses................................................................ 7 General Fund Revenue Summary ........................................................... 10 General Fund Operating Budgets Summary ......................................... 11 Other Appropriated Funds Revenue Summary.................................... 13 Other Appropriated Funds Operating Budgets Summary.................. 14 General Fund Recommendations by Category ..................................... 23 BUDGET MESSAGE The Economy: A Generally Positive Outlook for Arizona......................... 25 Good Government: Efficiency Review Savings and Cost Avoidances...... 27 Education: Preparing Arizona students for career success ........................ 31 Health and Welfare: Expanding access to health care............................... 35 Economic Development: Enhancing Arizona’s Competitive Capacity.... 39 Protection and Safety: Investing in Vigilance, Skill, and Experience ....... 41 Natural Resources: A commitment to environmental stewardship........... 46 Transportation: A Fast Track for Highway Construction ......................... 50 State Employees: Recommended FTE Increases ........................................ 53 Legislative Actions: Proposed Legislative Changes................................... 56 Elected Official Salaries ............................................................................ 59 CAPITAL OUTLAY Revitalization and Infrastructure Development ................................... 61 ACKNOWLEDGEMENTS BUDGET HIGHLIGHTS The Impact of the State Budget For stakeholders who are directly impacted by State services and programs, how the Executive and Legislative branches allocate resources transcends mere public policy What the Executive Budget Does for … ♦ $3 million to provide incen‐ tives for university students to study to become teachers in math and science; ♦ $2.5 million to award grants to school districts to establish innovative math and science programs and academies; EDUCATION Arizona’s children deserve the re‐ sources and opportunities to compete in today’s global economy. As we increase expectations for our students, we must provide quality teachers to instruct them. Teachers do the heavy lifting and deserve to be compensated at the level of other comparable professionals. The pay disparity between teach‐ ers and other professions puts schools and students at a disadvantage in attracting people to the profession. In addition, districts that are able to pay more are able to recruit and retain the most qualified teachers, further increasing the disparities with low‐ income, small and rural districts. The Executive Recommendation continues to demonstrate its commit‐ ment to education by establishing a statewide minimum teacher salary, increasing the base salary level of all teachers, and creating performance pay structures. Highlights include: • • $50 million to establish a State minimum base teacher salary of $33,000 per year and to increase the base pay of every teacher mak‐ ing at or above the minimum; $15.5 million to retain and in‐ crease the number of highly quali‐ fied math and science teachers by: ♦ $10.0 million to provide assis‐ tance for existing teachers to become highly qualified in math or science by increasing base pay for highly qualified math and science teachers currently teaching in Arizona schools; FY 2008 and FY 2009 Executive Budget • • • $4 million for a statewide system of professional development and performance pay; $4 million to continue expanding the Master Teacher program through regional partnerships (expanding Master Teacher allows more highly qualified, knowl‐ edgeable teachers to pass on their experience to novice teachers and help create a capable workforce to guide our children into the future); and $407.8 million for the New Con‐ struction program, expected to fund 29 new elementary schools and 7 new high schools and/or build‐outs of existing schools, in‐ cluding facilities planned for Vol‐ untary Full Day Kindergarten; What the Executive Budget Does for … COLLEGE STUDENTS For Arizona to achieve worldwide recognition as a center of North American trade and commerce, its higher education system must be able to produce a first‐class workforce. The demands of the 21st century place enormous expectations on Arizona’s graduates as they enter the workforce. Training and retention of university graduates in Arizona is, therefore, critical to the state’s future success. Arizona’s population growth is reflected in continued enrollment growth at the universities. In FY 2008, a 2.5% student enrollment increase is expected. Arizona must strive to maintain university access to all students within the state while im‐ proving the quality of education. The Executive Recommendation seeks to improve access to and the quality of university education by providing: • $6.3 million for the Arizona Financial Aid Trust (of this amount, $2.9 million funds the statutory formula by providing a 2:1 ratio of State funding to stu‐ dent fees; an additional $3.4 mil‐ lion is recommended to increase the State’s financial aid support and to assist students with rising tuition costs); • $29.8 million to improve student and faculty retention, with goals of increasing graduation rates and reducing the time it takes to earn a degree; • $25 million for expanding the biomedical education and research programs for all three universities at the Phoenix Biomedical Cam‐ pus; and • $17 million for enrollment growth. What the Executive Budget Does for … CHILDREN As Arizonans face rising health care costs, access to coverage contin‐ ues to be a concern. Of particular concern are massive increases in private sector health insurance costs and declining percentages of employ‐ ers offering health insurance for families. 1 The Executive Budget Recom‐ mendation recognizes that something must be done. It is especially important to ensure that all Arizona children have access to the medical care they need when they need it. To help address this concern, the Executive proposes a package of initiatives to ensure that Arizonans receive the quality medical care and social services they deserve. Highlights include: • • $6 million to establish an out‐ reach effort to enroll 63,000 kids beginning in January 2008 who are currently eligible for KidsCare but not participating, and to enroll 56,000 kids estimated to be cur‐ rently eligible beginning in Janu‐ ary 2008 for Title XIX but not par‐ ticipating. (Since the start of the enrollment is scheduled for Janu‐ ary 1, 2008 it is anticipated that 40% of the eligible children for the KidsCare and Title XIX programs will be enrolled by the June 30, 2008). In addition, increase, from the current 200%, KidsCare eligi‐ bility to children in families at 300% of the Federal Poverty Level (FPL); and $1.4 million for the Parents’ Evaluation of Developmental Status (PEDS) tool to be adminis‐ tered to all AHCCCS client chil‐ dren going in for well‐child visits at those ages. What the Executive Budget Does for … INNOVATION Arizonans increasingly recognize the need for a bold, statewide vision for economic development, including strategies that solidify the state’s place at the core of science and technology. While in recent years the Governor and Legislature have initiated meas‐ ures to enhance Arizona’s competitive capacity, a new economic develop‐ ment strategy is needed as a catalyst to ensure Arizona’s prominence in the broader economy. With the Department of Com‐ merce at the forefront, the Executive is 2 preparing measures to energize Arizona’s economic development structure and is launching efforts for new collaborative alignment of existing economic development programs and resources. In addition to addressing several organizational enhancements high‐ lights include: • $35 million to strengthen Science Foundation Arizona to create and lead industries of the future; • $1.2 million to expand Arizona’s global efforts, strengthen foreign direct investment and attract non‐ US based companies to locate Ari‐ zona; • $1.3 million to begin the process of restoring Arizona’s innovation investment fund; • $1.2 million for the Department of Commerce to develop, implement and lead the Arizona global com‐ petiveness innovation initiative and support the state ‘s ability to innovate and compete; • $5 million in additional capitali‐ zation, to the Greater Arizona De‐ velopment Authority (GADA) to address communities’ infrastruc‐ ture needs; • • $148,000 to enable the Depart‐ ment to implement and administer tax incentive programs enacted in the last two years relating to mo‐ tion picture, healthy forest, solar and “angel” tax credits; and $1.4 million during this biennium budget for marketing and tourism promotion activities. What the Executive Budget Does for … HEALTHCARE Arizona continues to be a national leader in the efficient provision of health services to the medically needy and low‐income populations. Demand for health care for low‐income indi‐ viduals continues to grow nationwide, particularly in rapidly growing states such as Arizona. Providing consistent, community‐ based primary care prevents long‐ term disorders and diverts people from more expensive forms of treat‐ ment. Additionally, investment in physician recruitment and retention, medical education, substance abuse treatment, newborn/infant health, and vaccines will result in long‐term dividends. Highlights include an additional: • $2.7 million for the purchase of vaccines for children and underin‐ sured adults (the funding will pro‐ vide 360,000 additional doses of vaccines for children and 51,000 total doses of vaccines for adults); • $1.5 million to fill the gap within Community Health Centers (CHCs) sliding scale fee collection from patients who are between 100% and 200% of FPL and for un‐ compensated care; • $3 million increase in state funds matched by $5.9 million in federal funds to expand the Graduate Medical Education Program, mak‐ ing a total of $44 million in FY 2008 available to support resi‐ dency slots in Arizona hospitals; • full funding for the Medical Stu‐ dent Loan Program, which en‐ courages physicians to set up their medical practice in underserved areas or to meet the needs of un‐ derserved populations; and • $1 million to provide Medicaid‐ eligible hospice services for all AHCCCS clients. What the Executive Budget Does for … TRIBAL GOVERNMENTS There are 21 tribal governments within Arizona’s borders, serving nearly 300,000 tribal members. While gaming opportunities on tribal lands have improved the economic envi‐ ronment for some of Arizona’s Native American tribes, many tribal areas, particularly in rural or remote areas, continue to experience high levels of poverty and other social afflictions. Many Native Americans do not have access to state programs and services. Partnering with tribal governments increases access to needed services. The Executive Recommendation Budget Highlights fosters these partnerships by provid‐ ing: • $150,000 to the Department of Public Safety (DPS) to provide crime lab services to tribal law en‐ forcement agencies; • $157,500 for DPS support of tribal law enforcement activities; • $142,400 for the architectural and design costs of the Hopi Assisted Living Center for disabled elders and young adults; • • $400,000 to the Tribal Metham‐ phetamine Program for drug pre‐ vention and treatment programs to fight the growing metham‐ phetamine problem in tribal com‐ munities; and $150,000 to increase tribal mem‐ bers’ access to health programs in urban areas. increasing relative to other population age groups. Nationwide, the first wave of Baby Boomers – over 78 million of them – will reach age 60 this year. Seniors remain positive contribu‐ tors to Arizona’s economy well beyond retirement age and are living longer than ever, thanks to advance‐ ments in health, wellness and medical science. While a vibrant senior popu‐ lation has emerged in Arizona, many individuals within this population group also remain at risk for chronic disabilities, economic fraud and reduced economic means. The Executive Recommendation provides an additional: • • $1 million to expand the Arizona Commodity Supplemental Food Program beyond the federal cap and provide food baskets to an additional 3,750 elderly per month; • Provide an additional 6 beds to expand the number of clients served by the Pioneers’ Home as well as giving the Home the flexi‐ bility and the resources necessary to provide quality care for Ari‐ zona’s pioneers; and • $92,000 for criminal prosecution of elder abuse. In FY 2006, the De‐ partment of Economic Security substantiated 2,672 cases of abuse, neglect and financial exploitation involving vulnerable adults. It is estimated that more than 12,000 instances of elder abuse occur in Arizona every single year. The Ex‐ ecutive recommends strengthen‐ ing the Elder Abuse Unit with the addition of two attorneys, a foren‐ sic accountant and a legal assis‐ tant. What the Executive Budget Does for … VETERANS There are approximately 600,000 veterans currently living in Arizona, and that population is certain to grow. The risks and sacrifices that veterans have made on behalf of our nation warrant our unfading appreciation and our commitment to accommodate their unique needs. Executive Order 2005‐15 created the Arizona Veteran Task Force. This year the Task Force analyzed and evaluated State services and benefits provided to Arizona’s veterans and found that those services needed substantial enhancement. The Executive budget provides: • 1.4 million for 30 new veteran benefit counselors and agency support staff; and • $242,300 to allow the Department to meet its increased financial ob‐ ligations related to its role as con‐ servator. $2 million to provide dental services to all Arizona long‐term care services patients; What the Executive Budget Does for … SENIORS Arizona has long been a choice destination for individuals reaching retirement age. Coupled with a growing segment of aging adults, the senior population age 65 and over is FY 2008 and FY 2009 Executive Budget What the Executive Budget Does for … WOMEN Many Arizona women face medi‐ cal needs and a major unmet need for domestic violence shelters. The Executive Recommendation addresses these concerns with: • $3.3 million to continue to ad‐ dress the large unmet need for emergency shelter beds for domes‐ tic violence victims (funding will provide an additional 283 beds, which will shelter over 4,000 vic‐ tims of domestic violence); • $250,000 to provide additional cancer screening for up to 4,200 women; and • $2.9 million to make the human papillomavirus (HPV) vaccine available to all AHCCCS women clients in the 21 to 26 age group. What the Executive Budget Does for … STATE EMPLOYEES More than 70,000 State employees make the operation of State govern‐ ment possible through their commit‐ ment to public service. According to the Department of Administration, State employees’ earnings are below their counterparts in other levels of government. The salary disparity leads to turnover and difficulty filling vacant positions. The FY 2008 Executive Recom‐ mendation provides funding for a number of issues that recognize the value of State employees: • a 3.5% statewide employee pay hike; • funding for pay raises for law enforcement personnel at the De‐ partment of Public Safety ($3 mil‐ lion), the Department of Correc‐ tions ($6.2 million), and the De‐ partment of Juvenile Corrections ($1.1 million); • funding for the Department of Administration’s General Ac‐ counting Office ($676,000); • $323,000 for a salary increase for security officers at the Arizona State Hospital; • funding for inspector and investi‐ gator salaries at the Registrar of Contractors ($128,000); • $102,000 for compliance officers at the Board of Pharmacy; 3 • $88,000 for a wage increase for 25 registered nurses at the Pioneers’ Home; • an additional $37 million total fund ($20.2 million general fund) to hold State employees harmless from increases in health insurance premium costs; and little to no electronic storage for its several million pages of docu‐ ments, which date back to 1910 and contain information relating to the Trust and its management and interaction since its inception); • strengthening the State’s ability to deal with trespassing on, and misuse of, State Trust land, includ‐ ing prosecution of a developer who is responsible for the destruc‐ tion of more than 270 acres, and enforcing the cleanup of a large sinkhole in northern Arizona that has become the dumping ground for approximately six tons of trash; • performing studies to identify and assess the safety of dams lo‐ cated on State Trust land and to assess the State’s liability associ‐ ated with dam safety; • strengthening the State’s ability to preserve its water rights on State Trust land; • an increase of $268,000 for bus subsidies for State employees (the funding covers 100% of bus costs for the three summer months and 65% of costs for the remaining months). What the Executive Budget Does for … ENVIRONMENTAL QUALITY The Executive Budget Recom‐ mendation includes several provi‐ sions designed to protect the envi‐ ronment and public health, including: • • • $4 million to protect Arizona rivers, streams, and wildlife in ri‐ parian habitats; $1 million to strengthen regula‐ tion and address permit applica‐ tion backlogs related to public wa‐ ter system wells, treatment plants, distribution systems, line exten‐ sions and other drinking water infrastructure; and $15 million to transfer to the Water Quality Assurance Revolv‐ ing Fund (WQARF) to identify, assess and clean up groundwater contamination caused by the re‐ lease of hazardous substances. What the Executive Budget Does for … STATE LAND The Land Department lacks the resources to work with communities and to plan for the appropriate sale and lease of State Trust lands, factors that will play a significant role in the way Arizona grows. The Executive proposes funding to help alleviate the factors associated with this problem, and to enhance the benefits that the State derives from State Trust land: • 4 modernizing and computerizing the Land Department’s documen‐ tation system (the Department has • • enhancing the Forestry Division’s ability to manage and address the problem of wild fires and to re‐ spond to all manner of natural and man‐made emergencies on a state‐ wide scale; and $4 million for the maintenance and operation of the parks system. This funding will enable the Board to operate the parks with no op‐ erational disruptions, to rehabili‐ tate historic buildings, to protect and enhance popular Arizona landmarks with urgent capital needs such as the Tonto Natural Bridge and Slide Rock State Park, and to increase care of the envi‐ ronment. With this recommenda‐ tion, the Board will have the fund‐ ing needed to make critical repairs and environmental upgrades maintaining state parks as points of pride for rural communities and all of Arizona that draw more than 2 million visitors each year. What the Executive Budget Does for … RURAL COMMUNITIES AND AGRICULTURE While Arizona is among the na‐ tion’s most urban states, with 80% of the state’s population concentrated in metropolitan areas, 13 of the state’s 15 counties are considered rural. Rural communities face the same demands for services as the urban centers but do not always have the resources found in densely populated areas. The Executive Recommenda‐ tion acknowledges this disparity and sets aside specific funding for rural areas. Highlights of the benefits to rural Arizona include: • full funding for the Medical Student Loan Program, which en‐ courages physicians to set up their medical practice in underserved areas or to meet the needs of un‐ derserved populations; • $2.5 million for the expansion of statewide methamphetamine ad‐ diction treatment options; • $4 million to protect Arizona rivers, streams, and wildlife in ri‐ parian habitats; and • $851,300 and 20 FTE positions to open and staff inspections at two port facilities on the California border, at I‐10 Ehrenberg and at Parker, as well as conduct round‐ the‐clock inspections at Yuma (as a result of this initiative, pest in‐ terceptions are anticipated to in‐ crease from 13,000 currently to 22,000 by FY 2009). What the Executive Budget Does for … STATE INFRASTRUCTURE State government buildings, equipment and other infrastructure are precious public assets, and effec‐ tive construction, maintenance and improvement are essential. The Executive’s Capital Outlay Recom‐ mendation includes: • $21.9 million for Building Re‐ newal, addressing some of the highest priorities to protect life and safety, ensure business conti‐ nuity and preserve the State’s as‐ sets; Budget Highlights • • $32.2 million for demolition of the Arizona State Hospital’s Forensic Unit and for construction of a new facility to provide functional and secured facility for forensic pa‐ tients; and • $40 million to begin implement‐ ing core components identified in the Capital Mall Centennial Plan, including renovation and mod‐ ernization of the old State Health Laboratory, which is not fully util‐ ized, and designing and develop‐ ing the core area of the Capitol Mall to align it with Arizona’s his‐ tory and its vision for the future. BORDER SECURITY AND IMMIGRATION What the Executive Budget Does for … TRANSPORTATION Arizona’s explosive growth poses unique challenges in transportation planning. Recent development of new communities in areas without ade‐ quate roads and highways has in‐ creased fuel use, contributed to pollution, added to law enforcement costs and increased congestion. Arizona’s continued growth and development depend on a quality transportation system, which will require investment in transportation planning and highway construction. Highlights include: • • • • $500 million in bond financing which creates more than $400 mil‐ lion in net new funds available to accelerate highway construction by expanding the HURF Bond ma‐ turity limit from 20 to 30 years. carrying out the State’s $5.8 billion five‐year transportation facilities construction program for Fiscal Years 2007 through 2011; accelerating freeway construction projects that have been approved pursuant to the Statewide Trans‐ portation Acceleration Needs (STAN) program (these projects are to be completed 14 years ahead of the original schedule); progress toward accelerated completion of the $3.2 billion Maricopa regional freeway system by December 31, 2007; and FY 2008 and FY 2009 Executive Budget $32.8 million from the State Aviation Fund for development and improvement of State, county and municipal airports. What the Executive Budget Does for … ing in FY 2007 is roughly $200 million, for such priorities as: • auto theft enforcement • ports‐of‐entry enforcement, and • the incarceration of illegal immi‐ grants convicted of Arizona crimes. One of the critical issues facing Arizona is illegal immigration. Indi‐ viduals who cross the border illegally risk serious danger to themselves and strain public and private health and social support systems. The result is often loss of life and additional taxpayer costs. Securing international borders is a federal responsibility. During federal fiscal year 2007, Arizona’s share of existing federal border security funding was approximately $700 million. Thanks to the persistent efforts of Arizona’s State and federal elected officials, in federal fiscal years 2006 and 2007 that amount was increased by an estimated $600 million. Funding is now available for: Considerable efforts by the De‐ partment of Public Safety near the border have included special attention by the High Intensity Drug Traffick‐ ing Center, auto theft enforcement, the Arizona Counter‐Terrorism Information Center, border liaison officers, cross‐border training pro‐ grams, and the Financial Crimes Unit. The Department also plans to utilize 55 mobile license plate readers in the near future, to allow a patrol officer to determine which nearby vehicles are listed by the Motor Vehicle Division as stolen or as a suspect vehicle in a crime. The Executive Recommendation for increasing the capabilities of State and local law enforcement agencies to stop illegal immigration includes: • additional border patrol agents and training; • $5 million for DPS border secu‐ rity initiatives; • additional assistant U.S. Attor‐ neys; • • National Guard units at the border; $271,300 for inspectors to monitor cross‐boundary hazardous waste shipments from Mexico; and • • border radar and other technol‐ ogy initiatives; $245,300 for the operation of the Hazardous Air Emergency Re‐ sponse. • unmanned aerial vehicles and helicopters; • additional Immigration and Customs Enforcement detention beds; • joint immigration and border control operations among federal, State, local and tribal law en‐ forcement agencies; • additional immigration judges, attorneys, and support staff; and • additional border infrastructure projects, including border fences, vehicle barriers and infrared cam‐ eras. The State has also been active in funding activities affecting and affected by illegal immigration and to enhance border security. State fund‐ What the Executive Budget does for ... LAW ENFORCEMENT ‐ PUBLIC SAFETY As Arizona’s population continues to grow at a healthy pace, so does the demand for law enforcement services. The Executive Recommendation provides funding to help public safety in the state keep pace with popula‐ tion, traffic and crime. The Executive Recommendation for the Department of Public Safety (DPS) provides for the following initiatives: • $7.5 million to increase officer pay and make DPS more competi‐ tive in the labor market; 5 • $389,500 to accelerate evaluation of potential recruits to a timeframe comparable with competing juris‐ dictions; • $2.1 million for civilian motorist assistance and detention officers, in order to free sworn officers to focus on patrols of State highways and perform other functions that require their training and experi‐ ence; • $942,800 to hire civilian school bus inspectors and a civilian me‐ chanic, in order to free commercial vehicle enforcement bureau offi‐ cers to focus on patrols and com‐ mercial vehicle inspections; • • • $2.2 million to complete a de‐ tailed design of the interoperable communications system, to make possible real‐time, interoperable communications among local, county, State, tribal and federal public safety entities in Arizona; $262,900 to continue successful prosecutions by the Antitrust Unit has distributed $6 million to Ari‐ zona consumers and $2.5 million to the State over the past two years. The Executive Recommen‐ dation adds an assistant Attorney General to increase Arizona’s par‐ ticipation in multi‐state cases and investigate and prosecute more local cases; and Tobacco Enforcement personnel, to defend against cigarette manu‐ facturers’ challenges and continue to defend the State’s master set‐ tlement agreement payments. What the Executive Budget does for ... LAW ENFORCEMENT ‐ CORRECTIONS At the end of November 2006, ADC had an inmate population of 35,811 – 4,600 more than the funded bed capacity of 31,211 – producing a bed deficit of nearly 15%. Through November 2006, the average monthly growth rate in the prison population for the current fiscal year was 189, 89% more than the 100 per month anticipated in spring 2006 when the current appropriations were enacted. 6 As this publication went to print, the Department was housing the surplus inmates in 4,063 temporary beds and 1,732 lockup (special deten‐ tion) beds. To accommodate the inmates, the Department of Correc‐ tions (ADC) relies on such short‐term solutions as lockup beds and triple bunking. Accommodating the influx of new inmates will require an additional $91.4 million through the end of FY 2008. Major components of the recom‐ mended funding include: • $43.4 million to open 2,000 provisional beds in FY 2008; • $16.3 million to accommodate increased per diem rates for in‐ mates housed in private prisons; • $10.6 million to produce con‐ struction and operational cost es‐ timates related to bid preparation for 3,000 new prison beds; • $10.2 million to annualize the funding for 1,000 new beds at the Central Arizona Correctional Fa‐ cility, which opened in December 2006; • $5.6 million for temporary, emergency beds; • $3.3 million for food, clothing and some medical care for the addi‐ tional inmate population; and • $2 million to evaluate the potential for expansion at the State’s exist‐ ing prison sites. Part of the difficulty of operating a rapidly growing prison system is maintaining an experienced work‐ force. In the FY 2007 appropriation, starting pay for all entry‐level Correc‐ tional Officers was raised to a level that is generally competitive with the Department of Corrections’ major recruiting rivals: Maricopa County, Pima County and Pinal County. Thanks to the pay increases, recruiting efforts are more successful, and position vacancies are decreasing. However reduced, the loss of ex‐ perienced officers continues to be a concern. In September 2006 the annualized loss rate among officers was 19%; a year earlier, it was 20%. One of the main reasons for the loss of experienced officers is that State pay at the most experienced and valuable levels is below market. Compared to Maricopa County, the State is paying 38% less for sergeants, 63% less for lieutenants, and 83% less for captains. Similar disparities exist in compari‐ sons with Pima and Pinal counties. The Executive Recommendation provides salary increases for each sergeant, lieutenant and captain, such that (a) the starting pay for each rank will be the mid‐point of the salary range of the immediately lower rank, (b) each officer receives a raise equal to the increase in starting pay for his or her rank, (c) officers whose current salaries are above the new salary range midpoint will not be adjusted, and (d) officers whose adjusted salaries will total more than the salary range midpoint will be raised to the midpoint. Juvenile Corrections. The Depart‐ ment of Juvenile Corrections is experiencing a stable flow of juveniles through its system, but, like the Department of Corrections, salary compression among the supervisory ranks has lead to the loss of experi‐ enced officers. The Executive is recommending pay increases for more experienced officers (YCO IIIs, ser‐ geants, and lieutenants), to correct more than a decade of inadequate adjustments that sometimes resulted in senior officers earning less than the officers they supervised. The recommendation also pro‐ vides pay increases for entry‐level Youth Correction Officers ($887,700, or $1,222 per officer), to bring YCO compensation more in line with Maricopa and Pima counties and thus reduce the current 38% turnover rate.] Budget Highlights Budget Summary STATE OF ARIZONA SOURCES AND USES OF FUNDS GENERAL FUND (In Thousands) FY 2006 Actual FY 2007 Estimated FY 2008 Executive Recommendation SOURCES OF FUNDS Balance Forward Base Revenues Urban Revenue Sharing Adjusted Base Revenues SFB Building Renewal Transfer Enacted Fund Transfers Ladewig Refunds 1/ TOTAL SOURCES OF FUNDS 638,989.0 1,074,935.1 9,728,393.3 (425,228.9) 9,303,164.4 10,239,251.9 (551,230.7) 9,688,021.2 (60,080.5) 10,000.0 (48,722.1) 60,080.5 ‐ (94,800.1) 421,651.1 10,686,941.3 (684,559.6) 10,002,381.7 ‐ ‐ 9,843,350.9 10,728,236.7 10,424,032.8 Operating Budgets 8,193,160.7 Operating Budget Supplementals 33,633.7 Teacher Pay Teacher Retirement Hold Harmless Continuing Teacher Education and Performance Pay Master Teacher Math & Science Incentives Student Retention Research Building Arizona Financial Aid Trust 2,100.0 Phoenix Biomedical Campus 7,000.0 Greater AZ Development Authority (GADA) Enhancement Healthcare for Children State Employee Compensation 39,900.0 Employer Retirement Contribution 10,000.0 Employee Health Insurance Science Foundation Arizona 2/ Payback K‐12 Rollover 2/ Transfer to Rainy Day Fund (Budget Stabilization) 480,957.9 Other State Agencies Adjustments/Expenditure Total Operating Budgets 8,766,752.3 9,392,796.0 45,245.4 55,000.0 45,000.0 10,014,930.0 USES OF FUNDS Building Renewal and Capital Outlay Highway Construction Administrative Adjustments Revertments 5,000.0 7,000.0 50,000.0 18,750.0 4,000.0 4,000.0 15,500.0 29,800.0 34,625.0 6,300.0 25,000.0 5,000.0 5,951.4 69,654.4 10,000.0 20,245.0 35,000.0 129,700.0 27,635.5 28,695.9 35,000.0 191,000.0 9,808.6 29,350.0 10,001,231.4 8,606.7 10,357,362.5 17,150.0 80,354.2 245,000.0 29,295.6 *** 74,338.0 (89,824.5) 70,000.0 (90,000.0) 35,000.0 (60,000.0) USES OF FUNDS 8,768,415.8 10,306,585.6 10,361,658.1 ENDING BALANCE 1,074,935.1 421,651.1 62,374.7 TOTAL USES OF FUNDS 9,843,350.9 10,728,236.7 10,424,032.8 *** In FY08, the Executive recommendation includes $500 million in bond financing which creates more than $400 million in net new funds available to accelerate highway construction by expanding bond maturity limit from 20 to 30 years. 1/ In FY06, School Facilities Board transferred $60 million more from the General Fund to its building renewal fund than it was entitled to. The adjusting transfer was not made in FY06, but was done in FY07. 2/ $191M K‐12 Rollover and $35M AZ Science Foundation were recorded as FY06 appropriations, but did not occur in FY06 as intended by the legislation since the effective date of the appropriation was beyond the end of FY06. Therefore these amounts are shown in FY07. FY 2008 and FY 2009 Executive Budget 7 GENERAL FUND Sources and Uses of Funds T he sources and uses of funds document presents budget data on projected revenue sources and expenditures for the General Fund. For FY 2006, the data reflect actual expenditures taken from the State’s Accounting and Financial Information System. FY 2007 revenues reflect OSPB1 projections of taxes, fees and other General Fund Revenue sources, while FY 2007 Uses of Funds reflect appropriations made by the Legisla‐ ture in the 2006 Legislative session for FY 2007. FY 2008 sources and uses include OSPB projections of taxes, fees and other General Fund revenue sources and estimates of expenditures in support of the Executive FY 2008 budget. SOURCES OF FUNDS Revenue Projections. The OSPB revenue estimating process involves participation by representatives from the Department of Revenue, Depart‐ ment of Economic Security, Arizona State University College of Business, and OSPB. The process includes: • Presentation of projection scenar‐ ios for the State’s economy. Each participant provides independent views of projection scenarios based on various projection tech‐ niques and models. 1 • $15.5 million to retain and increase the number of highly qualified math and science teachers by: ♦ $10.0 million to provide assis‐ tance for existing teachers to become highly qualified in math or science by increasing base pay for highly qualified math and science teachers currently teaching in Arizona schools; ♦ $3 million to provide incen‐ tives for university students to study to become teachers in math and science; ♦ $2.5 million to award grants to school districts to establish innovative math and science programs and academies; • Blending of revenue projections by OSPB to reflect an achievable revenue collection scenario. USES OF FUNDS Operating Budget Supplementals. The budget includes $45.3 million for supplemental appropriations for agencies in FY 2007. This estimate reflects projected shortfalls for the following departments: Administration: Corrections: Economic Security: Education: $ 1.7 million 14.2 million 19.7 million 9.7 million Teacher Pay Package. The budget continues to provide resources for teachers and the teaching profession, with several recommendations that serve to recruit and retain quality teachers to Arizona’s schools, includ‐ ing: • $50 million to establish a mini‐ mum base salary of $33,000 per year and provide additional fund‐ ing to increase the base salary of teachers at or above the minimum, • $18.8 million to hold teachers harmless for the 0.5% retirement contribution increase, • Consensus reached on forecasts of economic variables, including per‐ sonal income, employment and gross domestic product. These variables serve as inputs to the revenue projections. Baseline, op‐ timistic and pessimistic scenarios are finalized. • $4 million to continue expanding the Master Teacher program, de‐ signed to retain new teachers in the profession and provide leader‐ ship opportunities for experienced teachers. • Presentation of revenue projec‐ tions for the “Big Three” tax sources based on economic scenar‐ ios. Each participant provides in‐ • $4 million for the State Board of Education to design a statewide system for continuing education and performance pay. Governor’s Office of Strategic Planning and Budgeting 8 dependent views on revenue pro‐ jections for the economic scenar‐ ios. Revenue flows of recent tax collections are analyzed for consis‐ tency with projections. Phoenix Biomedical Campus. Ari‐ zona has a shortage of physicians, pharmacists, and technical and allied health professionals. T address this issue, the FY 2008 Executive Budget includes $25 million to support ex‐ panding the capacity of the biomedi‐ cal education and research programs of Arizona universities. The recom‐ mended resources provide funding for the following: • $6 million for the UA College of Medicine – Phoenix Program to expand enrollment capacity and graduate more physicians; • $4 million for Northern Arizona University to expand health pro‐ fessions programs in Flagstaff and throughout the state; • $2 million for Arizona State Uni‐ versity to increase the teaching ca‐ pacity of the Biomedical Informat‐ ics program; • $1.5 million for the UA College of Pharmacy to start a four‐year Doc‐ tor of Pharmacy program in Phoe‐ nix; General Fund Sources and Uses • $1 million for the UA Telemedi‐ cine Program, to implement a pro‐ gram in the College of Medicine ‐ Phoenix Program using telemedi‐ cine for interdisciplinary educa‐ tion to medical students; and • $10.5 million split evenly between ASU and the University of Ari‐ zona (UA) to cover the costs of programming, conceptual and schematic design for the ABC 2 and Education buildings (one‐ time); GADA Enhancement. The Budget includes $5 million in additional capi‐ talization, to the Greater Arizona Development Authority (GADA) to address communities’ infrastructure needs. The recommended amount will enable local communities and tribal governments to finance public infra‐ structure projects, accelerate project development, and lower financing costs through the Authority’s techni‐ cal and financial assistance. Healthcare for Children. It is espe‐ cially important to ensure that all Arizona children have access to the medical care they need, when they need it. To help address this concern, the Executive Recommendation in‐ cludes $6 million to: • establish an outreach effort, to enroll 63,000 kids begin‐ning in January 2008 who are cur‐rently eligible for KidsCare but not par‐ ticipating, and 56,000 kids es‐ timated to be currently eligible for Title XIX but not participating. (Since the start of the enrollment is scheduled for January 1, 2008 it is anticipated that 40% of the eligible children for the KidsCare and Title XIX programs will be enrolled by the June 30, 2008). In addition, in‐ crease, from the current 200%, KidsCare eligibility to children in FY 2008 and FY 2009 Executive Budget families at 300% of the Federal Poverty Level (FPL) • enroll in the KidsCare program 40% of the 56,000 children esti‐ mated to be eligible for Title XIX but not participating, State Employee Compensation, Em‐ ployee Related Expense, and Employee Health Insurance. The budget includes a State employee 3.5% general pay increase, estimated at $69.7 million in General Fund expenditures. Addi‐ tionally, $10 million General Fund is estimated to cover employer retire‐ ment contributions. As a result of rising health care costs, an additional $20.2 million is required to fund the General Fund portion of the State’s self‐insured health insurance program. Science Foundation Arizona. The budget includes $35 million to the Department of Commerce, to enhance Arizona’s position in the global econ‐ omy by investing in science‐based research and innovation in areas bene‐ ficial to Arizona’s long‐term competi‐ tiveness and quality of life. The funds are to be used to attract world‐class researchers to Arizona and support research into new products and tech‐ nologies that can be commercialized and brought to the market. Legal Fees. After seven years and two appeals, the legal fees for the Burke litigation have been determined. The Budget includes $5 million for the legal fees. Budget Stabilization Fund. Due to significant transfers to the Budget Stabilization Fund in FY 2006 and FY 2007, the Fund is funded to its statu‐ tory limit and therefore does not re‐ ceive additional funding in FY 2008. Building Renewal and Capital Out‐ lay. The budget includes $29.3 million for the following projects: • prison cell doors and locks at the Black Canyon School housing units, • mold abatement at the Tucson Of‐ fice Complex, • Capitol Mall Centennial Plan, • water and sewage treatment plants at four prison complexes, and • replacement of the Forensic Unit at the Arizona State Hospital. Highway Construction. During the 2007 Legislative session, serious coop‐ erative efforts will be needed for addi‐ tional financing measures to enable ADOT to accelerate highway con‐ struction projects and address local and statewide transportation needs. Included in the Executive proposal to the Legislature will be a statutory amendment to authorize the State Transportation Board to issue high‐ way revenue bonds with maturity of up to 30 years (the current limit is 20 years). Several states have success‐ fully implemented this measure, and Arizona should be among them. When approved, this expansion will enable the Board to leverage Highway User Revenue Fund (HURF) monies and increase its ability to finance and accelerate additional highway con‐ struction. Administrative Adjustments and Re‐ vertments. The budget includes an estimate of $35 million for administra‐ tive adjustments in FY 2007 and FY 2008, which reflect funds that have been encumbered by agencies for payment of obligations but are carried over into another fiscal year. Additionally, the budget incorpo‐ rates projections of unexpended or unencumbered funds to be reverted to the General Fund in FY 2007 and FY 2008. These projections reflect histori‐ cal experience. ] 9 STATE OF ARIZONA GENERAL FUND REVENUE SUMMARY FY 2006 THROUGH FY 2008 (in thousands) TAXES Actual Estimate Estimate FY 2006 FY 2007 FY 2008 Corporate Income 874,219.5 959,200.0 982,000.0 Individual Income 3,689,511.0 3,857,000.0 3,930,300.0 25,000.3 23,400.0 21,000.0 4,273,358.2 4,615,000.0 4,976,000.0 Property Taxes Sales and Use Luxury Taxes 66,732.5 67,976.0 67,389.1 373,703.5 393,638.7 415,919.0 Estate Taxes 11,683.6 0.0 0.0 Other Taxes 2,846.1 2,900.0 3,000.0 9,317,054.7 9,919,114.7 10,395,608.1 131,876.8 136,900.0 143,000.0 Interest Earnings 74,320.4 68,500.0 40,000.0 Lottery 45,690.0 40,000.0 40,000.0 Transfers & Reimbursements 51,447.2 47,534.2 41,823.2 Disproportionate Share 108,004.2 113,100.0 113,100.0 TOTAL OTHER REVENUES 411,338.6 406,034.2 377,923.2 9,728,393.3 10,325,148.9 10,773,531.3 Insurance Premium Taxes TOTAL TAXES OTHER REVENUES Licenses, Fees & Permits/Misc. TOTAL REVENUES ADJUSTMENTS Urban Revenue Sharing (425,228.9) B.S.F. Deposit (480,957.9) (9,808.6) 0.0 (48,722.1) (94,800.1) 0.0 10,000.0 (84,900.0) Ladewig Refunds Onetime Transfer/ Other Adjustments+ GRAND TOTAL REVENUES 8,783,484.4 (551,230.7) 9,584,409.5 (684,559.6) (86,590.0) 10,002,381.7 + FY 07 revenue adjustments: $(55.2) million for TPT threshold adjustment - one time, $(4) million for corporate consolidated credit, $(10)M corporate tuition tax credits, and other miscellaneous FY 08 revenue adjustments: $(55) million corporate consolidated tax credit (this is the last payment), $(12) million corporate tuition tax credits, $(10.5) million motion picture tax credit, $(6.8) million health insurance premium tax credits, and other miscellaneous Budget Summary 10 General Fund Operating Budgets Summary Arizona Department of Administration Office of Administrative Hearings Arizona Department of Agriculture Arizona Health Care Cost Containment System Arizona Commission on the Arts ASU ‐ Polytechnic ASU ‐ Tempe ASU ‐ West FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 34,379.8 27,559.7 1,151.8 1,214.6 FY 2008 Changes and Adjustments 4,404.9 (0.9) FY 2008 Executive Budget FY 2009 Changes and Adjustments FY 2009 Executive Budget 31,964.6 N/A N/A 1,213.7 (0.9) 1,213.7 10,715.0 11,369.6 1,022.1 12,391.7 1,285.4 12,655.0 993,730.6 1,199,768.0 118,483.6 1,318,251.6 N/A N/A 3,847.7 8,888.1 (6,759.9) 2,128.2 (6,799.9) 2,088.2 15,811.7 19,980.9 3,305.3 23,286.2 N/A N/A N/A N/A 307,911.9 354,043.3 49,321.6 403,364.9 N/A 44,844.3 49,095.8 1,442.8 50,538.6 N/A (1,123.5) Attorney General ‐ Department of Law 25,209.8 22,495.5 124.0 22,619.5 Auditor General 12,551.0 17,891.9 0.0 17,891.9 0.0 17,891.9 0.0 220.0 501.7 721.7 501.7 721.7 720.1 785.1 572.4 1,357.5 260.1 1,045.2 8,560.1 11,983.7 8,831.6 20,815.3 8,829.6 20,813.3 152,325.7 165,536.6 165,350.8 N/A N/A 5,536.9 (6.3) 5,536.9 913,552.7 N/A N/A State Capital Post‐Conviction Public Defender Office State Board for Charter Schools Department of Commerce Arizona Community Colleges Corporation Commission Department of Corrections Arizona Criminal Justice Commission 5,212.9 5,543.2 707,715.4 817,157.7 1,118.0 4,302.0 16,766.4 21,260.9 623,932.0 718,950.2 3,365,828.0 4,028,165.6 Department of Emergency Services and Military Affairs 10,309.5 14,394.1 Department of Environmental Quality 13,493.3 32,295.7 Arizona State Schools for the Deaf and the Blind Department of Economic Security Department of Education (185.8) (6.3) 96,395.0 0.0 (147.4) 4,302.0 0.0 21,372.0 4,302.0 21,113.5 (1,391.0) 19,869.9 68,978.3 787,928.5 N/A N/A 383,406.6 4,411,572.2 N/A N/A 14,014.9 (379.2) 14,014.9 (379.2) 1,562.4 33,858.1 1,545.4 33,841.1 Governorʹs Office for Equal Opportunity 227.4 245.7 1.0 246.7 1.0 246.7 State Board of Equalization 574.6 653.5 (2.4) 651.1 (0.7) 652.8 Board of Executive Clemency 919.3 1,067.9 30.9 1,098.8 30.9 1,098.8 State Department of Financial Institutions 3,309.5 3,733.9 241.8 3,975.7 269.3 4,003.2 Department of Fire, Building and Life Safety 3,187.4 3,625.5 153.9 3,779.4 116.5 3,742.0 0.0 3,500.0 Arizona Game & Fish Department Arizona Geological Survey Government Information Technology Agency Office of the Governor (3,500.0) 0.0 (3,500.0) 0.0 825.1 1,106.1 164.6 1,270.7 198.3 1,304.4 0.0 1,500.0 1,795.3 3,295.3 4,231.1 5,731.1 6,101.8 6,634.8 0.0 6,634.8 0.0 6,634.8 476,671.4 549,247.6 47,729.0 596,976.6 N/A N/A 4,114.6 4,337.0 44.5 4,381.5 48.5 4,385.5 0.0 0.0 486.3 486.3 486.3 486.3 10,690.1 13,354.8 0.0 13,354.8 0.0 13,354.8 204.1 224.4 153.1 377.5 153.1 377.5 Department of Insurance 6,635.5 7,172.8 1.9 7,174.7 1.9 7,174.7 Joint Legislative Budget Committee 1,152.9 2,949.0 0.0 2,949.0 0.0 2,949.0 125,025.4 N/A N/A Department of Health Services Arizona Historical Society Department of Homeland Security House of Representatives Arizona Commission of Indian Affairs Judiciary (0.2) 118,238.4 125,025.6 Department of Juvenile Corrections 70,562.5 79,848.3 301.3 80,149.6 N/A N/A State Land Department 22,777.6 26,435.4 940.8 27,376.2 972.5 27,407.9 Budget Summary 11 FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 70.8 76.4 Legislative Council 4,994.0 Arizona State Library, Archives & Public Records 7,064.6 Department of Liquor Licenses and Control 2,923.9 4,813.1 323.1 1,500.0 Law Enforcement Merit System Council Board of Medical Student Loans State Mine Inspector FY 2008 Changes and Adjustments FY 2008 Executive Budget FY 2009 Changes and Adjustments FY 2009 Executive Budget 0.2 76.6 0.2 76.6 8,076.2 0.0 8,076.2 0.0 8,076.2 7,540.6 200.0 7,740.6 0.0 7,540.6 (1,256.3) 3,556.8 0.0 1,500.0 (83.2) 1,143.5 (1,276.3) 0.0 (106.6) 3,536.8 1,500.0 1,161.9 1,226.7 Department of Mines and Mineral Resources 798.8 843.9 106.3 950.2 106.3 Arizona Navigable Stream Adjudication Commission 164.9 267.8 (92.1) 175.7 (267.7) 0.1 124,506.4 135,949.4 19,858.7 155,808.1 N/A N/A 163.4 166.0 0.0 166.0 0.0 166.0 2.7 0.0 0.0 0.0 0.0 0.0 22,526.6 27,040.3 1,577.5 28,617.8 4,577.5 31,617.8 301.9 358.1 0.5 358.6 0.5 358.6 Arizona Pioneersʹ Home 0.0 1,280.9 State Board of Podiatry Examiners 0.0 0.0 1,391.3 652.7 Northern Arizona University State Board of Nursing OSHA Review Board State Parks Board Personnel Board Commission for Postsecondary Education Prescott Historical Society of Arizona Department of Public Safety (43.3) 1,237.6 0.0 0.0 6,620.8 0.0 750.4 50.1 950.2 1,237.6 0.0 0.0 6,620.8 0.0 6,620.8 800.5 50.1 800.5 41,751.2 166,196.6 87,850.6 10,909.3 177,105.9 Arizona Department of Racing 2,606.8 2,750.7 183.8 2,934.5 153.7 2,904.4 Radiation Regulatory Agency 1,140.4 1,530.9 163.1 1,694.0 125.2 1,656.1 12.8 13.0 0.4 13.4 0.7 13.7 Arizona Rangersʹ Pension (78,346.0) (43.3) 1,120.1 Department of Real Estate 3,694.4 3,986.7 435.8 4,422.5 511.3 4,498.0 Arizona Board of Regents 6,814.7 14,904.1 6,848.0 21,752.1 N/A N/A Department of Revenue 65,534.1 71,856.1 72,777.6 (773.7) 71,082.4 School Facilities Board 52,401.1 413,764.2 (253,654.9) 160,109.3 N/A N/A Department of State ‐ Secretary of State 3,026.4 7,074.0 (133.8) 6,940.2 3,224.6 10,298.6 Senate 7,620.0 8,693.0 0.0 8,693.0 0.0 8,693.0 Governorʹs Office of Strategic Planning and Budgeting 2,096.5 2,211.1 0.0 2,211.1 0.0 2,211.1 276.1 307.5 1.6 309.1 2.5 310.0 10,517.9 14,986.0 592.8 15,578.8 864.5 15,850.5 76.4 82.9 0.0 82.9 N/A N/A 4,976.9 5,769.3 486.0 6,255.3 334.7 6,104.0 44.8 52.3 4.5 56.8 5.5 57.8 N/A N/A State Board of Tax Appeals Arizona Office of Tourism Department of Transportation State Treasurer Commission on Uniform State Laws University of Arizona ‐ Health Sciences Center University of Arizona ‐ Main Campus 921.5 64,261.3 69,098.5 10,928.6 80,027.1 N/A 293,785.2 320,798.1 29,009.3 349,807.4 N/A Department of Veteransʹ Services 2,372.0 4,149.7 1,336.7 5,486.4 1,257.1 5,406.8 Department of Water Resources 18,898.9 20,877.8 4,518.8 25,396.6 4,513.0 25,390.8 1,590.0 1,649.8 7,832,872.1 9,690,827.4 Department of Weights and Measures General Fund Operating Total 12 (0.2) 1,649.6 523,029.0 10,213,856.4 (24.9) 29,874.3 1,624.9 631,725.2 FY 2008 and FY 2009 Executive Budget STATE OF ARIZONA OTHER APPROPRIATED FUNDS REVENUE SUMMARY FY 2006 THROUGH FY 2008 (in thousands) TAXES Motor Vehicle Fuel Tax Actual Estimate Estimate FY 2006 FY 2007 FY 2008 733,773.6 744,685.9 782,362.7 Property Taxes 19,679.6 19,152.3 19,828.3 Sales and Use 16,166.2 12,285.0 11,545.1 Luxury Taxes 225,556.0 194,052.8 198,947.2 Insurance Premium Taxes 37,040.7 36,849.2 37,937.4 Motor Carrier License Tax 19,687.1 25,273.2 22,783.7 UST Contents Tax 33,711.6 33,680.0 33,680.0 348,204.8 381,441.1 390,602.9 9,196.8 8,964.9 9,283.2 1,443,016.4 1,456,384.4 1,506,970.5 Licenses, Fees & Permits 304,978.2 323,758.6 344,646.8 Charges for Service 464,270.8 457,659.7 466,472.7 66,425.6 65,170.7 64,826.7 Miscellaneous Revenues 395,924.7 455,067.2 518,546.0 Lottery 468,696.8 474,900.0 474,900.0 1,700,296.1 1,776,556.2 1,869,392.2 5,961,953.4 5,925,636.2 6,371,443.2 9,105,265.9 9,158,576.8 9,747,805.9 Vehicle License Taxes Other Taxes TOTAL TAXES OTHER REVENUES Interest Earnings TOTAL OTHER REVENUES OTHER FINANCING SOURCES Transfers & Reimbursements GRAND TOTAL REVENUES *Other Appropriated Funds Revenues include all revenues for funds which may only be partially subject to statutory or legislative appropriation. The expenditures shown in the "Other Funds Budget Summary" are for the appropriated portion of these funds only and may represent only a small portion of the funds' total expenditures. There are several funds where a General Fund appropriation is deposited into an "Other Appropriated Fund" and these deposits are reflected in the figures above. Budget Summary 13 Other Appropriated Funds Operating Budgets Summary FY 2006 Expendi‐ tures FY 2007 Appro‐ priation FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget State Board of Accountancy Accountancy Board Fund Agency Total 1,629.4 2,287.4 10.7 2,298.1 13.3 2,300.7 1,629.4 2,287.4 10.7 2,298.1 13.3 2,300.7 83.3 106.9 17.2 124.1 17.2 124.1 83.3 106.9 17.2 124.1 17.2 124.1 14,933.9 10,461.2 800.0 619.4 574.1 3,998.5 11,304.2 2,599.1 63.1 77,428.8 21,754.9 2,116.1 17,057.8 11,302.5 796.0 717.0 575.1 5,101.2 11,737.5 4,223.9 429.0 88,627.9 24,289.4 3,047.7 978.3 1,255.0 (796.0) 6.4 0.0 900.8 (189.4) 1.1 2.0 2,787.1 3,255.6 (34.9) 18,036.1 12,557.5 0.0 723.4 575.1 6,002.0 11,548.1 4,225.0 431.0 91,415.0 27,545.0 3,012.8 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 146,653.3 167,905.0 8,166.0 176,071.0 0.0 0.0 Acupuncture Board of Examiners Acupuncture Board of Examiners Fund Agency Total Arizona Department of Administration Personnel Division Fund Capital Outlay Stabilization Fund Watercraft Licensing Fund Corrections Fund Air Quality Fund Special Employee Health Fund Motor Pool Revolving Fund State Surplus Property Fund Admin ‐ Surplus Property/Federal Fund Risk Management Fund Automation Operations Fund Telecommunications Fund Agency Total Office of Administrative Hearings AHCCCS Donation Fund 14.1 14.5 0.0 14.5 0.0 14.5 14.1 14.5 0.0 14.5 0.0 14.5 67.4 277.7 564.4 259.3 21.4 35.7 57.3 277.6 828.1 6.7 160.6 71.7 291.3 721.3 274.8 21.4 53.1 79.4 290.8 1,042.8 9.2 186.1 31.5 1.4 131.6 1.4 18.6 0.0 (0.2) 7.1 0.1 0.0 0.0 103.2 292.7 852.9 276.2 40.0 53.1 79.2 297.9 1,042.9 9.2 186.1 77.2 1.4 129.9 1.4 18.6 0.0 (0.2) 7.1 0.1 0.0 0.0 148.9 292.7 851.2 276.2 40.0 53.1 79.2 297.9 1,042.9 9.2 186.1 Agency Total 2,556.2 3,041.9 191.5 3,233.4 235.5 3,277.4 551.2 586.2 9.8 596.0 9.8 596.0 Agency Total 551.2 586.2 9.8 596.0 9.8 596.0 79,128.8 30,317.9 0.0 109,090.6 0.0 83,162.5 29,371.2 0.0 123,185.9 2,531.9 78,306.1 29,264.1 300.0 150,844.1 2,683.1 N/A N/A N/A N/A Agency Total Arizona Department of Agriculture Agricultural Consulting/Training Program Fund Agriculture Commercial Feed Fund Egg and Egg Product Control Fund Pesticide Fund Agriculture Dangerous Plants Fund Agriculture Seed Law Fund Livestock Custody Fund Fertilizer Materials Fund Citrus, Fruit, and Vegetable Revolving Fund Aquaculture Fund AZ Protected Native Plant Fund State Board of Appraisal Board of Appraisal Fund Arizona Health Care Cost Containment System Tobacco Tax and Health Care Fund Tobacco Products Tax Fund Physician Recruitment Fund Childrenʹs Health Insurance Program Fund Budget Neutrality Compliance Fund 14 (4,856.4) (107.1) 300.0 27,658.2 151.2 N/A N/A N/A N/A N/A N/A FY 2008 and FY 2009 Executive Budget FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 3,465.8 0.0 3,811.8 884.2 2,061.2 769.9 5,873.0 1,654.1 N/A N/A N/A N/A 222,003.1 242,947.5 25,977.0 268,924.5 0.0 0.0 12,961.4 2,000.0 16,576.0 2,000.0 0.0 0.0 16,576.0 2,000.0 N/A N/A N/A N/A 14,961.4 18,576.0 0.0 18,576.0 0.0 0.0 196,172.7 217,845.0 0.0 217,845.0 N/A N/A 196,172.7 217,845.0 0.0 217,845.0 0.0 0.0 18,304.7 1,600.0 20,845.4 1,600.0 0.0 0.0 20,845.4 1,600.0 N/A N/A N/A N/A 19,904.7 22,445.4 0.0 22,445.4 0.0 0.0 1,748.9 307.4 4,339.3 11,188.5 3,019.8 7,987.3 0.0 2,135.0 232.4 4,585.2 12,027.3 3,266.4 9,214.2 6,497.5 0.7 0.1 1.2 13.5 1.5 1.9 135.2 2,135.7 232.5 4,586.4 12,040.8 3,267.9 9,216.1 6,632.7 0.7 0.1 1.2 (8.5) (1.4) 1.9 130.7 2,135.7 232.5 4,586.4 12,018.8 3,265.0 9,216.1 6,628.2 28,591.2 37,958.0 154.1 38,112.1 124.7 38,082.7 Arizona Health Care Cost Containment System Healthcare Group Fund Temporary Medical Coverage Fund Agency Total ASU ‐ Polytechnic ASU Collections ‐ Appropriated Fund Technology and Research Initiative Fund Agency Total ASU ‐ Tempe ASU Collections ‐ Appropriated Fund Agency Total ASU ‐ West ASU Collections ‐ Appropriated Fund Technology and Research Initiative Fund Agency Total Attorney General ‐ Department of Law Consumer Protection/Fraud Revolving Fund Attorney General Antitrust Revolving Fund Attorney General Collection Enforcement Fund Attorney General Agency Services Fund Victims Rights Fund Risk Management Fund Attorney General Legal Services Cost Allocation Agency Total Automobile Theft Authority Automobile Theft Authority Fund Agency Total 4,973.7 5,251.6 192.8 5,444.4 600.3 5,851.9 4,973.7 5,251.6 192.8 5,444.4 600.3 5,851.9 201.4 300.5 30.5 331.0 13.9 314.4 201.4 300.5 30.5 331.0 13.9 314.4 Board of Barber Examiners Barber Examiners Board Fund Agency Total Board of Behavioral Health Examiners Behavioral Health Examiner Fund 1,144.2 1,366.2 (35.3) 1,330.9 (47.9) 1,318.3 1,144.2 1,366.2 (35.3) 1,330.9 (47.9) 1,318.3 460.3 509.2 (3.0) 506.2 (1.2) 508.0 460.3 509.2 (3.0) 506.2 (1.2) 508.0 219.1 107.2 2,981.2 108.6 274.6 139.2 3,028.6 175.6 (0.7) (0.3) (1,320.3) (0.4) 273.9 138.9 1,708.3 175.2 (0.7) (0.3) (1,320.3) (0.4) 273.9 138.9 1,708.3 175.2 Agency Total 3,416.1 3,618.0 (1,321.7) 2,296.3 (1,321.7) 2,296.3 Utility Regulation Revolving Fund Pipeline Safety Revolving Fund Security Regulatory and Enforcement Fund 11,690.8 0.0 3,118.8 13,100.6 0.0 3,714.9 228.6 55.4 (26.2) 13,329.2 55.4 3,688.7 209.2 0.0 (26.2) 13,309.8 0.0 3,688.7 Agency Total State Board of Chiropractic Examiners Chiropractic Examiners Board Fund Agency Total Department of Commerce Lottery Fund Commerce Development Bond Fund Commerce and Economic Development Fund Oil Overcharge Fund Corporation Commission Budget Summary 15 FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 3,056.1 829.0 44.0 3,817.3 893.9 48.6 664.0 (9.8) 0.0 4,481.3 884.1 48.6 18,738.7 21,575.3 912.0 22,487.3 1,009.7 22,585.0 25,505.0 1,384.5 193.9 70.2 66.6 10,230.2 534.4 2,031.4 29,040.4 1,609.9 599.3 180.0 600.0 10,250.0 869.2 570.0 0.1 0.4 0.0 0.0 0.0 4,576.6 2,000.0 0.0 29,040.5 1,610.3 599.3 180.0 600.0 14,826.6 2,869.2 570.0 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Agency Total 40,016.2 43,718.8 6,577.1 50,295.9 0.0 0.0 1,554.6 1,673.6 178.6 1,852.2 58.6 1,732.2 Agency Total 1,554.6 1,673.6 178.6 1,852.2 58.6 1,732.2 Criminal Justice Enhancement Fund Victim Compensation and Assistance Fund State Aid to County Attorneys Fund State Aid to Indigent Defense Fund 578.3 3,457.6 847.8 805.0 606.7 3,400.0 877.5 833.2 103.0 400.0 175.0 166.0 709.7 3,800.0 1,052.5 999.2 73.1 400.0 175.0 166.0 679.8 3,800.0 1,052.5 999.2 Agency Total 5,688.7 5,717.4 844.0 6,561.4 814.1 6,531.5 917.5 12,831.0 0.0 13,816.9 0.0 0.0 0.0 13,816.9 (25.6) 0.0 (25.6) 13,816.9 13,748.5 13,816.9 0.0 13,816.9 (25.6) 13,791.3 4,202.8 5,391.3 1.8 5,393.1 1.8 5,393.1 4,202.8 5,391.3 1.8 5,393.1 1.8 5,393.1 972.6 1,026.5 73.9 1,100.4 68.2 1,094.7 972.6 1,026.5 73.9 1,100.4 68.2 1,094.7 98.3 110.1 10.2 120.3 8.7 118.8 98.3 110.1 10.2 120.3 8.7 118.8 278.0 387.5 295.9 320.7 0.0 0.0 295.9 320.7 0.0 0.0 295.9 320.7 665.5 616.6 0.0 616.6 0.0 616.6 Tobacco Tax and Health Care Fund 0.0 Workforce Investment Grant Fund 39,996.5 Temporary Assistance for Needy Families (TANF 228,080.2 200.0 55,871.4 232,894.6 200.0 55,852.1 232,931.4 N/A N/A N/A N/A N/A N/A Corporation Commission Public Access Fund Securities Investment Management Fund Arizona Arts Trust Fund Agency Total 836.5 (9.8) 0.0 4,653.8 884.1 48.6 Department of Corrections Corrections Fund State Education Fund for Correctional Education DOC ‐ Alcohol Abuse Treatment Fund Transition Office Fund Transition Program Drug Treatment Fund Prison Construction and Operations Fund Penitentiary Land Earnings Fund State Charitable, Penal & Reformatory Land Earni Board of Cosmetology Cosmetology Board Fund Arizona Criminal Justice Commission Arizona State Schools for the Deaf and the Blind SDA Telecommunications Tax Fund Schools for the Deaf and Blind Fund Agency Total Commission for the Deaf and the Hard of Hearing Telecom for the Deaf Fund Agency Total State Board of Dental Examiners Dental Board Fund Agency Total State Board of Dispensing Opticians Dispensing Opticians Board Fund Agency Total Arizona Drug and Gang Prevention Resource Center Drug and Gang Prevention Fund Intergovernmental Agreements and Grant Funds Agency Total Department of Economic Security 16 0.0 (19.3) 36.8 FY 2008 and FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget Department of Economic Security 117,114.9 2,193.6 14,787.2 1,700.0 1,574.9 209.6 502.6 21,897.2 2,551.4 850.0 500.0 271.5 1,000.0 0.0 (24.0) (9.8) 0.4 0.0 (0.2) 0.0 0.0 (3.2) (0.3) 0.0 0.0 0.0 (0.1) 3,496.3 117,090.9 2,183.8 14,787.6 1,700.0 1,574.7 209.6 502.6 21,894.0 2,551.1 850.0 500.0 271.5 999.9 3,496.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 411,160.0 454,118.9 3,476.6 457,595.5 0.0 0.0 1,936.3 3,555.3 3,755.4 0.0 0.0 50,295.0 0.0 2,134.7 0.0 7,000.0 10,000.0 3,000.0 45,220.7 1,865.4 0.4 0.0 0.8 0.0 0.0 0.0 0.0 2,135.1 0.0 7,000.8 10,000.0 3,000.0 45,220.7 1,865.4 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 59,542.0 69,220.8 1.2 69,222.0 0.0 0.0 78.0 132.7 0.0 132.7 0.0 132.7 78.0 132.7 0.0 132.7 0.0 132.7 31,833.8 104.1 14,949.2 1,099.4 5.8 956.4 4,826.4 752.0 8.2 1,700.1 10,978.2 35,919.3 780.0 4,938.9 0.0 22.0 2,169.5 5,816.2 1,482.9 137.3 4,200.4 10,485.7 0.2 0.0 215.0 0.0 0.0 150.3 0.7 0.1 0.0 1,259.3 121.5 35,919.5 780.0 5,153.9 0.0 22.0 2,319.8 5,816.9 1,483.0 137.3 5,459.7 10,607.2 0.2 0.0 212.0 0.0 0.0 150.3 0.7 0.1 0.0 1,239.3 219.3 35,919.5 780.0 5,150.9 0.0 22.0 2,319.8 5,816.9 1,483.0 137.3 5,439.7 10,705.0 67,213.6 65,952.2 1,747.1 67,699.3 1,821.9 67,774.1 11,556.2 16,100.3 (34.8) 16,065.5 (34.8) 16,065.5 11,556.2 16,100.3 (34.8) 16,065.5 (34.8) 16,065.5 313.7 333.1 Child Care and Development Fund 106,877.2 Special Administration Fund 662.1 Child Support Enforcement Administration Fund 11,939.3 Domestic Violence Shelter Fund 1,700.0 Child Abuse Prevention Fund 110.8 Children and Family Services Training Program 52.8 Public Assistance Collections Fund 242.8 Department Long‐Term Care System Fund 19,169.6 Spinal and Head Injuries Trust Fund 2,062.3 Homeless Trust Fund 0.0 Utility Assistance Fund 266.4 Risk Management Fund 0.0 Indirect Cost Recovery Fund 0.0 Reed Act Fund 0.0 Agency Total Department of Education Teacher Certification Fund School Accountability Fund School Accountability Fund Prop 301 Fund English Learners Compensatory Instruction Fund E‐Learning Pilot Program Fund Public Institution Permanent School Earnings Fun School Improvement Revenue Bond Debt Svc Fun Agency Total Department of Emergency Services and Military Affairs Emergency Response Fund Agency Total Department of Environmental Quality DEQ Emissions Inspection Fund Hazardous Waste Management Fund Air Quality Fund Clean Air In‐Lieu Fee Account Underground Storage Tank Revolving Fund Recycling Fund Permit Administration Fund Solid Waste Fee Fund Used Oil Fund Water Quality Fee Fund Indirect Cost Fund Agency Total Arizona Exposition & State Fair Coliseum and Expo Center Fund Agency Total State Board of Funeral Directors & Embalmers Funeral Directors and Embalmers Fund Budget Summary 0.4 333.5 0.4 333.5 17 FY 2006 Expendi‐ tures FY 2007 Appro‐ priation FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget State Board of Funeral Directors & Embalmers Agency Total 313.7 333.1 0.4 333.5 0.4 333.5 0.0 21,215.1 1,932.7 156.1 18.3 0.0 3,500.0 27,409.8 3,176.3 328.2 43.4 16.0 (3,500.0) 2,182.0 1,287.5 0.1 0.0 0.0 0.0 29,591.8 4,463.8 328.3 43.4 16.0 (3,500.0) 2,066.0 1,224.0 0.1 0.0 0.0 0.0 29,475.8 4,400.3 328.3 43.4 16.0 23,322.2 34,473.7 (30.4) 34,443.3 (209.9) 34,263.8 300.0 1,920.8 9,168.4 300.0 2,054.6 9,512.8 0.0 (12.3) 2,925.3 300.0 2,042.3 12,438.1 0.0 (12.3) 4,762.2 300.0 2,042.3 14,275.0 11,389.2 11,867.4 2,913.0 14,780.4 4,749.9 16,617.3 2,394.0 2,754.4 (0.3) 2,754.1 2.5 2,756.9 2,394.0 2,754.4 (0.3) 2,754.1 2.5 2,756.9 33,753.6 1,406.2 727.2 66.2 1,000.0 1,618.8 4,500.6 3,267.3 2,500.0 0.0 842.1 99.6 0.0 152.1 7,626.6 300.9 6,879.9 37,924.8 1,576.1 802.2 0.0 1,000.0 0.0 5,231.2 6,076.5 2,500.0 166.5 946.1 100.0 500.0 329.8 7,964.6 350.0 7,705.3 (4,147.7) (1,576.1) 0.1 0.0 0.0 0.0 11.0 661.8 0.0 0.0 0.2 0.0 0.0 0.1 (3,299.6) 0.0 1,120.2 33,777.1 0.0 802.3 0.0 1,000.0 0.0 5,242.2 6,738.3 2,500.0 166.5 946.3 100.0 500.0 329.9 4,665.0 350.0 8,825.5 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 64,741.1 73,173.1 (7,230.0) 65,943.1 0.0 0.0 193.7 193.7 0.0 193.7 0.0 193.7 193.7 193.7 0.0 193.7 0.0 193.7 81.7 87.8 5.4 93.2 3.7 91.5 81.7 87.8 5.4 93.2 3.7 91.5 697.3 0.0 728.1 195.9 125.9 1.6 854.0 197.5 184.0 1.6 912.1 197.5 697.3 924.0 127.5 1,051.5 185.6 1,109.6 Arizona Game & Fish Department Wildlife Habitat Restoration Aand Enhancement Game and Fish Fund Game and Fish Watercraft License Fund Game/Non‐game Fund Waterfowl Conservation Fund Wildlife Endowment Fund Agency Total Department of Gaming Lottery Fund Permanent Tribal‐State Compact Fund Arizona Benefits Fund Agency Total Government Information Technology Agency Information Technology Fund Agency Total Department of Health Services Tobacco Tax and Health Care Fund Capital Outlay Stabilization Fund Child Care and Development Fund Medical Examiners Board Fund Health Research Fund Poison Control Fund Emergency Medical Services Operating Fund Newborn Screening Program Fund Substance Abuse Services Fund Nursing Care Institution Protection Fund Environmental Lab License Revolving Fund Child Fatality Review Fund Vital Records Electronic Systems Fund Hearing and Speech Professionals Fund The Arizona State Hospital Fund DHS State Hospital Land Earnings Fund DHS ‐ Indirect Cost Fund Agency Total Arizona Historical Society Capital Outlay Stabilization Fund Agency Total Board of Homeopathic Medical Examiners Homeopathic Medical Examiners Fund Agency Total Arizona Department of Housing Housing Trust Fund Housing Development Fund Agency Total 18 FY 2008 and FY 2009 Executive Budget FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 17,386.6 18,938.9 609.5 19,548.4 660.4 19,599.3 17,386.6 18,938.9 609.5 19,548.4 660.4 19,599.3 25.0 25.0 (25.0) 0.0 (25.0) 0.0 25.0 25.0 (25.0) 0.0 (25.0) 0.0 5,238.7 12,558.1 3,843.4 3,812.3 327.4 500.0 2,444.7 10,093.7 14,786.6 5,395.7 3,454.2 477.5 500.0 2,444.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10,093.7 14,786.6 5,395.7 3,454.2 477.5 500.0 2,444.7 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 28,724.6 37,152.4 0.0 37,152.4 0.0 0.0 585.3 2,301.5 3,360.0 0.0 685.3 2,638.3 1,094.9 340.0 0.0 0.6 0.0 0.0 685.3 2,638.9 1,094.9 340.0 N/A N/A N/A N/A N/A N/A N/A N/A 6,246.8 4,758.5 0.6 4,759.1 0.0 0.0 265.1 0.0 318.6 220.0 1,000.0 230.6 0.0 0.0 (230.6) 220.0 1,000.0 0.0 0.0 0.0 (230.6) 220.0 1,000.0 0.0 583.7 1,450.6 (230.6) 1,220.0 (230.6) 1,220.0 634.2 661.8 0.0 661.8 0.0 661.8 634.2 661.8 0.0 661.8 0.0 661.8 68,998.8 71,363.4 (2,001.8) 69,361.6 (2,167.8) 69,195.6 68,998.8 71,363.4 (2,001.8) 69,361.6 (2,167.8) 69,195.6 5,335.3 5,697.3 (117.8) 5,579.5 (77.2) 5,620.1 5,335.3 5,697.3 (117.8) 5,579.5 (77.2) 5,620.1 283.4 9.3 0.0 309.8 0.0 0.0 0.0 309.8 0.0 0.0 0.0 309.8 292.7 309.8 0.0 309.8 0.0 309.8 0.0 1,148.3 (1,148.3) 0.0 (1,148.3) 0.0 0.0 1,148.3 (1,148.3) 0.0 (1,148.3) 0.0 Industrial Commission of Arizona Industrial Commission Admin Fund Agency Total Department of Insurance Captive Insurance Regulatory/Supervision Fund Agency Total Judiciary Supreme Court CJEF Disbursements Fund Judicial Collection ‐ Enhancement Fund Defensive Driving Fund Court Appointed Special Advocate Fund Confidential Intermediary Fund Drug Treatment and Education Fund State Aid to Courts Fund Agency Total Department of Juvenile Corrections Juvenile Corrections CJEF Dist Fund State Education Fund for Committed Youth Fund Endowments/Land Earnings Fund Risk Management Fund Agency Total State Land Department Environmental Special Plate Fund Due Diligence Fund Risk Management Fund Agency Total Arizona State Library, Archives & Public Records Records Services Fund Agency Total Arizona State Lottery Commission Lottery Fund Agency Total Arizona Medical Board Medical Examiners Board Fund Agency Total Board of Medical Student Loans Medical Examiners Board Fund Med Student Loan Fund Agency Total State Mine Inspector Aggregate Mining Reclamation Fund Agency Total Naturopathic Physicians Board of Medical Examiners Naturopathic Board Fund Agency Total Budget Summary 483.5 493.7 92.9 586.6 90.3 584.0 483.5 493.7 92.9 586.6 90.3 584.0 19 FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation 39,543.9 42,706.8 0.0 42,706.8 N/A N/A 39,543.9 42,706.8 0.0 42,706.8 0.0 0.0 3,169.8 3,398.4 308.9 3,707.3 80.9 3,479.3 3,169.8 3,398.4 308.9 3,707.3 80.9 3,479.3 232.7 406.6 (47.9) 358.7 (47.9) 358.7 232.7 406.6 (47.9) 358.7 (47.9) 358.7 180.7 239.0 1.2 240.2 1.7 240.7 Agency Total 180.7 239.0 1.2 240.2 1.7 240.7 146.9 193.9 0.5 194.4 0.5 194.4 Agency Total 146.9 193.9 0.5 194.4 0.5 194.4 576.5 655.9 2.0 657.9 0.1 656.0 576.5 655.9 2.0 657.9 0.1 656.0 324.5 2,064.0 10,397.2 679.7 522.8 1,092.7 8,392.8 692.1 0.0 0.0 (1,496.7) 0.0 522.8 1,092.7 6,896.1 692.1 0.0 0.0 (4,496.7) 0.0 522.8 1,092.7 3,896.1 692.1 13,465.4 10,700.4 (1,496.7) 9,203.7 (4,496.7) 6,203.7 Northern Arizona University NAU Collections ‐ Appropriated Fund Agency Total State Board of Nursing Nursing Board Fund Agency Total Nursing Care Ins. Admin. Examiners Nursing Care Institution Admin/ACHMC Fund Agency Total Board of Occupational Therapy Examiners Occupational Therapy Fund State Board of Optometry Board of Optometry Fund Arizona Board of Osteopathic Examiners Osteopathic Examiners Board Fund Agency Total State Parks Board Reservation Surcharge Revolving Fund Boating Safety Fund State Parks Enhancement Fund Off‐highway Vehicle Recreation Fund Agency Total Arizona State Board of Pharmacy Pharmacy Board Fund Agency Total 1,446.5 1,566.2 899.6 2,465.8 292.5 1,858.7 1,446.5 1,566.2 899.6 2,465.8 292.5 1,858.7 269.9 293.7 88.9 382.6 58.9 352.6 269.9 293.7 88.9 382.6 58.9 352.6 4,239.8 1,558.2 3,422.3 1,664.7 40.1 11.0 3,462.4 1,675.7 163.6 11.0 3,585.9 1,675.7 5,798.0 5,087.0 51.1 5,138.1 174.6 5,261.6 101.4 121.9 15.8 137.7 15.8 137.7 101.4 121.9 15.8 137.7 15.8 137.7 2,175.7 2,930.8 14.5 2,945.3 14.5 2,945.3 2,175.7 2,930.8 14.5 2,945.3 14.5 2,945.3 272.3 318.4 2.1 320.5 2.1 320.5 272.3 318.4 2.1 320.5 2.1 320.5 299.0 381.3 (6.7) 374.6 (4.3) 377.0 Board of Physical Therapy Examiners Physical Therapy Fund Agency Total Arizona Pioneersʹ Home Pioneersʹ Home State Charitable Earnings Fund Pioneersʹ Home Minersʹ Hospital Fund Agency Total State Board of Podiatry Examiners Podiatry Examiners Board Fund Agency Total Commission for Postsecondary Education Postsecondary Education Fund Agency Total State Board for Private Postsecondary Education Private Postsecondary Education Fund Agency Total State Board of Psychologist Examiners Psychologist Examiners Board Fund 20 FY 2008 and FY 2009 Executive Budget FY 2006 Expendi‐ tures FY 2007 Appro‐ priation FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget State Board of Psychologist Examiners Agency Total 299.0 381.3 (6.7) 374.6 (4.3) 377.0 42,197.6 19,282.7 1,372.0 4,527.9 0.0 2,190.5 2,613.1 85.0 153.8 0.0 63,999.3 2,636.9 210.0 10,000.0 21,514.1 0.0 5,282.4 1,512.0 3,286.2 2,753.3 0.0 205.0 2,768.1 10,000.0 3,186.7 296.2 31,527.8 (1,824.8) 0.0 544.4 0.0 (0.1) 673.8 0.0 0.0 500.0 56,729.6 (0.5) 668.7 41,527.8 19,689.3 0.0 5,826.8 1,512.0 3,286.1 3,427.1 0.0 205.0 3,268.1 66,729.6 3,186.2 964.9 (4.0) (1,006.7) 0.0 544.4 0.0 (0.1) 1,056.8 0.0 0.0 1,000.0 (5.0) (0.5) (230.0) 9,996.0 20,507.4 0.0 5,826.8 1,512.0 3,286.1 3,810.1 0.0 205.0 3,768.1 9,995.0 3,186.2 66.2 139,268.8 60,804.0 88,818.9 149,622.9 1,354.9 62,158.9 45.0 298.9 45.0 300.0 22.0 150.0 67.0 450.0 22.0 150.0 67.0 450.0 343.9 345.0 172.0 517.0 172.0 517.0 Department of Public Safety State Highway Fund Arizona Highway Patrol Fund Safety Enforcement and Transportation Infrastruc Crime Laboratory Assessment Fund Motor Vehicle Liability Insurance Enforcement F Auto Fingerprint Identification Fund DNA Identification System Fund Sex Offender Monitoring Fund Motorcycle Safety Fund Parity Compensation Fund Highway User Revenue Fund Criminal Justice Enhancement Fund Risk Management Fund Agency Total Arizona Department of Racing Racing Administration Fund County Fair Racing Fund Agency Total Radiation Regulatory Agency State Radiologic Technologist Certification Fund Agency Total 243.6 281.8 15.5 297.3 16.4 298.2 243.6 281.8 15.5 297.3 16.4 298.2 9,599.1 10,625.6 1,073.0 11,698.6 903.5 11,529.1 9,599.1 10,625.6 1,073.0 11,698.6 903.5 11,529.1 1,051.3 1,275.4 0.5 1,275.9 3.0 1,278.4 1,051.3 1,275.4 0.5 1,275.9 3.0 1,278.4 Registrar of Contractors Registrar of Contractors Fund Agency Total Residential Utility Consumer Office Residential Utility Consumer Office Revolving Fu Agency Total Board of Respiratory Care Examiners Board of Respiratory Care Examiners Fund 198.0 209.1 19.0 228.1 17.3 226.4 Agency Total 198.0 209.1 19.0 228.1 17.3 226.4 17,994.9 2,368.5 18,228.3 2,897.7 809.4 0.0 19,037.7 2,897.7 1,346.7 0.0 19,575.0 2,897.7 20,363.4 21,126.0 809.4 21,935.4 1,346.7 22,472.7 475.0 1,564.5 316.3 503.3 3,461.3 416.8 107.3 (72.3) 0.1 610.6 3,389.0 416.9 147.4 (72.3) 0.1 650.7 3,389.0 416.9 2,355.8 4,381.4 35.1 4,416.5 75.2 4,456.6 9,588.7 0.0 20,000.0 164.9 (5,000.0) (70.0) 15,000.0 94.9 (16,000.0) (80.0) 4,000.0 84.9 9,588.7 20,164.9 (5,070.0) 15,094.9 (16,080.0) 4,084.9 Arizona State Retirement System Retirement System Appropriated Fund LTD Trust Fund Agency Total Department of Revenue Tobacco Tax and Health Care Fund DOR Unclaimed Property Fund DOR Liability Setoff Fund Agency Total Department of State ‐ Secretary of State Election Systems Improvement Fund Professional Employer Organization Fund Agency Total Budget Summary 21 FY 2006 Expendi‐ tures FY 2007 Appro‐ priation FY 2008 FY 2008 FY 2009 Changes and Executive Changes and Adjustments Budget Adjustments FY 2009 Executive Budget State Boards Office Special Services Fund Agency Total 155.5 180.8 62.6 243.4 62.6 243.4 155.5 180.8 62.6 243.4 62.6 243.4 1,955.2 2,253.5 406.8 2,660.3 383.5 2,637.0 1,955.2 2,253.5 406.8 2,660.3 383.5 2,637.0 Structural Pest Control Commission Structural Pest Control Fund Agency Total State Board of Technical Registration Technical Registration Board Fund 1,392.8 1,521.1 93.5 1,614.6 87.5 1,608.6 Agency Total 1,392.8 1,521.1 93.5 1,614.6 87.5 1,608.6 Agency Total 0.0 0.0 0.0 0.0 0.0 0.0 State Aviation Fund 2,056.2 State Highway Fund 364,714.8 Transportation Department Equipment Fund 34,839.2 Safety Enforcement and Transportation Infrastruc 3,571.1 Air Quality Fund 62.8 Vehicle Inspection and Title Enforcement Fund 1,208.5 Motor Vehicle Liability Insurance Enforcement F 1,233.9 Driving Under Influence Abatement Fund 309.4 Highway User Revenue Fund 383.2 2,188.8 391,757.1 38,526.8 558.7 68.6 1,534.1 4,029.0 136.8 607.3 378.2 14,538.0 (4.7) (0.2) 0.0 239.1 (1.8) 0.0 0.0 2,567.0 406,295.1 38,522.1 558.5 68.6 1,773.2 4,027.2 136.8 607.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 408,379.1 439,407.2 15,148.6 454,555.8 0.0 0.0 16,263.0 13,890.2 0.0 13,890.2 N/A N/A 16,263.0 13,890.2 0.0 13,890.2 0.0 0.0 104,213.1 118,470.6 0.0 118,470.6 N/A N/A 104,213.1 118,470.6 0.0 118,470.6 0.0 0.0 659.1 12,367.3 721.0 13,262.1 3.7 1.0 724.7 13,263.1 9.2 1.0 730.2 13,263.1 13,026.4 13,983.1 4.7 13,987.8 10.2 13,993.3 Veterinary Medical Examiners Board Fund 386.4 442.9 13.9 456.8 6.6 449.5 Agency Total 386.4 442.9 13.9 456.8 6.6 449.5 0.0 1,100.0 0.1 1,100.1 0.1 1,100.1 0.0 1,100.0 0.1 1,100.1 0.1 1,100.1 1,231.1 63.1 1,445.8 115.2 12.1 71.6 1,457.9 186.8 23.2 61.8 1,469.0 177.0 Arizona Office of Tourism Department of Transportation Agency Total University of Arizona ‐ Health Sciences Center U of A College of Medical ‐ Collections ‐ Appropr Agency Total University of Arizona ‐ Main Campus U of A Main Campus ‐ Collections ‐ Appropriate Agency Total Department of Veteransʹ Services Veteransʹ Conservatorship Fund State Home for Veterans Trust Fund Agency Total State Veterinary Medical Examining Board Department of Water Resources Assured and Adequate Water Supply Administra Agency Total Department of Weights and Measures Air Quality Fund Motor Vehicle Liability Insurance Enforcement F Agency Total 1,294.2 1,561.0 83.7 1,644.7 Other Appropriated Funds Operating Total 2,308,153.1 2,470,761.5 141,663.0 2,612,424.5 22 85.0 (10,262.3) 1,646.0 494,163.0 FY 2008 and FY 2009 Executive Budget Budget Summary 23 Percent of growth over base 9,690,827,400 360,424,500 All Other Agencies All Agencies 14,394,100 166,196,600 71,856,100 413,764,200 20,877,800 963,870,100 27,559,700 22,495,500 165,536,600 817,157,700 718,950,200 79,848,300 4,028,165,600 11,983,700 32,295,700 1,199,768,000 549,247,600 26,435,400 Administration Attorney General Community Colleges Corrections Economic Security Juvenile Corrections Education Commerce Environmental Quality AHCCCS Homeland Security Health Services Land Department Emergency Services and Military Affairs Public Safety Revenue School Facilities Board Water Resources Universities Agency FY 2007 Appropriation 6.1% 587,055,300 887,400 16,984,100 0.0% (1,807,300) - - (3,766,300) 6,765,900 36,982,600 761,100 0.3% 24,276,700 - - 195,400 (613,400) 100,844,600 1,928,100 18,900 17,928,800 1,959,000 Debt Repayment 0.5% 52,917,300 5,989,700 34,625,000 864,800 683,500 148,400 516,600 6,608,200 3,481,100 0.8% 76,114,600 4,644,000 4,500,000 21,829,300 187,600 12,380,900 864,500 863,800 7,314,200 6,463,100 463,200 16,294,300 1,104,100 (794,400) Unfunded Extension of Legislative Federal and Existing and Statutory Court Programs Mandates Mandates 333,100 90,829,100 35,767,100 (826,600) 301,920,100 625,700 Caseload Requirements and Inflation Growth -4.0% (385,422,570) (16,881,870) (379,200) (91,838,900) (475,700) (250,010,100) 18,800 173,100 (13,877,000) (1,368,300) 75,900 612,000 (4,000,000) (1,071,200) 543,300 63,200 (126,600) 1,300 26,900 (6,908,200) Technical and Other Adjustments 0.8% 69,654,400 80,396,100 - - 2,539,500 323,400 1,064,700 6,173,900 640,200 1.6% 159,153,100 3,157,300 47,102,800 8,642,300 1,378,300 121,500 75,150,000 8,681,900 155,100 11,238,200 486,300 4,288,200 (1,555,200) 306,400 6.1% 69,654,400 10,283,510,630 358,221,030 14,014,900 87,850,600 72,777,600 160,109,300 25,396,600 1,084,584,400 31,964,600 22,619,500 165,350,800 913,552,700 787,928,500 80,149,600 4,411,572,200 20,815,300 33,858,100 1,318,251,600 486,300 596,976,400 27,376,200 FY 2008 Executive Employee Executive New Recommendation Compensation Initiatives FY 2008 General Fund Executive Recommendation: Expenditure Growth Breakdown Budget Message THE ECONOMY A Generally Positive Outlook for Arizona Global stability and the continued good health of the U.S. economy will help Arizona get past predicted downturns in real estate and construction T HE NATION AS a whole, and Arizona in particular, will endure slower growth in 2007 due primarily to linger‐ ing effects of the housing slowdown. Globally, the economy appears to be satisfactory, and most economists believe that the overall health of the world economy will sustain a mod‐ erate level of economic growth. NATIONAL OUTLOOK Historically, growth above 3% has been associated with a vibrant economy. In the U.S., 2006 economic growth for real GDP was solid, at over 3%, with growth in 2007 pro‐ jected to moderate. The consensus outlook for 2007 is for a slight decline in the growth rate, to about 2.5% in real GDP. Less optimistic economists are looking for only modest growth in 2007. Job growth. Employment gains at a national level con‐ tinue at a modest pace, impeded by the same pressures that have existed for several years: high health benefit costs, global market alternative opportunities, and labor‐saving productivity enhancements. The quality of job opportunities (as measured by access to increasingly high‐paying jobs) continues to erode nationally and in most states. The steady progression from manufacturing jobs to service jobs contin‐ ues. Consumer spending. Nationally, consumer spending has sustained growth despite the recent deceleration in housing activity. Catalysts for the consumer include modest inflation rates and historically low credit costs, combined with modest wage gains and a very robust equity market. Wall Street gains are the strongest since 2003, and the post‐2001 expansion will enter its sixth year. To date, the housing market deceleration has not resulted in a rapid deceleration of consumer expenditures. Clearly, the capital gains and dividend returns from Wall Street have helped buffer the lost equity accumulations in housing. Interest rates. Most observers of the Federal Reserve Board believe that the Fed is as likely to ease as it is to tighten interest rates at this stage of the cycle, and there are some signs that energy price inflation is having the desired moderating effect. While short‐term rates clearly reflect recent Fed tightening, long‐term rates remain very low for this point in the business cycle, given the federal funds rate of 5.25% as this went to print. Historically, high short‐term rates and low long‐term rates have signaled an impending slowdown, but other FY 2008 and FY 2009 Executive Budget explanations prevail today. The low long‐term rates remain sustained by very modest inflation and an unrelenting pref‐ erence by foreign central banks to invest in the U.S. treasury markets. Homebuyers continue to benefit from the attractive rates on conventional mortgages; this is especially important as homeowners abandon some of their unconventional mortgage positions and shift back into conventional means of borrowing. Economists continue to speculate about the end of low long‐term rates, but as long as inflation rates are moderate and the dollar avoids a spiral of depreciation, the U.S. Treasury market will be attractive to credit market investors around the world, keeping our interest rates at or near current levels. Business spending. The pace of corporate profits has ac‐ celerated smartly out of the 2001 recession, and it continues to grow far more rapidly than the pace of job creation. Con‐ sequently, corporations have large amounts of ready cash in addition to access to credit at historically low rates, which puts businesses in a position to invest in people, plant and equipment. Profit growth accelerated in 2006 by nearly 20% over 2005, much to the pleasant surprise of some Wall Street investors. The catalyst for an accelerating pace of business investment will be ongoing improvements in business con‐ fidence about the health of the U.S. economy, coupled with a moderation in the trend to move capital offshore. Despite challenges, the U.S. continues to be a very prof‐ itable option for multi‐national corporations. However, most economists believe that profit percentage growth will slow in 2007, to the mid‐single digits over the lofty 2006 levels. Value of the dollar. The dollar has appreciated consid‐ erably off the lows set in early 2005 and then revisited the lows in late 2006. At present, short‐term interest rates in the U.S. are attractive in comparison to rates earned in alterna‐ tive currencies, and investors have responded by buying dollars. That has helped the dollar stabilize, albeit at lower rates of exchange with foreign currencies. The trade imbal‐ ance and domestic deficit will continue to pressure the dol‐ lar, but as long as inflation rates remain modest there should be no free fall in dollar value, despite ongoing con‐ cerns about trade and domestic fiscal imbalances. Despite well‐documented pressures, the U.S. remains an attractive low‐risk investment for both financial and physical capital, and this attractiveness will buffer against dollar deprecia‐ tion pressures. 25 Current events and risks. The U.S. economy displayed remarkable resilience to the adverse effects of Katrina/Rita and associated energy shocks in late 2005 and early 2006. The next test will be whether it can maintain overall mo‐ mentum in light of the drags induced by real estate. Risks to continued national prosperity are the possibility of some housing‐related pressures, as regions heavily dependent upon the real estate expansion lose momentum; possible spillovers from the hardship of the Midwest’s structural manufacturing slump; and the ongoing threat of a geopoliti‐ cal event. Indeed, the purchasing managers index slipped below the growth/no growth threshold of 50 in November, so the evidence for slow growth is showing up in some of the data. ARIZONA OUTLOOK 6 23 8 17 7 38 16 2 3 36 31 20 1 39 50 21 26 4 29 41 28 35 42 37 14 44 34 32 40 49 45 43 19 27 24 30 25 11 48 47 46 12 13 33 18 5 22 10 15 Source: Blue Chip Job Growth Update based on rank of percent growth Employment Growth, 1991‐2006 8% Arizona 7% U.S. 6% 5% 4% 3% 2% 1% 0% -1% -2% Jan-06 Jan-05 Jan-04 Jan-03 Jan-02 Jan-01 Jan-00 Jan-99 Jan-98 Jan-97 Jan-96 Jan-95 Jan-94 Jan-93 Jan-92 26 9 Jan-91 Arizona business cycles typically have more amplitude than national cycles, and for this cycle the upside catalyst was clearly real estate. Both job gains and income growth outpaced the nation since the most recent recession ended in 2003. The continuing challenge at this point in the cycle is to determine which portion of the economy will provide posi‐ tive momentum as real estate and construction cool. Despite Arizona’s return to its number‐one ranking among states in terms of population growth, there are clear signs of cooling in sales and permitting activity, so pressures on employ‐ ment in real estate and construction are likely to appear in 2007. Employment. Job growth in Arizona maintained a healthy pace in 2006, at over 5% over 2005. As the map shown above illustrates, Arizona was the top‐ranked state for job growth in comparison to the prior year. The state’s job growth is expected to slow to about 4% in 2007. Employment related to real estate and construction has been spectacular and, thanks to the strength of commercial construction, was sustained in 2006 despite slowing in homebuilding. Pressures on these growth sectors in 2007 could lead to slower overall growth, although shrinking inventories of retail space may support construction job growth. Personal income. As reported by the Bureau of Eco‐ nomic Analysis, aggregate personal income growth in Ari‐ zona is vibrant, with growth in 2005 averaging over 8.5% on a year‐over‐year basis, and with the first quarter of calendar 2006 especially robust. Top 10 Job Growth States October 2006 over October 2005 The challenge for economists is to discern how much of this growth is due to the real estate boom and how much comes from segments of the economy that will yield sus‐ tainable growth over the longer term. Fortunately, the Ari‐ zona economy is more diverse than it was in previous real estate down cycles. Risks. Continued economic growth for the Arizona economy is subject to risk in two areas. First, any prolonged U.S. downturn will adversely affect the state, as it has in the past. In particular, Arizona’s export, construction and hospi‐ tality industries would suffer. Second, Arizona is more exposed than most states to the real estate cycle. The state enjoyed considerable growth and prosperity in the up trend of the cycle and in 2007 will experience a drag due to the slowing of real estate activity. ] The Budget Message GOOD GOVERNMENT Efficiency Review Savings and Cost Avoidances The Efficiency Review process challenges agency management to find sensible ways to reduce costs in an effort to do more with less, while improving the way the State does business I n January 2003, the State faced serious fiscal challenges that re‐ quired bold and creative solutions. State revenues had been in decline for some time, and State agencies were struggling to maintain programs and meet growing service demands. As part of her plan to cope with the fiscal crisis, Governor Napolitano estab‐ lished the Efficiency Review (ER) initiative, which ultimately challenged all executive agencies to find sensible ways to save money and reduce costs without harming programs and ser‐ vices. This first phase of ER was based on a successful approach that had been pioneered several years earlier by the Texas Performance Review. Unlike the Texas effort, however, Arizona’s ER was staffed at no cost using personnel borrowed from par‐ ticipating State agencies. Phase II: Project Implementa‐ tion and Accountability. In Janu‐ ary 2004, ER entered a distinctly new phase. Many good ideas on how to save money had been generated, and ER faced two difficult challenges: • ER PHASES ER has developed and evolved over the past four years in two dis‐ tinct phases. Phase I: Idea Generation and Pro‐ ject Development. From January through April 2003, ER worked with three pilot agencies to develop an initial set of short‐term initiatives that could be implemented immediately. The three agencies also developed ideas for longer‐term projects that would require time for planning and development and offer potential for savings in future fiscal years. In April 2003, the Governor issued Executive Order 2003‐14, which re‐ quired all cabinet agencies to find savings in such key areas as travel, fleet reduction, training consolidation, electronic communications, and en‐ ergy. At the same time, the scope of ER’s project development effort was expanded to six additional executive agencies that were asked to generate cost saving ideas following the tem‐ plate that had been successfully de‐ veloped by the pilot agencies. FY 2008 and FY 2009 Executive Budget how to accomplish its large port‐ folio of newly developed projects, and • how to institutionalize and sustain the effort for the long‐term. The ER Steering Committee was established to oversee and guide project implementation. Comprised of the Governor’s chiefs of staff and top advisors, the Steering Committee has been meeting monthly since early 2004, receiving reports from agency directors and holding agencies ac‐ countable for implementation of ER projects. In addition, the Governor’s Office of Strategic Planning and Budgeting (OSPB) established the Consolidated Efficiency Review Tracking System (CERTS), which requires State agen‐ cies to document and report their efficiency savings in the form of an‐ nual savings plans. Through CERTS, agencies are able to forecast and ana‐ lyze their internal ER efforts and con‐ sider ER results in preparing their annual budget. During this second phase of ER, agencies made considerable progress implementing agency‐specific effi‐ ciencies. In addition, significant pro‐ gress has been made in advancing several statewide project initiatives. Many observers credit the ER Steering Committee with driving these suc‐ cesses, as its monthly meetings have kept the focus on ER and ensured that agencies follow through on their pro‐ ject commitments. FINANCIAL SUCCESS According to data compiled by OSPB, agency‐specific and statewide projects developed through ER will save an estimated $213 million in FY 2008. By the end of the current fiscal year, cumulative project savings since FY 2004 are expected to total almost $768.5 million. Statewide initiatives continued to produce savings in FY 2006 and are projected to contribute approximately $105.1 million to the estimated FY 2008 savings identified above. These initiatives include energy conserva‐ tion, fleet consolidation, statewide e‐ procurement, and employee benefits. All State agencies were required to participate in the total savings achieved through these initiatives. Agency‐specific savings. Agen‐ cies continue to be challenged to cre‐ ate annual savings plans that produce new ideas for efficiency savings on an annual basis. While all projects may not yet be implemented, ideas for agency‐specific efficiency savings in FY 2008 total $108 million. Two tables, FY 2008 Efficiency Review Initiatives and Efficiency Review Initiatives: Five‐ Year Summary, identify: • estimated savings for FY 2008 by agency, • actual savings for FY 2004, FY 2005 and FY 2006, and 27 • FY 2007 and FY 2008 estimated savings for initiatives. If an initiative is a cost avoidance – i.e., a permanent or long‐term savings – it is accounted for in each year of the five‐year plan in which the avoidance applies. If an initiative is a cost savings – i.e., a temporary or short‐term sav‐ ings – it is accounted for in the year(s) to which it applies. For FY 2004 through FY 2006, agencies have saved a total of $441.3 million. Many of the ER projects reported in CERTS for FY 2008 include the following themes: Technology. Agencies have been able to utilize technology to convert paper processes to forms of electronic communication. Several agencies are now completing license renewals on‐ line, and many are converting mail‐ ings for items such as reports, news‐ letters and various other documents to Internet formats for public viewing. Hiring Gateway, the new paper‐ less recruiting and hiring system deployed to all agencies, was able to achieve savings of $1.9 million in FY 2006 and is estimated to save the State $2.1 million by the current fiscal year end. The Department of Revenue has also been successful in encouraging taxpayers to file their tax returns on line through the recently developed E‐ File web‐based application. Human resources. Several agen‐ cies have increased the number of volunteers and volunteer hours to alleviate some of the pressures caused 28 by a lack of funding for additional staff. Additionally, one agency has implemented a “virtual office” initia‐ tive that allows employees to work from their homes. This saves the State money in leasing space for employees and reduces costly turnover as a result of satisfied employees. Red tape reduction. Process streamlining has also been able to achieve savings. While some agencies have consolidated the number of required forms by reducing duplica‐ tive questions, others have also been conducting process reviews and have been able to eliminate unnecessary steps. While all of these themes have generated significant saving, agencies have also been able to implement other innovative approaches that have created efficiencies for the State. Some of these approaches include reducing the intake process for short‐term prison inmates, taking advantage of creative purchasing opportunities for prescription drugs, using a solar farm to supplement power usage, limiting the number of hair cuts for juveniles in custody, and creating policies that guide supervisors and employees on how to reduce overtime. Redeployment of savings. Agen‐ cies continued to be required to report how they redeployed savings in FY 2006 and their expected redeployment for FYs 2007 and 2008. Most agencies redeploy their savings to cover the increasing costs of operations. THE FUTURE OF ER In 2007 and beyond, Efficiency Review will be focused on statewide initiatives that have the capacity to yield much larger savings and require a higher degree of coordination be‐ tween agencies and the Governor’s Office. In order to achieve large‐scale statewide initiatives, the ER team has recommended development of several implementation teams with cabinet‐ level leadership, to ensure an appro‐ priate level of commitment, knowl‐ edge and overview of the initiatives. One new method for coordination among agencies is the development of a new segment of the monthly cabinet meetings, during which one agency director will be asked to describe one of his or her agency’s best practices. This presentation will be followed by general instructions for implementing the practice with other agencies. In addition, the steering commit‐ tee format will be adapted for 2007 and beyond by requiring agencies to report on their efforts in accomplish‐ ing larger statewide initiatives rather than solely reporting on their individ‐ ual efforts. Implementing these approaches will help to ensure that Efficiency Review becomes institutionalized into agencies’ thinking, not only with their individual efforts, but also for the benefit of State government in gen‐ eral. ] The Budget Message FY 2008 Efficiency Review Initiatives Agency Request Prior to Efficiency Agency Request Post Efficiency Statewide Initiatives Energy Conservation Efficiency Initiative Savings 205.0 Fleet Consolidation 922.0 Statewide E‐Procurement 45,000.0 Employee Benefits 59,000.0 Total for Statewide Initiatives Arizona Department of Administration 105,127.0 920,897.3 918,617.1 2,280.2 29,788.3 29,592.9 195.4 7,994,751.3 7,937,783.6 56,967.7 83,621.6 83,435.6 186.0 Department of Corrections 1,046,741.6 1,038,064.8 8,676.8 Department of Economic Security 3,334,510.7 3,317,689.6 16,821.1 73,895.1 73,789.1 106.0 385,207.8 385,074.7 133.1 321.0 313.7 7.3 5,556.7 5,550.4 6.3 92,281.4 90,862.1 1,419.3 123,844.1 123,725.9 118.2 2,120,951.7 2,112,581.4 8,370.3 Arizona Department of Agriculture Arizona Health Care Cost Containment System Department of Commerce Department of Emergency Services and Military Affairs Department of Environmental Quality Governorʹs Office for Equal Opportunity State Department of Financial Institutions Arizona Game & Fish Department Department of Gaming Department of Health Services Arizona Department of Housing 115,285.8 115,255.8 30.0 Department of Insurance 18,484.7 18,347.6 137.1 Department of Juvenile Corrections 93,858.9 92,746.6 1,112.3 State Land Department 48,067.0 48,027.0 40.0 4,972.5 4,963.5 9.0 745,746.2 741,874.2 3,872.0 77,151.1 76,940.6 210.5 Department of Liquor Licenses and Control Arizona State Lottery Commission State Parks Board 323,631.8 321,491.2 2,140.6 Arizona Department of Racing Department of Public Safety 7,089.3 6,992.9 96.4 Department of Real Estate 6,287.2 6,285.4 1.8 23,867.4 23,766.4 101.0 1,310.6 1,275.4 35.2 175,172.2 174,600.5 571.7 1,444,585.5 1,442,065.6 2,519.9 25,537.9 25,112.4 425.5 3,387,636.2 3,386,480.4 1,155.8 Department of Veteransʹ Services 20,578.9 20,521.7 57.2 Department of Water Resources 80,997.4 80,876.9 120.5 3,472.5 3,389.3 83.2 Registrar of Contractors Residential Utility Consumer Office Department of Revenue School Facilities Board Arizona Office of Tourism Department of Transportation Department of Weights and Measures Total For Agency Initiatives 108,007.4 Total for FY 2008 ‐ All Initiatives for All Agencies and Statewide 213,134.4 FY 2008 and FY 2009 Executive Budget 29 Efficiency Review Initiatives - Five-Year Summary 2004 Actual 2005 Actual 2006 Actual 2007 OSPB 2008 OSPB Five-Year Est. Est. Total Statewide Initiatives Employee Benefits Energy Conservation Leasing/Space Utilization Fleet Consolidation Statewide E-Procurement 0.0 0.0 0.0 0.0 0.0 0.0 442.8 1,543.0 922.0 15,700.0 25,000.0 205.0 1,200.0 1,074.9 22,295.0 48,000.0 205.0 0.0 922.0 45,000.0 59,000.0 205.0 0.0 922.0 45,000.0 132,000.0 1,057.8 2,743.0 3,840.9 127,995.0 0.0 18,607.8 49,774.9 94,127.0 105,127.0 267,636.7 Total for Agency Specific Initiatives 31,408.3 91,342.6 170,863.4 99,322.5 108,007.4 500,944.2 Total for All Initiatives 31,408.3 109,950.4 220,638.3 193,449.5 213,134.4 768,580.9 Total for Statewide Initiatives 30 The Budget Message EDUCATION Preparing Arizona Students for Career Success Helping students succeed in the modern workplace requires an emphasis on math and science T he demands of the 21st century place enormous expectations on Arizona’s graduates as they enter into the workforce. To help students fulfill those expectations and reach their career objectives, Governor Napoli‐ tano established the P20 Council to examine the alignment of Arizona’s education systems, from preschool to postsecondary levels; to identify gaps in that alignment; and to recommend solutions to elevate Arizona’s educa‐ tion system with the demands of a 21st century marketplace. Growth in Average Daily Membership, 1998‐2008 (est.) Traditional, District Charter, and Board Charter Schools 40,000 Traditional Charter 35,000 30,000 25,000 20,000 15,000 10,000 5,000 K‐12 EDUCATION The P20 Council issued its first set of recommendations on December 12, 2006. In reviewing the Council’s rec‐ ommendations, the Executive FY 2008 budget stresses increasing student success in math and science. Math and science. Student achievement in math and science plays a fundamental role in preparing students to meet the challenges con‐ fronting today’s workforce in the competitive global economy. In order to prepare students to meet those challenges, expanded learning oppor‐ tunities and academic support for math and science must be made avail‐ able to all Arizona students. According to the National Science Foundation, the national need for a more science‐ and math‐literate work‐ force is ever growing as we move towards an increasingly technological job market and scientifically complex society. In recognition of that trend, the FY 2008 Executive Recommenda‐ tion includes $15.5 million to retain and increase high qualified math and science teachers by: • $10.0 million to provide assis‐ tance for existing teachers to be‐ FY 2008 and FY 2009 Executive Budget 0 1998 1999 2000 2001 2002 come highly qualified in math or science by increasing base pay for highly qualified math and science teachers currently teaching in Ari‐ zona schools; • • 2003 2005 2006 2007 2008 demic content areas they teach. The Executive Recommendation addresses this issue by funding: • $3 million in scholarships for students attending one of the three public universities to attain their teacher certification, focusing on being highly qualified in math or science; • $2.5 million in financial assistance for retraining existing teachers as highly qualified in math or science and grants to implement innova‐ tive programs and academies in math and science; and $3 million to provide incentives for university students to study to become teachers in math and sci‐ ence; $2.5 million to award grants to school districts to establish inno‐ vative math and science programs and academies; Exploring new ways to deliver math and science instruction and increasing the number of highly quali‐ fied math and science teachers is essential to building the capacity needed to provide quality math and science education in Arizona’s schools. According to the Arizona Department of Education’s School District Employee Report (FY 2006), of 53,503 teachers statewide, only 2,890 are math teachers, and only 2,318 are science teachers. The federal No Child Left Behind Act requires all teachers to be highly qualified in the core aca‐ 2004 • $10 million to increase base pay for teachers who are already highly qualified in math or sci‐ ence. Additionally, the Executive rec‐ ommends monies to the State Board of Education to fund innovative pro‐ grams and academies in Math and Science. Quality teachers. The Governor’s P20 Council’s recommendations in‐ clude strategies to improve and en‐ 31 hance teacher training and career development opportunities and ad‐ dress teacher pay in order to attract, prepare and retain high quality teach‐ ers in Arizona. These recommenda‐ tions include: • • • providing for statewide mentor‐ ing and induction activities; establishing a statewide system of standards‐based professional de‐ velopment; and ensuring competitive base sala‐ ries in addition to performance‐ based wage enhancements. The FY 2008 Executive Recom‐ mendation continues to support and enhance the teaching profession with the following recommendations. Minimum salary. The Executive recommends establishing a State minimum base teacher salary of $33,000 per year. Approximately 10,000 teachers in 194 school districts earn less than $33,000 per year, thus requiring an additional $25 million in FY 2008 to reach the $33,000 minimum base salary. An additional $25 million is recommended to increase the base pay of every teacher making at or above the mandatory minimum. Professional development and per‐ formance pay. The Executive Recom‐ mendation includes $4 million for the State Board of Education to design a statewide system for professional development and performance pay. Currently, every school district re‐ ceives Proposition 301 money for performance pay, and districts may design their own performance pay structures. Most districts receive no additional funding to support per‐ formance pay structures and continu‐ ing education, programs that are proven methods to keep teachers in the profession and enhance their effectiveness. Statewide coordination of districts’ performance pay and professional development is essential to provide consistency and maximize the benefits available for all Arizona teachers and students. Master Teacher. The Recommenda‐ tion also provides $4 million to the State Board to continue expanding the 32 Master Teacher program through regional partnerships. Originally initiated by the Governor in 2004, the Master Teacher program, adminis‐ tered through the K‐12 Center at Northern Arizona University, is a teacher‐mentoring program designed to retain new teachers in the profes‐ sion and provide leadership opportu‐ nities for experienced teachers. Ex‐ panding Master Teacher allows more highly qualified, knowledgeable teachers to pass on their experience to novice teachers and help create a capable workforce to guide our chil‐ dren into the future. Professional, quality teachers are greatly needed to prepare students for the future. The teaching profession continues to struggle with attracting and retaining quality candidates. By creating incentives, increasing teacher pay, providing continuing education, support and career development opportunities, the FY 2008 Executive Budget continues to address Ari‐ zona’s most critical education needs. Basic State Aid. The largest for‐ mula‐driven funding program for K‐ 12 education, Basic State Aid provides financial assistance to school districts and charter schools for their mainte‐ nance and operations needs. For FY 2008, the Executive rec‐ ommends $288.2 million to fully fund student growth in traditional and charter schools. The overall student population is expected to rise by 31,055 – to 1,066,209. The Executive Recommendation is based on the following growth assumptions for FY 2008: • 3% total growth in new students, • 8% increase in net assessed valua‐ tion, and • 1.9% inflationary growth. Other statutory programs. The Additional State Aid program pro‐ vides a 35% subsidy for residential property owners toward the local obligation of funding public schools. The Executive Recommendation pro‐ vides $12.1 million for this program. Additionally, $2 million is for spe‐ cial education programs in permanent and residential educational institu‐ tions, for students whose parents are employed by and live at State institu‐ tions, and for students placed in school districts by federal or State agencies. New Construction. For FY 2008 the Executive recommends financing $407.8 million for the New Construc‐ tion program, expected to fund 29 new elementary schools and seven new high school and/or build‐outs of existing schools, including facilities planned for Voluntary Full Day Kin‐ dergarten; additional funds for energy efficiency; and increased costs attrib‐ utable to construction inflation. To fund payments on existing ob‐ ligations, the Executive recommends a total of $72 million General Fund for the FY 2008 lease payments. Community College FTSE Growth 140,000 120,000 100,000 80,000 60,000 40,000 20,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 The Budget Message COMMUNITY COLLEGES Arizona community colleges offer higher education opportunities for all students, regardless of previous aca‐ demic experience and are the largest higher education provider in the state. They are a critical piece of Arizona’s education landscape, providing aca‐ demic courses and student support services to meet the needs of a very diverse and growing student popula‐ tion. Between FY 2005 and FY 2006, stu‐ dent enrollment at all Arizona com‐ munity colleges decreased by 1.3% (see chart next page), although individ‐ ual colleges experienced increased enrollment. The Executive recom‐ mends fully funding community colleges with an additional $3.8 mil‐ lion for formula programs, to include $574,700 for Operating State Aid, ($241,600) for Capital Outlay, and $3.5 million for Equalization Aid. The 1.3% reduction represents a loss of 1,558 full‐time equivalent stu‐ dents (FTSE) from FY 2005 to FY 2006. Of those colleges that experienced increased enrollment, the largest FTSE growth occurred in Gila County, which, as a provisional community college district, continues to grow as it expands its services and offerings to the community. Overall, the highest growth‐rate counties were: County Growth % New FTSE Gila 103.5% 323 Yavapai 3.74% 81 Yuma/La Paz 1.5% 65 1% 37 Pinal Five districts – Graham, Maricopa, Mohave, Navajo and Pima – experi‐ enced declining enrollment. Funding levels are not decreased for districts experiencing enrollment decline; instead, community college districts are held harmless as their funding level remains the same as the previous fiscal year. UNIVERSITIES Arizona’s population growth is re‐ flected in continued enrollment FY 2008 and FY 2009 Executive Budget Arizona Universities’ Fall Enrollment Full‐time Student Equivalents 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 ASU growth at the universities. In FY 2008, a 2.5% student enrollment increase is expected in the university system, for which the Executive recommends $17 million for enrollment growth. Financial aid. The Arizona Finan‐ cial Aid Trust (AFAT) is used to pro‐ vide immediate aid to students with verifiable financial needs, assist stu‐ dents who by virtue of special circum‐ stances present a unique need for financial aid, and create an endow‐ ment for future financial aid. In FY 2006, students at Arizona universities contributed $5 million toward the Arizona Financial Aid Trust. Legislation during the 2006 session changed A.R.S. § 15‐1642 to require the State to provide two dol‐ lars for every dollar raised in actual student fees (previously, the State had to match the student contributions) and increased the amount available for financial aid. The Executive Recommendation continues to ensure access to higher education by recommending an addi‐ tional $6.3 million for the Arizona Financial Aid Trust. Of this amount, $2.9 million funds the statutory for‐ mula by providing a 2:1 ratio of State funding to student fees. An additional $3.4 million is recommended to in‐ crease the State’s financial aid support and to assist students with rising tuition costs. This recommendation increases the amount committed to financial aid to $13.4 million and is the largest amount that the State has ever provided for student assistance. NAU UA Retention – student and faculty. The Governor’s P20 Council recom‐ mendations emphasize creating an environment in which students are supported throughout their educa‐ tional journey. This support is critical for students beginning their univer‐ sity experience. The majority of students who fail to complete a degree program drop out in their first two years. The Execu‐ tive Recommendation includes $29.8 million to improve student retention, with goals of increasing graduation rates and reducing the time it takes to earn a degree. The funding will in‐ crease faculty capacity and under‐ graduate advisors, increase the num‐ ber of course offerings, reduce class size, and allow the universities to implement strategies designed to increase student retention. Phoenix biomedical campus. As Arizona grows, so does its need for health professionals and bioscience innovation and discovery. In order to build capacity and meet future needs, the Executive Recommendation in‐ cludes $25 million for expanding the biomedical education and research programs at Northern Arizona Uni‐ versity (NAU), Arizona State Univer‐ sity (ASU) and the University of Ari‐ zona (UA). Programs benefiting from this funding are: • College of Medicine – Phoenix: $6 million to expand enrollment (UA) • Health Professions: $4 million to expand health professions pro‐ 33 grams in Flagstaff and statewide (NAU) macy degree at Phoenix campus (UA) • Biomedical Informatics: $2 mil‐ lion for increased teaching capac‐ ity (ASU) • Telemedicine Program: $1 million to expand the program to the Phoenix campus (UA). • College of Pharmacy: $1.5 mil‐ lion to establish a Doctor of Phar‐ • Capital Costs: $10.5 million for programming, conceptual, and 34 schematic design costs for the ABC 2 and Education buildings (UA and ASU)] The Budget Message HEALTH AND WELFARE Expanded Access to Health Care and Strengthen‐ ing Families Executive initiatives will make health insurance available to more Arizona children I n an environment in which Arizo‐ nans face a more slowly growing economy and rising health care costs, there is reason to worry that one’s medical needs will be neglected. Of particular concern are massive in‐ creases in private sector health insur‐ ance costs and declining percentages of employers offering health insur‐ ance for families. The Executive Budget Recom‐ mendation recognizes that something must be done. It is especially impor‐ tant to ensure that all Arizona chil‐ dren have access to the medical care they need when they need it. To help address this concern, the Executive Recommendation proposes a package of new initiatives to ensure that Ari‐ zonans receive the quality medical care and social services they deserve. CHILDRENS’ HEALTH INSURANCE All Arizona children must have access to health care. To that end, the Executive proposes expanding the KidsCare program in two ways: • • $6 million to establish an outreach effort to enroll 63,000 kids begin‐ ning in January 2008 who are cur‐ rently eligible for KidsCare but not participating, and to enroll 56,000 kids estimated to be currently eli‐ gible beginning in January 2008 for Title XIX but not participating. (Since the start of the enrollment is scheduled for January 1, 2008 it is anticipated that 40% of the eligible children for the KidsCare and Title XIX programs will be enrolled by the June 30, 2008). increase, from the current 200%, KidsCare eligibility to children in FY 2008 and FY 2009 Executive Budget families at 300% of the Federal Poverty Level (FPL); Regarding the second point, AHCCCS‐provided data from the Current Population Survey of the U.S. Census Bureau indicates that 26,000 Arizona children are part of families between 200% and 300% FPL. (For a family of four, that represents an income range of $40,000 to $60,000.) The Executive Recommendation for FY 2008 includes $6 million Gen‐ eral Fund, to be matched by $18.6 million in federal funds and member premiums, to help ensure that more Arizona children have access to af‐ fordable health insurance. order to produce better health out‐ comes. Child Safety and Permanency. Children services continue to be un‐ der‐funded in Arizona, exposing vulnerable children to abuse and neglect. Rather than remove children from homes, there is now a focus on strengthening families and educating parents. The Executive Recommenda‐ tion provides an additional $7 million to focus on strengthening family rela‐ tionships. Strengthening Families. Child welfare reform has made significant improvements in the few years in‐ cluding the following: • The number of children returned safely to their parents increased by almost 64%. • Permanent guardianships in‐ creased by 86%. • Finalized adoptions increased by more than 59%. • The number of available foster homes increased by about 50%, and the processing time for a completed application was cut in half. OTHER SERVICES FOR CHILDREN Children constitute one of soci‐ ety’s most defenseless populations, and the Executive Recommendation provides a variety of expanded ser‐ vices intended to ensure that every child can receive adequate care. Parents Developmental Evalua‐ tion. Both the American Academies of Pediatrics and its Arizona chapter recommend formal developmental screening at nine, 18 and 24 months of age. The Executive recommends $1.4 million General Fund, to be matched by $2.8 million in federal funds, for the Parents’ Evaluation of Develop‐ mental Status (PEDS) tool to be ad‐ ministered to all AHCCCS client chil‐ dren going in for well‐child checkups at those ages. The PEDS tool elicits and weighs parents’ concerns to help health care providers make informed treatment decisions. By screening very young children for behavioral and developmental problems, issues can be addressed as early as possible in Arizona Families First. Over 90% of families involved with CPS struggle with some sort of substance abuse. Arizona Families First, a nationally recognized program, reduces the burden shouldered by CPS workers by providing treatment and support services to needy families that might otherwise lose their children to foster care. This early intervention effort, which is a product of the DES/Department of Health Services Joint Substance Abuse Treatment 35 (JSAT) program, is designed to keep parents sober and clean and children in their homes. Arizona Families First also serves families that receive Tem‐ porary Assistance for Needy Families (TANF) and for which a substance abuse problem is a main barrier to finding employment. As part of H.B. 2554, also known as the “Meth Bill,” DES received a one‐time funding increase of $2 million to combat methamphetamine addiction. The Executive Recommendation seeks to make this funding permanent as the epidemic continues to grow. Adoption Services. Adoption is the preferred outcome for children whose natural parents are unable to care for them. Adoption provides a permanent placement for a child and is less costly to the State than tempo‐ rary out‐of‐home placements. The Executive Recommendation includes a $7.5 million General Fund increase to cover new caseload growth in FY 2008. The program is anticipated to provide maintenance payments to the adoptive parents of an average of 10,598 children each month. Permanent Guardianship. At times, adoption may not be possible for a child in the CPS system. In these instances, DES seeks to place the child in a permanent guardianship that, while not severing the parents’ legal rights, does provide a more perma‐ nent placement for the child. The Executive recommends $1.6 million from the General Fund to cover 20% caseload growth. Children’s Rehabilitative Ser‐ vices. Continuing a tradition that dates to 1927, the Children’s Rehabili‐ tative Services (CRS) program, admin‐ istered by the Department of Health Services (DHS) Office for Children with Special Health Care Needs, pro‐ vides specialty rehabilitative services to Arizona children who are afflicted with a crippling disorder, regardless of financial status. Services include medical treatment, rehabilitation, support services and case manage‐ ment. 36 To be eligible for services, the child or youth must be an Arizona resident under 21 years of age and have an identified physical disability, chronic illness, or medical condition that is potentially disabling. Services are provided through four contracted regional clinics in Phoenix, Tucson, Flagstaff and Yuma. Early referral is encouraged to produce optimum results. Anyone – including doctors, nurses, teachers, patients or friends – may refer a child to CRS. The Title XIX CRS Program, which is eligible for federal matching dollars, provides services under a monthly capitated rate basis. Title XIX CRS requires that capitation rates paid to CRS contractors are actuarially sound and developed in compliance with federal regulations. The Title XIX CRS General Fund increase recommended for FY 2008 will fund an expected 3.8% medical inflation increase and a 2.7% client growth rate for FY 2008. The program expects to provide ser‐ vices to 16,000 children in FY 2008. SERVICES FOR WOMEN Many Arizona women face medi‐ cal needs and a major unmet need for domestic violence shelters. The Execu‐ tive Recommendation addresses these concerns. Domestic violence. The Executive Recommendation includes $3.3 mil‐ lion from the General Fund to con‐ tinue to address the large unmet need for emergency shelter beds for domes‐ tic violence victims. Currently, ap‐ proximately 12,000 requests for shel‐ ter are denied in a 12‐month period. The Executive Recommendation will fund an additional 283 beds, which will shelter over 4,000 victims of domestic violence. This second phase of a four‐year initiative to eliminate the unmet need for emer‐ gency shelter addresses approxi‐ mately a third of the unmet need. Well Women HealthCheck. When diagnosed in the early stages, women with breast cancer have a 98% sur‐ vival rate. At current funding levels, the Well Women HealthCheck pro‐ gram can screen only 6% of eligible women for breast and cervical cancer. To help close this gap, the Executive recommends $250,000 to provide additional cancer screenings for up to 4,200 women. Human Papillomavirus. Two strains of human papillomavirus (HPV) cause 70% of cervical cancers worldwide. If a newly approved HPV vaccine is given prior to exposure to the virus, women are protected from HPV caused by the targeted types and therefore protected from developing cervical cancer. The Centers for Disease Control (CDC) recommends that all women below age 27 receive the vaccine. The Executive recommends $2.9 million from the General Fund, to be matched with $5.6 million in federal funds, to make the HPV vaccine available to all AHCCCS women clients in the 21 to 26 age group. DHS will provide vac‐ cine for the majority of the under‐21 population. Of the General Fund recommendation, $2.7 million is one‐ time funding to vaccinate the current AHCCCS population, and $183,800 is ongoing for newly eligible women every year. AHCCCS estimates that its cost for treating cervical cancer is $7 million per year. If 70% of those cancers were to be prevented, the State would save approximately $4.9 million in cancer treatment annually. SERVICES FOR SENIORS An aging population makes ser‐ vices for seniors more crucial. The Executive Recommendation seeks to build the infrastructure and services to support the growing number of aging Arizona constituents. Adult Dental Care. AHCCCS does not provide preventive dental services for enrolled adult members. This results in treatment only when condi‐ tions become severe enough to require expensive treatment in hospital emer‐ gency rooms. To address dental prob‐ lems before they reach this point, the Executive recommends $2 million from the General Fund and $3.3 mil‐ The Budget Message lion in county funds, to be matched with an estimated $10.5 million in federal funds, to provide dental ser‐ vices to all Arizona long‐term care services patients. The services will include basic di‐ agnostic (exams and x‐rays), preven‐ tive (dental cleanings), restorative (fillings), periodontal (treatment of gum disease) and prosthetic (dentures and partial dentures) services, plus oral surgery (extractions). Over the long term, savings resulting from better client health is expected to reduce capitation rates. Supports for Older Arizonans. Adult Services provides non‐medical support for the elderly population. DES proposes spending $2.7 million to expand the program in response to growing caseload demand. Eight local area agencies – two of which support tribal communities – will receive $2.2 million of that total to build the necessary infrastructure and provide independent living services to elderly Arizonans. Approximately $525,000 will be used to expand the Long Term Care Ombudsman Pro‐ gram. Grandparent Kinship Care. When parents cannot care for their children, grandparents are often a critical re‐ source. To ensure that family mem‐ bers raise children whenever possible, the Executive Recommendation seeks to make permanent a program that provides assistance to grandparents raising their grandchildren. Arizona Pioneers’ Home. Dis‐ abled miners and all Arizonans over the age of 75 who have lived in the state for at least 50 years are eligible to live in the Arizona Pioneers’ Home in Prescott. The Executive Recommenda‐ tion seeks to provide an additional 6 beds to expand the number of clients served by the Home as well as giving the Home the flexibility and the re‐ sources necessary to provide quality care for Arizona’s pioneers. Commodity Supplemental Food. Each month, the Arizona Commodity Supplemental Food Program provides 14,250 elderly, whose incomes are at FY 2008 and FY 2009 Executive Budget or below 130% of the FPL, with a basket of goods valued at $50. This program is funded entirely by federal funds and is operating at the federal cap. No new elderly can be served. The Executive recommends $1 million from the General Fund to expand the Arizona Commodity Sup‐ plemental Food Program beyond the federal cap and provide food baskets to an additional 3,750 elderly per month. RURAL ARIZONA Rural communities face the same demands for services as the urban centers but do not always have the resources found in densely populated areas. The Executive Recommenda‐ tion acknowledges this disparity and sets aside specific funding for rural areas. Medical Student Loan Program. In support of the statewide initiative relating to recruitment and retention of Arizona physicians, the Executive Recommendations provides full fund‐ ing for the Medical Student Loan Program. This program, overseen by the Medical Student Loan Board, encourages physicians to set up their medical practice in underserved areas or to meet the needs of underserved populations. In the Board’s history, few stu‐ dents have defaulted on their service requirement. In fact, 33 of the pro‐ gram participants are still practicing in eligible service areas, although they already fulfilled their obligation to the State, and 12 other physicians are serving their commitments. Methamphetamine epidemic. The Executive Recommendation provides support to the broad‐scale attack on methamphetamine production and addiction. The FY 2008 Executive Recommendation provides $2.5 mil‐ lion to DHS for the expansion of treatment options statewide. PUBLIC HEALTH SERVICES Public health services are targeted at a broad population to suppress epidemics and provide for an overall improvement to the quality of life for Arizona’s citizens. Vaccinations. Vaccinations are a crucial component of public health. The Institute of Medicine estimates that a dollar spent on vaccinations yields long‐term savings of up to $27. In FY 2008, the Executive Recom‐ mendation provides an additional $2.7 million for the purchase of vac‐ cines for children and underinsured adults. The funding will provide 360,000 additional doses of vaccines for children and 51,000 total doses of vaccines for adults. Community Health Centers. Acutely ill uninsured or underinsured persons have few treatment options available to them beyond the emer‐ gency room. Community Health Cen‐ ters (CHCs) provide an alternative to this most expensive form of health care. When patients are able to pay, CHCs collect fees on a sliding scale from patients who are between 100% and 200% of FPL. However, many CHCs are providing uncompensated care to patients in this category. For FY 2008, the Executive Recommenda‐ tion includes $1.5 million to fill this gap. HEALTH CARE Demand for health care for low‐ income individuals continues to grow nationwide, particularly in rapidly growing states such as Arizona. Hospice. Medicaid funds hospice services for long‐term care members and for acute clients up to age 20. However, hospice services provided by health plans for acute clients be‐ tween ages 21 and 65 are not reim‐ bursed to the health plans. Some plans do provide unreimbursed hospice services, while other plans choose to leave terminal patients in the hospital (in such cases, the plans receive com‐ pensation). However, this approach is more expensive for AHCCCS and difficult for clients than sending them to a hospice. The Executive recom‐ mends $1 million General Fund, to be matched with $2 million in federal 37 funds, to provide Medicaid‐eligible hospice services for all AHCCCS clients. AHCCCS. Like most other state governments, Arizona spends more on Medicaid, through the Arizona Health Care Cost Containment Sys‐ tem (AHCCCS), than on any other program except education. Over one million Arizonans – 18% of the state’s population – receive AHCCCS bene‐ fits, and, as the number of people depending on the State for health care grows, the State must address its competing responsibilities of provid‐ ing adequate services while contain‐ ing costs. AHCCCS enrollment is expected to climb by 1.8% over the fiscal year 2008. In addition to the projected enrollment increase, a capitation rate increase of 6% is anticipated for FY 2008 (the capitation rate is comprised of medical inflation, program changes, and utilization). For FY 2008, the Executive recommends an additional $66.9 million above the FY 2007 ap‐ propriation. The KidsCare Parents program provides health insurance to ap‐ proximately 14,000 parents of children enrolled in the KidsCare program. The program is legislated to end on June 30, 2007; consequently, the Ex‐ ecutive Recommendation provides $9.2 million General Fund to fund the KidsCare Parents program through FY 2008. The State will qualify to receive enhanced federal funds for these parents. The Executive recommends a total fund increase of $8.9 million, of which $3 million in General Fund is to be 38 matched with $5.9 million in federal funds, to expand Graduate Medical Education (GME) training opportuni‐ ties making a total of $44 million in FY 2008 available to support residency slots in Arizona Hospitals. This funding will allow Arizona hospitals to increase the number of residency slots by up to 95, based on Medicare Cost Reports per‐resident cost figures. This represents a 28% increase over the 343 medical resi‐ dents supported by state funds in FY 2007. Behavioral Health. Arizona’s pub‐ lic behavioral health system provides psychiatric treatment, rehabilitation, crisis intervention, in‐patient, residen‐ tial and prevention services to indi‐ viduals of all age groups. In November 2006, almost 96,000 children and adults were receiving services under the Title XIX behav‐ ioral health system. Twenty‐one per‐ cent of recipients were adults with a serious mental illness, i.e., emotional or behavioral functioning that is so impaired that it interferes with their capacity to remain in the community without supportive treatment. Steady medical inflation continues to drive increased costs. The Execu‐ tive Recommendation for capitation rate inflation for FY 2008 is based on the five‐year trend for each category, as follows: • 16% for children’s behavioral health, • 11% for general mental health and substance abuse services, and • 4% for seriously mentally ill indi‐ viduals. Further, the amount of federal medical assistance percentage (FMAP) will decrease as of October 2007, from 66.47% to 66.2%. As a consequence of inflation and the reduced FMAP, overall costs to the State for the Be‐ havioral Health program are projected to increase. The Executive Recom‐ mendation includes the additional General Fund dollars required to fund these trends. Title XIX Long Term Care. This population includes individuals with mental disabilities, cerebral palsy, autism and epilepsy. Funding for this program supports the Arizona Train‐ ing Program at Coolidge, smaller State‐operated homes, case manage‐ ment, home services, respite care, and medical services for the eligible popu‐ lation. All services provided are con‐ sidered entitlements. The Executive Recommendation includes $25.7 million to fund an estimated 5.4% caseload growth in the Title XIX developmentally disabled population and a 3% capitation rate increase. These funds will allow the State to provide services to develop‐ mentally disabled individuals, consis‐ tent with federal law. Developmental Disabilities Infla‐ tion. State‐only clients are currently receiving the same services as those that qualify for Title XIX funding. Providers of these services are reim‐ bursed a uniform amount, regardless of which population they serve. In order to avoid the creation of a dual‐ system, the Executive Recommenda‐ tion sets aside $990,000 to ensure capitation rates remain equal for both populations. ] The Budget Message ECONOMIC DEVELOPMENT Enhancing Arizona’s Innovation Capacity The Executive Budget Recommendation supports a new economic development strategy to ensure Arizona’s prominence in the broader economy A rizonans increasingly recog‐ nize the need for a bold, statewide vision for economic development, including strategies that solidify the state’s place at the core of science and technology. While in recent years the Governor and Legislature have initiated measures to enhance Arizona’s competitive capacity, a new eco‐ nomic development strategy is needed as a catalyst to ensure Ari‐ zona’s prominence in the broader economy. With the Department of Com‐ merce at the forefront, the Execu‐ tive is preparing measures to ener‐ gize Arizona’s economic develop‐ ment structure and is launching efforts for new collaborative align‐ ment of existing economic devel‐ opment programs and resources. In addition to addressing several organizational enhancements, the Executive Budget Recommendation provides funding for several key economic programs to support innovation sectors that are critical to the state’s long‐range vitality. Science Foundation Arizona ‐ Laws 2006, Chapter 334 created the Arizona 21st Century Initiative Fund, provided initial funding and charged the Commerce and Eco‐ nomic Development Commission to form a program designed to foster science, engineering and innova‐ tion. That is now known as the Science Foundation Arizona, a non‐ for profit corporation. The FY 2008 Executive recommendation ex‐ pands Arizona’s innovation capac‐ ity and includes $35 million to strengthen SFA to create and lead industries of the future. FY 2008 and FY 2009 Executive Budget Arizona must continue to com‐ pete in a rapidly changing global economy, fueled by innovation, research, advances in science and technology, and skilled creative workers. Foreign Direct Investment. The Department of Commerce has de‐ veloped a strategic initiative to capitalize on global economic de‐ velopment opportunities. Capitaliz‐ ing on those opportunities requires Arizona to invest in new global business attraction programs in key industries and markets. For FY 2008, the Executive rec‐ ommends $1.2 million to expand Arizona’s global efforts, strengthen foreign direct investment and at‐ tract non‐US based companies to locate Arizona. This recommenda‐ tion supports a new foreign direct investment (FDI) grant program to complement the State’s efforts in key overseas markets and targeted industries. This program will en‐ courage public and private partners to coordinate FDI activities with the Department, provide cooperative marketing dollars for new FDI programs, and leverage existing funds. New FDI‐focused programs will be launched in Canada, Ger‐ many and China, and current FDI programs in Japan, the United Kingdom and Mexico will be en‐ hanced. CEDC Fund. The recommenda‐ tion begins the process of restoring Arizona’s innovation investment fund. The Commerce and Economic Development Commission (CEDC) is the State of Arizona’s strategic economic investment and initiatives entity. Its mission is to manage and leverage financial resources that enhance economic development in the state. The CEDC Fund provides loans and grants to projects and busi‐ nesses that create, attract and retain jobs in Arizona. The Department of Commerce is at a competitive dis‐ advantage in recruiting new com‐ panies because, hampered by in‐ adequate funding, the CEDC is unable to fulfill its role as the State’s strategic “deal closing” agency. To address the funding issue, the Ex‐ ecutive Recommendation shifts responsibility for $1.3 million and 7.0 FTE positions from the CEDC Fund to the General Fund, to allow CEDC Fund resources to better support the CEDC’s mission. Funding for the CEDC’s finan‐ cial assistance programs is derived from two special instant lottery games conducted each fiscal year by the Lottery Commission. Cur‐ rent statutes require that no more than 21.5% of the revenues from those games be transferred to the CEDC Fund. The recommendation will help restore the integrity of the program and strengthen the State’s efforts for job creation and business investment. Growth Alliance. To start the process of alignment, the Executive recommends $1.2 million and 10.0 FTE positions for the Department of Commerce to develop, implement and lead the Arizona global com‐ petiveness innovation initiative and support the state ‘s ability to inno‐ vate and compete. The recommen‐ dation supports statewide, domes‐ tic and international efforts to accu‐ rately project the image of the De‐ 39 partment as a “Growth Alliance” for private‐public partnership in the areas of economic planning, inno‐ vation, community development, and infrastructure finance. The Growth Alliance will be comprised of diverse economic development expertise, with the charge to reach out, align and ex‐ pand technical and business re‐ sources for the benefit of communi‐ ties, investors and entrepreneurs. The Growth Alliance will also serve as a clearinghouse for best practices in INNOVATION, zoning and land use, real estate development, en‐ ergy planning, public involvement, infrastructure and other related areas. Tourism Promotion and Eco‐ nomic Development – The Execu‐ tive recommendation supports over $1.4 million during this biennium budget for marketing and tourism promotion activities. The recom‐ mended increase is consistent with the funding level approved by the voters in 2000 under Proposition 302. The increased funding will enable the State to take advantage of the growing global market and promote Arizona as a domestic and international travel and business destination, and will allow the State to compete for tourism‐related economic development expendi‐ tures and investments. Tax‐Based Incentives. Tax in‐ centive programs are targeted to support new capital investment, job creation and retention, research and development activities, skills train‐ ing, and specific industry develop‐ ment in promoting film production and protecting forest assets in Ari‐ zona. The Executive recommends 2.0 FTE positions and $148,000 in FY 2008 to enable the Department to implement and administer tax incentive programs enacted in the last two years relating to motion picture, healthy forest, solar and “angel” tax credits. Greater Arizona Development Authority. In addition to support‐ ing business development, the statewide economic strategy seeks to help Arizona communities iden‐ tify and develop plans to address their basic infrastructure invest‐ ments in order to compete for jobs and business investments. The Executive recommends $30 million in additional capitalization, spread over three fiscal years, to the Greater Arizona Development Authority (GADA) to address communities’ infrastructure needs. The recommended amount will enable local communities and tribal governments to finance public infrastructure projects, accelerate project development, and lower financing costs through the Author‐ ity’s technical and financial assis‐ tance. It is projected that a $30 mil‐ lion appropriation will provide an additional $900 million in bonding capacity. CEDC Annual Revenues vs. Appropriations Actual and projected, in millions of dollars 5 4 3 2 Revenues Expenditures 1 0 F Y 99 F Y 00 40 F Y 01 F Y 02 F Y 03 F Y 04 F Y 05* F Y 06* F Y 07* F Y 08* F Y 09* F Y 10* F Y 11* The Budget Message PROTECTION AND SAFETY Investing in Vigilance, Skill and Experience Preserving Arizonans’ safety in an era of explosive growth and burgeoning demand requires financial resources devoted to people and infrastructure P reventing crime, apprehending suspected criminals, convicting perpetrators, providing a secure envi‐ ronment for convicted criminals, and enhancing border safety are funda‐ mental components of the State’s responsibility to provide protection and safety for the law‐abiding public. In Arizona, those functions are primarily vested in five State agencies: the Department of Public Safety, the Department of Homeland Security, the Attorney General’s Office, the Department of Corrections, and the Department of Juvenile Corrections, with other key contributions coming from the Department of Environ‐ mental Quality and the Department of Agriculture. For all five agencies, fulfilling their missions are challeng‐ ing enough in normal times; however, getting the job done for the people of the nation’s most rapidly growing state and ensuring that capacity aligns with demand require a unique level of attention to financial and human resources and to necessary infrastruc‐ ture. PUBLIC SAFETY As Arizona’s population continues to grow at a healthy pace, so does the demand for public safety services. The Executive Recommendation provides funding to help public safety in the state keep pace with population and traffic. To meet this challenge the De‐ partment of Public Safety (DPS) must sharpen its recruiting focus and maximize the effectiveness of the officers in the field. In order to achieve this goal, the Executive Budget Rec‐ ommendation supports a three‐ pronged strategy: FY 2008 and FY 2009 Executive Budget • continue aggressive recruitment of quality candidates to fill previ‐ ously appropriated officer posi‐ tions; • separate tasks into specialized duties, and reassign to non‐police employees any tasks that do not require a sworn police officer, thus allowing officers to focus on criti‐ cal tasks that require their training and experience; and • provide the technology and sup‐ port necessary to help officers do their jobs. The Executive Budget Recom‐ mendation provides for the following related initiatives: • $7.5 million to increase officer pay, thus making DPS more com‐ petitive in the labor market (see “DPS Officer Salary Gaps,” at right); • $389,500 to hire background investigators and a polygraph ex‐ aminer, thus allowing DPS to ac‐ celerate its evaluation of potential recruits to a timeframe compara‐ ble to competing jurisdictions; • $2.1 million for civilian motorist assistance and detention officers, to free sworn officers to focus on proactive patrols of State high‐ ways and perform other functions that require their training and ex‐ perience; • $942,800 to hire eight civilian school bus inspectors and one ci‐ vilian mechanic, to free commer‐ cial vehicle enforcement bureau officers to focus on patrols and commercial vehicle inspections; • $2.2 million to complete a de‐ tailed design of the interoperable communications system, to make possible real‐time, interoperable communications among local, county, State, tribal and federal public safety entities in Arizona; and • $709,000 in FY 2008 and FY 2009 for a five‐year personal computer replacement cycle, to allow the Department to replace aging com‐ puters and increase efficiency. DPS Officer Salary Gaps Compared to Current Market Officer, minimum ...........................‐12.4% Officer, maximum...........................‐11.6% Sergeant, minimum ..........................‐6.8% Sergeant, maximum .......................‐10.4% Lieutenant ......................................‐13.7% Commander ...................................‐11.2% Assistant Chief ..............................‐12.4% HOMELAND SECURITY Laws 2006, Chapter 317 created the Department of Homeland Security as a State agency (previously the Office of Homeland Security existed by Executive order and was funded by federal grants.) The Executive recommends $486,300 to further solid‐ ify the management infrastructure of the new agency, including the posi‐ tions of Director, Deputy Director of Finance & Administration, Deputy Directory of Operations and Policy, and an administrative assistant. The recommended funding is designed to allow the Department to continue operations even if there are reductions in federal funding. Among the Department’s primary duties are to coordinate statewide homeland security efforts, implement the State Homeland Security Strategy, carry out the Governor’s Roadmap for 41 Homeland Security, and provide oversight for important homeland security projects. If federal funding declines, the need for a body to perform these statewide homeland security planning functions will continue with State funding. BORDER SECURITY Much has been accomplished in recent years to secure Arizona’s inter‐ national border. Thanks to the persis‐ tent efforts of Arizona’s State and federal elected officials, funding is now available for: • additional border patrol agents and training, • additional assistant U.S. Attor‐ neys, • National Guard units at the bor‐ der, • border radar and other technol‐ ogy initiatives, • unmanned aerial vehicles and helicopters, • additional Immigration and Cus‐ toms Enforcement detention beds, • joint immigration and border control operations among federal, State, local and tribal law en‐ forcement agencies, • additional immigration judges, attorneys, and support staff, and • additional border infrastructure projects, including border fences, vehicle barriers and infrared cam‐ eras. During federal fiscal year 2007, Arizona’s share of existing federal border security funding was ap‐ proximately $700 million. In federal fiscal years 2006 and 2007, that amount was increased by an esti‐ mated $600 million. The State has also been active in funding activities affecting and af‐ fected by illegal immigration and to enhance border security. State fund‐ ing in FY 2007 is roughly $200 million, for such priorities as auto theft en‐ forcement, ports‐of‐entry enforce‐ ment, and the incarceration of illegal 42 immigrants convicted of Arizona crimes. Considerable efforts by the Department of Public Safety near the border have included special attention by the High Intensity Drug Traffick‐ ing Center, auto theft enforcement, the Arizona Counter‐Terrorism In‐ formation Center, border liaison offi‐ cers, cross‐border training programs, and the Financial Crimes Unit. The Department also plans to utilize 55 mobile license plate readers in the near future, to allow a patrol officer to determine which nearby vehicles are listed by the Motor Vehicle Division as stolen or as a suspect vehicle in a crime. The combined efforts of State and federal funding provides about $1.5 billion to secure Arizona’s interna‐ tional border. For FY 2008, the Executive pro‐ poses additional resources for safe‐ guarding the border and the associ‐ ated affects of illegal immigration. To support the State’s continuing efforts to secure Arizona’s international border and reduce illegal immigra‐ tion, the Executive proposes four initiatives. Department of Public Safety: Border Security. The Executive is recommending $5 million for border security initiatives by the Department of Public Safety (DPS), which was appropriated $7 million in FY 2007 to fill 100 Gang and Immigration Intelli‐ gence Team Enforcement (GIITEM) positions. The Executive recommends an additional $5 million to fill the allocated but underfunded GIITEM positions. The Executive also recom‐ mends that DPS be permitted to util‐ ize the additional funding to hire either sworn officers or civilian intel‐ ligence analysts as determined by the Director. The recommended funding will allow the agency to hire sworn officers and border security intelli‐ gence analysts to staff the Arizona Counter‐Terrorism Information Cen‐ ter and a Border Auto Theft Informa‐ tion Center to facilitate communica‐ tion between Arizona and Mexican law enforcement. Department of Environmental Quality: Hazardous Waste. The De‐ partment of Environmental Quality (DEQ) reports that hazardous waste shipments entering Arizona through the Mexican border are not regularly inspected by the U.S. Customs for compliance with applicable environ‐ mental laws. There is no consistent and effective inspection program at Arizona ports of entry (POE) to re‐ view shipments of hazardous waste and other materials coming into the state through the POEs or to ensure that the cross‐border transportation and disposal of hazardous wastes and materials is performed in a manner that will protect Arizona’s environ‐ ment and citizens. Arizona has limited inspection presence for hazardous waste ship‐ ments entering the State. The Execu‐ tive Recommendation provides $271,300 for three inspectors to moni‐ tor cross‐boundary hazardous waste shipments from Mexico. The three positions consist of: • two Border Hazardous Waste Inspectors to perform inspections of hazardous waste crossing the international border at Douglas, Nogales and San Luis, and • a Solid Waste Emergency Readi‐ ness Coordinator to address with Arizona’s border communities unique trans‐boundary solid waste management and emer‐ gency preparedness needs. Department of Environmental Quality: Hazardous Air Emergency Response. The Executive Recommen‐ dation provides $245,300 in FY 2008 and $228,300 in FY 2009 for two new positions. The funding is recom‐ mended as a non‐lapsing appropria‐ tion to allow all unspent monies to be deposited in a reserve account that DEQ can use for emergencies and other environmental contingencies that have no designated funding source. DEQ receives no funding for the operation of the Hazardous Air Emergency Response unit, which monitors air quality and supports the The Budget Message ADEQ Emergency function, as re‐ quired by A.R.S. § 49‐108. The pro‐ gram utilizes a mobile air quality monitoring van to collect meteoro‐ logical and air quality information necessary to develop public health advisories when emissions from in‐ dustrial chemical releases, industrial fires and wild land fires threaten public health. Recent developments requiring more advanced and sophis‐ ticated response capabilities to sup‐ port Homeland Security needs have compounded the problem caused by lack of funding for the operation of the Hazardous Air Emergency Re‐ sponse. Department of Agriculture: Ports of Entry Inspection Program. A 2000 Auditor General performance review concluded that port inspections help the State prevent expensive pests from entering. The ports of entry along the California border also contain large amount of traffic from international border crossings. To the extent poten‐ tial eradication and health costs can be ameliorated by prevention, costs associated with port operations are a good investment for Arizona. Currently, the Arizona Depart‐ ment of Agriculture estimates that 100,000 regulated trucks pass through the State’s ports of entry without inspection. The Executive recom‐ mends 20 new positions to open and staff inspections at two port facilities on the California border, at I‐10 Ehrenberg and at Parker, as well as conduct round‐the‐clock inspections at Yuma. As a result of this initiative, pest interceptions are anticipated to increase from 12,185 in FY 2006 to 22,000 by FY 2009. LEGAL PROTECTION AND SERVICES If the Attorney General’s Office is the largest law firm in Arizona, with approximately 400 attorneys and 1,000 employees. The Attorney General’s Office investigates and prosecutes consumer fraud, white‐collar crime, organized crime, public corruption, drug, environmental violations and deprivation of civil rights. It also FY 2008 and FY 2009 Executive Budget provides legal advice to most State agencies. The Executive recommends pro‐ tecting the State’s interests and the legal interests of the public at large with the following recommendations for the Attorney General’s Office. Antitrust Enforcement. The Execu‐ tive Recommendation provides $262,900 to add an assistant Attorney General to increase Arizona’s partici‐ pation in multi‐state cases, investigate and prosecute more local cases, and recover money for the State. During the past two years, the antitrust unit has prosecuted cases that have dis‐ tributed $6 million to Arizona con‐ sumers and $2.5 million to the State. Tobacco Enforcement. The Executive recommends $429,100 to add profes‐ sional resources to the Attorney Gen‐ eral’s Tobacco Enforcement Unit to defend against cigarette manufactur‐ ers’ challenges. Since 1999, Arizona has received over $700 million in master settlement agreement (MSA) payments, including $92 million in FY 2006 dedicated to health care services for Arizona’s financially needy. How‐ ever, Arizona’s MSA payments could be in jeopardy if the State fails to legally protect its interests provided in the agreement. Criminal Prosecution of Elder Abuse. The Executive recommends $92,000 for the prosecution of elder‐abuse crimes. The recommendation provides two attorneys, one forensic accountant and one legal assistant in the elder abuse unit. In FY 2006, the Depart‐ ment of Economic Security substanti‐ ated 2,672 cases of abuse, neglect and financial exploitation involving vul‐ nerable adults. It is estimated that at least 12,724 instances of elder abuse occur in Arizona every single year, and over 10,000 go unreported by elderly victims who are living in silent fear. Post‐Conviction Appeals. The Execu‐ tive recommends $415,200 to handle post‐conviction appeals. In Maricopa County alone, more than 120 cases are pending that are being pursued as death penalty cases. In addition, the U.S. Supreme Court has prohibited the execution of mentally retarded offenders. Since this ruling, ten Ari‐ zona death row inmates have alleged that they are mentally retarded. These cases face time‐consuming and re‐ source‐intensive hearings, with analy‐ sis focusing on a case‐by‐case basis. As the percentage of capital cases in which the death penalty has been imposed under the new jury‐ sentencing statue has increased (from 25% to 60%), so has the number of appeals. That number will grow even more in the years to come, and the Attorney General’s Office must have the professional and financial re‐ sources to defend the position and interests of the people of Arizona. ARIZONA PRISONS The inmate population of the State prisons is growing very rapidly, both in absolute terms and as compared to its historical rates (see chart on next page). Much of the growth and the resulting strains on prison capacity can be attributed to a handful of key factors. Contributing factors. It is the cur‐ rent policy in Arizona’s most popu‐ lous county not to plea bargain with persons accused of certain serious crimes. This policy results in longer prison sentences. The Maricopa County Attorney’s Office is also ag‐ gressive in sending probation viola‐ tors to prison, and in adding previ‐ ously unused charges against proba‐ tion violators. For example, if a proba‐ tioner has a positive drug test, the probationer is charged with drug possession. Methamphetamine use. The explo‐ sive rise in the production and use of methamphetamine has prompted a large increase in convictions for drug possession and for drug sales and trafficking. Probation. Because a prison sen‐ tence is often shorter in duration than a probation sentence, and because of the presumed likelihood that a proba‐ tion violation will ultimately result in incarceration, some convicted felons 43 Monthly Average Increase in Prison Inmates 200 180 160 140 120 100 80 60 40 20 0 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07* 08** *Through November 2006 **Projected choose the brevity and certainty of a prison sentence over the less predict‐ able option of probation. Conse‐ quently, some individuals who oth‐ erwise would be on probation, instead are adding to the overcrowding of the State’s correctional facilities. Stricter sentencing. In November 2006, Arizona voters approved Propo‐ sition 301, which, among other provi‐ sions, requires three‐time violators, after two referrals for drug treatment, to serve prison time. This requirement will further stimulate the growth of an already burgeoning inmate popula‐ tion. No vacancy. Through November 2006, the average monthly growth rate in the prison population for the current fiscal year was 189, 89% more than the 100 per month anticipated in spring 2006 when the current appro‐ priations were enacted. It is no exaggeration to assert that the State prisons are full. To accom‐ modate the inmates, the Department of Corrections (ADC) relies on such short‐term solutions as lockup beds and triple bunking. At the end of November 2006, ADC had an inmate population of 35,811 – 4,600 more than the funded bed capacity of 31,211 – producing a bed deficit of nearly 15%. As this publication went to print, the De‐ partment was housing the surplus 44 inmates in 4,063 temporary beds and 1,732 lockup (special detention) beds. The need for additional prison beds has forced ADC to create more emergency beds by renovating old buildings, constructing new tent units, and double‐bunking more inmates in existing facilities. The number of temporary emergency beds is sched‐ uled to increase from 3,795 beds in July 2006 to 5,181 beds by April 2007. Expansion. Some long‐term relief will arrive in April 2008, when 3,000 permanent beds are scheduled to open. To manage the anticipated growth and the resulting strain on capacity in the meantime, the Execu‐ tive recommends contracting for an additional 2,000 provisional beds at whatever prison facilities are avail‐ able, whether in Arizona or in other Executive Bed Plan Department of Corrections 4/07: Add 1,386 temporary, emer‐ gency beds 7/07: Add 1,000 provisional beds 9/07: Add 1,000 provisional beds 4/08: Open 1,000 new permanent beds 7/08: Open 1,000 new permanent beds and begin evaluation for expansion of existing public prison sites 10/08: Open 1,000 new permanent beds states. Future prison growth also needs to be considered. With that in mind, the Executive recommends an imme‐ diate and thorough evaluation of the expansion potential in all of the State’s existing facilities. Staffing. Part of the difficulty of operating a rapidly growing prison system is maintaining an experienced workforce. As part of the Fiscal Year 2007 appropriation, starting pay for all entry‐level Correctional Officers was raised to a level that is generally competitive with ADC’s major recruit‐ ing rivals: Maricopa County, Pima County and Pinal County. Thanks to the pay increases, recruiting efforts are more successful and position vacancies are decreasing. However, the loss of experienced officers continues. In September 2006 the annualized loss rate among offi‐ cers was 19%; a year earlier, it was 20%. Particularly damaging is that officer departures are occurring at the most experienced levels. For example, the average tenure of captains leaving the Department is 19 years (the aver‐ age tenure of all ADC captains is 12 years). One of the main reasons for the loss of experienced officers is shown in the table at the top of the next page, which compares salaries for sergeants, lieutenants and captains at ADC and at Maricopa, Pima and Pinal counties. Clearly, State pay at the most experi‐ enced and valuable levels is strikingly below market. Compared to Maricopa County, the State is paying 38% less for sergeants, 63% less for lieutenants, and 83% less for captains. Similar disparities exist in comparisons with Pima and Pinal counties. The Executive Recommendation provides salary increases for each sergeant, lieutenant and captain, such that (a) the starting pay for each rank will be the mid‐point of the salary range of the immediately lower rank, (b) each officer receives a raise equal to the increase in starting pay for his or her rank, (c) officers whose current salaries are above the new salary The Budget Message JUVENILE FACILITIES Correction Officer Salary Gaps State vs. Selected Counties State Pay Maricopa County Pay State Gap Pinal County Pay State Gap Pima County Pay State Gap Starting Sergeant Lieutenant Captain 37,434 40,023 43,129 51,730 65,416 78,749 ‐38% ‐63% ‐83% 46,571 56,284 65,707 ‐24% ‐41% ‐52% 44,059 54,991 68,353 ‐18% ‐37% ‐58% Mid‐Range Sergeant Lieutenant Captain 46,956 50,230 54,627 57,782 71,136 86,767 ‐23% ‐42% ‐59% 54,059 65,915 76,253 ‐15% ‐31% ‐40% 48,216 58,604 80,290 ‐3% ‐17% ‐47% Maximum Sergeant Lieutenant Captain 56,478 60,437 66,125 63,814 76,835 94,786 ‐13% ‐27% ‐43% 64,314 76,856 96,709 ‐14% ‐27% ‐46% 52,372 62,217 92,226 7% ‐3% ‐39% range midpoint will not be adjusted, and (d) officers whose adjusted sala‐ ries will total more than the salary range midpoint will be raised to the midpoint. Financial issues. In addition to meeting the rapid growth of the in‐ mate population and retaining experi‐ enced officers, the financial require‐ ments of operating the State prison system demand attention. The Execu‐ tive Recommendation for FYs 2007 and 2008 provides inflationary ad‐ justments for health care and utility costs and funding to replace a small portion of the system’s worn‐out inmate transportation vehicles, van pool vehicles and other equipment. The Executive is also recommend‐ ing expanding the number of inmates treated for sex offenses and substance abuse, specifically methamphetamine. More than 4,000 of Arizona prison inmates were convicted of sex of‐ fenses, but ADC is able to provide remedial psychiatric treatment to only 565, less than 14%. The recommenda‐ tion is to expand treatment by 22% to accommodate 120 more inmates. As for treatment for substance abuse, the funding recommendation would increase the number of inmates re‐ ceiving treatment by 23%, from 795 to 975. Budget recommendation. In all respects, the cost of this rapid growth is painfully high. Accommodating the influx of new inmates will require an FY 2008 and FY 2009 Executive Budget additional $91.4 million through the end of FY 2008. Major components of the recommended funding include: The Department of Juvenile Cor‐ rections (DJC) delivers a valuable public safety service to Arizona by providing secure care, rehabilitation, treatment and education for some of Arizona’s most troubled youth. In welcome contrast to the grow‐ ing number of adult inmates in the ADC prison system, the size of the juvenile population at DJC’s secure care facilities has remained fairly level, and an anticipated increase, to 671, in the average daily population during FY 2007 has not occurred. Nevertheless, additional funding will be required in FY 2008 in order for DJC to fulfill its mission. Impor‐ tant components of the recommended funding include the following: • $43.4 million to open 2,000 provi‐ sional beds in FY 2008; • • $16.3 million to accommodate increased per diem rates for in‐ mates housed in private prisons; utility costs, which in one year have increased by 30% at DJC in‐ stitutions; • pay increases for more experi‐ enced officers (YCO IIIs, sergeants and lieutenants), to correct more than a decade of inadequate ad‐ justments that sometimes resulted in senior officers earning less than the officers they supervised; and • pay increases for entry‐level Youth Correction Officers ($887,700, or $1,222 per officer), to bring YCO compensation more in line with Maricopa and Pima counties and thus reduce the cur‐ rent 38% turnover rate. ] • $10.6 million to produce con‐ struction and operational cost es‐ timates related to bid preparation for 3,000 new prison beds;1 • $10.2 million to annualize the funding for 1,000 new beds at the Central Arizona Correctional Fa‐ cility, which opened in December 2006; • $5.6 million for temporary, emer‐ gency beds;2 • $3.3 million for food, clothing and some medical care for the addi‐ tional inmate population; and • $2 million to evaluate the potential for expansion of the State’s exist‐ ing prison sites. Entry‐Level Pay Youth Corrections Officers DJC ................................................ $29,958 Maricopa County ........................ $31,180 Pima County ................................ $33,700 The Department is allowed, for the first time, to bid against private vendors for the right to operate prison beds. The recommended funding for FY 2007 is $600,000; for FY 2008, $10 million. 2 The Department has reallocated part of its existing budget to add 1,115 temporary beds at nine locations: 200 beds at Douglas, 20 at Yuma, and 895 via double bunking at Eyman, Florence, Phoenix, Safford, Fort Grant, Apache, Douglas, Lewis and Yuma. 1 45 NATURAL RESOURCES A Commitment to Environmental Stewardship Effective, aggressive management of Arizona’s water, minerals, lands, parks and agricultural assets is a key to smarter, sustainable growth A rizona’s unique and enduring feature – its natural beauty – has fueled our seemingly permanent magnetism for tourism and growth. The state’s prosperity depends on our maintaining that beauty. Arizona citizens, community organizations, businesses, and government entities must provide more coordinated and responsible environmental steward‐ ship, as exemplified by the following Executive initiatives. Six agencies are the forefront of the State’s efforts to serve as faithful and effective stewards of the natural assets that have been entrusted to us: the Department of Water Resources, the Department of Agriculture, the Arizona Geological Survey, the State Land Department, the Department of Environmental Quality, and the State Parks Board. WATER Arizona owes its viability as a state to its access to and wise man‐ agement of water. To preserve our quality of life and ensure our future economic vitality, it is imperative that we place a high priority on effectively managing our water resources to ensure that they are available now and well into the future. Rural Water Infrastructure and Development. Historically, Arizona’s growth has radiated from the state’s urban hubs and gradually spread into the rural areas. Where growth has outpaced State and local govern‐ ments’ preparedness, there have been instances of drinking water degrada‐ tion and other environmental prob‐ lems, posing growing threats to the state’s economy and quality of life. 46 To address those threats, the Ex‐ ecutive proposes creation of the Ari‐ zona Water Supply Development Fund to provide financial assistance, through low‐interest loans and grants, for the planning and development of water supply systems and infrastruc‐ ture investment projects. The recommendation also calls for statutory changes to grant local gov‐ ernment the authority to plan for growth and development, including the ability to require an assured water supply. Water Protection Fund. The Water Protection Fund grant program is a vital source of conservation resources for our state. The Fund provides grants to public and private entities for conservation and restoration of rivers and streams as well as the fish and other wildlife that are dependent on those habitats. Water management functions are especially important at this time, as Arizona continues to suffer the effects of regional drought conditions. The June 2006 Drought Monitor Report, a collaborative effort by the Department of Water Resources (DWR) and repre‐ sentatives of the University of Ari‐ zona, National Weather Service, Salt River Project and other concerned entities, demonstrated that particu‐ larly vulnerable areas, such as the Little Colorado River habitats and San Pedro River, remain under severe drought conditions. The impact of the Water Protec‐ tion Fund grant program includes effective recharge programs, which have resulted in water being diverted into a basin for the purposes of perco‐ lating into underground aquifers. Other projects include riparian habitat creation. A 1997 grant helped the City of Tucson develop a new riparian habitat from partially treated waste‐ water in Lincoln Park. A.R.S. § 45‐2112 requires an an‐ nual appropriation of up to $5 million to protect Arizona rivers, streams, and wildlife in riparian habitats. Session law (most recently, Laws 2006, Chap‐ ter 349) has suspended this appropria‐ tion since FY 2004, and the Executive recommends $4 million from the General Fund for this grant program in FYs 2008 and 2009. For FY 2008, the Department of Water Resources ex‐ pects to receive at least $1 million from water banking fees. Combined with the Executive’s recommended General Fund amount of $4 million, the Water Protection Fund will have at least $5 million in FY 2008. Conservation and Drought Pro‐ grams. In 2003, Governor Napoli‐ tano’s Executive order established the Arizona Drought Task Force and commissioned it to develop the State’s first plan to deal with drought prepa‐ ration and water conservation. Spe‐ cifically, the task force was directed to develop a sustainable drought plan‐ ning process for Arizona to include: • monitoring drought and water supply conditions in the state and assessing their impacts; • assessing the vulnerability of key sectors, regions and population groups in the state and potential actions to mitigate those impacts; and • assisting stakeholders in preparing for and responding to drought impacts, including development of a statewide water conservation strategy and public awareness program. The Budget Message The Executive Recommendation for FY 2008 provides $500,000 to back‐ fill administrative positions in the DWR’s Conservation and Drought Office. This office implements new and innovative conservation strategies statewide. Water Rights Adjudication Sup‐ port. The DWR provides technical analysis and support to Arizona courts for water rights adjudication. For both FY 2008 and FY 2009, the Executive Recommendation includes a continuation of $500,000 as a special line item originally appropriated as one‐time funding for FY 2007. ENVIRONMENTAL QUALITY The mission of the Arizona De‐ partment of Environmental Quality (ADEQ) is to protect public health and the environment through compliance with air, water and land quality stan‐ dards. The Executive Budget Recom‐ mendation includes several compo‐ nents designed to protect the envi‐ ronment and public health: • a $15 million transfer to the Wa‐ ter Quality Assurance Revolving Fund (WQARF) to identify, assess and clean up groundwater con‐ tamination caused by the release of hazardous substances; • increased funding of $863,800 over the next two years to address permitting backlogs and workload increases in ADEQ’s Water Qual‐ ity Division. • an additional $542,600 for this biennium budget cycle to strengthen the State’s efforts to monitor cross‐boundary hazard‐ ous waste shipments entering the state at Douglas, Nogales and San Luis; • $473,600 in additional funding over the next two years for haz‐ ardous air emergency response; • additional funding to help protect the water quality of the Colorado River against a hexavalent chro‐ mium plume caused by Pacific Gas & Electric near Topock; FY 2008 and FY 2009 Executive Budget • more than $1 million in addi‐ tional funding to strengthen regu‐ lation and address permit applica‐ tion backlogs related to public wa‐ ter system wells, treatment plants, distribution systems, line exten‐ sions and other drinking water in‐ frastructure; • $300,400 to enhance the State’s Recycling Fund; and • an additional $426,600 for air quality compliance support, to help with the enforcement of Title V air permits and related viola‐ tions. STATE LAND The Land Department needs addi‐ tional resources to work with com‐ munities and plan for the appropriate management, sale and lease of State Trust lands, which will play a signifi‐ cant role in the way Arizona grows. The Executive proposes funding to help alleviate the factors associated with this problem. The Executive recommends nine FTE positions and $761,100 in FY 2008 to provide the Land Department with technical expertise needed to further enhance its revenue generation capa‐ bilities on behalf of the State Trust. The additional positions include ge‐ ologists, a water resource engineer, a hydrologist, a lease administrator, a billing auditor and a buyer. The ap‐ propriation also provides for addi‐ tional legal professionals to work on real estate and water matters that would increase the value of State Trust land and also actively prosecute entities who have adversely affected the Trust and its land. Other initiatives designed to en‐ hance the benefits that the State de‐ rives from State Trust land include: • modernizing and computerizing the Land Department’s documen‐ tation system (the Department has little to no electronic storage for its several million pages of docu‐ ments, which date back to 1910 and contain information relating to the Trust and its management and interaction since its inception); • strengthening the State’s ability to deal with trespassing on, and misuse of, State Trust land, includ‐ ing prosecution of a developer who is responsible for the destruc‐ tion of more than 270 acres, and enforcing the cleanup of a large sinkhole in northern Arizona that has become the dumping ground for approximately six tons of trash; • performing studies to identify and assess the safety of dams lo‐ cated on State Trust land and to assess the State’s liability associ‐ ated with dam safety; • strengthening the State’s ability to preserve its water rights on State Trust land; and • enhancing the Forestry Division’s ability to manage and address the problem of wild fires and to re‐ spond to all manner of natural and man‐made emergencies on a state‐ wide scale. Wildland fire remains a threat to Arizona’s landscape and its communi‐ ties. The Executive Budget includes resources to enhance the Forestry Division’s ability to manage and ad‐ dress the problem of wildlife and to respond to all manner of natural and man‐made emergencies on a state‐ wide scale. STATE PARKS Arizona’s State parks annually provide historical preservation, out‐ door recreation, and scenic beauty to over two million people, 44% of whom are visitors from outside Ari‐ zona. In a 2002 analysis, Northern Arizona University found that direct spending associated with State parks exceeds $126 million. The FY 2008 Executive Recom‐ mendation provides $1.5 million, plus $3 million for FY 2009, for parks’ operating expenses, which will allow the State Parks Board to use a like amount from the Enhancement Fund for deferred maintenance costs. With this recommendation, the State will achieve environmental compliance, 47 prevent deterioration of historical sites, and meet structural needs at parks such as roofing, foundation repair, and water system repairs. GAME AND FISH Stewardship of the state’s wildlife is a key aspect of natural resources management. The Executive Budget Recommendation provides a number of initiatives pertaining to the De‐ partment of Game and Fish. Equity compensation plan. The rec‐ ommendation includes $525,900 from the Game and Fish Fund and $118,400 from the Watercraft Licensing Fund to address salary inequities and reduce turnover among the professional staff. Watercraft OUI Reduction Program. Alcohol‐related accidents on the state’s waterways continue to be a major problem. In a typical year, about 41% of Arizona’s known boat‐ ing accident deaths are related to alcohol consumption. A.R.S. § 5‐311 established the Watercraft Operating Under the Influence (OUI) Reduction Program, and the Department contin‐ ues to improve its desired outcomes. The Executive recommends an addi‐ tional $657,000 in FY 2008 and $675,000 in FY 2009 for the program. The recommended amount will strengthen and enhance ongoing awareness and public education ac‐ tivities to support and complement all enforcements measures. Vehicle replacement. The Executive recommends $1 million for FY 2008 and FY 2009 to provide for the re‐ placement of field vehicles and to enable the Department to maintain its regular schedule for equipment re‐ placement. Information technology. The Execu‐ tive recommends $360,000 in FY 2008 and $260,000 in FY 2009 for informa‐ tion technology enhancements. The recommended funding includes: • $100,000 for development of accounting to meet new require‐ ments from federal regulations; • $30,000 for Internet connections for wildlife assignments; and 48 • $230,000 to replace servers and personal computers to maintain a three‐year replacement schedule. Shooting range development. The 1,679‐acre Ben Avery Shooting Range is the largest publicly operated recrea‐ tional and competitive shooting sports complex in the world. In September 2006, operational responsibility of the Clay Target Center shifted from a private entity to the Game and Fish Commission, requiring additional financial resources. The Executive Recommendation includes $500,000 in FY 2008 and FY 2009 for required funding. Urban fishing. The Urban Fishing Program is a unique partnership among the Department, municipali‐ ties, urban anglers, and fish suppliers to provide convenient and quality fishing recreation in urban cities. Higher production, the delivery of fish contracts, and the addition of new lakes to the program’s inventory have driven up operating costs. The Execu‐ tive Recommendation provides an additional $25,000 in FY 2008 and $37,000 in FY 2009 to meet increased costs and demand for services. Boating safety education. The Execu‐ tive recommends an increase of $175,000 in FY 2008 and FY 2009 to support the Department’s efforts in furthering public information and boating safety education. The recom‐ mended funding will build on the progress made in this program and will enhance outreach activities to inform the public on alcohol con‐ sumption and related unsafe water‐ craft operations. Radio communications. The Execu‐ tive recommends $250,000 in FY 2008 and FY 2009 for the purchase of radio towers in the lower and upper regions of the Colorado River. Establishing radio communication will enhance the Department’s field operations net‐ work and support the State’s en‐ forcement and monitoring with other entities. Lower Gila Wildlife Area. The Ex‐ ecutive recommends $75,000 in FY 2008 and FY 2009 to enhance the wild‐ life resources near the Lower Gila Wildlife Area. The Department plans to improve the area’s irrigation capa‐ bilities and increase the acreage of croplands planted for wildlife food crops. Target species would include small game such as white‐winged and mourning dove, quail and rabbits. Big game would include javelina and mule deer. Field operations equipment. The Ex‐ ecutive Recommendation includes $181,900 for equipment and operating resources. Included in the recommen‐ dation is $85,700 in FY 2008 to replace various office and other equipment, tools and machinery. The recom‐ mended funding supports the acquisi‐ tion of survey‐level global positioning system (GPS) equipment and all‐ terrain‐vehicle trailers. The recom‐ mendation also provides $96,200 for operating expenditures to provide additional resources to meet cost increases in various operating catego‐ ries. Watercraft cost transfer. Finally, the recommendation provides $25,000 in FY 2008 and $50,000 in FY 2009 to cover labor cost allocations and re‐ lated increases due to wider enforce‐ ment areas and salary adjustments approved by the Legislature. AGRICULTURE Despite the state’s trend toward urbanization, agriculture continues to be an essential part of the state’s economy, and agricultural issues are inseparable from the State’s efforts to preserve Arizona’s natural resources. Ports of Entry. Pest infestations, once entrenched, can be extremely difficult and costly to manage. For example, in 1999, eradicating red imported fire ants at Yuma’s Cibola High School cost $750,000. Texas A&M University estimates that fire ants cost the Texas economy $1.2 billion a year. In 2003, another notori‐ ous insect, the Mexican fruit fly, cost California an estimated $97 million, including $22 million in eradication costs. The Budget Message Arizona’s ports of entry are the first line of defense against dangerous and costly pest infestations. A 2000 Auditor General performance review concluded that port inspections help the State prevent expensive and haz‐ ardous pests from entering. To the extent potential eradication and health costs can be ameliorated by prevention, costs associated with port operations are a good investment for Arizona. Currently, the Arizona Depart‐ ment of Agriculture estimates that 100,000 regulated trucks pass through the State’s ports of entry without inspection. The Executive recom‐ mends 20 new positions and $851,300 to open and staff inspections at two port facilities on the California border, at I‐10 Ehrenberg and at Parker, as well as conduct round‐the‐clock in‐ spections at Yuma. As a result of this initiative, pest interceptions are an‐ ticipated to increase from 12,185 in FY 2006 to 22,000 by FY 2009. State Agricultural Laboratory. The Executive recommends funding and staff to meet the growing burden of testing at the State agricultural laboratory, including the replacement of obsolete testing equipment. FY 2008 and FY 2009 Executive Budget A microbiologist will help protect Arizona consumers from potentially dangerous bacteria, such as e‐coli. An entomologist will identify dangerous pests such as the red imported fire ant and handle increased volume from the ports‐of‐entry. In addition to these two agricul‐ ture initiatives, the Executive pro‐ poses increased funding for inspec‐ tion coverage of Arizona’s growing egg, dairy and beef cattle industries. MINERAL RESOURCES The Executive Budget Recom‐ mendation includes an emphasis on the State’s Mineral Resource Devel‐ opment Program. Increased funding will allow the Arizona Geological Survey to better provide technical support to State agencies, local gov‐ ernments and the general public on strategic mineral planning and natural resource issues. Advances in this area will include development of a system for interoperability among State min‐ eral resources and compile a central repository for all of the State’s mineral information. Local and State agencies (in par‐ ticular, the State Land Department) and the private sector increasingly rely on the Arizona Geological Survey for unbiased, accessible and definitive information on the environmental impacts of mining and on the location, nature and potential of mineral re‐ sources related to economic growth. Natural Hazards Response and Mitigation. The costs and risks to lives from catastrophic natural haz‐ ards can be greatly reduced through meeting State, county, and municipal agencies’ requests for identification and assessment of potential for flood‐ ing, debris flows, landslides, rockfalls, and expansive soils, and for providing technical advice to agencies that do not have geologic expertise in‐house. The Executive recommends funding to add an engineering geologist, who would assist State agencies and local governments in reviewing and pre‐ paring policy regarding mitigating natural hazards, and a geo‐technician to develop and publish guidelines for preparation of geologic/geotechnical reports from developers and help develop the statewide Hazards Bibli‐ ography database. 49 TRANSPORTATION A Fast Track for Highway Construction The Executive Budget Recommendation reflects the importance of building freeways and improving the State’s transportation infrastructure … ahead of schedule T he Arizona highway construction program continues to expand at the same time that demands to expe‐ dite project completion are at an all‐ time high. Despite clear evidence that re‐ gional and local governments in the metropolitan areas have made signifi‐ cant investments in plans, regulatory structures, and public facilities to mitigate sprawl, the extent to which development patterns have emerged still presents questions and continues to challenge our sustained develop‐ ment and quality of life. Transportation congestion and bottlenecks damage air quality, slow commerce, increase energy consump‐ tion and threaten our quality of life, depriving Arizona businesses and citizens of significant time and money. Arizonans want practical answers to these transportation chal‐ lenges and require that the answers be consistent with sound environmental planning. The State has an obligation to ensure that transportation is safe and efficient, and that our transporta‐ tion network connects each of us to vitally important aspects of our lives: work, education, family, friends, recreation, health and commerce. During the 2006 Legislative ses‐ sion, the Governor and Legislature approved the Statewide Transporta‐ tion Acceleration Needs (STAN), providing General Fund monies to help expedite highway construction. This is the first time such funding is being used on freeway construction. While this initiative is extremely help‐ ful and important, more financial support is required to maintain the momentum in placing highway im‐ provements on a faster track. 50 The Executive Budget Recom‐ mendation provides strategic and prudent levels of funding to support the State’s transportation system. BUDGET HIGHLIGHTS The FY 2008 Executive Budget in‐ creases funding for mission‐critical operating programs and the most challenging aspects of transportation relating to infrastructure maintenance, congestion, reliability and access. The Executive recommends a total operat‐ ing budget of $455.9 million and 4,742.0 FTE, an increase of, respec‐ tively, $16.9 million and 51.0 positions over FY 2007. The recommended funding will enable ADOT to: • $500 million in bond financing which creates more than $400 mil‐ lion in net new funds available to accelerate highway construction by expanding the HURF Bond ma‐ turity limit from 20 to 30 years. • carry out its $5.8 billion five‐year transportation facilities construc‐ tion program for Fiscal Year 2007 through Fiscal Year 2011, • accelerate freeway construction projects that have been approved pursuant to STAN (these projects are to be completed 14 years ahead of the original schedule); and • continue toward completion of the $3.2 billion Maricopa Regional Freeway System by the accelerated date of December 31, 2007. The primary sources of ADOT’s operating and construction budgets are the Federal Highway Trust Fund, State Highway User Revenue Fund (HURF), bond proceeds, and the Maricopa County Transportation Excise Tax, which is deposited into the Regional Area Revolving Fund (RARF). In FY 2008, the excise tax is expected to generate $418.7 million, an increase of 5.3% over FY 2007. Since the excise tax is applied only in Maricopa County, RARF monies are exclusively dedicated to the Maricopa Regional Transportation System. FY 2008 ADOT Financial Plan Total Program: $2.17 Billion In millions of dollars S O U R C E S HURF Federal Funds RARF STAN Bonds HELP Fund $683 516 227 154 591 3 31% 24% 11% 7% 27% 0.1% U S E S Capital Budget Debt Service Highways Maintenance MVD Administration Magazine $1,306 402 172 131 108 43 8 60% 18% 8% 6% 5% 2% 1% Regional Area Revolving Fund. In 1985, Maricopa County Voters approved Proposition 300 to establish a one‐half cent transportation excise (sales) tax for the construction of a regional freeway system within the county. The half‐cent sales tax was approved for a period of 20 years and ended on December 31, 2005. On November 2, 2004, Maricopa County’s voters approved Proposition 400 to extend the one‐half cent sales tax for another 20 years, through December 31, 2025. The sales tax ex‐ tension is used for freeway construc‐ tion; widening existing freeways and highways; improving the arterial The Budget Message street system, regional bus service and other special transportation services; and high capacity transit services such as light rail, bus rapid transit and express buses. The transportation excise tax revenues are deposited in the Mari‐ copa County Regional Area Road Fund (RARF), which is the principal source of funding for that county’s regional freeway system. The trans‐ portation excise tax is levied on busi‐ ness activities in Maricopa County, including retail sales, contracting, utilities, rental of real and personal property, restaurant and bar receipts, and other activities. ADOT adminis‐ ters the RARF for highway projects, while the Maricopa Association of Governments (MAG) oversees the arterial streets monies. The Valley Metro and Valley Metro Rail adminis‐ ter the Public Transportation Fund monies. Pima County Regional Transpor‐ tation Authority. In the May 16, 2006, special election, Pima County voters approved $2.1 billion regional trans‐ portation plan and a 20‐year, one‐half cent sales tax to finance it. These revenues will be collected and trans‐ ferred to a dedicated transportation fund managed by the Regional Trans‐ portation Authority. The first projects of the 20‐year, multi‐modal plan were started in fall 2006, and more are underway. While new urban freeways are not included in this plan, the fund‐ ing will provide $1.3 billion for road‐ way and safety improvement, $500 million for transit, and $200 million for environmental and economic vitality. The Regional Transportation Au‐ thority serves Pima County, Tucson, Marana, Oro Valley, Pascua Yaqui, Sahuarita, South Tucson and the To‐ hono O’odham Nation. Members of each jurisdiction and a representative of ADOT serve on the RTA board, which is charged with developing the 20‐year transportation plan that will include various modes of transporta‐ tion to connect people with work, school, shopping and entertainment. FY 2008 and FY 2009 Executive Budget Highway User Revenue Fund (HURF). The State of Arizona taxes motor fuels and collects a variety of fees relating to the registration and operation of motor vehicles. These collections include gasoline and use fuel taxes, motor carrier fees, vehicle license taxes, motor vehicle registra‐ tion fees, and other miscellaneous fees. The revenues are deposited in the Highway User Revenue Fund (HURF) and distributed to counties and municipalities and to the State Highway Fund, which is adminis‐ tered by ADOT. The taxes and fees represent the primary source of reve‐ nues available to the State for high‐ way construction, improvements and other related expenses. More than half (50.5%) of the mon‐ ies flowing into HURF are shared with cities and counties, while the balance remains with ADOT to sup‐ port statewide highway construction projects. In FY 2008, HURF is pro‐ jected to receive $1.5 billion, reflecting an increase of 4.3% over FY 2007. Statewide Transportation Accel‐ eration Needs (STAN). As was dis‐ cussed earlier, STAN provides Gen‐ eral Fund monies to help expedite highway construction. The list of projects recommended by the Mari‐ copa Association of Governments (MAG) and ADOT must receive final approval from the State Transporta‐ tion Board. Under the STAN program, ADOT and regional transportation entities will use more than $300 mil‐ lion to accelerate highway projects across the state, including $193 mil‐ lion in the MAG region. Projects on MAG’s list include new lanes in both directions of I‐17 north of Phoenix, between Carefree Highway (State Route 74) and Anthem Way, and to Interstate 10 between Sarival Road and Verrado Way in the West Valley. Construction of both projects would be accelerated by 14 years, starting in 2009 instead of 2023. During the 2007 Legislative ses‐ sion, serious cooperative efforts will be needed for additional financing measures to enable ADOT to acceler‐ ate highway construction projects and address local and statewide transpor‐ tation needs. Included in the Execu‐ tive proposal before the Legislature will be a statutory amendment to authorize the State Transportation Board to issue highway revenue bonds with maturity of up to 30 years (the current limit is 20 years). Several states have successfully implemented this measure, and Arizona should be among them. When approved, this expansion will enable the Transporta‐ tion Board to leverage HURF revenue and increase its ability to finance and accelerate additional highway con‐ struction. HIGHWAY CONSTRUCTION The State Transportation Board has approved a $5.8 billion highway construction program as part of the Five‐Year Transportation Facilities Construction Program for Fiscal Years 2007 through 2011. The statutory power to prioritize individual airport and highway projects is placed on the State Transportation Board, a seven‐ member panel appointed by the Gov‐ ernor and confirmed by the Legisla‐ ture. Members of the panel serve six‐ year terms and represent different regions of the state. The Board pre‐ sides over the establishment of priori‐ ties and oversees all highway con‐ tracts. Highway Program FYs 2007-2011 In millions of dollars MAG Regional Plan 3,243 55% System Improvements 1,325 22% 892 16% System Preservation System Management Total 378 $5,838 7% 100% The construction program covers highways and airports under the “priority programming” law (A.R.S. § 28‐6951), which sets guidelines that ADOT follows in prioritizing projects for the program. Included in the Highway Program are transportation corridors under both the national highway system and the statewide system. During the five‐year program period, the Maricopa County urban 51 freeway system will receive nearly $3.2 billion of the expected funds. The primary source of this program is the transportation excise tax assessed by voters in Maricopa County. Another portion of this program will be fi‐ nanced by 15% controlled access funds and federal funds dedicated to the MAG area. Funding Recommendations. The Executive Recommendation includes $750.9 million from the State Highway Fund in FY 2008 for highway con‐ struction and debt service. In accor‐ dance with statutes, the actual expen‐ ditures levels will continue to be de‐ termined and adjusted within the scope of the Five‐Year Highway Con‐ struction Program as approved by the State Transportation Board. The primary source of the MAG regional transportation program is the excise tax assessed in Maricopa County. Another portion of this pro‐ gram will be financed by 15% con‐ trolled access funds and federal funds dedicated to the MAG area. For FY 2008, the Executive rec‐ ommends $106.4 million for the con‐ struction of urban freeways, from the distribution formula for dedicated highway revenues. The current alloca‐ tion provides 75% to MAG and 25% to the Pima County Association of Gov‐ ernments (PAG). Engineering and Technical Staff Re‐ tention. The FY 2008 Executive Rec‐ ommendation places a strong focus on employee retention to preserve ADOT’s core competency and to meet its primary mission. The Recommen‐ dation provides $4.7 million to enable ADOT to (a) optimize resources and reduce consultant usage in areas re‐ lated to design, construction man‐ agement, and engineering; (b) shift 21.0 FTE positions from consultant allocations to in‐house services in the areas of bridge design, right‐of‐way plans, and environmental assessments and protection; and (c) adjust com‐ pensation for engineering and techni‐ cal personnel.3 3 This measure also aims to address a key finding in the State Auditor General’s July 2006 per- 52 Highway Maintenance and Safety. The FY 2008 Executive Recommenda‐ tion includes additional funding for highway maintenance and road safety, including: • $4.7 million and 11.0 FTE traffic signal technicians to help maintain the State’s transportation infra‐ structure, improve roadway con‐ ditions and ensure the safety of highway users; and • $4.9 million to accommodate cost increases of construction and maintenance materials (e.g., as‐ phalt, concrete, fuel, steel, deicing materials) that have forced ADOT to reduce critical maintenance ac‐ tivities and that, in turn, reduces the useful life of pavement, jeop‐ ardizes motorist safety, and in‐ creases the State’s liability. Growth Alignment at the Prescott Maintenance District. The recommen‐ dation includes $1.1 million from the State Highway Fund and 7.0 FTE positions to address growth and workload issues in the Prescott Main‐ tenance District, which includes Pay‐ son, Cordes Junction Wickenburg and Prescott. Due to growth and traffic increases, ADOT had to move staff positions from the main quarter to the Cordes Junction area. The average daily traffic volume has increased by 113% since 1990, leading to more accidents and freeway closures. The recommendation includes the neces‐ sary resources to allow for this align‐ ment and to ensure more timely highway maintenance and avoid road closures. suant to the National Airport Im‐ provement Act, are distributed by the Federal Aviation Administration to local airports. State funds come mainly from flight properly tax, lieu taxes on aircraft and aviation fuel taxes. Federal grant monies will finance $589 million of the program, while the State share is $73.9 million and local sponsors contribute another $31.3 million. State Share of the Airport Development Program In millions of dollars Commercial/Reliever Airports Public Airports Total Airport Program $56.2 17.7 $73.9 The Executive Recommendation provides $32.8 million from the State Aviation Fund for development and improvement of State, county and municipal airports as approved by the State Transportation Board. The Rec‐ ommendation also appropriates to ADOT all monies in the State Aviation Fund that are in excess of amounts determined in the General Appropria‐ tion Act and the Capital Outlay Act for airport planning and develop‐ ment. Monies in the State Aviation Fund consist of receipts from a flight property tax, aircraft lieu tax, and revenues from the operations of Grand Canyon Airport. ] AIRPORT DEVELOPMENT Funding for the Five‐Year Avia‐ tion Program totals $716.9 million, financed through a combination of federal, State and local fund sources. Federal monies are derived primarily from taxes on airline tickets and, pur‐ formance report, including the recommendation that ADOT transfer ongoing construction activities from consultants to in-house services and develop strategies to recruit and retain staff to help reduce the impact of employee turnover. The Budget Message STATE EMPLOYEES Recommended FTE Increases The net increase of 1,273.9 FTE positions is comprised of two components: technical changes to the appropriations base and newly funded positions T he Executive Budget is divided into one‐ and two‐year budget recommendations. One‐year recommendations are made for 17 selected agencies. In the following analysis of full‐time equivalent positions (FTE), the FY 2008 recom‐ mendation includes all State agencies. In contrast, the FY 2009 recommendation includes only those agencies that qualify for two‐year reviews. As reported in the FY 2007‐2008 budget detail that fol‐ lows, the net increase between the appropriated FTE levels in FY 2007 and the recommended FTE levels in FY 2008 is 1,222.9 FTE and is comprised of technical adjustments and newly received FTE: • • a net of 67.8 FTE through technical changes to the ap‐ propriation base, and a net increase of 1,155.1FTE resulting from newly funded or eliminated programs FY 2008 FTE TECHNICAL CHANGES Department of Economic Security............................................. 67.8 67.8 Child Support Staff FY 2008 NEW FTE POSITIONS Department of Administration .................................................. 24.0 12.0 Capital Police 6.0 Self‐Insurance Administration 4.0 Financial Data Warehousing 2.0 Remote Access System Development Department of Agriculture......................................................... 24.5 20.5 Agricultural Inspections at Arizona Ports of Entry 2.0 Egg Inspectors 2.0 State Agricultural Laboratory Quality Assurance Arizona State University ‐ Main Campus .............................. 265.0 248.2 Faculty and Support Staff 14.0 Biomedical Informatics Program 2.8 Faculty and Staff – Math and Science Teacher Initiative Arizona State University ‐ Polytechnic ..................................... 36.0 36.0 Faculty and Support Staff Arizona State University ‐ West Campus................................. 15.0 15.0 Faculty and Staff FY 2008 and FY 2009 Executive Budget Attorney General ........................................................................... 8.0 3.0 Tobacco Enforcement Staff 3.0 Post Conviction Appeals Staff 1.0 Attorney for Antitrust Enforcement 1.0 Attorney for the Prosecution of Elder Abuse Crimes Board of Behavioral Health Examiners ....................................... 4.0 2.0 Investigative Staff 2.0 Licensure Workload Staff Capital Post‐Conviction Public Defender Office........................ 7.0 3.0 Attorneys 3.0 Support Staff 1.0 Investigator State Board for Charter Schools ................................................... 3.0 3.0 Legal Secretaries Board of Executive Clemency....................................................... 1.0 1.0 Victim Researcher Department of Commerce .......................................................... 14.0 10.0 Economic Growth Alliance 2.0 Foreign Direct Investment Program 2.0 Tax Incentive Program Corporation Commission.............................................................. 3.0 1.0 Administrative Law Judge 1.0 Division Director 1.0 Attorney Criminal Justice Commission ....................................................... 1.0 1.0 Victim Compensation Restitution Specialist Department of Corrections ........................................................... 7.0 4.0 Methamphetamine‐Abuse Treatment Program Staff 3.0 Psychology Associates Commission for the Deaf and the Hard of Hearing .................. 1.0 1.0 Administrative Assistant Board of Dental Examiners........................................................... 1.0 1.0 Licensing Staff Department of Economic Security ........................................... 113.1 71.0 Unemployment Insurance Program 26.0 Title XIX Caseload Growth 10.4 Eligibility/ Case Management System Modernization 4.3 Document Management System Staff 1.0 Long Term Care Omnibudsman 0.4 Tri‐Agency Disaster Recovery Staff 53 Department of Education ............................................................ 5.0 3.0 Information Technology Staff 2.0 Continuing Teacher Education Staff Department of Environmental Quality..................................... 40.0 11.0 Surface Water Permitting 8.0 Aquifer Protection Permitting 6.0 Water Permit Review Staff 4.0 Hazardous Air Emergency Response 3.0 Border Hazardous Waste Inspectors 3.0 Air Quality Comliance Support Staff 3.0 Recycling and Solid Waste Compliance Staff 2.0 Colorado River Chromium‐6 Contamination Protection Department of Financial Institutions .......................................... 3.0 1.0 Payday Lender Supervision and Enforcement Staff 1.0 Finance Manager 1.0 Legal Secretary Department of Fire, Building and Life Safety ............................ 2.0 2.0 State Fire Marshalls Department of Gaming ................................................................. 3.0 1.0 Gaming Employees Certification Staff 1.0 Financial Inspector 1.0 Problem Gambling Program Manager Geological Survey.......................................................................... 2.0 1.0 Engineering Geologist 1.0 Mineral Resource Development Program Government Information Technology Agency.......................... 3.0 3.0 Statewide Information Security Office Annual Operations Arizona Health Care Cost Containment System ................... 132.2 34.5 Caseload Staffing Backfill 48.0 Healthcare Group Program 24.0 Children’s Health Insurance Initiative 10.6 DES Eligiliblity System 8.8 AZ 2‐1‐1 Phase 2 Call Centers 5.0 Temporary Medical Coverage Program Staff 1.3 Information Technology Staff Department of Health Services .................................................. 22.1 9.0 50:1 Phase 2 of the 3 Year Phase‐In Investigative Staff 5.0 Electronic Medical Records Information Technology Staff 4.0 Valley Fever Disease Surveillance Staff 2.0 Health Status and Vital Statistics Staff 1.6 Office of Medical Facilities Staff 0.5 Seniors Farmers’ Market Nutrition Program Staff Department of Homeland Security ............................................. 4.0 1.0 Director 1.0 Deputy Director of Finance and Administration 1.0 Deputy Director of Policy and Operations 1.0 Administrative Assistant Department of Housing ................................................................ 2.0 2.0 Compliance Officers Industrial Commission ................................................................. 9.0 3.0 Minimum Wage Enforcement Staff 3.0 Elevator Inspectors 2.0 Information Technolgy Staff 1.0 Accountant 54 Department of Juvenile Corrections....................................... (20.0) (20.0) Youth Population Adjustment Land Department......................................................................... 16.0 9.0 Lands Sales Support Staff 4.0 Forestry Support Staff 3.0 Information Technology Specialist Department of Mines and Mineral Resources............................ 2.0 2.0 Sunset Review Mandate Fulfillment Naturopathic Board of Medical Examiners ................................ 1.0 1.0 Investigator Northern Arizona University ..................................................... 89.0 64.0 Faculty and Staff 19.0 Health Programs Expansion Faculty and Staff 6.0 Faculty and Staff – Math and Science Teacher Initiative Board of Nursing ........................................................................... 1.0 1.0 Information Technolgy Staff Board of Ostepathic Examiners.................................................... 1.3 1.3 Investigative Staff Board of Pharmacy ........................................................................ 1.0 1.0 Investigative Staff Board of Physical Therapy Examiners ........................................ 1.0 1.0 Administrative Assistant Department of Public Safety....................................................... 52.0 13.0 Crime Lab Workload Growth 11.0 Criminal Justice Services Personnel 9.0 Civilian School Bus Inpectors 8.0 Motor Assist and Detention Officers 4.0 BackGround Investigators 4.0 Sex Offender Compliance Team Staff 2.0 Contact Tracking System Staff 1.0 Polygraph Examiner Department of Racing ................................................................... 1.0 1.0 Pari‐Mutuel Auditor Radiation Regulatory Agency ...................................................... 2.0 1.0 X‐Ray Compliance Inspector 1.0 Radioactive/Non‐Ionizing Compliance Inspector Department of Real Estate ............................................................ 7.0 3.0 Customer Service Representatives 3.0 Case Managers 1.0 Investigator Registrar of Contractors ................................................................ 6.0 5.0 Inpectors 1.0 Investigator State Retirement System................................................................ 7.0 3.0 Records Management 2.0 Member Advocate and Call Center 1.0 Budget Control Development Specialist 1.0 Portfolio Manager Department of Revenue .............................................................. 16.0 10.0 Application Developers 3.0 Lead Application Developers 3.0 Business Analysts The Budget Message Schools for the Deaf and Blind..................................................(10.1) (10.1) Preschool Teachers School Facilities Board .................................................................. 2.0 2.0 School Facilities Liasons State Boards Office ........................................................................ 1.0 1.0 Adminstrative Assistant Structural Pest Control Commission........................................... 5.0 3.0 Investigators 1.0 Information Technology Assistant 1.0 Administrative Assistant State Board of Technical Registration ......................................... 2.0 1.0 Customer Service Representative 1.0 Investigator FY 2009: FTE POSITIONS The FY 2009 Executive Budget provides for the addition of 1,264.0 FTE over FY 2007, or an additional 51.0 FTE over the FY 2008 budget for various State agency programs. The new FTE are distributed in the following manner: • a net reduction of (2.0) FTE through technical changes to the appropriation base, and • a net increase of 53.0 FTE resulting from newly funded or eliminated programs. FY 2009 FTE TECHNICAL CHANGES Navigable Stream Adjudication Commission.......................... (2.0) (2.0) Sunset Agency Department of Transportation ................................................... 49.0 21.0 Highway Construction Program Staff 11.0 Traffic Signal Technicians 7.0 Prescott District Staff Realignment 5.0 Commercial Drivers License Renewal Staff 3.0 Vehicle Inspection and Title Enforcement Staff 2.0 Aging Population Transportation Research Staff FY 2009 NEW FTE POSITIONS State Treasurer ............................................................................... 1.0 1.0 Compliance Officer Department of Housing ................................................................ 1.0 1.0 Compliance Officer University of Arizona ‐ Health Sciences Center ...................... 46.5 26.5 College of Medicine‐ Phoenix Program 11.0 College of Pharmacy‐ Phoenix Program 9.0 Faculty and Support Staff State Land Department ................................................................. 3.0 2.0 Document Processing and Security Staff 1.0 Information Technology Specialist University of Arizona ‐ Main Campus ..................................... 87.5 92.3 Faculty and Staff (7.6) Faculty and Support Staff 2.8 Faculty and Staff – Math and Science Teacher Initiative Department of Veterans’ Services ............................................. 30.0 19.0 Counselors for Veterans Federal Benefits 11.0 Veterans Administrative Support Department of Water Resources.................................................. 6.0 6.0 Conservation and Drought Program Staff Department of Financial Institutions........................................... 2.0 1.0 Legal Secretary 1.0 Mortgage Examiner Government Information Technology Agency .......................... 8.0 8.0 Statewide Information Security Office Annual Operations Geological Survey .......................................................................... 2.0 1.0 Geological Technician 1.0 Database Manager Department of Public Safety....................................................... 30.0 13.0 Crimelab Workload Growth 9.0 Motor Assist and Detention Officers 8.0 Criminal Justice Services Personnel Department of Real Estate ............................................................ 2.0 2.0 Customer Service Representatives Radiation Regulatory Agency ...................................................... 1.0 1.0 Radioactive/Non‐IonizingSource Monitoring State Retirement System................................................................ 3.0 3.0 Appeals Member Advocate Structural Pest Control Commission ........................................... 1.0 1.0 Fiscal Services Specialist FY 2008 and FY 2009 Executive Budget 55 LEGISLATIVE ACTION Proposed Legislative Changes The following changes are necessary to implement the Executive Budget recommendation ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM Allocation to Counties of Part of Part D Co‐payment Subsidy: A.R.S. § 11‐292(C). Of the $5,478,800 Executive Recommendation for dual eligible Medicare Part D co‐ payments, $1,185,100 is allocated to counties for their part of the long‐term care portion of the subsidy. The alloca‐ tion to the counties was determined based on the formula generated in A.R.S. §§ 11‐292(C)(1) through (C)(4). Lan‐ guage should be added to 11‐292(C) to make a specific provision that will allow Part D co‐pays to be allocated to the counties (as was done in the same section for claw‐ back last year). Graduate Medical Education Changes for New Fund‐ ing: A.R.S. § 36‐2903.01(H)(9). The Executive recom‐ mends an increase of $3 million General Fund, to be matched with $5.9 million in federal funds, to expand the Graduate Medical Education subsidy for hospitals to train residents. Language is needed to prioritize this new money. Physician Recruitment: A.R.S. §§ 20‐220(B)(2), 20‐845(E) and 20‐1065(E). The Executive recommends the creation of the Out‐of‐State Physician Recruitment Fund to sup‐ port the recruitment of out‐of‐state physicians. Revenue for this fund will consist of penalties collected in excess of $200,000 by the Department of Insurance for violations of timely payments and health care appeals laws. Outlier Payment Methodology: A.R.S. § 36‐ 2903.01(H)(10). The Executive recommends changing the current methodology by which hospitals are reimbursed for outliers, or extraordinary operating costs. For normal in‐patient charges, hospitals are paid based on seven tiers of service, including surgery, maternity, ICU, etc. How‐ ever, for hospital stays with operating costs that are sig‐ nificantly higher than the average, a different methodol‐ ogy has been applied: the cost‐to‐charge ratio (CCR). In this methodology, hospitals are reimbursed a set percent‐ age of their charges for their outliers. However, the ratio has not been recalculated since 1998. In that time, hospital charges have outpaced costs, which means that the CCRs should be much lower than they are. Changes to statute are necessary to allow AHCCCS to use the Medicare CCRs. come limit for KidsCare eligibility be expanded from 200% of the federal poverty level (FPL) to 300% FPL. Children’s Health Insurance Initiative: A.R.S. § 36‐ 2988(I). The Executive recommends eliminating the pro‐ hibition on AHCCCS and AHCCCS contractors from con‐ tracting for any KidsCare‐related functions with a school district. County Acute Care Contribution: Laws 2006, Chapter 331, Sections 18 (as modified by Laws 2006, Chapter 261) and 21. Two session laws pertain to county contribu‐ tions totaling $54.4 million for Acute Care services within AHCCCS. The Executive Recommendation continues the Acute Care county contribution at this level. KidsCare Parents Program Continuation: Laws 2006, Chapter 331, Section 32 and A.R.S. 36‐2984 (repealed by Laws 2002, Chapter 329, Section 15). This program is leg‐ islated to end June 30, 2007. The Executive Recommenda‐ tion reinstates KidsCare Parents health insurance cover‐ age in permanent law. Withholding State Shared Revenues for FY 2008: Laws 2006, Chapter 331, Section 20. The Executive recom‐ mends that the FY 2008 Transaction Privilege Tax with‐ holdings, authorized under the DSH payments program, be $84,652,400. ARIZONA STATE SCHOOLS FOR THE DEAF AND THE BLIND Excess Voucher Funds: General Appropriations Act Footnote. The Executive recommends that the General Appropriations Act footnote that allows the Arizona School for the Deaf and Blind to expend endowment and voucher earnings in excess of its appropriation for the Arizona Schools for the Deaf and Blind Fund be updated to reflect FY 2008 projected amounts. COMMISSION FOR POSTSECONDARY EDUCATION Postsecondary Education Grant Program: A.R.S. § 15‐ 1855. The Executive recommends that the Commission be allowed to expend up to 10% of monies appropriated for the Postsecondary Education Grant Program for costs in‐ curred in administering the program. Childrens Health Insurance Initiative: A.R.S. § 36‐ 2981(6). The Executive recommends that the upper in‐ 56 The Budget Message DEPARTMENT OF ADMINISTRATION Increase Pro Rata Assessment: A.R.S. § 41‐764(A). To raise additional revenue for human resources, the Execu‐ tive recommends an increase in the pro rata assessment on “System A” agencies from the current statutory rate of 1.04% to 1.07%. These funds would be deposited in the Department of Administration’s Personnel Division Fund, which supports human resources, including the certificate of participation payment for the Human Re‐ sources Information Solution payroll system. State Facility Lease Rates: A.R.S. § 41‐792.01(D). AS SESSION LAW: Notwithstanding any other law, in FY 2008, agencies occupying State‐owned buildings shall pay an office square footage rental rate of $19.50 and a storage square footage rental rate of $7.00. DEPARTMENT OF AGRICULTURE Agriculture Consultation and Training Program: A.R.S. § 3‐109.01. The Agriculture Consultation and Training Program was established by Laws 1994, Chapter 370, di‐ recting the Department to provide services advising regulated entities on interpretation of and compliance with rules and regulations under A.R.S. Title III. The Ex‐ ecutive recommends adding language to A.R.S. § 3‐109.01 to allow the Department to charge fees, as determined by the Director, for services of the program. Fees should be deposited into the appropriated Agriculture Consultation and Training Fund established by A.R.S. § 5‐113(J). With this amendment, the Department will be able to maintain and enhance the level of services provided and minimize reliance on appropriations from the State General Fund. DEPARTMENT OF EDUCATION Teacher Certification Fund: A.R.S. § 15‐531. The Execu‐ tive proposes that the Teacher Certification Fund be es‐ tablished permanently in statute to avoid end‐of‐ year fund reconciliation issues that are caused by the Fund’s status as a sub‐account of the General Fund. Desegregation “Soft Cap” Extension FY 2007: Session Law. The Executive recommends extending into FY 2008 the desegregation “soft cap,” which allows school dis‐ tricts to increase their desegregation budgets pursuant to increased enrollment and inflation. Convert Current Testing System: New Session Law. The Executive Recommendation includes directing the State Board of Education to begin converting all current state‐ wide testing to (a) computer‐based rather than paper tests and (b) end‐of‐course testing. Failing Schools Tutoring Fund: A.R.S. § 15‐241. The Ex‐ ecutive Recommendation includes expanding the types of students eligible to receive a certificate of supplemen‐ tal instruction from the Failing Schools Tutoring Fund to FY 2008 and FY 2009 Executive Budget include those students in grades eight through 12 who are in danger of failing math or science courses and at risk of dropping out. The recommendation would allow the Department of Education to use up to $150,000 per year for administration and direct the State Board of Edu‐ cation to examine the Fund’s administration and make recommendations to improve access and delivery of ser‐ vices to all eligible students. Arizona Scholarships for Students with Disabilities: A.R.S. § 15‐891.06. The Executive recommends that the Department of Education be allowed to use up to $150,000 per year for costs related to administering the scholarship program. Increase Age of Required Attendance: A.R.S. § 15‐802. The Executive recommends increasing the required age of school attendance from 16 to 17. Math and Science Initiative: New Session Law. The Ex‐ ecutive recommends that the State Board of Education be directed to distribute grants to establish innovative math and science programs and academies, provide assistance for existing teachers to obtain a math or science certificate endorsement, and provide additional base pay for math and science teachers in order to improve math and sci‐ ence literacy in K‐12. Minimum Teacher Salary: New Statute. The Executive recommends establishing a statewide minimum base sal‐ ary of $33,000 per year for teachers. Of the amount rec‐ ommended, any additional remaining funds not used to establish a $33,000 base salary shall be distributed on a per teacher basis to those at or above the minimum sal‐ ary. Performance Pay and Professional Development, Tech‐ nical Assistance: New Session Law. The Executive rec‐ ommends that the State Board of Education be directed to design a statewide system for continuing teacher educa‐ tion and performance pay. AzREADS Performance Audit: New Session Law. The Executive recommends that the State Board of Edu‐ cation be directed to conduct a performance audit on the progress and effectiveness of the AzREADS program. DEPARTMENT OF HOUSING Establish Permanent Fund for Housing Finance Author‐ ity: A.R.S. § 41‐3905. The Arizona Housing Finance Au‐ thority, under the Department of Housing, would be granted its own fund for the collection of interest income. Under A.R.S. § 41‐3905 (“Costs of operation and admini‐ stration of authority”), the Arizona Housing Finance Au‐ thority is charged with covering “all costs and expenses of the authority … from bond proceeds or other monies of the Authority.” This same area of statute did not estab‐ lish a fund or allow the Finance Authority to receive the 57 interest from the monies it collects and administers. Cur‐ rently, the money for the Finance Authority is a separate ISA account administered by the Department of Housing, but interest income reverts back into the General Fund account. DEPARTMENT OF PUBLIC SAFETY Crime Laboratory Funding: A.R.S. §§ 41‐2401(D)(11) and 41‐2415 (C). This recommendation continues the policy from previous years of redirecting to the Crime Labora‐ tory Assessment Fund the 9% Criminal Justice Enhance‐ ment Fund (CJEF) distribution that would otherwise be distributed to the General Fund. This proposal will allow for continued full funding of the Department of Public Safety crime lab system. Highway User Revenue Fund (HURF)/State Highway Fund DPS Expenditure Limits: A.R.S. §§ 28‐6537 and 28‐ 6993. The Executive recommends notwithstanding the provisions of A.R.S. §§ 28‐6537 and 28‐6993(B) or repeal‐ ing those sections of law to permit the Department of Public Safety to exceed the expenditure limits on High‐ way Fund monies to the Department stipulated in these sections. This change is necessary in FY 2008 to imple‐ ment the Executive Recommendation for the Department of Public Safety. DEPARTMENT OF REAL ESTATE Fee Recovery: A.R.S. § 32‐2103(B). The Executive rec‐ ommends continuing the provisions of Laws 2005, Chap‐ ter 299 notwithstanding A.R.S. § 32‐2103(B), which pre‐ vents the Real Estate Commissioner from revising fees in FY 2008 and FY 2009 for the purposes of meeting the re‐ quirement to recover at least 95% but no more than 110% of the Real Estate Department’s appropriated budget. DEPARTMENT OF WATER RESOURCES Water Protection Fund: A.R.S. § 45‐2112. The Executive recommends notwithstanding A.R.S. § 45‐2112 to provide that the annual appropriation from the General Fund to the Water Protection Fund for FY 2008 and FY 2009 shall be specified in the General Appropriation Act. GOVERNMENT INFORMATION TECHNOLOGY AGENCY Statewide Information Security and Privacy Office: A.R.S. § 41‐3507. The Statewide Information Security and Privacy Office would be established in the Government Information Technology Agency. It would serve as the strategic planning, facilitation, and coordination office for information technology security. Individual agencies would continue to maintain operational responsibility for their information technology security. The Statewide In‐ 58 formation Security and Privacy Office would develop, implement, maintain and ensure each agency’s compli‐ ance. PARKS BOARD Off‐Highway Vehicle Recreation Fund; Use: A.R.S. § 28‐ 1176. Notwithstanding A.R.S. § 28‐1176, the State Parks Board may spend up to $692,100 from the State Parks Board portion of the Off‐Highway Vehicle Recreation Fund in Fiscal Years 2006 and 2007 for parks operating expenses. State Parks Enhancement Fund; Use: A.R.S. § 41‐511.11. Notwithstanding A.R.S. § 41‐511.11 or any other law, all monies are available for either (a) operating of State parks in Fiscal Years 2006 and 2007 as appropriated by the Leg‐ islature in the General Appropriations Act or (b) capital needs, as determined by the Arizona State Parks Board with the prior approval of the Joint Committee on Capital Review, to acquire and develop real property and im‐ provements as State parks consistent with the purposes and objectives prescribed in A.R.S. § 41‐511.03. SCHOOL FACILITIES BOARD New Construction Lease‐to‐Own Authority: A.R.S. § 15‐ 2006. For FY 2008, the Executive recommends an addi‐ tional $207.8 million in lease‐to‐own authority for the School Facilities Board for new school construction. As current statute prohibits the School Facilities Board from entering into any lease‐to‐own transactions after May 15, 2006, and sets a maximum of $200 million annually for these transactions, a notwithstanding provision is needed to allow for the authority. Kindergarten as Full Average Daily Membership (ADM) for New Construction Purposes: A.R.S. § 15‐ 2011. For new construction purposes, the School Facilities Board counts kindergarten students as 1/2 ADM. As Vol‐ untary Full‐Day Kindergarten expands to all school dis‐ tricts, kindergarten students must be counted as full ADM in all school funding formulas, including new con‐ struction. This will allow districts to develop facilities able to accommodate full‐day kindergarten. Energy Efficiency Expenditures for New Construction: A.R.S. § 15‐2041. The Executive Recommendation in‐ cludes allowing each school awarded an additional 5% above the new construction formula funding that may only be used to purchase Leadership in Energy Efficient Design (LEED) required or other Board‐approved energy and environmental design items. The Budget Message ELECTED OFFICIALS’ SALARIES I n 1970, the Legislature established the Commission on Salaries for Elective State Officers. The Commission is required to conduct a biennial salary review and make rec‐ ommendations to the Governor regarding salaries for elected State officers, justices, judges of courts of record, the clerks of the Superior Court and others. The Commission makes recommendations during even‐ numbered years. After receiving the recommendations, the Governor is required to include in the next budget transmit‐ ted to the Legislature the Governor’s recommendations for exact rates of pay. Elective State officers have not received a salary increase since 1999, with the following exceptions: • • • In 2001, judges received a salary increase of approxi‐ mately 6.5%. They are scheduled for another increase in 2007. Pima counties received a 13% salary increase, from $73,000 to 79,500. That year the Clerks of the Court in the other counties also received a 13% salary increase, from $50,000 to %56,500. As the table below indicates, salaries for Arizona elected officials rank among the lowest in the nation. Office Governor Secretary of State Attorney General Treasurer Supt. of Public Instruction Corporation Commission Rank 37 41 37 43 45 38 Arizona judges’ compensation is more competitive: Also in 2001, Corporation Commission members re‐ ceived a 9% salary increase. In 2003, the Clerks of the Court in both Maricopa and Judges Salary $95,000 $70,000 $90,000 $70,000 $85,000 $79,500 Salary Effective January 1, 2007 Chief Justice Supreme Court Justices Court of Appeals Judges Superior Court Judges Commission Proposed Salary $129,500 $126,525 $123,900 $120,750 22 20 16 12 Commission Proposed Effective Date Supreme Court, Chief Justice 129,150 169,600 January 1, 2009 Supreme Court Justices 126,525 164,300 January 1, 2009 Appellate Court Judges 123,900 159,000 January 1, 2009 Superior Court Judges 120,750 153,700 January 1, 2009 Current Salary Commission Proposed Salary Commission Proposed Effective Date Governor 95,000 169,600 January 1, 2011 Secretary of State 70,000 116,600 January 1, 2011 Attorney General 90,000 143,100 January 1, 2011 State Treasurer 70,000 111,300 January 1, 2011 Superintendent 85,000 132,500 January 1, 2011 Mine Inspector 50,000 79,500 January 1, 2011 Clerks of the Court: Maricopa & Pima 67,800 106,000 January 1, 2011 Clerks of the Court: Other Counties 56,500 84,800 January 1, 2011 Corporation Commissioners 79,500 100,700 January 1, 2009 Elected Officials FY 2008 and FY 2009 Executive Budget 59 Capital Outlay CAPITAL OUTLAY Revitalization and Infrastructure Development T he Capital Outlay Budget provides funding from the General Fund and other appropriated funds for two main categories of projects: Building Renewal and New Construction. Funding for capital projects is typically made through the Capital Outlay Bill, but it may also be approved through other Legislative enactments. The Capital Budget may also include recommendations for advanced appropria‐ tions. For the purposes of capital planning and management, State Government is divided into three building systems: • the Arizona Department of Administration (ADOA) Building System, • the Arizona Department of Transportation (ADOT) Building System, and • the Arizona Board of Regents (ABOR) Building Sys‐ tem. The ADOA Building System contains 2,973 structures and comprises all State buildings except for the Department of Transportation (ADOT) and the Board of Regents, which oversees the three State universities. The FY 2008 requests for New Construction capital from State agencies within the ADOA Building System exceeded $331.1 million, while the Building Renewal requests was estimated at $80.1 million. ADOT requested $70.2 million for New Construction and $7.9 million for Building Re‐ newal. FY 2008 CAPITAL PROJECT REQUESTS, BY AGENCY NEW CONSTRUCTION BUILDING RENEWAL Department of Administration $23,637,500 $9,882,800 Arizona State Courts Building 2,545,000 930,000 126,523,200 60,403,500 AGENCY Department of Corrections Department of Economic Security 9,363,500 1,263,500 Dept. of Emerg. & Military Affairs 65,106,300 2,694,600 Department of Health Services 38,532,400 531,400 2,400,000 430,800 11,755,000 2,000,000 Department Game & Fish Dept. of Juvenile Corrections Arizona Schools for Deaf & Blind State Parks Department 1,804,000 500,000 16,750,000 250,000 500,000 195,000 Pioneers Home Department of Public Safety 32,345,000 999,200 Department of Transportation 70,160,400 7,895,500 $401,422,300 $87,976,300 General Fund 312,111,900 79,363,800 Other Funds 89,310,400 8,612,500 Total Needs ‐ Request FY 2008 and FY 2009 Executive Budget ADOA BUILDING SYSTEM NEW CONSTRUCTION The Executive recommends $14.9 million in FY 2008 for New Construction projects. GENERAL FUND Department of Corrections. The Executive recommends an annual commitment of $5.2 million for Phase II of an eight‐year replacement schedule designed to replace cell doors and locks at State prisons. The project’s magnitude and the complexity of relocating inmates during construc‐ tion make it impossible to carry out the project without phasing the work. Funding to address these public safety needs has been requested in several preceding budget cy‐ cles. Deferring support for this project will continue to com‐ promise security through the prison system and increase liability and personal risks to officers and other personnel. Additionally, the cost to maintain the useful life of the buildings is increasing, which forces the Department to face broken and non‐functioning components on an emergency basis rather than through system replacement. This ap‐ proach is disruptive to management and leads to higher operating costs and creates inefficient systems. Tucson Office Complex. The Executive Recommenda‐ tion includes $1.5 million for mold abatement, rehabilitation and majors repairs to address water damage at the Tucson Office Complex. After discovering that water has been leak‐ ing into the atrium of the building at 400 W. Congress, Risk Management inspected the damage and found mold in the building. ADOA has contracted with an architect to deter‐ mine the extent of the problem throughout the three‐ building complex and to recommend a course of action. Department of Juvenile Corrections. The Executive rec‐ ommends $885,000 to replace air‐cooling and electrical sys‐ tems at DJC’s Black Canyon housing unit. These facilities have evaporative cooling systems that are deteriorating and beyond their life expectancy. The evaporative cooling units cannot adequately cool the housing. The humidity levels and temperature create health concerns for residents who are on medication or are pregnant. LEASE PURCHASE FINANCE The Executive recommends $7.4 million for FY 2008 debt service payments on $79 million in new 15‐year Certificates of Participation (COP) for replacement of the Forensic Unit at the Arizona State Hospital, construction of water and 61 sewage treatment plants, and design and implementation of a Centennial Mall Corridor, including renovation of the underutilized Arizona State Laboratory. Department of Health Services. The current Arizona State Hospital (ASH) wing, designated as the Forensic Unit, is housed in a 50‐year old building that contains asbestos, which provides an unhealthy and dangerous environment for patients and medical staff. Due to the age and condition of the current structure, it is not cost‐effective to renovate the building as a forensic unit that would meet security and health standards. Forensic patients require treatment and rehabilitation as well as the equivalent of Level 5 security as defined by the Department of Corrections. The Executive recommends funding of approximately $32.2 million for demolition and construction of a new Forensic Unit at ASH to provide functional and secured facility for forensic pa‐ tients. Department of Corrections. The Recommendation in‐ cludes $6.8 million to construct water and sewage treatment plants and water storage facilities at the Tucson, Lewis, Winslow/Apache, and Douglas prison complexes. The un‐ treated groundwater is deteriorating pipes, water heaters, evaporative coolers and other system components. The cur‐ rent plant is outdated and non‐compliant with environ‐ mental standards and constitutes a health risk to persons inside and outside of the prison. This situation presents a substantial liability to the State and continues to pose a pub‐ lic health risk. Department of Administration, Capitol Mall Commis‐ sion. The Executive recommends $40 million to begin im‐ plementing core components identified in the Capital Mall Centennial Plan, including the renovation and moderniza‐ tion of the old State health laboratory that is presently not fully utilized. Additionally, funding is recommended to design and develop the core area of the Capitol Mall to align it with Arizona’s history and its vision for the future. This initiative reflects efforts from various public and private entities. As envisioned in the Plan, the Capitol Mall will features a series of sustainable connective infrastructures that make public spaces and services more accessible and facilitate more effective governance. OTHER FUNDS Game and Fish Department. The Executive recom‐ mends $2.1 million from other funds in FY 2008 for Game and Fish Department projects. This amount includes $1.6 million from the Capital Improvement Fund, $237,000 from the Game and Fish Fund, and $275,000 from the Watercraft Licensing Fund. Flagstaff Regional Office Remodel and Expansion. The rec‐ ommendation includes $1.1 million to develop approxi‐ mately 1,800 square feet of office space and file storage to alleviate space concerns in the Regional Office. The available space will be configured to create adequate work environ‐ ment and provide suitable space for activities and events. 62 New Construction Prison Cell Doors and Locks Black Canyon School Housing Units Mold Abatement, Tucson Office Lease Purchase Capitol Mall Centennial Plan Prison Water/Sewage Treatment Plants Arizona State Hospital: Forensic Unit Building Renewal DOA - Statewide Projects Agency-Specific Cost $5,200,000 Source General Fund $885,000 General Fund $1,500,000 General Fund $40,000,000 $6,800,000 $32,200,000 Cost $14,310,600 $5,435,000 2,166,000 General COP: $7.4 million annually to make payments related to $79 million COP financing Source General Fund COSF Other Funds Robin Butte Levee Repair and Ditch Conversion. The rec‐ ommendation includes $228,000 to repair the levee along the south perimeter of the Robbins Butte Wildlife Area, which was damaged by a flood in 2003. Benefits include a more resilient armoring of the entire structure, providing prop‐ erly engineered and long‐term protection from the larger flow events in the adjoining wash. Of this recommended amount, $53,000 will be allocated to replace a ditch, in the eastern portion of Robbins Butte, with a pipeline system. Shooting Range Access Improvements. The recommenda‐ tion includes $198,000 from the Capital Improvement Fund to continue a phased approach to resurfacing selected roadways at Ben Avery Shooting Facility. Additionally, the Department’s four other shooting ranges are remote and accessible only by poorly maintained roadways. This fund‐ ing will allow the Department to continue its efforts in pro‐ viding long‐term shooting range access improvements. The recommended amount includes $48,000 to repair the water system at the seven‐mile shooting range in the Kingman area. The current system does not provide adequate flow to allow proper operation of the existing facilities at capacity. Rehabilitation of the water system will allow operation of the facilities and prevent back‐flow problems. Becker Lake Facilities Improvement. The recommendation includes $120,000 from the Capital Improvement Fund to repair and construct ADA‐compliant facilities. The modifi‐ cation is needed to address facilities that are inadequate and represent a risk liability. These improvements will provide enhanced access and comply with safety design standards. Emergency Maintenance and Repairs. The Executive rec‐ ommends from the Game and Fish Fund $30,000 as a con‐ tinuing appropriation to address emergency facility repairs that require immediate attention. This allocation is separate from building renewal projects and is used for all statewide facilities. DPS Microwave Tower. The recommendation includes $207,000 from the Game and Fish Fund to upgrade the communication system maintained by DPS. The Legislature Capital Outlay appropriated $207,000 in FY 2007, 2008 and 2009 for this project. Covered Storage for Equipment. The Executive recom‐ mends $195,000 from the Watercraft Licensing Fund to con‐ struct shade canopies at various regional offices to protect various equipment and machinery. Department Headquarters. The Executive recommends $80,000 from the Watercraft Licensing Fund to enable the program to pay its share of the construction of the Depart‐ ment’s new office building. The construction of this project has been approved. ADOA BUILDING SYSTEM BUILDING RENEWAL The Executive Recommendation provides $21.9 million for Building Renewal, including $14.3 million from the Gen‐ eral Fund, $5.4 million from the Capital Outlay Stabilization Fund, $1.6 million from the Exposition and State Fair Fund, $474,200 from the Game and Fish Fund, and $60,000 from the State Lottery fund. Pursuant to Laws 1986, Chapter 85, appropriations for Building Renewal are based on a formula approved by the Joint Committee on Capital Review. The formula takes into account a building’s replacement value, age and life cycle. The formula does not consider deferred maintenance result‐ ing from less than 100% funding in prior years. The ADOA Building System historically has been funded through a combination of the General Fund and the Capital Outlay Stabilization Fund (COSF), which consists of rent payments on about 35 State‐owned buildings. Since funding is dependent on Legislative appropriation, it must compete for funding during each budget cycle. The State has not fully funded the formula in recent years, and deferred maintenance costs have risen to ap‐ proximately $169 million for the ADOA Building System. The Executive Recommendation focuses on addressing some of the highest priorities to protect life and safety, en‐ sure business continuity and preserve the State’s assets. below depicts the most critical known areas of attention within the ADOA Building System. CAPITAL OUTLAY STABILIZATION FUND (COSF) The Executive recommends $5.4 million in COSF monies for Building Renewal. This funding level is at 18.2% of for‐ mula funding but is $2 million, or 59.8%, above the FY 2007 appropriation of $3.4 million. The COSF consists of rents paid from approximately 35 buildings within the ADOA system; however, there are 2,973 facilities within the System that are supported by Building Renewal monies. Since not all buildings make rent payments into the COSF, the Fund is unable to support Building Renewal needs for the entire ADOA Building Sys‐ tem. Unless an alternative funding source can be identified, the General Fund should provide support to maintain and preserve the State’s assets. The COSF continues to be strained because, statutorily, it is used to fund utilities, pre‐ ventive maintenance and a portion of ADOA’s operating budget. OTHER FUNDS The Executive Recommendation includes $2.1 million for Building Renewal, reflecting 100% formula funding for each agency within the ADOA Building System that has its own funding source. The funding includes $1.6 million from the Exposition and State Fair Fund, $474,200 from the Game and Fish Fund, and $60,000 from the State Lottery Fund. For details on ADOA Building System’s Building Renewal recommendations, see the table on the next two pages. GENERAL FUND The Executive Recommendation provides $14.3 million to enable ADOA to address its highest priorities in major maintenance and repair of State‐owned buildings. Limited General Fund monies have been approved for Building Re‐ newal. In FY 2007, the Legislature appropriated $3.8 million from the General Fund. Analysis and review of the State’s buildings indicate that conditions are deteriorating and costs to maintain them continue to increase. While the Gen‐ eral Fund recommendation is only at 48% of the formula funding, it is directed at meeting a variety of deferred main‐ tenance items and deficiencies that have become a high pri‐ ority. Absence of adequate funding for Building Renewal has created threats to building reliability and safety. The list FY 2008 and FY 2009 Executive Budget 63 General Fund Department of Administration Renovate traction elevator system - 1600 W. Monroe Replace electrical service entrance, main panels - 1300/1400 W. Washington Replace cooling towers and 180 water source heat pumps - 15 S. 15th Ave. Replace roof membrane - 1624/1688 W. Adams Replace roof membrane - 1740 W. Adams Replace air handler #1 - 1535 W Jefferson Reseal windows to building - 1535 W. Jefferson Replace air handler (125 HP motor) - 1740 W. Adams Replace eight DX HVAC units - 1502 W. Washington Replace three five-ton heat pumps & ductwork - 1802 W. Jackson Replace six large air handlers - House & Senate Replace seven water source heat pumps - 1101 W. Washington Renovate two garage elevators - 15 S. 15th Ave. Replace carpet – 402/416 W. Congress Replace roof - 1700 Executive Tower main roof Replace 30 evaporative coolers - 1919 W. Jefferson 0 0 0 0 0 0 0 0 0 0 800,000 0 0 0 0 0 1,500,000 400,000 1,000,000 225,000 125,000 250,000 175,000 600,000 60,000 50,000 0 60,000 0 230,000 200,000 60,000 Corrections Replace 96 30-year-old A/C-heating units - ASPC-Douglas Upgrade reject water (treatment plant) evaporation ponds - ASPC-Lewis Replace main water line - ASPC-Douglas Complex Replace aging water storage tank - ASPC-Tucson Upgrade water distribution system, replace asbestos containing pipe - ASPC-Florence Replace ADC training bureau (COTA) fire alarm system Upgrade security control system - ASPC-Eyman Special Management Unit 2 Re-roof housing units - Cocopah unit, ASPC-Tucson $220,000 $800,000 475,000 $975,800 $998,300 350,000 525,000 205,000 0 0 0 0 0 0 0 0 Juvenile Corrections Replace service entrance section (SES)/substation - Black Canyon School Install eight 10-ton gas packs, two girls housing units - Black Canyon School Install fire sprinkler system, two girls housing units - Black Canyon School Emergency power upgrades: Eagle Point and Adobe Mountain schools Replace/upgrade HVAC system for Admin/EDU - Catalina Mountain School Statewide roof replacements CMS water tank replacement 0 400,000 330,000 1,000,000 500,000 500,000 100,000 0 0 0 0 0 0 0 Emergency and Military Affairs Upgrade fire alarm systems to Class A - Nine readiness centers Upgrade fire main loop system - Papago Military Reservation Renovate restrooms and upgrade to ADA standards - Roosevelt Armory Renovate restrooms and upgrade to ADA standards - Flagstaff Armory Renovate restrooms and upgrade to ADA standards - Nogales Armory 320,000 300,000 75,000 65,000 65,000 0 0 0 0 0 Public Safety Statewide roof replacements (Tucson, Douglas, Needles Mtn., Wikieup housing,fleet, Knutson Street) Statewide HVAC replacements (nine locations) Statewide carpet replacement (eight buildings) ADA restroom upgrade - Phoenix compound supply CI operations 245,000 52,000 150,000 85,000 0 0 0 0 School for Deaf & Blind Replace fire alarm system - Phoenix Day School Campus Replace roof - Vocational building, Tucson Campus Replace 16 15-year-old HVAC units (215 total tons) Re-zone library/media center HVAC system - Phoenix Day School Upgrade lock system - Tucson Campus Resurface track - Phoenix Day School 715,000 150,000 275,000 0 80,000 100,000 0 0 0 56,000 0 0 1,100,000 400,000 295,000 0 0 0 0 0 42,000 30,000 550,000 175,000 100,000 0 0 0 Courts Building HVAC thermal storage system replacement Replace roof Replace defective primary air distribution ducts and install energy efficiency fixtures Prescott Historical Society Replace roof - Bashford House Replace cooling tower - Museum Complex Economic Security ADA bathroom modifications - ATP-Coolidge (five buildings with nine bathrooms) Replace five buildings’ roofs (four at ATP-Coolidge & 1717 W. Jefferson) Replace HVAC, ductwork, electrical (20 units at ATP-Tucson and two 10-ton units at ATP-Coolidge) 64 COSF Capital Outlay Renovate well #1 - ATP-Coolidge Replace interior water pipes (asbestos abatement) - ATP-Coolidge (11 buildings) Replace 10-year-old HVAC controls, 13 buildings - statewide Health Services Replace plate and frame heat exchanger - Central Plant Upgrade fire alarm panels ADA upgrades to dietary building restrooms Dietary sewer replacement Replace cast iron sewer lines - Granada Hall Replace two 500-gallon hot water storage tanks, install two condensate recovery tanks - Central Plant Retrofit light fixtures, install occupancy sensors for energy conservation Install recycled water holding tank to substitute cooling tower water for irrigation TOTAL RECOMMENDATION ADOT BUILDING SYSTEM NEW CONSTRUCTION The Executive recommends $14.3 million to the Depart‐ ment of Transportation for new capital improvement pro‐ jects. The amount includes $13.5 million from the State Highway Fund and $845,000 from the State Aviation Fund. For Building Renewal, the Executive Recommendation pro‐ vides $3.9 million, or 49.6% of the formula funding. In‐ cluded in the recommendation is $3.8 million from the State Highway Fund and $141,100 from the State Aviation Fund. STATE HIGHWAY FUND Surprise Customer Service Center. The Executive recom‐ mends $3.96 million to construct a 14,500‐square‐foot Motor Vehicle Division service center in Surprise. The current MVD facility is inadequate and cannot accommodate the business volume from the area’s growing population. The Department needs to expand capacity to meet the area’s service needs and comply with business and public safety standards. Vehicle Wash System, Statewide Program. The Executive recommends $2 million to install vehicle wash systems that meet EPA and ADEQ regulations regarding controlled wa‐ ter distribution. Safford Maintenance Facility Replacement. The recommen‐ dation provides $3.2 million for demolition and for con‐ struction of a 17,500 square‐foot equipment service facility. The current structure is old and no longer meets the high‐ way maintenance needs for Safford and its vicinity. De‐Icing Materials Storage Buildings. The Executive rec‐ ommends $1.8 million to build five storage facilities to house bulk sand, cinders and materials used during the winter months for highway de‐icing operations. Some of these materials are being stored outside, where exposure to moisture and freezing temperatures makes their use diffi‐ cult. Asphalt Storage Tanks. The Recommendation provides $1.4 million to purchase and install five 10,000‐gallon as‐ FY 2008 and FY 2009 Executive Budget General Fund 0 0 0 COSF 37,000 150,000 90,000 97,500 120,000 110,000 132,000 162,000 63,000 0 150,000 0 0 0 0 0 0 95,000 0 14,310,600 5,435,000 phalt storage tanks with containment basins. The existing tanks are old, deteriorating or defective and have become environmental concerns. To ensure protection of surface and groundwater, environmental regulation requires that the Department replace these tanks and attain compliance. ADOT Business Headquarters. The recommendation in‐ cludes $250,000 to prepare specifications for a new adminis‐ trative building on the current Phoenix site between 17th and 18th Avenues and between Madison Street and the rail‐ road tracks. The current ADOT administrative complex is comprised of five buildings whose average age is over 50 years. The existing structure poses safety and health con‐ cerns. The Capitol Mall Centennial Plan also supports this project. Highway Construction. The Executive Recommendation supports a $2.2 billion transportation infrastructure pro‐ gram for FY 2008. The funding level would provide $1.3 billion for highway construction, $402 million for debt ser‐ vice, and $452 million for highway maintenance, admini‐ stration and motor vehicle services. In accordance with stat‐ ute, the actual expenditures levels are determined within the scope of the Five Year Highway Construction Program FY 2008 Highway Construction Program Costs Construction1 .............................................................$ 362,800 Pavement Preservation Maintenance ...........................133,200 Other2 ...........................................................................196,000 MAG Regional Program3 ..............................................430,100 Debt Service4 ................................................................323,700 Total .......................................................................$ 1,445,800 1 Includes corridor improvements, major capacity/operational spot improvements, minor capacity/operational spot improvement, and roadside facilities improvements. 2 Includes bridge preservation, operational facilities, public transit, roadside facilities, safety program, development support, operational support and program contingencies 3 Includes $430,056,000 for Proposition 400, MAG Regional Plan – Phase I. 4 Includes $103,327,000 for HURF statewide construction bonds; $61,117,000 for HURF Maricopa and Pima Associations of Governments (MAG and PAG) controlled access facilities bonds; $41,631,000 for Maricopa Regional Area Road Fund bonds; and $51,636,000 for Grant Anticipation Notes and $66,000,000 of BFO repayments from the State Highway Fund. 65 as approved by the State Transportation Board. Controlled Access Highways. The Executive recommends $106.3 million from the distribution formula for dedicated highway revenues for the construction of urban freeways. The current allocation provides 75% to the Maricopa Asso‐ ciation of Governments (MAG) and 25% to the Pima County Association of Governments (PAG). Debt Service. The Executive recommends $103 million from the State Highway Fund for the appropriated portion of the debt service on bonds in FY 2008. The Legislature has authorized the Department to issue bonds against the Highway User Revenue Fund (HURF). These bond pay‐ ments are the sole obligation and enforceable only from the HURF. STATE AVIATION FUND Grand Canyon Airport Infrastructure Improvement. The Ex‐ ecutive recommends $845,000 to clean, repair and bring into compliance two water storage tanks at the Grand Canyon Airport. The recommended funding includes $210,000 to renovate and improve restroom facilities to increase func‐ tionality and capacity to handle increasing passenger traffic at the airport. Airport Planning and Development. The Executive Rec‐ ommendation provides $32.8 million from the State Avia‐ 66 tion Fund for development and improvement of State, county and municipal airports as approved by the State Transportation Board. The recommendation also supports appropriating to the Department all monies in the State Aviation Fund that are in excess of amounts determined in the General Appropriation Act and the Capital Outlay Act for airport planning and development. Monies in the State Aviation Fund consist of receipts from a flight property tax, aircraft lieu tax, and revenues from the operations of Grand Canyon Airport. BOARD OF REGENTS BUILDING SYSTEM NEW CONSTRUCTION Arizona State University College of Construction. The Ex‐ ecutive recommends $1.7 million for FY 2008 debt service payments on $20 million in new 20‐year Certificates of Par‐ ticipation (COPs) to support designing and building the ASU College of Construction. The recommended funding is the State’s contribution. Other public and private entities will be donating another $43 million for the establishment of the new College of Construction. ] Capital Outlay Acknowledgement Governor Napolitano gratefully acknowledges the skilled and dedicated efforts of the staff of the Governor’s Office of Strategic Planning and Budgeting ************* Special thanks to Gary Yaquinto, who served as OSPB Director from January 2005 through December 2006 Director James J. Apperson Deputy Director Robert Chapko Assistant Directors Marcel Benberou Bret Cloninger Bill Greeney Chief Economist Norm Selover Team Leader Stacey Morley Budget Analysts Jay Baughman Orrin Cooper Matt Gottheiner Timothy Grubbs Chris Hall Ryan Harper Matthew Kennedy Patrick Makin Judith Padres John Stahmer Senior Economist Duong Nguyen Senior Systems Analyst Richard Sietz Systems Analyst Joy Su Office Manager Pamela Ray