The Executive Budget SUMMARY FISCAL YEARS 2010 AND 2011 Includes Budget Management Plans FISCAL YEARS 2009 AND 2010 Janet Napolitano GOVERNOR Provisions for Individuals with Disabilities Individuals who have a disability and 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 OFFICE OF THE GOVERNOR JANET NAPOLITANO GOVERNOR 1700 WEST WASHINGTON STREET, PHOENIX, ARIZONA 85007 MAIN PHONE: 602-542-4331 FACSIMILE: 602-542-7601 January 2009 To the Honorable Members of the Forty-Ninth Arizona Legislature: As the first regular session of the Forty-Ninth Legislature convenes, we face economic conditions that will test the mettle of elected officials in every state, in Washington, D.C., and throughout the world. The global recession has wreaked havoc on our economy, moved Congress and President Bush to provide billions of dollars to the financial industry and private companies, and inflicted unprecedented state budgetary shortfalls across the country. The causes of the downturn in Arizona mirror those in other states: depressed real estate markets, scarcity of credit, and low consumer confidence. The consensus among economists is that the economic situation will not improve until, at the earliest, the second half of 2009. We can expect that, by that time, State government will begin to feel fiscal relief brought by federal economic stimulus programs and the benefits of our own budget management efforts. As the Legislative and Executive branches work together to resolve the Fiscal Year 2009 General Fund shortfall and consider State agency budgets for FY 2010, it is essential that the solutions to the State’s immediate fiscal challenges respect the need to safeguard and provide for Arizona’s future. We must continue to pursue these critical objectives: • Improve our education system, from early childhood education through the highest degree levels of our colleges and universities. • Protect, to the maximum extent possible, our most vulnerable citizens. • Maintain public safety throughout the state. • Promote the long-term health of Arizona’s economy. In order to meet these requirements for Fiscal Years 2009 and 2010, I propose a Budget Management Plan that will maximize our support of K-12 classroom education, minimize harmful impacts on the State’s universities and community colleges, and preserve health and care services for needy children and adults. Further, we will ensure our citizens’ safety by maintaining the strength of the Department of Public Safety and the Department of Corrections. It is also essential that we honor our commitment to support development of Arizona’s bioresearch industry and make other key enhancements to our economic system. January 2009 Page 2 This future-oriented perspective will be achieved without a general tax increase. As described in the Budget Management Plan for Fiscal Years 2009 and 2010, we can cut budgets, transfer non-General Fund revenues to the General Fund, and securitize Lottery and Tobacco Settlement revenue streams to benefit the General Fund. We should also count on the planned arrival, in the spring of this year, of federal economic stimulus funds that will provide an immediate and noticeable jump-start to Arizona’s economy. The stimulus funds will reflect both the recession-related impacts on state government budgets and the need for investment in education, transportation and other infrastructure. While this is not the time to fund new initiatives, it is a time for State government to position itself to move quickly and decisively as Arizona and the nation inevitably emerge from the current recessionary cycle. As revenue streams improve, we should use “trigger” protocols to restore suspended funding in programs critical to our future, including education and health and human services. The Executive Budget Recommendation for Fiscal Years 2009, 2010 and 2011 provides a roadmap for navigating these very difficult economic times, and I encourage you to follow it as our branches develop sound solutions to meet the fiscal challenges of the next two fiscal years. Yours very truly, Janet Napolitano Governor JN/neh TABLE OF CONTENTS BUDGET OVERVIEW Economy and Revenues ............................................................................. 1 General Fund Sources and Uses: Baseline Budget.................................. 6 General Fund Sources and Uses: with Budget Management Plan ....... 7 General Fund Revenue Summary ............................................................. 9 BUDGET MANAGEMENT PLAN Balancing the FY 2009, 2010 Budgets...................................................... 11 Securitization: Overview and Analysis .................................................. 16 FY 2009 Recommended Fund Transfers................................................. 18 FY 2010 Recommended Fund Transfers................................................. 19 FY 2009 and FY 2010 Recommended Expenditure Suspensions ........ 20 BUDGET SUMMARY General Fund Operating Budgets Summary ......................................... 25 Other Appropriated Funds Revenue Summary.................................... 27 Other Appropriated Funds Operating Budgets Summary.................. 28 Supplemental Appropriation Recommendations................................. 38 Proposed Legislative Changes................................................................. 40 Capital Outlay Recommendations .......................................................... 44 Efficiency Review Initiatives.................................................................... 48 ACKNOWLEDGEMENT DEDICATION Budget Overview ECONOMY AND REVENUES U.S. Recession Leads to State Revenue Decline Depressed real estate and construction sectors, tightness in credit markets, and low consumer confidence combined have impacted Arizona to a greater degree than most states T he nation in general and Arizona in particular are in the midst of a significant recession. As the Executive Budget Recommendation goes to print, the major headwinds interfering with growth are a depressed real estate sector, tightness in credit markets, and consumers who are concerned about the future of the economy. Consumer confidence, business confidence and investor confidence are at historical lows, and the impact is being felt around the world. National Trends Gross Dom estic Product Grow th (percentage) 4.0 3.0 2.0 1.0 NATIONAL OUTLOOK Economic growth in the fourth quarter of 2008 and through the first two quarters of 2009 will be negative, with some estimates suggesting negative growth will prevail in each quarter in 2009. The consensus economic forecast is for signifi‐ cant declines – 4% to 6% – in the fourth quarter, with slight improvements in the rate of decline throughout 2009.1 For many, this recession will prove to be the worst they have experienced, and sectors dependent on the purchase of con‐ sumer durables – e.g., housing and automobiles – will be espe‐ cially hard hit. Gross Domestic Product. The U.S. economy has been in recession since December 2007. Real GDP growth was weak during 2008, at 1.2%, and is expected to turn negative in 2009, to (1.8%), before recovering to 2.1% in 2010. Employment. Employment declined by 0.2% in 2008 and will decline further, by 1.9%, in 2009, due to a very weak hous‐ ing sector and pressures in the credit market. Unemployment rates will reach upper single‐digit levels, with manufacturing and construction at depressed levels and even service sector and health care jobs in decline. Consumer Spending. Consumer spending is down amid continued declining home prices, a weak labor market and tighter credit. An anemic growth rate of 0.2% is expected for 2008, slipping to (0.5%) in 2009. A strong argument can be made that the mood of the buying public is even more negative than these weak aggregate numbers would suggest, as many con‐ sumers simply are not able to withstand pressures from the deterioration in housing equity and the collapse of equity prices despite the recent relief at the gas pump. The Federal Reserve will continue to inject massive amounts of cash into the system, and federal stimulus packages will be introduced in an attempt to rekindle confidence. However, to truly regain requisite levels of confidence, a catalyst has to come from the private sector in the form of improved equity prices or some measure of stability in housing prices. Prior to September, capital gains and dividend returns from Wall Street helped buffer the lost equity accumulations in housing, but Wall Street offers no consolation today. 1 (1.0) ( 2.0) 2000 2002 2004 2006 2008 2010 Housing Starts (m illions): Housing Dow nturn Still Deepenening 2.500 2.000 1.500 1.000 0.500 0.000 2000 2002 2004 2006 2008 2010 Consum er Spending (percentage) 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 2000 2002 2004 2006 2008 2010 Interest Rates. During 2009, one of the most aggressive easing programs in recent memory will occur, as central bank‐ ers confront the recession. Eventually, credit will find its way to borrowers and help counter the headwinds now faced by busi‐ nesses and consumers, but it will take some time and near‐zero interest rates for the markets to ease. Homeowners with non‐ conventional mortgage positions will find some relief, as long‐ Source: Global Insight Summary 1 angst about the proper course of action will make the task of confidence building all the more difficult. Perhaps the most positive aspect of the U.S. economy in 2009 is that, by the end of the year, economic conditions will almost certainly start to improve. As of now, there is no obvious catalyst in place that would suggest that the pace of improve‐ ment will be rapid. Federal Funds Rate: Fed to Cut Rates 7.0 6.0 5.0 4.0 3.0 ARIZONA OUTLOOK 2.0 1.0 0.0 2000 2002 2004 2006 2008 2010 term rates will likely approach historical lows. As long as infla‐ tion rates remain low (the bigger concern in the short term is the threat of a deflationary spiral), the Fed should have consid‐ erable latitude to extend credit in hopes of stimulating the economy. Business Spending. The corporate profit picture in 2009 will be markedly different from that of recent years, with dou‐ ble‐digit declines projected. The erosion in business profitability is a major contributor to the length and severity of the reces‐ sion, as it will limit the ability of businesses to invest in people, infrastructure and equipment. For 2009 overall, Global Insight forecasts that businesses will pull back on capital spending, and equipment spending will drop by 12.2%. The Dollar. The value of the dollar will be very difficult to predict over the course of the next year. While the U.S. will see little economic strength, the rest of the world will also experi‐ ence a slowdown. The relative severity of the recession around the globe will dictate how well the dollar fares, as the dollar has recently gained some strength as the global economy plunges. The strong dollar will make U.S. exports more expensive, likely causing a decline in exports in 2009. Eventually, as the recession ends, the downward pressure on the dollar is likely to return. Fiscal Stimulus. As the private sector contracts, the federal government is likely to come forward with a large fiscal stimu‐ lus package, and a massive injection of funds could help to reignite the declining economy. NATIONAL RISKS Key indicators, such as the Purchasing Managers Index and the Index of Consumer Confidence, paint a dismal picture for the U.S. economy. Could it actually get much worse from here? If the financial crisis worsens, the credit markets could remain clogged. Without access to credit, domestic spending could contract further, and the housing market could fall into an even deeper hole. If home prices fall much deeper, coupled with a slowdown in job growth and lower stock market wealth, consumer confidence could deteriorate, leading to further retrenching in consumer spending. If confidence erodes further from current levels, the U.S. may experience massive job separations and a very long and deep recession. Consequently, any shock that depresses con‐ sumer, business and investor confidence could have a profound impact. Congress and the new administration will have their hands full in crafting a program designed to simultaneously boost spending and confidence, and continued debate and 2 Arizona business cycles typically have more amplitude – especially higher highs ‐ than national cycles. The current situation is clearly an exception to that rule. The state normally enters recessions later, but this time is one of the first states, along with California, Nevada, and Florida — states that also participated in the recent housing bubble, to enter the recession. In 2005 and 2006, the state’s job gains and income growth outpaced the nation. Now, the flip side of this cycle is clearly in place, and the only remaining question is: How long will the down cycle persist? The consensus view is that the Arizona econ‐ omy will contract on a number of fronts in 2009.2 Population. Population growth remains a bright spot in Arizona’s economic picture. After Arizona’s population grew by 3.6% in 2006 and 2.8% in 2007, the growth rate slowed somewhat in 2008 to an estimated 2.3%, still the second‐highest in the nation. In the process, Arizona passed Massachusetts and Arizona's Population Grow th Po p ulat i o n Population (millions) M illions Gro wt h 4% 7.0 6 .2 3% 5.4 2% 4 .6 1% 3 .8 0% 3 .0 2000 2001 2002 2003 2004 US P o pulatio n Gro wth 2005 2006 2007 2008* 2009* A Z P o pulatio n Gro wth A Z To tal P o pulatio n Indiana to become the 14th‐largest state. For 2009, the state’s population growth rate is forecast to moderate even more, to about 2%. Employment. In 2006, Arizona ranked fifth in job growth among all states. Since then, the decline in home construction helped drop Arizona to number 46 (in 2007) and then to 49 (in 2008). From November 2007 to November 2008, Arizona lost 83,100 jobs, with 35,500 of the lost jobs coming from the construction sector. Arizona’s unemployment rate in November 2008 was 6.3%, compared to 6.7% for the nation. In November 2007, the state’s unemployment rate was 4.1%. Job losses will probably continue to characterize the Ari‐ zona economy in 2009. Construction‐ and real estate‐related employment will suffer the most, but no major sector of the 2 Sources: U.S. Census Bureau, U.S. Bureau of Economic Analysis, Arizona Department of Commerce. 2009 and 2010 are projections from Census Bureau, Global Insight, Arizona Commerce, Arizona Blue Chip, and ASU FY 2010 and FY 2011 Executive Budget economy will be immune. Overall, Arizona employment is estimated to decline by 1.3% in 2009 and 0.9% in 2010. Personal Income. Aggregate personal income (PI) growth in Arizona, as reported by the Bureau of Economic Analysis, is also deteriorating. Arizona’s 9.3% PI growth for 2006 ranked 4th in the nation before dropping to 4.5% in 2007 and 3.3% during the first three quarters of 2008. Arizona PI is expected to grow at just 2.7% in 2008 and 1.7% in 2009 – the state’s lowest level in 65 years. Disappointing prospects for aggregate income growth will act as a drag on consumer confidence. Real Estate. Real estate activities, as measured by the vol‐ ume of sales in the Phoenix metropolitan area, experienced losses in the last 10 quarters and are expected to decline further through the first half of 2009 before bottoming in the later part of the year. A large inventory of houses must be absorbed in order for homebuilding to get back on track and stimulate economic recovery. Consumer Spending. Consumer spending in Arizona is estimated to have declined by 3% in 2008 and, according to the Arizona Blue Chip forecast, is expected to see very modest growth of 1% in 2009. Arizona 's Em ploym ent % G ro wt h T o tal ( t ho us a nds 6 .0 % 3000 4 .0 % 2 50 0 2 .0 % 0 .0 % 2000 - 2 .0 % - 4 .0 % 150 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* US % Gro wth A Z % Gro wth A Z To tal Jo bs Arizona's Personal Income $ A m o unt ( billio ns ) % G ro wt h 240 12 .0 % 10 .0 % 200 8 .0 % 16 0 6 .0 % 12 0 4 .0 % ARIZONA RISKS Consistent with past recessions, the severe U.S. downturn will adversely affect Arizona, particularly in exporting, con‐ struction and hospitality. Risks to the Arizona economy are numerous, and there are few logical catalysts for growth in the state. 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 is now in the depths of the down cycle in the residential sector. There are indications of a decline in the commercial construction sector as well. Upside Potential. With regard to direct federal intervention in the health of the economy, the nation is in largely uncharted waters. Federal funding for transportation and other forms of public infrastructure will provide an immediate and noticeable stimulus and help jump‐start Arizona’s economy. Another catalyst may come from the only piece of good news about housing: affordability. Arizona has historically been a magnet for in‐migration, and recent declines in housing prices may ensure that the housing market remains attractive for buyers considering relocation. While the state’s economy is sluggish, it is no more so than in many areas of the Midwest and other parts of the country; therefore, Arizona remains – as it has been for many decades – an attractive ultimate destina‐ tion. IMPACT OF THE RECESSION ON REVENUE COLLECTIONS Since the beginning of the recession in December 2007, con‐ sumer confidence has dropped sharply in response to job losses, further declines in home prices, tight credit, and declines in the value of investment portfolios. These factors have had a signifi‐ cant impact on State revenue collections in all categories. Transaction Privilege Tax. The pace of Arizona retail sales activity has slowed considerably since the beginning of 2007, and Transaction Privilege Tax (TPT) collections are growing at a slower rate than that of the state’s overall economy. Summary 80 2 .0 % 0 .0 % 40 US %Gro wth p er cent ag e A Z % Gro wth A rizo na To tal Real Estate Activity Grow th in Arizona (over previous year's quarter) 60 40 20 0% 0 -20 -40 -60 2005.3 2006.1 2006.3 2007.1 2007.3 2008.1 2008.3 2009.1* 2009.3* No te: The data reflects change in residential actitivities in Greater P ho enix, as measured by vo lume o f sales. The slower growth is a predictable consequence of the high consumer spending of 2005 and 2006, when purchasing was boosted by home mortgage refinancing, easy access to credit, and aggressive rebates offered by auto manufacturers. Subse‐ quently, consumers ratcheted back expenditures on automo‐ biles and housing‐related consumer durables. Less predictable were the recent economic events that have driven many consumers to “no purchase” mode. For the rest of FY 2009 and through much of FY 2010, TPT collections are expected to grow at a relatively anemic rate, albeit from a very low base, that matches the weak growth of the economy in FY 2010. The silver lining is that pent‐up demand should provide a catalyst for recovery when the economy turns around. Other TPT Categories. Overall TPT collections are also strongly influenced by Use Tax collections, contracting collec‐ 3 4 2010.1* 2009.3* 2008.3 2009.1* 2008.1 2007.3 2007.1 2006.3 2006.1 2005.3 2005.1 2004.3 2004.1 2003.3 2003.1 2002.3 2002.1 2001.3 2001.1 2000.3 FY FY 19 91 19 FY 92 1 FY 993 19 FY 94 1 FY 995 19 FY 96 19 FY 97 1 FY 998 19 FY 99 2 FY 000 20 FY 01 20 FY 02 20 FY 03 20 FY 04 2 FY 005 20 FY 06 20 FY 07 2 FY 00 09 8 FY es 10 t. es t. 2000.1 tions, and utilities collections. The Use Arizona Personal Income Growth and Retail Sales and category is in turn buffeted by decisions of Contracting Collections Growth 40.0% businesses to expand plants or stores and purchase new equipment, and by 30.0% assessments on fuel purchased by utility companies. Consistent with forecasts for a 20.0% slowly recovering construction sector, 10.0% contracting collections will be very slow for the foreseeable future. 0.0% Individual Income Tax. From FY 2003 -10.0% through FY 2006, the state’s Individual Income Tax collections displayed strong -20.0% growth, fueled by solid wage and salary -30.0% expansion and increases in capital gains and sole proprietor activity. In FY 2005, Individual Income Tax Collections grew by 28.9%, while personal income grew by AZ Personal Income Retail Sales Contracting 10.2%. Historically, Arizona capital gains * estimated growth collections have been bolstered by strong equity markets and strong real estate Arizona Personal Income and Individual Income Tax Collections markets. (Year over year percentage change) Employment losses, coupled with de‐ clining contributions from investor‐driven 30.0% real estate, have resulted in extremely weak 22.5% collections in FY 2008 – a historically low growth rate of (8.8%). It is expected that 15.0% Individual Income Tax collections will be 7.5% very weak under the weight of the recession, with an estimated decline of 0.0% (4.3%) in FY 2009 and 0.2% for FY 2010. Corporate Income Tax. The corporate -7.5% profit picture in calendar year 2009 will be -15.0% markedly different from that of recent years, with large declines projected. Corporate Income Tax collections will be weak in FY 2009, with estimated decline of Personal Income IIT Actual Collections and Current Forecast 16.3%, and will be very modest in FY 2010, with 3% growth despite a very low base. inmate population are expected to grow by 94,800 from FY Budget Impact. Revenues have deteriorated significantly in 2009. This translates to an increased funding requirement, from the past two years and will decline further in FY 2009, followed FY 2009 to FY 2010, amounting to $657 million. by virtually flat growth in FY 2010. Total General Fund Total caseload, enrollment and inflation growth for all collections in FY 2010 will not meet the FY 2006 level. agencies – including the Department of Economic Security, the Meanwhile, as is generally the case in weak economic times, Department of Health Services, and the universities and com‐ caseload growth in social services has placed sharply growing munity colleges – will require $884 million in additional demands on the General Fund. In FY 2010, the AHCCCS funding. • caseload, K‐12 enrollment, and the Department of Corrections FY 2010 and FY 2011 Executive Budget Arizona Trends General Fund Revenue Collections ($ in m illions) Transaction Privilege and Use Tax Revenue Collections ($ in millions) $10,000 $5,000 $9,000 $4,500 $8,000 $4,000 $7,000 $3,500 $6,000 $3,000 $5,000 $2,500 FY FY FY FY FY FY FY FY 2003 2004 2005 2006 2007 2008 2009 2010 Enacted Budget Forecast FY FY FY FY FY FY FY FY 2003 2004 2005 2006 2007 2008 2009 2010 Enacted Budget Forecast Current Forecast Individual Incom e Tax Revenue Collections ($ in m illions) Current Forecast Corporate Incom e Tax Revenue Collections ($ in m illions) $4,000 $1,200 $3,500 $1,000 $800 $3,000 $600 $2,500 $400 $2,000 $200 FY FY FY FY FY FY FY FY 2003 2004 2005 2006 2007 2008 2009 2010 Enacted Budget Forecast Summary Current Forecast FY FY FY FY FY FY FY FY FY 2002 2003 2004 2005 2006 2007 2008 2009 2010 Enacted Budget Forecast Current Forecast 5 SOURCES AND USES OF FUNDS BASELINE BUDGET FY 2008 ‐ FY2010 ($ in thousands) FY 2008 Actual FY 2009 Enacted Budget FY 2009 Current Estimate FY 2010 Current Estimate SOURCES OF FUNDS Balance Forward Adjustment to Balance Forward Base Revenues Urban Revenue Sharing Adjusted Base Revenues Rainy Day (Budget Stabilization) Fund Transfer Agency Fund Transfers Local Government Fund Transfer Adjustment Other Adjustments Proceeds from prior year lease‐purchase financing TOTAL SOURCES OF FUNDS 377,947.0 11,768.5 9,474,101.4 (684,538.9) 8,789,562.5 560,036.5 290,186.0 1,000.0 10,062,092.6 (727,677.4) 9,334,415.2 1,000.0 8,966,221.5 (727,677.4) 8,238,545.1 1,000.0 8,956,772.0 (628,644.6) 8,328,128.4 20,000.0 280,867.7 20,000.0 264,463.1 45,793.3 10,038,195.9 344,000.0 9,980,282.9 344,000.0 8,913,801.5 8,329,128.4 31,981.5 1,273,797.0 168,912.4 890,813.9 796,905.1 4,031,981.4 578,383.1 126,867.6 80,353.7 134,533.1 481,557.4 84.6 1,091,780.4 27,109.6 1,425,272.3 147,679.8 947,476.0 808,328.1 4,141,201.0 611,507.2 126,324.4 74,700.4 63,459.7 101,217.2 84.6 1,080,414.1 27,109.6 1,425,272.3 147,679.8 947,476.0 808,328.1 4,141,201.0 611,507.2 126,324.4 74,700.4 63,459.7 101,217.2 84.6 1,080,414.1 27,109.6 1,773,699.5 148,445.6 1,024,285.0 917,296.3 4,388,115.0 686,744.6 126,324.4 78,400.4 63,101.2 204,237.5 84.6 1,092,063.0 432,532.2 406,919.0 406,919.0 416,228.5 OPERATING BUDGET SUBTOTAL 10,120,483.4 9,961,693.4 9,961,693.4 10,946,135.2 Agencywide Issues/ Unallocated Items Total Operating Budget 20,607.0 10,141,090.3 25,320.3 9,987,013.7 25,320.3 9,984,513.7 82,801.9 * 11,028,937.1 13,500.0 (50,000.0) 55,200.0 (97,000.0) $9,908,714 195,314.3 13,500.0 (50,000.0) 136,000.0 (117,600.0) 10,161,728.0 4,916.5 ‐ 82,320.0 (132,347.2) 10,983,826.4 (1,247,926.5) (2,654,698.0) 8,695.3 USES OF FUNDS Operating Budget Administration, AZ Department of AHCCCS Community Colleges, Arizona Corrections, State Department of Economic Security, Department of Education, Department of Health Services, Department of Judiciary Juvenile Corrections, Department of Public Safety, Department of School Facilities Board Transportation, Department of Universities Subtotal ‐ Other Agencies Supplementals Capital Statutory Revertments Administrative Adjustments Revertments TOTAL USES OF FUNDS ENDING BALANCE 13,479.5 (13,419.8) 90,715.8 (194,669.9) $10,037,196 1,000.0 71,569.2 *FY10 Adjustments: Health Insurance $42m, Retirement ‐$3.7m, COP $17.4m, PLTO Rent $0.1m, Risk Mgmt $2m, AZ 21st Century $25m. 6 FY 2010 and FY 2011 Executive Budget SOURCES AND USES OF FUNDS BUDGET MANAGEMENT PLAN FY 2008 ‐ FY2010 ($ in thousands) FY 2008 Actual FY 2009 Enacted Budget FY 2009 Budget Mgmt Plan FY 2010 Budget Mgmt Plan 1,000.0 56,073.9 SOURCES OF FUNDS Balance Forward Adjustment to Balance Forward Base Revenues Urban Revenue Sharing Adjusted Base Revenues Rainy Day (Budget Stabilization) Fund Transfer Agency Fund Transfers Local Government Fund Transfer Adjustment Revenue Adjustments Proceeds from prior year lease‐purchase financing Budget Management Plan ‐ Adjustments to Revenue Additional Rainy Day Fund Transfer Additional Agency Fund Transfers Lottery Securitization Tobacco Settlement Securitization Revenue Adjustments Federal Fiscal Relief TOTAL SOURCES OF FUNDS 377,947.0 11,768.5 9,474,101.4 (684,538.9) 8,789,562.5 560,036.5 290,186.0 1,000.0 10,062,092.6 (727,677.4) 9,334,415.2 8,966,221.5 (727,677.4) 8,238,545.1 20,000.0 280,867.7 20,000.0 264,463.1 45,793.7 344,000.0 344,000.0 8,956,772.0 (628,644.6) 8,328,128.4 8,695.3 120,000.0 111,000.0 119,400.0 500,000.0 400,000.0 258,300.0 675,000.0 10,336,902.3 10,038,195.9 9,980,282.9 400,000.0 50,000.0 100,000.0 9,694,801.9 Operating Budgets 10,120,483.4 9,961,693.4 9,961,693.4 10,946,135.2 Agencywide Issues/ Unallocated Items Total Operating Budget 20,607.0 10,141,090.3 25,320.3 9,987,013.7 25,320.3 9,984,513.7 82,801.9 * 11,028,937.1 USES OF FUNDS Supplementals Capital Statutory Revertments Administrative Adjustments Revertments 13,479.5 (13,419.8) 90,715.8 (194,669.9) 13,500.0 (50,000.0) 55,200.0 (97,000.0) Budget Management Plan ‐ Adjustments to Spending Agency Operating Suspensions Payment Schedule Deferrals House of Reps Prior Year Excess TOTAL USES OF FUNDS ENDING BALANCE 195,314.3 13,500.0 (50,000.0) 136,000.0 (117,600.0) (300,000.0) (216,000.0) (7,000.0) 4,916.5 ‐ 82,320.0 (132,347.2) (675,100.0) 6,000.0 10,037,195.9 9,908,713.7 9,638,728.0 10,314,726.4 1,000.0 71,569.2 56,073.9 22,175.9 *FY10 Adjustments: Health Insurance $42m, Retirement ‐$3.7m, COP $17.4m, PLTO Rent $0.1m, Risk Mgmt $2m, AZ 21st Century $25m. Summary 7 GENERAL FUND Sources and Uses of Funds T of funds document presents budget data on projected revenue sources and expenditures for the General Fund. The Sources and Uses Baseline Budget presents the follow‐ ing: HE SOURCES AND USES • For FY 2008, the data reflect actual expenditures taken from the State’s Accounting and Financial Information System. • For FY 2009, the Enacted Budget column reflects the reve‐ nue projections of taxes, fees and other General Fund sources and appropriations made by the Legislature, in the 2008 Legislative session, for FY 2009. • The FY 2009 and FY 2010 Current Estimate columns re‐ flect Governor’s Office of Strategic Planning and Budget‐ ing (OSPB) revenue projections of taxes, fees and other General Fund sources, and the Executive’s estimate of the baseline budget, which includes only mandatory changes such as statutory requirement, caseload growth, and res‐ toration of previous year’s one‐ time fund transfers. The Sources and Uses Budget Management Plan presents the following: • For FY 2008, the data reflect actual expenditures taken from the State’s Accounting and Financial Information System. • For FY 2009, the Enacted Budget column reflects the reve‐ nue projections of taxes, fees and other General Fund sources and appropriations made by the Legislature, in the 2008 Legislative session, for FY 2009. • The FY 2009 and FY 2010 Budget Management Plan col‐ umns reflect OSPB revenue projections of taxes, fees and other General Fund revenue sources, and the Executive’s proposal to balance the budget as revenue collections de‐ teriorates under the impact of the recession. SOURCES OF FUNDS Revenue Projections. The OSPB revenue estimating proc‐ ess involves participation by representatives from the De‐ partment of Revenue, Department of Economic Security, the W.P. Carey School of Business at Arizona State University, and OSPB. The process includes: economic scenarios. Revenue flows of recent tax collec‐ tions are analyzed for consistency with projections. • Blending of revenue projections by OSPB. This is done to re‐ flect an achievable revenue collection scenario. Urban Revenue Sharing. Laws 2006, Chapter 351, pro‐ vided that, for FY 2009, cities and towns are to receive a spe‐ cial one‐time Urban Revenue Sharing distribution of $10,549,800 as a repayment of the reduction in the Urban Revenue Sharing distribution percentage of 14.8% in FY 2003 and FY 2004. USES OF FUNDS Operating Budget Supplementals. The budget includes $195.3 million for FY 2009 General Fund supplemental ap‐ propriations for agencies. This estimate reflects projected shortfalls for the following departments: AHCCCS .................................................................. $142,600,000 Economic Security, Dept. of ...................................... 31,700,000 Health Services, Dept. of ........................................... 15,700,000 Corrections, Dept. of .....................................................3,800,000 Cosmetology, Board of.....................................................400,000 Pharmacy, Board of ..........................................................300,000 Psychologist Examiners, Board of..................................400,000 Veterinary Medical Examiners, Board of......................300,000 Administrative Adjustments and Revertments. The Recom‐ mendation includes $82.3 million for estimated administrative adjustments in FY 2010, reflecting funds that have been en‐ cumbered by agencies for payment of obligations in FY 2009 that are carried over into another fiscal year (FY 2010). Addi‐ tionally, the Recommendation incorporates projections of unexpended or unencumbered funds to be reverted to the General Fund in FY 2010. These projections are based on historical experience. ● • Presentation of projection scenarios for the state’s economy. Each participant provides independent views of projec‐ tion scenarios based on various projection techniques and models. • Consensus reached on forecasts of economic variables, including personal income, employment and gross domestic product. These variables serve as inputs to the revenue projections. Baseline, optimistic and pessimistic scenarios are final‐ ized. • Presentation of revenue projections for the “Big Three” tax sources based on economic scenarios. Each participant pro‐ vides independent views on revenue projections for the 8 FY 2010 and FY 2011 Executive Budget STATE OF ARIZONA GENERAL FUND REVENUE SUMMARY FY 2008 THROUGH FY 2010 (in thousands of dollars) TAXES FY 2008 Actual FY 2009 Estimate FY 2010 Estimate Corporate Income Tax 784,510.9 656,550.0 676,000.0 Individual Income Tax 3,406,453.3 3,260,900.0 3,267,200.0 20,041.3 20,000.0 20,000.0 4,353,564.8 4,174,700.0 4,201,200.0 61,037.2 61,000.0 62,220.0 407,043.0 404,400.0 412,900.0 3,568.6 3,000.0 3,000.0 9,036,219.1 8,580,550.0 8,642,520.0 140,892.1 153,000.0 156,060.0 Interest Earnings 95,150.8 28,000.0 20,000.0 Lottery 48,449.6 46,500.0 46,500.0 Transfers & Reimbursements 34,067.7 20,000.0 20,000.0 Disproportionate Share 72,189.6 71,693.0 71,693.0 TOTAL OTHER REVENUES 390,749.8 319,193.0 314,253.0 9,426,968.9 8,899,743.0 8,956,773.0 Property Taxes Sales and Use Taxes Luxury Taxes Insurance Premium Taxes Other Taxes TOTAL TAXES OTHER REVENUES Licenses, Fees & Permits/Misc. TOTAL REVENUES ADJUSTMENTS Urban Revenue Sharing Onetime Transfer/ Other Adjustments * GRAND TOTAL REVENUES * (684,538.9) (727,677.4) 47,132.5 66,479.5 8,789,562.5 8,238,545.1 (628,644.6) ‐ 8,328,128.4 FY 08 revenue adjustments: $47.1 million increase from Unclaimed Property FY 09 One‐time Legislative Changes: ALTCS Reversion: $17.9 million, Local Contributions: $29.7 million, VLT: $8.4 million, Lottery: $10.5 million Summary 9 10 FY 2010 and FY 2011 Executive Budget Budget Management Plan BUDGET MANAGEMENT PLAN Balancing the FY 2009, 2010 Budgets Challenging times call for disciplined, prudent measures in addressing projected budget shortfalls for the current fiscal year and the next F OR FISCAL YEARS 2009 and 2010, the State of Arizona finds itself in a position similar to that of most state and local governments. With the national and world economies in the midst of difficult recessions, State government faces very sig‐ nificant budget deficits for both FY 2009 and FY 2010. As the Executive Budget Recommendation went to print, the Baseline Sources and Uses projected a deficit of $1.248 billion for FY 2009 and $2.655 billion for FY 2010. Guiding Principles. The Executive Budget Recommenda‐ tion for FY 2009 and FY 2010 includes this comprehensive plan to mitigate the impact of the recession, while: • Maintaining our commitment to efficiency and ensuring that the integral functions of State government are not com‐ promised; • Constructing a fiscally prudent, balanced budget that maxi‐ mizes the efficient use of State resources and does not raise taxes; • Recommending spending reductions on an agency‐by‐ agency and program‐by‐program basis, not across the board; • Invoking prudent fiscal measures that are necessary, given the extraordinary circumstances we face; • Protecting Arizona’s children and vulnerable populations; and • Reinforcing our commitment to education, families, eco‐ nomic development, natural resources, and border security. BUDGET MANAGEMENT PLAN FOR FY 2009 Most of the elements of this plan were presented by the Ex‐ ecutive during October 2008 discussions with Legislative lead‐ ers. Summary: FY 2009 Budget Management Plan SHORTFALL (in millions) ($1,247.9) SAVINGS FROM BALANCING OPTIONS Tobacco Settlement Securitization 400.0 Agency Operating Suspensions 300.0 Payment Schedule Deferrals 216.0 Rainy Day Fund 120.0 Agency Fund Transfers 111.0 Federal Fiscal Relief 100.0 Revenue Adjustment 50.0 House of Representatives Excess Balance Total Savings Net Surplus/(Shortfall) Summary 7.0 1,304.0 $56.1 Tobacco Settlement Securitization: $400 million. At least 21 states and counties have securitized Tobacco Settlement payments. These entities have taken their contractually obli‐ gated payment stream of Tobacco Settlement Payments and sold the payment stream to an entity in exchange for an up‐ front, lump‐sum payment. For Arizona, it is projected that, barring restrictions, as much as $900 million could be generated through securitiza‐ tion. However, due to Proposition 204 and voter protection, the funding generated from Tobacco Settlement Securitization must be used to cover the AHCCCS (Arizona Health Care Cost Con‐ tainment System) population that was expanded by Arizona voters in 2000. In FY 2009, the General Fund requirement to support the AHCCCS Proposition 204 expansion is projected to be $400 million. Additional information regarding this recommendation can be found in Securitization: Overview and Analysis, starting on page 16. Agency Operating Suspensions: $300 million. The Execu‐ tive has identified a number of areas in which to reduce spend‐ ing in the current fiscal year. A list of the proposed reductions can be found in FY 2009 and FY 2010 Recommended Expenditure Suspensions starting on page 20. Included in the savings to be achieved from these suspensions is the following: • Other Human Resources Suspensions: $25 million. All agencies, including elected officials and universities, will be required to return to the General Fund a total of $18.75 million in personnel‐based savings ($15.625 million for non‐university agencies and $3.125 million for the universities) and $6.25 million in performance pay reductions. Payment Schedule Deferrals: $216 million General Fund. The Executive proposes using three additional payment timing opportunities that exist for AHCCCS, the Department of Eco‐ nomic Security (DES), and the State Universities. When the economy recovers and State government realizes excess reve‐ nue, these deferral payments will need to be reversed. The following is a detailed description of each of these payment schedule deferrals: • AHCCCS: $100 million General Fund. AHCCCS has proposed that the June capitation payment to health plans be sus‐ pended to a future date. This would require contract changes with the health plans, and the proposal would be structured in such a manner that smaller plans would defer a half‐month while larger plans would defer a full month. This approach will require interest payments be made at a cost of $6 million in FY 2010. The Executive recommends an interest rate of 2%. The federal government will not share in interest costs on the portion of federal funds deferral, which will place the effective interest rate above 6%. The deferred capitation payments would need to be made within the next 11 24 months. The proposal would also involve deferring some fee‐for‐service payments for up to one month. • DES: $41 million General Fund. The DES payment deferral would push the payments of June 2009 expenses in Child‐ care, Children Services, and Developmental Disabilities into July of FY 2010, rather than administratively adjusting them in the FY 2009 budget. The amount being deferred is ap‐ proximately $41 million. It could be continued indefinitely, pushing the payments from the last month of a fiscal year into July of the following year. There is no impact on clients or providers, because they are already paid on a reim‐ bursement basis. • Universities: $75 million General Fund. The State universities receive their appropriation in monthly allotments, with the final allotment disbursed in June of each fiscal year. The Budget Management Plan would defer the June 2009 pay‐ ment until July 2009, resulting in a one‐time savings for FY 2009. Rainy Day Fund: $120 million. The Executive recommends that part of the FY 2009 shortfall be resolved by transferring $120 million from the Budget Stabilization Fund. After the transfer, the Fund balance will be approximately $10 million. Agency Fund Transfers: $111 million. The Executive has identified more than $100 million in fund transfers that can be made to assist with balancing the FY 2009 budget. A list of these funds can be found on page 18. Federal Fiscal Relief: $100 million. During the most recent economic downturn, which occurred from 2001 to 2003, the federal government provided significant relief to the states, in the form of enhanced federal participation in Medicaid and block grants. President‐Elect Obama has already endorsed the need for a large stimulus package to be enacted shortly after he takes office. In addition, economists have testified before Con‐ gress on the importance of a federal stimulus and the benefit of assisting states. Recently, economist Dr. Mark M. Zandi, chief economist and co‐founder of Moody’s Economy.com, testified before Congress that support of programs like unemployment and Medicaid have a much better stimulus impact on the gross domestic product than further tax cuts. Recent discussions have indicated that the overall stimulus plan could be substantial – as large as $800 billion or more, with estimates of up to $100 billion being targeted for state Medicaid programs. Arizona’s share could be $1 billion or more, which would be used to meet the needs of AHCCCS clients, support education, and create jobs through transportation and other infrastructure projects. For purposes of the Budget Manage‐ ment Plan, the Executive has assumed that federal relief would be $775 million, with $100 million for the current fiscal year and $675 million for FY 2010. Revenue Adjustment: $50 million. For FY 2009, there will be a monthly average of 64 photo radar cameras in place. Based on the number of citations during October, the first month of operation, the Executive projects about 420,000 paid citations during FY 2009, generating approximately $50 million in depos‐ its to the General Fund after expenses. House of Representatives Prior‐Year Appropriation Excess Balance: $7 million. Given the significant budget crisis being 12 faced by the State, all excess funding sources should be utilized to help sustain important governmental operations. The Execu‐ tive recommends that the sizable House balance be transferred to the General Fund. BUDGET MANAGEMENT PLAN FOR FY 2010 Summary: FY 2010 Budget Management Plan ($2,654.7) SHORTFALL (in millions) SAVINGS FROM BALANCING OPTIONS Balance Carried Forward 55.1 Tobacco Settlement Securitization 400.0 Agency Operating Suspensions 675.1 Interest Expense re: Payment Schedule Deferrals (6.0) Lottery Securitization 500.0 Agency Fund Transfers 119.4 Federal Fiscal Relief 675.0 Revenue Adjustments Total Savings Net Surplus/(Shortfall) 258.3 2,676.9 $22.2 Agency Operating Suspensions: $675.1 million. The Ex‐ ecutive Budget contains a number of significant operating suspensions that will be necessary to balance the budget for FY 2010. Education, health care and public safety have been priori‐ ties of the Administration over the last six years. While totaling more than $675 million, this overall plan tries to spread the impact across State government without having a debilitating effect on the provisions of critical services upon which the citizens depend. The guiding principle in developing the recommendations is that, as a community, all Arizonans will have to share in the sacrifice in order to preserve the critical functions that govern‐ ment provides. A detailed list of these proposals and a brief description of each item can be found in the next section, FY 2010 Spending Reductions on page 14. Federal Fiscal Relief: $675 million. As discussed above in the FY 2009 Budget Management Plan, the Executive Budget incorporates a funding estimate associated with proposed fed‐ eral fiscal relief. For FY 2010 the budget anticipated additional federal assistance of $675 million, which is expected to create a corresponding savings to the General Fund. Lottery Securitization: $500 million. The Executive pro‐ poses that the net General Fund revenues from the Lottery be leveraged so that a lump‐sum amount would be received in exchange for the annual revenue stream. The State would still maintain control of the Lottery operations. Under the plan, agencies and programs receiving Lottery proceeds will be held harmless and not impacted by the securitization. The same protection will apply to funds dedicated to repayment of the nearly $1 billion bond package for construction and major maintenance at the State’s universities. Additional detail on this recommendation can be found in the Securitization: Overview and Analysis section, starting on page 16. FY 2010 and FY 2011 Executive Budget Tobacco Settlement Securitization: $400 million. As was detailed in the FY 2009 Budget Management Plan, the Executive recommends that a second year of funding be made available to support the AHCCCS Proposition 204 program for FY 2010. In Arizona it is projected that up to $900 million could be gener‐ ated through securitization, and the Budget Management Plan utilizes $400 million in both FY 2009 and FY 2010 to support AHCCCS coverage. An additional approximate $100 million will be used in FY 2010 to make up for the Tobacco Settlement monies that would be required for debt service. Additional information regarding this recommendation can be found in Securitization: Overview and Analysis, starting on page 16. Agency Fund Transfers: $119.4 million. The Budget Man‐ agement Plan also provides relief to the General Fund through more than $119 million in agency fund transfers: • Continue County Contributions: $28 million. The Executive continues the increased funding from Maricopa County and Pima County for FY 2010. Originally, this funding was util‐ ized for the AHCCCS program, but, due to anticipated fed‐ eral stimulus restrictions, the Executive recommends that funding be deposited into the County Contribution Fund for transfer to the General Fund. • STAN Account of the State Highway Fund: $75 million. Laws 2006, Chapter 344, appropriated $245 million from the Gen‐ eral Fund to the Statewide Transportation Acceleration Needs (STAN) Account. Given the current economic condi‐ tions and the almost $3 billion FY 2010 shortfall, the Budget Management Plan incorporates a transfer of $75 million from the STAN back to the General Fund. Most, if not all, of this transfer may be reversed after the State receives the federal economic stimulus funds referenced earlier in this section. Other funds have been identified for providing assistance to the General Fund in FY 2010. Additional detail on this recom‐ mendation can be found on page 14. Revenue Adjustments: $258.3 million. The Budget Man‐ agement Plan incorporates four modest revenue proposals for FY 2010, none of which is a general tax increase. • Continuation of State Equalization Property Tax Suspension. The Executive Budget allows the suspension of the cost to the State of the equalization property tax to end in 2010 as provided by law. This provision was enacted in 2004 per agreement between the Executive and the Legislature at a time when the state enjoyed a $1 billion surplus. The end of the suspension will save approximately $250 million for the state general fund budget in FY 2010. However, if the legislature elects to extend the suspension, the $250 million impact to the general fund budget can be offset thereby making it fiscally neutral. As an example, the Executive of‐ fers the following proposal for consideration: first, the sus‐ pension of the Motion Picture Tax Credit would save about $17 million in general fund revenues and, second, the es‐ tablishment of an Energy Conservation Assessment at the rate of $0.001 per KWH of electric power generated in Ari‐ Summary zona would raise about $233 million, much of which would be exported to other states. This option could protect criti‐ cally needed revenues while suspending a marginally effec‐ tive tax credit and implementing a conservation‐based assessment. • Estimated Payment Threshold Change: $55 million. The Trans‐ action Privilege Tax estimated June payment is required for businesses that have more than $1 million in State TPT tax liability in the prior calendar year. If the $100,000 threshold (which applied until FY 2007) were reinstated, an estimated additional 4,965 businesses would be required to make the June estimated payment. • Fee Increase: $55.9 million. The Budget Management Plan includes a number of proposed user fees and licenses (see table) that should be increased to reflect the true cost of pro‐ viding services and to more properly reflect the market value associated with these transactions. Many agencies that exist to regulate specific industries would assess higher fees to ensure adequate cost coverage of providing a ser‐ vice. General Fund Impact of Proposed Fee Changes, FY 2010 Agriculture, Department of $10,000,000 Corporation Commission 4,800,000 Environmental Quality, Department of 4,800,000 Health Services, Department of 8,200,000 Insurance, Department of 1,800,000 Liquor Licenses and Control, Department of 11,600,000 Racing, Department of 800,000 Radiation Regulatory Authority 700,000 State Land Department Weights and Measures, Department of 11,000,000 2,200,000 $55,900,000 • Private Prison Fee: $20 million. The Executive proposes that a $5 per day per inmate assessment be imposed on private prisons. Based on the number of out‐of‐state prisoners housed in Arizona, this proposal would generate a net in‐ crease of approximately $20 million in FY 2010 if imple‐ mented by July 1, 2009. • DOR Revenue Generation Proposal: $52.4 million. The Execu‐ tive proposes that 112.0 new FTE positions be authorized for the Department of Revenue, at an annual cost of $9 mil‐ lion, to pursue delinquent taxpayers. This proposal does not involve new fees or taxes, but it does provide the resources to ensure that all citizens and corporations are paying their fair share. • Photo Radar: $75 million. Similar to FY 2009, the Executive Budget continues the Photo Radar safety enforcement ef‐ forts and recognizes the revenue based on early trends that have occurred since implementation. 13 Department of Revenue: Revenue Generation Proposal Plus 40 New Staff Starting April 1, 2009 Revenue Generating Options FTE Net Revenue Staff Increase 40 $19,864,691 Standard Revenue Generation 49 6,616,183 Collections Delinquency Project 23 11,976,119 Automated Bank Match 0 7,550,000 Increase Statutes of Limitations 0 4,204,200 Increase License Fees 0 292,501 Non-Residential Withholding 0 1,859,026 112 $52,362,720 sumes that these savings will also be incorporated into the various health plan capitation rates at the start of the next con‐ tract cycle. Given the dramatic slowdown in the economy and the increase in unemployment, there will be no wage pressures on staffing, and this level of reduction is not anticipated to have an impact on access to services. AHCCCS – Reduce Plan Risk Contingency and Admini‐ stration Funding: $29.7 million. The Executive Budget recom‐ mends that the Risk Contingency for rate setting be reduced by 50% for all Managed Care Organizations (MCOs). The recom‐ mendation would also impose a reduction of 5.88% on all MCO administration funding levels. These reductions would be ap‐ plied to the following: • acute care program (MCOs), • long‐term care (MCOs), FY 2010 SPENDING SUSPENSIONS • developmentally disabled MCO (DES) and its acute care contractors, FY 2010 Recommended Agency Operating Suspensions (in Millions) Incorporate Proposed FY 2009 Reductions Ongoing 229.2 AHCCCS: Freeze Hospital Rates 16.1 AHCCCS: Reduce Provider Rates by 5% 54.6 AHCCCS: Reduce Plan Risk Contingency and Administration 29.7 AHCCCS: Acute Plan Reinsurance Changes 10.1 DHS: Reduce Provider Rates by 5% for Behavioral Health 17.0 DES: Reduce Provider Rates by 5% for Dev. Disabled 12.0 AHCCCS: Impact of Federal Increase in Medicaid Funding (17.6) ADE: Delay Funding of Excess Utilities 46.0 ADE: Reduce Capital Outlay Revenue Limit 25% 61.0 ADE: Fund 50% of Soft Capital 104.0 Commerce: Reduce 21st Century Fund Contribution 10.0 SFB: Reduce Building Renewal for FY10 43.0 SFB: Suspend Part of Building Renewal Grant (in Base) - DOC: Delay Openings (in Base) - DOC: County Responsibility for Short-Term Offenders Suspend Statutory DWR Water Protection Fund Deposit Total 55.0 5.0 675.1 FY 2009 Ongoing Budget Suspensions: $229.2 million. The Executive Budget for FY 2010 continues $229.2 million in oper‐ ating reductions that were recommended as part of the FY 2009 Budget Management Plan. Attached is a listing of the adjust‐ ments made by agency in FY 2009 that will continue into FY 2010. AHCCCS – Hospital Rate Freeze: $16.1 million. The Execu‐ tive Budget recommends that the rate freeze, put in place for FY 2009 for both inpatient and outpatient hospital services, con‐ tinue into FY 2010. It is assumed that these savings will also be incorporated in the health plan capitation rates at the start of the next contract period. AHCCCS – Provider Rate Reduction: $54.6 million. The Executive Budget recommends that AHCCCS reduce all fee‐for‐ service rates by 5%. The only categories of service exempt from this proposal are Hospice, which is required by federal law to use Medicare rates, and Pharmacy. The recommendation as‐ 14 • Behavioral Health (DHS) and the Regional Behavior Health Authorities (RBHAs), • Children’s Rehabilitative Services (DHS) and its contracted MCO, and • Children’s Medical and Dental Plan (DES). AHCCCS – Acute Plan Reinsurance: $10.1 million. The Budget Management Plan provides for lowering by one level the reinsurance thresholds for the Acute Care plan for the con‐ tract year ending 2010. This would result in a one‐time saving from the timings of payments as dollars are moved from capita‐ tion to reinsurance. The current thresholds from which plans can choose are $20,000, $35,000 and $50,000. Department of Health Services – 5% Provider Rate Reduc‐ tion: $17 million. Consistent with the changes made in the AHCCCS program, the Budget Management Plan incorporates a reduction of 5% for Behavioral Health providers. The savings estimate anticipates a July 1, 2009, start date and that the reduc‐ tions would be incorporated into the capitation rates for all RBHAs. Department of Economic Security – 5% Provider Rate Re‐ duction: $12 million. Consistent with the changes made in the AHCCCS program, the Budget Management Plan incorporates a reduction of 5% for all Developmentally Disabled (DD) pro‐ gram providers. The savings estimate anticipates a July 1, 2009, start date and that the reductions would be incorporated into the capitation rates for the DD program and the contracted health plans. COST: Impact of Federal Increase in Medicaid Funding: ($17.6 million). The Budget Management Plan incorporates the potential impact of enhanced federal funding that is anticipated to be included in the next federal stimulus package. However, the $140 million in Medicaid savings identified above for FY 2010 assumes no change in the federal match rate. An increase of 4.0% in federal matching funds would reduce the size of the savings by $17.6 million. Department of Education (ADE) – Expenditure Adjust‐ ments: $211 million. The Executive Budget protects education to the greatest extent possible. However, with the State facing a shortfall of almost $3 billion in FY 2010, some modest reduc‐ tions are prerequisites for balancing the budget. The proposals FY 2010 and FY 2011 Executive Budget below are aimed at protecting teacher salaries and classroom sizes. • ADE Delay Funding of Excess Utilities: $46 million. Due to the significant nature of the State’s funding shortfall, the Execu‐ tive Budget does not include funding for the excess utilities fund shift that was planned to transition from the property tax in FY 2010. • ADE Reduce Capital Outlay Revenue Limit 25%: $61 million. The Executive Budget reduces Capital Outlay Revenue Lim‐ it (CORL) funding by 25%, which is approximately the amount that has remained in place for capital funding. • ADE Fund 50% of Soft Capital: $104 million. The Executive Budget recommends that Soft Capital funding for K‐12 be reduced by 50%. This funding is outside the Proposition 301 voter protection requirements. During very difficult finan‐ cial times, all districts will need to reduce these types of ex‐ penditures. Arizona 21st Century Fund Deposit: $10 million. The FY 2010 Budget Management Plan reduces the commitment to the 21st Century Fund from the FY 2010 appropriated level of $25 million to $15 million. The Executive believes that, in light of the benefits to the general public and the fact that income is Summary being generated, a deposit of at least $15 million is needed, even in these challenging fiscal times. School Facilities Board – Building Renewal Reduction: $43 million. Due to limited resources, the Executive Budget provides half of the Building Renewal Funding that was appro‐ priated for FY 2007 and FY 2008. This provides a total of $43 million for school district to meet important building mainte‐ nance needs in FY 2010. Department of Corrections – County Responsibility for Short‐Term Offenders: $55 million. The FY 2010 Budget Man‐ agement Plan would require that any inmate who has a term of one year or less be sentenced to the counties and not the Ari‐ zona Department of Corrections. The proposed shifting of incarceration of short‐term offenders is consistent with a prac‐ tice employed by many other states. Department of Water Resources – Suspend Statutory De‐ posit to Water Protection Fund: $5 million. Current statute requires a $5 million annual appropriation to the Water Protec‐ tion Fund, which is administered by the Department of Water Resources. Due to the economic challenges facing the State, the FY 2010 Budget Management Plan suspends this allocation.• 15 BUDGET MANAGEMENT PLAN Securitization: Overview and Analysis Securitization of tobacco settlement payments and Lottery proceeds allows State government to put future revenues to work in relieving pressure on the General Fund TOBACCO SETTLEMENT Arizona is one of 45 states that receive payments from to‐ bacco companies pursuant to a Master Settlement Agreement (MSA). The MSA provides that the states will be collectively compensated annually with an approximate $8 billion payment for their health and social services related costs attributable to the use of tobacco. Arizona’s share of this $8 billion aggregate annual tobacco settlement revenue stream is an estimated $120 million. In theory, states could receive these annual distributions in perpe‐ tuity, as no ending point is contained in the MSA. Arizona has historically dedicated the entire $120 million to meet the state funds matching requirement for AHCCCS, Arizona’s Medicaid program. The use of the match for this purpose is mandated by statutory provisions that were enacted by voter initiative in 2000. This initiative is subject to voter protection provisions contained within the Arizona constitution that prohibit the Legislature from amending an initiative unless the amendment (a) furthers the initiative’s purpose and (b) is approved by a three‐fourths majority vote of the Legislature. Securitization in Concept. To help balance the FY 2009 and FY 2010 budgets, the State would issue bonds totaling $900 million in fiscal year 2009 that would be “securitized” through a pledge of $90 million of the $120 million annual MSA payment for annual debt service payments on the issued bonds. The term of the bonds is anticipated to be 15 to 20 years, depending upon market conditions, interest rates and other factors. It is intended that: • $400 million of the proceeds of the bond sale will be used to assist in balancing the FY 2009 budget and • $500 million will be used for budget‐balancing purposes in FY 2010. The $500 million used in FY 2010 will generate a net Gen‐ eral Fund savings of $410 million, since approximately $90 million will be used to replace the Tobacco Settlement funds that will be utilized for debt service. Securitization in Practice. In order to make this concept work in the financial markets and the policymaking arena, there are certain conditions or understandings that must be prerequi‐ site to a successful financing of the tobacco settlement funds: 1. The structure of the financing should provide for no debt service in FY 2009 and full debt service payments in FY 2010, the latter to be partially offset by interest earnings on the unused principle amount. 2. By amortizing $900 million of the MSA revenue stream, the General Fund will need to provide the $90 million matching requirement for AHCCCS in FY 2010 and thereafter. 3. Given current bond market conditions, investors will re‐ quire a “backstop” source of revenue to make the bonds 16 marketable. Specifically, the backstop revenue will ensure that if MSA annual revenues should diminish below the debt service requirement level of $90 million, a second source of revenue will be available to meet the State’s debt service obligations. Using General Fund revenues as the backstop in the unlikely event that the MSA revenues prove insufficient in any year may violate Arizona’s Constitutional restriction on the State’s ability to issue general obligation debt. To avoid this potential problem, it is proposed that the State use the Vehicle License Tax (VLT) as the backstop revenue source because it is not a General Fund revenue source. The portion of the VLT tax revenue that is deposited in the Highway User Revenue Fund (HURF) for use by the State is more than double ($192 million in FY 2008) the debt service requirement under this proposal. If, in any fiscal year, the VLT had to be used to make any payments on the bonds secured by the tobacco MSA, payments from the General Fund would be used to offset the lost revenue to the HURF. LOTTERY PROCEEDS Each year, the Arizona Lottery disburses approximately $100 million: to the General Fund (approximately $46.5 million) and to a number of non‐General Fund beneficiaries, including the Arizona Heritage Fund, local transportation funds, county assistance, and various health programs. After the above‐mentioned recipients receive their statutory distributions, any surplus flows to the General Fund. It is fore‐ cast that, within 10 years, the surplus will exceed $40 million. Anticipated Beneficiary Distribution, FY 2010 General Fund ......................................$46 million Local Transportation Funds ................... 23 million Healthy Arizona .................................... 22 million Heritage Fund ...................................... 20 million University Capital.................................. 13 million Mass Transit......................................... 10 million County Assistance................................... 7 million Economic Development........................... 4 million Homeless Services .................................. 1 million Water Supply ...................................................0 Community Protection........................................0 Securitization in Concept. Securitizing the existing General Fund cash flow stream would provide up to $500 million of one‐time capital. To accomplish this financing approach, Lot‐ tery revenues would be pledged to the holders of the Lottery bonds, similar to other revenue bonds issued by State agencies such as ADOT. Such a securitization would reduce annual General Fund revenues by the bond payment amount of ap‐ proximately $45 million per year, which would start in the fiscal year following the issuance. While Lottery revenues would be FY 2010 and FY 2011 Executive Budget pledged to bondholders, this bond structure would not require changing the order of distribution of Lottery revenues currently in statute. Securitization in Practice. The strongest credit, and the lowest borrowing cost, would be achieved through the issuance of Lottery revenue bonds that are secured by a first lien on, and pledge of, all Lottery proceeds received by the State, except for Lottery proceeds to be distributed pursuant to the Healthy Arizona initiative. This distribution was voter‐created after 1998 (and therefore subject to the provisions of Prop. 105) and cannot be subordinated without a three‐fourths vote of the Legislature. While the bonds would be secured by a lien on all unpro‐ tected Lottery revenues, the bond issue would be structured and sized conservatively so as to be payable only from the portion of revenues distributed to the General Fund. Specifi‐ cally, the proposal would be to limit the annual debt service payment on the bonds to no more than $45 million per year, well within the annual amount distributed to the General Fund. As a result, under this proposal, none of the statutory distribu‐ Summary tions of Lottery revenues that occur prior to the distribution to the General Fund would be put in jeopardy, and the State would be able to issue Lottery revenue bonds with the highest possible credit rating and, therefore, the lowest borrowing cost. For purposes of this proposal, the bond assumptions include a 20‐year term, a 6% interest rate, and debt payments of $45 mil‐ lion. Legislative Changes. Issuance of the Lottery revenue bonds would require Legislative authorization. The legislation would be similar to current statutory language authorizing the issu‐ ance of revenue bonds by other State agencies, such as ADOT for its Highway User Revenue Bonds. Senior Lien Lottery Bonds – Anticipated Proceeds. Based on an assumed annual debt payment of $45 million over a 20‐ year financing term, approximately $500 million of bond pro‐ ceeds could be obtained. The bonds are assumed to be issued on a tax‐exempt basis, subject to meeting the various rules and requirements under the federal Tax Code. 17 FY 2009 BUDGET MANAGEMENT PLAN DETAIL FY 2009 Recommended Fund Transfers Fund Name AHCCCS Intergovernmental Service Fund Air Quality Fund Arizona Arts Endowment Expend Trust Fund Arizona Water Banking Fund Arizona Water Protection Fund Arson Detection Reward Fund Auditor General - Audit Services Fund Arizona Scholarships for Pupils with Disabilities Behavioral Health Examiners Fund Board of Respiratory Care Examiners Fund Child/Family Services Training Program Fund Citizens Clean Election Fund Commerce Development Bond Fund Constable Ethics Standards and Training Fund Criminal Justice Enhancement Fund DEQ Emissions Inspection Fund DOR Estate & Unclaimed Fund ATP - Phoenix Closure Fund Displaced Pupils Choice Grant Fund DOR Liability Setoff Fund DPS Peace Officers Training Fund Drug and Gang Prevention Fund Drug Treatment and Education Fund - Parents Commission E-Learning Fund Gift Shop Revolving Fund Greenfields Program Fund Industrial Commission Revolving Fund Information Technology Fund Juvenile Corrections - CJEF Distributions Fund Library/Archives Miscellaneous Collections Fund Livestock Board Seizure Fund Off-Highway Vehicle Recreation Fund Pipeline Safety Revolving Fund Radiation Certification Fund Real Estate Recovery Fund Receivership Revolving Fund Records Services Fund Recycling Fund Registrar of Contractors Fund Residential Contractors Recovery Fund Residential Utility Consumer Office Revolving Fund Risk Management Fund School Facilities Revenue Bond Debt Service Fund State Highway Fund State Parks Enhancement Fund State School Trust Revenue Bond Debt Service Fund Teacher Certification Fund Technical Registration Board Fund Underground Storage Tank Revolving Fund Voluntary Vehicle Repair Fund Water Quality Assurance Revolving Fund Water Quality Fee Fund Wine Commission Fund TOTAL 18 Transfer Amount 1,500,000 200,000 5,000,000 700,000 400,000 35,000 200,000 729,000 400,000 150,000 300,000 5,000,000 100,000 150,000 400,000 100,000 200,000 2,700,000 1,755,700 20,000 150,000 305,000 1,000,000 2,997,200 50,000 165,000 50,000 150,000 37,000 50,000 50,000 400,000 200,000 9,000 75,000 200,000 150,000 335,000 400,000 200,000 44,800 9,000,000 2,290,000 70,000,000 100,000 990,000 1,000,000 25,000 200,000 50,000 200,000 50,000 25,000 110,987,700 FY 2010 and FY 2011 Executive Budget FY 2010 BUDGET MANAGEMENT PLAN DETAIL FY 2010 Recommended Fund Transfers Fund Name Agriculture Commercial Feed Fund Agriculture Dangerous Plants Fund Agriculture Fertilizer Materials Fund Agriculture Seed Law Fund AHCCCS Fund Aquaculture Fund Arizona Department of Housing Program Fund Board of Fingerprinting Fund Breeders Award Fund Child Fatality Review Fund Clean Water Revolving Fund Community-Based Marriage & Communication Fund Budget Neutrality Compliance Fund DHS Substance Abuse Treatment Fund Domestic Violence Shelter Fund DPS FBI Fingerprinting Fund Drug and Gang Prevention Fund Fingerprint Clearance Card Fund Livestock Board Seizure Fund Military Installation Fund Motorcycle Safety Fund Naturopathic Board Fund Off-Highway Vehicle Recreation Fund Postsecondary Education Voucher Fund Racing/Betterment Fund Receivership Revolving Fund Spinal and Head Injuries Trust Fund State Highway Fund State Parks Enhancement Fund Student Tuition Recovery Fund Technical Registration Board Fund Telecommunication for the Deaf Fund Victims' Rights Implementation Fund Vital Records Electronic Systems Fund TOTAL Summary Transfer Amount 25,000 25,000 25,000 15,000 2,000,000 5,000 700,000 100,000 100,000 300,000 201,400 8,300 28,000,000 500,000 700,000 81,000 100,000 100,000 50,000 4,000,000 100,000 110,000 100,000 800,000 200,000 2,000,000 800,000 75,000,000 100,000 500,000 25,000 500,000 1,500,000 600,000 119,370,700 19 FY 2009 AND FY 2010 BUDGET MANAGEMENT PLAN DETAIL FY 2009 and FY 2010 Recommended Expenditure Suspensions FY 2009 Recommended Expenditure Suspensions Accountancy Board Other Funds 164,507 0 Acupuncture Board Other Funds 9,044 9,044 1,417,200 3,650,000 1,505,922 1,950,000 Office of Administrative Hearings General Fund Other Funds 140,000 111,870 140,000 111,870 Department of Agriculture General Fund Other Funds 600,000 446,957 600,000 446,957 11,920,600 10,320,600 Commission on the Arts General Fund Other Funds 200,000 115,948 180,000 0 Attorney General - Department of Law General Fund Other Funds 606,790 950,973 606,790 950,973 Auditor General General Fund Other Funds 927,600 118,993 927,600 118,993 Barber Examiners Other Funds 28,280 28,280 Behavioral Health Examiners Other Funds 95,750 95,750 Chiropractic Board Other Funds 36,428 36,428 Capital Post Conviction Public Defender Office General Fund 50,000 50,100 State Board for Charter Schools General Fund 41,100 41,100 319,400 2,316,634 319,400 1,011,956 16,000,000 24,000,000 400,000 0 400,000 400,000 Department of Administration General Fund Other Funds Arizona Health Care Cost Containment System General Fund Department of Commerce General Fund Other Funds Community Colleges General Fund Corporation Commission General Fund Other Funds 20 FY 2009 Recommended Expenditure Suspensions Continued into FY 2010 FY 2010 and FY 2011 Executive Budget FY 2009 Recommended Expenditure Suspensions FY 2009 Recommended Expenditure Suspensions Continued into FY 2010 Department of Corrections General Fund Other Funds 6,000,000 6,284,670 0 5,000,000 Criminal Justice Commission Other Funds 1,134,413 1,134,413 Schools for the Deaf and the Blind General Fund 369,000 369,000 Deaf and the Hard of Hearing Other Funds 210,739 460,000 77,667 10,000 5,888 5,888 44,730 44,730 Department of Economic Security General Fund* Other Funds 22,324,700 726,500 19,431,300 271,000 Department of Education General Fund Other Funds 26,773,700 797,174 4,108,400 Department of Emergency and Military Affairs General Fund Other Funds 1,389,000 22,379 2,628,600 22,379 Department of Environmental Quality General Fund Other Funds 1,500,000 9,173,100 1,500,000 3,597,500 Governor's Office for Equal Opportunity General Fund 30,000 30,000 Board of Executive Clemency General Fund 40,900 40,900 Department of Financial Institutions General Fund Other Funds 200,000 101,031 0 101,031 Department of Fire, Building and Life Safety General Fund Other Funds 400,000 44,860 400,000 0 192,600 1,653,813 152,600 1,653,813 12,000 12,000 1,402,900 1,402,900 120,000 120,000 Dental Examiners Other Funds Dispensing Opticians Other Funds Drug and Gang Prevention Resource Center Other Funds Office of the State Forester General Fund Other Funds Funeral Directors and Embalmers Other Funds Game and Fish Other Funds Arizona Geological Survey General Fund Summary 21 FY 2009 Recommended Expenditure Suspensions Government Information Technology Agency General Fund Other Funds 250,000 349,124 250,000 349,124 Governor's Office General Fund 475,000 475,000 75,000 75,000 5,982,700 878,600 5,982,700 878,600 Arizona Historical Society General Fund Other Funds 400,000 40,782 400,000 40,782 House of Representatives General Fund 723,600 723,600 3,229,499 3,229,499 24,000 24,000 1,404,137 2,808,274 Department of Insurance General Fund Other Funds 222,600 30,622 264,000 40,000 Joint Legislative Budget Committee General Fund 152,500 152,500 10,000,000 10,000,000 2,500,000 37,002 3,000,000 37,002 10,000,000 18,200 15,000,000 18,200 Legislative Council General Fund 287,000 287,000 Library, Archives and Public Records General Fund Other Funds 351,400 13,300 351,400 13,300 Department of Liquor Licenses and Control General Fund Other Funds 335,900 48,664 387,000 84,400 Medical Board Other Funds 417,017 417,017 Governor's Office of Strategic Planning and Budgeting General Fund Department of Health Services General Fund Other Funds Housing Other Funds Commission of Indian Affairs Other Funds Industrial Commission Other Funds Judiciary General Fund Department of Juvenile Corrections General Fund Other Funds Land Department General Fund Other Funds 22 FY 2009 Recommended Expenditure Suspensions Continued into FY 2010 FY 2010 and FY 2011 Executive Budget FY 2009 Recommended Expenditure Suspensions Board of Medical Student Loans General Fund FY 2009 Recommended Expenditure Suspensions Continued into FY 2010 120,000 120,000 Mine Inspector General Fund 54,000 54,000 Naturopathic Board Other Funds 20,000 20,000 Navigable Streams Adjudication Commission General Fund 20,000 20,000 289,443 81,843 Nursing Care Administrators Board Other Funds 11,839 11,839 Occupational Therapy Examiners Other Funds 17,143 17,143 194,373 194,373 State Parks Board General Fund Other Funds 0 6,283,054 0 3,200,000 Power Authority Other Funds 2,189,747 2,189,747 Personnel Board General Fund 40,100 40,100 1,000,000 103,000 1,000,000 6,000 50,000 50,000 14,750,000 4,746,000 7,852,400 3,653,196 Department of Racing General Fund Other Funds 250,000 186,462 300,000 186,462 Radiation Regulatory Agency General Fund 200,000 180,000 Department of Real Estate General Fund Other Funds 320,000 3,850 350,000 5,000 1,500,000 1,500,000 Nursing Other Funds Office of Pest Management Other Funds Commission for Postsecondary Education General Fund Other Funds Prescott Historical Society General Fund Department of Public Safety General Fund Other Funds Board of Regents General Fund Summary 23 FY 2009 Recommended Expenditure Suspensions FY 2009 Recommended Expenditure Suspensions Continued into FY 2010 Registrar of Contractors Other Funds 606,500 400,000 Residential Utility Consumer Office Other Funds 122,003 0 18,312 18,312 1,000,000 42,500 1,000,000 60,000 12,755,899 200,000 70,000 70,000 478,900 478,900 Board of Tax Appeals General Fund 30,000 30,000 Technical Registration Other Funds 22,164 40,000 Office of Tourism General Fund 2,000,000 2,000,000 Department of Transportation General Fund Other Funds 10,000 7,089,100 0 3,150,000 State Treasurer General Fund 70,000 70,000 Universities General Fund 50,000,000 50,000,000 Veterans' Services Military Installation Fund 1,729,126 1,729,126 Department of Water Resources General Fund Other Funds 4,000,000 500,000 4,000,000 80,000 160,000 160,000 2,000,000 0 25,000,000 12,600,000 300,000,000 229,155,056 Respiratory Care Examiners Other Funds Department of Revenue General Fund Other Funds School Facilities Board General Fund Secretary of State - Department of State General Fund Senate General Fund Department of Weights and Measures General Fund Capital Outlay Appropriations General Fund HR Related Suspensions Totals *These proposed cut figures were originally based on one half of a year’s appropriation. Beginning January 1, for each month that passes without a Legislative mandate to reduce or eliminate these programs, 1/6 of the proposed cut amount will no longer be available. These programs cannot be reduced or eliminated without legislation. 24 FY 2010 and FY 2011 Executive Budget Budget Summary General Fund Operating Budgets Summary (Dollars in Thousands) Arizona Department of Administration Office of Administrative Hearings Arizona Department of Agriculture Arizona Health Care Cost Containment System Arizona Commission on the Arts Attorney General ‐ Department of Law 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 Arizona State Schools for the Deaf and the Blind Department of Economic Security FY 2008 Expendi‐ tures FY 2009 Appro‐ priation 35,359.3 27,109.6 FY 2010 Changes and Adjustments 0.0 FY 2010 Executive Budget FY 2011 Changes and Adjustments 27,109.6 N/A FY 2011 Executive Budget N/A 1,284.7 1,284.7 0.0 1,284.7 0.0 1,284.7 11,903.8 11,640.4 0.0 11,640.4 0.0 11,640.4 1,219,660.1 1,425,272.3 348,427.2 1,773,699.5 N/A N/A 2,023.4 1,930.8 0.0 1,930.8 0.0 1,930.8 23,964.8 23,107.4 668.3 23,775.7 668.3 23,775.7 779.2 870.9 0.0 870.9 0.0 870.9 811.3 828.7 0.0 828.7 0.0 828.7 13,470.4 7,385.2 2,431.8 9,817.0 2,431.8 9,817.0 167,744.8 147,679.8 765.8 148,445.6 N/A N/A 5,655.6 4,791.7 0.0 4,791.7 0.0 4,791.7 884,274.5 947,476.0 76,809.0 1,024,285.0 N/A N/A 1,067.7 1,172.0 0.0 1,172.0 0.0 1,172.0 20,226.8 22,011.7 0.0 22,011.7 0.0 22,011.7 785,264.1 808,328.1 108,968.2 917,296.3 N/A N/A N/A 3,943,009.3 4,141,201.0 246,914.0 4,388,115.0 N/A Department of Emergency and Military Affairs 10,814.0 13,920.3 387.0 14,307.3 1,349.2 15,269.5 Department of Environmental Quality 17,323.1 24,080.2 5,000.0 29,080.2 5,000.0 29,080.2 249.2 249.3 0.0 249.3 0.0 249.3 Department of Education Governorʹs Office for Equal Opportunity State Board of Equalization 638.9 656.2 0.0 656.2 0.0 656.2 Board of Executive Clemency 1,097.2 1,097.6 0.0 1,097.6 0.0 1,097.6 State Department of Financial Institutions 3,882.7 3,809.3 0.0 3,809.3 0.0 3,809.3 Department of Fire, Building and Life Safety 3,609.8 3,586.8 0.0 3,586.8 0.0 3,586.8 Arizona State Forester 8,227.5 6,921.9 0.0 6,921.9 0.0 6,921.9 Arizona Geological Survey 1,101.3 1,102.5 0.0 1,102.5 0.0 1,102.5 Government Information Technology Agency 1,744.9 3,455.7 0.0 3,455.7 0.0 3,455.7 Office of the Governor 6,621.1 7,136.0 0.0 7,136.0 0.0 7,136.0 Governorʹs Office of Strategic Planning and Budgeting 2,230.7 2,198.5 0.0 2,198.5 0.0 2,198.5 577,756.1 611,507.2 75,237.4 686,744.6 N/A N/A 4,430.2 4,430.9 0.0 4,430.9 0.0 4,430.9 762.6 762.8 0.0 762.8 0.0 762.8 Department of Health Services Arizona Historical Society Prescott Historical Society of Arizona Arizona Commission of Indian Affairs 212.2 234.4 0.0 234.4 0.0 234.4 7,233.1 7,369.7 25.4 7,395.1 25.4 7,395.1 126,611.4 126,324.4 0.0 126,324.4 N/A N/A Department of Juvenile Corrections 80,019.3 74,700.4 3,700.0 78,400.4 N/A N/A State Land Department 17,828.7 16,438.5 25.0 16,463.5 25.0 16,463.5 76.8 76.9 1.4 78.3 1.4 78.3 Auditor General 17,480.1 17,502.6 0.0 17,502.6 0.0 17,502.6 House of Representatives 12,152.1 13,653.4 0.0 13,653.4 0.0 13,653.4 727.8 2,877.0 0.0 2,877.0 0.0 2,877.0 Department of Insurance Judiciary Law Enforcement Merit System Council Joint Legislative Budget Committee Summary 25 FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 Changes and Adjustments FY 2010 Executive Budget FY 2011 Changes and Adjustments FY 2011 Executive Budget Legislative Council 5,299.1 5,414.7 0.0 5,414.7 0.0 5,414.7 Arizona State Library, Archives & Public Records 7,445.9 7,378.9 0.0 7,378.9 0.0 7,378.9 Senate 7,531.5 9,036.2 0.0 9,036.2 0.0 9,036.2 Department of Liquor Licenses and Control 3,464.1 3,474.8 0.0 3,474.8 0.0 3,474.8 Board of Medical Student Loans 1,500.0 1,121.0 0.0 1,121.0 0.0 1,121.0 State Mine Inspector 1,635.1 1,568.4 0.0 1,568.4 0.0 1,568.4 Department of Mines and Mineral Resources 924.5 947.8 0.0 947.8 0.0 947.8 Arizona Navigable Stream Adjudication Commission 217.6 180.8 0.0 180.8 0.0 180.8 State Board of Nursing 125.4 167.3 0.0 167.3 0.0 167.3 Arizona Board of Osteopathic Examiners State Parks Board Personnel Board 0.0 0.0 411.9 411.9 0.0 0.0 27,784.5 28,463.2 0.0 28,463.2 0.0 28,463.2 349.0 372.4 0.0 372.4 0.0 372.4 Arizona Pioneersʹ Home 1,123.9 24.0 0.0 24.0 0.0 24.0 Commission for Postsecondary Education 3,725.3 4,377.4 0.0 0.0 State Board of Psychologist Examiners Department of Public Safety (400.0) 463.0 3,977.4 (400.0) 3,977.4 463.0 0.0 0.0 65,483.5 118,648.7 63,459.7 63,101.2 2,023.8 Arizona Department of Racing 2,673.7 2,623.3 0.0 2,623.3 0.0 2,623.3 Radiation Regulatory Agency 1,548.6 1,775.3 (20.0) 1,755.3 (20.0) 1,755.3 (358.5) Arizona Rangersʹ Pension 13.4 13.7 0.3 14.0 0.6 14.3 Department of Real Estate 4,365.5 4,236.5 40.0 4,276.5 40.0 4,276.5 Department of Revenue 74,391.8 73,918.6 122.4 74,041.0 122.4 74,041.0 School Facilities Board 73,789.5 101,217.2 103,020.3 204,237.5 N/A N/A 7,047.4 6,980.7 3,710.7 600.0 7,580.7 269.4 310.6 0.0 310.6 0.0 310.6 15,488.0 15,022.9 982.0 16,004.9 1,800.0 16,822.9 75.7 84.6 0.0 84.6 N/A N/A Department of State ‐ Secretary of State State Board of Tax Appeals Arizona Office of Tourism Department of Transportation (3,270.0) State Treasurer 21,000.3 5,075.3 0.0 5,075.3 0.0 5,075.3 Arizona Board of Regents 19,706.2 20,342.4 0.0 20,342.4 N/A N/A 404,668.4 396,428.7 3,135.6 399,564.3 N/A N/A 25,471.1 30,489.2 565.4 31,054.6 N/A N/A ASU ‐ Tempe ASU ‐ Polytechnic 52,739.0 53,279.7 738.5 54,018.2 N/A N/A Northern Arizona University 159,465.1 161,560.9 5,712.4 167,273.3 N/A N/A University of Arizona ‐ Main Campus 351,637.2 340,316.6 1,497.0 341,813.6 N/A N/A 80,548.0 77,996.6 0.0 77,996.6 N/A N/A ASU ‐ West University of Arizona ‐ Health Sciences Center Department of Veteransʹ Services 8,758.1 8,399.5 0.0 8,399.5 0.0 8,399.5 Department of Water Resources 22,330.8 17,858.1 2,450.0 20,308.1 7,582.6 25,440.7 1,603.4 1,593.6 9,526,695.8 9,961,693.4 Department of Weights and Measures General Fund Operating Total 26 (9.0) 1,584.6 984,441.8 10,946,135.2 (9.0) 21,241.5 1,584.6 491,620.2 FY 2010 and FY 2011 Executive Budget STATE OF ARIZONA OTHER APPROPRIATED FUNDS * REVENUE SUMMARY FY 2008 THROUGH FY 2010 (in thousands) TAXES Motor Fuel Taxes FY 2008 Actual FY 2009 Estimate FY 2010 Estimate 689,272.4 729,991.3 713,955.0 Property Taxes 21,238.6 22,917.0 20,160.0 Sales and Use Taxes 13,545.6 13,286.4 12,972.1 209,158.6 145,466.8 145,629.3 Insurance Premium Taxes 42,959.3 36,211.4 34,293.6 Motor Carrier License Tax 20,677.6 21,670.6 26,389.2 373,876.9 380,112.3 433,825.0 42,104.7 38,086.2 37,855.6 1,412,833.7 1,387,742.0 1,425,079.8 340,297.3 336,553.5 367,182.1 1,628,154.1 1,653,573.1 1,749,365.9 91,004.7 98,370.1 97,431.8 Miscellaneous Revenues 330,507.7 459,485.5 435,348.3 Lottery 212,881.5 481,900.0 481,900.0 2,602,845.3 3,029,882.2 3,131,228.1 1,837,704.1 1,553,332.8 1,591,440.0 5,853,383.1 5,970,957.0 6,147,747.9 Luxury Taxes Vehicle License Tax Other Taxes TOTAL TAXES OTHER REVENUES Licenses, Fees & Permits Charges for Service 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 ʺOther Funds Budget Summaryʺ are for the appropriated portion of these funds only and may represent only a small portion of the fundsʹ total expenditures. There are several funds where a General Fund appropriation is deposited into an ʺOther Appropriated Fundʺ and these deposits are reflected in the figures above. Summary 27 Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget State Board of Accountancy Accountancy Board Fund 1,488.4 2,350.1 (458.0) 120.1 129.2 Personnel Division Fund 17,798.6 18,418.0 Capital Outlay Stabilization Fund 11,975.9 13,000.6 0.0 Corrections Fund 700.4 732.3 Air Quality Fund 573.9 850.1 4,784.4 145.0 Motor Pool Revolving Fund State Surplus Property Fund 1,892.1 (458.0) 1,892.1 Acupuncture Board of Examiners Acupuncture Board of Examiners Fund 0.0 129.2 12.9 142.1 17,300.0 N/A N/A 13,000.6 N/A N/A 0.0 732.3 N/A N/A 0.0 850.1 N/A N/A 5,487.3 0.0 5,487.3 N/A N/A 0.0 0.0 0.0 N/A N/A 11,575.1 12,726.8 0.0 12,726.8 N/A N/A 2,709.5 4,258.0 0.0 4,258.0 N/A N/A Arizona Department of Administration Special Employee Health Fund Highway User Revenue Fund (1,118.0) 151.0 449.3 0.0 449.3 N/A N/A Risk Management Fund 73,245.7 93,491.1 6,722.1 100,213.2 N/A N/A Automation Operations Fund 23,261.8 24,087.5 0.0 24,087.5 N/A N/A 4,103.3 7,891.8 0.0 7,891.8 N/A N/A 151,024.6 181,392.8 5,604.1 186,996.9 0.0 0.0 14.4 14.5 0.0 14.5 0.0 14.5 Admin ‐ Surplus Property/Federal Fund Telecommunications Fund Agency Total Office of Administrative Hearings Healthcare Group Fund Arizona Department of Agriculture Agricultural Consulting/Training Program Fund 104.8 106.7 0.0 106.7 0.0 106.7 Agriculture Commercial Feed Fund 298.7 300.3 0.0 300.3 0.0 300.3 Egg and Egg Product Control Fund 671.1 897.8 102.9 1,000.7 102.9 1,000.7 Pesticide Fund 371.6 386.2 20.8 407.0 20.8 407.0 0.0 40.0 60.0 100.0 60.0 100.0 Agriculture Dangerous Plants Fund Agriculture Seed Law Fund 54.7 54.3 35.5 89.8 35.5 89.8 Livestock Custody Fund 52.2 79.4 40.6 120.0 40.6 120.0 Fertilizer Materials Fund 307.7 306.1 182.2 488.3 182.2 488.3 Citrus, Fruit, and Vegetable Revolving Fund 873.1 1,087.0 0.0 1,087.0 0.0 1,087.0 Aquaculture Fund 6.8 9.2 110.4 194.7 2,851.1 3,461.7 Tobacco Tax and Health Care Fund 60,727.2 62,886.2 Tobacco Products Tax Fund 24,205.2 25,716.5 AZ Protected Native Plant Fund Agency Total 0.0 (30.7) 9.2 164.0 0.0 (30.7) 9.2 164.0 3,873.0 411.3 3,873.0 (10,487.1) 52,399.1 N/A N/A (3,756.5) 21,960.0 N/A N/A N/A 411.3 Arizona Health Care Cost Containment System 133,887.4 145,970.9 (7,163.0) 138,807.9 N/A Budget Neutrality Compliance Fund 9,709.9 48,634.3 (45,671.8) 2,962.5 N/A N/A Healthcare Group Fund 5,088.1 6,526.8 6,526.8 N/A N/A Temporary Medical Coverage Fund 1,975.4 3,247.2 0.0 N/A N/A Childrenʹs Health Insurance Program Fund 28 0.0 (3,247.2) FY 2010 and FY 2011 Executive Budget Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation 235,593.2 292,981.9 607.5 621.8 2,134.8 142.6 FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget Arizona Health Care Cost Containment System Agency Total (70,325.6) 222,656.3 0.0 0.0 0.0 621.8 0.0 621.8 3,948.7 0.0 3,948.7 0.0 3,948.7 239.9 0.0 239.9 0.0 239.9 State Board of Appraisal Board of Appraisal Fund Attorney General ‐ Department of Law Consumer Protection/Fraud Revolving Fund Attorney General Antitrust Revolving Fund Attorney General Collection Enforcement Fund 3,640.0 4,916.3 0.0 4,916.3 0.0 4,916.3 13,127.6 13,378.8 0.0 13,378.8 0.0 13,378.8 Victims Rights Fund 3,242.9 3,277.4 0.0 3,277.4 0.0 3,277.4 Risk Management Fund 9,138.5 9,771.5 0.0 9,771.5 0.0 9,771.5 Attorney General Legal Services Cost Allocation Fund 6,669.8 6,682.9 0.0 6,682.9 0.0 6,682.9 38,096.2 42,215.5 0.0 42,215.5 0.0 42,215.5 5,435.3 6,016.7 0.0 6,016.7 0.0 6,016.7 272.1 328.2 0.0 328.2 21.0 349.2 1,342.4 1,367.2 72.9 1,440.1 78.9 1,446.1 0.0 500.0 0.0 500.0 0.0 500.0 617.1 520.4 (45.6) 474.8 (55.6) 464.8 279.0 286.2 0.0 286.2 0.0 286.2 Attorney General Agency Services Fund Agency Total Automobile Theft Authority Automobile Theft Authority Fund Board of Barber Examiners Barber Examiners Board Fund Board of Behavioral Health Examiners Behavioral Health Examiners Fund Arizona Biomedical Research Commission Health Research Fund State Board of Chiropractic Examiners Chiropractic Examiners Board Fund Department of Commerce Lottery Fund Commerce Development Bond Fund Commerce and Economic Development Fund Oil Overcharge Fund Agency Total 0.0 140.4 144.7 1,881.8 3,068.7 0.0 184.9 2,301.2 3,684.5 (250.0) 3,434.5 (250.0) 3,434.5 11,671.1 12,147.0 16.8 12,163.8 76.5 12,223.5 13,444.8 14,467.9 0.0 14,467.9 0.0 14,467.9 47.4 0.0 0.0 0.0 0.0 0.0 (250.0) 0.0 144.7 2,818.7 184.9 0.0 (250.0) 0.0 144.7 2,818.7 184.9 Registrar of Contractors Registrar of Contractors Fund Corporation Commission Utility Regulation Revolving Fund Pipeline Safety Revolving Fund Security Regulatory and Enforcement Fund 3,652.6 3,946.0 Public Access Fund 3,783.4 4,832.0 924.8 928.6 Securities Investment Management Fund Summary 0.0 (454.0) 0.0 3,946.0 4,378.0 928.6 0.0 (810.0) 0.0 3,946.0 4,022.0 928.6 29 Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation 47.9 51.1 21,900.9 24,225.6 FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget Corporation Commission Arizona Arts Trust Fund Agency Total 0.0 (454.0) 51.1 23,771.6 0.0 (810.0) 51.1 23,415.6 Department of Corrections 27,799.1 29,054.8 0.0 29,054.8 N/A N/A State Education Fund for Correctional Education Fund 451.5 424.0 0.0 424.0 N/A N/A DOC ‐ Alcohol Abuse Treatment Fund 555.4 599.3 0.0 599.3 N/A N/A Transition Office Fund 180.0 180.0 0.0 180.0 N/A N/A Corrections Fund Transition Program Drug Treatment Fund 387.3 600.0 Prison Construction and Operations Fund 17,535.3 15,050.0 600.0 N/A N/A (3,600.0) 11,450.0 N/A N/A 0.0 2,585.4 2,254.9 (1,500.0) 754.9 N/A N/A State Charitable, Penal & Reformatory Land Earnings Fund 562.0 4,062.5 (4,062.5) 0.0 N/A N/A Agency Total 50,056.0 52,225.5 (9,162.5) 43,063.0 0.0 0.0 1,827.3 1,747.8 46.3 1,794.1 68.0 1,815.8 Penitentiary Land Earnings Fund Board of Cosmetology Cosmetology Board Fund Arizona Criminal Justice Commission Criminal Justice Enhancement Fund 896.2 785.2 25.0 810.2 0.0 785.2 Victim Compensation and Assistance Fund 4,011.3 3,800.0 0.0 3,800.0 0.0 3,800.0 State Aid to County Attorneys Fund 1,052.5 1,052.5 0.0 1,052.5 0.0 1,052.5 997.8 999.2 0.0 999.2 0.0 999.2 6,957.8 6,636.9 25.0 6,661.9 0.0 6,636.9 14,299.5 14,695.4 0.0 14,695.4 0.0 14,695.4 4,472.5 5,441.1 0.0 5,441.1 0.0 5,441.1 1,097.8 1,102.8 3.8 1,106.6 12.0 1,114.8 Drug and Gang Prevention Resource Center Fund 257.3 302.4 0.0 302.4 0.0 302.4 Intergovernmental Agreements and Grant Funds Fund 243.3 336.6 0.0 336.6 0.0 336.6 500.6 639.0 0.0 639.0 0.0 639.0 119.0 200.0 0.0 200.0 N/A N/A 55,938.3 N/A N/A State Aid to Indigent Defense Fund Agency Total Arizona State Schools for the Deaf and the Blind Schools for the Deaf and Blind Fund Commission for the Deaf and the Hard of Hearing Telecom for the Deaf Fund State Board of Dental Examiners Dental Board Fund Arizona Drug and Gang Prevention Resource Center Agency Total Department of Economic Security Tobacco Tax and Health Care Fund Workforce Investment Grant Fund 30 35,758.4 55,938.3 0.0 FY 2010 and FY 2011 Executive Budget Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget Temporary Assistance for Needy Families (TANF) Fund 229,260.3 281,716.1 (11,746.2) 269,969.9 N/A N/A Child Care and Development Fund 109,494.7 112,159.0 (1,738.4) 110,420.6 N/A N/A N/A Department of Economic Security Special Administration Fund Child Support Enforcement Administration Fund Domestic Violence Shelter Fund Child Abuse Prevention Fund Children and Family Services Training Program Fund Public Assistance Collections Fund Department Long‐Term Care System Fund Spinal and Head Injuries Trust Fund 1,466.4 1,574.4 161.0 1,735.4 N/A 14,679.4 15,126.4 904.2 16,030.6 N/A N/A N/A 1,700.0 1,700.0 0.0 1,700.0 N/A 39.4 1,576.9 0.0 1,576.9 N/A N/A N/A 83.1 209.6 0.0 209.6 N/A 268.2 516.6 0.0 516.6 N/A N/A N/A 22,064.5 26,468.5 4,457.9 30,926.4 N/A 2,337.3 2,565.7 0.0 2,565.7 N/A N/A N/A Utility Assistance Fund 500.0 0.0 0.0 0.0 N/A Risk Management Fund 271.5 271.5 0.0 271.5 N/A N/A N/A Indirect Cost Recovery Fund Reed Act Fund Agency Total 0.0 1,000.0 0.0 1,000.0 N/A 516.5 3,495.7 0.0 3,495.7 N/A N/A 418,558.7 504,518.7 496,557.2 0.0 0.0 2,084.0 2,572.8 2,572.8 N/A N/A N/A (7,961.5) Department of Education Teacher Certification Fund School Accountability Fund Prop 301 Fund Golden Rule Special Plate Fund Public Institution Permanent School Earnings Fund Agency Total 0.0 7,626.2 7,000.0 0.0 7,000.0 N/A 28.1 0.0 0.0 0.0 N/A N/A N/A 45,220.7 45,220.7 0.0 45,220.7 N/A 54,959.0 54,793.5 0.0 54,793.5 0.0 0.0 55.6 132.7 0.0 132.7 0.0 132.7 33,375.3 37,470.7 0.0 37,470.7 0.0 37,470.7 189.1 795.0 0.0 795.0 0.0 795.0 5,567.4 5,227.5 0.0 5,227.5 0.0 5,227.5 0.0 5,000.0 Department of Emergency and Military Affairs Emergency Response Fund Department of Environmental Quality DEQ Emissions Inspection Fund Hazardous Waste Management Fund Air Quality Fund Clean Water Revolving Fund Underground Storage Tank Revolving Fund (5,000.0) 0.0 (5,000.0) 0.0 3.3 22.0 0.0 22.0 0.0 22.0 Recycling Fund 1,939.6 2,325.8 0.0 2,325.8 0.0 2,325.8 Permit Administration Fund 5,710.6 5,992.3 313.6 6,305.9 313.6 6,305.9 928.6 1,503.1 0.0 1,503.1 0.0 1,503.1 Solid Waste Fee Fund Used Oil Fund Water Quality Fee Fund Indirect Cost Fund Agency Total Summary 10.4 137.8 0.0 137.8 0.0 137.8 3,763.3 5,887.0 0.0 5,887.0 0.0 5,887.0 12,230.1 12,748.2 0.0 12,748.2 0.0 12,748.2 63,717.8 77,109.4 (4,686.4) 72,423.0 (4,686.4) 72,423.0 31 Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget 14,748.3 16,299.6 0.0 16,299.6 0.0 16,299.6 0.0 0.0 2,387.0 2,387.0 1,346.0 1,346.0 0.0 0.0 2,387.0 2,387.0 1,346.0 1,346.0 349.8 350.0 0.0 350.0 0.0 350.0 28,211.4 31,178.5 3,620.9 34,799.4 3,520.9 34,699.4 5,629.8 3,974.4 2,049.8 6,024.2 2,070.7 6,045.1 234.5 329.9 0.0 329.9 0.0 329.9 Arizona Exposition & State Fair Coliseum and Expo Center Fund State Department of Financial Institutions Banking Department Revolving Fund Agency Total State Board of Funeral Directors & Embalmers Funeral Directors and Embalmers Fund Arizona Game & Fish Department Game and Fish Fund Watercraft Licensing Fund Game/Non‐game Fund Waterfowl Conservation Fund Wildlife Endowment Fund Wildlife Habitat Restoration and Enhancement Fund Agency Total 21.1 43.4 0.0 43.4 0.0 43.4 0.0 16.0 0.0 16.0 0.0 16.0 1,891.7 0.0 0.0 0.0 0.0 0.0 35,988.5 35,542.2 5,670.7 41,212.9 5,591.6 41,133.8 Department of Gaming Lottery Fund 300.0 300.0 1,887.2 2,247.2 (287.5) 1,959.7 (287.5) 1,959.7 10,278.1 14,013.8 (3,138.0) 10,875.8 (2,064.6) 11,949.2 12,465.3 16,561.0 (3,425.5) 13,135.5 (2,352.1) 14,208.9 3,296.9 3,682.6 348.6 5,000.0 (4,850.0) 150.0 (4,850.0) 150.0 3,645.5 8,682.6 (4,850.0) 3,832.6 (4,850.0) 3,832.6 30,666.6 35,824.8 (5,204.1) 30,620.7 N/A N/A 1,558.8 1,578.0 0.0 1,578.0 N/A N/A 811.7 829.2 0.0 829.2 N/A N/A Health Research Fund 1,000.0 1,000.0 0.0 1,000.0 N/A N/A Emergency Medical Services Operating Fund 4,949.2 5,983.1 0.0 5,983.1 N/A N/A Newborn Screening Program Fund 5,238.2 6,805.3 0.0 6,805.3 N/A N/A Substance Abuse Services Fund 2,500.0 2,500.0 0.0 2,500.0 N/A N/A Permanent Tribal‐State Compact Fund Arizona Benefits Fund Agency Total 0.0 300.0 0.0 300.0 Government Information Technology Agency Information Technology Fund State Web Portal Fund Agency Total 0.0 3,682.6 0.0 3,682.6 Department of Health Services Tobacco Tax and Health Care Fund Capital Outlay Stabilization Fund Child Care and Development Fund Nursing Care Institution Protection Fund 360.0 38.0 0.0 38.0 N/A N/A Environmental Lab License Revolving Fund 752.6 970.6 0.0 970.6 N/A N/A 99.1 99.1 0.0 99.1 N/A N/A 471.1 499.7 0.0 499.7 N/A N/A 340.2 N/A N/A 5,032.6 N/A N/A Child Fatality Review Fund Vital Records Electronic Systems Fund Hearing and Speech Professionals Fund The Arizona State Hospital Fund 32 339.8 340.2 5,660.9 6,032.6 0.0 (1,000.0) FY 2010 and FY 2011 Executive Budget Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget Department of Health Services 750.0 N/A N/A 9,075.7 N/A N/A 66,122.2 0.0 0.0 0.0 194.2 0.0 194.2 117.3 10.5 127.8 7.8 125.1 886.5 944.8 0.0 944.8 0.0 944.8 18,440.0 19,859.7 0.0 19,859.7 0.0 19,859.7 102.1 0.0 0.0 0.0 0.0 0.0 Supreme Court CJEF Disbursements Fund 10,604.2 10,071.7 0.0 10,071.7 N/A N/A Judicial Collection ‐ Enhancement Fund 15,140.7 15,425.3 0.0 15,425.3 N/A N/A Defensive Driving Fund 3,614.4 5,393.6 0.0 5,393.6 N/A N/A Court Appointed Special Advocate Fund 2,675.7 3,449.2 0.0 3,449.2 N/A N/A Confidential Intermediary Fund 428.3 484.6 0.0 484.6 N/A N/A Drug Treatment and Education Fund 500.0 500.0 0.0 500.0 N/A N/A 3,919.7 2,945.3 0.0 2,945.3 N/A N/A 0.0 4,056.6 0.0 4,056.6 N/A N/A 36,883.0 42,326.3 0.0 42,326.3 0.0 0.0 686.5 686.6 0.0 686.6 N/A N/A 0.0 DHS State Hospital Land Earnings Fund DHS ‐ Indirect Cost Fund Agency Total 276.2 1,150.0 9,165.9 9,075.7 63,850.1 72,726.3 193.2 194.2 95.1 (400.0) 0.0 (6,604.1) Arizona Historical Society Capital Outlay Stabilization Fund Board of Homeopathic Medical Examiners Homeopathic Medical Examiners Fund Arizona Department of Housing Housing Trust Fund Industrial Commission of Arizona Industrial Commission Admin Fund Department of Insurance Tobacco Tax and Health Care Fund Judiciary State Aid to Courts Fund Photo Enforcement Agency Total Department of Juvenile Corrections Juvenile Corrections CJEF Dist Fund State Education Fund for Committed Youth Fund 2,337.4 2,684.8 2,684.8 N/A N/A Endowments/Land Earnings Fund 1,790.4 4,298.6 (3,700.0) 598.6 N/A N/A 4,814.3 7,670.0 (3,700.0) 3,970.0 0.0 0.0 260.0 260.0 0.0 260.0 0.0 260.0 0.0 500.0 0.0 500.0 0.0 500.0 260.0 760.0 0.0 760.0 0.0 760.0 596.2 675.9 0.0 675.9 0.0 675.9 67,114.5 80,257.3 235.6 80,492.9 166.6 80,423.9 Agency Total State Land Department Environmental Special Plate Fund Due Diligence Fund Agency Total Arizona State Library, Archives & Public Records Records Services Fund Arizona State Lottery Commission Lottery Fund Summary 33 Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget 5,650.6 5,822.6 118.5 309.8 278.9 0.0 155.8 155.8 7.5 7.5 591.5 604.3 0.0 604.3 0.0 604.3 3,871.2 4,134.9 0.0 4,134.9 0.0 4,134.9 315.3 377.7 0.0 377.7 0.0 377.7 225.3 244.9 0.0 244.9 0.0 244.9 121.4 124.3 0.0 124.3 0.0 124.3 187.7 202.2 0.0 202.2 0.0 202.2 698.4 698.7 0.0 698.7 0.0 698.7 347.5 548.0 0.0 548.0 0.0 548.0 0.5 0.0 0.0 0.0 0.0 0.0 Boating Safety Fund 2,274.3 1,092.7 0.0 1,092.7 0.0 1,092.7 State Parks Enhancement Fund 7,328.0 7,259.0 64.7 7,323.7 64.7 7,323.7 9,950.3 8,899.7 64.7 8,964.4 64.7 8,964.4 2,518.0 2,774.3 (129.0) 2,645.3 (129.0) 2,645.3 2,664.7 1,920.9 0.0 1,920.9 0.0 1,920.9 466.8 360.2 0.0 360.2 0.0 360.2 Arizona Medical Board Medical Examiners Board Fund 146.1 5,968.7 146.1 5,968.7 Board of Medical Student Loans Med Student Loan Fund (302.1) 7.7 (302.1) 7.7 State Mine Inspector Aggregate Mining Reclamation Fund Naturopathic Physicians Board of Medical Examiners Naturopathic Board Fund State Board of Nursing Nursing Board Fund Nursing Care Ins. Admin. Examiners Nursing Care Institution Admin/ACHMC Fund Board of Occupational Therapy Examiners Occupational Therapy Fund State Board of Dispensing Opticians Dispensing Opticians Board Fund State Board of Optometry Board of Optometry Fund Arizona Board of Osteopathic Examiners Osteopathic Examiners Board Fund State Parks Board Reservation Surcharge Revolving Fund Capital Outlay Stabilization Fund Agency Total Office of Pest Management Structural Pest Control Fund Arizona State Board of Pharmacy Pharmacy Board Fund Board of Physical Therapy Examiners Physical Therapy Fund Arizona Pioneersʹ Home Pioneersʹ Home State Charitable Earnings Fund 3,483.7 3,663.5 90.4 3,753.9 90.4 3,753.9 Pioneersʹ Home Minersʹ Hospital Fund 1,670.5 2,987.6 (90.4) 2,897.2 (90.4) 2,897.2 5,154.2 6,651.1 0.0 6,651.1 0.0 6,651.1 Agency Total 34 FY 2010 and FY 2011 Executive Budget Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget 108.3 143.6 0.0 143.6 0.0 143.6 2,686.1 3,852.7 0.0 3,852.7 0.0 3,852.7 304.4 334.7 0.0 334.7 0.0 334.7 367.6 407.9 0.0 407.9 0.0 407.9 State Highway Fund 51,770.0 41,050.5 0.0 41,050.5 0.0 41,050.5 Arizona Highway Patrol Fund 19,917.1 22,223.3 1,557.2 1,615.6 State Board of Podiatry Examiners Podiatry Examiners Board Fund Commission for Postsecondary Education Postsecondary Education Fund State Board for Private Postsecondary Education Private Postsecondary Education Fund State Board of Psychologist Examiners Psychologist Examiners Board Fund Department of Public Safety Safety Enforcement and Transportation Infrastructure Fund (3,560.6) 0.0 18,662.7 1,615.6 (3,560.6) 18,662.7 0.0 1,615.6 Crime Laboratory Assessment Fund 5,857.8 5,847.9 0.0 5,847.9 0.0 5,847.9 Auto Fingerprint Identification Fund 2,714.4 3,293.4 128.5 3,421.9 188.0 3,481.4 DNA Identification System Fund 4,557.7 4,604.6 (980.0) 3,624.6 2,504.0 7,108.6 0.0 205.0 0.0 205.0 0.0 205.0 Motorcycle Safety Fund Parity Compensation Fund 3,398.3 3,539.5 0.0 3,539.5 0.0 3,539.5 Highway User Revenue Fund 9,955.8 84,949.5 0.0 84,949.5 0.0 84,949.5 Criminal Justice Enhancement Fund 3,275.7 3,292.1 0.0 3,292.1 0.0 3,292.1 312.8 296.2 0.0 296.2 0.0 296.2 0.0 22,534.3 (752.4) 21,781.9 (752.4) 21,781.9 103,316.8 193,451.9 (5,164.5) 188,287.4 (1,621.0) 191,830.9 Risk Management Fund Highway Photo Radar Agency Total Arizona Department of Racing Racing Administration Fund County Fair Racing Fund Agency Total 62.7 66.8 0.0 66.8 0.0 66.8 440.2 446.8 0.0 446.8 0.0 446.8 502.9 513.6 0.0 513.6 0.0 513.6 288.0 288.8 0.0 288.8 0.0 288.8 1,141.5 1,302.0 0.0 1,302.0 0.0 1,302.0 229.0 261.6 0.0 261.6 0.0 261.6 20,115.9 21,247.0 2,749.8 2,800.0 22,865.7 24,047.0 Radiation Regulatory Agency State Radiologic Technologist Certification Fund Residential Utility Consumer Office Residential Utility Consumer Office Revolving Fund Board of Respiratory Care Examiners Board of Respiratory Care Examiners Fund Arizona State Retirement System Retirement System Appropriated Fund LTD Trust Fund Agency Total Summary (586.0) 0.0 (586.0) 20,661.0 2,800.0 23,461.0 (761.1) 0.0 (761.1) 20,485.9 2,800.0 23,285.9 35 Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget Department of Revenue Tobacco Tax and Health Care Fund DOR Unclaimed Property Fund DOR Liability Setoff Fund Risk Management Fund Agency Total 628.2 662.8 0.0 662.8 0.0 662.8 5,555.9 3,404.0 0.0 3,404.0 0.0 3,404.0 284.4 422.0 0.0 422.0 0.0 422.0 1,886.4 0.0 0.0 0.0 0.0 0.0 8,354.9 4,488.8 0.0 4,488.8 0.0 4,488.8 2,648.4 4,002.0 0.0 4,002.0 0.0 4,002.0 0.0 98.2 (98.2) 0.0 0.0 98.2 2,648.4 4,100.2 (98.2) 4,002.0 0.0 4,100.2 263.9 284.7 0.0 284.7 0.0 284.7 1,476.1 1,745.2 82.0 1,827.2 107.5 1,852.7 2,586.0 2,337.0 110.0 2,447.0 N/A N/A N/A Department of State ‐ Secretary of State Election Systems Improvement Fund Professional Employer Organization Fund Agency Total State Boards Office Special Services Fund State Board of Technical Registration Technical Registration Board Fund Department of Transportation State Aviation Fund State Highway Fund Transportation Department Equipment Fund Safety Enforcement and Transportation Infrastructure Fund Air Quality Fund 408,356.9 420,035.8 6,834.6 426,870.4 N/A 34,554.1 38,960.4 (5,163.0) 33,797.4 N/A N/A N/A 2,108.1 2,158.0 0.0 2,158.0 N/A 71.8 71.7 0.0 71.7 N/A N/A N/A Vehicle Inspection and Title Enforcement Fund 1,665.3 1,682.5 0.0 1,682.5 N/A Motor Vehicle Liability Insurance Enforcement Fund 2,254.1 2,419.5 0.0 2,419.5 N/A N/A Driving Under Influence Abatement Fund 143.3 143.3 0.0 143.3 N/A N/A Highway User Revenue Fund 583.7 617.0 0.0 617.0 N/A N/A 452,323.3 468,425.2 1,781.6 470,206.8 0.0 0.0 33.8 1.3 0.0 1.3 0.0 1.3 211,496.9 260,679.0 0.0 260,679.0 N/A N/A 21,324.2 27,120.2 0.0 27,120.2 N/A N/A 2,000.0 2,000.0 0.0 2,000.0 N/A N/A 23,324.2 29,120.2 0.0 29,120.2 0.0 0.0 23,325.9 27,573.2 0.0 27,573.2 N/A N/A N/A 0.0 Agency Total State Treasurer State Treasurerʹs Management Fund ASU ‐ Tempe ASU Collections ‐ Appropriated Fund ASU ‐ Polytechnic ASU Collections ‐ Appropriated Fund Technology and Research Initiative Fund Agency Total ASU ‐ West ASU Collections ‐ Appropriated Fund Technology and Research Initiative Fund Agency Total 36 1,600.0 1,600.0 0.0 1,600.0 N/A 24,925.9 29,173.2 0.0 29,173.2 0.0 FY 2010 and FY 2011 Executive Budget Other Appropriated Funds Operating Budgets Summary (Dollars in Thousands) FY 2008 Expendi‐ tures FY 2009 Appro‐ priation FY 2010 FY 2010 FY 2011 Changes and Executive Changes and Adjustments Budget Adjustments FY 2011 Executive Budget 47,823.2 52,620.5 0.0 52,620.5 N/A N/A 145,537.8 153,973.0 0.0 153,973.0 N/A N/A 14,068.2 16,102.6 0.0 16,102.6 N/A N/A 677.3 747.5 0.0 747.5 0.0 747.5 13,577.3 13,743.8 0.0 13,743.8 0.0 13,743.8 14,254.6 14,491.3 0.0 14,491.3 0.0 14,491.3 449.5 468.3 0.0 468.3 0.0 468.3 Arizona Water Banking Fund 0.0 6,900.0 Assured and Adequate Water Supply Administration Fund 4.7 1,119.1 4.7 8,019.1 (3,450.0) 4,569.1 (8,900.0) 1,488.0 1,542.9 (19.1) 1,523.8 (19.1) 1,523.8 133.2 324.0 (1.1) 322.9 (1.1) 322.9 Agency Total 1,621.2 1,866.9 (20.2) 1,846.7 (20.2) 1,846.7 Other Appropriated Funds Operating Total 2,463,500.3 2,897,256.0 (104,959.0) 2,792,297.0 (17,077.1) 661,450.2 Northern Arizona University NAU Collections ‐ Appropriated Fund University of Arizona ‐ Main Campus U of A Main Campus ‐ Collections ‐ Appropriated Fund University of Arizona ‐ Health Sciences Center U of A College of Medical ‐ Collections ‐ Appropriated Fund Department of Veteransʹ Services Veteransʹ Conservatorship Fund State Home for Veterans Trust Fund Agency Total State Veterinary Medical Examining Board Veterinary Medical Examiners Board Fund Department of Water Resources Agency Total (3,450.0) 0.0 3,450.0 1,119.1 (8,900.0) 0.0 (2,000.0) 1,119.1 (880.9) Department of Weights and Measures Air Quality Fund Motor Vehicle Liability Insurance Enforcement Fund Summary 37 SUPPLEMENTAL APPROPRIATIONS Caseload and Technical Changes to Enacted FY 2009 Appropriations SUMMARY AGENCY AMOUNT AHCCCS ...................................................................... $142,627,800 Department of Commerce..................................................... 180,000 Department of Corrections ................................................. 3,825,272 Department of Economic Security.................................... 31,733,900 Department of Financial Institutions...................................... 866,000 Game and Fish Department............................................... 2,000,000 Department of Health Services ........................................ 15,664,300 Mine Inspector....................................................................... 177,700 Board of Cosmetology........................................................... 400,000 Board of Pharmacy ............................................................... 300,000 Psychologist Examiners ........................................................ 463,000 Veterinary Medical Examining Board .................................... 300,000 AHCCCS Caseload Increases $96.8 million The Executive Budget includes a FY 2009 supplemental for AHCCCS in the amount of $96.8 million. The majority of the increase is associated with an updated projection of member‐ ship growth of 9.1% overall for the program. The original budget for FY 2009 was predicated on population growth of 2.6%. Additional funding for the current year was also re‐ quired as a result of capitation rates coming in slightly above budgeted levels. The FY 2009 budget assumed capitation rate increases of 6%, while actual increases for the Acute and ALTCS program were a weighted average of 8.7%. and the General Fund supplemental appropriation be in‐ creased by $45.8 million. The transfer from the counties will be implemented, but it will be reflected as a revenue increase to the General Fund. DEPARTMENT OF HEALTH SERVICES Behavioral Health – State Match $15.7 million The Executive recommends $15.7 million from the General Fund for a supplemental in FY 2009 for Behavioral Health Services ‐ Title XIX State Match. The Department of Health Services is responsible for behavioral health services to Title XIX eligible clients from the Seriously Mentally Ill (SMI), General Mental Health/Substance Abuse, and Children’s Be‐ havioral Health populations. The original budget for FY 2009 was developed based on the assumption that overall popula‐ tion growth would be 4%. This estimate has been updated to an increase of 7% which largely can be attributed to the over‐ all slowdown in the state and national economy. DEPARTMENT OF ECONOMIC SECURITY Adoption Subsidy $1.6 million The shortfall in the Adoption Services program is a function of an underestimation of the caseload. According to the JLBC Appropriations Report, the appropriation assumes an average monthly caseload of 11,950, while the Department is project‐ ing 12,369. Individuals who adopt a child from the child wel‐ fare system are provided a subsidy to allow them to finan‐ cially support that child. The Executive projects a funding shortfall of $2.7 million in this program in FY 2009 which is offset by a federal bonus of $1.1 million. County Contributions $45.8 million In current law, $24.2 million from Maricopa County and $3.8 million from Pima County is transferred to the Budget Neu‐ trality Compliance Fund (BNCF). Additionally, $17.8 million of prior‐year reversions from the Arizona Long Term Care System Fund, rather than being refunded to counties per A.R.S. § 11‐292(M), is mandated in session law to be depos‐ ited in the BNCF. These monies are appropriated to AHCCCS as state match for the Arizona Long‐Term Care System in place of General Fund. Children’s Services $14.1 million Children’s Services costs have grown primarily due to the expansion and enhancement of in‐home services, though some of the increase is a result of caseloads and costs in out‐ of‐home care. Once a child has been removed from a home and placed in the custody of the State, the State has an obliga‐ tion to fund the placement of that child; consequently, there are limited opportunities to reduce out‐of‐home costs. With‐ out adequate funding for the program, reductions would have to occur in in‐home services, which could potentially lead to higher instances of abuse or neglect. In past fiscal relief bills, the federal government has required that, as a condition of the receipt of federal relief by the states, the proportion of state match expenses incurred by local gov‐ ernments be no higher than it was in the year preceding the current year. Assuming that this language is also included in the current year fiscal relief bill, this shift of expenses from the General Fund to the BNCF would likely put Arizona in viola‐ tion of that requirement. Accordingly, the Executive proposes changing the session law so that the transfer is deposited di‐ rectly into the State General Fund. Child Care $4.7 million A child care shortfall was expected when the FY 2009 budget was enacted. In recognition of the deficit, a footnote was in‐ cluded in the appropriations act that stated, “It is the intent of the Legislature to fully fund child care caseloads and not cre‐ ate a wait list.” The shortfall is driven by growing caseloads across the program. Without this funding, it is estimated that the waiting list would grow to approximately 5,500 children by the end of the fiscal year. In the AHCCCS appropriation, the Executive recommends that the BNCF appropriation be reduced by ($45.8 million) 38 FY 2010 and FY 2011 Executive Budget Developmentally Disabled $6.3 million The Arizona Long Term Care System (ALTCS) for individuals with developmental disabilities is an entitlement under Ari‐ zona’s Medicaid plan. This Medicaid‐funded program must provide services to all eligible individuals. The original FY 2009 budget estimated an overall increase of 1% in capitation, while the final rate increased by 3.3%. Children, Youth and Families $5 million The Executive recommends $5 million General Fund to offset the shortfall in the Division of Children, Youth and Families (DCYF), which operates Child Protective Services (CPS). In‐ creasing in‐home and out‐of‐home caseloads and reports of abuse and neglect of children drives the operating budget of this Division. In FY 2008, workloads exceeded the Arizona‐ specific caseload standards by 21%. The FY 2009 budget in‐ cluded funding for the first of a three‐year plan to achieve the standard. Even when staff members are hired, caseloads are estimated to exceed the standards by 14% this year. GENERAL FUND ‐ OTHER AGENCIES Board of Cosmetology $400,000 Based on current appropriations and revenue forecasts, the Board of Cosmetology will not have sufficient funds to meet requirements for the current year and will be an estimated $225,000 short by the end of FY 2009. The Executive Budget recommends that the FY 2009 transfer be reduced by $400,000. Board of Pharmacy $300,000 The FY 2009 budget includes a fund transfer in the amount of $549,700 from the Board of Pharmacy Fund. The Board is pro‐ jected to have a negative fund balance of about $480,000 be‐ fore fees are paid in October and November of 2009. The Ex‐ ecutive recommendation reduces the FY 2009 fund transfer by $300,000. Board of Psychologist Examiners $463,000 The FY 2009 budget included a fund transfer of $563,000 from the Board of Psychologist Examiners Fund. It is projected that, by the end of FY 2010, the Fund will have a deficit balance of $300,000. The Fund’s total deficit will reach over $450,000 in FY 2011. The Executive Budget reduces the FY 2009 transfer by $463,000. Veterinary Medical Examining Board $300,000 The FY 2009 Budget included a fund transfer of $613,800 from the Veterinary Medical Examining Board. The fund is pro‐ jected to have a deficit of at least $150,000 by the end of FY 2010. By December 2010, the deficit will exceed $250,000. The Executive Budget reduces the FY 2009 transfer by $300,000. OTHER FUND SUPPLEMENTALS, FEE INCREASES Department of Commerce $180,000 The Executive Budget recommends that $180,000 be restored from the Motion Picture Income Tax Credit. This funding transfer was an error in drafting H.B. 2462 (Laws 2008, Chap‐ ter 291, Section 4). Department of Environmental Quality $0 The Executive Budget recommends that the Clean Water Re‐ volving Fund Transfer of $10.7 million and the Drinking Wa‐ Summary ter Revolving Fund transfer of $5 million be repealed. In or‐ der to limit the impact on the General Fund, the Executive recommends that $15.7 million be transferred from the Un‐ derground Storage Tank Fund. Department of Financial Institutions $866,000 S.B. 1028 was enacted during the 2008 Legislative session, creating the Loan Originator Licensing program. However, no funding was included in the bill or in the budget. The Execu‐ tive recommends using excess funds in the Receivership Re‐ volving Fund to cover start‐up costs prior to the program be‐ coming self‐sufficient. Game and Fish Department $2 million The Executive recommends that $2 million in expenditure authority to the Watercraft Licensing Fund be restored in FY 2009. Laws 2008, Chapter 285, Section 20 reduced by $2 mil‐ lion the FY 2009 appropriation to the Watercraft Licensing Fund. This cut was not intended or agreed to as part of the overall budget. Mine Inspector $177,700 The Mine Inspector requires language authorizing the expen‐ diture of monies from the Aggregate Mining Reclamation Fund. Currently there is no authority to spend money from Fund. The Executive Budget recommends that $177,700 be authorized from the Aggregate Mining Reclamation Fund to pay reclamation costs. Nursing Board $0 The Board of Nursing receives most of its revenues each year between April and June. Since the bulk of its revenues come at the end of the fiscal year, the Board requires a substantial fund balance in order to operate without a deficit. It is pro‐ jected that the Board will have insufficient funding to operate during FY 2010. The Executive recommends that the Board receive emergency authority to implement a one‐year fee in‐ crease for license renewals. Examiners of Nursing Care Institution Administrators $0 The Board of Examiners of Nursing Care Institution Adminis‐ trators and Assisted Living Facility Managers is operating with a declining balance and will be have a deficit of $4,300 by the end of FY 2010. The Executive recommends that the Board receive authority to increase fees to meet budget re‐ quirements. Without these increases, the Board will not be able to operate and carry out its mission to license and regu‐ late nursing care administrators. RECOMMENDED SUPPLEMENTAL FOR FY 2008 Department of Corrections $3.8 million During fall 2008, the Department of Corrections received ad‐ ditional health care invoices totaling $6.5 million for services rendered during FY 2008. The Department’s Health Care ap‐ propriation of $80.5 million for FY 2008 has been completely expended. The Department has $2.6 million from non‐ appropriated funds that can be used to reduce the health care liability. For the remaining $3.8 million, a supplemental ap‐ propriation is recommended from the General Fund. • 39 LEGISLATIVE ACTION Proposed Legislative Changes The following changes are necessary to implement the Executive Budget Recommendation, including changes that must go into effect in Fiscal Year 2009 DEPARTMENT OF ADMINISTRATION AFIS II Collections Fund Revenues Cap Increase. Laws 2008, Chapter 285. The Executive recommends that the Depart‐ ment be allowed to collect an amount not to exceed $5,517,500 from other funding sources, excluding federal funds, to recover pro rata costs of operating AFIS II. Any amounts left unspent from the Arizona Financial Information System line item shall revert to the General Fund. Capital Outlay Stabilization Fund. Amend current statutes to require all agencies that occupy State buildings, including Legislative offices, to make payments at the applicable rates to the Capital Outlay Stabilization Fund. Large Loss Support Unit. Laws 2009 General Appropriations Act. The Executive recommends appropriating in a special line item the Large Loss Support Unit recommendation. The special line item would have a double asterisk, indicating that the appropriation is non‐lapsing until June 30, 2011. Vehicle Replacement. Laws 2008, Chapter 285. The Execu‐ tive recommends changing the footnote in the feed bill to in‐ crease the Department’s authority to replace vehicles. DEPARTMENT OF AGRICULTURE Specialty Fertilizer License and Pesticide Registration. Notwithstanding A.R.S. §§ 3‐272(C) and 3‐351(D) or any other law, allow the Department to adjust the Specialty Fertilizer License and Pesticide Registration in FY 2010 to absorb costs from related Department services. Further, exempt the agency from the rulemaking requirement of A.R.S. Title 41, Chapter 6, for the purpose of adjusting fees pursuant to this section for a period of one year. ARZIONA HEALTH CARE COST CONTAINMENT SYSTEM County Transfers – FY 2009. Laws 2008, Chapter 288, Section 10. The currently effective session law requires Pima County and Maricopa County to transfer, respectively, $3,794,400 and $24,168,400 to the Budget Neutrality Compliance Fund.1 These funds are used to offset General Fund expenses in AHCCCS. The Executive proposes modifying this language so that these monies are deposited directly into the General Fund. (Must go into effect in FY 2009.) County Transfers – FY 2009. Laws 2008, Chapter 288, Section 11. The currently effective session law requires $17,830,500 that would otherwise be transferred to counties to be deposited in 1 40 The federal government has previously required that, as a condition of the receipt of federal relief to the states, the proportion of state match expenses incurred by local governments be no higher than in the year preceding the current year. Assuming that this language is also in‐ cluded in the current fiscal relief bill, this transfer would likely put Arizona in violation of that requirement. the Budget Neutrality Compliance Fund.1 These funds are used to offset General Fund expenses in AHCCCS. The Executive proposes modifying this language so that these monies are deposited directly into the General Fund. (Must go into effect in FY 2009.) County Transfers – FY 2010. Laws 2008, Chapter 288, Section 10. As Session Law, require Pima County and Maricopa County to transfer, respectively, $3,794,400 and $24,168,400 to the Budget Neutrality Compliance Fund. In its list of fund transfers, the Executive will transfer the entire $28 million to the State General Fund. AHCCCS Payment Schedule Deferral. New Session Law. Delinquent payments to contractors, under A.R.S. §§ 8‐512 and 36‐261, ‐554, ‐2906, ‐2942, ‐2944 and ‐2988, and to regional be‐ havioral health authorities, under Title 36, Chapter 34, Article 1, due on or after June 1, 2009, and before July 1, 2009, shall bear interest at the rate of 2% per annum notwithstanding §§ 35‐342 and 44‐1201. Without this change, the State would have to pay an effective interest rate of 12% per annum for deferred pay‐ ments. (Must go into effect in FY 2009.) Temporary Medical Coverage Suspension. Laws 2008, Chapter 288, Section 12. Continue for FY 2010 the Session Law that suspended the temporary medical coverage program that was established by A.R.S. § 36‐2930 for FY 2009. Disproportionate Share Hospital Payments. Laws 2008, Chapter 288, Section 13. Disproportionate Share payments for FY 2010 shall be: • $89,877,700 for the Maricopa Special Healthcare District, • $28,474,900 for Arizona State Hospital, and • $26,147,900 for private hospitals. County Acute Care Contribution. Laws 2008, Chapter 288, Section 14. The Session Law pertains to county contributions totaling $49.6 million for Acute Care services within AHCCCS. The Executive Recommendation reduces the Acute Care county contribution by $327,600. This reduction reflects A.R.S. § 11‐ 292(Q), which reduces the Maricopa County contribution by inflation, as measured by the GDP Price Deflator. County Long‐Term Care Contribution. Laws 2008, Chapter 288, Section 15. The Session Law assigns county contributions totaling $277 million for Long‐Term Care services within AHCCCS, per A.R.S. §§ 11‐292(B) and ‐292(C). AHCCCS Hospital Reimbursement Rates Freeze. Laws 2008, Chapter 288, Section 20. Continue the hospital rate freeze – in effect for the contract year ending September 30, 2009 – to the contract year ending September 30, 2010. ATTORNEY GENERAL Collection Enforcement Revolving Fund. Amend A.R.S. §§ 41‐191.03(B) and 41‐191.03(E) to allow the Attorney General to use the Collection Enforcement Revolving Fund for operating FY 2010 and FY 2011 Executive Budget expenses and to increase the beginning balance of the Fund at the beginning of each fiscal year from $100,000 to $500,000. Tobacco Master Settlement Agreement. Amend Laws 2008, Chapter 285, to exempt from lapsing the $1.7 million appropria‐ tion from the Consumer Fraud Revolving Fund for Tobacco Master Settlement Agreement arbitration. (Must go into effect in FY 2009.) Consumer Fraud Revolving Fund. Notwithstanding A.R.S. § 44‐1531.01(C), the Attorney General may use the Consumer Fraud Revolving Fund for any cost or expense related to the Tobacco Master Settlement Agreement in Fiscal Years 2010 and 2011. Legal Services Cost Allocation Fund. The Executive rec‐ ommends that, notwithstanding any law, if the amount depos‐ ited in the Legal Services Cost Allocation Fund pursuant to A.R.S. § 41‐191.09 is less than the prorated appropriation for the same time period, the Attorney General’s General Fund appro‐ priation will be increased by a formulaic amount. Interagency Service Agreement. The Executive recom‐ mends that, notwithstanding any other law, if an interagency service agreement is cancelled or reduced during fiscal year 2009 with the Department of Law so that the agreement falls below the contracted amount for FY 2009, the Department’s General Fund appropriation will be increased by a formulaic amount. (Must go into effect in FY 2009.) DEPARTMENT OF COMMERCE Motion Pictures. Notwithstanding A.R.S. § 41‐1517, subject to annual Legislative authorization, from income tax credits pursuant to A.R.S. § 41‐1517.01(J), $517,700 is allocated each year to the Department of Commerce for up to six full‐time equivalent positions dedicated solely for the purposes of §§ 41‐ 1517 and 1517.01. If the income tax credits terminate pursuant to §§ 41‐1517(A) and ‐1517.01(A), the authorization under this subsection and any positions dedicated for those purposes would also terminate. Military Installation Fund. A.R.S. § 41‐1512. Specify in the General Appropriation Act the annual appropriation from the General Fund to the Military Installation Fund for FY 2010 and FY 2011. CORPORATION COMMISSION FY 2009 Fund Shift. Specify that, with any reduction in the Corporation Commission’s FY 2009 General Fund appropria‐ tion (a) there will be a corresponding increase in the Commis‐ sion’s FY 2009 appropriation from the Utility Regulation Revolving Fund, and (b) the additional FY 2009 appropriation from the Utility Regulation Revolving Fund will not be greater than $400,000. (Must go into effect in FY 2009.) DEPARTMENT OF CORRECTIONS State Education Fund for Committed Youth. Authorize the expenditure of all revenues deposited into the Education Fund for Correctional Education. EDUCATION Excess Utilities. As Session Law, suspend additional fund‐ ing for excess utilities scheduled to begin in FY 2010 per Laws 2008, Chapter 287. Desegregation Funding. As Session Law, continue the soft cap on desegregation funding into FY 2010. Basic State Aid. As Session Law, continue to defer $602.6 million in Basic State Aid payments for FY 2010 until FY 2011. Soft Capital. As Session Law, fund soft capital at 50%. Capital Outlay. As Session Law, reduce funding for the capital outlay revenue limit by 25%. DEPARTMENT OF EMERGENCY AND MILITARY AFFAIRS Emergency Fund Reduction. Amend A.R.S. § 35‐192 to re‐ duce the aggregate amount of liabilities for emergencies that can be incurred in FY 2010 to $3.9 million. NURSING CARE INSTITUTION ADMINISTRATORS AND ASSISTED LIVING FACILITY MANAGERS BOARD Increase Fee Caps and Allow Emergency Authority to Raise Fees. Amend A.R.S. § 36‐446.12 to raise fee caps to ensure the Board’s fiscal solvency. Grant the Board of Examiners of Nursing Care Institution Administrators and Assisted Living Facility Managers emergency authority to bypass rulemaking to allow immediate fee increases. (Must go into effect in FY 2009.) DEPARTMENT OF FINANCIAL INSTITUTIONS Loan Originator Licensing Program. Amend A.R.S. §§ 6‐ 127 and 6‐135 and related sections in Title 6 to: • eliminate the existing cap on fund balances for the Special Revolving Fund; • establish a revenue stream to support the new program, including registry and certification of loan originators; and • set educational and professional standards. The Executive Recommendation includes the necessary changes to provide the legal authority to implement these measures. Receivership Fund. Notwithstanding A.R.S. §§ 6‐127, ‐135, ‐ 135.01 and any other law, in FY 2009 authorize the Department of Financial Institutions to use, from the Revolving Receiver‐ ship Fund, up to $866,000 and 9.0 FTE for a loan originator licensing program. Receivership Fund. In FY 2010 and beyond, authorize the Department to use monies in the Revolving Receivership Fund to supplement costs associated with the loan originator licens‐ ing program, if such expenditures are required to ensure a good‐faith effort to comply with the federal SAFE Act. (Must go into effect in FY 2009.) FUNERAL DIRECTORS AND EMBALMERS BOARD Increase Fee Caps. Amend A.R.S. § 32‐1309 to increase li‐ censing and renewal fees to replace lost interest income attrib‐ utable to the $496,000 FY 2009 Legislative fund transfer. The current fee structure has been in place since May 1998. (Must go into effect in FY 2009.) Rapid Decline Funding. As Session Law, continue to sus‐ pend adjustments in student count for rapid decline funding for FY 2010. Summary 41 DEPARTMENT OF HEALTH SERVICES Restoration to Competency, County Reimbursements. Notwithstanding A.R.S. § 13‐4512 or any other law, all counties shall be required to reimburse the State for the costs of a defen‐ dant’s inpatient competency restoration treatment at the Ari‐ zona State Hospital, with all counties and all cities reimbursing 86% of the costs. The funds shall be deposited into the Arizona State Hospital Fund pursuant to A.R.S. § 36‐545.08. DEPARTMENT OF INSURANCE Voluntary Plans Assessment Cap. Amend A.R.S. § 20‐ 2201(D) to increase the maximum annual assessment to $400 per insurer. Managed Care Oversight. Include the Managed Care and Dental Plan Oversight special line item as part of the Depart‐ ment’s lump sum appropriation in Laws 2009, General Appro‐ priations Act. Fee and Assessment Adjustment Suspension. Notwith‐ standing A.R.S. §§ 20‐167(F) and ‐466(J), the Director of Insur‐ ance shall not revise fees or assessments in FYs 2010 and 2011 for the purposes of meeting the requirement to recover at least 95% but not more than 110% of the Department of Insurance’s appropriated budget. DEPARTMENT OF JUVENILE CORRECTIONS State Education Fund for Committed Youth. Authorize the expenditure of all revenues deposited into the Education Fund for Committed Youth. MINE INSPECTOR Aggregate Mine Reclamation Fund. Notwithstanding A.R.S. § 27‐1233(B), monies collected by the Mine Inspector for submission of reclamation projects between January 1, 2006, and July 1, 2010, are appropriated to the Mine Inspector for reclamation plan review and evaluation. (Must go into effect in FY 2009.) NURSING BOARD Increase Fee Caps and Allow Emergency Authority to Raise Fees. Amend A.R.S. § 32‐1643 to raise fee caps to ensure the Board’s fiscal solvency. Grant the Board of Nursing emer‐ gency authority to bypass rulemaking to allow a one‐year fee raise for license renewals. (Must go into effect in FY 2009.) DEPARTMENT OF PUBLIC SAFETY GIITEM Lapsing Date. Amend, in the footnote in the Gen‐ eral Appropriations Act, the lapsing date to June 30, 2010, for the $10 million appropriation in the GIITEM special line item for immigration enforcement grants. Photo Enforcement. Amend A.R.S. § 41‐1722(D) to author‐ ize the reporting, to the Department of Transportation, of photo enforcement violations committed by drivers holding a com‐ mercial driver’s license. (Must go into effect in FY 2009.) REAL ESTATE DEPARTMENT Fee Adjustment Suspension. Notwithstanding A.R.S. § 32‐ 2103(B), the Real Estate Commissioner shall not revise fees in FYs 2010 and 2011 for the purposes of meeting the requirement 42 to recover at least 95% but not more than 110% of the Depart‐ ment of Real Estate’s appropriated budget. DEPARTMENT OF REVENUE Business Re‐engineering/Integrated Tax System Contract Extension; Retroactivity. Notwithstanding any other law, be‐ fore executing any extension or modification of the current business re‐engineering/integrated tax system contract with a fiscal impact that increases the contractorʹs share of gain‐ sharing proceeds from State revenues during FY 2010, the De‐ partment of Revenue shall submit the proposed changes to the Joint Legislative Budget Committee for its review. Data Center Charges. Notwithstanding any other law, the Department of Revenue may utilize up to $1,922,000 of General Fund revenue deposits to pay Data Center charges after review of an expenditure plan by the Joint Legislative Budget Commit‐ tee. TPT Estimated Payment Threshold. Amend A.R.S. § 42‐ 5014(D) to read, “ If the business entity under which a taxpayer reports and pays income tax under Title 43 has an annual total tax liability under this article, Article 6 of this chapter, and Chapter 6, Article 3 of this title, of one million ONE HUNDRED THOUSAND dollars or more, based on the actual tax liability in the preceding calendar year, regardless of the number of offices at which the taxes imposed by this article, Article 6 of this chapter or Chapter 6, Article 3 of this title are collected, or if the taxpayer can reasonably anticipate such liability in the current year, the taxpayer shall report on a form prescribed by the Department and pay an estimated tax pay‐ ment each June.” SCHOOL FACILITIES BOARD Building Renewal. As Session Law, Building Renewal funding shall be as specified in the General Appropriations Act. Lease‐to‐Own. As Session Law, suspend A.R.S. § 15‐2006(B) to permit the School Facilities Board to enter into lease‐to‐own transactions of up to $200 million in the aggregate for FY 2010. TREASURER Budget Stabilization Fund – Transfer. Notwithstanding A.R.S. § 35‐144, $120 million shall be transferred from the Budget Stabilization Fund to the General Fund in FY 2009. (Must go into effect in FY 2009.) UNIVERSITIES AND THE BOARD OF REGENTS Personnel Changes. As Session Law, notwithstanding any Board or university rule or policy, authorize the president of each State university to implement personnel changes – includ‐ ing reductions in force pursuant to institutional reorganization, department or program consolidation, reduction, elimination, or other budget management measures – as the president deems in the best interests of the university and the State of Arizona. Existing Board and university policies for employee termination regarding payout of accrued annual leave, ASRS benefits, and access to and disclosure of employment records are exempt and shall be followed as prior to the effective date of this act. Arizona Financial Aid Trust. As Session Law, notwith‐ standing A.R.S. § 15‐1642, State funding for the Arizona Finan‐ FY 2010 and FY 2011 Executive Budget cial Aid Trust shall be as specified in the General Appropria‐ tions Act. DEPARTMENT OF WATER RESOURCES Water Protection Fund. A.R.S. § 45‐2112. Specify in the General Appropriation Act the annual appropriation from the General Fund to the Water Protection Fund for FY 2010 and FY 2011. PERTAINING TO MULTIPLE AGENCIES Fees for Providing Services; Increases; Fiscal Year 2009‐ 2010; Intent; Appropriations; Exemption from Rule Making. A. Notwithstanding any other law, authorize the directors of the following agencies to raise fees in FY 2010 for services provided by the agencies, with fees not to exceed the limits noted: 1. Department of Public Safety, 2. Department of Agriculture, 3. Department of Environmental Quality, 4. Department of Health Services, 5. State Land Department, and 6. Radiation Regulatory Agency. B. Per Legislative intent, the additional revenue generated by the fee increases shall not exceed the amounts listed below: 1. Department of Public Safety: $7,800,300. 2. Department of Agriculture: $1,100,000. 3. Department of Environmental Quality: $600,000. 4. Department of Health Services: $600,000. 5. State Land Department: $600,000. 6. Radiation Regulatory Agency: $400,000. C. Monies generated from any fees raised pursuant to sub‐ section A are appropriated to the respective agencies. D. The agencies listed in subsection A are exempt from the rule‐making requirements of Title 41, Chapter 6, Arizona Re‐ vised Statutes, for the purpose of raising fees pursuant to this section for a period of one year from the effective date of this act. • Summary 43 CAPITAL OUTLAY Funding for Essential Maintenance, Preservation The need to maintain critical infrastructure and other capital assets does not lessen with downturns in the economy and State revenues 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 Capi‐ tal Outlay Bill, but it may be approved as well through other Legislative enactments. The Capital Budget may also include recommendations for advanced appropriations. For the purposes of capital planning and management, in accordance with A.R.S. § 41‐793, State Government provides for three building systems: • Arizona Department of Administration (ADOA), • Arizona Department of Transportation (ADOT), and • Arizona Board of Regents (ABOR). Annually, and no later than October 15, each building sys‐ tem develops its Capital Improvement Plan (CIP), to include capital spending on land acquisition, capital projects, energy management systems and building renewal. The ADOA Build‐ ing System reports a current inventory of 3,282 structures and comprises all State buildings except for ADOT and the Board of Regents, the latter of which oversees the three State universities. The FY 2010 capital requests for major projects and new construction submitted to ADOA for consideration in the FY 2010 ADOA Building System CIP totaled $433.8 million, includ‐ ing $15 million in capital project requests from the Game and Fish Department and Arizona State Parks. The request for Building Renewal request was estimated at $35.4 million. ADOT requested $94.6 million for New Construction and $4.6 million for Building Renewal. FY 2010 CAPITAL PROJECT REQUESTS, BY AGENCY AGENCY NEW CONSTRUCTION Administration, Department of ........................................ $ 157,387,400 Arizona Health Care Cost Containment System.......................... 194,500 Corrections, Department of ............................................... 179,296,200 Deaf and the Blind, Arizona State Schools for the................... 2,713,900 Economic Security, Department of .......................................11,631,100 Emergency & Military Affairs, Department of.........................11,247,000 Game and Fish Department .................................................. 4,115,000 Health Services, Department of ............................................ 2,500,000 Juvenile Corrections, Department of...................................... 1,865,600 Mines and Mineral Resources, Department of......................... 1,601,400 Public Safety, Department of ...............................................48,865,800 State Courts ........................................................................ 1,550,000 State Parks Department ......................................................10,888,500 Transportation, Department of.............................................94,662,800 Total Request $528,519,200 DOA Building System .................................................... $ 418,852,900 Other Funds ..................................................................... 109,666,300 44 ADOA BUILDING SYSTEM: NEW CONSTRUCTION The Executive recommends $9.0 million in FY 2010 for new and major maintenance capital projects. The Recommendation includes: • $3.2 million from the General Fund for Phase IV to secure and replace non‐working cell locks and doors throughout the prison system; • $1.7 million to repair and replace building systems, includ‐ ing fire emergency systems, air ventilation and electrical systems at various public buildings; and • $4.1 million from other appropriated funds for the Game and Fish Department. GENERAL FUND Department of Corrections: Prison Cell Doors and Locks The Executive recommends an annual commitment of $3.2 million for Phase IV 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 construction make it virtually impossible to carry out the project without phasing the work. Funding to address these public safety needs has been re‐ quested in several budget cycles. Deferring support for this project will continue to compromise security throughout the prison system and increase liability and personal risks to offi‐ cers and other personnel. Additionally, the cost to maintain the useful life of the buildings is increasing, which forces the De‐ partment to face broken and dysfunctional components on an emergency basis rather than through system replacement. This approach is disruptive to management and leads to higher operating costs and creates inefficient systems. Department of Juvenile Corrections: Fire Sprinklers The Executive recommends $828,300 to evaluate the instal‐ lation of fire sprinkler protection systems to housing units at the Catalina Mountain School, which was constructed to codes of 1967 and has received Fire Code violations from the State Fire Marshal. While the fire and life safety code requires fully opera‐ tional fire sprinkler systems in housing units, there are no fire suppressions systems. Moreover, the building exits are typically locked at all times, which elevates this funding recommenda‐ tion to a top priority level. Department of Administration: Fire Alarm Systems The Executive Recommendation includes $888,200 from the General Fund to replace obsolete and industry‐unsupported fire alarm systems at various facilities under the ADOA Build‐ ing System. Working fire alarms are an essential and manda‐ tory requirement for office buildings, and deferring replacement would carry a significant risk of liability to the FY 2010 and FY 2011 Executive Budget State should alarms fail to operate correctly in the event of a fire emergency. Fourteen office buildings and two supporting mechanical buildings on the Capitol Mall, including those occupied by the Senate, House of Representatives, State Land Department, Department of Health Services and Department of Corrections are currently equipped with eight‐ to 10‐year‐old Thorn Auto Call fire alarm systems. Their maintenance is difficult and costly as replacement parts are no longer available. OTHER FUNDS Game and Fish Department: Major Projects The Executive recommends $4.1 million from Other Funds in FY 2010 for Game and Fish Department projects. This amount includes $3.7 million from the Capital Improvement Fund, $285,000 from the Game and Fish Fund, and $80,000 from the Watercraft Licensing Fund. Silver Creek Hatchery Remodel Project. The Executive recom‐ mends $1.9 million in FY 2010 and $1 million in FY 2011 from the Game and Fish Capital Improvement Fund to renovate and modernize the Silver Creek Hatchery facility. The current struc‐ ture is outdated and provides inefficient fish culture operations. The project will reconfigure the facility to allow the staff to reuse as many as six times the spring water before nitrates and nitrites become toxic. This change alone will provide a five‐fold increase in fish production and allow for the creation of an Apache Trout broodstock program. Kingman Regional Office Remodel/Expansion. The Executive recommends $889,500 from the Game and Fish Capital Im‐ provement Fund to allow the Department 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 environment and provide suitable space for Region‐sponsored activities and events. Shooting Range Access Improvements. The Executive Recom‐ mendation includes $950,000 from the Game and Fish Capital Improvement Fund to continue a phased approach to resurfac‐ ing selected roadways at Ben Avery Shooting Facility and an‐ other $150,000 from the Game and Fish Fund to initiate a multi‐ year renovation of the facility. As part of the new Ben Avery Master Plan, the water sys‐ tem and septic systems will be replaced with water distribution and wastewater collection systems that would be connected to public utilities and compliant with all public and environmental requirements. This funding will allow the Department to con‐ tinue its efforts in providing long‐term improvements at the shooting range and allowing greater access and increased cus‐ tomer satisfaction. Watercraft Fund: Headquarter Construction Cost. The Execu‐ tive recommends $80,000 from the Watercraft Licensing Fund to enable the program to pay its share of the construction of the Department’s new office building. Watercraft activities as per‐ formed by the Department were not eligible under the funding source that allowed the construction of the new office building. The recommended funding will allow the Watercraft Licensing Fund to pay for the share of the space occupied for watercraft activities. Summary Emergency Maintenance and Repairs. The Executive recom‐ mends $30,000 from the Game and Fish Fund as a continuing appropriation to enable the Commission to address emergency facility repairs that require immediate attention. This allocation is separate from building renewal projects and is used for all statewide facilities. Pinetop Office: Covered Storage for Equipment. The Executive recommends $30,000 from the Game and Fish Fund to construct shade canopies at the Pinetop Regional Office to protect equip‐ ment and machinery. Pinetop Office: Paving Project. The Executive recommends $75,000 from the Game and Fish Fund to pave the surface on the south, east and west sides of the building. This will improve compliance with local dust control ordinances, address on‐site drainage issues, and expand the existing paving for the fleet and equipment area at the Pinetop Regional Office. ADOA BUILDING SYSTEM: BUILDING RENEWAL The Executive Recommendation provides $3.5 million for Building Renewal, including $2.8 million from the Capital Outlay Stabilization Fund for the Arizona Department of Ad‐ ministration (ADOA), $75,000 from the Exposition and State Fair Fund, $531,000 from the Game and Fish Fund, and $71,400 from the State Lottery fund. Pursuant to Laws 1986, Chapter 85, appropriations for Building Renewal in Arizona 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 resulting 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 pay‐ ments on about 36 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 approximately $279.3 million for the ADOA Building System. The Executive Recommendation addresses some of the highest priorities to protect life and safety, ensure business continuity, and preserve the State’s asset. CAPITAL OUTLAY STABILIZATION FUND (COSF) The Executive recommends $2.8 million in COSF monies for Building Renewal. As was mentioned above, the COSF consists of rents paid from about 36 buildings within the ADOA system. However, there are about 3600 facilities within the System that are supported by Building Renewal monies. Since not all build‐ ings make rent payments into the COSF, the Fund is unable to support Building Renewal needs for the entire ADOA Building System. 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, preventive main‐ tenance and a portion of ADOA’s operating budget. 45 OTHER DEDICATED FUNDS The Executive Recommendation includes $2.4 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 $1.8 million from the Exposition and State Fair Fund, $531,000 from the Game and Fish Fund, and $71,400 from the State Lottery Fund. FY 2010 Highway Construction Program Costs Construction1 .......................................................... $ 266,190,000 Pavement Preservation Maintenance............................ 130,000,000 Other2 ....................................................................... 209,549,000 MAG Regional Program3 .............................................. 704,068,000 Debt Service4 ............................................................. 282,007,000 $ 1,591,814,000 ADOT BUILDING SYSTEM The Arizona Department of Transportation (ADOT) in‐ cludes an inventory of 1,268 buildings and structures that have a total area of approximately 3.3 million square feet and a re‐ placement value estimated at $615.4 million. The Executive recommends $12.7 million to ADOT for new capital improve‐ ment projects. The amount includes $11.9 million from the State Highway Fund, $600,000 from the Safety Enforcement and Transportation Infrastructure Fund, and $181,900 from the State Aviation Fund. For Building Renewal, the Executive Recommendation pro‐ vides $4.5 million, including $4.4 million from the State High‐ way Fund and $162,900 from the State Aviation Fund. STATE HIGHWAY FUND Highway Construction. As is detailed in the table “FY 2010 Highway Construction Program Costs,” the Executive Recom‐ mendation supports a $1.6 billion transportation infrastructure program for FY 2010. The funding level would provide $970.3 million for highway construction, $282 million for debt service, and $339.5 million for pavement preservation maintenance, administration and motor vehicle services. In accordance with statutes, the actual expenditures levels are determined within the scope of the Five‐Year Highway Construction Program as approved by the State Transportation Board. Surprise Customer Services Center. The Executive recom‐ mends $2.3 million in additional funding to construct, in Sur‐ prise, a 14,500‐square‐foot Motor Vehicle Division service center and an adjacent 880‐square‐foot vehicle inspection facil‐ ity. The current 6,200‐square‐foot MVD center 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. The Legislature appropriated, for FY 2007, $2.7 million to purchase 6.2 acres of land for the new facility and, for FY 2008, $3.9 million to begin construction. This appropriated amount was underestimated, and current construction costs are at $9.3 million. The recommended funding of $2.3 million is the addi‐ tional amount that is needed to complete this project. Vehicle Wash System, Statewide Program. The Executive recommends $2.6 million to install five new vehicle wash sys‐ tems that meet EPA and ADEQ regulations regarding con‐ trolled water distribution. Southeast Valley Maintenance Facility. The Recommenda‐ tion provides $3.3 million for the construction of a four‐bay vehicle maintenance shop that will be located within the new multi‐use facility and replace the current Mesa vehicle mainte‐ nance shop. The current structure no longer meets the func‐ 46 1 Includes corridor improvements, major capacity/operational spot improvements, minor capacity/operational spot improvements 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 costs for Proposition 400, MAG Regional Plan – Phase I. 4 Includes $101,813,000 for HURF statewide construction bonds; $60,702,000 for HURF and Maricopa and Pima Associations of Governments (MAG and PAG) controlled access facilities bonds; $69,571,000 for Maricopa Regional Area Road Fund bonds; and $49,921,000 for Grant Anticipation Notes. tional and support needs for highway maintenance in the Southeast Valley and its vicinity. De‐Icing Materials Storage Buildings. The Executive rec‐ ommends $2.7 million to build five storage facilities and five liquid tanks to house bulk sand, cinders and de‐icer materials. Some of these materials are being stored outside, where expo‐ sure to moisture and freezing temperatures makes their use difficult. De‐icer materials must be stored in specially designed structures that meet public health and environmental regula‐ tions. Ethanol Fuel Stations. The Recommendation provides $720,000 to install nine self‐standing ethanol 85% (E85) refuel‐ ing depots to support the State’s current and future ethanol‐ capable fleet vehicles. Currently, the State owns only one E85 refueling depot, which is located near the Capitol Mall. The Recommendation will enable the fleets to expand the use of ethanol and renewable fuel. ADOT Business Headquarters. The Recommendation in‐ cludes $250,000 to prepare specifications for a new administra‐ tive building on the current Phoenix site between 17th and 18th Avenues and between Madison Street and the railroad tracks. The current ADOT administrative complex is comprised of five buildings whose average age is nearly 55 years. The existing structure is inadequate. The Capitol Mall Centennial Plan also supports this project. SAFETY ENFORCEMENT AND TRANSPORTATION INFRASTRUCTURE FUND Arizona Mexico Border Agreements. The Recommendation continues for FY 2010 the same $600,000 funding amount from the Safety Enforcement and Transportation Infrastructure Fund that the Legislature approved in FY 2008 to enable the Depart‐ ment to enter into agreements with and provide funding to the Arizona‐Mexico Commission, Department of Homeland Secu‐ rity, and Arizona International Development Authority. STATE AVIATION FUND 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. FY 2010 and FY 2011 Executive Budget Grand Canyon Airport Infrastructure Improvement. The Executive recommends an additional $181,900 to complete the repairs of building systems, general maintenance and renova‐ tion of terminal restrooms at the Grand Canyon Airport. In FY 2008, the Department was appropriated $210,000, but the con‐ struction costs ultimately exceeded the approved funding. The recommended amount will allow for the completion of this renovation project. Summary Airport Planning and Development. The Executive Recom‐ mendation provides $28.9 million from the State Aviation Fund for development and improvement of State, county and mu‐ nicipal airports as approved by the State Transportation Board. The Recommendation also supports appropriating to the De‐ partment all monies in the State Aviation Fund that are in ex‐ cess of amounts determined in the General Appropriation Act and the Capital Outlay Act for airport planning and develop‐ ment as provided in statutes. • 47 EFFICIENCY REVIEW State Agency Innovations Produce Major Savings By challenging agency management to find ways to reduce costs while improving services, the Efficiency Review process gains particular importance when State revenues are underperforming T HE GOVERNOR’S EFFICIENCY REVIEW team coordinates and implements efficiencies in partnership with agency lead‐ ership. The Efficiency Review (ER) process serves to further solidify the public’s confidence in a leaner, smarter State government. According to data compiled by the Governor’s Office of Strategic Planning and Budgeting (OSPB), by the end of FY 2009 the agency‐specific and statewide projects developed through ER will have saved the taxpayers an estimated $1.2 billion since its inception in 2003. STRUCTURE The Efficiency Review Steering Committee, composed of top advisors to the Governor, was established to oversee and guide projects and hold agencies accountable for implementa‐ tion of ER projects. In addition, OSPB developed the Consolidated Efficiency Review Tracking System (CERTS), which requires State agencies to document their efficiency savings and report those savings to OSPB. IMPLEMENTATION The Efficiency Review team coordinates with agencies to find and develop best practices and showcases them in monthly cabinet meetings. Examples include: • auditing software licensing, • reviewing consultant contracting, • consolidating job advertising, • implementing “virtual office” administration, • imaging documents for electronic efficiencies, and • printing, copying and mailing consolidation. Presentations are followed up with instructions for im‐ plementation as well as agency contacts to provide assistance. Implementation teams were established and charged with overseeing workgroups chaired by the ER Steering Commit‐ tee. Implementation team members include policy advisors, Executive agency directors, and subject matter experts. Examples of workgroups within the teams include: • Maximizing Energy Efficiency • Expanding use of Web Conferencing • Attracting & Retaining Volunteers • Expanding Electronic Licensing • Use of Inmate Services • Operation Efficiencies • “Plain Talk” Public Communications. 48 Agencies are expected to report on their efforts to accom‐ plish larger statewide initiatives in addition to reporting on their individual efforts. STATEWIDE INITIATIVES Statewide initiatives implemented in 2003 continue to produce savings and are projected to contribute over $100 million in FY 2009 alone. These initiatives include: • Energy Conservation, • 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 Agencies are continually challenged to create new ideas for efficiency savings. Agency‐specific efficiency savings achieved in FY 2008 from fully and partially implemented projects totaled approximately $200.0 million. The following table – FY 2010 Efficiency Review Initiatives – identify estimated savings by agency for FY 2009 and FY 2010; actual savings from FY 2004 through FY 2008; and estimates for projects scheduled for FYs 2009 and 2010. 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 savings – it is accounted for in the year(s) it applies. By the end of the current fiscal year, cumulative project savings since FY 2004 are expected to total almost $1.2 billion. Technology. Agencies have utilized technology to convert paper processes to forms of electronic communication. Sev‐ eral agencies are now completing license renewals on‐line, and many are converting mailings for items such as reports, newsletters and various other documents to Internet formats for public viewing. Hiring Gateway, the new paperless recruiting and hiring system implemented for all agencies, was able to achieve savings of close to $2.1 million in FY 2008 and is estimated to save the State approximately $2.3 million more by the end of FY 2009. In addition, the Department of Revenue has been successful in encouraging tax payers to file their tax returns on‐line through the recently developed E‐File web‐based application. Human Resources. Several agencies have increased the number of volunteers and volunteer hours to alleviate some of the pressures caused by a lack of funding for additional FY 2010 and FY 2011 Executive Budget staff. One agency has implemented the aforementioned Virtual Office initiative that, by allowing employees to work from their homes, reduces costs associated with leased office space and employee turnover. Reduction of Red Tape. Process streamlining has also achieved savings. While some agencies have consolidated the number of required forms by reducing duplicative questions, others have also been conducting process reviews and elimi‐ nating unnecessary steps. CONCLUSION In addition to the ER‐related improvements discussed above, State agencies have been able to implement other innovative approaches to enhancing efficiency, including: Summary • reducing the intake process for short‐term inmates, • seizing 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. The potential benefits associated with Efficiency Review are endless, and the people of Arizona can look forward to even more dynamic innovations in the years ahead. ● 49 FY 2010 Efficiency Review Initiatives Agency Request Prior to Efficiency Initiatives Agency Request Post‐Efficiency Initiatives Efficiency Initiative Savings Statewide Initiatives Employee Benefits Energy Conservation Fleet Consolidation Leasing/Space Utilization Statewide E‐Procurement Total for Statewide Initiatives 59,000.0 568.0 929.9 400.0 24,717.0 85,614.9 Agency Initiatives Arizona Department of Administration Arizona Department of Agriculture Arizona Health Care Cost Containment System Department of Commerce Department of Corrections Department of Economic Security Department of Emergency and Military Affairs Department of Environmental Quality Governorʹs Office for Equal Opportunity State Department of Financial Institutions Arizona Game and Fish Department Department of Gaming Department of Health Services Department of Homeland Security Arizona Department of Housing Department of Insurance Department of Juvenile Corrections State Land Department Department of Liquor Licenses and Control Arizona State Lottery Commission State Parks Board Department of Public Safety Department of Real Estate Residential Utility Consumer Office Department of Revenue Department of Transportation Department of Veteransʹ Services Department of Weights and Measures Total for Agency Initiatives Total for FY 2010 ‐ All Initiatives for All Agencies and Statewide 1,327,201.3 30,287.9 10,014,970.4 86,427.6 1,223,531.1 4,096,621.6 82,583.8 334,265.8 320.5 10,010.6 104,167.8 13,512.8 2,395,534.4 48,867.6 123,064.7 21,753.4 88,183.8 21,806.5 4,467.0 744,552.1 114,783.3 352,208.2 4,990.8 1,360.5 180,672.8 3,099,615.9 29,524.9 3,714.1 1,324,547.4 29,150.0 9,751,622.7 86,049.3 1,217,782.2 4,011,088.3 82,427.9 334,041.7 317.3 9,982.7 104,101.8 13,135.1 2,383,078.0 48,797.9 122,818.5 21,386.2 87,874.1 21,651.3 4,443.3 741,181.1 110,443.8 348,592.1 4,757.5 1,319.3 179,843.5 3,098,210.9 29,052.3 3,483.6 2,653.9 1,137.9 263,347.7 378.3 5,748.9 85,533.3 155.9 224.1 3.2 27.9 66.0 377.7 12,456.4 69.7 246.2 367.2 309.7 155.2 23.7 3,371.0 4,339.5 3,616.1 233.3 41.2 829.3 1,405.0 472.6 230.5 387,821.4 473,436.3 Efficiency Review Initiatives ‐ Seven‐Year Summary 2004 Actual + 2005 Actual 2006 Actual 2007 Actual 2008 Actual 48,000.0 205.0 0.0 922.0 45,000.0 94,127.0 88,589.8 182,716.8 59,000.0 205.0 0.0 922.0 45,000.0 105,127.0 94,880.8 200,007.8 2009 OSPB Est. 2010 OSPB Est. Seven‐Year Total Statewide Initiatives Employee Benefits Energy Conservation Leasing/Space Utilization Fleet Consolidation Statewide E‐Procurement Total for Statewide Initiatives Total for Agency Specific Initiatives Total for All Initiatives 50 0.0 442.8 1,543.0 922.0 15,700.0 18,607.8 117,421.9 136,029.7 25,000.0 205.0 1,200.0 1,074.9 22,295.0 49,774.9 166,414.7 216,189.6 59,000.0 382.4 400.0 929.9 24,717.0 85,429.3 334,914.9 420,344.2 59,000.0 250,000.0 568.0 2,008.2 400.0 3,543.0 929.9 5,700.7 24,717.0 177,429.0 85,614.9 438,680.9 387,821.4 1,190,043.5 473,436.3 1,628,724.4 FY 2010 and FY 2011 Executive Budget Acknowledgement Governor Napolitano gratefully acknowledges the skilled and dedicated efforts of the staff of the Governor’s Office of Strategic Planning and Budgeting ************* Director James J. Apperson Assistant Directors Marcel Benberou Bret Cloninger Bill Greeney Chief Economist Norm Selover Team Leader Stacey Morley Budget Analysts Matt Gottheiner Chris Hall Melissa Harto Patrick Makin Brandon Nee Kris Okazaki Illya Riske Thomas Soteros‐McNamara Jennifer Uharriet Economist Duong Nguyen Senior Systems Analyst Richard Sietz Systems Analyst Joy Su Office Manager Pamela Ray IN MEMORY OF JON K. HOBERG The Governor’s Office of Strategic Planning and Budgeting dedicates this budget book to the memory of Jon Hoberg. Jon joined the OSPB staff in 1997. During his years as a systems analyst he served with a passion to automate State Government’s budget and planning functions, and much of his work was focused on improving data collection processes for OSPB and all State agencies. Jon was instrumental in the evolution of the budget development tool known as BUDDIES, as well as the AZIPS strategic planning tool. Jon will be remembered as an inspirational and tireless man who spent long hours finding the right solution to data management issues. Jon brought a wonderful sense of humor and intellectual curiosity that endeared him to his colleagues. Jon’s contributions and strength of character enriched many lives. He will be greatly missed.