STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2009 Janice K. Brewer GOVERNOR PREPARED BY ARIZONA DEPARTMENT OF ADMINISTRATION FINANCIAL SERVICES DIVISION GENERAL ACCOUNTING OFFICE STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS INTRODUCTORY SECTION (Not Covered by the Independent Auditors’ Report) Letter of Transmittal ........................................................................................................................................................... Arizona State Government Organization ............................................................................................................................ Principal State Officials ...................................................................................................................................................... Page 1 8 9 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT....................................................................................................................... 15 MANAGEMENT’S DISCUSSION AND ANALYSIS................................................................................................... 21 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Assets ........................................................................................................................................... Universities - Affiliated Component Units – Statement of Financial Position ....................................................... Statement of Activities ............................................................................................................................................. Universities - Affiliated Component Units – Statement of Activities ..................................................................... Governmental Fund Financial Statements: Balance Sheet ........................................................................................................................................................... Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ..................................... Statement of Revenues, Expenditures and Changes in Fund Balances.................................................................... Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities............................................................................................... 38 40 42 44 45 46 47 48 Proprietary Fund Financial Statements: Statement of Net Assets ........................................................................................................................................... Statement of Revenues, Expenses and Changes in Fund Net Assets ....................................................................... Statement of Cash Flows.......................................................................................................................................... 50 54 56 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets ........................................................................................................................... Statement of Changes in Fiduciary Net Assets ........................................................................................................ 60 61 Component Unit Financial Statements: Combining Statement of Net Assets – Proprietary Funds........................................................................................ Combining Statement of Revenues, Expenses and Changes in Fund Net Assets – Proprietary Funds.................... 63 64 Universities – Affiliated Component Unit Financial Statements: Combining Statement of Financial Position............................................................................................................. Combining Statement of Activities .......................................................................................................................... 65 66 Notes to the Financial Statements .............................................................................................................................. 68 i STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONTINUED) FINANCIAL SECTION - CONTINUED REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule, Expenditures – General Fund.................................................................................. Budgetary Comparison Schedule, Expenditures – Transportation and Aviation Planning, Highway Maintenance and Safety Fund ..................................................................................................................................... Notes to Required Supplementary Information – Budgetary Comparison Schedules................................................... Infrastructure Assets ...................................................................................................................................................... Agent Benefit Plans’ Funding Progress......................................................................................................................... Page 131 149 151 154 158 COMBINING FINANCIAL STATEMENTS AND SCHEDULES Non-major Governmental Funds: Combining Balance Sheet ........................................................................................................................................ Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................ 162 163 Non-major Special Revenue Funds: Combining Balance Sheet ................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances.......................................... Budgetary Comparison Schedule, Expenditures............................................................................................... 166 168 170 Non-major Debt Service Funds: Combining Balance Sheet ................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances.......................................... 186 188 Non-major Capital Projects Funds: Combining Balance Sheet ................................................................................................................................. Combining Statement of Revenues, Expenditures and Changes in Fund Balances......................................... 192 194 Non-major Proprietary Funds: Non-major Enterprise Funds: Combining Statement of Net Assets ................................................................................................................. Combining Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. Combining Statement of Cash Flows................................................................................................................ 198 200 202 Internal Service Funds: Combining Statement of Net Assets ................................................................................................................. Combining Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. Combining Statement of Cash Flows................................................................................................................ 206 208 210 Fiduciary Funds: Pension and Other Employee Benefit Trust Funds: Combining Statement of Fiduciary Net Assets ................................................................................................. Combining Statement of Changes in Fiduciary Net Assets ............................................................................. 214 216 Investment Trust Funds: Combining Statement of Fiduciary Net Assets ................................................................................................. Combining Statement of Changes in Fiduciary Net Assets ............................................................................. 220 221 Agency Funds: Combining Statement of Assets and Liabilities ............................................................................................... Combining Statement of Changes in Assets and Liabilities............................................................................. 225 226 ii STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONCLUDED) FINANCIAL SECTION - CONCLUDED Non-major Universities – Affiliated Component Units: Combining Statement of Financial Position............................................................................................................. Combining Statement of Activities .......................................................................................................................... Page 230 232 STATISTICAL SECTION (Not Covered by the Independent Auditors' Report) Financial Trends: Schedule 1 – Net Assets by Component for the Last Eight Fiscal Years................................................................. Schedule 2 – Changes in Net Assets for the Last Eight Fiscal Years ...................................................................... Schedule 3 – Fund Balances, Governmental Funds for the Last Eight Fiscal Years ............................................... Schedule 4 – Changes in Fund Balances, Governmental Funds for the Last Eight Fiscal Years ........................... 238 240 244 246 Revenue Capacity: Schedule 5 – Net Taxable Sales by Classification for the Last Ten Fiscal Years .................................................... Schedule 6 – Sales Tax Revenue Payers by Classification, Current Year and Nine Years Ago.............................. Schedule 7 – Personal Income by Industry for the Last Ten Calendar Years .......................................................... Schedule 8 – Personal Income Tax Rates for the Last Ten Calendar Years ............................................................ Schedule 9 – Personal Income Tax Filers and Liability by Income Level for the Taxable Years 2006 and 1999 .. 250 253 254 256 256 Debt Capacity: Schedule 10 – Ratios of Outstanding Debt by Type for the Last Ten Fiscal Years ................................................. Schedule 11 – Legal Debt Margin Information, Arizona Transportation Board Highway Revenue Bonds for the Last Ten Fiscal Years .......................................................................................................... Schedule 12 – Legal Debt Margin Information, Arizona State University, for the Last Four Fiscal Years ............ Schedule 13 – Legal Debt Margin Information, University of Arizona, for the Last Three Fiscal Years.............. Schedule 14 – Legal Debt Margin Information, Northern Arizona University, for the Last Three Fiscal Years .... Schedule 15 – Pledged-Revenue Coverage, Arizona Transportation Board Highway Revenue Bonds for the Last Ten Fiscal Years .......................................................................................................... Schedule 16 – Pledged-Revenue Coverage, Arizona Transportation Board Transportation Excise Tax Revenue Bonds for the Last Ten Fiscal Years ................................................................................ Schedule 17 – Pledged-Revenue Coverage, School Facilities Board State School Improvement Revenue Bonds for the Last Eight Fiscal Years ........................................................................................................ Schedule 18 – Pledged-Revenue Coverage, School Facilities Board State School Trust Revenue Bonds for the Last Six Fiscal Years ........................................................................................................... Schedule 19 – Pledged-Revenue Coverage, Arizona State University Revenue Bonds for the Last Ten Fiscal Years .......................................................................................................... Schedule 20 – Pledged-Revenue Coverage, University of Arizona Revenue Bonds for the Last Ten Fiscal Years .......................................................................................................... Schedule 21 – Pledged-Revenue Coverage, Northern Arizona University Revenue Bonds for the Last Ten Fiscal Years .......................................................................................................... 258 260 260 261 261 262 262 263 263 264 265 265 Demographic and Economic Information: Schedule 22 – Demographic and Economic Statistics for the Last Ten Calendar Years ......................................... Schedule 23 – Principal Employers, Current Year and Nine Years Ago ................................................................. 266 266 Operating Information: Schedule 24 – State Employees by Function for the Last Six Fiscal Years ............................................................. Schedule 25 – Operating Indicators by Function for the Last Ten Fiscal Years...................................................... Schedule 26 – Capital Asset Statistics by Function for the Last Ten Fiscal Years ................................................. 267 268 270 iii INTRODUCTORY SECTION INTRODUCTORY SECTION DAVID RABER JANICE K. BREWER GOVERNOR INTERIM DIRECTOR ARIZONA DEPARTMENT OF ADMINISTRATION OFFICE OF THE DIRECTOR 100 NORTH 15th AVENUE • SUITE 401 PHOENIX, ARIZONA 85007 (602) 542-1500 May 7, 2010 The Honorable Janice K. Brewer, Governor of the State of Arizona; Members of the Legislature; Rebecca White Berch, Chief Justice of the Supreme Court; and Citizens and Taxpayers of the State of Arizona Ladies and Gentlemen: It is our pleasure to transmit to you the Comprehensive Annual Financial Report (CAFR) of the State of Arizona for the fiscal year ended June 30, 2009. Responsibility for the accuracy of data, as well as the completeness and fairness of presentation, including all disclosures, rests with the State's management. The data presented in this report, to the best of our knowledge and belief, is accurate in all material respects and is reported in a manner which fairly presents the financial position and results of operations of the major and non-major funds of the State. All disclosures needed for the reader to gain a reasonable understanding of the State's financial activities have been included. U.S. generally accepted accounting principles (GAAP) require that management provides a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of the Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The State’s MD&A can be found immediately following the Independent Auditors’ Report. INTERNAL CONTROLS The State is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the State are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with U.S. GAAP. Internal accounting controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. In the opinion of management, the State's internal controls are adequate to provide reasonable assurance that these objectives are met. INDEPENDENT AUDIT In compliance with State statute, an annual financial audit of the State Entity is completed each year by the State of Arizona, Office of the Auditor General in conjunction with other audit firms. Their audit was conducted in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Their report on the basic financial statements has been included in the financial section of this report. In addition, ARS §41-1279.03 requires at least a biennial single audit by the Office of the Auditor General. The Single Audit will be issued as a separate report at a later date. -1- PROFILE OF THE GOVERNMENT The State of Arizona was admitted to the Union as the 48th state in 1912. Arizona is the sixth largest state, with 113,998 square miles. Arizona is known for the Grand Canyon, one of the Seven Wonders of the World, and its cacti and other desert landscape. A number of national forests, four national parks, eighteen national monuments, and over 20 million acres of Native American reservations and tribal communities are located in Arizona. The State has three branches of government: Executive, Legislative, and Judicial. The Executive branch is headed by a governor elected for a four-year term. Arizona’s Legislative branch is bicameral, consisting of a thirty-member Senate and a sixty-member House of Representatives. Legislators are elected for two-year terms. The Judicial branch consists of the Arizona Supreme Court, Court of Appeals (with two divisions), superior courts, justice of the peace courts, and municipal courts. The superior courts, justice of the peace courts, and municipal courts are excluded from the State’s reporting entity. The Supreme Court is the highest court in the State and is comprised of five justices. Article 6, Section 5 of the Arizona State Constitution describes the types of cases and matters handled by the Supreme Court. The services provided by the State are administered through various agencies, departments, boards, commissions, councils, administrations, offices, and institutions of higher learning. These services include: (1) General Government, (2) Health and Welfare, (3) Inspection and Regulation, (4) Education, (5) Protection and Safety, (6) Transportation, and (7) Natural Resources. FINANCIAL REPORTING ENTITY The accompanying CAFR includes all funds of the State of Arizona (primary government), as well as its component units. Blended component units, although legally separate entities, are in substance, part of a government’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units are shown separately to emphasize that they are legally separate from the primary government and to differentiate their financial position and results of operations from those of the primary government. Discretely presented component units prepared in accordance with the Governmental Accounting Standards Board (GASB) are reported in separate columns in the government-wide financial statements. Discretely presented component units prepared in accordance with the Financial Accounting Standards Board are presented as separate financial statements immediately following the government-wide financial statements to emphasize that they are prepared in accordance with accounting standards other than those promulgated by the GASB. The criteria for inclusion in the reporting entity and presentation are defined by the Codification of Governmental Accounting and Financial Reporting Standards, issued by the GASB, (Section 2100). Note 1 of the Notes to the Financial Statements explains which component units are included in the Financial Reporting Entity of the State. BUDGETARY CONTROLS Budgetary control is maintained through legislative appropriation and the executive branch allotment process. The Governor is required to submit an annual budget to the Legislature. The budget is legally required to be adopted through passage of appropriation bills by the Legislature and approval by the Governor. The appropriated funds are controlled by the executive branch through an allotment process. This process generally allocates the appropriation into quarterly allotments by legal appropriation level. The State also maintains an encumbrance accounting system to further enhance budgetary control. Encumbered amounts generally lapse as of the end of the fiscal year, with the exception of capital outlay and other continuing appropriations. These appropriations and their encumbrances continue from year to year. The State's budgetary policies are explained in detail in the Required Supplementary Information. -2- GENERAL FUND BALANCE Graph 1 summarizes the General Fund revenues and expenditures for the last five fiscal years. This graph does not include transfer amounts relating to other fund types and other financing sources (uses), which affect the ending fund balance. Graph 1 General Fund Revenues and Expenditures for last 5 fiscal years (Dollars in billions) $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 2005 2006 2007 Revenues 2008 2009 Expenditures The General Fund ended the June 30, 2009 fiscal year with a deficit of $1.4 billion in unreserved fund balance and a $423.103 million reserved fund balance for a total fund balance deficit of $978.278 million. This compares to the previous year’s total fund balance of $361.622 million. Included in the $423.103 million reserved fund balance is $2.767 million for the Budget Stabilization Fund. The Budget Stabilization Fund is a form of Rainy Day Fund established by the Legislature in 1991. Graph 2 summarizes the General Fund Balance (Deficit) for the last five fiscal years: Graph 2 General Fund Balance (Deficit) for last 5 fiscal years (Dollars in millions) $3,000 $2,000 $1,000 $0 ($1,000) 2005 2006 2007 -3- 2008 2009 ECONOMIC CONDITION AND OUTLOOK The following economic summary is excerpted from the Arizona Department of Commerce’s Arizona’s Workforce, released on October 1, 2009. The Arizona Department of Commerce, Research Administration’s (RA) updated forecast projects nonfarm job losses for both calendar years 2009 (-178,500) and 2010 (-17,300). A total of more than 195,800 (7.5%) nonfarm jobs are expected to be lost over the two year period. Although projected job losses for 2009 have increased by 32,300 from the April 30th, 2009 Forecast, the projected losses in 2010 have decreased by 4,200 as the result of a gradually improving economy. The updated projected rate of loss for Arizona in 2009 is 6.8% and 0.7% for 2010. The nation, however, is forecast to have a slower rate of job loss of 3.7% in 2009 and 0.5% in 2010. Projected Arizona nonfarm job losses increased in this Forecast Update because the first eight months of 2009 have shown greater losses than earlier forecast. As of August 2009, the annual, average, over-the-year nonfarm job losses numbered 183,200 (7.0%), or 37,000 more than expected in the original Forecast. The bursting of the housing bubble and ensuing financial crisis caused substantial damage to Arizona’s economy. Construction was a significant economic driver of Arizona employment during the housing boom in 2001-06. In June 2006, Arizona construction employment reached its historical peak of 247,500 jobs, and the share of total nonfarm employment held by construction was noticeably higher in Arizona (9.5%) in comparison to the nation (5.6%). As the housing bubble burst in 2006, the share of construction employment in Arizona began to fall, reaching 5.8% in August 2009 compared to the nation at 4.7%. Along with Nevada, California, and Florida, Arizona has experienced significant economic decline including job losses, home price devaluation, and rising home mortgage foreclosures. Compounding the effects of the housing collapse and the resulting downturn in Arizona’s economy is the use of income by businesses and consumers to reduce debt, instead of purchasing goods and services. A large fraction of the consumer debt was created through home equity loans as people borrowed against the rising value of their homes. Businesses increased borrowing to expand operations to take advantage of opportunities in a growing economy. As Arizona’s economy starts to recover, RA projects nonfarm job growth will begin by the end of 2010 based on the following factors: • • • • • Federal government economic stimulus spending is projected to boost the State’s economy in the areas of infrastructure for energy, transportation, health care, and education. Federal government expenditures are expected to be maintained for border security, rural area firefighting, military bases, and private sector contracting for civilian and military purposes. Federal monetary policy is encouraging lending through low interest rates and the injection of liquidity into financial institutions. A buildup in the inventory cycle is anticipated as businesses and consumers increase spending to replenish depleted inventories and buy essential and other goods such as cars, clothing, and household appliances. Stable prices for many goods are expected to motivate some increased level of purchasing. Recent trends have shown increasing stabilization in the U.S. and global economies. These include increased orders for manufactured goods; a rise in the overall capacity utilization rate; an uptick of national housing starts and sales; a greater willingness to lend in financial institutions; and a leveling of world trade. Recently, the economies of major U.S. trading partners, including China, France, and Germany, have shown economic growth. As a result, U.S. export figures have increased. All these trends will have a positive impact on Arizona’s economy, but the growth rates are forecast to be slow for several reasons: • • • In an effort to reduce high debt levels, businesses and consumers will continue to moderate spending for goods and services. Stagnant wages and the fear of unemployment will result in constrained spending and increased savings by consumers. As of August 2009, Arizona’s unemployment rate had reached 9.1%. Rates above 9% have not been seen since 1983. Risk of further credit losses exists due to deteriorating performance of commercial real estate loans. Financing for commercial properties and projects has been extremely difficult with the worsening fundamentals in this sector. The national demographic shift of population from northern and eastern states to those in the south and west has long fueled Arizona’s economy. Until the national housing market recovers and people can sell their homes in order to move to Arizona, population growth will slow. -4- • Tourism, a primary driver of Arizona’s economy, is not expected to recover quickly because of the weaknesses in the U.S. and global economies. The following projections are updates for the 11 major sectors in Arizona for the two year forecast period 2009-10. Manufacturing job losses are forecast to total more than 15,200, or -8.8%. Aerospace products and parts is the only manufacturing industry expected to gain jobs as a result of ongoing civilian and military contracts. Increased export demand is projected to strengthen all fabrication industries. The Natural Resources and Mining sector is forecast to lose more than 2,400 jobs (-18.1%) over the two-year forecast period. Gradually increasing national and global demand for both metallic and non-metallic mineral ores from rising industrial production is projected to bolster this sector. Construction employment is forecast to lose more than 61,400 jobs, or -32.7%, due to continued weakness in residential and commercial real estate. However, federal government economic stimulus spending in energy and transportation projects is expected to bolster civil engineering and heavy construction. Employment reductions in Trade, Transportation, and Utilities are projected to be greater than 37,700 jobs, or -7.3%. Wholesale trade, and transportation and warehousing are forecast to lose jobs in both 2009 and 2010. However, the growth in the inventory cycle is forecast to propel growth in retail trade as consumers replace worn out and broken goods. In addition, federal government economic stimulus spending in energy projects is forecast to cause expansion in utilities. As a result, retail trade and utilities are projected to lose jobs in 2009 and add jobs in 2010. The Information industry is forecast to lose more than 4,400 jobs, or -10.7%. Consolidation and transformation in the video rental sectors could exacerbate job losses as firms close retail stores and expand kiosks and online operations. Financial Activities is projected to lose more than 9,400 jobs, or -5.3%. Gradual improvements are forecast to result in job gains for both 2009 and 2010 in the industries of securities and commodity contracts along with insurance, funds, and trusts due to increased investment activity. However, continued weakness in housing and commercial real estate is projected to contribute towards large jobs losses in the real estate, rental, and leasing industries. Job losses in Professional and Business Services are forecast to be more than 42,500, or -11.0%, over the two-year forecast period. Despite projected losses in 2009, slight gains are forecast for 2010 as demand increases from businesses that use contingent labor and outsourced services provided by the industries of employment services and business services. Educational and Health Services is the only sector in Arizona to have job gains forecast for both 2009 (+600) and 2010 (+5,800). These projected increases are primarily in health care industries as a result of the continued growth and aging of Arizona’s population. Despite projected losses in 2009, private educational services and social services are forecast to gain jobs in 2010. In Leisure and Hospitality, job losses are projected to total more than 14,500, or -5.4%, over the two-year period. Local travel and tourism (as a lower cost alternative to out-of-state travel) is projected to mitigate leisure and hospitality job losses. Other Services is projected to lose more than 6,900 jobs, or -6.9%. Repair of appliances and automobiles and refurbishment of existing items (as opposed to new purchases) is forecast to limit losses in this sector. Overall, Government (federal, state and local) employment losses are forecast to be more than 7,500, or -1.8%. Only the federal government is forecast to gain jobs as a result of the decennial census, economic stimulus, and ongoing activities in civilian and military spheres. However, state and local governments are expected to slash jobs in both 2009 and 2010 as a result of budget deficits and a more constrained ability to borrow funds. Education at the state and local level is forecast to hold steady due to support from federal government economic stimulus expenditures. Employment in Arizona is projected to show a gradual improvement with slowing nonfarm job losses over the period 2009-10. The primary reasons include a buildup of the inventory cycle; federal government economic stimulus spending; ongoing federal government expenditures in civilian and military sectors; federal government bailouts of financial services industries; and stable prices. Educational and Health Services is the only sector expected to see job gains for both 2009 and 2010 (+6,400 total). Construction is expected to see the greatest number of job losses (-61,400), at the most rapid rate (-32.7%). -5- ARIZONA STATE GOVERNMENT ORGANIZATION ELECTORATE LEGISLATIVE BRANCH STATE HOUSE OF REPRESENTATIVES* STATE SENATE* LEGISLATIVE COUNCIL AUDITOR GENERAL JOINT LEGISLATIVE BUDGET COMM. BD. OF LIBRARY, ARCHIVES AND PUBLIC RECORDS SECRETARY OF STATE* JUDICIAL BRANCH EXECUTIVE BRANCH ATTORNEY GENERAL* GOVERNOR* SUPREME COURT COURT OF APPEALS SUPERIOR COURTS MUNICIPAL COURTS JUSTICE OF THE PEACE COURTS* SUPERINTENDENT OF PUBLIC INSTRUCTION* STATE TREASURER* DEPARTMENT OF LAW CORPORATION COMMISSION* STATE MINE INSPECTOR* DEPARTMENT OF EDUCATION DEPARTMENT OF ADMINISTRATION DEPARTMENT OF CORRECTIONS DEPARTMENT OF TRANSPORTATION DEPARTMENT OF REVENUE DEPARTMENT OF PUBLIC SAFETY DEPARTMENT OF HEALTH SERVICES NORTHERN ARIZONA UNIVERSITY * ELECTED OFFICIALS -8- DEPARTMENT OF ECONOMIC SECURITY OTHER BOARDS, COMMISSIONS, AND AGENCIES BOARD OF REGENTS ARIZONA STATE UNIVERSITY AHCCCS UNIVERSITY OF ARIZONA STATE OF ARIZONA PRINCIPAL STATE OFFICIALS JUNE 30, 2009 ELECTED OFFICIALS Janice K. Brewer, Governor Tom Horne, Superintendent of Public Instruction Senator Robert Burns, President of the Senate Kristin K. Mayes, Chairman – Corporation Commission Representative Kirk Adams, Speaker of the House Paul Newman, Commissioner – Corporation Commission Ken Bennett, Secretary of State Gary Pierce, Commissioner – Corporation Commission Terry Goddard, Attorney General Sandra D. Kennedy, Commissioner – Corporation Commission Joe Hart, State Mine Inspector Bob Stump, Commissioner – Corporation Commission Dean Martin, State Treasurer APPOINTED OFFICIALS Executive Officials Legislative Officials William Bell, Director – Department of Administration Michael E. Braun, Executive Director – Legislative Council Charles Ryan, Interim Director – Department of Corrections Richard Stavneak, Director – Joint Legislative Budget i Debra K. Davenport, CPA, Auditor General – Office of the Auditor General Neal Young, Director – Department of Economic Security Gale Garriott, Director – Department of Revenue GladysAnn Wells, Director – Arizona State Library, Archives and Public Records Roger Vanderpool, Director – Department of Public Safety University Officials Will Humble, Interim Director – Department of Health Services Michael M. Crow, President – Arizona State University Anthony D. Rodgers, Director – Arizona Health Care Cost Containment System Dr. John D. Haeger, President – Northern Arizona University John Halikowski, Director – Department of Transportation Robert Shelton, President – University of Arizona Judicial Officials Ruth V. McGregor, Chief Justice – Supreme Court -9- FINANCIAL SECTION FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT STATE OF ARIZONA OFFICE OF THE DEBRA K. DAVENPORT, CPA AUDITOR GENERAL WILLIAM THOMSON AUDITOR GENERAL DEPUTY AUDITOR GENERAL Independent Auditors’ Report The Honorable Janice K. Brewer, Governor State of Arizona The Honorable Bob Burns, President Arizona State Senate The Honorable Kirk Adams, Speaker Arizona House of Representatives The Honorable Rebecca White Berch, Chief Justice Arizona Supreme Court We have audited the accompanying financial statements of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and aggregate remaining fund information of the State of Arizona as of and for the year ended June 30, 2009, which collectively comprise the State’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the State’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of certain departments and the component units, which account for the following percentages of the assets and revenues, additions, and other financing sources, as applicable, of the opinion units affected: Opinion Unit/Department Government-wide Statements Governmental activities: Arizona Health Care Cost Containment System Department of Transportation Business-type activities: Lottery Department Arizona Health Care Cost Containment System Department of Transportation Aggregate discretely presented component units: Component Units Universities—Affiliated Component Units 2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA Assets Revenues/Additions/ Other Financing Sources 2.76% 70.42% 21.28% 12.69% .90% 10.61% .19% 1.31% 1.39% .22% 100.00% 100.00% 100.00% 100.00% 85018 • (602) 553 -0333 • FAX (602) 553-0051 Opinion Unit/Department Fund Statements Major Governmental Funds: General Fund—Arizona Health Care Cost Containment System Transportation and Aviation Planning, Highway Maintenance and Safety Fund— Department of Transportation Major Enterprise Fund: Lottery Fund—Lottery Department Aggregate Remaining Fund Information: Arizona Health Care Cost Containment System Department of Transportation Arizona State Retirement System Public Safety Personnel Retirement System Corrections Officer Retirement Plan Elected Officials’ Retirement Plan Assets Revenues/Additions/ Other Financing Sources 35.94% 23.13% 100.00% 100.00% 100.00% 100.00% .10% 2.17% 60.37% 11.23% 2.63% .71% 2.63% 13.00% (35.90)% (5.70)% (1.38)% (.50)% Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as they relate to the amounts included for those entities, are based solely on the reports of the other auditors. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Arizona Power Authority and the universities—affiliated component units, which were reported as discretely presented component units, were not audited by the other auditors in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, aggregate discretely presented component units, each major fund, and aggregate remaining fund information of the State of Arizona as of June 30, 2009, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with U.S. generally accepted accounting principles. The financial statements of the Healthcare Group of Arizona, a nonmajor enterprise fund, are included as part of the State’s business-type activities and aggregate remaining fund information. As discussed in Note 9, the Healthcare Group of Arizona has incurred significant operating losses in the past years and has a fund deficit of $10.789 million at June 30, 2009, that raise substantial doubt about its ability to continue operations. Management’s plans in regard to these matters are also described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Management’s Discussion and Analysis on pages 21 through 33, the Budgetary Comparison Schedules on pages 131 through 153, the Infrastructure Assets information on pages 154 through 157, and the Schedule of Agent Retirement Plans’ Funding Progress on page 158 are not required parts of the basic financial statements, but are supplementary information required by the Governmental Accounting Standards Board. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we and the other auditors did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the State’s basic financial statements. The introductory section, combining financial statements and schedules, and statistical section listed in the table of contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The combining financial statements and schedules have been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, in our opinion, based on our audit and the reports of the other auditors, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. In accordance with Government Auditing Standards, we will also issue our report on our consideration of the State’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters at a future date. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Debbie Davenport Auditor General May 7, 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS The following is a discussion and analysis of the State of Arizona’s (the State’s) financial performance, providing an overview of the activities for the fiscal year ended June 30, 2009. Please read it in conjunction with the transmittal letter at the front of this report and with the State’s financial statements, which follow this section. The completeness and fairness of the following information is the responsibility of the State’s officials and management. FINANCIAL HIGHLIGHTS Government-wide: • The assets of the State exceeded liabilities at the close of the fiscal year by $18.9 billion (reported as net assets). Of this amount, a deficit of $2.6 billion exists for unrestricted net assets, $5.1 billion is restricted for specific purposes (restricted net assets), and $16.4 billion is invested in capital assets, net of related debt. • The State’s total net assets decreased in fiscal year 2009 by $2.7 billion. Net assets of governmental activities decreased by $2.3 billion, while net assets of the business-type activities decreased by $366.256 million. Fund Level: • As of the close of the fiscal year, the State’s governmental funds reported combined ending fund balances of $3.6 billion, a decrease of $1.9 billion from the beginning of the year. A deficit of $634.123 million exists for unreserved fund balance, which is approximately 17% of the combined fund balances. • As of the close of the fiscal year, unreserved fund balance for the General Fund had a deficit of $1.4 billion, which is approximately 7% of total General Fund expenditures. • The Land Endowments Fund reported fund balance at year end of $2.2 billion, a decrease of $348.591 million during the year. The Land Endowments Fund is used to help finance public education within the State as required by the federal government and the State’s Constitution. • The enterprise funds reported net assets at year end of $2.8 billion, a decrease of $356.788 million during the year. Long-term Debt: • The State’s total long-term primary government debt increased during the fiscal year to $8.1 billion, an increase of $1.4 billion (or 21%). Changes during the year included the addition of revenue bonds, grant anticipation notes, and certificates of participation of $1.0 billion, $55.420 million, and $580.231 million, respectively. Also, the State retired $176.970 million of revenue bonds, $24.050 million of grant anticipation notes, and $97.015 million of certificates of participation. More detailed information regarding the government-wide financial statements, fund level financial statements, and long-term debt activity can be found beginning on page 24. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is an introduction to the State’s basic financial statements, which are comprised of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. Required Supplementary Information and other supplementary information are included in addition to the basic financial statements. Government-wide Statements (Reporting the State as a Whole) The government-wide financial statements provide a broad overview of the State of Arizona’s finances in a manner similar to private sector business. The financial statements report information about the State, as a whole, and about its activities that should help answer this question: Is the State, as a whole, better or worse off as a result of this year’s activities? These statements include all non-fiduciary assets and liabilities using the accrual basis of accounting. The current year’s revenues and expenses are taken into account regardless of when cash is received or paid. The government-wide financial statements include the following: The Statement of Net Assets and the Statement of Financial Position (pages 38-40) present all of the State’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets measure whether the State’s financial position is improving or deteriorating. - 21 - The Statements of Activities (pages 42-44) present information showing how the State’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying events giving rise to the change occur, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused vacation leave). Additionally, long-term assets and liabilities are reported regardless of when these assets are expected to be converted to cash, or when the liability is expected to be liquidated (e.g., capital assets and bonded debt). Government-wide statements report three activities: • Governmental Activities – Most of the State’s basic services are reported under this category. Taxes and intergovernmental revenues generally fund these services. The Legislature, the Judiciary, and the general operations of the Executive departments fall within the governmental activities. • Business-type Activities – The State charges fees to customers to help it cover all or most of the cost of certain services it provides. Lottery tickets, the State’s unemployment compensation services, Industrial Commission rehabilitation services, and the State’s three universities are examples of business-type activities. • Discretely Presented Component Units – Component units are legally separate organizations for which the elected officials of the State are financially accountable. The Greater Arizona Development Authority, the University Medical Center, the Arizona Power Authority, and the Water Infrastructure Finance Authority are discretely presented component units reported by the State. Based on GASB Statement No. 39, the State has added University Foundations and financing authorities whose financial statements are prepared in conformity with U.S. generally accepted accounting principles as adopted by the Financial Accounting Standards Board. These organizations include the ASU Foundation, Arizona Capital Facilities Finance Corporation, the U of A Foundation, and other non-major foundations and financing authorities. Financial statements for these organizations are presented immediately following the government-wide statements to emphasize that they are prepared in accordance with accounting standards other than those promulgated by GASB, and include a statement of financial position (page 40) and a statement of activities (page 44). See pages 69-72 and 115-126 for more information on discretely presented component units. Fund Financial Statements (Reporting the State’s Major Funds) The fund financial statements begin on page 45 and provide detailed information about the major individual funds. A fund is a fiscal and accounting entity with a self-balancing set of accounts that the State uses to keep track of specific sources of funding and spending for a particular purpose. In addition to the major funds, page 162 begins the individual fund data for the non-major funds. The State’s funds are divided into three categories – governmental, proprietary, and fiduciary – each category uses different accounting approaches. • Governmental funds – Most of the State’s basic services are reported in the governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for future spending. The governmental fund financial statements provide a detailed short-term view of the State’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the State’s programs. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. Governmental funds include the general, special revenue, capital projects, debt service, and permanent funds. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. This report includes two schedules (pages 46 and 48-49) that reconcile the amounts reported on the governmental fund financial statements (modified accrual accounting) with governmental activities (accrual accounting) reported on the appropriate government-wide statement. Governmental fund financial statements can be found on pages 45 and 47 of this report. - 22 - • Proprietary funds – When the State charges customers for the services it provides, whether to outside customers or to other agencies within the State, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service) utilize accrual accounting; the same method used by private sector businesses. Enterprise funds report activities that provide supplies and services to the general public – such as the State Lottery Fund and Universities. Internal service funds report activities that provide supplies and services for the State’s other programs and activities – such as the State’s Risk Management Fund. Internal service fund operations primarily benefit governmental funds and are reported as governmental activities on the government-wide statements. The reconciliation between the government-wide financial statement business-type activities and the proprietary fund financial statements is presented at the end of the financial statements on pages 52-55. Proprietary fund financial statements can be found on pages 50-59 of this report. • Fiduciary funds – The State acts as a trustee or fiduciary for its employee pension plans. It is also responsible for other assets that, because of a trust arrangement, can be used only for the trust beneficiaries. The State’s fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets beginning on page 60. These funds are reported using accrual accounting and include pension and other employee benefit trust, investment trust, and agency funds. The government-wide statements exclude fiduciary fund activities and balances because these assets are restricted in purpose and do not represent discretionary assets of the State to finance its operations. Fiduciary fund financial statements can be found on pages 60-61 of this report. Notes to the Financial Statements The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found beginning on page 69 of this report. Required Supplementary Information Following the basic financial statements is additional Required Supplementary Information that further explains and supports the information in the financial statements. The Required Supplementary Information includes budgetary comparison schedules for the General Fund and each major special revenue fund and a reconciliation of the schedules of statutory and U.S. GAAP expenditures for the fiscal year. This section also includes schedules of condition and maintenance data regarding certain portions of the State’s infrastructure and agent benefit plans’ funding progress schedules. Required supplementary information begins on page 131 of this report. Other Supplementary Information Other supplementary information includes combining financial statements for non-major governmental, non-major enterprise, all internal service funds, all fiduciary funds, and non-major universities – affiliated component units. These funds are added together, by fund type, and presented in single columns in the basic financial statements, but are not reported individually, as are major funds on the governmental funds and proprietary funds financial statements. A budgetary expenditure comparison schedule for the non-major special revenue funds is also included. Other supplementary information begins on page 162 of this report. - 23 - GOVERNMENT-WIDE FINANCIAL ANALYSIS The State’s overall financial position and operations for the past year for the primary government are summarized, as follows, based on the information included in the government-wide financial statements. State of Arizona-Primary Government Net Assets as of June 30, 2009 and 2008 (expressed in thousands) Governmental Activities Current assets Capital assets Other non-current assets Total Assets Current liabilities Non-current liabilities Total Liabilities Net assets: Invested in capital assets, net of related debt Restricted net assets Unrestricted net assets Total Net Assets $ 2009 2,833,059 17,859,557 4,946,384 25,639,000 $ 2008 3,980,247 16,801,737 5,269,246 26,051,230 Business-type Activities 2008, as 2009 restated $ 1,685,745 $ 1,897,597 3,404,613 3,309,868 1,076,150 973,408 6,166,508 6,180,873 Primary Government Total 2008, as 2009 restated $ 4,518,804 $ 5,877,844 21,264,170 20,111,605 6,022,534 6,242,654 31,805,508 32,232,103 3,551,427 5,986,888 9,538,315 2,745,864 4,892,380 7,638,244 654,971 2,720,572 3,375,543 599,548 2,424,104 3,023,652 4,206,398 8,707,460 12,913,858 3,345,412 7,316,484 10,661,896 15,094,719 3,990,594 (2,984,628) $ 16,100,685 14,530,867 4,987,365 (1,105,246) $ 18,412,986 1,328,658 1,085,399 376,908 $ 2,790,965 1,387,655 1,581,212 188,354 $ 3,157,221 16,423,377 5,075,993 (2,607,720) $ 18,891,650 15,918,522 6,568,577 (916,892) $ 21,570,207 The largest portion of the State’s net assets (87%) represents capital assets, net of related debt of $16.4 billion. The State uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the State’s investment in its capital assets is reported net of accumulated depreciation and related debt, it should be noted that the resources needed to repay this debt are planned to be provided from other sources, since the capital assets themselves are not typically used to liquidate these liabilities. The State’s net assets also include $5.1 billion (27%) of resources that are subject to external restrictions on how they may be used. The largest restrictions are by the State’s Constitution for basic education funded by the earnings of the Land Endowments Fund and by federal regulations for unemployment insurance premiums from employers for funding the Unemployment Compensation Fund. Another major restriction is unspent debt instrument proceeds primarily for the acquisition and construction of federal, state, and local highways. After accounting for the above net asset restrictions, the State has a remaining deficit of $2.6 billion (14%) reported as unrestricted net assets. The State’s net assets decreased $2.7 billion during the current fiscal year. This decrease was primarily caused by decreases in revenues for sales taxes, income taxes, and losses on trust land sales, while expenses for health and welfare and unemployment compensation increased. The net asset decrease was partially offset by federal stimulus funds through the American Recovery and Reinvestment Act of 2009. Refer to Note 4 on page 91 for explanation of business-type activities restatement. - 24 - State of Arizona-Primary Government Changes in Net Assets for Fiscal Years June 30, 2009 and 2008 (expressed in thousands) Governmental Activities 2009 2008 Revenues: Program revenues: Charges for services Operating grants and contribution Capital grants and contributions General revenues: Sales taxes Income taxes Tobacco taxes Property taxes Motor vehicle and fuel taxes Other taxes Unrestricted investment earnings Unrestricted grants and contributions Gain (loss) on sale of trust land Miscellaneous revenue Total Revenues $ Expenses: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Interest on long-term debt Universities Unemployment Compensation Industrial Commission Special Fund Lottery Other business-type activities Total Expenses Excess (deficiency) before contributions, special items, extraordinary item, and transfers Contributions to permanent endowments Special items: Asset impairment of donated historical treasures Intergovernmental transfer of Sundome Center for the Performing Arts Extraordinary item: Insurance recovery, net of impairment loss Transfers Change in Net Assets Net Assets - July 1 Net Assets - June 30 $ 806,833 $ Business-type Activities 2009 2008 818,567 $ 2,196,190 $ Primary Government Total 2009 2008 2,125,875 $ 3,003,023 $ 2,944,442 10,620,642 553,198 9,190,910 523,898 1,243,697 14,710 898,441 38,029 11,864,339 567,908 10,089,351 561,927 5,442,563 3,126,076 370,073 32,564 1,643,276 574,030 92,957 6,270,419 4,205,426 413,333 36,732 1,800,920 559,440 243,160 58,528 22,450 72,945 39,763 5,501,091 3,126,076 370,073 32,564 1,643,276 574,030 115,407 6,343,364 4,205,426 413,333 36,732 1,800,920 559,440 282,923 12,440 (165,696) 222,712 23,331,668 13,574 196,953 214,751 24,488,083 45,786 3,581,361 64,564 3,239,617 12,440 (165,696) 268,498 26,913,029 13,574 196,953 279,315 27,727,700 928,485 12,055,439 176,354 6,084,342 1,514,282 695,070 228,430 982,382 10,884,297 185,996 6,242,173 1,510,615 670,173 250,258 - - 928,485 12,055,439 176,354 6,084,342 1,514,282 695,070 228,430 982,382 10,884,297 185,996 6,242,173 1,510,615 670,173 250,258 2,755,710 222,851 - 3,023,836 179,795 - 3,290,033 1,086,330 3,227,481 356,333 2,755,710 222,851 3,290,033 1,086,330 3,023,836 179,795 3,227,481 356,333 24,660,963 23,929,525 30,055 395,950 142,229 4,944,597 14,824 372,740 162,300 4,133,678 30,055 395,950 142,229 29,605,560 14,824 372,740 162,300 28,063,203 (1,329,295) 558,558 (1,363,236) (894,061) (2,692,531) (335,503) - - 4,014 3,927 4,014 3,927 - - - (20,100) - (20,100) - - 7,240 - 7,240 - (983,006) (2,312,301) 18,412,986 16,100,685 (994,435) (435,877) 18,848,863 18,412,986 2,720 983,006 (366,256) 3,157,221 2,790,965 15,475 994,435 99,676 3,057,545 3,157,221 2,720 (2,678,557) 21,570,207 18,891,650 15,475 (336,201) 21,906,408 21,570,207 $ $ - 25 - $ $ $ Change in Net Assets Governmental Activities – Net assets decreased by $2.3 billion, or 13%. This decrease was primarily attributed to decreases in earned general tax revenues and losses on State trust land sales, coupled with increased costs to the State’s health and welfare programs. Reported income tax and sales tax revenues decreased by $1.1 billion, or 26%, and $827.856 million, or 13%, as compared to fiscal year 2008, respectively. The costs of the State’s health and welfare increased $1.2 billion, or 11%, as compared to fiscal year 2008. Several key elements of the economy have led to the decreased general tax revenues, and increased health and welfare costs. Since the bursting of the housing bubble and ensuing financial crisis, Arizona has experienced significant economic decline including job losses, home price devaluation, and rising home mortgage foreclosures. Compounding the effects of the housing collapse and the resulting downturn in Arizona’s economy is the use of income by businesses and consumers to reduce debt, instead of purchasing goods or services. Stagnant wages and the fear of unemployment have also resulted in constrained spending and increased savings by consumers. Arizona’s unemployment rate increased from 5.5% June 30th, 2008, to 8.7% June 30th, 2009. Another significant contributor to the net asset decrease was a $362.649 million net decrease on the sale of State trust land. Many buyers bought at or near the peak of the real estate market and were unable to make their scheduled payments. Consequently, nine of the financed sales were canceled during the fiscal year. Some of the net asset decreases have been offset by a $1.4 billion, or 16%, increase in operating grant and contribution revenues, as compared to fiscal year 2008. These revenues partially consisted of federal stimulus funds through the American Recovery and Reinvestment Act of 2009. A comparison of the net cost (income) of services by function for the State’s governmental activities is shown below for fiscal years 2009 and 2008. Net cost (income) is the total cost less revenues generated by the activities and shows the financial burden placed upon the State’s taxpayers by each of these functions. Governmental Activities (expressed in thousands) Total Cost of Services 2009 2008 Functions/Programs: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Interest on long-term debt Total Governmental Activities $ 928,485 12,055,439 176,354 6,084,342 1,514,282 695,070 228,430 2,755,710 222,851 $ 24,660,963 - 26 - $ 982,382 10,884,297 185,996 6,242,173 1,510,615 670,173 250,258 3,023,836 179,795 $ 23,929,525 Net Cost (Income) of Services 2009 2008 $ 594,087 2,654,326 4,577 5,128,458 1,277,463 (86,556) 129,374 2,755,710 222,851 $ 12,680,290 $ 698,543 3,001,882 8,825 5,179,662 1,245,745 (82,861) 140,723 3,023,836 179,795 $ 13,396,150 Expenses and Program Revenues Governmental Activities for Fiscal Year 2009 (in millions of dollars) $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 Expenses $6,000 Program Revenues $5,000 $4,000 $3,000 $2,000 $1,000 G en er al G ov er nm H ea en lth t & In W sp ec el fa tio re n & Re gu la tio n Ed uc Pr at ot io ec n tio n & Sa fe ty Tr an sp or ta N tio at ur n In a l ter Re go so vt ur .R ce ev s In e nu ter e es Sh to ar n in Lo g ng -te rm De bt $0 Business-type Activities – The net assets decreased by $366.256 million, or 12%. This decrease was primarily caused by the net decrease in the Unemployment Compensation Fund of $453.993 million and partially offset with the net increase in the Universities Fund of $106.988 million. The Unemployment Compensation Fund had an increase in costs of sales and benefits of $729.997 million, which was partially offset by an increase in intergovernmental revenue of $324.689 million. The primary cause for the increase in the benefits paid was Arizona’s unemployment rate increased from 5.5% June 30th, 2008, to 8.7% June 30th, 2009. This amounts to a decrease of 194,000 individuals employed than the previous fiscal year. The Universities Fund net increase was primarily attributed to a net student tuition and fees increase due to increased tuition rates and enrollment. Federal Stabilization Funds from the American Recovery and Reinvestment Act of 2009 were used to help offset reductions in State appropriations. A comparison of the net cost (income) of services by function for the State’s business-type activities is shown on the next page for fiscal years 2009 and 2008. Net cost (income) is the total cost less revenues generated by the activities and shows the financial burden placed upon the State’s taxpayers by each of these functions. - 27 - Business-type Activities (expressed in thousands) Total Cost of Services 2009 2008 Functions/Programs: Universities Unemployment Compensation Industrial Commission Special Fund Lottery Other Total Business-type Activities Net Cost (Income) of Services 2009 2008 $ 3,290,033 1,086,330 $ 3,227,481 356,333 $ 1,129,521 445,737 $ 1,178,885 (741) 30,055 395,950 142,229 $ 4,944,597 14,824 372,740 162,300 $ 4,133,678 5,135 (88,536) (1,857) $1,490,000 (10,623) (100,197) 4,009 $ 1,071,333 FINANCIAL ANALYSIS OF THE STATE’S FUNDS The State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds – The general government functions are contained in the general, special revenue, debt service, capital projects, and permanent funds. The focus of the State’s governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the State’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. General Fund The General Fund is the chief operating fund of the State. At June 30, 2009, unreserved fund balance of the General Fund had a deficit of $1.4 billion, while total fund balance closed the year at a deficit of $978.278 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures and other financing uses. Unreserved fund balance represents a negative 6% of total expenditures and other financing uses, while total fund balance represents a negative 4% of the same amount. The fund balance of the State’s General Fund decreased $1.3 billion during the fiscal year. The primary reason for the decrease in fund balance during the fiscal year is expenditures were $21.1 billion, while revenues were $19.5 billion. Although intergovernmental revenues increased $1.8 billion from the prior fiscal year, sales tax revenues decreased $780.330 million (14%) and income tax revenues decreased $1.0 billion (25%). In particular, sales taxes paid by retail stores and construction contractors decreased by 12% and 26%, respectively, when compared to fiscal year 2008 sales tax receipts. In addition, income tax collections decreased from the previous year as a result of the 194,000 decrease in the amount of individuals employed and a decrease in the amount of corporate income taxes collected during the fiscal year. Health and welfare expenditures and intergovernmental revenue (including federal grants and county funding) increased by $1.1 billion, or 11%, and $1.8 billion, or 20%, as compared to fiscal year 2008, respectively. The increase in expenditures in fiscal year 2009 can be attributable to increased enrollment in the Arizona Health Care Cost Containment System’s (AHCCCS) programs and associated provider rates. The AHCCCS program experienced the most significant enrollment growth since the Proposition 204 expansion in calendar years 2001 to 2003. During fiscal year 2009, overall program enrollment in the various AHCCCS programs increased 12.0%, primarily due to growth in the Social Security Act Title XIX Waiver Group childless adults and Title XIX families and children program populations. The AHCCCS sets capitation rates within actuarially sound risk bands as required by the Federal Balanced Budget Act of 1997. The capitation rates were increased by a weighted average of 7.3% for the contract period of October 2008 to September 2009. The intergovernmental revenue increase was partially due to the use of federal stimulus funds from the American Recovery and Reinvestment Act of 2009. - 28 - Education expenditures decreased by $241.280 million, or 4%, compared to fiscal year 2008. The decrease can be primarily attributed to a decrease in State assistance for kindergarten through twelfth grade (K-12) and University operating expenditures to address mid-year budget shortfalls. Transportation and Aviation Planning, Highway Maintenance and Safety Fund The Transportation and Aviation Planning, Highway Maintenance and Safety Fund is responsible for the repair and maintenance of existing roads, paying the debt service for roads that are built from the issuance of revenue bonds and grant anticipation notes, and providing technical assistance with road construction provided by contractors hired by the Arizona Department of Transportation (ADOT). Total fund balance decreased $172.385 million during fiscal year 2009. The fund balance decrease was due, in part, to the transfer of $203.695 million to the General Fund due to House Bill 2209, Chapter 285, and Senate Bills 1001 and 1002, Chapters 1 and 2, respectively, which required the transfer in order to help the State balance the General Fund budget during Fiscal Year 2009. In addition, distributions to Arizona counties and cities decreased during fiscal year 2009 as collections for the Transportation and Aviation Planning, Highway Maintenance and Safety Fund decreased. Land Endowments Fund The fund was established when the federal government granted Arizona statehood. Both the State’s Constitution and the federal government require that the land grants given to the State be maintained indefinitely, and the earnings from the land grants should be used for public education, primarily K-12. The Land Endowments Fund total fund balance decreased $348.591 million during fiscal year 2009. Endowment investments decreased $381.342 million, at fiscal year end, due to receipts from land sales of $143.674 million, a $39.276 million decrease for distribution of prior year land sale installments collected on loans defaulted in the current fiscal year, a $59.359 million decrease for annual distributions as required by the State’s Constitution, and a net decrease in the fair value of investments of $403.213 million. Proprietary funds The business-type activities discussion for the fund level financial statements of the State’s enterprise funds provide the same type of information found in the government-wide financial statements analysis on page 27. GENERAL FUND BUDGETARY HIGHLIGHTS During the fiscal year, the original budget was amended by various supplemental appropriations and appropriation revisions. Budgetary Comparison Schedules for the major governmental funds are in the Required Supplementary Information section beginning on page 131. Differences between the original budget of $16.836 billion and the final amended budget of $16.781 billion resulted in a $55.006 million net decrease in appropriations for the General Fund, before adjustments. Some of the significant changes in the General Fund appropriations were: 1. $266.231 million increase due to prior fiscal year obligations that were paid in the current fiscal year per ARS §35-191 2. $272.000 million increase for the payment of the Department of Education’s Basic State Aid and Additional State Aid to school districts that was deferred in fiscal year 2008 3. $300.000 million decrease for the deferral of the Department of Education’s Basic State Aid and Additional State Aid payments to school districts 4. $123.000 million decrease for the Department of Education’s K-12 formula payment reductions, including $21.000 million soft capital suspension 5. $41.300 million increase for the Department of Education’s Arizona Structured English Immersion Fund 6. $37.441 million decrease to the AHCCCS primarily for agency budget reductions 7. $32.376 million decrease to the Department of Economic Security primarily for agency budget reductions - 29 - 8. $142.000 million decrease for reductions to the Universities Fund appropriations 9. $100.000 million decrease for the deferral of appropriations to the Universities Fund 10. $31.384 million increase to the Universities Fund to make debt service payments associated with the financing of research infrastructure projects 11. $117.000 million increase to the School Facilities Board’s (SFB) for new construction costs until SFB receives their newly authorized lease proceeds later in the fiscal year 12. $20.000 million increase for the Parks Board “Growing Smarter” transfer to the Land Conservation Fund per ARS §41-511.23 to provide grants to purchase State trust land for conservation purposes The actual expenditures were less than the final budget by $751.777 million, after adjustments. Of this amount, $43.091 million will continue as legislative multiple fiscal year spending authority for fiscal years 2010 and beyond, depending upon the budgetary guidelines of the Legislature. The remaining $708.686 million represents the unused portion of the State’s legislatively authorized annual operating budget. Additional budgetary information can be found on pages 151-153 of this report. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets: The State’s investment in capital assets for its governmental and business-type activities as of June 30, 2009 totaled $21.3 billion, net of accumulated depreciation. The total primary government increase in capital assets for the current period was 6%, with a 6% increase in capital assets used for governmental activities and a 3% increase for businesstype activities. Depreciation charges of the governmental and business-type activities for the fiscal year totaled $336.213 million. Major capital asset activity during the current fiscal year included the following: • The Universities’ additions to capital assets totaled $329.203 million and included increased investments in instruction, research, student housing, athletic facilities, and other projects. • The ADOT started or completed roads and bridges totaling $1.6 billion during the fiscal year. For the government-wide financial statement presentation, all depreciable assets were depreciated from the acquisition date to the end of the current fiscal year. Capital asset purchases of the governmental funds are reported in the fundlevel financial statements as expenditures. Capital assets for the governmental and business-type activities as of June 30, 2009 are presented below (expressed in thousands): Governmental Activities Land Buildings Improvements other than buildings Equipment Collections (non-depreciable) Infrastructure Construction in progress Less accumulated depreciation Total 2009 $ 2,502,039 1,747,807 2008 $ 2,513,888 1,709,900 Business-type Activities 2008, as 2009 restated $ 181,400 $ 166,613 3,877,636 3,701,943 142,248 760,820 10,647,110 3,282,323 (1,222,790) $ 17,859,557 136,246 772,238 10,108,526 2,719,856 (1,158,917) $ 16,801,737 4,811 1,345,615 17,882 367,408 131,054 (2,521,193) $ 3,404,613 - 30 - 4,811 1,282,525 15,853 346,268 125,230 (2,333,375) $ 3,309,868 Total 2009 $ 2,683,439 5,625,443 2008, as restated $ 2,680,501 5,411,843 147,059 2,106,435 17,882 11,014,518 3,413,377 (3,743,983) $ 21,264,170 141,057 2,054,763 15,853 10,454,794 2,845,086 (3,492,292) $ 20,111,605 As provided by GASB Statement 34, the State has elected to record its infrastructure assets, that the ADOT is responsible for maintaining, using the modified approach. Assets accounted for under the modified approach include 6,753 center lane miles (18,544 travel lane miles) and 4,648 bridges. The State manages its roads using the Present Serviceability Rating (PSR), which measures the condition of the pavement and its ability to serve the traveling public. The PSR uses a five-point scale (5 excellent, 0 impassable) to characterize the condition of the roadway. The State’s serviceability rating goal is 3.23 for the overall system. The most recent assessment indicated that an overall rating of 3.74 was achieved for fiscal year 2009. The State manages its bridges using the Arizona Bridge Information and Storage System. The State determines the condition rating based on standards developed by the Federal Highway Administration and additional internal criteria. It is the policy of the State to maintain a Condition Rating Index (CRI) of 92.5% or better. In fiscal year 2009, a CRI of 93.4% was obtained. In addition to many smaller projects, each of the following major highway construction projects in excess of $20.000 million were started during fiscal year 2009 (expressed in thousands): Project Description Major widening on State Route Loop 202 from the Interstate 10 and State Route 51 interchange to State Route Loop 101 in Maricopa County. Construction of new roads on State Route Loop 303 from Happy Valley Parkway to Lake Pleasant Parkway in Maricopa County. Major widening of US 93 from Hoover Dam to Mile Post 17 in Mohave County. Construction of new roads on State Route Loop 303 from Lake Pleasant Parkway to Interstate 17 in Maricopa County. Construction of new roads on Interstate 10 in Pima County. Construction of new roads on State Route 195 from Avenue B to 14th Street in Yuma County. Reconstruction on State Route Loop 303 at the Cactus, Waddell, and Bell Road traffic interchanges in Maricopa County. Construction of frontage road on State Route 85 in Maricopa County. Reconstruction on State Route Loop 202 from State Route Loop 101 to Gilbert Road in Maricopa County. Contract Start Date Contract Amount Current Year Expenditures 11/17/08 $ 188,895 $ 11/17/08 100,416 29,771 10/28/08 71,270 17,546 04/17/09 04/20/09 69,348 50,484 4,272 08/18/08 43,206 35,244 01/30/09 09/22/08 28,197 23,855 11,347 02/23/09 20,565 4,151 45,158 In addition to many smaller projects, the following major highway construction projects had expenditures in excess of $20.000 million in fiscal year 2009 (expressed in thousands): Project Description Interstate 10 from Price Road to 29th Street in Pima County. Interstate 17 from Jomax Road to Carefree Highway in Maricopa County. Interstate 10 from Sarival to State Route Loop 101 in Maricopa County. State Route 195 from Avenue B to 14th Street in Yuma County. State Route Loop 202 from the Interstate 10 and State Route 51 interchange to State Route Loop 101 in Maricopa County. State Route Loop 101 from Princess Drive to State Route Loop 202 in Maricopa County. State Route Loop 303 from Happy Valley Parkway to Lake Pleasant Parkway in Maricopa County. State Route 179 south of Sedona in Coconino and Yavapai Counties. Interstate 10 from the Picacho Peak interchange to the Pinal Air Park in Pinal County. Construction of frontage road on State Route 85 in Maricopa County. State Route Loop 101 from State Route Loop 202 (Red Mountain) to State Route Loop 202 (Santan) in Maricopa County. State Route Loop 202 from the junction of Interstate 10 west to the junction of Interstate 10 south in Maricopa County. Capital assets financed by debt instruments do not generate funds to repay the debt instruments. - 31 - Project Expenditures $ 97,772 91,635 54,908 54,655 48,059 36,374 34,588 30,979 30,102 24,955 24,259 22,849 More detailed information regarding capital assets are on pages 90 and 91. Long-term debt: The State issues no general obligation debt instruments. The Arizona Constitution, under Article 9, Section 5, provides that the State may contract debts not to exceed $350 thousand. This provision has been interpreted to restrict the State from pledging its credit as a sole payment for debts incurred for the operation of the State government. As a result, the State pledges either dedicated revenue streams or the constructed building or equipment acquired as security for the repayment of long-term debt instruments. Major long-term debt activity during the current fiscal year included the following: • The ADOT issued revenue bonds totaling $621.050 million to finance the costs of right-of-way purchase, design, and construction of federal, state, and local highways and to pay the costs of issuing the bonds. • The Universities issued revenue bonds for $385.850 million to fund the acquisition, construction, or renovation of capital facilities and infrastructure and to pay capitalized interest on certain bonds. • The ADOT issued $55.420 million of grant anticipation notes to pay a portion of the costs of certain controlledaccess highways in Maricopa County and to pay the costs of issuance. • The School Facilities Board issued $580.035 million of certificates of participation to finance the following: (i) finance the costs of acquiring leasehold interests in school sites and certain school facilities, which will be subleased to various school districts within the State, as well as the costs of other new school facilities, (ii) pay capitalized interest with respect to the 2008 COPs, and (iii) pay the costs of issuance. State of Arizona-Primary Government Outstanding Major Long-Term Debt as of June 30, 2009 (expressed in thousands) Revenue bonds Grant anticipation notes Certificates of participation Total Governmental Activities 2009 2008 $ 3,251,580 $ 2,759,070 329,650 298,280 1,649,870 1,135,640 $ 5,231,100 $ 4,192,990 Business-type Activities 2009 2008 $ 1,239,675 $ 902,255 872,829 903,843 $ 2,112,504 $ 1,806,098 Total 2009 $ 4,491,255 $ 329,650 2,522,699 $ 7,343,604 $ 2008 3,661,325 298,280 2,039,483 5,999,088 More detailed information regarding long-term debt begins on page 97. ECONOMIC CONDITION AND OUTLOOK Arizona’s economy, along with the rest of the nation, continued to contract in fiscal year 2009, as problems in the financial and housing markets continued, along with continued decline in labor markets. As previously mentioned, since the bursting of the housing bubble and ensuing financial crisis, Arizona has experienced significant economic decline including job losses, home price devaluation and rising home mortgage foreclosures. Compounding the effects of the housing collapse and the resulting downturn in Arizona’s economy is the use of income by businesses and consumers to reduce debt, instead of purchasing goods or services. Stagnant wages and the fear of unemployment have also resulted in constrained spending and increased savings by consumers. Arizona‘s unemployment rate increased from 5.5% June 30th, 2008, to 8.7% June 30th, 2009. Arizona’s economy is projected to continue losing jobs in calendar years 2009 and 2010. The Arizona Department of Commerce, Research Administration (RA), forecasts a loss of 195,800 jobs (-7.5%) for the calendar year 2009-2010 forecast period. However, RA expects employment in Arizona to show a gradual improvement with slowing job losses over the 2009-2010 calendar year forecast period (from losses of 178,500 in 2009 to losses of 17,300 in 2010). The primary reasons include a buildup of the inventory cycle; federal government economic stimulus spending; ongoing - 32 - federal government expenditures in civilian and military sectors; federal government bailouts of financial services industries; and stable prices. The State has recently experienced its worst economic downturn in at least 50 years. Over the period of fiscal year end 2007 through February 2010, the total revenue from the State’s major tax sources (sales and use, individual and corporate) has decreased by approximately one-third. With revenues falling short of budgeted levels, the State’s General Fund was faced with a fiscal year 2009 ending balance shortfall and approximately a $3.2 billion on-going structural deficit. The State Legislature has enacted a series of laws in response. Significant measures include deep cuts to education and health/welfare programs. Additionally, the State Legislature referred a temporary 1-cent increase in the transaction privilege tax to voters. The special election will be held on May 18, 2010. If approved, the increase would become effective June 1, 2010 and expire May 31, 2013. The State Legislature has already enacted laws for additional cuts to State spending authority that will be triggered if the temporary tax is not passed. Accordingly, the State has adopted a workable budget for fiscal year 2010 and 2011, and has made significant progress towards eliminating the long-term structural deficit. The State will continue to use federal stimulus funds through The American Recovery and Reinvestment Act of 2009 (ARRA) as part of the measures to balance the budget. From fiscal year 2009 through fiscal year 2011, the State is scheduled to receive approximately $2.8 billion in ARRA funding, that is a direct help to the General Fund, to be used largely for education and for health/welfare programs. The State recorded $834.355 million in ARRA revenue in fiscal year 2009. Further, the decline in tax revenues has created problems in the management of the State’s cash flow needs. As a result, throughout most of fiscal year 2010, the State Treasurer issued Treasurer’s Warrant Notes (TWNs) in lieu of immediate redemption of warrants presented to the State Treasurer for payment of authorized General Fund expenditures. At May 7, 2010, the outstanding balance of the TWNs was approximately $594.316 million. CONTACTING THE STATE COMPTROLLER’S OFFICE This financial report is designed to provide citizens, taxpayers, customers, investors, and creditors with a general overview of the State’s finances and to demonstrate the State’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Arizona Department of Administration, General Accounting Office, Financial Reporting Section at (602) 542-5405. You may also access and print this report at http://www.gao.az.gov/financials/. The State’s component units issue their own separately issued audited financial statements. These statements may be obtained by directly contacting the component unit. Contact information regarding the component units begins on page 70. - 33 - BASIC FINANCIAL STATEMENTS BASIC FINANCIAL STATEMENTS (This page intentionally left blank) STATE OF ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2009 (Expressed in Thousands) PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES ASSETS Current Assets: Cash Cash with U.S. Treasury Cash and pooled investments with State Treasurer Restricted cash and pooled investments with State Treasurer Cash held by trustee Collateral investment pool Short-term investments Restricted investments held by trustee Receivables, net of allowances: Taxes Interest Loans and notes Patient accounts receivable Other Internal balances Due from U.S. Government Due from local governments Due from others Inventories, at cost Other current assets Total Current Assets Noncurrent Assets: Restricted assets: Cash Cash and pooled investments with State Treasurer Cash held by trustee Investments Investments held by trustee Receivables, net of allowances: Loans and notes Other Securities held in escheat Investments Endowment investments Other noncurrent assets Capital assets: Infrastructure, land, and other non-depreciable Buildings, equipment, and other depreciable, net of accumulated depreciation Total Noncurrent Assets Total Assets $ 5,681 - $ 203,148 602,590 COMPONENT UNITS TOTAL PRIMARY GOVERNMENT $ 208,829 602,590 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES $ - $ 4,589 - 890,391 187,441 1,077,832 4,392 88,970 282,668 - 51,395 47,427 97,644 - 51,395 330,095 97,644 - - 2,607 2,470 111,538 19,868 68,975 3,682 12,557 114,810 199,187 64,658 28,737 3,494 1,685,745 629,234 163,012 36,395 274,536 924,957 19,500 24 42,586 60,175 4,518,804 4,392 12,466 85,343 46,430 12,576 6,523 393,380 48 18,560 18,608 - - 2,007,501 59,087 2,337 - 93,479 32,512 189,199 2,007,501 152,566 34,849 189,199 9,860 - 78,900 602,880 22,879 2,236,330 15,322 43,635 8,959 436,033 234,168 19,605 646,515 8,959 22,879 436,033 2,470,498 34,927 - 992,641 97,118 53,025 16,416,151 330,336 16,746,487 - 114,448 1,443,406 22,805,941 3,074,277 4,480,763 4,517,683 27,286,704 9,860 155,273 1,491,405 25,639,000 6,166,508 31,805,508 14,252 1,884,785 560,259 159,330 23,838 159,726 (199,187) 860,299 19,500 24 13,849 56,681 2,833,059 The Notes to the Financial Statements are an integral part of this statement. (Continued) - 38 - STATE OF ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2009 (Expressed in Thousands) PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES LIABILITIES Current Liabilities: Accounts payable and other current liabilities Payable for securities purchased Accrued liabilities Obligations under securities loan agreements Due to U.S. Government Due to local governments Due to others Unearned deferred revenue Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities $ 624,348 889,434 282,668 6,238 970,101 166,348 81,905 51,881 305,674 172,830 3,551,427 $ 155,459 5,878 84,886 47,427 10 31 96,585 127,776 26,658 95,065 15,196 654,971 COMPONENT UNITS TOTAL PRIMARY GOVERNMENT $ 779,807 5,878 974,320 330,095 6,248 970,132 262,933 209,681 78,539 400,739 188,026 4,206,398 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES $ - $ 56,265 46,215 2,470 4,736 37,055 8,580 155,321 Noncurrent Liabilities: Unearned deferred revenue Contracts payable Accrued insurance losses Funds held for others Long-term debt Other long-term liabilities Total Noncurrent Liabilities 61,556 307,932 5,487,004 130,396 5,986,888 20,070 13,985 351,862 51,780 2,227,802 55,073 2,720,572 81,626 13,985 659,794 51,780 7,714,806 185,469 8,707,460 - 2,336 10,385 1,078,032 10,818 1,101,571 Total Liabilities 9,538,315 3,375,543 - 12,913,858 - 1,256,892 15,094,719 1,328,658 16,423,377 - 35,879 34,345 532,766 26,442 3,578 619,003 27,293 34,345 536,344 619,003 53,735 9,860 - 93,302 2,866,103 203,806 156,630 297,108 3,022,733 - - 437,636 (2,984,628) 75,069 20 376,908 75,069 437,656 (2,607,720) 4,392 341,021 21,113 229,880 NET ASSETS Invested in capital assets, net of related debt Restricted for: Federal grants Capital projects Unemployment Compensation Debt service Permanent funds and University funds: Expendable Nonexpendable Loans and other financial assistance: Expendable Other purposes Unrestricted (deficit) Total Net Assets $ 16,100,685 $ 2,790,965 The Notes to the Financial Statements are an integral part of this statement. - 39 - $ 18,891,650 $ 14,252 $ 627,893 STATE OF ARIZONA STATEMENT OF FINANCIAL POSITION UNIVERSITIES - AFFILIATED COMPONENT UNITS JUNE 30, 2009 (Expressed in Thousands) ASSETS Cash and cash equivalent investments $ 77,216 Receivables: Pledges receivable Other receivables Total receivables 175,754 17,482 193,236 Investments: Investments in securities Investments held in trust for Universities Other investments Total investments 839,827 85,422 51,360 976,609 Net direct financing leases Property and equipment, net of accumulated depreciation Licenses Other assets 123,523 401,695 5,559 41,997 Total Assets 1,819,835 LIABILITIES Liability under Universities' endowment trust agreements Bonds payable Unearned revenue Other liabilities 73,544 661,474 33,108 68,063 Total Liabilities 836,189 NET ASSETS Permanently restricted Temporarily restricted Unrestricted Total Net Assets 665,707 332,829 (14,890) $ 983,646 The Notes to the Financial Statements are an integral part of this statement. - 40 - (This page intentionally left blank) STATE OF ARIZONA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) PROGRAM REVENUES EXPENSES FUNCTIONS/PROGRAMS PRIMARY GOVERNMENT: Governmental Activities: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Interest on long-term debt Total Governmental Activities $ Business-type Activities: Universities Unemployment Compensation Industrial Commission Special Fund Lottery Other Total Business-type Activities 928,485 12,055,439 176,354 6,084,342 1,514,282 695,070 228,430 2,755,710 222,851 24,660,963 OPERATING GRANTS AND CONTRIBUTIONS CHARGES FOR SERVICES $ 3,290,033 1,086,330 30,055 395,950 142,229 4,944,597 199,011 92,770 153,642 41,079 122,840 138,520 58,971 806,833 $ 1,272,694 270,859 24,920 484,486 143,231 2,196,190 135,387 9,308,088 18,135 914,805 113,979 90,618 39,630 10,620,642 CAPITAL GRANTS AND CONTRIBUTIONS $ 873,108 369,734 855 1,243,697 255 552,488 455 553,198 14,710 14,710 Total Primary Government $ 29,605,560 $ 3,003,023 $ 11,864,339 $ 567,908 COMPONENT UNITS: Governmental Activities: Greater Arizona Development Authority $ 5,620 $ - $ - $ - $ 42,520 530,782 29,750 603,052 $ 32,215 543,947 29,810 605,972 $ 20,035 20,035 $ 1,726 1,726 Business-type Activities: Water Infrastructure Finance Authority University Medical Center Arizona Power Authority Total Business-type Activities $ $ $ $ General Revenues: Taxes: Sales Income Tobacco Property Motor vehicle and fuel Other Unrestricted investment earnings Unrestricted grants and contributions (Loss) on sale of trust land Miscellaneous Contributions to permanent endowments Special Item: Intergovernmental transfer of Sundome Center for the Performing Arts Extraodinary Item: Insurance recovery, net of impairment loss Transfers Total General Revenues, Contributions, Special Item, Extraordinary Item, and Transfers Change in Net Assets Net Assets - Beginning Net Assets - Ending The Notes to the Financial Statements are an integral part of this statement. - 42 - NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS PRIMARY GOVERNMENT COMPONENT UNITS TOTAL GOVERNMENTAL BUSINESS-TYPE PRIMARY GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES GOVERNMENT ACTIVITIES ACTIVITIES $ (594,087) (2,654,326) (4,577) (5,128,458) (1,277,463) 86,556 (129,374) (2,755,710) (222,851) (12,680,290) $ $ (12,680,290) (594,087) (2,654,326) (4,577) (5,128,458) (1,277,463) 86,556 (129,374) (2,755,710) (222,851) (12,680,290) (1,129,521) (445,737) (5,135) 88,536 1,857 (1,490,000) (1,129,521) (445,737) (5,135) 88,536 1,857 (1,490,000) (1,490,000) (14,170,290) $ (5,620) $ 5,442,563 3,126,076 370,073 32,564 1,643,276 574,030 92,957 12,440 (165,696) 222,712 - 58,528 22,450 45,786 4,014 (983,006) 10,367,989 (2,312,301) 18,412,986 $ 16,100,685 5,501,091 3,126,076 370,073 32,564 1,643,276 574,030 115,407 12,440 (165,696) 268,498 4,014 (6,668) - 7,240 7,240 - - 2,720 983,006 2,720 - - - 1,123,744 (366,256) 3,157,221 $ 698 - 9,730 14,891 60 24,681 2,790,965 11,491,733 (2,678,557) 21,570,207 $ 18,891,650 698 (4,922) 19,174 $ 14,252 - 43 - (6,668) 18,013 609,880 $ 627,893 STATE OF ARIZONA STATEMENT OF ACTIVITIES UNIVERSITIES - AFFILIATED COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) UNRESTRICTED REVENUES Contributions Rental revenue Sales and services Net investment income Net assets released from restrictions Capital lease revenue Licensing revenue Other revenues $ TEMPORARILY PERMANENTLY RESTRICTED RESTRICTED TOTAL 12,769 $ 46,289 35,095 (51,762) 113,450 113 2,309 21,773 64,314 $ 89 (46,586) (94,379) 4,304 26,490 $ (63,514) (19,071) 34 180,036 (72,258) (56,061) 51,717 92,374 8,883 18,478 10,878 - - 92,374 8,883 18,478 10,878 58,049 8,823 25,064 18,089 8,866 - - 58,049 8,823 25,064 18,089 8,866 Total Expenses 249,504 - - 249,504 Decrease in net assets, before extraordinary items (69,468) (72,258) (56,061) (197,787) 1,394 (3,442) - - 1,394 (3,442) 5,678 (5,678) - (71,516) (66,580) (61,739) (199,835) 57,022 (356) (40) 404,068 (4,694) 35 722,396 5,050 - 1,183,486 (5) Total Revenues EXPENSES Program services: Payments to Universities Leasing related expenses Payments on behalf of Universities Other program services Personal services, operations, and administrative expenses Fundraising expenses Interest Depreciation and amortization Other expenses Extraordinary Items: Gain on lease revaluation due to bond refunding Loss on early debt extinguishment Reclassification of net assets per change in law - Decrease in net assets, after extraordinary items Net Assets - Beginning Transfers Cumulative effect of accounting change Net Assets - Ending $ (14,890) $ 332,829 The Notes to the Financial Statements are an integral part of this statement. - 44 - $ 665,707 $ 103,573 46,289 35,184 (161,862) 113 2,309 26,111 983,646 STATE OF ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2009 (Expressed in Thousands) TRANSPORTATION & GENERAL FUND ASSETS Cash Cash and pooled investments with State Treasurer Collateral investment pool Receivables, net of allowances: Taxes Interest Loans and notes Other Due from U.S. Government Due from local governments Due from others Due from other Funds Inventories, at cost Restricted assets: Cash Cash and pooled investments with State Treasurer Cash held by trustee Investments Securities held in escheat Endowment investments Other Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Due to U.S. Government Due to local governments Due to others Due to other Funds Unavailable deferred revenue Unearned deferred revenue Total Liabilities $ OTHER GOVERNMENTAL FUNDS $ $ - $ 28 3,496 TOTAL $ 4,949 31,336 10,620 34,836 94,427 170,195 656,928 46,301 761,975 282,668 434,645 1,421 84,986 797,790 19,500 22,930 3,560 61,018 1,779 9,789 25,914 57,968 8 7,447 152,041 616,929 9,396 1,703 - 64,596 4,082 24,543 24 325,195 95 560,259 159,323 626,718 144,839 855,758 19,500 24 349,836 11,102 48 - - - 48 425,757 25,353 2,337 22,879 135 700,224 50,816 2,236,330 - 881,520 33,734 12 2,007,501 59,087 2,337 22,879 2,236,330 50,963 $ 1,874,102 $ 960,419 $ 3,281,049 $ 2,040,526 $ 8,156,096 $ 291,455 437,519 $ 142,811 11,664 $ 51,426 237 $ 58,462 31,326 $ 544,154 480,746 Fund Balances: Reserved for: Budget stabilization fund Highway construction Other construction School facilities improvements Permanent funds Continuing appropriations Debt service Other fund balance reservations Unreserved Unreserved reported in: Non-major special revenue funds Total Fund Balances Total Liabilities and Fund Balances 1,425 AVIATION PLANNING, HIGHWAY LAND MAINTENANCE & ENDOWMENTS SAFETY FUND FUND 31,336 6,238 762,223 166,250 552,964 535,315 69,080 2,852,380 34,836 113,013 4,774 19,789 326,887 170,195 1 26,211 763,272 73,574 1,084,916 46,301 94,865 97 14,056 954 807 246,868 282,668 6,238 970,101 166,348 598,005 1,319,330 143,461 4,511,051 2,767 376,993 43,091 252 (1,401,381) 522,795 174,394 7,447 (71,104) 2,196,040 93 - 781,986 108,129 38,066 27,115 - 2,767 1,304,781 108,129 376,993 2,196,040 255,644 27,115 7,699 (1,472,485) 633,532 2,196,133 838,362 1,793,658 . 2,040,526 (978,278) $ 1,874,102 $ 960,419 The Notes to the Financial Statements are an integral part of this statement. - 45 - $ 3,281,049 $ 838,362 3,645,045 $ 8,156,096 STATE OF ARIZONA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2009 (Expressed in Thousands) Total fund balances - governmental funds $ 3,645,045 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 17,787,093 Certain receivables related to reimbursements are not available at year end and, therefore, are not reported in the governmental funds. 2,341 Certain receivables are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. 1,319,330 Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Assets. (326,657) The allocation of the internal service fund accumulated net loss results in an amount due from business-type activities, which is not reported in the governmental funds. 46,193 Deferred issue costs are reported as current expenditures in the governmental funds. However, deferred issue costs are amortized over the life of the bonds and are included in the governmental activities in the Statement of Net Assets. 13,697 Long-term debt is not due and payable from current financial resources and, therefore, is not reported in the governmental funds. These amounts consist of: Revenue bonds Grant anticipation notes Certificates of participation Capital leases Installment purchase contracts Notes payable Premium on debt Deferred amount on refundings (3,251,580) (329,650) (1,649,870) (233,044) (6,343) (42,668) (285,613) 9,171 (5,789,597) Accrued liabilities for AHCCCS programmatic costs and reimbursements are not due and payable from current financial resources and, therefore, are not reported in the governmental funds. (380,814) Accrued interest on long-term obligations is not due and payable from current financial resources and, therefore, is not reported in the governmental funds. (26,434) Other long-term liabilities are not due and payable from current financial resources and, therefore, are not reported in the governmental funds. Those liabilities consist of: Compensated absences Pollution remediation obligations (166,696) (22,813) (189,509) Other long-term assets are not available to pay for current-period expenditures and, therefore, are not reported in the governmental funds. Those assets consist of: Other non-current assets (3) Net assets of governmental activities $ The Notes to the Financial Statements are an integral part of this statement. - 46 - 16,100,685 STATE OF ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) GENERAL FUND REVENUES Taxes: Sales Income Tobacco Property Motor vehicle and fuel Other Intergovernmental Licenses, fees, and permits Earnings on investments Sales and charges for services Fines, forfeitures, and penalties Gaming Tobacco settlement Proceeds from sale of trust land Other Total Revenues $ EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Intergovernmental revenue sharing Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Proceeds from sale of capital assets Capital lease and installment purchase contracts Proceeds from notes and loans Bonds issued Grant anticipation notes issued Certificates of participation issued Premium on debt issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 4,669,693 3,137,714 75,128 20,589 456,561 10,614,124 110,563 19,107 88,198 40,570 5,973 125,571 147,796 19,511,587 TRANSPORTATION & AVIATION PLANNING, HIGHWAY MAINTENANCE & SAFETY FUND $ 219,164 11,975 1,672,151 653,999 88,072 24,796 936 24,122 2,695,215 LAND ENDOWMENTS FUND $ OTHER GOVERNMENTAL FUNDS - $ (410,911) 37,809 143,674 7,269 (222,159) 540,596 80 294,945 117,469 47,900 211,367 48,687 27,728 162,767 78,167 74,681 1,604,387 TOTAL $ 5,429,453 3,137,794 370,073 32,564 1,672,151 574,030 11,316,023 410,002 (318,321) 154,671 203,337 84,140 125,571 143,674 253,868 23,589,030 766,236 11,688,927 55,210 5,365,372 1,350,340 70 87,506 1,663,817 564,442 1,100,959 7,109 45,455 7,349 - 147,030 263,604 119,423 620,778 103,003 44,119 132,524 - 913,266 11,959,640 174,633 6,031,605 1,460,692 608,631 220,030 2,764,776 55,057 52,189 50,665 21,135,389 412 5,423 618,760 2,289,996 26 59,939 180,502 180,818 626,079 2,417,880 235,971 238,430 1,295,530 25,903,204 (1,623,802) 405,219 (282,098) (813,493) (2,314,174) 815,357 (1,126,584) 3,134 580,035 11,960 283,902 (1,339,900) 361,622 2,898 (605,768) 2,127 23,139 (577,604) (172,385) 805,917 8 (66,501) (66,493) (348,591) 2,544,724 430,004 (370,111) 922 621,050 55,420 58,123 795,408 (18,085) 1,811,743 1,248,267 (2,168,964) 2,127 4,056 23,139 621,050 55,420 580,035 70,083 435,213 (1,878,961) 5,524,006 (978,278) $ 633,532 The Notes to the Financial Statements are an integral part of this statement. - 47 - $ 2,196,133 $ 1,793,658 $ 3,645,045 STATE OF ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Net change in fund balances - total governmental funds $ (1,878,961) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the Statement of Activities, the cost of assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlay 1,295,530 Infrastructure and land adjustment (128,578) Depreciation expense (104,243) 1,062,709 The net expense of internal service funds is included with governmental activities in the Statement of Activities. (61,589) Some revenues reported in the Statement of Activities are not currently available at yearend and are not reported as revenue in the governmental funds. Sales taxes 13,110 Tobacco settlement 2,138 Accrued interest on land sales' contracts 35,025 Operating grants 15,630 Other revenue 9,118 75,021 Certain revenues that are reported as resources in the funds, but were earned in prior fiscal years, are not reported in the Statement of Activities. Income taxes (11,718) Right-of-way lease revenue (10,689) (22,407) Trust land sales are financed with long-term mortgages. In the Statement of Activities, the gain on sale of trust land is reported, whereas in the governmental funds, the proceeds from the collection of mortgage payments are reported. In FY 2009, mortgage payments exceeded gains resulting from current year land sales. Land sale defaults also resulted in write-offs of receivables deemed uncollectible. Write off of long-term mortgage receivables related to land sales defaults are not reported in the governmental funds. Mortgage payment proceeds (34,906) Land sale defaults (274,464) (309,370) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. AHCCCS accrued programmatic costs (52,960) Pollution remediation obligations (22,813) The Notes to the Financial Statements are an integral part of this statement. (75,773) (Continued) - 48 - STATE OF ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Certain expenditures that are reported in the governmental funds in the current year, but were incurred in prior fiscal years, are not reported in the Statement of Activities. Compensated absences 136 Bond proceeds provide current financial resources to the governmental funds; however, issuing debt increases long-term liabilities in the Statement of Net Assets. In the current period, proceeds were received from: Bonds issued (621,050) Grant anticipation notes issued (55,420) Certificates of participation issued (580,035) Proceeds from notes and loans (23,139) Bond issuance costs 3,967 Premium on debt issued (70,083) (1,345,760) Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces noncurrent liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Debt service principal 235,971 Debt premium/discount amortization 27,286 Amortization of bond issuance costs (982) Amortization of deferred amount (3,974) 258,301 Accrued interest on long-term obligations is not due and payable from current financial resources and, therefore, is not reported in the governmental funds. (10,552) Some capital asset additions were financed through capital leases and installment purchase contracts. Such financing arrangements are reported as an other financing source in the governmental funds, however, these amounts are reported as liabilities in the Statement of Net Assets. (4,056) Change in net assets of governmental activities $ The Notes to the Financial Statements are an integral part of this statement. - 49 - (2,312,301) STATE OF ARIZONA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2009 (Expressed in Thousands) UNIVERSITIES ASSETS Current Assets: Cash $ Cash with U.S. Treasury Cash and pooled investments with State Treasurer Restricted cash and pooled investments with State Treasurer Collateral investment pool Short-term investments Receivables, net of allowances: Taxes Interest Loans and notes Other Due from U.S. Government Due from other Funds Inventories, at cost Other current assets Total Current Assets Noncurrent Assets: Restricted assets: Cash Cash held by trustee Investments Investments held by trustee Receivables, net of allowances: Loans and notes Other Investments Endowment investments Other noncurrent assets Capital assets: Land and other non-depreciable Buildings, equipment, and other depreciable, net of accumulated depreciation Total Noncurrent Assets Total Assets 156,250 119,807 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS INDUSTRIAL UNEMPLOYMENT COMMISSION COMPENSATION SPECIAL FUND LOTTERY $ 602,590 - $ 44,961 6,961 $ OTHER 35,538 $ 1,937 25,135 97,541 - 44,736 - - 51,395 2,691 103 989 4,166 78,074 64,423 254,138 20,260 3,146 798,794 65,737 17,140 685,467 3,238 2,198 4,293 106,387 5,783 2,367 43,688 495 8,391 9,520 235 86 6,110 348 106,446 18,560 93,479 32,512 189,199 - - - - 27,975 8,959 174,135 234,168 11,275 - 261,898 - 8,330 15,660 - 324,195 - 2,997 991 2,153 3,034,786 4,149,243 4,948,037 685,467 16,300 281,195 387,582 2,797 12,118 55,806 20,394 38,207 144,653 The Notes to the Financial Statements are an integral part of this statement. - 50 - TOTAL ENTERPRISE FUNDS $ 203,148 602,590 187,441 GOVERNMENTAL ACTIVITIES INTERNAL SERVICE FUNDS $ 732 128,417 51,395 47,427 97,644 - 68,975 3,682 12,557 114,810 64,658 254,224 28,737 3,494 1,740,782 8 14,887 2,200 3,956 2,747 5,718 158,665 18,560 93,479 32,512 189,199 - 43,635 8,959 436,033 234,168 19,605 1,625 330,336 548 3,074,277 4,480,763 6,221,545 71,916 74,089 232,754 (Continued) - 51 - STATE OF ARIZONA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2009 (Expressed in Thousands) UNIVERSITIES LIABILITIES Current Liabilities: Accounts payable and other current liabilities Payable for securities purchased Accrued liabilities Obligations under securities loan agreements Due to U.S. Government Due to local governments Due to others Due to other Funds Unearned deferred revenue Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities $ Noncurrent Liabilities: Unearned deferred revenue Contracts payable Accrued insurance losses Funds held for others Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital projects Unemployment compensation Debt service University funds: Expendable Nonexpendable Loans and other financial assistance: Expendable Other Unrestricted (deficit) Total Net Assets $ 139,855 62,216 18,863 118,606 94,982 14,097 448,619 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS INDUSTRIAL UNEMPLOYMENT COMMISSION COMPENSATION SPECIAL FUND LOTTERY $ 20,464 10 45,792 198 66,464 $ 4,309 5,878 44,736 26,658 81,581 $ OTHER 4,532 31,930 8,645 308 45,415 $ 6,763 2,206 2,691 31 1 9,170 83 791 21,736 20,070 51,780 2,227,576 54,833 2,354,259 2,802,878 66,464 351,862 351,862 433,443 45,415 13,985 226 240 14,451 36,187 1,283,335 - 19,297 3,788 22,238 3,578 27,293 619,003 - - - - 203,806 156,630 - - - - 470,517 - 6,603 75,069 20 11,139 2,145,159 $ 619,003 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Net assets of business-type activities The Notes to the Financial Statements are an integral part of this statement. - 52 - (65,158) $ (45,861) $ 10,391 $ 108,466 TOTAL ENTERPRISE FUNDS $ 155,459 5,878 84,886 47,427 10 31 96,585 8,844 127,776 26,658 95,065 15,196 663,815 GOVERNMENTAL ACTIVITIES INTERNAL SERVICE FUNDS $ 20,070 13,985 351,862 51,780 2,227,802 55,073 2,720,572 3,384,387 307,932 487 104,309 412,728 559,411 1,328,658 69,383 3,578 619,003 27,293 - 203,806 156,630 - 75,069 20 423,101 $ 80,192 1,441 1,167 51,881 2,594 9,408 146,683 2,837,158 (396,040) $ (326,657) (46,193) $ 2,790,965 - 53 - STATE OF ARIZONA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) UNIVERSITIES OPERATING REVENUES Sales and charges for services: Student tuition and fees, net of scholarship allowances of $251,177 Auxiliary enterprises, net of scholarship allowances of $12,011 Educational department Lottery Other Unemployment assessments Workers' compensation assessments Intergovernmental Nongovernmental grants and contracts Licenses, fees, and permits Earnings on investments Fines, forfeitures, and penalties Settlement Income Other Total Operating Revenues $ OPERATING EXPENSES Cost of sales and benefits Interest Scholarships and fellowships Personal services Contractual services Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) NON-OPERATING REVENUES (EXPENSES) Share of State sales tax revenues Intergovernmental Gifts and donations Gain (loss) on sale of capital assets Investment income (loss) Endowment earnings on investments Other non-operating revenue Distributions to local governments Interest expense Other non-operating expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions, Special Item, Extraordinary Item, and Transfers 880,989 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS INDUSTRIAL UNEMPLOYMENT COMMISSION COMPENSATION SPECIAL FUND LOTTERY $ - $ - $ - 268,809 330,100 2,050 18 600,977 13,717 11,203 24,920 484,486 551 485,037 141,470 855 633 1,128 1,368 145,454 774,721 159,755 2,031,987 214,156 3,180,619 (1,294,139) 1,086,330 1,086,330 (485,353) 24,387 1,305 25,692 (772) 332,135 6,107 16,081 356 56 3,073 357,808 127,229 95,515 1,877 27,423 8,392 1,969 300 5,612 141,088 4,366 58,528 186,469 164,636 (59) 37,315 (60,374) 10,118 (93,760) (6,186) 296,687 39,634 39,634 (17,920) 1,790 (4,363) (20,493) 752 (38,142) (37,390) 191 2,303 400 (49) (1,092) 1,753 (997,452) (445,719) (21,265) 89,839 6,119 2,720 1,075,756 - (8,274) Change in Net Assets Total Net Assets - Beginning 106,988 2,038,171 (453,993) 1,072,996 $ - 324,675 67,030 467,797 114,580 31,409 1,886,480 Capital grants and contributions Contributions to permanent endowments Special Item: Intergovernmental transfer of Sundome Center for the Performing Arts Extraordinary Item: Insurance recovery, net of impairment loss Transfers in Transfers out Total Net Assets - Ending $ OTHER 14,710 4,014 - - - - 7,240 - - - - 2,145,159 $ 619,003 Change in net assets of enterprise funds Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Change in net assets of business-type activities The Notes to the Financial Statements are an integral part of this statement. - 54 - $ 6,000 - (90,938) (15,265) (30,596) (1,099) 11,490 (45,861) $ 10,391 3,397 (2,935) 6,581 101,885 $ 108,466 TOTAL ENTERPRISE FUNDS $ $ 880,989 GOVERNMENTAL ACTIVITIES INTERNAL SERVICE FUNDS $ - 324,675 67,030 484,486 141,470 268,809 13,717 798,752 114,580 633 1,128 2,050 11,203 33,346 3,142,868 905,146 55 905,201 2,313,088 1,877 159,755 2,065,517 24,473 217,786 356 8,685 4,791,537 (1,648,669) 779,838 33,357 35,580 14,184 42,957 9,964 915,880 (10,679) 58,528 186,469 164,636 132 62,084 (60,374) 12,308 (38,142) (93,809) (11,641) 280,191 (104) 93 262 (168) (281) (198) (1,368,478) (10,877) 14,710 4,014 2,129 - 7,240 - 2,720 1,085,153 (102,147) 1,087 (63,396) (356,788) 3,193,946 (71,057) (255,600) 2,837,158 $ (356,788) (9,468) $ (366,256) $ (326,657) - 55 - STATE OF ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) UNIVERSITIES CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Receipts from assessments Receipts from student tuition and fees Receipts from sales and services of auxiliary enterprises Receipts from sales and services of educational departments Receipts from interfund services / premiums Receipts from grants and contracts Receipts from student loans collected Receipts from repayment of loans to local governments Receipts from settlement income Receipts from other Funds Payments to suppliers, prize winners, claimants, insurance companies, or beneficiaries Payments to employees Payments to retirees Payments for scholarships and fellowships Payments for student loans issued Payments for loans to local governments Payments to other funds Other receipts (payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Custodial funds received Office rental receipts Share of State sales tax receipts Grants and contributions received Transfers from other Funds Custodial funds disbursed Grants and contributions disbursed Distributions to local governments Payments of interfund loans Transfers to other Funds Other receipts (payments) Net Cash Provided (Used) by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets Proceeds from capital debt, installment purchase contracts, and capital leases Capital grants and contributions received Transfers from other funds Acquisition and construction of capital assets Interest paid on capital debt, installment purchase contracts, and capital leases Principal paid on capital debt, installment purchase contracts, and capital leases Other receipts (payments) Net Cash (Used) by Capital and Related Financing Activities $ 861,623 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS INDUSTRIAL UNEMPLOYMENT COMMISSION COMPENSATION SPECIAL FUND LOTTERY $ 268,587 - $ 15,457 - $ OTHER 249,898 - $ 140,527 - 319,920 - - - - 74,653 611,781 9,341 330,100 - - - 957 - - - 11,203 - - 14,067 33,900 (753,189) (2,033,295) (152,502) (6,277) 31,370 (1,036,575) (1,061,358) 2,068 (460,603) (31,146) (4,486) (127,329) (6,129) 10,542 126,982 (108,949) (27,593) (3,982) (20,000) (1,955) 26,972 306,495 63,350 925,992 783,274 (288,837) (557,209) 25,133 (8,516) - 1,790 6,000 (2,733) (38,142) (109,172) - 3,396 (54,047) (2,935) (35) (8,516) 5,057 (147,314) (53,621) 1,258,198 558 - - 399,874 9,928 34,625 (314,178) - (90,897) - (90,318) - - (45) (50,408) - (207) The Notes to the Financial Statements are an integral part of this statement. - 56 - (162) - (142) 2 (430) - (48) - (80) 400 (142) (156) TOTAL ENTERPRISE FUNDS $ 390,425 284,044 861,623 GOVERNMENTAL ACTIVITIES INTERNAL SERVICE FUNDS $ - 319,920 - 74,653 942,838 9,341 902,496 - 14,067 11,203 33,900 - (2,081,971) (2,067,017) (152,502) (6,277) (3,982) (20,000) 42,025 (1,347,710) (841,953) (32,897) (11,040) - 306,495 1,790 63,350 925,992 792,670 (288,837) (557,209) (38,142) (54,047) (120,623) 22,365 1,087 (63,396) (278) 1,053,804 560 14 16,620 (62,587) 1,377 399,874 9,928 34,625 (314,912) (8,913) (90,945) (90,398) 355 (166) (2,797) 258 (50,913) (10,241) (Continued) - 57 - STATE OF ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) UNIVERSITIES BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS INDUSTRIAL UNEMPLOYMENT COMMISSION COMPENSATION SPECIAL FUND LOTTERY OTHER CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments Interest and dividends from investments Change in cash collateral received from securities lending transactions Purchase of investments Other (payments) Net Cash Provided (Used) by Investing Activities 338,311 18,984 39,634 232,295 11,602 162 2,479 (554,373) (197,078) 39,634 (3,074) (227,729) (1,056) 12,038 162 2,691 (4) (61) 5,105 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning (25,863) 413,959 Cash and Cash Equivalents - Ending RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Interest expense Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances (Increase) decrease in due from U.S. Government (Increase) decrease in due from other Funds (Increase) decrease in inventories, at cost (Increase) decrease in other assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities (Decrease) in due to U.S. Government Increase in due to local governments Increase in due to others (Decrease) in due to other Funds Increase (decrease) in deferred revenue (Decrease) in accrued insurance losses Increase in other liabilities (429,485) 1,032,075 $ 388,096 $ $ (1,294,139) $ 602,590 12,402 84,256 $ (485,353) $ 214,156 - - (7,038) (464) (265) 32,517 - $ (1,036,575) $ (460,603) $ SCHEDULE OF NONCASH INVESTING, CAPITAL AND NON-CAPITAL FINANCING ACTIVITIES Gifts and conveyances of capital assets $ (Loss) on disposal of capital assets, net Change in fair value of investments Unrealized loss on endowments Amortization of bond discount and issuance costs Amortization of bond premium Intergovernmental transfer of capital assets Amortization of deferred rent Total Noncash Investing, Capital and Non-capital Financing Activities $ 1,995 $ (3,203) (21,611) (20,350) (2,300) 1,487 7,240 4,900 - (31,842) $ - The Notes to the Financial Statements are an integral part of this statement. - 58 - (21,700) 102,858 $ 35,538 $ 81,158 (772) $ 127,229 $ 4,366 1,305 - 18,522 (896) 6,063 (12,565) 12,669 19,615 - Net Cash Provided (Used) by Operating Activities 96,658 (20,312) 55,850 1,458 (2,859) (3,618) - 356 - 1,969 1,877 (20) 1,147 (582) 1,195 (2,343) - 9,055 102 33,893 944 110 3,618 (7,097) 31 (19,999) (1,922) 25 (4,486) $ 126,982 $ 26,972 $ - $ (30,206) - - $ 366 - $ (30,206) $ - $ 366 TOTAL ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES INTERNAL SERVICE FUNDS 570,606 72,861 91 (383) (782,106) (1,117) (140,139) 91 (484,958) 1,688,998 $ $ 1,204,040 (56,117) 185,266 $ 129,149 (1,648,669) $ (10,679) 217,786 1,877 14,184 21,977 102 33,893 1,195 5,591 (10,611) 2,765 (265) 31 32,517 (19,999) 17,693 (3,618) 25 (283) (387) (2,016) 847 (2,902) (5,349) 480 (248) (4,114) 27,087 $ (1,347,710) $ 16,620 $ 1,995 $ (3,203) (51,451) (20,350) (2,300) 1,487 7,240 4,900 2,129 - $ (61,682) $ 2,129 - 59 - STATE OF ARIZONA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2009 (Expressed in Thousands) PENSION AND OTHER ASSETS Cash Cash and pooled investments with State Treasurer Prepaid benefits Short-term investments Receivables, net of allowances: Accrued interest and dividends Securities sold Forward contract receivable Contributions Court fees Due from other Funds Miscellaneous receivables Total receivables EMPLOYEE BENEFIT INVESTMENT AGENCY TRUST FUNDS TRUSTS FUNDS $ Due from others Investments, at fair value: Temporary investments Temporary investments from securities lending U.S. Government securities Corporate bonds Corporate notes Corporate stocks Real estate mortgages and contracts Collateral investment pool Repurchase agreements Money market mutual funds Other investments Total investments Custodial securities in safekeeping Other assets Property and equipment, net of accumulated depreciation Total Assets 110,162 $ - $ 28,017 566 - - 220,709 4,487 70,691 231,792 562,074 65,974 833 2,537 8,790 942,691 5,790 5,790 119 119 - - 80,168 1,166,821 - - 3,422,623 3,167,443 3,896,929 16,494,304 577,792 820,815 1,132,216 30,678,943 1,355,543 6,607 535,044 114,534 2,353,475 14,492 4,379,695 - - - 3,468,285 8,816 4,901 - - 31,737,263 4,385,485 3,810,601 LIABILITIES Accounts payable and other current liabilities Payable for securities purchased Obligation under securities loan agreements Due to local governments Due to others Due to other Funds 621,948 533,836 3,077 - 4,243,438 2,537 114,534 9,764 - 155,718 3,654,883 - Total Liabilities 5,401,759 127,375 3,810,601 26,335,504 - 4,258,110 - NET ASSETS Held in trust for: Pension benefits Pool participants Total Net Assets $ 26,335,504 $ 4,258,110 The Notes to the Financial Statements are an integral part of this statement. - 60 - $ - STATE OF ARIZONA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) PENSION AND OTHER ADDITIONS: Member contributions Employer contributions Member purchase of service credit Court fees EMPLOYEE BENEFIT INVESTMENT TRUST FUNDS TRUSTS $ 1,050,472 1,271,305 77,562 8,000 $ Investment income (loss): Net (decrease) in fair value of investments Interest income Dividends Real estate Other investment income Securities lending income Total investment income (loss) (6,160,669) 311,994 382,347 (175,091) (56,619) 34,481 (5,663,557) (26,896) 58,627 30 31,761 Less investment expenses: Investment activity expenses Securities lending expenses Net investment income (loss) 127,793 32,780 (5,824,130) 2,960 24 28,777 Capital share and individual account transactions: Shares sold Reinvested interest income Shares redeemed Net capital share and individual account transactions Other additions 7,151,059 62,540 (7,848,043) - (634,444) 4,545 Total Additions - (3,412,246) DEDUCTIONS: Retirement and disability benefits Death benefits Refunds to withdrawing members, including interest Administrative expense Dividends to investors Other deductions Total Deductions Change in net assets held in trust for: Pension benefits Pool participants Net Assets - Beginning Net Assets - Ending - (605,667) 2,576,454 30,378 - 143,343 37,334 8,019 56,509 - 2,795,528 56,509 (6,207,774) 32,543,278 $ 26,335,504 (662,176) 4,920,286 $ 4,258,110 The Notes to the Financial Statements are an integral part of this statement. - 61 - (This page intentionally left blank) STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS COMPONENT UNITS - PROPRIETARY FUNDS JUNE 30, 2009 WATER (Expressed in Thousands) INFRASTRUCTURE FINANCE AUTHORITY ASSETS Current Assets: Cash Cash and pooled investments with State Treasurer Cash held by trustee Collateral investment pool Short-term investments Restricted investments held by trustee Receivables, net of allowances: Interest Patient accounts receivable Other Inventories, at cost Other current assets Total Current Assets $ 82,840 2,607 2,470 - UNIVERSITY MEDICAL CENTER $ 4,589 111,538 16,493 ARIZONA POWER AUTHORITY $ 6,130 3,375 TOTAL $ 4,589 88,970 2,607 2,470 111,538 19,868 12,444 5,791 106,152 17 85,343 37,181 12,576 3,829 271,566 5 3,458 2,694 15,662 12,466 85,343 46,430 12,576 6,523 393,380 992,641 97,118 4,254 72,303 15,375 6,597 33,396 78,900 992,641 97,118 53,025 101 (101) 1,094,013 114,448 399,223 (244,121) 357,228 1,328 (1,157) 40,164 114,448 400,652 (245,379) 1,491,405 1,200,165 628,794 55,826 1,884,785 9,059 2,470 29,095 65 40,689 51,193 36,566 4,736 4,145 8,444 105,084 5,072 590 3,815 71 9,548 56,265 46,215 2,470 4,736 37,055 8,580 155,321 Noncurrent Liabilities: Unearned deferred revenue Accrued insurance losses Long-term debt Other long-term liabilities Total Noncurrent Liabilities 2,336 755,976 758,312 10,385 279,843 10,818 301,046 42,213 42,213 2,336 10,385 1,078,032 10,818 1,101,571 Total Liabilities 799,001 406,130 51,761 1,256,892 - 35,708 171 35,879 341,021 60,143 21,113 165,843 3,894 341,021 21,113 229,880 Noncurrent Assets: Restricted investments held by trustee Loans and notes receivable, net of allowances Investments Other noncurrent assets Capital assets: Land and other non-depreciable Buildings, equipment, and other depreciable Less: accumulated depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Loans and other financial assistance Other Unrestricted Total Net Assets $ 401,164 $ The Notes to the Financial Statements are an integral part of this statement. - 63 - 222,664 $ 4,065 $ 627,893 STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS COMPONENT UNITS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) WATER INFRASTRUCTURE FINANCE AUTHORITY OPERATING REVENUES Sales and charges for services Intergovernmental Licenses, fees, and permits Earnings on investments Total Operating Revenues $ 20,035 12,690 19,525 52,250 UNIVERSITY MEDICAL CENTER $ 543,947 543,947 OPERATING EXPENSES Cost of sales and benefits Interest on program loans Personal services Contractual services Aid to local governments Depreciation and amortization Insurance Other Total Operating Expenses Operating Income 34,098 1,262 787 916 5,457 42,520 9,730 120,011 245,634 98,227 23,593 4,522 30,783 522,770 21,177 NON-OPERATING REVENUES (EXPENSES) Investment income (loss) Interest expense Other non-operating expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions 7,564 7,564 17,294 (14,431) (6,650) (1,362) (22,443) (1,266) Capital grants and contributions Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending $ ARIZONA POWER AUTHORITY $ TOTAL 29,810 29,810 $ 28,095 32 1,506 29,633 177 573,757 20,035 12,690 19,525 626,007 148,106 34,098 246,896 99,014 916 23,625 4,522 37,746 594,923 31,084 199 (117) 82 259 (6,668) (6,767) (1,362) (14,797) 16,287 - 1,726 - 1,726 17,294 383,870 460 222,204 259 3,806 18,013 609,880 401,164 $ The Notes to the Financial Statements are an integral part of this statement. - 64 - 222,664 $ 4,065 $ 627,893 STATE OF ARIZONA COMBINING STATEMENT OF FINANCIAL POSITION UNIVERSITIES - AFFILIATED COMPONENT UNITS JUNE 30, 2009 (Expressed in Thousands) ARIZONA STATE UNIVERSITY FOUNDATION ASSETS Cash and cash equivalent investments $ 5,919 UNIVERSITY OF ARIZONA FOUNDATION ARIZONA CAPITAL FACILITIES FINANCE CORPORATION $ $ 51,237 291 OTHER COMPONENT UNITS $ 19,769 TOTAL $ 77,216 Receivables: Pledges receivable Other receivables Total receivables 106,447 2,173 108,620 21,651 21,651 656 656 47,656 14,653 62,309 175,754 17,482 193,236 Investments: Investments in securities Investments held in trust for Universities Other investments Total investments 378,525 53,065 39,697 471,287 306,968 28,288 8,218 343,474 48,247 687 48,934 106,087 4,069 2,758 112,914 839,827 85,422 51,360 976,609 27,605 - 47,358 48,560 123,523 20,149 15,824 3,616 3,023 223,591 6,076 154,339 5,559 17,074 401,695 5,559 41,997 649,404 423,001 326,906 420,524 1,819,835 53,065 81,352 4,178 27,580 15,492 7,006 351,376 24 15,136 4,987 228,746 28,906 18,341 73,544 661,474 33,108 68,063 166,175 22,498 366,536 280,980 836,189 343,943 162,118 (22,832) 281,265 107,445 11,793 (39,630) 40,499 63,266 35,779 665,707 332,829 (14,890) Net direct financing leases Property and equipment, net of accumulated depreciation Licenses Other assets Total Assets LIABILITIES Liability under Universities' endowment trust agreements Bonds payable Unearned revenue Other liabilities Total Liabilities NET ASSETS Permanently restricted Temporarily restricted Unrestricted (deficit) Total Net Assets $ 483,229 $ 400,503 The Notes to the Financial Statements are an integral part of this statement. - 65 - $ (39,630) $ 139,544 $ 983,646 STATE OF ARIZONA COMBINING STATEMENT OF ACTIVITIES UNIVERSITIES - AFFILIATED COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) ARIZONA STATE UNIVERSITY FOUNDATION REVENUES Contributions Rental revenue Sales and services Net investment income Capital lease revenue Licensing revenue Other revenues $ Total Revenues 22,594 914 18,464 (75,587) 5,040 ARIZONA CAPITAL FACILITIES FINANCE CORPORATION UNIVERSITY OF ARIZONA FOUNDATION $ 60,715 (73,652) 9,292 $ 16,695 8,507 353 4,026 OTHER COMPONENT UNITS $ TOTAL 20,264 28,680 8,213 (12,976) 113 2,309 7,753 $ 103,573 46,289 35,184 (161,862) 113 2,309 26,111 (28,575) (3,645) 29,581 54,356 51,717 42,389 5,493 35,806 12,130 - 2,547 - 11,632 8,883 6,348 5,385 92,374 8,883 18,478 10,878 23,758 2,236 3,551 5,401 - 10,216 13,629 20,524 3,422 9,199 58,049 8,823 25,064 2,369 7,025 - 10,454 1,075 5,266 766 18,089 8,866 Total Expenses 83,270 56,888 37,921 71,425 249,504 Decrease in net assets, before extraordinary items (111,845) (60,533) (8,340) (17,069) (197,787) - - 1,394 (3,442) - 1,394 (3,442) (111,845) (60,533) (10,388) (17,069) (199,835) 595,074 - 461,036 - (29,242) - 156,618 (5) 1,183,486 (5) (39,630) $ 139,544 EXPENSES Program services: Payments to Universities Leasing related expenses Payments on behalf of Universities Other program services Personal services, operations, and administrative expenses Fundraising expenses Interest Assets expensed under capital lease agreement Depreciation and amortization Other expenses Extraordinary Items: Gain on lease revaluation due to bond refunding Loss on early debt extinguishment Decrease in net assets, after extraordinary items Net Assets - Beginning Cumulative effect of accounting change Net Assets - Ending $ 483,229 $ 400,503 The Notes to the Financial Statements are an integral part of this statement. - 66 - $ $ 983,646 (This page intentionally left blank) STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS INDEX Page Note 1. Summary of Significant Accounting Policies --------- 69 A. Reporting Entity ------------------------------------- 69 B. Basis of Presentation-------------------------------- 73 C. Measurement Focus and Basis of Accounting ----------------------------------------- 75 D. Deposits and Investments -------------------------- 75 E. Taxes Receivable------------------------------------ 76 F. Inventories ------------------------------------------- 77 G. Property Tax Calendar------------------------------ 77 H. Capital Assets---------------------------------------- 77 I. Investment Earnings -------------------------------- 77 J. Scholarship Allowances---------------------------- 78 K. Deferred Revenue ----------------------------------- 78 L. Compensated Absences ---------------------------- 78 M. Long-Term Obligations ---------------------------- 78 N. New Accounting Pronouncements ---------------- 79 Note 2. Deposits and Investments-------------------------------- 79 A. Deposits and Investment Policies ----------------- 79 B. Custodial Credit Risk – Deposits and Investments ------------------------ 81 C. Interest Rate Risk ----------------------------------- 81 D. Credit Risk------------------------------------------- 83 E. Concentration of Credit Risk ---------------------- 84 F. Foreign Currency Risk ----------------------------- 85 G. Unemployment Compensation -------------------- 85 H. Securities Lending ---------------------------------- 85 I. Derivatives ------------------------------------------ 87 J. State Treasurer’s Separately Issued Financial Statements ------------------------------ 88 Page D. Annual OPEB Cost----------------------------- 95 E. Funded Status and Funding Progress -------- 96 F. Actuarial Methods and Assumptions -------- 96 Note 7. Long-Term Obligations ----------------------------- 97 A. Revenue Bonds --------------------------------- 97 B. Grant Anticipation Notes --------------------- 101 C. Certificates of Participation ------------------ 102 D. Leases ------------------------------------------- 105 E. Compensated Absences----------------------- 106 F. Changes in Long-Term Obligations -------- 107 Note 8. Interfund Transactions------------------------------108 Note 9. Fund Deficit------------------------------------------ 109 A. General Fund----------------------------------- 109 B. Industrial Commission Special Fund ------- 109 C. Healthcare Group of Arizona ---------------- 109 D. Arizona Highways Magazine ---------------- 110 E. Risk Management Fund ---------------------- 110 F. Retiree Sick Leave Fund (RASL) ----------- 110 Note 10. Joint Venture --------------------------------------- 110 Note 11. Commitments, Contingencies, and Compliance ----------------------------------111 A. Insurance Losses-------------------------------111 B. Litigation ---------------------------------------112 C. Accumulated Sick Leave ---------------------113 D. Unclaimed Property ---------------------------113 E. Construction Commitments ------------------113 F. Arizona State Lottery -------------------------113 Note 3. Receivables/Deferred Revenue ------------------------- 88 A. Taxes Receivable ----------------------------------- 88 B. Deferred Revenue----------------------------------- 89 Note 12. Tobacco Settlement--------------------------------114 Note 4. Capital Assets --------------------------------------------- 90 Note 14. Treasurer’s Warrant Notes -----------------------114 Note 5. Pension Benefits ----------------------------------------- 91 A. Participating Employers---------------------------- 91 B. Contributions, Benefits, and Refund Payments ---------------------------------- 91 C. Funding Policy -------------------------------------- 92 D. Annual Pension Cost ------------------------------- 92 E. Funded Status and Funding Progress------------- 93 F. Actuarial Methods and Assumptions ------------- 93 G. Universities’ Retirement Plans -------------------- 93 Note 15. Subsequent Events---------------------------------114 Note 6. Other Post-Employment Benefits-----------------------94 A. Plan Description------------------------------------- 94 B. Contributions, Benefits, and Refund Payments ---------------------------------- 94 C. Funding Policy -------------------------------------- 95 - 68 - Note 13. Public-Private Partnership------------------------114 Note 16. Discretely Presented Component Unit Disclosures ----------------------------------------115 A. Summary of Significant Accounting Policies ----------------------------------------115 B. Deposits and Investments --------------------117 C. Program Loans---------------------------------120 D. Pledges Receivable----------------------------120 E. Direct Financing Lease Agreements --------120 F. Capital Assets ----------------------------------121 G. Long-Term Obligations-----------------------122 H. Conduit Debt -----------------------------------125 I. Related Party Transactions -------------------126 J. Subsequent Events ----------------------------126 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the State of Arizona (the State) conform to U.S. Generally Accepted Accounting Principles (GAAP) applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A. REPORTING ENTITY The State is a general purpose government. The accompanying financial statements present the activities of the State (the primary government) and its component units. Component Units’ footnote disclosures are presented in Note 16 – Discretely Presented Component Unit Disclosures. Component Units Component units are legally separate entities for which the State is considered to be financially accountable, or organizations that raise and hold economic resources for the direct benefit of the State. Blended component units, although legally separate entities, are in substance, part of a government’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units of the State, except for component units affiliated with the State's Universities, are reported in separate columns in the government-wide financial statements to emphasize they are legally separate from the State. Because the component units affiliated with the Universities follow Financial Accounting Standards Board (FASB) statements, these financial statements have been reported on separate pages following the respective counterpart financial statements of the State. For financial reporting purposes, only the statement of financial position and the statement of activities for component units affiliated with the Universities are included in the State's financial statements, as required by the GASB. GASB Statement No. 14, The Financial Reporting Entity has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization’s governing body and (1) the ability of the State to impose its will on that organization or (2) the potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the State. In addition, GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units (GASB 39) requires that legally separate, tax-exempt entities that meet all of the following criteria should be discretely presented as component units: (1) The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents, (2) The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization, and (3) The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. The State reports the following blended component units: The Arizona State Retirement System (ASRS) is a cost-sharing, multiple-employer, defined benefit pension plan that benefits employees of the State, its political subdivisions, and school districts. The ASRS is administered in accordance with provisions of Arizona Revised Statutes (ARS) Title 38, Chapter 5, Articles 1, 2, and 2.1. The ASRS is governed by a nine-member board that is appointed by the Governor and approved by the Senate to serve three-year terms. The Public Safety Personnel Retirement System (PSPRS) is an agent, multi-employer public employee retirement system that benefits fire fighters and police officers employed by the State and its political subdivisions. The PSPRS is jointly administered by the Fund Manager and 224 local boards according to the provisions of ARS Title 38, Chapter 5, Article 4. The Fund Manager is a five-member board appointed by the Governor and approved by the Senate to serve a fixed three-year term. Each eligible group participating in the system has a five-member local board. In general, all members serve a fixed four-year term. The Elected Officials’ Retirement Plan (EORP) is a cost-sharing, multi-employer public employee retirement plan that benefits all State and county elected officials and judges and certain elected city officials. The Fund Manager of the PSPRS administers the EORP plan according to the provisions of ARS Title 38, Chapter 5, Article 3. The Corrections Officer Retirement Plan (CORP) is an agent, multi-employer public employee retirement plan that benefits county detention officers, certain employees of the State’s Department of Corrections and Department of Juvenile Corrections, - 69 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 and judiciary, probation, surveillance and juvenile detention officers. The Fund Manager of the PSPRS administers the CORP plan according to the provisions of ARS Title 38, Chapter 5, Article 6. Each plan issues a publicly available financial report that includes its financial statements and required supplementary information. A report may be obtained from the applicable plan’s office or website at: Arizona State Retirement System P.O. Box 33910 Phoenix, Arizona 85067-3910 (602) 240-2000 or (800) 621-3778 www.azasrs.gov Public Safety Personnel Retirement System, Elected Officials’ Retirement Plan or the Corrections Officer Retirement Plan 3010 East Camelback Road, Suite 200 Phoenix, Arizona 85016 (602) 255-5575 www.psprs.com The State reports the following discretely presented component units: Governmental Fund: Greater Arizona Development Authority (GADA) – The purpose of the GADA is to provide cost-effective access to capital for local communities, certain special districts, and tribal governments for public infrastructure projects. The GADA was created by an Act of the Arizona Legislature in 1997 and is a body, corporate and politic, of the State. The GADA is governed by a nine member Board of Directors consisting of four State of Arizona agency heads and five members, one of which shall be a representative of a tribal nation in Arizona, appointed by the Governor of the State. Members appointed by the Governor serve staggered five year terms. The GADA fund was originally capitalized with General Fund appropriations and requests for additional capitalization of the GADA must be approved by the Arizona Legislature. Complete financial statements may be obtained from the GADA’s administrative office at 1700 West Washington Street, Executive Tower, Suite 600, Phoenix AZ 85007, (602) 771-1100. Proprietary Funds: University Medical Center (UMC) – The UMC is the primary teaching hospital for the College of Medicine, the College of Nursing, the College of Pharmacy, the College of Public Health, and the School of Health Related Professions of the University of Arizona (U of A). The UMC was created in 1984 when the State Legislature passed a bill that allowed the Arizona Board of Regents (ABOR) to convey the UMC to a private, not-for-profit, tax-exempt corporation. Although an autonomous entity was created, the teaching missions and research alliances with the U of A and the State remained. The ABOR confirms all members of the UMC’s Board of Directors, and must approve all amendments to the UMC’s articles of incorporation and bylaws. Complete financial statements may be obtained from the UMC’s administrative offices at 655 East River Road, Tucson, Arizona 85704, (520) 694-2700. Arizona Power Authority (APA) – The APA purchases the State’s allocation of power produced at the federally owned Boulder Canyon Project hydropower plant and resells it to Arizona entities that are eligible purchasers under federal and state laws. The APA is governed by a commission of five members appointed by the Governor and approved by the Senate. The term of office of each member is six years and the members select a chairman and vice-chairman from among their membership for a term of two years. All revenue bonds issued by the APA must be approved by the State Certification Board. Complete financial statements may be obtained from the APA’s administrative offices at 1810 West Adams Street, Phoenix, Arizona 85007, (602) 368-4265. Water Infrastructure Finance Authority (WIFA) – The WIFA is authorized to administer the Clean Water Revolving Fund. The Clean Water Revolving Fund was created pursuant to the Federal Water Pollution Control Act, which required the State to establish the Clean Water Revolving Fund to accept federal capitalization grants for publicly owned wastewater treatment projects. The WIFA has also entered into an agreement with the Environmental Protection Agency to administer the Drinking Water Revolving Fund pursuant to the Safe Drinking Water Act. The WIFA is governed by a twelve-member board of directors. - 70 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The ten Governor appointed directors serve staggered terms of five years and serve at the pleasure of the Governor. Complete financial statements may be obtained from the WIFA’s administrative offices at 1100 West Washington Street, Suite 290, Phoenix, Arizona 85007, (602) 364-1324. Component units of the State affiliated with the Universities are legally separate, tax-exempt organizations controlled by separate boards of directors that meet the criteria established in GASB 39, with the exception of the Collegiate Golf Foundation, University Public Schools, Inc., and Campus Research Corporation (CRC). The Collegiate Golf Foundation and University Public Schools, Inc. are included because each is a legally separate organization that the State believes would be misleading to exclude due to its financial relationship or close affiliation to the State. The CRC is included because the U of A approves the budget, thus fiscal dependency exists. The following discretely presented component units affiliated with the Universities are reported as major component units of the State: Arizona State University Foundation (ASU Foundation) – The ASU Foundation's resources are disbursed at the discretion of the Foundation's independent board of directors, in accordance with donor directions and Foundation policy. Arizona Capital Facilities Finance Corporation (ACFFC) – The ACFFC provides facilities for either use by students of ASU or ASU itself. University of Arizona Foundation (U of A Foundation) – The U of A Foundation supports the U of A through various fundraising activities and contributes funds to the U of A in support of various programs. The following discretely presented component units affiliated with the Universities are reported as non-major component units of the State: Arizona State University Alumni Association, Sun Angel Foundation, and Sun Angel Endowment – These three foundations receive funds primarily through donations and dues, and contribute funds to ASU for support of various programs. Arizona State University Research Park, Inc. (ASU Research Park) – ASU Research Park manages a research park to promote and support research activities in coordination with ASU. Mesa Student Housing, LLC and Downtown Phoenix Student Housing, LLC – These foundations provide facilities for use by students of ASU. Collegiate Golf Foundation – This foundation operates an ASU-owned golf course. University Public Schools, Inc. (UPSI) – The UPSI operates a public school designed to be on the forefront of education innovation and improvement, with the goal of developing educational models that can be scaled across the State and nation to improve the academic achievement of children. University of Arizona Alumni Association (U of A Alumni Association) – The U of A Alumni Association was established to serve the U of A and its graduates, former students, and friends by attracting, organizing, and encouraging them to advance the U of A's missions - teaching, research, and public service. University of Arizona Law College Association (Law Association) – The Law Association was established to provide support and financial assistance to the College of Law at the U of A. The Law Association funds provide support to the College on many levels, from endowed student scholarships to named faculty professorships. University of Arizona Campus Research Corporation (CRC) – The CRC was established to assist the U of A in the acquisition, improvement, and operation of the U of A Science and Technology Park (Park) and related properties. The CRC currently leases from the U of A the remaining 67.00% of building space of the Park not leased to the Arizona Research Park Authority. The CRC is responsible for assisting in the development of the presently undeveloped portions of the Park and for subleasing unoccupied space, newly developed space, and space now occupied by IBM or its subtenants once the current subleases expire. The U of A is responsible for payment of operational expenses associated with the space occupied by the U of A departments, offices, and programs. - 71 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Northern Arizona University Foundation, Inc. (NAU Foundation) – The NAU Foundation receives gifts and bequests, administers and invests securities and property, and disburses payments to and on behalf of NAU for advancement of its mission. Northern Arizona Capital Facilities Finance Corporation (NACFFC) – The NACFFC was established for the purpose of acquiring, developing, constructing, maintaining, and operating student housing and other capital facilities and equipment for the use and benefit of NAU's students. Complete financial statements for each of the aforementioned component units, except for the U of A Foundation, may be obtained at the following addresses: ASU Foundation, ASU Alumni Association, Sun Angel Foundation, Sun Angel Endowment, ASU Research Park, Collegiate Golf Foundation, ACFFC, Mesa Student Housing, LLC, Downtown Phoenix Student Housing, LLC, and the UPSI – Arizona State University, Financial Services, P.O. Box 875812, Tempe, Arizona 85287-5812 or (480) 965-3601 The U of A Alumni Association – Alumni Association, University of Arizona, P.O. Box 210109, Tucson, Arizona 85721-0109 The Law Association – Law College Association, University of Arizona, P.O. Box 210176, Tucson, Arizona 85721-0176 CRC - University of Arizona Science and Technology Park, 9030 South Rita Road, Suite 302, Tucson, Arizona 85747 NAU Foundation and NACFFC – Northern Arizona University, Comptroller's Office, P.O. Box 4069, Flagstaff, Arizona 86011 The financial statements of the U of A Foundation are not publicly available. For information regarding the U of A Foundation's financial statements, contact the U of A Comptroller at the following address: University of Arizona, Financial Services, P.O. Box 3310, Tucson, Arizona 85722-3310. Related Organizations Related organizations are legally separate entities for which the State is not considered to be financially accountable, and that do not meet the criteria established by GASB 39. The State’s accountability for these organizations does not extend beyond making the appointments, nor are the economic resources accessible to the State. As a result, financial activity for the organizations described below is not included in the State’s financial statements. Arizona Health Facilities Authority (the Authority) – ARS §36-482 established the Authority to issue tax-exempt bonds and loans for the purpose of reducing health care costs and improving health care for Arizona residents by providing less expensive financing for health care institutions. Proceeds from bond issues are loaned to various qualifying nonprofit health care institutions. The health care institutions reimburse the Authority for expenses for issuance of the bonds, pay fees of the Authority, and make payments under the loans for the benefit of the holders of the bonds. The Authority is governed by a seven-member board of directors that is appointed by the Governor and approved by the Senate. The directors serve staggered terms of seven years, and can be removed for cause or at will by the Governor with the consent of the Senate. The State cannot abrogate the rights of the Authority until all bonds, together with the interest thereon, are fully paid and discharged and all agreements are fully performed. Arizona International Development Authority (the Authority) – ARS §41-1533.01 established the Authority to facilitate the development of international trade or commerce between Arizona and other countries. The Authority is governed by a sevenmember board of directors appointed by the Governor and approved by the Senate for five-year terms, and can be removed only for cause. Arizona Sports and Tourism Authority (the Authority) – ARS §5-802 established the Authority to construct, finance, furnish, maintain, improve, operate, market, and promote the use of a multipurpose facility and do all things necessary or convenient to accomplish those purposes. The Authority may issue revenue bonds in such principal amounts to accomplish the above stated purposes. The Authority is governed by a nine-member board of directors of which five are appointed by the Governor and approved by the Senate and two members each by the President of the Senate and the Speaker of the House. The directors serve terms of five years, and may be re-appointed for one full subsequent term, and can be removed only for cause. - 72 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Arizona Housing Finance Authority (the Authority) – ARS §41-3902 established the Authority to issue bonds for residential dwelling units and multifamily residential rental projects in rural areas. The Authority may also establish mortgage credit certificate programs to finance residential dwelling units in rural areas. The Authority is required to notify and obtain written consent from the governing bodies of any city, town, county, tribal government, or existing corporation for any multifamily residential rental projects planned for their jurisdiction. The Authority is governed by a seven-member board of directors that is appointed by the Governor and approved by the Senate. The directors serve terms of seven years, and can be removed only for cause. State Compensation Fund (the Fund) – ARS §23-981 established the Fund to provide insurance to employers for workers’ compensation, occupational disease compensation, and medical, surgical, and hospital benefits. The Fund is governed by a board of directors that consists of five members appointed by the Governor for staggered terms of five years. Annually, the Governor appoints a chairman from among the board members. Joint Ventures As described in Note 10, the U of A participates in a joint venture. In accordance with U.S. GAAP, the financial activities of this joint venture are not included in the State’s financial statements. B. BASIS OF PRESENTATION The basic financial statements include both government-wide statements and fund financial statements. The government-wide statements focus on the State as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the usefulness of the information. Government-wide statements provide information about the primary government and its component units. The statements include a statement of net assets and a statement of activities. These statements report the financial activities of the overall government, except for fiduciary activities. They also distinguish between the governmental and business-type activities of the State and between the State and its discretely presented component units. Governmental activities generally are financed through taxes and intergovernmental revenues. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Net Assets presents the State’s non-fiduciary assets and liabilities, with the difference reported as net assets. Net assets are reported in three categories: Invested in capital assets, net of related debt consist of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or voter initiative. Unrestricted net assets consist of net assets which do not meet the definition of the two preceding categories. Unrestricted net assets often have constraints on resources, which are imposed by management, but can be removed or modified. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the State’s governmental activities, and its different business-type activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular program or function. The State does not allocate indirect expenses to programs or functions. Program revenues include: • • • charges to customers or applicants for goods, services, privileges provided, and fines or forfeitures operating grants and contributions capital grants and contributions, including special assessments - 73 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Revenues that are not classified as program revenues, including internally dedicated resources and all taxes, are reported as general revenues. Interfund balances have been eliminated from the government-wide financial statements to the extent that they occur within either the governmental or business-type activities. Balances between governmental and business-type activities are presented as internal balances and are eliminated in the total column. Revenues and expenses associated with reciprocal transactions within governmental or within business-type activities have not been eliminated. Fund financial statements provide information about the State’s funds, including fiduciary funds. Separate statements are presented for the governmental, proprietary, and fiduciary fund categories. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Fiduciary funds are aggregated and reported by fund type. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The State reports the following major governmental funds: The General Fund – is the State’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Transportation and Aviation Planning, Highway Maintenance and Safety Fund – accounts for all financial transactions applicable to the general operations of the Arizona Department of Transportation (ADOT). The ADOT builds and maintains the State’s highway system and the Grand Canyon Airport. The Land Endowments Fund – holds lands granted to the State by the Federal government for the benefit of public schools and other public institutions. Principal is maintained intact and investment earnings and lease revenues are distributed to beneficiaries in accordance with State statute. The State reports the following major enterprise funds: The Universities – account for transactions of the State’s three universities, which comprise the State’s university system. Unemployment Compensation – pays claims for unemployment to eligible recipients from employer contributions and reimbursements. The Industrial Commission Special Fund – accounts for deposits not to exceed 1.50% of all premiums received by the State Compensation Fund and private insurance carriers during the preceding calendar year. These monies are used to provide additional awards as necessary to enable injured employees to accept the benefits of any law for promotion of vocational rehabilitation of persons disabled in industry. In addition, benefits may be paid for workers’ compensation claims filed by employees of non-insured employers. The Industrial Commission (Commission) then pursues against the non-insured employer for reimbursement of all benefits paid, including assessed penalties. The Lottery – accounts for the activities of the Arizona State Lottery. Additionally, the State reports the following fund types: Internal Service Funds – account for insurance coverage, employee benefits, automotive maintenance and operation, highway equipment rentals, and data processing and telecommunication services provided to State agencies on a cost-reimbursement basis. It is the policy of the State to classify immaterial proprietary fund activities in governmental funds. This policy helps to reduce the number of funds reported in the financial statements to the minimum amount needed. These funds allocate a fixed rate payroll processing charge among all agencies, allocate postage and mailing costs among all agencies, or arrange for the sale of the State’s office equipment and motorized vehicles at public auctions. - 74 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Pension and Other Employee Benefit Trust Funds – account for the activities of the ASRS, the PSPRS, the EORP, and the CORP, for which the State acts as a trustee. These retirement and other post-employment benefit plans accumulate resources to pay pension, health insurance premium subsidies, and long-term disability benefits of State employees and employees of other governmental entities participating in the plans. Investment Trust Funds – account for transactions by local governments and political subdivisions that elect to participate in the State Treasurer’s investment pools. The Treasurer acts as trustee for the original deposits made into the investment pools. Agency Funds – account for the receipt and disbursement of various taxes, deposits, deductions, property collected by the State, and payment of the health insurance subsidy by the PSPRS, the EORP, and the CORP, where the State acts as an agent for distribution to other governments and organizations. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The government-wide, proprietary fund, and fiduciary fund financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. The agency funds are custodial in nature and do not have a measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Grants and donations are recognized as revenues as soon as all eligibility requirements the provider imposed have been met. Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The State considers all revenues reported in the governmental funds to be available if the revenues are collected within 31 days after yearend, except for State fiscal stabilization funds, which consider revenues to be available if collected within 90 days after year-end, and except for the Transportation and Aviation Planning, Highway Maintenance and Safety Major Fund, as well as certain nonmajor governmental funds administered by the ADOT, which consider revenues to be available if collected within 60 days after year-end. Those revenues susceptible to accrual are federal reimbursements, highway user revenue tax, and state sales tax. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of long-term debt and acquisitions under capital leases are reported as other financing sources. Under the terms of grant agreements, the State funds certain programs through a combination of grants and general revenues. Therefore, when program expenses are incurred, there are both restricted and unrestricted resources available to finance the program. The State’s policy regarding whether to first apply restricted or unrestricted resources is made on a case-by-case basis. The State’s business-type activities and enterprise funds follow Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. The State has chosen the option not to follow FASB Statements and Interpretations issued after November 30, 1989. D. DEPOSITS AND INVESTMENTS 1. Cash and Cash Equivalents On the Statement of Cash Flows, the amount reported as “Cash and Cash Equivalents” is equal to the total of the amounts on the Statement of Net Assets “Cash”, “Cash with U.S. Treasury”, “Cash and pooled investments with State Treasurer”, “Cash held by trustee” and “Collateral investment pool”. For purposes of the Statement of Cash Flows, the State considers only those highly liquid debt instruments with an original maturity of ninety days or less to be cash equivalents. • Cash (not with State Treasurer) – includes undeposited receipts, petty cash, bank accounts, non-negotiable certificates of deposit, and demand deposits with banking institutions other than the State Treasurer. • Cash with U.S. Treasury – consists of unemployment compensation contributions from Arizona employers that are deposited in a trust fund maintained by the United States Treasury. - 75 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 • Cash and pooled investments with State Treasurer – consists of a centralized management of most State cash resources maintained by the State Treasurer. From the perspective of the various State funds, the pool functions as both a cash management pool and a demand deposit account. The operations and investments of the State Treasurer’s pooled investments are described in Note 2. • Cash held by trustee – consists of capital projects and bond debt service funds invested by the trustee in accordance with the applicable financing indenture, generally limited to United States Treasury securities and other Federal agency securities, certificates of deposit, commercial paper, and money market funds. • Collateral investment pool – consists of cash received as collateral on securities lending transactions and investments made with that cash. The State records the collateral received as an asset. A corresponding liability is also recorded for such securities lending transactions. 2. Investment Valuation Investments maintained by the State Treasurer are reported at fair value using JP Morgan prices, as determined by independent, industry recognized data vendors who provide values that are either exchange based or matrix based. Equities are priced utilizing the primary exchange close price. In the absence of a closed price, the mid/bid price will be utilized. If no pricing source is available, the cost price or last available price from any source will be utilized. All bonds are priced using an evaluated price, the closing trade/bid price or the most recent mid/bid price, except securities with a remaining maturity of 90 days or less are priced at amortized cost (amortizing premium/accreting discount on a straight-line to maturity method). If no pricing source is available, the cost price or the last available price from any source will be utilized. The ASRS’ publicly traded investments are reported at fair value determined by the custodial agents. The agents’ determination of fair values includes, among other things, using pricing services or prices quoted by independent brokers at current exchange rates. The fair value of currency forward contracts is calculated by interpolating the spot rate and the forward rates based upon the number of days to maturity. Each future contract value is marked to market daily during the period that the contract is held. Private real estate, private equity, and opportunistic partnership investments are valued based on the partnership’s March 2009 financial statements adjusted for cash flows through June 30, 2009. Short-term investments are reported at cost plus accrued interest, which approximates fair value. For investments where no readily ascertainable fair value exists, the ASRS, in consultation with its investment advisors, has determined the fair values for the individual investments based on anticipated maturity dates and current interest rates commensurate with the investment’s degree of risk. Security transactions and any resulting gains or losses are accounted for on a trade date basis. Net investment income (loss) includes net appreciation (depreciation) in the fair value of investments, interest income, dividend income, real estate, private equity and opportunistic investments income and total investment expense. This includes investment management, custodial fees, real estate, private equity and opportunistic investment expenses and all other significant investment related costs. For the PSPRS, the EORP, and the CORP, investments are reported at fair value. Short term investments are reported at fair value, which approximates cost. Equity securities are valued at the last reported sales price. Fixed income securities are valued using the last reported sales price or the estimated fair market value as determined by the fixed income broker/dealers. Investments that do not have an established market are reported at estimated fair value. Directed real estate and venture capital investments are reported at fair value using appraisals to estimate the fair market value. Appraisals will be performed every three years on a rolling schedule unless circumstances warrant otherwise. Investment income is recognized as earned. E. TAXES RECEIVABLE Taxes receivable include amounts owed by taxpayers for prior periods including assessments for underpayments, penalties, and interest. In the government-wide financial statements, a corresponding amount is recorded as revenue using the accrual basis of accounting. In the governmental fund financial statements, revenue is recorded using the modified accrual basis of accounting. The remainder is recorded as deferred revenues. The income tax receivable is composed of individual and corporate estimated payments, withholding payments, and payments with final returns and assessments that relate to income earned through June 30, 2009. Sales and motor vehicle and fuel tax receivables represent amounts that are earned by the State in the fiscal period ended June 30, 2009, but not collected until the following month. - 76 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 F. INVENTORIES Inventories consist of expendable supplies held for consumption in all funds and merchandise intended for sale to customers in the proprietary funds. Inventories are stated at cost using the first-in, first-out method, weighted average, or lower of cost or market. In the governmental funds, inventories are accounted for using the consumption method. Under this method, inventories are recorded as expenditures as they are used. G. PROPERTY TAX CALENDAR Real property taxes are levied on or before the third Monday in August and become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. A lien attaches on the first day of January preceding assessment and levy. H. CAPITAL ASSETS Capital assets are stated at cost at the date of acquisition or, if donated, at the estimated fair market value at the date received. Interest incurred during the construction of capital assets is only capitalized in the proprietary funds. Most capital assets are depreciated over their useful life. However, the State utilizes an alternative accounting treatment for most infrastructure assets in which costs to maintain and preserve these assets are expensed and no depreciation expense is recorded. This approach is discussed further in the Required Supplementary Information (RSI) portion of this report. The State has adopted a general policy for capitalization thresholds, depreciation, and estimated useful lives of capital assets. In addition, the State has approved alternative policies for some State agencies. Depreciable capital assets are depreciated on a straight-line basis. Capitalization thresholds (the dollar values at which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets being depreciated in the government-wide financial statements and the proprietary funds are as follows: Asset Category Land Buildings Improvements other than buildings Equipment Infrastructure General State Policy Capitalization Estimated Useful Threshold Life (years) All capitalized Not depreciated All capitalized 25-40 $5,000 15 $5,000 3-15 All capitalized Not depreciated Other Authorized Agency Policies Capitalization Estimated Useful Threshold Life (years) All capitalized Not depreciated $0-$100,000 10-50 $5,000-$100,000 20-50 $5,000 3-25 $0-$100,000 20-100 The State is trustee for approximately 9.3 million acres of land acquired through U.S. Government land grants in the early 1900’s. The State acquired a substantial portion of this land at no cost and its fair market value at acquisition has not been reliably estimated. Accordingly, this land is not reported in the accompanying financial statements. The State has interest in and maintains significant special collections, works of art, and historical treasures. Except for Arizona State University (ASU), all special collections, works of art, and historical treasures which are held for financial gain are capitalized at fair market value at the date of acquisition or donation. Those special collections, works of art, and historical treasures which are held for educational, research, or public exhibition purposes are not capitalized, as they are not subject to disposal for financial gain or encumbrance. Such items are inventoried for property control purposes. ASU capitalizes all works of art and historical treasures with a unit cost of $5,000 or more. Additional disclosures related to capital assets and assets acquired through capital leases are provided in Notes 4 and 7, respectively. I. INVESTMENT EARNINGS Investment earnings are composed of interest, dividends, and net changes in fair value of applicable investments. - 77 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 J. SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues earned by the three State Universities are reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses and Changes in Fund Net Assets. A scholarship discount and allowance is the difference between the stated charge for goods and services provided and the amount that is paid by the student or third party making payment on behalf of the student. Accordingly, some types of student financial aid such as Pell grants and scholarships awarded by the Universities are considered to be scholarship allowances. These allowances are netted against applicable revenues in the Statement of Revenues, Expenses and Changes in Fund Net Assets. K. DEFERRED REVENUE Deferred revenue consists of payments to the State for goods and services not yet rendered, or taxes, grants, and other nonexchange transactions for which related resources are not available to pay current liabilities. In the government-wide and proprietary fund financial statements, revenue is deferred when cash, receivables, or other assets are received prior to their being earned. In the governmental fund financial statements, revenue is deferred when that revenue is unearned or unavailable. L. COMPENSATED ABSENCES In the government-wide and proprietary fund financial statements, the State accrues liabilities for compensated absences as required by the GASB. In the governmental fund financial statements, liabilities for compensated absences are not accrued, because they are not considered due and payable. In general, State employees accrue vested annual leave at a variable rate based on years of service. Except for uncovered State employees and University employees, an employee generally forfeits accumulated annual leave in excess of 240 hours as of the last day of the last pay period for a calendar year, unless the Director of the Department of Administration authorizes an exception. Uncovered State employees shall forfeit accumulated annual leave in excess of 320 hours as of the end of each calendar year, unless an exception is authorized. University employees may accumulate up to 264 hours of vacation, and any vacation hours in excess of the maximum amount that are unused at December 31 are forfeited. Except for University employees, an employee who separates from State service is paid for all unused and unforfeited annual leave at the employee’s rate of pay at the time of separation. University employees, upon termination of employment, are paid all unused vacation benefits not exceeding 176 hours (annual accrual amount), depending on years of service and full-time equivalent employment status. Some employees accumulate compensatory leave for time worked over 40 hours per week. An employee may accumulate up to 240 hours of compensatory leave (480 if working in a public safety activity or an emergency response activity). An employee who separates from State service is paid for all unused compensatory leave at either the employee’s average base salary during the last three years of employment or final base salary, whichever is higher. For sick leave policy, see Note 11.C. M. LONG-TERM OBLIGATIONS In the government-wide and proprietary fund financial statements, long-term debt and long-term liabilities are reported as liabilities. Amounts due within one year are reported as current liabilities, and amounts due thereafter are reported as non-current liabilities. Premiums and discounts on revenue bonds and COPs are deferred and amortized over the life of the debt instrument using the straight-line method. Bonds and COPs are reported net of the applicable premium or discount. Bond issuance costs and deferred gains or losses on debt refundings are charged to expense in the period incurred unless those costs are deemed to be material to the State’s financial statements by management, in which case, they are deferred and amortized using either the straight-line method or the effective interest method. In the fund financial statements, governmental fund types recognize proceeds from revenue bonds, COPs, and premiums and discounts on revenue bonds and COPs as other financing sources and uses in the current period. Long-term liabilities are more fully described in Note 7. - 78 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 N. NEW ACCOUNTING PRONOUNCEMENTS GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This Statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The scope of the document excludes pollution prevention or control obligations with respect to current operations, and future pollutions remediation activities that are required upon retirement of an asset, such as landfill closure and post-closure care and nuclear power plant decommissioning. When an obligating event occurs, the State is required to accrue and report a pollution remediation obligation (PRO) for those components of the PRO which are reasonably estimable. Accordingly, the State has recorded a new PRO liability for soil and groundwater contaminations and releases of petroleum based products from underground storage tanks on non-State-owned property regulated by the Arizona Department of Environmental Quality, using the expected cash flow technique. PRO liabilities include all outlays at current value expected to be expended to remediate polluted sites. Additionally, the provisions of GASB 49 are required to be applied retroactively. Therefore, net assets as of June 30, 2008 would have been restated, however, the State’s adoption of GASB 49 was not material to the financial statements for the governmental activities. The requirements of this Statement are effective for periods beginning after December 15, 2007. GASB Statement No. 52, Land and Other Real Estate Held as Investments by Endowments. This Statement establishes consistent standards for the reporting of land and other real estate held as investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments also are required to report the changes in fair value as investment income and to disclose the methods and significant assumptions employed to determine fair value, and other information that they currently present for other investments reported at fair value. The requirements of this Statement are effective for periods beginning after June 15, 2008. The State has implemented the requirements of this standard, but they had no material effect on the financial statements. NOTE 2. DEPOSITS AND INVESTMENTS A. DEPOSITS AND INVESTMENT POLICIES The State’s deposits and investments are primarily under the control of the State Treasurer, the Retirement Systems, the Universities, and the Commission. These entities maintain the majority of the deposits and investments of the primary government. The investment policies of these organizations are defined according to State statutes or a governing board or both and are described below. ARS §35-312, §35-313, and §35-314 authorize the State Treasurer to invest operating, trust, and permanent endowment fund monies. Monies deposited with the State Treasurer by State agencies are invested by the State Treasurer in a pooled fund. Any interest earned is allocated monthly into each respective fund based on average daily cash balances. There is no income from investments associated with one fund that is assigned to another fund. The State statutes and the State Treasurer’s investment policies designed to administer these statutes restrict investments to obligations of the U.S. Government and its agencies, obligations or other evidence of indebtedness of the State and certain local government subdivisions, negotiable certificates of deposit, bonds, debentures and notes issued by U.S. corporations, commercial paper issued by entities organized and doing business in the United States, bankers acceptances, collateralized repurchase agreements, money market mutual funds, domestic equities, and other securities. The State Treasurer is not allowed to invest in foreign investments. The State Treasurer maintains external investment pools [the Local Government Investment Pool (LGIP), Local Government Investment Pool-Government, Local Government Investment Pool – Long Term, and the Central Arizona Water Conservation District]. The pools are not required to register (and are not registered) with the Securities and Exchange Commission under the 1940 Investment Advisors Act. The activity and performance of the pools are reviewed monthly by the State Board of Investment in accordance with ARS §35-311. The fair value of investments is measured on a monthly basis. Participant shares are purchased and sold based on the Net Asset Value (NAV) of the shares. The NAV is determined by dividing the fair value of the portfolio by the total shares outstanding. The State Treasurer does not contract with an outside insurer in order to guarantee the value of the portfolio or the price of shares redeemed. - 79 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 During the year, the State agencies’ and an external investment pool’s share of the Lehman Brothers bond value of $39.427 million was transferred to a new pool due to Lehman Brothers filing for Chapter 11 bankruptcy protection on September 15, 2008. The transfer was made to provide for the decline in fair value of the Lehman Brothers securities. As of June 30, 2009, the fair value of the pool was $5.819 million. The likelihood that these participant monies will be recovered is not known. State statutes authorize the retirement systems to make investments in accordance with the “Prudent Person” rule. As such, investment management shall discharge the duties of their position with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a “prudent person” acting in enterprise of a like character and with like aims as that of the systems, subject to certain statutory limitations and restrictions. The ASRS invests in short-term securities, obligations of the U.S. government or agencies of the U.S. government, corporate bonds, common and preferred stocks (domestic and foreign), mortgages, real estate, private equity and opportunistic investments. Per ARS §38-719, no more than 80.00% of the ASRS’ total assets may be invested at any given time in corporate stocks or equity equivalents, based on cost value of the stocks or equity equivalents irrespective of capital appreciation. No more than 5.00% of the voting stock of any one corporation may be owned. No more than 30.00% of the ASRS’ assets may be invested in foreign securities, and those investments shall be made only by investment managers with demonstrated expertise in such investments. No more than 10.00% of the ASRS’ assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the U.S. is a member nation, including the International Bank for Reconstruction and Development, the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank. No more than 1.00% of the ASRS’ assets may be invested in economic development projects authorized as eligible for such investment by the Arizona Department of Commerce. ARS §35-392 requires divestment from investments in companies that do business in Sudan, Iran, or other State Sponsors of Terrorism countries under certain conditions. Subject to the limitations noted above, the ASRS Board may authorize the ASRS Director to make investments that are designated by the ASRS Board and that do not exceed 50.00 % of the assets of the investment account measured at cost. The ASRS Board has not formally adopted more restrictive policies for the various types of risks. Per ARS §38-848, §38-803A(4), and §38-883A(4), the PSPRS, the EORP, and the CORP, respectively, may not invest at any given time more than 80.00% of the combined assets of the system or other plans that the fund manager manages in corporate stocks, based on cost value of such stocks irrespective of capital appreciation. In addition, the PSPRS, the EORP, and the CORP investments shall be restricted to stocks and exchange traded funds that, except for bank and insurance stocks and membership interests in limited liability companies, are either: 1) listed or approved on issuance for listing on an exchange registered under the Securities Exchange Act of 1934, as amended, 2) designated or approved on notice of issuance for designation on the national market system of a national securities association registered under the Securities Exchange Act of 1934, as amended, 3) listed or approved on issuance for listing on an exchange registered under the laws of this State or any other State, 4) listed or approved on issuance for listing on an exchange registered of a foreign country with which the U.S. is maintaining diplomatic relations at the time of purchase, except that no more than 20.00% of the combined assets of the system or other plans that the fund manager manages shall be invested in foreign securities, based on the cost value of the stocks irrespective of capital appreciation, or 5) an exchanged traded fund that is recommended by the chief investment officer of the system, that is registered under the Investment Company Act of 1940, and that is both traded on a public exchange and based on a publicly recognized index. Not more than 5.00% of the voting stock of any one corporation shall be owned by the system and other plans that the fund manager administers, except that this limitation does not apply to membership interests in limited liability companies. The ABOR governs the investment policies of the Universities. The Universities are generally limited to investing their pooled operating funds in collateralized certificates of deposit and repurchase agreements, U.S. Treasury securities, Federal agency securities, investment grade corporate bonds, or in the LGIP administered by the State Treasurer. Investment of capital project funds is also governed by the financing indenture agreements. For endowment investments, ABOR policy dictates that these funds are to be invested under the direction of an investment committee designated by the president of each university. The investment committee is responsible for advising on the definition, development, and implementation of investment objectives, policies, and restrictions. However, if donors restrict the investments, ABOR policy requires the University to invest those funds separately as directed by the donor, and the individual endowments bear all changes in value. Per ARS §23-1065, the Commission’s investment committee is responsible for prescribing investment policies and supervising the investment activities of the Commission. The Commission requires that their investment policy be responsive to the unpredictable nature of the incidence and severity of claims, the long periods over which losses may be paid, and the effect on both claims and losses of increases in treatment and rehabilitation costs. The investment committee may invest in any legal investment authorized under ARS §38-719. - 80 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 B. CUSTODIAL CREDIT RISK – DEPOSITS AND INVESTMENTS Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the deposits or collateral securities may not be recovered from an outside party. The State Treasurer, the Retirement Systems, and the Universities’ deposits of State treasury monies with financial institutions are required by State statutes to be entirely covered by the Federal Depository Insurance Corporation (FDIC) or, alternatively, collateralized for amounts in excess of the amount insured. Surety collateral for the Universities and the Retirement Systems must be equal to at least 100.00% of the bank balance required to be collateralized (102.00% for the State Treasurer). Beyond this requirement, these organizations do not have a formal policy specifically addressing custodial credit risk on deposits, except for the State Treasurer. The State statutes require surety collateral for the State Treasurer to consist of U.S. Government obligations, State obligations, and obligations of counties and municipalities within the State. As of June 30, 2009, some State agencies have uncollateralized and uninsured deposits in the amount of $535 thousand and $4.815 million in deposits collateralized with securities held by the pledging financial institution’s trust department or agent, but not in the State’s name. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the value of the investment or collateral securities that are in the possession of an outside party may not be recovered. The State does not have a formal policy in regards to custodial credit risk for investments. As of June 30, 2009, the State had $61.323 million in securities that were uninsured, not registered in the State’s name and held by a counterparty or a counterparty’s trust department or agent but not in the State’s name. C. INTEREST RATE RISK Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The State manages interest rate risk using the segmented time distribution, weighted average maturity, and effective duration methods. The State Treasurer manages interest rate risk by incorporating ARS limitations into their investment policy and setting forth various thresholds or parameters in accordance with each investment pool’s portfolio structure. The State Treasurer’s policy provides either maturity or duration limitations for the various investment pools. The interest rate risk inherent in the portfolio is monitored monthly by measuring the weighted average maturity and/or duration. The ASU policy for operating funds limits the maximum maturity of any fixed rate issue to five years. The capital projects funds portfolio is not limited as to the overall maturity of its investments, with funds invested per the financing indentures to coincide with capital spending needs and debt service requirements, which are typically less than three years, with the additional limitation that certificates of deposit and commercial paper have maximum maturities of 360 days and 270 days, respectively. The Commission approves and contracts with different investment managers of fixed income equities in order to manage the exposure to interest rate risk with each different fund manager focusing on different goals of yield periods or duration of maturities of their particular portion of the investment pool. - 81 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The following table presents the State Treasurer’s, the ASU’s, and the Commission’s weighted average maturity in years by investment type (expressed in thousands): Investment Type Bond mutual funds Commercial mortgage backed securities Commercial paper Corporate asset backed securities Corporate collateralized mortgage obligations Corporate notes & bonds Government bonds Government mortgage backed securities Index linked government bonds Money market mutual funds Repurchase agreements U.S. agency securities U.S. agency securities-full faith U.S. agency mortgage backed securities U.S. Treasury securities Other Total Debt Securities Fair Value $ 8,109 6,901 314,731 67,360 17,095 1,601,702 6,876 43,810 8,734 157,734 3,614,477 1,775,273 15,344 785,608 1,243,636 8,619 $ 9,676,009 Weighted Average Maturity (in years) 9.30 28.61 0.13 0.33 16.61 3.55 10.86 17.18 4.60 0.15 0.02 1.30 0.77 17.34 0.92 4.28 2.52 The ASRS does not have a formal policy in regards to interest rate risk, but does manage interest rate risk using effective duration. Effective duration measures the expected change in value of a fixed income security for a given change in interest rate. This method takes into account the likely timing and amounts of variable cash flows for bonds with call options and prepayment provisions. The following table presents ASRS’ effective duration by investment type (expressed in thousands): Investment Type Asset backed securities Collateralized mortgage obligations (CMOs) of government agencies Commercial mortgage backed Corporate bonds Government agencies Government bonds Government mortgage backed Non-government backed CMOs Total Debt Securities $ Fair Value 139,591 $ 16,969 458,816 1,735,814 564,510 659,902 1,663,108 196,804 5,435,514 Effective Duration (in years) 1.00 1.70 3.30 3.60 5.00 5.00 2.80 6.00 3.66 The PSPRS, the EORP, the CORP, and the NAU do not have a formal policy in regards to interest rate risk. The U of A’s investment policy limits its operating funds to having a portfolio comprised of a significant proportion of authorized securities with maturities of one year or less, and requires that a maximum maturity of any fixed rate issue may not exceed five years and the final maturity of any floating rate issue may not exceed five years. The U of A capital projects and endowment funds have no such limitations. - 82 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The following table presents the interest rate risk for the PSPRS, the EORP, the CORP, the NAU, the U of A, and other State agencies utilizing the segmented time distribution (expressed in thousands): Investment Type Corporate notes & bonds Collateralized bond obligations (CBOs) Collateralized debt obligations (CDOs) Money market mutual funds U.S. agency securities U.S. Treasury securities Other investments Total Debt Securities Investment Maturities (in years) 6-10 11-15 16-20 $ 306,916 $ 69,929 $ 192,155 Fair Value $ 1,363,034 Less than 1 $ 3,207 1-5 $ 89,867 41,317 - 12,460 12,314 - 5,157 11,386 1,119 266,481 433,274 75,676 21,361 $ 2,202,262 266,481 32,050 52,834 5,292 $ 359,864 144,724 20,847 1,955 $ 269,853 1,118 73,346 449 8,534 $ 402,677 13,789 193 83,911 1 121,793 531 1,063 $ 320,700 47,572 1,015 4,324 765,257 $ More than 20 $ 700,960 $ The following table presents the State’s investments at fair value that are considered to be highly sensitive to interest rate changes (expressed in thousands): Interest Rate Terms The London Interbank Offered Rate (LIBOR) plus/minus fixed basis point which resets from monthly to quarterly. Corporate asset backed securities with coupon tied to LIBOR plus/minus fixed basis point which resets monthly. Mortgage backed securities - when interest rates fall, mortgages are refinanced and paid off early and the reduced stream of future interest payments diminishes fair value. Callable step-up notes - where on certain specified dates, the issuer can call the security. If the security is not called, the interest rate is increased by a specified amount. Prevailing interest rates may go up faster than this increase in the coupon interest rate. Other securities with high sensitivity to rate changes. Total Corporate Securities $ $ U.S. Agency Securities 810,057 $ Total 266,120 $ 1,076,177 66,945 - 66,945 - 830,678 830,678 - 65,377 125,437 65,377 125,437 877,002 $ 1,287,612 $ 2,164,614 D. CREDIT RISK Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the holder of the investment. The State statutes and the State Treasurer’s investment policy require that commercial paper must be rated by at least two nationally recognized statistical rating organizations (NRSROs) and that the ratings assigned by at least two of the NRSROs be of the two highest rating categories for short-term obligations. Corporate bonds, debentures, and notes must carry a minimum Baa or better rating from Moody’s Investor Service (Moody’s) or a BBB or better rating from Standard and Poor’s Rating Service (S & P). For investments not rated by Moody’s, Fitch rating information is used. There is no statute or investment policy on ratings or credit quality for obligations issued by the U.S. Government or its agencies or repurchase agreements. The underlying securities for repurchase agreements must be explicitly guaranteed by the U.S. Government. The ASRS has not adopted a formal policy with respect to credit risk. The PSPRS, the EORP, and the CORP’s investment policy is specific as to permissible credit quality ranges, exposure levels within individual quality tiers, and the average credit quality of the overall portfolios. The fixed income portfolio must have a minimum weighted average quality rating of A3 by Moody’s and A- by S & P. Fixed income investments must have a minimum quality rating of Baa3 by Moody’s and BBB- by S & P at the time of purchase. Commercial paper must have a minimum quality rating of P-1 by Moody’s and A1 by S & P at the time of purchase. The portion of the bond portfolio in investments rated Baa3 - 83 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 through Baa1 by Moody’s and BBB- through BBB+ by S & P must be 20.00% or less of the fair value of the fixed income portfolio. The Universities’ policies mirror that of the ABOR, which requires that negotiable certificates of deposit, corporate bonds, debentures and notes, bankers acceptances, and State of Arizona bonds carry a minimum BBB or better rating by S & P or Baa or better rating by Moody’s; and that commercial paper be rated by at least two NRSROs and must be of the two highest rating categories for short-term obligations of at least two of the NRSROs. Also, ASU’s capital projects and bond debt service funds are invested by the bond trustee in accordance with the applicable financing indenture. The Commission’s investment policy requires that purchases of fixed income securities will consist of U.S. Treasury or Federal agency obligations or those bonds rated not less than Ba by Moody’s or BB by S & P, except for fixed income managers who have been hired to manage funds in a specialized manner (high yield). The following table presents the State’s investments which were rated by S & P and/or an equivalent national rating organization as of June 30, 2009. The ratings are presented using S & P’s rating scale (expressed in thousands): Investment Type Asset backed securities Bond mutual funds CBOs CDOs CMOs of government sponsored entities Commercial mortgage backed securities Commercial paper Corporate notes & bonds Government agencies Government bonds Government mortgage backed securities Money market mutual funds Non-government backed CMOs U.S. agency mortgage backed securities U.S. agency securities Other investments Total Fair Value $ 211,158 13,213 41,317 1,119 AAA $ 144,116 - AA $ 6,358 - A 11,525 23,273 1,119 BBB $ 4,508 12,460 - BB $ 7,970 - B $ 27,167 - CCC Thru D $ 9,040 - - Not Rated $ 474 13,213 5,584 - 16,969 16,291 - - - - 678 - - - 465,717 19,988 435,740 - 8,094 - 3,091 - 4,506 - - 10,387 - 3,899 - 19,988 - 4,524,359 564,510 659,902 638,980 564,276 651,366 556,331 - 1,804,237 234 8,536 598,905 - 74,031 - 467,755 - 6,944 - - 377,176 - 1,698,250 1,698,250 - - - - - - - - 424,215 376,211 - - - - - - - 48,004 213,899 69,550 27,455 8,324 3,822 4,872 47,673 51,980 - 223 463,219 1,942,791 20,668 463,219 1,261,265 5,083 1,843 5,076 - 228 - - - 676,337 - 113 13,514 $ 11,281,294 $ 6,324,347 $ 600,081 $ 1,865,415 $624,429 $ 86,873 $ 553,660 $71,863 $ 696,325 $458,301 $ A1 $ E. CONCENTRATION OF CREDIT RISK Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The State Treasurer’s, the ASRS’, ASU’s, the U of A’s, and the Commission’s investment policies state that no more than 5.00% of their investments may be invested in securities issued by any one institution, agency, or corporation, other than securities issued as direct obligations of or are fully guaranteed by the U.S. Government or mortgage backed securities and agency debentures issued by federal agencies. The PSPRS’, the EORP’s, and the CORP’s investment policy states that no more than 5.00% of the combined assets of the system or other plans that the fund manager manages shall be invested in corporate stock issued by any one corporation, other than corporate stock issued by corporations chartered by the U.S. government or corporate stock issued by a bank or insurance company. NAU has no formal policy in regards to concentration of credit risk. At June 30, 2009, more than 5.00% of the Governmental Activities’ total investments were held in the following single issues (expressed in thousands): Issuer Description Federal Home Loan Mortgage Corporation Federal National Mortgage Association - 84 - Fair Value $ 475,902 455,590 Percentage 8.64% 8.27% STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 F. FOREIGN CURRENCY RISK Foreign currency risk is the risk that changes in the foreign exchange rate will adversely impact the fair value of an investment or deposit. The State does not have a formal policy regarding foreign currency risk. The ASRS is the primary State agency that has foreign currency risk. Per ARS §38-719, no more than 30.00% of the ASRS assets may be invested in foreign equity securities and those investments shall be made only by investment managers with demonstrated expertise in those investments. The ASRS has not adopted a formal policy that is more restrictive. The following table summarizes the State’s foreign currency risk as of June 30, 2009 (expressed in thousands): Currency Australian Dollar British Pound Sterling Canadian Dollar Chinese Yen Czech Koruna Danish Krone Euro Currency Hong Kong Dollar Indonesian Rupian Japanese Yen Malaysian Ringit New Mexican Peso New Taiwan Dollar New Zealand Dollar Norwegian Krone South African Rand Singapore Dollar South Korean Won Swedish Krona Swiss Franc Foreign Currency Risk by Investment Type at Fair Value Fixed Other Income Investments Short Term Equities Total $ 45,211 40,124 14,504 100 226 825 (21,913) 8,035 4 84,665 (31,206) (501) 3,241 25,349 102,103 Thailand Baht - Various mutual funds Total $ 270,767 $ - $ 2,516 35,178 - 41,326 $ 1,014 3,632 $ 56,301 450,605 23,299 3,776 18,233 843,481 93,429 558,600 689 2,467 3,651 6,799 11,807 11,599 18,370 14,012 25,032 206,323 2,394,211 $ - 44,724 $ 3,346 43,364 35 - 1,014 4,420 $ 51,165 101,512 496,591 37,803 100 4,002 19,058 900,110 101,499 4 643,265 689 2,467 3,651 (24,407) 11,306 11,599 21,611 14,012 50,381 308,426 52,776 $ 2,757,469 G. UNEMPLOYMENT COMPENSATION Pursuant to Section 904 of the Social Security Act (42 U.S.C. §1104), unemployment insurance contributions from Arizona employers are deposited in an unemployment trust fund account with the Secretary of the Treasury of the United States. The cash on deposit in the trust fund account is pooled and invested. Interest earned from investments purchased with such pooled monies is deposited in the trust fund account. The Unemployment Compensation Fund, reported as a major enterprise fund, has been established for this purpose. H. SECURITIES LENDING Cash received as collateral on securities lending transactions and investments made with that cash are reported as assets. A corresponding liability is also recorded for such securities lending transactions. 1. Industrial Commission State statutes and the Commission’s policies permit the Commission to enter into securities lending transactions with its custodial bank. There were no significant violations of legal or contractual provisions, and there were no borrower or lending agent default - 85 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 losses to the securities lending agent. The custodial bank, Northern Trust, manages the securities lending operations through a contractual agreement with the Commission and splits the fees received with the Commission. There was no credit risk (i.e., lender’s exposure to the borrowers of its securities) related to the securities lending transactions at June 30, 2009. Northern Trust’s indemnification responsibilities include performing appropriate borrower and collateral investment credit analysis, demanding adequate types and levels of collateral, and complying with applicable Department of Labor and Federal Financial Institutions Examinations Council regulations concerning securities lending. Securities are loaned for collateral that may include cash, U.S. Government securities, and irrevocable letters of credit. Domestic securities are loaned for collateral valued at 102.00% of the market value of securities loaned plus accrued interest. International securities are loaned for collateral valued at 105.00% of the market value of securities loaned plus accrued interest. The market value at June 30, 2009 for loaned securities collateralized by cash and non-cash collateral was $43.631 million and $0, respectively. As part of the securities lending transactions, Northern Trust received cash and non-cash collateral valued at $44.736 million and $0, respectively at June 30, 2009. Non-cash collateral cannot be pledged or sold unless the borrower defaults. Deposit and investment risk disclosures are only reported for collateral received on securities lent. All securities loans can be terminated on demand by either the lender or the borrower. The average term of the loans is 52 days and cash open collateral is invested in a short-term investment pool, the Core USA Collateral Section, which had an average weighted maturity of 15 days as of June 30, 2009. Cash collateral may also be invested separately in term loans, in which case the investments match the loan term. Cash open loans can be terminated on demand by either the lender or the borrower and there were no dividends or coupon payments owing on securities lent. Securities lending earnings are credited to participating clients on approximately the fifteenth day of the following month. Investments made with cash collateral received are classified as an asset on the Statement of Net Assets. A corresponding liability is recorded as the Commission must return the cash collateral to the borrower upon expiration of the loan. At June 30, 2009, the Commission had $44.736 million outstanding as payable for securities lending. A cap restriction on the amount of securities that can be out on loan at any one time of $43.976 million was set by the Commission on September 29, 2008. 2. Arizona State Retirement System The ASRS is permitted by ARS §38-715(D) (3), to enter into securities lending transactions. The ASRS’ custodial bank enters into agreements with counterparts to loan securities and have the same securities redelivered at a later date. All securities are eligible for loan (U.S. fixed income securities, U.S. equities, and international equities) with a higher percentage of U.S. Treasuries on loan than most other security types. It is the policy of the ASRS to receive as collateral at least 102.00% of the market value of the loaned securities and maintain collateral at no less than 100.00% for the duration of the loan. At year-end, the ASRS has no credit risk exposure to borrowers because the amount the ASRS owes the borrowers exceeds the amount the borrowers owe the ASRS. The ASRS records the collateral received as an asset and the same amount as an obligation for securities on loan. Cash collateral received may be reinvested. The maturities of the investments are closely matched to those of the security loans to avoid interest rate exposure. The ASRS receives a spread for its lending activities. Investments made with cash collateral received are classified as an asset on the Statement of Fiduciary Net Assets. A corresponding liability is recorded as the ASRS must return the cash collateral to the borrower upon expiration of the loan. At June 30, 2009, the fair value of securities on loan was $3.5 billion. Cash of $3.4 billion received as collateral for securities loaned was reinvested and had a net asset value of $3.4 billion, as of June 30, 2009. The securities lending payable at June 30, 2009 was $3.4 billion. The ASRS does not have the ability to pledge or sell the collateral unless there is a borrower default. The ASRS is indemnified against gross negligence and borrower default by the lending agents. 3. Public Safety Personnel Retirement System, Elected Officials’ Retirement Plan, and Corrections Officer Retirement Plan The PSPRS, the EORP, and the CORP are permitted by ARS Title 38, Chapter 5, Articles 4, 3, and 6, respectively, to enter into securities lending transactions. The PSPRS, the EORP, and the CORP are parties to securities lending agreements with a bank. The bank, on behalf of the PSPRS, the EORP, and the CORP, enters into agreements with brokers to loan securities and have the same securities returned at a later date. The loans are fully collateralized, primarily by cash. Collateral is marked-to-market on a daily basis. Non-cash collateral can be sold only upon borrower default. The PSPRS, the EORP, and the CORP require collateral of at least 102.00% of the fair value of the loaned U.S. Government or corporate security. The PSPRS, the EORP, and the CORP have no credit risk because the amounts owed to the borrowers exceed the amounts the borrowers owe to the retirement system or plan. Securities on loan are carried at fair value. As of June 30, 2009, the fair values of securities on loan for the PSPRS, the EORP, and the CORP were $617.673 million, $38.842 million, and $144.776 million, respectively. At June 30, 2009, the fair - 86 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 value of the associated collateral for the PSPRS, the EORP, and the CORP were $632.722 million, $39.598 million, and $148.495 million, respectively. The PSPRS, the EORP, and the CORP are indemnified for broker default by the securities lending agent. 4. University of Arizona During the fiscal year, the U of A elected not to participate in securities lending. This investment option remains available to the U of A. I. DERIVATIVES A derivative instrument is a financial instrument or other contract with all three of the following characteristics: • It has one or more underlyings and one or more notional amounts or payment provisions or both. Those terms determine the amount of the settlement or settlements, and in some cases, whether or not a settlement is required. • It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. • Its terms require or permit net settlement, it can readily be settled net by means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. The principal categories of derivatives employed and their uses during the year were as follows: Category Currency forward contracts Equities index futures contracts Purpose Hedge currency risk of investments denominated in foreign currencies. Reduce transaction costs; obtain market exposure; enhance returns. Derivatives are reported at fair value. The fair value of currency forward contracts is a calculated value, determined by interpolating the spot rate and the forward rates based upon number of days to maturity. Futures contracts on equity indexes trade daily and are settled the following trade day. The value of each contract is marked-to-market daily during the period that the contract is held. This value is determined by calculating the daily difference, called “margin,” between the closing Bloomberg market price of the applicable contract(s) on the valuation date as compared to the prior day. The ASRS exchanges the daily percontract margin, by the number of contracts held, with the counterparty brokerage firm with whom the ASRS transacts its equity index futures trading. The counterparty pays the total margin to the ASRS if the daily market value of the contract(s) rises; the ASRS pays the counterparty if the daily market value declines. Generally, derivatives are subject to both interest rate risk and credit risk. The derivatives utilized by the ASRS internal investment managers typically have no greater interest rate risk than their physical counterparts, and in many cases, are offset by exposure elsewhere in the portfolio. As of June 30, 2009, the ASRS had $814 thousand in temporary investments held as collateral for equity and fixed income derivatives which may have a positive or negative notional value. The ASRS believes that it is unlikely that any of the derivatives used by its internal investment managers could have a material adverse effect on the financial conditions of the ASRS. Refer to Note 7.A.3.c. for information on derivatives utilized by ASU. - 87 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 J. STATE TREASURER’S SEPARATELY ISSUED FINANCIAL STATEMENTS The State Treasurer issues a separately published Annual Financial Report. The report provides additional information relating to the State Treasurer’s total investing activities, including the investment trust funds. A copy of the State Treasurer’s Office Annual Financial Report can be obtained from their office location or website at: Arizona State Treasurer’s Office 1700 W. Washington St. Phoenix, Arizona 85007 (602) 604-7800 or (877) 365-8310 www.aztreasury.gov The Treasurer’s financial statements are audited by the Office of the Auditor General. NOTE 3. RECEIVABLES/DEFERRED REVENUE A. TAXES RECEIVABLE The following table summarizes taxes receivable at June 30, 2009 (expressed in thousands): Type of Tax Sales Income – individual and corporate Motor vehicle and fuel Luxury Unemployment Other Gross taxes receivable Allowance for uncollectible taxes Net Taxes Receivable General Fund $ 451,624 173,995 7,115 632,734 (198,089) $ 434,645 Transportation & Aviation Planning, Highway Maintenance & Safety Fund $ 61,018 61,018 $ 61,018 - 88 - Unemployment Compensation Fund $ 65,737 65,737 $ 65,737 Industrial Commission Special Fund $ 3,238 3,238 $ 3,238 Non-Major Governmental Funds $ 44,875 19,721 64,596 $ 64,596 Government-wide Total $ 496,499 173,995 61,018 26,836 65,737 3,238 827,323 (198,089) $ 629,234 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 B. DEFERRED REVENUE At June 30, 2009, the components of deferred revenue, in terms of revenue unavailable and unearned, were as follows (expressed in thousands): Current Deferred Revenue for Governmental Funds: General Fund: Delinquent sales tax Delinquent income tax Tobacco settlement Child support administrative reimbursements Advance insurance premium taxes Advance land lease payments Public assistance overpayments Vaccine & commodity food supplement Advance county acute and long term care payments Federal grants Other Transportation & Aviation Planning, Highway Maintenance & Safety Fund: Loans & notes receivable for asset purchases and construction Land Endowments Fund: Land sales receivable Land leases receivable Advance land lease payments Non-Major Funds: Public assistance overpayments Advance payments for Hawaii/Arizona PMMIS Alliance Other Unavailable Unearned Total Deferred Revenue $ $ $ Total Current Deferred Revenue for Governmental Funds Noncurrent Deferred Revenue for Governmental Funds: General Fund: Advance land lease payments Land Endowments Fund: Land sales receivable Advance land lease payments Total Noncurrent Deferred Revenue for Governmental Funds Total Current and Noncurrent Deferred Revenue for Governmental Funds Current Deferred Revenue for Proprietary Funds: Universities: Unexpended cash advances received Auxiliary sales and services IBM lease related to acquisition of research park Student tuition and fees Deposits Other Non-Major Funds: Policyholders' advance premiums Magazine subscriptions Other $ 109,077 98,181 59,140 4,219 1,464 263,234 - 44,762 290 2,563 16,231 100 19,789 - 19,789 153,445 6,229 - 17,152 153,445 6,229 17,152 954 - 769 38 954 769 38 715,732 81,905 797,637 - 5,134 5,134 603,598 - 56,422 603,598 56,422 603,598 61,556 1,319,330 $ 143,461 Unearned $ 44,721 6,089 4,900 59,373 1,357 2,166 6,036 2,614 520 Total Current Deferred Revenue for Proprietary Funds $ 127,776 Noncurrent Deferred Revenue for Proprietary Funds: Universities: IBM lease related to acquisition of research park Total Noncurrent Deferred Revenue for Proprietary Funds - 89 - 109,077 98,181 59,140 4,219 44,762 290 1,464 2,563 16,231 263,234 100 $ 20,070 $ 20,070 665,154 $ 1,462,791 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 4. CAPITAL ASSETS Capital asset activities for the fiscal year ended June 30, 2009 were as follows (expressed in thousands): Primary Government Beginning Balance Governmental Activities: Non-depreciable capital assets: Land Construction in progress Infrastructure Total Non-depreciable Capital Assets $ 2,513,888 2,719,856 10,101,408 15,335,152 Additions Retirements Adjustments & Reclassifications $ $ $ 92,260 1,120,660 533,372 1,746,292 (48,715) (552,274) (2,991) (603,980) Ending Balance (55,394) (5,919) (61,313) $ 2,502,039 3,282,323 10,631,789 16,416,151 Depreciable capital assets: Buildings Improvements other than buildings Equipment Infrastructure Total Depreciable Capital Assets 1,709,900 136,246 772,238 7,118 2,625,502 28,243 795 34,660 2 63,700 1,119 (18) (52,574) (51,473) 8,545 5,225 6,496 8,201 28,467 1,747,807 142,248 760,820 15,321 2,666,196 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Infrastructure Total Accumulated Depreciation (546,719) (71,312) (536,436) (4,450) (1,158,917) (46,259) (3,947) (67,885) (336) (118,427) (1,350) 3 50,917 49,570 2,765 638 3,702 (2,121) 4,984 (591,563) (74,618) (549,702) (6,907) (1,222,790) 1,466,585 (54,727) (1,903) 33,451 1,443,406 $ 16,801,737 $ 1,691,565 $ (27,862) $ 17,859,557 Beginning Balance (As restated) Additions Retirements Total Depreciable Capital Assets, Net Total Governmental Activities Capital Assets, Net Business-type Activities: Non-depreciable capital assets: Land Construction in progress Collections Total Non-depreciable Capital Assets $ 166,613 125,230 15,853 307,696 $ 17,152 141,491 2,064 160,707 $ (605,883) (2,365) (11,359) (35) (13,759) $ Adjustments & Reclassifications $ (124,308) (124,308) Ending Balance $ 181,400 131,054 17,882 330,336 Depreciable capital assets: Buildings Improvements other than buildings Equipment Infrastructure Total Depreciable Capital Assets 3,701,943 4,811 1,282,525 346,268 5,335,547 72,288 96,553 4,259 173,100 (4,217) (33,214) (53) (37,484) 107,622 (249) 16,934 124,307 3,877,636 4,811 1,345,615 367,408 5,595,470 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Infrastructure Total Accumulated Depreciation (1,330,804) (2,501) (882,621) (117,449) (2,333,375) (116,342) (188) (89,264) (11,992) (217,786) 1,764 28,193 11 29,968 (69) 1 68 - (1,445,451) (2,688) (943,624) (129,430) (2,521,193) Total Depreciable Capital Assets, Net 3,002,172 (44,686) (7,516) 124,307 3,074,277 (1) $ 3,404,613 Total Business-type Activities Capital Assets, Net $ 3,309,868 $ 116,021 - 90 - $ (21,275) $ STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The capital assets beginning balance for business-type activities has been restated by $11.989 million to correct ASU’s building assets related to a capital lease with one of ASU’s affiliated component units, which was offset by the fund held for others liability, therefore the restatement did not impact the business-type activities. Depreciation expense was charged to governmental functions as follows (expressed in thousands): General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Total Governmental Activities $ 22,338 16,192 1,769 844 51,652 17,460 8,172 $ 118,427 Depreciation expense was charged to business-type activities as follows (expressed in thousands): Lottery Industrial Commission Special Fund Universities Other Total Business-type Activities $ 356 1,305 214,156 1,969 $ 217,786 NOTE 5. PENSION BENEFITS The State participates in the ASRS, the PSPRS, the EORP, and the CORP. Benefits are established by State statutes and provide retirement, death, and survivor benefits to State employees, public school employees and employees of counties, municipalities, and other State political subdivisions. A. PARTICIPATING EMPLOYERS The number of participating government employers as of June 30, 2009 is shown below: Employer Cities and towns Counties and county agencies State Special districts School districts Charter schools Community college districts Dispatchers ASRS 78 15 1 94 242 156 10 - PSPRS 143 21 1 59 - EORP 21 15 1 - CORP 1 14 1 8 B. CONTRIBUTIONS, BENEFITS, AND REFUND PAYMENTS For the ASRS, contributions from employees and employers for service through June 30 are accrued. These contributions are considered to be fully collectible and, accordingly, no allowance for uncollectible receivables is reflected in the financial statements. Pension benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. For the PSPRS, the EORP, and the CORP, member and employer contributions are recognized when due, pursuant to formal commitments, as well as statutory or contractual requirements. Pension benefits are recognized when due and payable in accordance with the terms of the plan. Refunds are due and payable by state law within 20 days of receipt of a written application for a refund. Refunds are recorded when paid. - 91 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 C. FUNDING POLICY The contribution requirements of plan members and the State are established by Title 38, Chapter 5 of the ARS. These contribution requirements may be amended by the Arizona State Legislature. Cost-sharing plans For the year ended June 30, 2009, active ASRS members and the State were each required by statute to contribute at the actuarially determined rate of 8.95% and 7.99% of the members' annual covered payroll, respectively. The State's contributions to the ASRS for the years ended June 30, 2009, 2008, and 2007 were $155.820 million, $162.121 million, and $142.382 million, respectively, for the primary government which were equal to the required contributions for these years. In addition, active EORP members were required by statute to contribute 7.00% of the members' annual covered payroll. The State was required to contribute a designated portion of certain fees collected by the Supreme Court plus additional contributions of 26.00% of the members' annual covered payroll, as determined by actuarial valuation. The State's contributions to EORP for the years ended June 30, 2009, 2008, and 2007 were $2.830 million, $2.230 million, and $1.789 million, respectively, which were equal to the required contributions for these years. Agent plans For the year ended June 30, 2009, active PSPRS members were required by statute to contribute 7.65% of the members' annual covered payroll and the participating State agencies were required to contribute at actuarially determined rates of 13.02 - 48.33%. Active CORP members were required by statute to contribute 8.41% of the members' annual covered payroll and the participating State agencies were required to contribute at actuarially determined rates of 7.48 - 7.85%. D. ANNUAL PENSION COST The State’s annual pension costs, required contributions, and excess other post-employment benefit (OPEB) contributions applied to pensions (see Note 6.A. and B. for explanation) for each of the agent, multiple-employer defined benefit pension plans for the year ended June 30, 2009, is as follows (expressed in thousands): PSPRS CORP Pension Contributions Made Required Excess OPEB Contributions Contributions $ 30,588 $ 674 35,022 2,188 Annual Pension Costs $ 30,588 35,022 The State’s annual pension cost, the percentage of annual pension cost contributed to the plan, and the net pension for the current and preceding year follows for each of the agent, multiple-employer defined benefit pension plans. The year ended June 30, 2007, contains both pension and OPEB information. (expressed in thousands) PSPRS CORP Fiscal Year Ended 6/30/09 6/30/08 6/30/07 Annual Pension/ OPEB Cost $ 30,588 25,879 19,993 Percentage of Annual Cost Contributed 102% 102% 100% Net Pension $ 1,274 600 - 6/30/09 6/30/08 6/30/07 35,022 26,405 17,494 106% 110% 100% 4,791 2,603 - - 92 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 E. FUNDED STATUS AND FUNDING PROGRESS The State’s funded status for each of the agent, multiple-employer defined benefit pension plans, as of the most recent actuarial valuation, is as follows (expressed in thousands): Plan PSPRS CORP Actuarial Valuation Date 6/30/2009 6/30/2009 Actuarial Value of Plan Assets $ 564,000 806,941 Actuarial Accrued Liability (AAL) $ 857,854 910,317 (Unfunded) AAL $ (293,854) (103,376) Funded Ratio 65.7% 88.6% Annual Covered Payroll $ 99,558 373,674 (Unfunded) AAL as a Percentage of Covered Payroll (295.2)% (27.7)% The required schedule of funding progress immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. F. ACTUARIAL METHODS AND ASSUMPTIONS The State’s actuarial methods and significant assumptions for each of the agent, multiple-employer defined benefit pension plans for the most recent actuarial valuation as of 6/30/09 and actuarial valuation as of 6/30/07 that was used to determine the fiscal year 2009 annual required contribution are as follows: Actuarial valuation date Actuarial cost method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at Cost-of-living adjustments Amortization method Remaining amortization Asset valuation method PSPRS 6/30/07 projected unit credit CORP 6/30/07 projected unit credit PSPRS 6/30/09 projected unit credit CORP 6/30/09 projected unit credit 8.50% 5.50 – 8.50% 5.00% None level percent closed for unfunded actuarial accrued liability, open for excess 29 years for unfunded actuarial accrued liability, 20 years for excess smoothed market value 8.50% 5.50 – 8.50% 5.00% None level percent closed for unfunded actuarial accrued liability, open for excess 29 years for unfunded actuarial accrued liability, 20 years for excess smoothed market value 8.50% 5.50 – 8.50% 5.50% None level percent-ofpay closed 8.50% 5.50 – 8.50% 5.50% None level percent-ofpay closed 27 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market 27 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market G. UNIVERSITIES’ RETIREMENT PLANS Faculty, academic professionals, service professionals, and administrative staff at the three universities (the ASU, the NAU, and the U of A) may select one of four retirement plans: the Teachers Insurance Annuity Association/College Retirement Equities Fund (TIAA/CREF), Variable Annuity Life Insurance Company (VALIC), Fidelity Investments Tax-Exempt Services Company (Fidelity), or the ASRS. The ASRS is a defined benefit plan and the other three plans are defined contribution plans. The three defined contribution plans are administered by independent insurance and annuity companies approved by the ABOR. In addition, the U of A employees hired before July 1, 1972, have the option to participate in the defined contribution plan administered by the ASRS. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Contributions made by employees vest immediately and the Universities' contributions vest no later than after five years of full-time employment. Employees and Universities' contributions and associated returns earned on investments may be withdrawn starting upon termination of employment, death, or retirement. The distribution of employee contributions and associated investment earnings are made in accordance with the employee's contract with the applicable insurance and annuity - 93 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 company. Universities' contributions and associated investment earnings must be distributed to the employee in the form of an annuity paid over the employee's life. The Arizona State Legislature establishes and may amend active plan members' and the Universities' contribution rates. For the year ended June 30, 2009, plan members and the three Universities were each required by statute to contribute an amount equal to 7.00% of an employee's compensation, except for a 7.50% member contribution and an 8.46% University contribution for the ASRS defined contribution plan. Contributions to these plans for the year ended June 30, 2009, were as follows (expressed in thousands): Plan TIAA/CREF VALIC Fidelity ASRS Employee Contributions $ 29,903 2,917 13,464 29 University Contributions $ 29,903 2,917 13,464 33 Total Contributions $ 59,806 5,834 26,928 62 NOTE 6. OTHER POST-EMPLOYMENT BENEFITS A. PLAN DESCRIPTION Cost-sharing plans In addition to the pension benefits described, the ASRS provides health insurance premium supplemental benefits and disability benefits to retired members, disabled members, and eligible dependents through the Health Benefit Supplement Fund (HBS) and the Long Term Disability Fund (LTD), which are cost-sharing, multiple-employer defined benefit post-employment plans. Title 38, Chapter 5 of the ARS assigns the authority to establish and amend the benefit provisions of the HBS plan and the LTD plan to the Arizona State Legislature. The ASRS issues a publicly available financial report that includes the financial information and disclosure requirements for the HBS plan and the LTD plan. Information on how to obtain this report is included in Note 1.A. The EORP, by statute, is a cost-sharing, multiple employer plan. However, because of its statutory structure, in accordance with GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, paragraphs 5 and 41, the EORP’s health insurance premium subsidy benefit (OPEB) is reported for such purposes as an agent, multiple-employer plan. Information on how to obtain the EORP’s publicly available financial report is included in Note 1.A. However, the EORP’s OPEB benefit is relatively insignificant to the State’s financial statements and, therefore, is not further described in these notes or the RSI that follows. Agent plans In addition to pension benefits described, the PSPRS and the CORP each offer a health insurance premium subsidy benefit to retired members and survivors, which are agent, multiple-employer defined benefit post-employment plans. Title 38, Chapter 5 of the ARS assigns the authority to establish and amend the health insurance subsidy benefit provisions to the Arizona State Legislature. The PSPRS and the CORP do not administer a separate healthcare plan as defined under IRC § 401(h) or an equivalent agreement. In addition, the PSPRS and the CORP are not statutorily authorized to maintain a separate account for the health insurance subsidy assets and benefits payments. Therefore, in accordance with GASB Statement No. 43, the health insurance subsidy benefit is reported as an agency fund. There are no accumulated assets or liabilities, only contributions and benefit distributions are presented in these funds. All assets of the PSPRS and the CORP are available to pay both pension benefits and the health insurance subsidy benefits. The PSPRS and the CORP each issue publicly available financial reports that include the financial information and disclosure requirements for the health insurance subsidy benefits. Information on how to obtain these reports is included in Note 1.A. - 94 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 B. CONTRIBUTIONS, BENEFITS, AND REFUND PAYMENTS Cost-sharing plan The ASRS recognition of contributions for the HBS plan and the LTD plan are the same as the pension benefit in Note 5.B. Benefit and refund payments are recognized when due and payable in accordance with the terms of the HBS plan and LTD plan. Agent plans The PSPRS and the CORP recognition of employer contributions and refunds for the health insurance subsidy benefit are the same as the pension benefit in Note 5.B. Contributions in excess of the health insurance subsidy payments are reported as excess pension contributions in the pension benefit plan. Health insurance subsidy benefits are recognized when due and payable in accordance with the terms of the plan. C. FUNDING POLICY The contribution requirements of plan members and the State are established by Title 38, Chapter 5 of the ARS. These contribution requirements are established and may be amended by the Arizona State Legislature. Cost-sharing plan For the year ended June 30, 2009, active ASRS members and the State were each required by statute to contribute at the actuarially determined rate of 0.50% of the members' annual covered payroll for LTD. In addition, the State also contributed 0.96% for the HBS. The State's contributions for LTD to the ASRS for the years ended June 30, 2009, 2008, and 2007 were $9.751 million, $10.070 million, and $9.429 million, respectively, for the primary government which were equal to the required contributions for these years. The State's contributions for the HBS to the ASRS for the years ended June 30, 2009, 2008, and 2007 were $18.722 million, $21.146 million, and $19.802 million, respectively, for the primary government which were equal to the required contributions for these years. Agent plans For the year ended June 30, 2009, the PSPRS participating State agencies were required to contribute at actuarially determined rates of 1.21 - 4.48% of covered payroll. The CORP participating State agencies were required to contribute at actuarially determined rates of 0.94 - 1.05% of covered payroll. D. ANNUAL OPEB COST The State’s annual OPEB costs, OPEB contributions made, and increase in OPEB obligation for each of the agent, multipleemployer defined benefit post-employment plans for the year ended June 30, 2009, is as follows (expressed in thousands): Annual OPEB Costs $ 2,401 3,918 PSPRS CORP OPEB Contributions Made $ 1,727 1,730 Increase in OPEB Obligation $ 674 2,188 The State’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the current and preceding year follows for each of the agent, multiple-employer defined benefit post-employment plans. Information for the last year of the required trend information will be reported next year when it becomes available. (expressed in thousands) PSPRS CORP Fiscal Year Ended 6/30/09 6/30/08 Annual OPEB Cost (AOC) $ 2,401 2,350 Percentage of AOC Contributed 71.9% 74.5% 6/30/09 6/30/08 3,918 4,301 44.2% 39.5% - 95 - Net OPEB Obligation $ 1,274 600 4,791 2,603 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 E. FUNDED STATUS AND FUNDING PROGESS The State’s funded status for each of the agent, multiple-employer defined benefit post-employment plans, as of the year ended June 30, 2009, is as follows (expressed in thousands): Plan PSPRS CORP Actuarial Valuation Date 6/30/2009 6/30/2009 Actuarial Value of Plan Assets - Actuarial Accrued Liability (AAL) $ 26,141 43,951 (Unfunded) AAL $ (26,141) (43,951) Funded Ratio 0.0% 0.0% Annual Covered Payroll $ 99,558 373,674 (Unfunded) AAL as Percentage of Covered Payroll (26.3)% (11.8)% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The required schedule of funding progress immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. F. ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits for financial reporting purposes are based on the plan and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The State’s actuarial methods and significant assumptions for each of the agent, multiple-employer defined benefit postemployment plans for the most recent actuarial valuation as of 6/30/09 and actuarial valuation as of 6/30/07 that was used to determine the fiscal year 2009 annual required contribution are as follows: Actuarial valuation date Actuarial cost method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at Cost-of-living adjustments Amortization method Remaining amortization Asset valuation method PSPRS 6/30/07 projected unit credit CORP 6/30/07 projected unit credit PSPRS 6/30/09 projected unit credit CORP 6/30/09 projected unit credit 8.50% 5.50 – 8.50% 5.00% None level percent closed for unfunded actuarial accrued liability, open for excess 29 years for unfunded actuarial accrued liability, 20 years for excess not applicable 8.50% 5.50 – 8.50% 5.00% None level percent closed for unfunded actuarial accrued liability, open for excess 29 years for unfunded actuarial accrued liability, 20 years for excess not applicable 8.50% 5.50 – 8.50% 5.50% None level percent-ofpay closed 8.50% 5.50 – 8.50% 5.50% None level percent-ofpay closed 27 years for unfunded actuarial accrued liability, 20 years for excess not applicable 27 years for unfunded actuarial accrued liability, 20 years for excess not applicable - 96 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 7. LONG-TERM OBLIGATIONS A. REVENUE BONDS Governmental Activities 1. Arizona Department of Transportation The ADOT has issued Senior and Subordinated Lien Highway Revenue Bonds to provide funds for acquisition of right-of-way, design, and construction of federal, state, and local highways. The original amount of Highway Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $1.6 billion. During the year, Highway Revenue Bonds totaling $181.050 million were issued to finance portions of the ADOT’s Five Year Transportation Facilities Construction Program and pay the costs of issuing the bonds. The Highway Revenue Bonds are secured by a prior lien on and a pledge of motor vehicle and related fuel fees and taxes. On September 21, 2006, House Bill 2206 became effective and eliminated the restriction that limited the principal amount of the Highway Revenue Bonds that could be outstanding at any time to 1.3 billion. Also during fiscal year 2007, the ADOT received legislative authority to begin issuing Highway Revenue Bonds with maturities of up to 30 years in length, replacing the 20 year maturity requirement that has been in place since 1980. The ADOT has pledged future motor vehicle and related fuel fees and taxes to repay $1.7 billion in outstanding Highway Revenue Bonds issued since 1993. Proceeds from the bonds finance portions of the ADOT’s Five Year Transportation Facilities Construction Program. The bonds are payable solely from motor vehicle and related fuel fees and taxes and are payable through 2033. The total principal and interest remaining to be paid on the bonds is $2.7 billion. Principal and interest paid for the current year and total pledged revenues were $154.000 million and $509.200 million, respectively. The annual principal and interest payments on the bonds required 30.20% of the pledged revenues. The Maricopa County Regional Area Road Fund is used to record all payments of principal and interest for Transportation Excise Tax Revenue Bonds issued by the ADOT. The Bonds are secured by transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. The original amount of Transportation Excise Tax Revenue Bonds issued in prior years and outstanding at the start of the fiscal year was $350.955 million. During the year, Transportation Excise Tax Revenue Bonds totaling $440.000 million were issued to pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County, Arizona and the costs of issuing the bonds. On September 21, 2007, the ADOT adopted a Master Resolution relating to Transportation Excise Tax Revenue Bonds. On April 17, 2009, the ADOT adopted the Second Supplemental Resolution authorizing the issuance of the second series of bonds under the Master Resolution in an amount not to exceed $440.000 million. No debt service reserve is required for the outstanding bonds. Transportation Excise Tax Revenue Bonds aggregating $404.805 million are subject to redemption prior to their maturity dates at the option of the ADOT in whole or in part, at any time, on or after July 1, 2017. These bonds may be redeemed at par, plus accrued interest to the date fixed for redemption. Transportation Excise Tax Revenue Bonds aggregating $372.325 million are not subject to redemption. The ADOT has pledged future transportation excise taxes to repay $777.130 million in outstanding Transportation Excise Tax Revenue Bonds issued since 2007. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Maricopa County, Arizona. The bonds are payable solely from transportation excise taxes and are payable through 2025. The total principal and interest remaining to be paid on the bonds is $1.1 billion. Principal and interest paid for the current year and total pledged revenues were $31.000 million and $219.200 million, respectively. The annual principal and interest payments on the bonds required 14.10% of the pledged revenues. In prior fiscal years, the ADOT refinanced various bond issues through advance-refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal, redemption premium, if any, and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. - 97 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the accompanying financial statements. Refunded bonds for the ADOT at June 30, 2009 totaled $212.880 million. 2. School Facilities Board In prior fiscal years, the SFB refinanced various bond issues through advance-refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal, redemption premium, if any, and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the accompanying financial statements. Refunded bonds for the SFB at June 30, 2009 totaled $535.310 million. The SFB has pledged portions of its gross revenues towards payment of debt related to State school improvement revenue bonds, State school improvement revenue refunding bonds, State school trust revenue bonds, and State school trust revenue refunding bonds outstanding at June 30, 2009. These bonds finance the correction of existing deficiencies in school facilities in the State of Arizona. These pledged revenues include Education Transaction Privilege Taxes approved by voters as part of Proposition 301 and expendable State School Trust Revenues. Expendable State School Trust Revenues include State Trust Lands’ land lease revenue, interest earnings on land sales financed over time, and a formula distribution from the State’s Permanent Fund prescribed by the State’s Constitution. Pledged revenues do not include sales of State Trust Lands, sales of natural products derived from State Trust Lands, or royalties from minerals extracted from State Trust Lands. These revenues are held in perpetuity for the benefit of various beneficiaries of the State Land Trust and are not available to pay debt service. Expendable State School Revenues in excess of $72.263 million are not available to pay debt service on the State school trust revenue bonds and State school trust revenue refunding bonds per the debt documents. During fiscal year 2009, total expendable trust revenues exceeded the maximum allowable amount to pay debt service by $56.165 million. This excess is not included in total pledged revenues. At June 30, 2009, pledged revenues totaled $631.163 million, of which 14.03% ($88.553 million) was required to cover current year debt service. Future pledged revenues required to pay all future debt service on these bonds through final maturity of July 1, 2021 is $948.188 million. Business-Type Activities 3. Universities a. University of Arizona The U of A’s bonded debt consists of various issues of system revenue bonds that are generally callable with interest payable semi-annually. Bond proceeds are used to pay for acquiring or constructing capital facilities and infrastructure. Bond proceeds are also used for refunding obligations from previously issued bonds. On April 28, 2009, the U of A sold System Revenue Bonds Series 2009A (2009A Bonds) for $202.370 million dated May 14, 2009. The 2009A Bonds include $137.895 million of serial bonds with interest rates ranging from 3.00% to 5.00% and maturity dates ranging from 2012 to 2032. The 2009A Bonds also include two term bonds consisting of $24.965 million with an interest rate of 5.00% due June 1, 2035; and $39.510 million with an interest rate of 5.00% due June 1, 2039. The 2009A Bonds with maturity on or after June 1, 2020, are subject to optional redemption without premium. The 2009A Bonds with maturity on June 1, 2035 and June 1, 2039 (the Term Bonds) are subject to mandatory sinking fund redemption without premium pursuant to the debt documents. The 2009A Bonds sold at a premium of $8.341 million. The U of A realized net proceeds of $209.115 million after payment of $1.596 million for issuance costs and underwriter discounts. The net proceeds were used to finance the Sixth Street Residence Halls, the Residence Life Building Renewal Phase 3 and 4 Projects, and to pay capitalized interest until December 1, 2011 on bonds allocated to the Sixth Street Residence Halls Project. In fiscal year 2003, the U of A refunded, in advance of maturity, a portion of outstanding System Revenue Bonds Series 2000A. At June 30, 2009, the outstanding principal balance of the refunded bonds was $2.320 million, which will be paid by investments held in an irrevocable trust with a fair value of $2.378 million. Accordingly, the trust account assets and liability for these defeased bonds are not included in the accompanying financial statements. In fiscal year 2005, the U of A refunded, in advance of maturity, the remaining principal balance of System Revenue Bonds Series 2000A. At June 30, 2009, the total outstanding principal balance of the refunded System Revenue Bonds Series 2000A - 98 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 was $14.210 million, which will be paid by investments held in an irrevocable trust with a total fair value of $14.365 million. Accordingly, the trust account assets and liability for these defeased bonds are not included in the accompanying financial statements. The U of A has pledged portions of its gross revenues towards the payment of debt related to all system revenue and system revenue refunding bonds outstanding at June 30, 2009. The bonds generally provide financing for various capital projects of the U of A. These pledged revenues include student tuition and fees, auxiliary enterprise revenue, sales and service revenue, and other operating revenues such as indirect cost recovery and certain investment income. Pledged revenues do not include State appropriations, gifts, endowment income, or other restricted revenues. At June 30, 2009, pledged revenues totaled $681.900 million, of which 5.60% ($38.200 million) was required to cover current year debt service. Future pledged revenues required to pay all remaining debt service for the system revenue and system revenue refunding bonds through final maturity of June 1, 2040 is $828.900 million. b. Northern Arizona University On August 14, 2008, the NAU sold System Revenue Bonds Series 2008 for $43.130 million dated August 14, 2008 for the purpose of constructing a residence life warehouse, expanding the distance learning facility, expanding recreational fields, replacing the turf in the Skydome athletic facility, and various infrastructure improvements. The 2008 Bonds include $22.310 million of serial bonds with interest rates ranging from 3.00% to 5.25% and maturity dates ranging from June 1, 2009 to June 1, 2028. The 2008 Bonds also include $20.820 million of term bonds, with interest rates ranging from 5.00% to 5.25% and maturing on June 1, 2033 and 2038, and are subject to annual sinking fund contributions. The bonds maturing on or after June 1, 2019, are subject to optional redemption without premium on June 1, 2018. The 2008 Bonds were sold with net original issue discount of $88 thousand. The NAU realized net proceeds of $43.042 million after payment of $319 thousand for issuance costs, underwriter discounts, and bond insurance. The costs associated with this issue were recorded in the current fiscal year. The Series 2008 have an average interest rate of 5.04%. In prior years, the NAU defeased certain revenue bonds by either placing the proceeds of new bonds, or cash and investments accumulated in the sinking fund, in an irrevocable trust to provide for all future debt service payments on the refunded bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the accompanying financial statements. At June 30, 2009, $41.130 million of such bonds outstanding are considered defeased. The NAU has pledged portions of its gross revenues towards the payment of debt related to various senior lien system revenue bonds outstanding at June 30, 2009. The bonds generally provide financing for various capital projects of the NAU. These pledged revenues include student tuition and fees, certain auxiliary enterprise revenue, investment income, and indirect cost recovery revenue. Pledged revenues do not include State appropriations, gifts, endowment income, or other restricted revenues. At June 30, 2009, pledged revenues totaled $164.900 million, of which 9.30% ($15.400 million) was required to cover current year debt service. Future pledged revenues required to pay all remaining debt service for the system revenue bonds through final maturity of June 1, 2040 is $320.600 million. c. Arizona State University At June 30, 2009, the ASU held a combination of fixed and variable rate bonds. The ASU’s fixed rate bonded debt consists of various issues of system revenue bonds that are generally callable at a prescribed date with interest payable semi-annually. Certain system revenue bonds of the ASU were defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased bonds are not included in the accompanying financial statements. The principal amount of all such bonds outstanding at June 30, 2009 was $46.900 million. In November 2008, the ASU issued $104.100 million in system revenue bonds having an average maturity of 14 years and an average interest rate of 5.89%. The bonds were issued to fund construction of the Polytechnic Campus Academic Complex. In April 2009, the ASU issued $36.250 million in system revenue bonds having an average maturity of 8 years and an average interest rate of 3.76%. The bonds were issued primarily to fund the new Weatherup Center, an indoor basketball practice facility, the Memorial Union fire renovation project, and several building renewal and deferred maintenance projects. - 99 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The ASU has outstanding two series of Variable Rate Demand System Revenue Refunding Bonds, Series 2008A and 2008B (2008A&B Bonds), totaling $103.700 million with final maturities of July 1, 2034. Both series continue to bear interest at a weekly rate not to exceed 12.00% per annum based upon prevailing market conditions, as determined by the respective remarketing agents. The bonds are subject to conversion, at the option of the Arizona Board of Regents (ABOR) on behalf of the ASU, to a different or alternate adjustable rate mode, or a fixed rate pursuant to the bond indenture. The interest rate in effect on June 30, 2009 was .20% for the Series 2008A and .16% for the Series 2008B bonds. The variable rate bonds are subject to purchase on the demand of the holder at a price equal to principal plus accrued interest on seven days’ notice to the remarketing agents. To provide credit and liquidity support for the bonds, the ASU entered into an Irrevocable Letter of Credit and Reimbursement Agreement (LOC) with Lloyds TSB Bank, PLC, upon execution of the refunding bonds. The LOC was extended on June 18, 2009 and expires on June 15, 2012. Assuming all of the $51.800 million Series 2008A and $51.800 million Series 2008B Bonds are not resold within 90 days, the ASU would be responsible to make quarterly installment principal payments of $5.200 million over a five-year period, plus interest to be calculated as established in the letter of credit. The ASU has agreed to pay TSB Bank, PLC, an annual commitment fee for the letter of credit of 1.55% per annum on the stated amount which consists of outstanding principal of the bonds, plus 51 days of interest, at an assumed rate of 12.00% per annum. Effective January 1, 2007, the ASU entered into a swap agreement on $103.000 million, notional amount, relating to the 2008A&B Bonds. The $103.000 million in bond principal is not exchanged; it is only the basis on which the interest payments are calculated. The notional amount under the swap decreases as principal payments are made on the 2008A&B Bonds. The intention of the swap was to effectively change the variable rate interest on the 2008A&B Bonds to a synthetic fixed rate. The swap agreement expires on July 1, 2034. Under the terms of the swap agreement, the ASU pays the counterparty interest calculated at a fixed rate of 3.91% and receives payments from the counterparty based on the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index set weekly. The SIFMA rate at June 30, 2009 was .35%. At June 30, 2009, the synthetic fixed interest rate on the bonds was: Interest Rate Swap Fixed payment to counterparty Variable payment from counterparty Net interest rate swap payments Variable-rate bond coupon payments Synthetic fixed interest rate on bonds Terms Fixed SIFMA Spread to SIFMA Rates (%) 3.91 (.35) 3.56 .18 3.74 As of June 30, 2009, the swap had a fair value of $(5.700) million, which represents the cost to the ASU to terminate the swap. The fair value was developed by an independent third party, with no vested interest in the transaction, using the zero-coupon discounting method. This method calculates the future payments required by the swap, assuming the current forward rates implied by the yield curve are the market’s best estimate of future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for a hypothetical zero-coupon rate bond due on the date of each future net settlement on the swaps. As of June 30, 2009, the ASU was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap becomes positive, the ASU would be exposed to credit risk in the amount of the derivative’s fair value. The swap counterparty was rated A+ by Fitch, A by Standard & Poor’s, and A2 by Moody’s Investor Services as of June 30, 2009. Based on current ratings, the counterparty was not required to provide collateral. In the event a rating downgrade occurs, the counterparty may be required to provide collateral if the ASU’s overall exposure exceeds predetermined levels. Collateral may be held by the ASU or a third party custodian. The swap exposes the ASU to basis risk should the weekly SIFMA rate paid by the counterparty fall below the weekly interest rate due on the bonds which is also a variable rate with a spread to SIFMA. This basis risk can be the result of a downgrade of the ASU’s rating or the pricing of the ASU’s bonds by the remarketing agent at rates higher than the SIFMA index. The ASU continues to pay interest to the bondholders at the variable rate provided by the bonds. However, during the term of the swap agreement, the ASU effectively pays a fixed rate on the debt. If a default occurs regarding the swap agreement, the nondefaulting party may designate a date to terminate the agreement. The ASU will revert to a variable rate if the counterparty - 100 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 defaults or if the swap is terminated. A termination of the swap agreement may also result in the ASU making or receiving a termination payment. Securities and cash restricted for bond debt service held by the trustee at June 30, 2009 totaled $36.900 million. The ASU has pledged portions of its gross revenues towards the payment of debt related to various senior lien system revenue bonds outstanding at June 30, 2009. The related revenue bonds are primarily for new academic and research facilities, academic and laboratory renovations, and infrastructure improvements. These pledged revenues include student tuition and fees, certain auxiliary enterprise revenue, investment income, and indirect cost recovery revenue. Pledged revenues do not include State appropriations, gifts, endowment income, or other restricted revenues. For the year ended June 30, 2009, annual pledged revenues totaled $702.800 million, of which 6.40% ($44.800 million) was required to cover current year debt service. Future pledged revenues required to pay all remaining debt service for system revenue bonds through final maturity of July 1, 2036 is $827.800 million. In addition, the ASU has pledged the same revenues on a subordinate basis to secure the Series 2006 Arizona State University Research Park, Inc. Development Refunding Bonds. Research Park bonds outstanding at June 30, 2009 were $10.900 million with annual debt service requirements of approximately $1.200 million through July 1, 2021. The ASU presently plans to issue up to $230.000 million in system revenue bonds in fiscal year 2010. Summary of Revenue Bonds The following schedule summarizes revenue bonds outstanding at June 30, 2009 (expressed in thousands): Revenue Bonds Outstanding Governmental Activities: Department of Transportation School Facilities Board Proprietary Funds: University Revenue Bonds Interest Rates Outstanding Balance at June 30, 2009 Dates Issued Maturity Dates 1994-2009 2001-2008 2010-2033 2010-2021 2.00-6.00% .14-5.75% $2,517,895 733,685 1992-2009 2010-2040 .18-6.50% 1,239,675 Principal and interest debt service payments on revenue bonds outstanding at June 30, 2009 are as follows (expressed in thousands): Annual Debt Service Governmental Activities Fiscal Year 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2039 2040 Total Total Principal $ 154,395 162,520 170,705 179,435 188,515 1,090,790 840,600 304,585 160,035 $ 3,251,580 Total Interest $ 159,390 153,300 145,064 136,373 127,270 486,237 235,306 73,717 20,484 $ 1,537,141 Business-type Activities Total $ 313,785 315,820 315,769 315,808 315,785 1,577,027 1,075,906 378,302 180,519 $ 4,788,721 Total Principal $ 51,960 58,505 53,050 58,850 61,470 269,000 223,295 222,960 149,655 88,355 2,575 $ 1,239,675 Total Interest $ 55,366 52,017 49,355 46,882 44,174 180,974 127,370 75,404 37,140 11,790 117 $ 680,589 Net Payments (Receipts) on Swap Agreement $ 3,692 3,615 3,533 3,547 3,357 15,274 12,256 8,409 3,405 $ 57,088 Total 111,018 114,137 105,938 109,279 109,001 465,248 362,921 306,773 190,200 100,145 2,692 $ 1,977,352 $ B. GRANT ANTICIPATION NOTES Grant Anticipation Notes (GANs) are issued by the ADOT and secured by revenues received from the Federal Highway Administration under a grant agreement and certain other federal-aid revenues. The original amount of GANs issued in prior - 101 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 years and outstanding at the start of the fiscal year was $298.280 million. During the year, GANs totaling $55.420 million were issued to pay the costs of projects (as specified) and the costs of issuing the bonds. The ADOT has pledged federal revenues to repay $329.650 million in outstanding GANs issued since 2003. Proceeds from the bonds pay the costs of design, right-of-way purchase, or construction of certain freeways and other routes within Arizona. The bonds are payable solely from federal revenues and are payable through 2016. The total principal and interest remaining to be paid on the bonds is $394.800 million. Principal and interest paid for the current year and total pledged revenues were $38.500 million and $532.000 million, respectively. The annual principal and interest payments on the bonds required 7.20% of the pledged revenues. Grant Anticipation Notes currently outstanding are as follows (expressed in thousands): Grant Anticipation Notes Outstanding Governmental Activities: Department of Transportation Dates Issued Maturity Dates Interest Rates 2004-2009 2010-2016 2.50-5.00% Outstanding Balance at June 30, 2009 $ 329,650 Future debt service principal and interest payments on Grant Anticipation Notes issues for fiscal years ended June 30 are summarized below (expressed in thousands): Annual Debt Service Fiscal Year 2010 Governmental Activities Total Total Principal Interest $ 25,170 $ 16,370 Total Debt Service $ 41,540 2011 70,570 14,835 85,405 2012 43,885 11,404 55,289 2013 45,340 9,284 54,624 2014 55,265 7,121 62,386 2015-2016 Total 89,420 $ 329,650 6,165 $ 65,179 95,585 $ 394,829 C. CERTIFICATES OF PARTICIPATION Governmental Activities 1. Department of Administration The State has issued COPs to finance construction or improvements of office buildings that are primarily leased to State agencies. The State’s obligation to make lease payments and any other obligations of the State under the lease are subject to, and dependent upon, annual appropriations made by the State Legislature and annual allocations of such appropriations being made by the Department of Administration for such purpose. The Department of Administration agrees to use its best efforts to budget, obtain, allocate, and maintain sufficient appropriated monies to make lease payments. In the event any such appropriation and allocation is not made, the leases will terminate and there can be no assurance that the proceeds for the re-leasing or sale of the projects will be sufficient to pay principal and interest with respect to the then outstanding COPs. The scheduled payments of principal and interest with respect to the COPs are guaranteed under certificate insurance policies. The State’s obligation to make lease payments does not constitute a debt or liability of the State within the meaning of any constitutional or statutory limitation. Neither the full faith and credit nor the general taxing power of the State is pledged to make payments of principal or interest due with respect to the COPs. Such payments will be made solely from amounts derived under the terms of the lease, including lease payments, and amounts from time to time on deposit under the terms of the declaration of trust. 2. School Facilities Board In prior fiscal years, the SFB refinanced various COPs through advance-refunding arrangements. Under the terms of the refundings, sufficient assets to pay all principal, redemption premiums, if any, and interest on the refunded COPs have been placed in irrevocable trust accounts at commercial banks and invested in U.S. securities which, together with interest earned - 102 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased COPs are not reflected in the accompanying financial statements. Refunded COPs for the SFB at June 30, 2009 totaled $311.130 million. On November 14, 2008, the SFB, through The Bank of New York Mellon Trust Company, NA (BNY), issued COPs Series 2008 for $580.035 million. The 2008 COPs include $430.835 million of serial certificates with interest rates ranging from 4.00% to 5.75% and maturity dates ranging from 2011 to 2024. The 2008 COPs also include two term certificates consisting of $89.655 million, with an interest rate of 5.13% due September 1, 2021, and $59.545 million, with an interest rate of 5.25% due September 1, 2023. The 2008 COP certificates maturing on or after September 1, 2019 are subject to optional prepayment, prior to maturity, without premium. The 2008 COP term certificates maturing on September 1, 2021 and September 1, 2023 are subject to mandatory prepayment without premium. The State realized net proceeds of $581.000 million after receipt of $11.960 million net original issue premium, deposit to BNY Certificate Account of $8.096 million for capitalized interest, and payment of $2.899 million of issuance costs, including underwriters’ discount. The 2008 COPs were issued to: (i) finance the costs of acquiring leasehold interests in school sites and certain school facilities, which will be subleased to various schools districts within the State, as well as the costs of other new school facilities, (ii) pay capitalized interest with respect to the 2008 COPs, and (iii) pay the costs of issuance. Business-Type Activities 3. Universities a. University of Arizona The U of A utilizes COPs and various capital leases to acquire buildings, equipment, and land. The COPs are generally callable, and the capital leases are subject to prepayment. In fiscal year 2003, the U of A refunded, in advance of maturity, a portion of outstanding COPs Series 2001B. At June 30, 2009, the outstanding principal balance for the COPs Series 2001B was $2.905 million, which will be paid by investments held in an irrevocable trust with a fair market value of $3.132 million. Accordingly, the trust account assets and liability for these defeased COPs are not included in the accompanying financial statements. In fiscal year 2005, the U of A refunded, in advance of maturity, a portion of outstanding COPs Series 2001A. At June 30, 2009, the total outstanding principal balance for the COPs Series 2001A was $8.730 million, which will be paid by investments held in an irrevocable trust with a fair value of $8.931 million. Accordingly, the trust account assets and liability for these defeased COPs are not included in the accompanying financial statements. In fiscal year 2007, the U of A refunded, in advance of maturity, a portion of outstanding COPs Series 2001A, 2001B, and 2002A. At June 30, 2009, the total outstanding principal balance for the COPs Series 2001A, 2001B, and 2002A was $59.195 million, which will be paid by investments held in an irrevocable trust with a fair value of $60.333 million. Accordingly, the trust account assets and liability for these defeased COPs are not included in the accompanying financial statements. b. Arizona State University At June 30, 2009, the ASU has issued fixed rate COPs. The ASU’s non-bonded debt consists of various issues of COPs that are generally callable at a prescribed date with interest payable semi-annually. Certain COPs of the ASU have been defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased COPs are not included in the accompanying financial statements. The principal amount of all such COPs outstanding at June 30, 2009 was $65.400 million. Securities and cash restricted for COP debt service held by the trustee at June 30, 2009 totaled $13.000 million. - 103 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 A summary of the COPs issued as of June 30, 2009 is as follows (expressed in thousands): Project Governmental Activities: Department of Administration: Refunding Certificates of 92A, 92C, & 1091 Health Lab/HRIS 2002A Refunding Certificates of 92B Refunding Certificates of 93B 1000 Bed Prison 2004B 4000 Bed Prison, Wastewater Upgrades, Forensic Unit 2008A School Facilities Board: New School Construction 2003A New School Construction 2003B New School Construction 2004A New School Construction 2004B New School Construction 2004C Refunding Certificates of 2003A Refunding Certificates of 2003B Refunding Certificates of 2004B New School Construction 2008 Total Governmental Activities: Business-Type Activities: Arizona State University: Towers Project Downtown Center – 1999A Downtown Center – 1999B 2002 Certificates of Participation 2004 West Campus – Refunding 2004 Certificates of Participation 2005A Certificates of Participation 2006 Certificates of Participation 2006 Refunding Certificates of Participation University of Arizona: Fixed Student Union A Park Std. Union/Learning Svcs/6th St Garage/TEP Bldg. Gittings Bldg/Highland Infra/Life Sci. Student Housing, Health Bldg., UA North Meinel Bldg & Refund COPS 1994B Refund COPS 1997 & Portion of Series 2001B Med. Research. Bldg./Biomed Sci.&Biotech/Tech. Infra. Chem.Bldg./Res.Life/Highland Pkg.Garage/Rfnd. COPS 1994A Refund COPs 1999A Refund COPs 1999 Refund COPs 2001A Refund COPs 1999, 1999A&B, 2000A, 2001A&B, 2002A&B, 2003A&B, 2004A Refund COPs 1999A&B, 2000A, 2001A&B, 2002A&B, 2003A&B, 2004A Biomed Research Collaborative Bldg. Project Refund COPs 2001A, 2001B, 2002A, 2004B Northern Arizona University: 2004 Certificates of Participation 2005 Certificates of Participation 2006 Certificates of Participation Total Business-Type Activities: Total Certificates of Participation Issue Date Final Maturity Date 2001 2002 2003 2004 2004 2008 2012 2023 2011 2012 2019 2028 2003 2004 2004 2005 2005 2005 2005 2005 2009 2014 2015 2019 2017 2020 2018 2019 2020 2024 Original Amount Issued $ $ 1991 1999 1999 2002 2004 2005 2005 2006 2007 2011 2025 2025 2027 2010 2031 2031 2031 2027 1999 2001 2001 2002 2002 2003 2004 2004 2005 2005 2005 2020 2012 2014 2022 2023 2022 2031 2029 2024 2024 2022 2006 372,730 194,610 47,160 190,040 47,585 201,125 80,055 53,045 580,035 2,250,560 $ Interest Rates 11,490 40,605 35,330 7,270 24,820 238,990 4.00 – 5.25 4.13 – 5.50 3.60 – 5.50 3.75 – 5.00 4.00 – 5.25 3.25 – 5.00 122,330 81,680 35,795 102,060 40,175 198,850 77,905 52,535 580,035 $ 1,649,870 3.25 – 5.00 3.00 – 5.25 2.50 – 5.00 4.00 – 5.25 4.75 – 5.00 2.75 – 5.00 2.75 – 5.00 2.75 – 5.00 4.00 – 5.75 800 4,445 4,315 21,495 5,855 76,385 104,500 14,890 64,580 6.89 5.75 8.00 4.75 2.36 4.89 4.36 4.52 4.15 21,607 31,695 21,425 76,965 29,845 10,615 153,960 42,020 12,660 14,825 16,330 4,159 2,535 2,185 15,665 27,220 10,615 142,825 33,620 12,660 14,825 16,330 5.13 – 5.30 4.20 – 4.45 4.75 – 5.00 4.38 – 5.50 3.50 – 5.13 3.50 – 5.00 3.77 – 5.25 3.60 – 5.25 4.00 – 5.00 5.00 4.13 – 5.00 2025 29,460 27,355 3.50 – 5.00 2006 2006 2007 2025 2031 2031 58,650 18,240 105,080 57,525 17,315 105,025 3.63 – 5.00 4.00 – 5.00 3.50 – 4.50 2005 2006 2006 2030 2030 2030 $ 35,715 38,180 11,810 872,829 2.50 – 5.13 3.00 – 5.00 4.00 – 4.50 $ 37,585 40,255 12,445 1,147,332 $ 3,397,892 $ 2,522,699 - 104 - $ 57,930 63,270 75,295 16,725 31,965 238,990 Outstanding Balance 4,500 5,620 5,165 103,800 22,495 80,275 110,115 15,810 65,890 $ STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Principal and interest debt service requirements on COPs outstanding at June 30, 2009 are as follows (expressed in thousands): Annual Debt Service Governmental Activities Fiscal Year Total Principal 2010 $ Business-type Activities Total Amount Required Total Interest 77,540 $ 80,647 $ Total Principal 158,187 $ 32,315 Total Amount Required Total Interest $ 40,288 $ 72,603 2011 109,980 76,289 186,269 28,605 39,187 67,792 2012 115,430 70,835 186,265 34,802 38,433 73,235 2013 120,905 65,155 186,060 36,506 36,960 73,466 2014 126,870 58,978 185,848 38,303 35,190 73,493 2015-2019 680,635 192,220 872,855 228,947 144,254 373,201 2020-2024 360,235 60,705 420,940 242,896 85,267 328,163 2025-2029 58,275 5,938 64,213 164,485 35,075 199,560 2030-2034 Total $ 1,649,870 $ - - 610,767 $ 2,260,637 65,970 $ 872,829 3,241 $ 457,895 69,211 $ 1,330,724 D. LEASES 1. Leases The State has entered into capital lease agreements for the acquisition of buildings, telephone systems, copy machines, and other equipment. Capital lease assets and liabilities are reported on the government-wide Statement of Net Assets. A lease is reported as a capital lease if one or more of the following criteria are met: • Title to or ownership of the asset is transferred to the State at the end of the lease. • The lease contains a bargain purchase option. • The lease term is equal to 75.00% or more of the useful life of the leased asset. (This criterion does not apply if the beginning lease term falls within the last 25.00% of the total useful life of the asset.) • The present value of the minimum lease payments at the inception of the lease, excluding executory costs, equals at least 90.00% of the fair market value of the leased asset. (This criterion does not apply if the beginning lease term falls within the last 25.00% of the total useful life of the asset.) - 105 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 The future minimum lease payments for long-term capital leases as of June 30, 2009 are summarized below (expressed in thousands): 2. Fiscal Year 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2039 Total minimum lease payments Less: amount representing interest Less: amount representing executory costs Annual Debt Service Governmental Business-type Activities Activities $ 29,502 $ 14,591 27,839 14,582 27,526 14,362 26,990 14,293 32,268 12,538 106,674 58,468 110,396 56,793 67,307 58,363 5,567 54,306 8,345 434,069 306,641 (110,545) (131,188) (87,399) - Present Value of Net Minimum Lease Payments $ 236,125 $ 175,453 Capital Assets Financed through Capital Leases and Certificates of Participation The following table summarizes the historical costs of assets acquired under capital leases and COPs (expressed in thousands): Less: accumulated depreciation Governmental Activities $ 6,663 135,385 585,637 2,420 71,147 801,252 (191,007) Business-type Activities $ 6,882 1,020,037 53,762 23,540 1,104,221 (144,773) Carrying Value $ $ Land Construction in progress Buildings Infrastructure Improvements other than buildings Equipment 610,245 959,448 E. COMPENSATED ABSENCES Compensated absences are paid from various funds in the same proportion that those funds pay payroll costs. The compensated absence liability attributable to governmental activities will be liquidated primarily by the General Fund. During fiscal year 2009, the State paid for compensated absences as follows: 82.39% from the General Fund, 12.03% from other funds, and 5.58% from other major funds. - 106 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 F. CHANGES IN LONG-TERM OBLIGATIONS The following is a summary of changes in Long-Term Obligations (expressed in thousands): Balance July 1, 2008 Increases Decreases Balance June 30, 2009 Due Within One Year Due Thereafter Governmental Activities: Long-term Debt: Revenue bonds $ 2,759,070 $ 621,050 (128,540) $ 3,251,580 298,280 55,420 (24,050) 329,650 25,170 304,480 1,135,640 580,035 (65,805) 1,649,870 77,540 1,572,330 249,876 1,300 (15,051) 236,125 14,522 221,603 Grant anticipation notes Certificates of participation Capital leases Installment purchase contracts $ $ 154,395 $ 3,097,185 8,908 2,756 (5,321) 6,343 3,591 2,752 22,838 23,139 (3,309) 42,668 3,451 39,217 Premiums and discounts on debt 242,816 70,083 (27,286) 285,613 30,979 254,634 Deferred amounts on refundings (13,145) - 3,974 (9,171) (3,974) (5,197) 4,704,283 1,353,783 (265,388) 5,792,678 305,674 5,487,004 252,323 262,382 (234,292) 280,413 171,738 108,675 Notes payable Total Long-term Debt Other Long-term Liabilities: Compensated absences Pollution remediation obligations - 23,712 (899) 22,813 1,092 21,721 252,323 286,094 (235,191) 303,226 172,830 130,396 $ 4,956,606 $ 1,639,877 $ (500,579) $ 6,095,904 $ 478,504 $ 5,617,400 $ $ 1,239,675 $ Total Other Long-term Liabilities Total Long-term Obligations Business-type Activities: Long-term Debt: Revenue bonds 902,255 $ 385,850 Certificates of participation 903,843 196 (31,210) 872,829 32,315 840,514 Capital leases 179,052 2,945 (6,544) 175,453 6,127 169,326 13,024 7,935 (4,541) 16,418 4,040 12,378 1,022 - (348) 674 314 360 Premiums and discounts on debt 38,211 9,149 (4,248) 43,112 1,966 41,146 Deferred amounts on refundings (27,711) - 2,417 (25,294) (1,657) (23,637) 2,009,696 406,075 (92,904) 2,322,867 95,065 2,227,802 Installment purchase contracts Notes payable Total Long-term Debt (48,430) $ 51,960 $ 1,187,715 Other Long-term Liabilities: Compensated absences Total Other Long-term Liabilities Total Long-term Obligations 66,117 80,122 (75,970) 70,269 15,196 55,073 66,117 80,122 (75,970) 70,269 15,196 55,073 $ 2,075,813 $ 486,197 (168,874) $ 2,393,136 110,261 $ 2,282,875 $ $ The above long-term obligations relating to governmental activities include internal service funds. Amounts for capital leases and compensated absences differ from those in the Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets because $3.081 million of capital leases and $113.717 million of compensated absences are attributable to internal service funds. These amounts are included in the reconciliation as part of internal service fund net assets. - 107 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 8. INTERFUND TRANSACTIONS INTERFUND BALANCES AND TRANSFERS Interfund Receivables/Payables Interfund balances as of June 30, 2009 are as follows (expressed in thousands): General Fund $ - Due From General Fund Due To Transportation & Aviation Planning, Land Non-Major Highway Maintenance Endowments Governmental Universities Funds & Safety Fund Fund Funds $ $ 1,703 $ 295,263 $ 254,138 Non-Major Internal Enterprise Service Funds Funds $ 9 $ 1,851 Total Due To $ 552,964 Transportation & Aviation Planning, Highway Maintenance & Safety Fund Land Endowments Fund Non-Major Governmental Funds Unemployment Compensation Fund Lottery Fund Non-Major Enterprise Funds Internal Service Funds Total Due From 1,789 12 11,912 2 8,058 1,157 $ 22,930 8 8 $ $ 1,703 $ 2,908 24,552 1,688 196 587 1 325,195 $ 254,138 $ 77 86 1,647 448 1 9 $ 3,956 4,774 26,211 14,056 198 8,645 1 1,167 $ 608,016 Interfund balances represent (1) amounts due to and from the internal service funds for goods and services rendered, and (2) cash transferred between funds for various interfund activities subsequent to the balance sheet date. The cash is recorded in the fund which initiated the transfer, and a corresponding liability is recorded. The receiving fund records an interfund receivable. Interfund Transfers Transfers for the year ended June 30, 2009 are as follows (expressed in thousands): General Fund Transferred From General Fund Transportation & Aviation Planning, Highway Maintenance & Safety Fund Land Endowments Fund Non-Major Governmental Funds Unemployment Compensation Fund Lottery Fund Non-Major Enterprise Funds Internal Service Funds Total Transfers In Transferred To Transportation & Aviation NonPlanning, Highway Land Non-Major Industrial Major Maintenance Endowments Governmental Universities Commission Enterprise & Safety Fund Fund Funds Special Fund Funds Fund $ $ - $ 1,183 $ 8 $ 46,837 $ 1,075,756 $ - $ Internal Service Funds 2,800 $ Total Transfers Out - $ 1,126,584 349,626 - - - 255,642 66,501 - - 500 - - 605,768 66,501 331,646 251 - 32,117 - 6,000 97 - 370,111 6,224 64,125 2,935 60,801 815,357 $ 1,464 2,898 $ 8 $ 2,050 26,813 44 430,004 $ 1,075,756 $ 6,000 $ 8,274 90,938 2,935 1,087 63,396 3,397 $ 1,087 $ 2,334,507 Interfund transfers represent legally authorized non-exchange transfers of funds. These transfers include: (1) legislative appropriations from the General Fund, (2) other legislative transfers, (3) statutorily required transfers, (4) transfers related to the elimination of funds, and (5) transfers for debt service. - 108 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 9. FUND DEFICIT A. GENERAL FUND The General Fund deficit of $978.278 million is primarily due to lower-than-expected economic growth and resulted in revenues falling short of budgeted levels. For fiscal year 2009, expenditures were $21.1 billion, while revenues were $19.5 billion. Sales tax and income tax revenues were significantly impacted by these economic conditions. Reported sales tax and income tax decreased by $780.330 million, or 14.32%, and $1.0 billion, or 24.84%, as compared to fiscal year 2008, respectively. B. INDUSTRIAL COMMISSION SPECIAL FUND The Industrial Commission Special Fund (Special Fund) deficit increased in the amount of $15.265 million, from $30.596 million to $45.861 million, during fiscal year 2009. The main contributor to the increase in the Special Fund deficit was the net decrease in fair value of investments of $30.206 million during fiscal year 2009. The Special Fund is responsible for paying all current and future Arizona workers’ compensation claims of insolvent insurance carriers and self-insured plans, which accounted for $238.150 million of the $378.520 million total actuarial liability at June 30, 2009. Some of the claims expense will be recovered over a period of years as the Special Fund receives liquidation distributions from the insolvent companies. A 1.50% Special Fund assessment, under ARS §23-1065(A), was levied beginning in calendar year 2004 because of the growth in insolvent carrier liabilities. Furthermore, in 2005, ARS §23-1081(B) was amended to permit a surplus in the Industrial Commission Administrative Fund to be transferred to the Special Fund when the Special Fund is not actuarially sound. During fiscal year 2009, $6.000 million was transferred from the Administrative Fund to the Special Fund. C. HEALTHCARE GROUP OF ARIZONA As of June 30, 2009, the Healthcare Group of Arizona (HCG) had a fund deficit of $10.789 million as a result of significant losses in prior fiscal years. In fiscal years 2008 and 2009, HCG revenues were sufficient to cover all expenses incurred in the respective years. In addition to HCG’s fiscal year 2009 operating income of $3.157 million, HCG received a net $2.648 million General Fund subsidy in order to reduce its liabilities owed to its contracted HMOs for reconciliations incurred in previous fiscal years. HCG management also made significant administrative and programmatic changes in order to eliminate future losses and reduce the net deficit. Some significant changes included the elimination of the PPO program in Maricopa and Pima Counties, employers with groups of one being placed in a separate group with adjusted premiums to cover higher cost of care, and a continued decrease in administrative costs. As a result, HCG was able to reduce their net deficit in fiscal year 2009 by $5.008 million. For fiscal year 2010, management is projecting that HCG will continue to operate without incurring additional losses. The following table summarizes HCG’s reconciliation liability, as of June 30, 2009, for fiscal year 2009 activity (in thousands of dollars): Balance June 30, 2008 Payments made Accruals and adjustments Balance June 30, 2009 $ $ FY 07 14,877 (5,281) (13) 9,583 $ $ Reconciliation Period FY 08 FY 09 4,324 $ (150) (502) 150 3,822 $ - $ $ Total 19,201 (5,431) (365) 13,405 The remaining reconciliation liability will be paid by allocating 2.00% of medical premium revenues for a reconciliation reserve, from residual earnings, and from any State subsidies provided by the Legislature. There can be no assurance that operating improvements realized over the past two fiscal years will continue to occur or will provide sufficient cash to fund operating expenses. Additionally, if there is an adverse change in enrollment and the premium increases are not sufficient to fund the reserves for past losses and future medical claims experience costs, then HCG will be required to further scale back administrative expenditures to the level supported by actual enrollment. Subsequent to June 30, 2009, HCG took over the provider payment function from HCG’s preferred point of service third party administrator. As a result of provider payment reconciliations and payment history research, HCG determined that due to certain - 109 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 errors on the part of the third party administrator, approximately $996 thousand was owed to providers for services provided in fiscal years 2009 and prior. This amount is reflected on the Statement of Revenues, Expenses and Changes in Fund Net Assets as an other non-operating expense. HCG is currently working with AHCCCS legal counsel to resolve this ongoing issue and is seeking reimbursement for this loss. Even though deficit reduction measures resulted in a net gain for fiscal year 2009, a net deficit of $10.789 million still exists as of June 30, 2009. It is not anticipated in the near future that operations will generate sufficient cash flow to significantly pay down the deficit. Additionally, should the health plans elect to call the prior year reconciliation liabilities before HCG has sufficient funds to provide such payments and new terms are not negotiated, or the Legislature does not provide HCG with additional subsidies, it raises substantial doubt in HCG’s ability to continue as a going concern. In conclusion, even though HCG posted operating income of $3.157 million in fiscal year 2009, and management currently projects that the positive trend will continue, $10.789 million remained as a net deficit at year end due to the outstanding reconciliation liability owed to the HMO’s for prior fiscal years. It is not anticipated in the near future that operations will generate sufficient cash flow to entirely pay off the outstanding obligation. Accordingly, the accompanying financial statements have been prepared assuming that HCG will continue as a going concern. The matters discussed above raise substantial doubt about HCG’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should HCG be unable to continue as a going concern. D. ARIZONA HIGHWAYS MAGAZINE The Arizona Highways Magazine had a fund deficit of $278 thousand which stemmed from four legislatively mandated cash transfers to the General Fund totaling $1.483 million in fiscal year 2009. These transfers were mandated by House Bill 2209, section 46, and Senate Bill 1001, sections 4, 5, and 7. E. RISK MANAGEMENT FUND The Risk Management Fund (RMF) deficit of $313.425 million is primarily due to the RMF receiving annual funding only for expected paid claims (self-insured and excess insurance expenditures, legal and other claim related expenditures, and administrative expenditures), and not being funded for non-current accrued insurance losses. Accrued insurance losses of the RMF are not considered when determining funding for each fiscal year. F. RETIREE SICK LEAVE FUND (RASL) The RASL pays retirees for their accumulated sick leave upon retirement from State service when they meet certain criteria. Beginning with fiscal year 2008, the State applied the provisions of GASB Statement No. 16 – Accounting for Compensated Absences to the RASL. This results in a liability in the RASL which is significantly greater than the actual funding of the RASL, because the liability is based upon an estimate of the total RASL benefit earned by existing employees at the balance sheet date; however, State agencies pay for only one year based on a 0.40% charge on gross payroll. The $107.609 million fund deficit is primarily due to the above funding mechanism. NOTE 10. JOINT VENTURE The U of A is a participant in the Large Binocular Telescope Corporation (LBT). The LBT was formally incorporated as a nonprofit corporation in August 1992 pursuant to a Memorandum of Understanding, as amended, executed on February 24, 1989, between the U of A and the Arcetri Astrophysical Observatory in Florence, Italy (Arcetri). The purpose of the joint venture is to design, develop, construct, own, operate, and maintain a binocular telescope currently being constructed in Arizona. The current members of the LBT are the U of A, INAF Astrophysical Observatory, Research Corporation, Ohio State University, and the LBT Beteiligungsgesellschaft. The U of A has committed resources equivalent to 25.00% of the LBT’s construction costs and annual operating costs. As of June 30, 2009, the U of A has made cash contributions of $18.159 million toward the project’s construction costs, which were recorded as long-term investments on the Statement of Net Assets. The U of A’s financial interest represents its future viewing/observation rights. As of December 31, 2007, the assets had been substantially completed and the telescope has entered the commissioning phase. During calendar year 2007, the telescope has become operational for research purposes; thus, - 110 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 depreciation of the property and equipment has commenced. The U of A recorded its proportionate share of the use of the viewing/observation rights, $726 thousand in calendar year 2008, as a reduction in its investment. At June 30, 2009, the investment totaled $16.757 million. According to the audited financial statements of the LBT for the year ended December 31, 2008, assets, liabilities, revenues, and expenses totaled $125.000 million, $3.000 million, $15.000 million, and $11.000 million, respectively. The LBT’s separate audited financial statements can be obtained from the University of Arizona Comptroller at the University of Arizona, Financial Services, P.O. Box 3310, Tucson, AZ 85722-3310. NOTE 11. COMMITMENTS, CONTINGENCIES, AND COMPLIANCE A. INSURANCE LOSSES The Department of Administration – Risk Management Division manages the State’s property, environmental, general liability, and workers’ compensation losses. The State has determined that the management of these losses can be performed effectively and efficiently through the Risk Management Division. Consequently, all agencies are required to participate in this program. The State’s Risk Management Division evaluates the proper mix of purchased commercial insurance and self-insurance annually. The Industrial Commission Special Fund (Special Fund) provides payment of workers’ compensation losses which are not covered by the State Compensation Fund, the Department of Administration – Risk Management Division, private insurance carriers, or self-insured employers. The workers’ compensation claims paid by the Special Fund encompass claims against uninsured or underinsured employers and insolvent insurance carriers and would include payments for vocational rehabilitation, medical conditions incurred prior to 1973, apportionment claims for pre-existing industrial and non-industrial related physical impairments, and compensation for loss of earnings associated with the disability. The State records claims liability when the reported loss is probable and reasonably estimated. On an annual basis, independent actuarial firms are engaged to estimate the State’s total year-end outstanding claims liability, which takes into account recorded claims and related allocated claims adjustment expenditures, loss development factors, and an estimate for incurred but not reported claims. There were no non-incremental claims adjustment expenses included in the liability for claims and adjustments. The management and payment of these losses is accomplished through the funding mechanism of the Risk Management Fund (internal service fund) and the Special Fund (enterprise fund). As discussed in the above paragraph, an independent annual actuarial analysis is performed to evaluate the needed funding. The Risk Management Division will assess each agency an annual portion of the necessary funding for the Risk Management Fund based on their exposures and prior loss experience. Interest and dividend earnings of investments and assessments on gross premium revenues currently fund the Special Fund. To provide funding for workers’ compensation claims, the Special Fund may direct payment to the State Treasurer an amount not to exceed one and one-half percent of all premiums received by the State Compensation Fund, private carriers, and self-insured plans during the immediately preceding calendar year. Beginning in calendar year 2004, this 1.50% assessment was levied under ARS §231065(A) because of a deficit net assets balance. AMI Risk Consultants, Inc. was retained to evaluate the medical and compensation related liabilities of the Special Fund as of June 30, 2009. The estimated loss reserve of $378.520 million is $3.618 million lower than the $382.138 million reserve estimate at June 30, 2008. The most significant category of change was the insolvent carrier claims that decreased in the amount of $4.621 million from $242.771 million at June 30, 2008 to $238.150 million at June 30, 2009. The reserves were discounted at an assumed rate of 2.89% for the compensation claims and zero percent for the medical claims. For medical benefits, it was assumed that the inflation in medical costs will equal the investment return earned by the Special Fund on those reserves. The only Special Fund assessment levied in 2009 was the 1.50% assessment under ARS §23-1065(A). The .50% assessment under ARS §23-966(D), based on the insolvent carrier losses, and .50% assessment under ARS §23-1065(F), based on the total apportionment liability, were not levied in 2009. The Special Fund has filed pending proof of claim requests with ancillary receivers and liquidators holding deposits and surety bonds of several insolvent companies. Since the actual amount that will ultimately be received cannot be determined, the Special Fund will continue to recognize receipt of insolvent carrier deposits (settlement income) as revenue at the time received rather than recording a receivable. Occasionally, the Risk Management Division agrees with claimants to purchase an annuity contract to settle specific claims when it is determined that it is in the best interest of the State to do so. In these instances, the State requires the claimant to sign an - 111 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 agreement releasing the State from any further obligation. As a result of these requirements, the likelihood that the State will be required to make future payments on these claims is remote. There have been no significant reductions in the current fiscal year insurance coverage. There have been no settlements that have exceeded insurance premium coverage in the last three years. The following table presents the changes in claims liabilities balances (short- and long-term combined) during fiscal years ended June 30, 2008 and June 30, 2009 (expressed in thousands): Fiscal Year Risk Management Fund: 2008 2009 Industrial Commission Special Fund: 2008 2009 Current Year Claims and Changes in Estimates Beginning Balance $ 344,105 363,927 401,148 382,138 $ 84,363 61,179 7,576 24,467 Ending Balance Claims Payments $ 64,541 65,293 26,586 28,085 $ 363,927 359,813 382,138 378,520 B. LITIGATION In Roosevelt Elementary School District No. 66 vs. State of Arizona and Somerton Elementary School District No. 11 vs. State of Arizona, the plaintiffs are seeking a declaration that Arizona’s funding of the Building Renewal Fund for school district capital resources under ARS §15-2031 is unconstitutional. The actions were originally commenced in 1999 and 2002, but they were remanded by the Arizona Court of Appeals after its decision in Roosevelt Elem. Sch. Dist. v. State of Arizona, 205 Ariz. 594, 74 P.3d 258 (App. 2003). On remand, plaintiffs substituted some parties, leaving the plaintiff school districts as Globe Unified School District, Williams Unified School District, and Sierra Vista Unified School District, and discovery recommenced. In October, 2006, the court granted the State summary judgment, finding that the named school districts had failed to seek emergency funding under ARS §15-2022. The court indicated that if the districts proved subsequently that they had sought emergency funding and been rejected, and had exhausted all sources of State funding available to them for their facility needs, they might reinstate their claims. Plaintiff Globe Unified School District is no longer a party. The court later agreed to stay the judgment against plaintiffs through June 1, 2007, and plaintiffs successfully sought even further continuance on the inactive calendar. The plaintiffs moved to add a new plaintiff district, Tempe Union High School District, and to transfer the case to the active calendar and set it for trial. The State objected, and sought dismissal of the cases. The motions were argued in September, 2008, and the court issued an order requiring a further evidentiary hearing on the status of the plaintiff districts’ alleged capital needs and financial resources for late February, 2009. In the meantime, plaintiff, Williams Unified School District decided not to continue as a plaintiff in the case. After considering the evidence presented in the evidentiary hearing, the trial court issued an order granting the State’s cross-motion to dismiss the plaintiff’s claims without prejudice but placing the case on the inactive calendar and providing that “should plaintiffs in the future establish that they have exhausted all appropriate sources of State funding and yet been denied emergency funds, their claims may be reinstated.” After receiving the court’s ruling, the plaintiffs filed a motion for reconsideration of the ruling. The court ordered the State to file a response, which the State did. The plaintiffs have filed their reply in support of the motion for reconsideration, and the parties are awaiting a ruling on the motion for reconsideration. The plaintiffs are not seeking damages. However, they are seeking a declaration that would require the State to provide additional funding for building maintenance and renewal needs. The plaintiffs are likely to argue that the Arizona State Legislature was required to fund according to the Building Renewal Fund Formula, which was ultimately suspended by the Arizona State Legislature. The formula-calculated amounts that were not funded for just the 1999-2000, 2001-2002, and 20022003 fiscal years amounted to almost $186.000 million. The potential outcome is uncertain at this time. If this case were to have an unfavorable outcome, it is possible that the State could incur losses in excess of $200.000 million. In the Mayer vs. Winkelman case disclosed in prior fiscal years, the State prevailed on statute of limitation grounds. The State has a variety of claims pending against it that arose during the normal course of its activities. Management believes, based on advice of legal counsel, losses, if any, resulting from settlement of these claims will not have a material effect on the financial position of the State. All losses for any unsettled litigation or contingencies involving workers’ compensation, medical malpractice, construction and design, highway operations, employment practices, criminal justice, fidelity and surety, - 112 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 environmental property damage, general liability, environmental liability, building and contracts, auto liability, or auto physical damage are determined on an actuarial basis and included in the Accrued Insurance Losses of the internal service funds and the Industrial Commission Special Fund. C. ACCUMULATED SICK LEAVE Sick leave includes any approved period of paid absence granted an employee due to illness, injury, or disability. Most State employees accrue sick leave at the rate of eight hours per month without an accumulation limit. State employees are eligible to receive payment for an accumulated sick leave balance of at least 500 hours, with a maximum of 1,500 hours, upon retirement directly from State service. The benefit value is calculated by taking the State employee’s hourly rate of pay at the retirement date, multiplied by the number of sick hours at the retirement date times the eligibility percentage. The eligibility percentage varies based upon the number of accumulated sick hours from 25.00% for 500 hours to a maximum of 50.00% for 1,500 hours. The maximum benefit value is $30 thousand. The benefit is paid out in annual installments over three years. The RASL Fund is accounted for in the financial statements as an internal service fund and accounts for the retiree accumulated sick leave liability of $111.978 million. D. UNCLAIMED PROPERTY The State of Arizona’s Uniform Unclaimed Property Act requires the deposit of certain unclaimed assets into a managed agency fund. A total of approximately $652.315 million (net of refunds issued) has been collected since the inception of the fund. The State is also holding securities valued at $21.509 million and mutual funds valued at $1.371 million. In accordance with ARS §44-313 and ARS §44-314, for fiscal year 2009, $28.554 million was deposited in the Department of Commerce Housing Fund, $10.383 million was deposited in the Racing Fund, and $10.879 million was deposited in the General Fund. The remittances to the General Fund and the holdings by the State represent contingencies, as claims for refunds can be made by the owners of the property. The GASB requires that a liability be reported to the extent that it is probable that escheat property will be reclaimed and paid to claimants. This liability is also reported as a reduction of revenue. This liability is reported in the General Fund because it is the fund to which the property ultimately escheats in Arizona. At June 30, 2009, $165.604 million of this liability is included as Due to Others in the General Fund. E. CONSTRUCTION COMMITMENTS The ADOT had outstanding commitments under construction contracts of approximately $1.1 billion at June 30, 2009. (in thousands) Expenditures Remaining to Date Commitments Construction contracts: Rural roadways Small urban roadways Urban roadways Large urban roadways Sub-total Design contracts Other commitments Total $ $ 408,912 72,713 109,005 712,495 1,303,125 811,432 437,732 2,552,289 $ 264,056 51,786 42,002 299,316 657,160 94,255 385,832 $ 1,137,247 F. ARIZONA STATE LOTTERY Annuities are purchased for all prizes over $400 thousand for which winners will receive the jackpot in annual installments for The Pick on-line game. These annuities are purchased from qualifying insurance companies which have the highest ratings from among A.M. Best Company, Standard & Poor’s, Moody’s, Duff & Phelps, or Weiss. The Lottery may incur future liabilities on these annuities. Aggregate future payments to prize winners on existing annuities totaled approximately $76.105 million at June 30, 2009. Approximately $56.652 million of the total aggregate future payments at June 30, 2009 relate to annuities purchased from five separate insurance companies, of which approximately $13.026 million relates to a single insurance company. - 113 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 NOTE 12. TOBACCO SETTLEMENT The State is one of many states participating in the settlement of litigation with the tobacco industry over the reimbursement of healthcare costs. The settlement money is intended to compensate the State for costs it has incurred in providing health and other services to its citizens that were necessitated by the use of tobacco products. The State expects to receive settlement payments through 2025. The State recorded tobacco settlement revenue of $125.571 million and $127.709 million in the fund statements and the government-wide statements in fiscal year 2009, respectively. Future settlement payments are subject to several adjustments, but the amounts are not presently determinable. These adjustments include a volume adjustment, which could reflect any decreasing cigarette production under a formula that also takes into account increased operating income from sales. Other factors that might affect the amounts of future payments include ongoing and future litigation against the tobacco industry and the future financial health of the tobacco manufacturers. Because the net realizable value of the future settlement payments is not measurable and there is no obligation for the tobacco companies to make settlement payments until cigarettes are shipped, the State did not record a receivable for the future payments related to cigarette sales after June 30, 2009. NOTE 13. PUBLIC-PRIVATE PARTNERSHIP The State of Arizona has entered into a partnership agreement with Accenture. The purpose of this partnership is to fund the Department of Revenue’s technology needs. The agreement stipulates that Accenture will be paid 85.00% of the new revenue generated from the system enhancements, even if this amount is insufficient to cover the total contract cost. Accordingly, Accenture had created a system that increases the State’s efficiency in collecting tax revenues. As of June 30, 2009, the State has paid Accenture $151.129 million towards the $160.936 million contract cost. Included in the $160.936 million contract cost is capitalized interest charges of $7.000 million and application support charges of $54.610 million. NOTE 14. TREASURER’S WARRANT NOTES On April 15, 2009 through April 27, 2009, May 13, 2009 through May 20, 2009, and May 22, 2009 through May 26, 2009, pursuant to ARS §35-185.01 and §35-185.02, the State Treasurer issued Treasurer’s Warrant Notes (TWNs) in daily amounts ranging from $5.163 million to $339.904 million in lieu of immediate redemption of warrants presented to the State Treasurer for payment of authorized General Fund expenditures. The TWNs were purchased by the State’s internal investment pools. TWNs are issued only in the event the State Treasurer has insufficient funds to redeem warrants presented for payment of authorized expenditures of the State’s General Fund. TWNs are issued daily depending on cash flow needs, and are redeemed the next business day. Any time TWNs are outstanding, all monies which would normally be deposited into the State General Fund, except amounts sufficient to pay constitutional officers of the State, shall be deposited into the TWN Redemption Fund to redeem outstanding TWNs. No TWNs were outstanding at June 30, 2009. NOTE 15. SUBSEQUENT EVENTS On December 8, 2009, the NAU issued $108.860 million of System Revenue Bonds, Taxable Series 2009A and $5.640 million of System Revenue Bonds, Tax Exempt Series 2009B. These bonds have maturity dates ranging from 2015 to 2024 and interest rates ranging from 4.84% to 5.84%. On January 13, 2010, the State of Arizona issued COPs, Series 2010A for $709.090 million. The 2010A COPs include $709.090 million of serial certificates with interest rates ranging from 2.00% to 5.25% and maturity dates ranging from 2013 to 2030. The 2010A COP certificates maturing on or after October 1, 2020 are subject to optional redemption prior to maturity, without premium. The 2010A COP certificates are subject to extraordinary redemption prior to maturity from the net proceeds of insurance or condemnation awards, without premium. The 2010A COP certificates maturing on or after October 1, 2017 are subject to mandatory redemption and shall be redeemed prior to maturity from the Mandatory Prepayment Amounts, if any, calculated in accordance with the Lease, at the direction of the State, on any date on or after October 1, 2016 in whole or in part, at the “Adjusted Redemption Value” plus premium. The State realized net proceeds of $735.419 million after receipt of $34.187 million net original issue premium and payment of $7.858 million of issuance costs, including underwriters’ discount. The 2010A COPs are being issued to: (i) finance the costs of acquiring leasehold interests in State-owned buildings by U.S. Bank, NA, as trustee; upon receipt of the 2010A COP proceeds by the trustee, the trustee will immediately purchase the State property as defined in the debt documents and (ii) pay the costs of issuance. - 114 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 On March 30, 2010, the ASU issued System Revenue Bonds totaling $178.350 million, consisting of $165.980 million of Taxable Series 2010A (2010A Bonds) with interest rates ranging from 4.01% to 6.30% and $12.370 million of Tax-Exempt Series 2010B (2010B Bonds) with interest rates ranging from 3.00% to 5.00%. The 2010A Bonds and the 2010B Bonds have final maturities of 2030 and 2039, respectively. These bonds are being issued to finance various projects of the ASU. On April 28, 2010, the NAU issued $64.785 million of Stimulus Plan for Economic and Educational Development Revenue Bonds, Taxable Series 2010. These bonds have maturity dates ranging from 2017 to 2031 and interest rates ranging from 4.27% to 6.59%. Throughout most of fiscal year 2010, the State Treasurer issued TWNs in lieu of immediate redemption of warrants presented to the State Treasurer for payment of authorized General Fund expenditures. At May 7, 2010, the outstanding balance of the TWNs was approximately $594.316 million. The State has recently experienced its worst economic downturn in at least 50 years. Over the period of fiscal year end 2007 through February 2010, the total revenue from the State’s major tax sources (sales and use, individual and corporate) has decreased by approximately one-third. With revenues falling short of budgeted levels, the State’s General Fund was faced with a fiscal year 2009 ending balance shortfall and approximately a $3.2 billion on-going structural deficit. The State Legislature has enacted a series of laws in response. Significant measures include deep cuts to education and health/welfare programs. Additionally, the State Legislature referred a temporary 1-cent increase in the transaction privilege tax to voters. The special election will be held on May 18, 2010. If approved, the increase would become effective June 1, 2010 and expire May 31, 2013. The State Legislature has already enacted laws for additional cuts to State spending authority that will be triggered if the temporary tax is not passed. Accordingly, the State has adopted a workable budget for fiscal year 2010 and 2011, and has made significant progress towards eliminating the long-term structural deficit. NOTE 16. DISCRETELY PRESENTED COMPONENT UNIT DISCLOSURES The accounting policies of the State’s component units conform to U.S. GAAP applicable to governmental units adopted by the GASB, except for those component units affiliated with the State's Universities. Because the component units affiliated with the Universities are not governmental entities, they follow FASB statements for not-for-profit organizations for financial reporting purposes. Each component unit has a June 30 year-end with the exception of the Law College Association, which has a May 31 year-end. A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Measurement Focus and Basis of Accounting The State's component units and component units affiliated with the Universities are presented using the economic resources measurement focus and the accrual basis of accounting. The State’s component units follow FASB Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. The State has chosen the option not to follow FASB Statements and Interpretations issued after November 30, 1989, except for the UMC, which has elected to apply the provisions of all relevant pronouncements of the FASB, including those issued after November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements. 2. Net Assets Component units affiliated with the Universities classify net assets, revenues, expenses, gains and losses based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the component units affiliated with the Universities and changes therein are classified and reported as follows: • Unrestricted net assets include assets and contributions that are not restricted by donors or for which such restrictions have expired. • Temporarily restricted net assets include contributions for which donor imposed restrictions have not been met (either by the passage of time or by actions of the Foundations), charitable remainder unitrusts, pooled income funds, gift annuities, and pledges receivable for which the ultimate purpose of the proceeds is not permanently restricted. Donor- 115 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 restricted contributions are classified as temporarily restricted if the restrictions are satisfied in the same reporting period in which the contributions are received; however, the component units affiliated with the ASU, other than the ASU Foundation, classify such contributions as unrestricted. • 3. Permanently restricted net assets include contributions, charitable remainder unitrusts, pooled income funds, gift annuities, and pledges receivable which require by donor restriction that the corpus be invested in perpetuity and only the board-approved payout be made available for program operations in accordance with donor restrictions. Cash and Cash Equivalents Cash and cash equivalents includes monies held in certificates of deposit, overnight money market accounts, and money market funds. Cash and cash equivalents are stated at cost, which approximates fair value. 4. Investments Investments are recorded in accordance with Statements of Financial Accounting Standards (SFAS) No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. The fair values of publicly traded securities are based on quoted market prices and exchange rates, if applicable. Absolute return limited partnership interests are recorded at fair value based on quoted market prices (where the underlying investment is a mutual fund) or as determined by the fund manager. Purchases and sales of investment securities are reflected on a trade-date basis. Realized gains and losses are calculated using the average cost for securities sold. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Investment income or loss (including realized and unrealized gains and losses on investments, interest, and dividends) is included in the increases or decreases in net assets in the Statement of Activities. 5. Income Taxes The Foundations qualify as tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code and, accordingly, there is no provision for income taxes in the accompanying financial statements, except for the Collegiate Golf Foundation and the ACFFC. In addition, they qualify for the charitable contribution deduction and have been classified as organizations that are not private foundations. Any income determined to be unrelated business taxable income would be taxable. The ACFFC and NACFFC are exempt from taxes under the provisions of Section 501(c)(4) of the Internal Revenue Code. The ACFFC does not qualify for the charitable contribution deduction. 6. Annuities Payable and Other Trust Liabilities Annuities payable and other trust liabilities for the U of A Foundation are stated at the actuarially computed present value of future payments to the annuitants. The excess of the fair values of assets received (classified according to their nature in the Statement of Financial Position) pursuant to annuity agreements over the actuarially computed annuities payable (using market rates in effect on the contribution date) is recorded as contributions in the year received. 7. Contributions Contributions are recorded in accordance with SFAS No. 116, Accounting for Contributions Received and Contributions Made. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. 8. Net Assets Released from Restriction Expenses are not incurred in the temporarily restricted or permanently restricted net asset categories. As the restrictions on these net assets are met, the assets are reclassified to unrestricted net assets. The total assets reclassified are reported as net assets released from restriction in the accompanying Statement of Activities. - 116 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 9. Use of Estimates The preparation of the Universities-affiliated component units' financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. B. DEPOSITS AND INVESTMENTS 1. Component Units a. Deposits and Investment Policies The investments of the WIFA are stated at fair value, except guaranteed investment contracts, which are stated at cost since they are non-participating contracts. The investments of the UMC are stated at fair value. b. Custodial Credit Risk - Deposits and Investments Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the deposits or collateral securities may not be recovered from the outside party. The WIFA and the UMC do not have a formal policy regarding custodial credit risk for deposits. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the value of the investment or collateral securities that are in the possession of an outside party may not be recovered. The WIFA and the UMC do not have a formal policy regarding custodial credit risk for investments. The investments of the UMC are uninsured, unregistered, and held by brokers in the UMC’s name. c. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The WIFA does not have a formal policy regarding interest rate risk. The following table presents the interest rate risk for the WIFA utilizing the segmented time distribution method as of June 30, 2009 (expressed in thousands): Investment Type Corporate asset backed securities Corporate notes Guaranteed investment contracts Money market mutual funds Repurchase agreements U.S. agency securities U.S. agency mortgage backed securities U.S. Treasury securities Total Fair Value $ 2,137 20,312 80,893 3,021 30,570 32,975 1,260 11,827 $ 182,995 Investment Maturities (in years) Less than 1 1-5 6-10 More than 10 $ 2,137 $ $ $ 20,312 80,893 3,021 30,570 17,998 14,977 1,260 11,827 $ 85,865 $ 14,977 $ 80,893 $ 1,260 The UMC’s investment policy limits the portfolio duration related to debt securities to the Lehman Brothers Intermediate Government/Credit Index. This is an index based on all publicly issued intermediate government and corporate debt securities with average maturities of four to five years. The following table presents the estimated maturities of the UMC’s investments, utilizing the segmented time distribution method as of June 30, 2009 (expressed in thousands): - 117 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Investment Type Commercial paper Corporate fixed income Guaranteed investment contracts Money market mutual funds Structured notes U.S. Treasury securities Total Fair Value $ 15,610 6,658 4,396 85,656 22,632 8,948 $ 143,900 Less than 1 $ 15,610 153 85,656 8,948 $ 110,367 Investment Maturities (in years) 1-5 6-10 More than 10 $ $ $ 6,658 4,243 22,632 $ 29,290 $ $ 4,243 d. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the holder of the investment. The WIFA does not have a formal policy regarding credit risk. The following table presents the WIFA’s investments which were rated by S & P’s and/or an equivalent national rating organization. The ratings are presented using S & P’s rating scale as of June 30, 2009 (expressed in thousands): Investment Type Corporate asset backed securities Corporate notes Guaranteed investment contracts Money market mutual funds U.S. agency securities U.S. agency mortgage backed securities Total Fair Value $ 2,137 17,816 80,893 3,021 32,975 1,260 $ 138,102 AAA $ 2,137 370 80,893 31,212 1,260 $ 115,872 AA $ $ 4,639 - A $ 4,639 A1 11,582 - $ $ 11,582 1,763 $ 1,763 BB $ $ 1,225 1,225 Not Rated $ $ 3,021 3,021 The UMC’s investment policy establishes ranges which limit the level of investments held in domestic and international equities, fixed income securities, and alternative investment strategies. Investment in fixed income securities is limited to investment grade securities with a credit rating of BBB, or equivalent, or better. The portfolio of fixed income securities must maintain an average rating of A or better at all times. The following table presents the UMC’s investments which were rated by S & P’s and/or an equivalent national rating organization. The ratings are presented using S & P’s rating scale as of June 30, 2009 (expressed in thousands): Investment Type Alternative investments Commercial paper Corporate fixed income Guaranteed investment contracts Hedge fund of funds Money market mutual funds Structured notes Other Total e. Fair Value $ 2,893 15,610 6,658 4,396 36,312 85,656 22,632 17,229 $ 191,386 AAA $ $ 5,123 5,123 AA $ 4,243 17,553 $ 21,796 A $ 1,535 5,079 $ 6,614 Not Rated $ 2,893 15,610 153 36,312 85,656 17,229 $ 157,853 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The WIFA’s investment policy contains no limitations on the amount that can be invested in any one issuer. As of June 30, 2009, an investment in Bayerische Landesbank (fair value of $40.586 million) was approximately 22.18% of the WIFA’s total investments, an investment in AIG Matched Funding Corp. (fair value of $25.153 million) was approximately 13.74% of the WIFA’s total investments, an investment in Royal Bank of Canada (fair value $15.155 million) was approximately 8.28% of the - 118 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 WIFA’s total investments, and an investment in Federal Home Loan Mortgage Corporation (fair value $16.226 million) was approximately 8.87% of the WIFA’s total investments. f. Foreign Currency Risk The UMC’s investment policy permits it to invest a portion of its holdings in international equities, alternative, and managed future investments. The UMC’s current holdings in international securities totaled approximately $23.217 million, or 18.05% of total investments not held by trustee. The following table summarizes the UMC’s foreign currency risk as of June 30, 2009 (expressed in thousands): Currency Australian Dollar Brazilian Real British Pound Sterling Canadian Dollar Chilean Peso Chinese Yuan Czech Koruna Danish Krone Euro Hong Kong Dollar Hungarian Florint Israeli Shekel Japanese Yen New Mexican Peso New Zealand Dollar Polish Zloty Singapore Dollar South African Rand South Korean Won Swedish Krona Swiss Franc Turkish Lira Other Total 2. Foreign Currency Risk by Investment Type at Fair Value (Expressed in Thousands) Fixed Income Equities Total $ 14 $ 1,513 $ 1,527 4 26 30 6 3,492 3,498 6 887 893 45 45 694 782 1,476 45 45 1 93 94 1,470 7,245 8,715 339 339 109 109 32 32 3,139 3,139 45 45 3 251 254 39 39 230 230 116 116 67 67 4 400 404 884 884 77 77 420 739 1,159 $ 2,622 $ 20,595 $ 23,217 Universities-Affiliated Component Units Investments of the Universities-affiliated component units include the following amounts at June 30, 2009. Investments are stated at fair value (expressed in thousands): Money market funds and cash equivalents Domestic/international equity securities and mutual funds Fixed income Absolute return limited partnerships and funds Other investments Total Investments ASU Foundation $ 57,763 216,121 95,828 48,510 $ 418,222 - 119 - ACFFC $ 46,416 2,518 $ 48,934 U of A Foundation $ 112,262 85,092 98,807 39,095 $ 335,256 NAU Foundation $ 1,132 36,308 22,206 $ 59,646 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 C. PROGRAM LOANS The WIFA has made loans to local governments and others in Arizona to finance various projects pursuant to the requirements of the Clean Water and Safe Drinking Water Acts. The loans are generally payable in semi-annual installments due January 1 and July 1 of each year, including interest. However, several loans are payable monthly or quarterly. Changes in the program loans during fiscal year 2009 are as follows (expressed in thousands): Clean Water Fund Drinking Water Fund Total Beginning Balance $ 600,725 297,038 $ 897,763 Increases $ 128,709 27,763 $ 156,472 Decreases $ (48,008) (13,586) $ (61,594) Ending Balance $ 681,426 311,215 $ 992,641 Repayment of these loans will be made from pledged property taxes, net revenues from the systems, transaction privilege taxes, or from special assessments. Most loans have a .30% to 4.00% annual administrative fee. Some program loans require a monthly or quarterly payment into a debt service reserve to assure payments of the loans. The debt service reserve is a liability of the WIFA to the borrowers and interest on the reserve accrues to the borrowers. D. PLEDGES RECEIVABLE Pledges receivable (unconditional promises to give) are recorded at their net realizable value, which is net of a discount and any applicable loss allowance. The ASU Foundation’s pledges are discounted using the applicable risk free rate at the date the pledge was recognized. The discount rates range from 2.40% to 10.90%. An allowance for uncollectible pledges is estimated based on the ASU Foundation’s collection history and is recorded as a reduction to contribution support and revenue and an increase in the allowance for uncollectible pledges. The Sun Angel Foundation’s pledges receivable are recorded using a 5.14% discount rate for the year ended June 30, 2009. Pledges receivable, as of June 30, 2009, include the following (expressed in thousands): Gross pledges receivable Present value discount Allowance for uncollectible pledges Net Pledges Receivable ASU Foundation $ 152,740 (32,776) (13,517) $ 106,447 Sun Angel Foundation $ 9,998 (753) $ 9,245 E. DIRECT FINANCING LEASE AGREEMENTS 1. ASU Foundation The ASU Foundation leases a portion of the Fulton Center building (the ASU Foundation's headquarters) to the ASU under a direct financing lease. At the end of lease, the ASU Foundation and affiliates will gift their portion of the building to the ASU and the ASU will receive title to the building. The ASU Foundation's net investment in this direct financing lease at June 30, 2009 is $27.605 million. 2. ACFFC Pursuant to a Sublease Agreement, dated April 7, 2004, Nanotechnology Research, LLC, a wholly-owned subsidiary of ACFFC, leases its interest in the Research Park to the ASU. The Sublease Agreement commenced April 7, 2004, and continued until June 30, 2005, with successive automatic annual renewals for the period July 1 through June 30 of each year without action on the part of Nanotechnology or the ASU, through the period ending March 31, 2034. The Sublease Agreement is subject to early termination by Nanotechnology or the ASU upon the payment in full of the outstanding debt. Upon termination or expiration of the Sublease Agreement, Nanotechnology's interest in the premises, including all buildings and improvements on the leased premises, transfers to the ASU without further consideration. Therefore, the lease is classified as a direct financing capital lease. ACFFC's net investment in the Nanotechnology facility direct financing lease is $34.900 million at June 30, 2009. - 120 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Effective April 29, 2009, the Sublease Agreement was amended and the Series 2004 A&B Bonds were refunded by the Series 2009 Refunding Bonds. The refunding bonds effectively converted the interest payments from variable rate to fixed rate, with interest rates ranging from 4.00% to 6.40%. Pursuant to the ASU Lease Agreement, dated July 1, 2005, McAllister Academic Village, LLC, a wholly-owned subsidiary of ACFFC, leases its interest in the non-residential portion of Hassayampa Academic Village (HAV) to the ASU which consists of the academic, tutorial, retail, and food service facilities. The lease commenced on July 1, 2005 and continued until June 30, 2006 with annual renewals through June 30, 2045. Any right, title, or interest of McAllister (HAV) in and to the academic portions of the project will pass to the ASU without further cost upon payment in full of the Bonds by McAllister (HAV) of the ASU. Therefore, the lease is considered a direct financing capital lease. ACFFC's net investment in the McAllister (HAV) direct financing lease is $12.400 million at June 30, 2009. Effective September 1, 2008, the ASU Lease agreement was amended and the Series 2005 A&B Bonds were refunded by the Series 2008 Refunding Bonds. The refunding bonds effectively converted the interest payments from variable rate to fixed rate, with interest rates ranging from 3.50% to 5.80%. 3. NACFFC On May 19, 2005, the NAU entered into a lease purchase agreement with NACFFC. During the 28 year lease term, the NAU will make lease payments on two apartment style student housing complexes, Pine Ridge Village and McKay Village. The NACFFC recorded a sales-type lease receivable of $13.225 million in fiscal year 2005 for the Pine Ridge complex. The agreement also provided for the NAU's lease purchase agreement of the McKay Village complex for $22.685 million in fiscal year 2007. Upon expiration of the lease, the real property will become the sole property of the NAU without further cost. On September 1, 2006, the NAU entered into a lease purchase agreement with NACFFC. During the 30 year lease term, the agreement provides for the NAU lease purchase of the convention center/parking garage complex for $12.400 million in fiscal year 2008. Upon expiration of the lease, the real property will become the sole property of the NAU without further cost. F. CAPITAL ASSETS Capital asset activity for the UMC for the fiscal year ended June 30, 2009 was as follows (expressed in thousands): University Medical Center Beginning Balance Non-depreciable capital assets: Land Construction in progress Total Non-depreciable Capital Assets $ 8,008 56,411 64,419 Additions $ Retirements 3,675 73,105 76,780 $ (47) (47) Adjustments & Ending Reclassifications Balance $ 9 (26,713) (26,704) $ 11,692 102,756 114,448 Depreciable capital assets: Buildings Improvements other than buildings Equipment Total Depreciable Capital Assets 210,562 772 143,756 355,090 10,350 92 8,702 19,144 (1,715) (1,715) 20,477 6,227 26,704 241,389 864 156,970 399,223 Less accumulated depreciation for: Buildings Improvements other than buildings Equipment Total Accumulated Depreciation (112,781) (348) (110,086) (223,215) (9,083) (64) (13,305) (22,452) 1,546 1,546 - (121,864) (412) (121,845) (244,121) 131,875 (3,308) (169) 26,704 155,102 Total Depreciable Capital Assets, Net Total UMC Capital Assets, Net $ 196,294 $ 73,472 - 121 - $ (216) $ - $ 269,550 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 Capital assets for the Universities-affiliated component units for the fiscal year ended June 30, 2009 include the following (expressed in thousands): Buildings and improvements Furniture, fixtures, and equipment Construction in progress Other property and equipment Total cost or donated value Less: Accumulated Depreciation Total Property and Equipment, Net ASU Foundation $ 17,396 7,516 24,912 (4,763) $ 20,149 ACFFC $ 202,835 47,916 7,748 729 259,228 (35,637) $ 223,591 Downtown Phoenix Student Housing $ 112,962 10,258 123,220 (2,449) $ 120,771 G. LONG-TERM OBLIGATIONS 1. Component Units a. Water Infrastructure Finance Authority The WIFA’s bonds are callable and interest is payable semiannually. The bonds are special obligations of the WIFA payable solely from and secured by the WIFA’s assets. The bonds are not obligations, general, specific, or otherwise, of the State or any other political subdivision, thereof, other than the WIFA. In prior fiscal years, the WIFA refinanced various bond issues through advance-refunding arrangements. Under the terms of the refunding bond issues, sufficient assets to pay all principal, redemption premium, if any, and interest on the refunded bond issues have been placed in irrevocable trust accounts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of these trust accounts and the liability for the defeased bonds are not reflected in the accompanying financial statements. The amount outstanding on the refunded bonds for the WIFA at June 30, 2009 totaled $62.995 million. The $6.372 million deferred amount on retirement of bonds is being amortized over the lives of the defeased bonds on a straightline basis. The amortization for the year ended June 30, 2009 is $554 thousand. Amortization has been offset against interest expense. Bond premiums are being amortized over the life of the bonds. The amortization for the year ended June 30, 2009 is $3.196 million. Further, bond issuance costs are amortized over the life of the bond and offset to interest expense. The amortization for the ended June 30, 2009 is $313 thousand. b. University Medical Center The UMC is subject to certain financial covenants under the Master Trust Indenture (the Indenture). In addition, the Indenture places certain restrictions on the incurrence of additional indebtedness and the sale or acquisition of property. The UMC has established and maintains separate funds as a bond reserve fund on outstanding bonds payable. These funds, which totaled $20.067 million at June 30, 2009, are held by the trustee and are reflected as restricted investments held by trustee in the accompanying financial statements. These principally consist of money market investments, collateralized by U.S. government securities. The bonds or other obligations of the UMC do not constitute general obligations of the Arizona Board of Regents, the U of A, the State, or any political subdivision thereof. In May 2009, the UMC issued $61.800 million of Hospital Revenue Bonds (Series 2009 Bonds). The Series 2009 Bonds were issued at a discount to yield an effective interest rate of 6.48% and are being used for the construction of the Diamond Children’s Medical Center and to finance other capital needs of the UMC. The total debt issuance costs for the Series 2009 Bonds were $890 thousand at June 30, 2009. These costs will be amortized over the term of the Series 2009 Bonds. - 122 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 c. Arizona Power Authority In prior years, the APA defeased various issues of bonds by purchasing U.S. Government securities which were deposited in an irrevocable trust with an escrow agent to provide future debt service until the call dates. As a result, those bonds are considered to be defeased and the liability has been removed from the Hoover Uprating Fund. Accordingly, these trust account assets and related liabilities are not included in the accompanying financial statements. Summary of Revenue Bonds The following schedule summarizes revenue bonds outstanding at June 30, 2009 (expressed in thousands): Revenue Bonds Outstanding Component Units: Water Infrastructure Finance Authority University Medical Center Arizona Power Authority Dates Issued Maturity Dates Interest Rates 1995-2008 1993-2009 2001-2004 2010-2029 2010-2040 2010-2018 2.00-5.63% 4.82-6.48% 5.00-5.25% Outstanding Balance at June 30, 2009 $ 742,840 286,890 45,565 Principal and interest debt service payments on revenue bonds outstanding at June 30, 2009 are as follows (expressed in thousands): Fiscal Year 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 Total Annual Debt Service Water Infrastructure Finance Authority Principal Interest Total $ 29,095 31,520 39,455 37,060 38,620 214,960 233,315 118,815 $ 742,840 $ 35,327 33,995 32,386 30,575 28,747 113,022 57,551 10,662 $ 342,265 Fiscal Year 2010 2011 2012 2013 2014 2015-2019 Total $ $ Annual Debt Service University Medical Center Principal Interest Fiscal Year 64,422 65,515 71,841 67,635 67,367 327,982 290,866 129,477 1,085,105 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2039 Total $ 4,145 4,295 4,515 5,555 5,845 34,140 45,295 58,375 75,440 49,285 $ 286,890 Annual Debt Service Arizona Power Authority Principal Interest $ 3,815 4,220 4,585 4,810 5,065 23,070 $ 45,565 - 123 - $ 2,265 2,065 1,844 1,603 1,344 2,500 $ 11,621 Total $ $ 6,080 6,285 6,429 6,413 6,409 25,570 57,186 $ 13,682 15,059 14,846 14,621 14,365 67,145 57,532 44,796 28,177 8,204 $ 278,427 Total $ $ 17,827 19,354 19,361 20,176 20,210 101,285 102,827 103,171 103,617 57,489 565,317 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 d. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations for the component units (expressed in thousands): Balance July 1, 2008 Water Infrastructure Finance Authority: Long-term Debt: Revenue bonds Revenue bond premium Deferred amounts, net Total Long-term Debt $ 770,260 51,799 (6,926) 815,133 Other Long-term Liabilities: Compensated absences Total Other Long-term Liabilities Decreases Balance June 30, 2009 Due Within One Year Due Thereafter - $ (27,420) (3,196) 554 (30,062) $ 742,840 48,603 (6,372) 785,071 $ 29,095 29,095 $ 713,745 48,603 (6,372) 755,976 74 74 (74) (74) 65 65 65 65 - 74 $ (30,136) $ 785,136 $ 29,160 $ 755,976 $ (4,040) (208) (4,248) $ 286,890 (2,902) 283,988 $ 4,145 4,145 $ 282,745 (2,902) 279,843 Increases $ 65 65 Total Long-term Obligations $ 815,198 $ University Medical Center: Long-term Debt: Revenue bonds Revenue bond premium and discounts Total Long-term Debt $ 229,130 (1,262) 227,868 $ 61,800 (1,432) 60,368 12,845 4,044 16,889 9,435 2,442 11,877 (7,711) (1,793) (9,504) 14,569 4,693 19,262 8,444 8,444 6,125 4,693 10,818 $ 244,757 $ 72,245 $ (13,752) $ 303,250 $ 12,589 $ 290,661 $ $ $ $ $ $ Other Long-term Liabilities: Compensated absences Other Total Other Long-term Liabilities Total Long-term Obligations Arizona Power Authority: Long-term Debt: Revenue bonds Revenue bond premium and discounts Deferred amounts, net Total Long-term Debt Other Long-term Liabilities: Compensated absences Total Other Long-term Liabilities Total Long-term Obligations 49,015 1,774 (1,210) 49,579 67 67 $ 49,646 - 54 54 $ 54 - 124 - (3,450) (317) 216 (3,551) (50) (50) $ (3,601) 45,565 1,457 (994) 46,028 71 71 $ 46,099 3,815 3,815 71 71 $ 3,886 41,750 1,457 (994) 42,213 $ 42,213 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 2. Universities-Affiliated Component Units A summary of bonds payable as of June 30, 2009 include the following (expressed in thousands): Final Maturity Amount ASU Foundation: Series 2004A Variable Rate Revenue Bonds 2034 Series 2004B Variable Rate Revenue Bonds 2022 $ 22,420 10,360 Series 2003 Lease Revenue Bonds 2034 46,425 Capital Lease 2011 2,147 Series 2009 Revenue Bonds 2024 41,240 Series 2009A Lease Revenue Refunding Bonds 2034 22,955 Series 2009B Lease Revenue Refunding Bonds 2022 12,085 Series 2008 Revenue Bonds 2028 16,315 Series 2008 Revenue Refunding Bonds 2039 145,180 Series 2008 Variable Rate Demand Revenue Refunding Bonds 2030 52,620 Series 2005 Tax-Exempt Refunding Bonds 2035 16,005 Series 2003 Revenue Bonds 2035 13,220 ACFFC: Series 2002 Revenue Bonds 2018 24,655 Series 2000 Revenue Bonds 2032 10,080 Unamortized Bond Discount (2,979) Downtown Phoenix Student Housing: Series 2007A&C Revenue Bonds 2042 Series 2007B Revenue Bonds 2012 119,040 785 Series 2007D Tax-Exempt Revenue Bonds 2042 22,700 Unamortized Bond Discount (1,259) NACFFC: Series 2008 Refunding Bonds 2033 36,390 North Campus Lease Revenue Serial and Term Bonds 2036 12,170 Unamortized Bond Discount (38) Scheduled future maturities of Universities-affiliated component units' bonds payable are as follows (expressed in thousands): Fiscal Year 2010 ASU Foundation $ 1,799 ACFFC $ 4,400 Downtown Phoenix Student Housing $ NACFFC - $ 785 2011 1,875 5,795 600 850 2012 1,988 8,455 655 915 2013 1,755 8,995 430 985 2014 1,835 9,580 610 1,060 Thereafter Total $ 72,100 314,151 81,352 $ 351,376 140,230 $ 142,525 43,965 $ 48,560 H. CONDUIT DEBT During the year ended June 30, 2009, the Greater Arizona Development Authority (GADA) issued $26.725 million of Bonds, Series 2009A for public infrastructure projects in the communities of the Mayer Fire District, Pinal County, and the City of San Luis. During the year ended June 30, 2009, the GADA issued $16.300 million of Bonds, Series 2009B for public infrastructure projects in the communities of the City of El Mirage and the Town of Sahuarita. The GADA’s bond structure allows it to lower borrowing costs for Arizona’s communities by issuing and selling bonds tax-exempt and by sharing financing costs among several borrowers. Eligible applicants include cities, towns, counties, Indian tribes, and certain special districts. Principal and - 125 - STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009 interest are payable semiannually. Loans are secured by the Pledged Collateral Reserve Fund, a requirement that is calculated and deposited by the GADA from the GADA Fund, which is held by the State Treasurer. Some borrowers also have separate, additional reserve funds, which are held by the Trustee. An intercept mechanism of state-shared revenues for political subdivisions enhances the security of the GADA bonds. In previous years, the State appropriated a total of $20.000 million to the GADA for the express purpose of securing bonds issued by the GADA. As of June 30, 2009, the remaining balance in the appropriations account was $14.252 million including interest earned. Although issued in the name of the GADA, loans funded through the GADA bonds are solely the obligation of the underlying borrowers and are documented by loan repayment agreements. Pursuant to ARS §41-1554.08, the GADA’s bonds do not constitute nor create a general, special, or other obligation or other indebtedness of the State or any governmental unit within the meaning of any constitutional or statutory debt limitation. The bonds do not constitute a legal debt of the State and are not enforceable against the State. The only exposure to the State is related to the restricted net assets of $9.860 million in the Pledged Collateral Reserve Fund. As such, the Series 2009A and 2009B bonds do not constitute a legal debt of the State and are not enforceable against the State. At June 30, 2009, the total outstanding face value of all bonds issued by the GADA was $368.335 million. I. RELATED PARTY TRANSACTIONS The UMC and the U of A both provide and receive services from each other under various contracts. Payments to the U of A by the UMC include mission and program support, resident and intern salaries, utilities, ground maintenance, mailroom operations, and various administrative functions. Amounts paid to the U of A for these services were approximately $27.556 million for the year ended June 30, 2009. At June 30, 2009, the amount outstanding for mission support agreements is $4.920 million. The UMC has entered into contractual agreements with the U of A to provide support for the academic mission of the U of A. Charges to the U of A for such services and facilities provided by the UMC were approximately $9.040 million for the year ended June 30, 2009. This amount is included in sales and charges for services in the accompanying financial statements. The UMC also has an agreement to provide health care services to members of an AHCCCS health plan owned by University Physicians Healthcare (UPH) called University Family Care (UFC). UFC, an AHCCCS-funded health maintenance organization (HMO), manages approximately 15,000 members. The UMC provides health care services to UFC members in the normal course of business. The UMC operates under a contract with UFC at rates that are substantially the same as rates received from other unaffiliated AHCCCS HMOs. Such rates are generally at or below the maximum rates established by AHCCCS and do not cover the UMC’s costs of providing care to UFC members. Sales and charges for services include $20.312 million from this payor, based on negotiated rates. During fiscal year 2009, AHCCCS committed approximately $28.000 million to the UMC related to the UMC’s eligible unreimbursed Indirect Medical Education (IME) costs. Of the $28.000 million, $8.000 million was paid to the UMC in 2009, with the remainder received by the UMC subsequent to year-end. The availability of these funds was made possible due to the UMC’s unreimbursed IME costs and facilitated by matching funds made available by the U of A and Pima County. Pursuant to a separate but related agreement, the UMC agreed to pay $21.000 million of the funds to UPH in support of unreimbursed costs of residents and fellows incurred by UPH. At June 30, 2009, a receivable in the amount of $23.000 million is recorded in the accompanying financial statements. At June 30, 2009, accounts payable included $14.500 million due to UPH under this agreement. J. SUBSEQUENT EVENTS In July 2009, the WIFA issued $148.785 million of Water Quality Revenue Bonds, Series 2009A and $39.655 million of Water Quality Revenue Refunding Bonds, Series 2009A, due in annual principal installments ranging from $3.000 million to $11.610 million, plus semi-annual interest ranging from 2.00% to 5.00% through October 1, 2029. - 126 - (This page intentionally left blank) REQUIRED SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) GENERAL FUND General Accounting Office Assistant Attorney General Salary Adjustments Capital Outlay - Navajo Equalization Aid - Cochise Equalization Aid - Graham Equalization Aid - Navajo Equalization Aid - Yuma La Paz General Relief Health Insurance Adjustments HR Pro Rata Adjustments IT Planning Adjustments LP and PLTO Adjustments Nursing Education Demonstration Project Operating State Aid - Cochise Operating State Aid - Coconino Operating State Aid - Gila Operating State Aid - Graham Operating State Aid - Maricopa Operating State Aid - Mohave Operating State Aid - Navajo Operating State Aid - Pima Operating State Aid - Pinal Operating State Aid - Yavapai Operating State Aid - Yuma La Paz Rent Adjustments Rent Adjustments Retirement Adjustments Retirement Adjustments Risk Management Adjustments Salary Adjustments Telecommunications Adjustments Woolsey Flood District Department of Administration Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Arizona Financial Information System Building Renewal FY00 - 01 Building Renewal FY05 - 06 Building Renewal FY06 - 07 Building Renewal FY06 - 07 Building Renewal FY07 - 08 Building Renewal FY08 - 09 Capital Mall Fire System Replace NEBT Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Classification Pilot Program County Attorney's Immigration Enforcement DJC HVAC and Electrical Renovations ENSCO HB1464 Personnel Reform $ 982,800 500,000 5,833,400 14,775,700 5,386,500 1,931,400 0 2,291,500 38,400 375,000 274,000 0 8,303,100 3,245,400 713,000 5,173,200 55,416,100 4,063,300 4,250,300 18,874,100 5,854,300 4,903,400 5,512,600 1,574,000 1,060,000 1,025,500 9,033,400 292,000 6,584,200 913,800 38,614 0 0 0 0 1,115,200 10,186 37,876 204,357 1,432,221 4,809,988 6,100,000 491,000 0 0 0 0 0 122,454 2,430,000 575,009 2,867,300 273,045 The Notes to Required Supplementary Information are an integral part of this schedule. - 131 - FINAL BUDGET (Appropriations) $ 100 500,000 5,833,400 14,775,700 5,386,500 1,931,400 255,778 2,600 100 0 0 4,000,000 7,660,604 2,994,270 657,828 4,772,897 51,127,990 3,748,881 3,921,411 17,413,618 5,401,293 4,523,974 5,086,034 6,600 2,100 900 301,800 0 6,100 0 38,614 162,749 417,160 84,926 178,774 1,120,500 10,186 37,876 189,330 1,432,221 4,537,366 882,300 491,000 2,980,000 1,356,300 131,100 249,200 14,614,800 122,454 2,430,000 575,009 2,867,300 273,045 ACTUAL EXPENDITURE AMOUNTS $ 0 500,000 5,833,400 14,775,700 5,386,500 1,931,400 253,989 0 0 0 0 4,000,000 7,660,604 2,994,270 657,828 4,772,897 51,127,990 3,748,881 3,921,411 17,413,618 5,401,293 4,523,974 5,086,034 0 0 0 0 0 0 0 38,614 162,749 417,160 84,926 178,774 1,059,362 0 33,162 136,089 1,395,315 3,324,525 689,084 69 2,980,000 1,356,300 131,100 249,200 14,614,800 0 2,430,000 385,257 2,867,300 0 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) HRIS Certificate Of Participation Old Health Laboratory Renovation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation - COSF Operating Lump Sum Operating - Federal Surplus PLTO 1 Backfill Agency Relocations FY01 - 02 PLTO 1 Backfill Agency Relocations FY02 - 03 PLTO 1 Backfill Space Renovations PLTO 1 Backfill Space Renovations FY01 - 02 PLTO 1 Backfill Space Renovations FY02 - 03 PLTO 1 Project Management FY01 - 02 PLTO 1 Project Management FY02 - 03 PLTO 1 Project Management FY03 - 04 Prison Cell Locks/Door Replacement GF FY06 - 07 Prison Cell Locks/Door Replacement GF FY07 - 08 Relocation FY00 - 01 Relocation FY01 - 02 Relocation FY06 - 07 Relocation FY07 - 08 Relocation FY08 - 09 Relocation FY99 - 00 State Boards Lump Sum Appropriation State Boards Lump Sum Appropriation FY07 - 08 State Surplus Property Sales Proceeds SW Telecommunications Mgt Contract Lease Treasurer's Warrant Notes Interest Utilities Utilities Radiation Regulatory Agency Administrative Adjustments Cash Transfer To General Fund General Fund Transfer to NEMF SB 1037 Operating Lump Sum Appropriation Service Fees Increase Office of Equal Opportunity Operating Lump Sum Appropriation Attorney General Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Crane Elementary School Case Legal Arizona Workers Act Military Installation/Planning Military Installation/Planning FY05 - 06 Military Installation/Planning FY07 - 08 Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Grand Jury Department of Agriculture Administrative Adjustments Agricultural Employment Relations Board Animal Damage Control Operating Lump Sum Appropriation 4,354,000 1,207,000 19,181,100 5,650,100 14,198,400 1,272,300 5,200,700 444,300 4 243,490 106,402 847 348,161 1 55,659 144,694 4,218,563 1,925,132 60,000 59,026 33,383 59,851 60,000 46,526 260,000 20,686 3,000,000 851,800 0 625,700 7,349,900 The Notes to Required Supplementary Information are an integral part of this schedule. - 132 - FINAL BUDGET (Appropriations) 4,354,000 0 12,384,535 5,590,700 14,064,000 1,263,000 5,200,700 444,300 4 243,490 106,402 847 348,161 1 55,659 144,694 4,218,563 (1,274,868) 60,000 59,026 33,383 59,851 60,000 46,526 284,700 20,686 3,000,000 851,800 50,576 625,700 7,349,900 ACTUAL EXPENDITURE AMOUNTS 4,354,000 0 12,373,867 4,009,867 12,003,919 1,051,173 3,914,606 112,283 0 0 0 0 0 0 0 0 4,130,541 (1,274,868) 0 0 3,350 0 0 0 284,495 20,686 1,152,257 809,477 50,576 625,700 7,027,710 0 0 0 1,628,200 0 1,233 4,300 612,548 991,200 400,000 1,233 4,300 612,500 990,671 349,292 245,200 249,300 216,766 0 0 159,300 20,989 96,003 0 2 32,367 21,122,900 12,329,300 160,000 62,995 168,173 159,300 20,989 96,003 100,000 2 32,367 21,328,400 13,378,800 179,000 62,995 168,173 159,300 0 (3,997) 74,475 0 32,367 21,229,747 12,364,418 178,821 0 23,300 65,000 12,006,000 23,325 23,300 65,000 10,056,300 23,325 23,300 65,000 10,049,835 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Red Imported Fire Ant Arizona State University Biomedical Informatics Downtown Phoenix Campus Operating Lump Sum Appropriation - Main Operating Lump Sum Appropriation-East Operating Lump Sum Appropriation-West Research Infrastructure Lapp-Polytechnic Research Infrastructure Lease-Purch Pymt Auditor General Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY02-03 Operating Lump Sum Appropriation FY03-04 Operating Lump Sum Appropriation FY04-05 Operating Lump Sum Appropriation FY05-06 Operating Lump Sum Appropriation FY06-07 Operating Lump Sum Appropriation FY07-08 Procurement Study Department of Financial Institutions Administrative Adjustments Operating Lump Sum Appropriation State Board of Nursing CNA Fingerprinting Arizona Board of Regents Administrative Adjustments Arizona Teachers Incentive Program AZ Transfer Articulation Support System Math and Science Teacher Initiative Operating Lump Sum Appropriation Student Financial Assistance Western Interstate Commission Office Wiche Student Subsidies Cosmetology Board Operating Lump Sum Appropriation Corporation Commission Administrative Adjustments Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Railroad Warning Systems Court of Appeals Division I Operating Lump Sum Appropriation - Div I State Board for Charter Schools Administrative Adjustments Operating Lump Sum Appropriation Court of Appeals Division II Administrative Adjustments Operating Lum Sum-Division II Department of Corrections Administrative Adjustments All Other Operating Expenditures All Other PS and ERE (ERE) All Other PS and ERE (ERE) All Other PS and ERE (PS) All Other PS and ERE (PS) Cash Transfer To General Fund FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 23,200 23,200 23,200 3,051,800 35,153,600 363,698,700 31,092,300 56,796,300 0 0 2,575,721 26,033,709 266,746,636 22,821,693 41,233,184 773,948 11,440,429 2,575,721 26,033,709 266,746,636 22,821,693 41,233,184 773,948 11,440,429 17,891,900 293,330 375,518 405,827 584,183 2,083,792 403,114 291,000 15,179,400 0 0 0 187,317 1,858,555 190,892 0 14,902,528 0 0 0 187,317 1,858,555 4 0 0 3,806,800 209 3,304,900 209 3,304,393 166,000 97,600 97,589 0 90,000 213,700 2,250,000 2,404,100 10,041,200 116,000 4,115,000 2,207,082 90,000 213,700 364,400 2,344,100 10,041,200 120,000 3,982,600 300,000 300,000 293,392 0 0 5,542,500 48,300 47,510 714 500 4,216,100 51,100 47,510 714 500 4,213,034 51,036 0 9,657,700 9,599,800 9,588,572 0 1,051,000 298,408 723,200 298,408 699,941 0 4,296,100 1,278 4,275,000 1,278 4,273,688 0 0 30,026,326 127,154 71,491,254 302,746 0 5,681,894 90,790 28,191,568 125,550 65,945,034 298,450 339,600 5,681,894 (299) 28,175,585 59,184 65,621,777 171,851 339,600 The Notes to Required Supplementary Information are an integral part of this schedule. - 133 - 2,207,082 90,000 213,700 364,400 (1,694,796) 10,041,200 120,000 3,894,406 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Cash Transfer To General Fund Correctional Officer PS and ERE (ERE) Correctional Officer PS and ERE (PS) County Jail Beds Electronic Monitoring Of Sex Offenders Health Care All Other Operating Exp Health Care All Other Operating Exp FY06 - 07 Health Care PS and ERE (ERE) Health Care PS and ERE (PS) Non-Health Care All Other Operating Exp Non-Health Care All Other Operating Exp Non-Health Care All Other Operating Exp FY06 - 07 Overtime Compensatory Time Private Prison Per Diem Provisional Beds Department of Economic Security ADM Attorney General Legal Services ADM Attorney General Legal Services ADM Attorney General Legal Services ADM Finger Imaging ADM Finger Imaging ADM High Performance Bonus ADM Operating Lump Sum Appropriation ADM Operating Lump Sum Appropriation ADM Operating Lump Sum Appropriation ADM Statewide Cost Allocation Plan Fund ADM WIA Operating Lump Sum Administration Federal Reed Act Grant 4050 Administration Tri-agency Disaster Recovery Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund DACS Adult Services DACS Community And Emergency Services DACS Coordinated Homeless Program DACS Coordinated Homeless Program DACS Coordinated Hunger Program DACS Coordinated Hunger Program DACS Domestic Violence Prevention DACS Domestic Violence Prevention DACS Lifespan Respite Care DACS Lifespan Respite Care Program DACS Marriage and Communication Skills DACS Marriage Handbook DACS Marriage Skills Training DACS Navajo Nation Multipurpose Center DACS Navajo Nation Multipurpose Facility FY06 - 07 DACS Navajo Nation Senior Centers DACS Navajo Senior Center DACS Navajo Senior Centers-Birdsprings DACS Navajo Senior Centers-Dilcon FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 0 118,521,149 289,665,963 866,200 0 76,175,400 0 11,983,808 37,449,400 180,000 119,035,300 0 24,331,400 52,478,300 113,179,700 21,100 133,475,390 299,299,963 806,600 96,225 77,925,400 0 13,604,545 39,350,000 180,000 122,540,400 0 9,858,700 53,058,900 81,567,600 21,100 133,475,380 299,171,616 775,170 96,225 74,311,842 (8,958) 13,595,172 39,265,215 177,555 120,012,009 (5,219) 9,739,069 53,058,476 79,129,649 755,700 167,900 17,300 461,400 277,500 21,489 34,119,400 6,565,500 1,147,600 1,000,000 0 259,200 271,500 0 0 0 0 0 0 0 0 19,277,700 5,424,900 1,155,400 1,649,500 1,514,600 500,000 8,326,700 6,620,700 500,000 198,762 20,983 540 9,301 1,000,000 450,000 45,000 144,759 65,000 30,000 667,100 168,000 17,300 161,300 127,500 21,489 26,082,600 3,137,100 823,700 1,000,000 225,000 259,200 0 7,542,254 6,857,125 31,951,091 22,242,375 1,000,000 7,602,426 8,306,100 334,700 16,916,500 4,788,400 873,100 1,649,500 1,347,000 500,000 5,409,500 6,620,700 150,000 198,762 20,983 540 9,301 1,000,000 450,000 45,000 144,759 65,000 30,000 667,100 129,656 12,756 160,940 47,951 0 26,082,600 2,746,729 370,559 1,000,000 0 0 0 7,542,254 6,857,125 31,951,091 22,242,375 1,000,000 7,602,426 8,306,100 334,700 15,652,893 3,564,684 861,650 1,432,305 1,236,049 473,103 5,277,138 5,920,405 150,000 170,213 0 0 0 1,000,000 59,367 0 98,848 0 30,000 The Notes to Required Supplementary Information are an integral part of this schedule. - 134 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) DACS Navajo Senior Centers-White Cone DACS Operating Lump Sum Appropriation DACS Operating Lump Sum TANF DACS Risk Management DACS Serving Homeless Excess FY06 - 07 DACS Serving Homeless Excess FY07 - 08 DACS TANF Short-Term Crisis Services DACS Tribal Senior Centers - Navajo Day Care Subsidy Day Care Subsidy Care TANF DBME DTA-Document Management DBME Eligibility System Upgrade (ASRP) DBME Eligibility System Upgrade (ASRP) DBME General Assistance DBME Operating Lump Sum Appropriation DBME Operating Lump Sum Appropriation DBME TANF Cash Benefits DBME TANF Cash Benefits DBME Tribal Pass-Thru Funding DBME Tuberculosis Control DCFS Intensive Family Services DCSE Attorney General Legal Services DCSE Attorney General Legal Services DCSE County Participation DCSE Genetic Testing DCSE Genetic Testing DCSE Operating Lump Sum Appropriation DCSE Operating Lump Sum Appropriation DCYF Adopt Services Family Preservation FY06 DCYF Adoption Services (DCFS) DCYF Adoption Services Family Preservation Project DCYF Adoption Services TANF DCYF Attorney General Legal Services DCYF Attorney General Legal Services DCYF Child Support Services TANF - SSBG DCYF Children Support Svcs - GF DCYF Children Support Svcs - TANF DCYF Comprehensive Med and Dental (DCFS) DCYF CPS Appeals DCYF Education and Training Vouchers DCYF Emergency Placement - GF DCYF Emergency Placement - TANF DCYF Emergency Placement TANF - SSBG DCYF Family Builders TANF (DCYJ) DCYF Foster Care Placement - GF DCYF Foster Care Placement - TANF DCYF Foster Care Placement TANF - SSBG DCYF Healthy Families DCYF Healthy Families (TANF) DCYF Homeless Youth Intervention DCYF Independent Living Maintenance DCYF Joint Sub Abuse Treat-GF DCYF Operating Lump Sum Appropriation DCYF Operating Lump Sum Appropriation DCYF Permanent Guard Subsidy DCYF Permanent Guardianship Subsidy 30,000 6,822,400 247,500 0 998 7 2 46,351 64,285,800 15,083,100 494,600 963,300 5,468,000 2,060,800 23,851,900 14,934,800 45,850,800 79,297,200 4,288,700 32,200 1,985,600 12,221,700 52,200 6,845,200 122,400 360,000 8,087,000 48,729,300 1,000,000 35,942,200 700,000 19,302,400 910,600 9,922,500 5,371,700 45,403,300 24,557,400 2,057,000 732,900 700,000 2,180,100 672,700 2,333,700 5,200,000 17,139,500 1,148,700 5,074,400 5,715,800 5,034,200 400,000 3,136,000 5,224,500 61,447,000 36,546,100 1,743,000 7,192,300 The Notes to Required Supplementary Information are an integral part of this schedule. - 135 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 30,000 3,978,100 247,600 271,500 998 7 2 46,351 89,785,800 47,979,900 74,100 134,500 0 1,544,000 26,112,600 13,824,500 50,590,500 65,297,200 5,003,100 8,200 1,489,200 11,394,100 52,200 8,645,200 32,400 360,000 6,931,400 50,009,800 1,000,000 35,942,200 500,000 19,302,400 711,600 9,924,800 5,371,700 39,500,000 24,557,400 1,757,000 732,300 200,000 3,680,100 672,700 2,333,700 3,200,000 18,337,200 1,148,700 5,074,400 0 0 266,700 3,136,000 4,462,000 56,605,000 40,112,300 1,743,000 6,122,300 11,810 3,978,100 188,617 0 998 7 0 0 82,271,257 28,265,996 74,100 103,300 0 1,514,099 24,220,300 13,391,425 49,754,111 64,297,200 4,875,853 7,030 1,489,200 11,394,100 39,190 7,262,730 32,400 124,170 6,891,400 38,614,818 0 35,942,200 448,087 19,302,400 711,600 7,748,135 2,510,909 33,142,925 24,022,044 1,757,000 732,300 200,000 2,180,100 659,439 2,333,700 3,192,378 16,562,505 1,115,670 5,074,400 0 0 266,700 3,136,000 3,992,796 56,605,000 38,111,835 1,743,000 6,003,704 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) DCYF Resident Placement TANF - SSBG DCYF Residential Placement - GF DCYF Residential Placement - TANF DCYF Substance Abuse Treatment (TANF) DDD Arizona Early Intervention Program DDD Arizona Training Program At Coolidge DDD Case Management DDD Children's Autism Intensive Behavior DDD Children's Autism Intensive-Toddlers DDD Home and Communication Based System DDD Home and Community Based Services DDD Institutional Services DDD Operating Lump Sum Appropriation DDD State Funded LTC Services DDD State Funded LTC Services DERS CCCA Sliding Fee Scales TANF DERS Daycare Subsidy DERS Fed Reed Act Grant 4050 DERS Independent Living Rehabilitation Svcs DERS JOBS DERS JOBS DERS JOBS DERS Operating Lump Sum Appropriation DERS Operating Lump Sum Appropriation DERS Operating Lump Sum Appropriation DERS Summer Youth Employment DERS Transitional Child Care DERS Vocational Rehabilitation Services DERS WIA Discretionary DERS WIA Operating Lump Sum DERS Workforce Investment Act Programs LTC Arizona Training Program At Coolidge LTC AZ Training Program Coolidge LTC Case Management LTC Case Management LTC Home and Community Based Services LTC Home and Community Based Services LTC Institutional Services LTC Institutional Services LTC Medical Services LTC Medical Services LTC Medicare Clawback Payments LTC Operating Lump Sum Appropriation Department of Juvenile Corrections Administrative Adjustments Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Department of Transportation Lump Sum Appropriation-Hwys Department of Education Achievement Testing Additional State Aid To Schools Administrative Adjustments Adult Education Assistance AIMS Intervention; Dropout Prevention FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 9,833,300 6,543,400 1,333,300 2,000,000 3,500,000 572,400 4,537,600 1,800,000 500,000 848,100 35,873,900 294,900 16,680,500 762,900 25,620,300 2,423,734 82,920,100 3,236,500 784,200 2,000,000 1,825,200 18,246,500 9,847,000 5,897,400 10,508,800 750,000 36,193,000 4,714,400 3,614,000 2,282,600 48,040,600 17,083,200 5,829,200 14,546,700 42,630,900 207,298,400 608,905,600 5,174,600 15,164,800 46,100,700 135,103,500 2,206,600 40,744,800 9,833,300 7,743,400 1,333,300 2,000,000 1,843,700 96,400 3,947,000 1,800,000 500,000 848,100 29,267,800 204,900 16,402,800 1,762,900 25,620,400 2,423,734 33,023,300 3,236,500 743,200 2,000,000 0 13,973,700 8,533,800 5,900,200 10,839,200 750,000 28,893,000 3,467,800 3,614,000 2,058,700 48,040,600 18,017,000 5,643,600 13,769,700 37,640,600 159,947,012 702,251,688 5,072,800 20,235,700 45,398,500 119,104,100 2,206,600 41,298,800 9,276,731 5,943,400 1,278,227 1,834,546 1,843,700 95,594 3,947,000 1,350,000 500,000 500,000 27,202,146 139,375 16,402,800 837,500 24,993,159 0 21,014,877 0 720,872 2,000,000 0 12,475,381 7,902,200 5,900,200 9,162,755 750,000 26,755,373 3,467,800 2,585,793 0 36,080,643 14,933,491 5,643,600 13,769,700 31,600,292 159,927,679 585,861,680 5,072,800 17,617,938 45,398,500 108,625,234 2,206,600 31,784,045 0 0 2,682,500 74,057,900 574,699 99,700 2,684,800 72,200,400 574,699 99,700 2,423,787 71,828,983 84,600 72,500 69,734 7,905,900 404,880,500 0 4,477,900 5,550,000 7,883,571 320,065,516 48,474,168 4,241,098 5,550,000 7,883,571 295,940,789 48,474,168 4,241,098 5,499,188 The Notes to Required Supplementary Information are an integral part of this schedule. - 136 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Basic State Aid Deferred Payment FY08 Basic State Aid Entitlement Basic State Aid Reduced Apportion Costs Cash Transfer To General Fund Cash Transfer To General Fund Chemical Abuse Compensatory Instruction Fund Deposit Employee Discipline and Risk Mgmt Techniques English Language Acquisition FY06 - 07 English Language Acquisition FY08 - 09 English Language Instruction FY08 - 09 English Learner Classroom Bonus Fund FY02-03 English Learner Classroom Bonus Fund FY03-04 English Learner Classroom Bonus Fund FY04-05 English Learner Instruction FY04 - 05 English Learner Material English Learner Teacher FY02 - 03 English Learner Teacher FY03 - 04 English Learner Teacher FY04 - 05 Extended School Year Family Literacy Gifted Support Math and Science Initiatives Math and Science Initiatives FY07 - 08 Non-Formula Programs-Operating '09 Non-Formula Programs-Operating '09 Operating Lump Sum - Administration Operating Lump Sum - Formula Programs Operating Lump Sum Appropriation Operating Lump Sum Appropriation Optional Performance Incentive Programs Other State Aid To Districts '07 Parental Choice For Reading Success Reading First Initiative School Accountability School Safety Program School Safety Program FY06 - 07 School Safety Program FY07 - 08 Small Pass-Through Programs Special Education Fund State Block Grant For Early Childhood Education State Block Grant For Vocational Education Statewide Compensatory Instruction Fund Teacher Certification Vocational Education Extended Year Department of Commerce Administrative Adjustments Agriculture Preservation District Apprenticeship Services Office Arizona 21st Century Competitive Initiative Fund Cash Transfer To General Fund Cash Transfer To General Fund Commerce And Econ Development Commission Greater Arizona Development Authority International Trade Offices Military Base Economic Research Study 0 3,296,549,500 0 0 23,200 826,300 10,000,000 2 3,264,162 5,025,500 0 1,017 0 0 0 0 0 0 3,443,972 500,000 1,011,300 3,385,300 2,500,000 0 217,700 1,548,400 6,705,300 2,198,700 692,500 383,600 120,000 983,900 1,000,000 0 39,400 6,728,300 7,828 624,721 681,600 35,237,700 19,457,100 11,467,200 0 1,994,000 600,000 0 26,747 179,200 0 0 0 14,812,002 2,000,000 1,328,000 50,000 The Notes to Required Supplementary Information are an integral part of this schedule. - 137 - FINAL BUDGET (Appropriations) 272,000,000 2,947,520,184 627,700 78,700 23,200 764,257 10,000,000 2 1,798,611 4,731,916 41,300,133 (8,000) (135,737) (248,719) (11,834) (24,159) (31,694) (215,907) 2,161,663 500,000 971,038 3,109,808 633,513 1,869,293 217,700 858,627 6,135,255 6,993,580 418,281 383,700 0 983,900 0 0 39,400 6,285,539 7,828 624,721 556,400 40,237,700 18,337,530 11,397,299 (980,465) 1,971,400 190,879 26,218 26,747 156,600 22,500,000 1,144,000 25,736,047 14,812,002 0 487,800 50,000 ACTUAL EXPENDITURE AMOUNTS 272,000,000 2,945,863,923 0 78,700 23,200 642,637 5,350,514 0 1,005,035 4,731,916 41,300,133 (8,000) (135,737) (248,719) (12,659) (25,963) (57,025) (215,907) 1,699,863 500,000 971,038 3,055,887 630,708 1,869,293 217,700 858,627 6,135,255 5,318,614 418,281 383,700 0 772,529 0 (90,460) 39,400 6,176,354 7,828 624,721 556,400 40,237,700 18,337,530 11,397,299 (980,465) 1,869,500 190,879 26,218 0 155,940 22,500,000 1,144,000 25,736,047 13,945,880 0 442,377 0 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Military Installation GF Transfer Military Installation Operating Military Installation Operating FY05 - 06 Military Installation Operating FY06 - 07 Military Installation Operating FY07 - 08 Motion Picture Development Motion Picture Prod Tax Incentive Admin Operating Lump Sum Appropriation Operating Lump Sum Appropriation Rural Economic Development State Board of Equalization Operating Lump Sum Appropriation Department of Environmental Quality Administrative Adjustments Aquifer Protection Permit Program Cash Transfer To General Fund Counties Travel Deduction Plan Drinking Water Revolving Loan Program Indirect Cost Recovery Fund Supplemental Operating Lump Sum Appropriation Operating Lump Sum Appropriation Relief Bill Cash Transfer FY09 Water Infrastructure Finance Authority Game and Fish Department Cash Transfer To General Fund Arizona Geological Survey Earth Fissure Maps Operating Lump Sum Appropriation Government Information Technology Agency 2-1-1 System Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund E-Health Initiative Operating Lump Sum Appropriation Operating Lump Sum Appropriation PS Comm Systems - Interoperability Public Safety Communications Program SW Information Security and Privacy Office Governor's Office Administrative Adjustments Emergency Fund Emergency Fund FY07 - 08 Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY06 - 07 Operating Lump Sum Appropriation FY07 - 08 Operating Lump Sum Appropriation-OSPB Arizona Health Care Cost Containment System Administrative Adjustments Administrative Adjustments Administrative Adjustments Breast and Cervical Cancer Breast and Cervical Cancer Capitation Capitation FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 0 0 6,172 5,114 6,820 337,700 0 4,021,400 139,500 323,900 25,000 56,300 6,172 5,114 6,820 0 337,700 2,952,200 144,700 202,100 25,000 55,487 0 0 0 0 304,329 2,829,554 137,286 200,032 653,500 602,500 602,450 0 788,700 0 1,676,900 893,200 2,000,000 10,531,000 12,400,600 0 1,551,900 156,744 788,700 5,687,800 176,900 0 2,000,000 10,748,200 5,720,600 6,922 0 156,744 787,513 5,687,800 176,900 0 1,828,101 352,484 5,709,038 6,922 0 0 145,000 144,218 178 1,073,900 178 962,800 178 961,595 1,175,200 0 0 0 0 1,500,000 5,000,000 2,758,600 0 880,600 870,300 425,100 497,628 5,109 629,000 633,600 0 5,000,000 2,815,100 358,501 803,400 870,300 425,100 497,628 5,109 629,000 633,600 0 645,525 2,295,964 0 639,486 676,860 0 0 0 7,134,800 481,703 653,404 2,209,900 39 2,604,509 1,450,024 7,384,900 14,766 552,741 2,149,600 39 0 0 6,319,767 8,153 422,416 2,147,288 0 0 0 1,164,500 365,500 608,625,400 1,443,017,300 52,019,049 61,648,938 10,340,983 764,500 220,390 486,580,150 1,478,842,300 52,019,049 61,648,938 10,340,983 695,388 218,086 486,469,297 1,464,054,537 The Notes to Required Supplementary Information are an integral part of this schedule. - 138 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Cash Transfer To General Fund Cash Transfer To General Fund CHIP - Parents CHIP - Services Critical Access Hospitals Critical Access Hospitals DES Eligibility DES Eligibility DES Eligibility System Upgrade DES Eligibility System Upgrade DES Title XIX Pass Through DES Title XIX Pass Through Disproportionate Share Payments Disproportionate Share Payments DOA Data Center Charges DOA Data Center Charges Dual Eligible Part D Copay Subsidy/Acute Dual Eligible Part D Copay Subsidy-LTC Fee For Service Fee For Service Graduate Medical Education Graduate Medical Education Healthcare Group Admin Indian Advisory Council Indian Advisory Council KidsCare Administration Long Term Care Board Of Nursing Long Term Care Board Of Nursing Medical Clawback Payments - Acute Care Medical Clawback Payments - LTC Medical Clawback Payments - LTC Medicare Premiums Medicare Premiums Mental Health - Adults New and Expanded Graduate Medical Education Program New and Expanded Graduate Medical Education Program Office Of Administrative Hearings Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Prop 204 - Capitation Prop 204 - Capitation Prop 204 - Capitation Prop 204 - Capitation Prop 204 - County Hold Harmless Prop 204 Fee-For-Service Prop 204 Fee-For-Service Prop 204 Medicare Prop 204 Pass Through Admin Prop 204 Pass Through Admin Prop 204 Pass Through Admin Prop 204-Reinsurance Prop 204-Reinsurance 0 0 8,336,300 32,996,800 580,100 1,119,900 26,466,700 29,220,700 1,300,000 1,300,000 154,000 203,800 8,922,200 21,427,800 1,724,700 3,992,800 1,029,700 470,300 108,552,200 464,843,500 15,323,100 29,583,100 5,000,000 116,600 116,300 2,226,200 104,800 104,900 28,844,600 11,307,200 9,433,700 29,022,700 67,252,600 45,368 958,535 4,494,824 271,300 28,585,800 104,355,200 41,521,800 0 1,023,680,200 45,793,300 224,247,700 54,004,600 794,114,800 114,004,100 4,825,600 47,747,000 195,628,100 20,629,400 22,050,800 18,737,300 2,841,000 44,336,200 85,584,000 The Notes to Required Supplementary Information are an integral part of this schedule. - 139 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 1,963,300 17,830,500 5,925,545 25,907,000 458,782 1,119,900 29,167,600 29,220,700 137,431 1,300,000 151,400 203,800 8,950,358 21,399,643 2,528,200 6,106,000 2,151,000 588,527 93,060,990 419,843,500 11,222,059 32,696,200 2,800,000 116,600 116,300 2,341,900 104,800 104,900 28,794,940 11,307,200 9,433,700 22,881,077 67,677,600 45,368 958,535 4,494,824 271,300 26,478,500 121,151,300 36,808,600 29 1,031,680,200 45,793,300 218,066,648 48,996,700 1,015,585,200 114,004,100 0 38,171,399 181,628,100 20,629,400 18,299,369 18,737,300 2,841,000 23,865,744 49,359,000 1,963,300 17,830,500 5,925,545 25,907,000 425,202 1,117,718 26,467,600 24,522,022 127,431 93,077 120,915 138,505 0 4,202,300 2,292,617 5,532,472 2,150,993 588,527 92,910,854 418,823,185 0 0 2,800,000 108,590 107,032 2,300,369 104,800 104,800 28,794,408 11,307,200 9,399,312 22,874,508 67,630,962 0 0 0 217,750 26,017,102 121,151,300 34,592,869 0 983,799,874 0 216,617,616 46,828,921 1,015,449,744 114,004,100 0 37,095,859 176,639,932 20,568,430 18,265,909 16,703,487 2,130,750 23,796,596 49,358,961 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Prop 204 Admin Operation 100% Fall Expansion Prop 204 Admin Operation 100% FPL Expansion Prop 204 Admin Operation 100% FPL Expansion Reinsurance Reinsurance Rural Hospital Reimbursement Rural Hospital Reimbursement Temporary Medical Coverage Ticket To Work Ticket To Work Office of Administrative Hearings Operating Lump Sum Appropriation Operating Lump Sum Appropriation Arizona Historical Society Field Services and Grants Operating Lump Sum Appropriation Papago Park Museum Papago Park Museum House of Representatives Lump Sum Appropriation FY00 - 01 Lump Sum Appropriation FY01 - 02 Lump Sum Appropriation FY02 - 03 Lump Sum Appropriation FY03 - 04 Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY04-05 Operating Lump Sum Appropriation FY05-06 Operating Lump Sum Appropriation FY06-07 Operating Lump Sum Appropriation FY07-08 Department of Health Services ADHS Indirect Costs AHCCCS - CRS Administrative Adjustments Administrative Adjustments Administrative Adjustments Adult Cystic Fibrosis Adult Sickle Cell Anemia AHCCCS Rehabilitative Services AHCCCS-Childrens Rehabilitative Services AIDS Reporting and Surveillance Alzheimer Disease Research Arnold V. Sarn Arnold V. Sarn ASH Accreditation ASH Corrective Action Plan Supplemental Assurance and Licensure Assurance and Licensure Assurance and Licensure Assurance and Licensure Attorney General Legal Services AZ Statewide Immunization Info System Breast and Cervical Cancer Screening Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Children BHS-Tobacco Litigation Children's Behavioral Health Services The Notes to Required Supplementary Information are an integral part of this schedule. - 140 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 5,723,600 5,678,100 0 45,807,200 88,395,000 4,148,600 8,009,500 3,247,200 3,041,500 5,871,900 4,511,700 5,678,100 5 25,560,730 76,109,000 3,038,310 9,119,800 3,247,200 1,748,516 4,290,757 4,431,979 5,183,902 0 25,470,929 76,108,924 0 0 3,137,968 1,746,365 4,263,715 14,500 1,213,900 14,500 1,117,900 14,500 1,117,900 80,000 2,339,900 193,700 1,978,900 65,000 2,073,900 194,200 1,878,900 65,000 2,073,900 194,200 1,878,900 442,195 0 0 593,819 13,854,800 1,009,668 1,901,541 1,997,741 1,703,087 442,195 (382,940) (842,055) 0 13,653,400 0 730,024 1,997,741 1,703,087 442,195 42,373 0 0 11,989,731 0 129,478 535 3,750 350,000 0 0 0 105,200 33,000 0 32,640,789 1,125,000 3,000,000 9,653,100 27,500,000 3,140 398,060 950,200 343,200 9,392,500 829,200 394,900 517,500 1,348,600 1,000,000 0 0 0 1 9,351,800 350,000 336,185 3,618,340 28,611 105,200 25,554 53,462,500 27,688,800 1,125,000 1,125,000 9,653,100 26,150,000 3,140 398,060 950,200 340,200 8,762,277 829,200 394,900 373,062 1,015,800 1,000,000 36,800 821,400 5,803,200 1 8,320,692 350,000 336,185 3,618,340 28,611 105,200 25,554 0 22,736,811 1,114,736 1,125,000 0 25,700,186 0 0 0 313,957 8,707,383 797,802 394,900 373,062 791,137 1,000,000 36,800 134,200 5,803,200 1 8,313,775 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Children's Bh State Match For Title XIX Children's Bh State Match For Title XIX Children's Rehabilitative Services Community Health Centers Community Placement Treatment Community Placement Treatment Contract Compliance Contract Compliance County Prenatal Services Grant County Public Health County Tuberculosis Provider Care and Control Court Monitoring Diabetes Prevention and Control Direct Grants Dual Eligible Part D Copay Subsidy Electronic Medical Records Hepatitis C Surveillance High Risk Perinatal Services Indirect Cost Fund Kidney Program Laboratory Services Loan Repayment Medicaid Special Exemption Payments Medicaid Special Exemption Payments BHS Medicaid Special Exemption Payments BHS Medicaid Special Exemption Payments Chas Medicare Clawback Payments Mental Health - Non-Title XIX Mental Health and Substance Abuse State Match for Title XIX Mental Health and Substance Abuse State Match for Title XIX Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Poison Control Center Funding Prop 204 Administration Title XIX Match Prop 204 Administration Title XIX Match Prop 204 CBHS Title XIX Match Prop 204 CBHS Title XIX Match Prop 204 GMH/SA Title XIX Match Prop 204 GMH/SA Title XIX Match Prop 204 SMI Title XIX Match Prop 204 SMI Title XIX Match Reg Hearing Aid Dispensers, Audiologists, and SL Pathologists Reimbursement To Counties Renal and Non-Renal Disease Management Scorpion Antivenom Senior Food Program Seriously Emotionally Handicapped Child Seriously Mentally Ill Non-Title XIX 261,605,206 122,432,700 3,587,000 8,981,300 5,574,100 1,130,700 3,667,400 1,856,100 1,148,500 200,000 1,410,500 197,500 400,000 460,300 802,600 300,000 409,300 4,980,600 8,053,000 50,500 4,087,900 100,000 615,300 13,454,800 6,969,100 1,188,100 10,718,100 2,447,300 36,133,300 77,043,283 2,181,000 1,578,100 5,063,900 14,876,300 3,821,700 5,823,200 4,528,800 50,932,100 4,901,900 1,000,000 675,000 4,404,600 2,130,200 3,203,621 1,546,500 78,858,332 36,964,900 152,107,898 71,300,600 62,243 67,900 468,000 150,000 600,000 500,000 30,191,900 The Notes to Required Supplementary Information are an integral part of this schedule. - 141 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 283,380,513 106,015,237 2,815,600 6,564,686 3,263,170 1,130,700 3,667,400 1,182,700 783,600 0 968,400 197,500 63,527 345,225 466,792 168,233 157,210 3,493,362 8,075,700 0 3,786,060 38,570 615,300 14,185,322 7,354,100 1,188,100 10,718,100 1,947,300 31,426,158 82,203,173 2,181,000 1,578,000 5,063,900 13,608,930 3,014,202 4,902,075 4,087,021 49,977,563 5,035,200 1,000,000 524,500 4,404,600 2,130,200 2,597,997 1,013,552 89,783,294 35,127,055 170,408,751 66,305,223 62,243 50,925 198,000 120,000 75,045 0 25,524,898 0 106,015,237 2,815,600 6,552,989 3,263,170 0 0 1,182,700 783,600 0 821,241 197,500 62,964 345,225 466,792 163,506 157,209 3,338,340 7,433,663 0 3,717,343 36,570 615,300 0 7,354,100 0 10,718,100 1,947,237 31,426,158 0 0 1,572,511 0 13,232,195 2,991,682 4,842,651 4,085,839 49,689,278 4,211,357 1,000,000 506,250 0 2,130,200 0 1,013,552 0 35,127,055 0 66,305,223 0 50,043 138,707 120,000 41,285 0 25,501,875 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Seriously Mentally Ill St Mch For T-XIX Seriously Mentally Ill St Mch For T-XIX Sexually Violent Persons STD Control Subventions Substance Abuse - Non Title XIX TANF Perinatal Services Telemedicine Teratogen Program U of A Poison Control Center Funding Vaccines Vital Records - Archiving, Cust Svc, Ops Vital Records Maintenance Arizona Commission on the Arts Community Service Projects Operating Lump Sum Appropriation Arizona Commission of Indian Affairs Administrative Adjustments Operating Lump Sum Appropriation Occupation Safety & Health Board Lump Sum Appropriation FY00 - 01 Lump Sum Appropriation FY02 - 03 Lump Sum Appropriation FY03 - 04 Lump Sum Appropriation FY99 - 00 Operating Lump Sum Appropriation FY04 - 05 Operating Lump Sum Appropriation FY98 - 99 Department of Insurance Cash Transfer To General Fund Cash Transfers Between Agency Funds Managed Care and Dental Plan Oversight Operating Lump Sum Appropriation Arizona Criminal Justice Commission Administrative Adjustments Criminal Justice Information Systems Methamphetamine Interdiction Operating Lump Sum Appropriation Rural State Aid To County Attorneys Rural State Aid To Indigent Defense Joint Legislative Budget Committee Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07-08 Department of Library, Archives, and Public Records Cash Transfer To General Fund Grants-In-Aid Grants-In-Aid FY05 - 06 Grants-In-Aid FY06 - 07 Grants-In-Aid FY07 - 08 Historical Advisory Commission Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY 01 - 02 Operating Lump Sum Appropriation FY 03 - 04 Operating Lump Sum Appropriation FY 05 - 06 Operating Lump Sum Appropriation FY 06 - 07 Operating Lump Sum Appropriation FY 07 - 08 Operating Lump Sum Appropriation FY 07 - 08 Statewide Radio Reading Service for the Blind FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 146,337,459 68,585,400 10,628,100 26,300 12,135,400 47,270 260,000 60,000 1,275,000 8,410,400 16,715 502,200 156,457,649 59,303,976 10,178,850 0 9,635,400 47,270 208,000 35,000 1,025,500 1,497,571 16,715 499,700 0 59,303,976 9,798,083 0 9,635,026 0 146,902 0 956,250 1,497,571 550 468,000 1,463,100 625,000 860,800 646,800 860,797 646,378 0 223,300 21,999 211,000 21,999 208,063 1,000 4,800 4,800 1,000 4,800 2,796 1,000 4,800 4,800 1,000 4,800 2,796 0 0 0 0 0 0 0 0 601,700 6,764,100 38,100 123,315 463,451 5,953,349 38,100 123,315 463,451 5,940,013 0 800,000 2,000,000 994,200 157,700 150,100 130,724 0 0 747,000 157,700 150,100 130,724 0 0 747,000 157,700 150,100 2,948,600 2,210,637 2,106,757 1,532,581 874,531 1,532,581 0 651,400 28,708 78,018 80,976 46,683 6,787,900 662,500 2,924 4 15 10 79,605 6,783 97,000 312,700 630,100 28,708 78,018 80,976 46,683 5,593,600 675,900 2,924 4 15 10 79,605 6,783 97,000 312,700 523,403 28,708 78,018 13,158 5,405 5,593,599 626,842 0 0 0 0 2,757 6,783 97,000 The Notes to Required Supplementary Information are an integral part of this schedule. - 142 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Legislative Council Arizona Centennial Celebration Juvenile Study Ombudsman-Citizens Aid Office Ombudsman-Citizens Aid Office FY 93 - 94 Ombudsman-Citizens Aid Office FY 94 - 95 Ombudsman-Citizens Aid Office FY 07 - 08 Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY 06-07 Operating Lump Sum Appropriation FY 07-08 Operating Lump Sum Appropriation FY 99-00 State Archives And History Building FY 05 - 06 State Archives And History Building FY 06 - 07 State Archives And History Building FY 07 - 08 Land Department Cap User Fees Due Diligence Fund Earth Fissure Maps Environmental County Grants Fire Suppression Operating Expenses Inmate Fire Crews Natural Resource Conservation Districts Operating Lump Sum Appropriation Service Fees Increase Fund Department of Liquor Licenses and Control Improvement of Data Processing System Operating Lump Sum Appropriation Law Enforcement Merit System Operating Lump Sum Appropriation Department of Emergency Management & Military Affairs 2007 Monsoons 2007 Monsoons FY07 - 08 Administrative Adjustments Armory Restroom Renovation-Flag/Nogales Aspen Fire Emergency Arizona/Mexico International Border Security Emergency Management 2-1-1 Services Euz701 Search Euz701 Search and Rescue Euz701 Search FY07 - 08 February 2005 Winter Storms February 2005 Winter Storms and Flooding Glassy-Winged Sharpshooter Emergency FY05 - 06 Glassy-Winged Sharpshooter Emergency FY06 - 07 Guardsmen Tuition Reimbursement Hazard Materials Contingency FY03 - 04 Hazard Materials Contingency FY07 - 08 January 2008 Severe Precipitation January 2008 Severe Precipitation FY07 - 08 La Paz County Summer Monsoon Emergency La Paz/Maricopa Counties Storm Emergency FY01 - 02 La Paz/Maricopa Counties Storm Emergency FY03 - 04 Military Gift Package Postage Mitigation Projects 2004 Emergency Funds Navajo, Gila and Coconino Cts Rodeo Fire Nogales and 52nd Street Bldg Renewal FY01 - 02 The Notes to Required Supplementary Information are an integral part of this schedule. - 143 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 2,450,000 19,520 593,000 43,000 95,169 127,902 4,983,100 661,735 101,513 886,420 545 2,435,141 6,000,000 2,450,000 0 573,700 0 1 63,951 4,151,000 661,735 101,513 140,359 545 2,435,141 6,000,000 0 0 512,160 0 0 41,830 4,130,794 436,162 98,567 0 545 1,918,178 5,162,231 1,488,300 500,000 182 250,000 2,566,600 974,300 430,000 17,208,600 0 311,200 500,000 182 0 2,489,900 965,200 94,600 13,050,100 600,000 311,127 0 182 0 2,489,900 965,200 94,600 13,043,244 600,000 975,171 3,534,100 975,171 3,031,800 824,405 3,029,786 74,200 76,900 76,776 0 131,786 0 0 661,543 128,666 104,200 0 428 9,015 675,303 87,090 1,567 249,624 1,446,000 3,820 50,000 0 172,635 55,244 58,871 105,264 100,000 81,655 319,102 12,032 50,015 131,786 6,833 145,000 661,543 121,425 31,152 310,000 428 9,015 675,303 87,090 1,567 73,881 750,000 3,820 50,000 122,500 172,635 176 58,871 105,264 50,000 81,655 319,102 12,032 37,240 131,786 6,833 70,160 (199,257) 121,425 31,152 285,786 428 9,015 145,273 86,400 1,567 73,881 739,453 (24) 265 0 27,530 176 1,628 96,024 50,000 4,264 (8,179) 0 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Nogales Wash Flooding 2007 Nogales Wash Flooding 2008 Northern Arizona Winter Storm Emergency Northern Arizona Winter Storm Emergency FY04 - 05 Northern Arizona Winter Storm Emergency FY05 - 06 Northern Arizona Winter Storm Emergency FY06 - 07 Northern Arizona Winter Storm Emergency FY07 - 08 Nuclear Emergency Management Fund Nuclear Emergency Management Fund Buckeye Nuclear Emergency Management Fund Maricopa Off Site Nuclear Emergency 89-90 Operating Lump Sum - Administration Operating Lump Sum - Military Affairs Operating Lump Sum-Emergency Management Operation Good Neighbor Project Challenge Construction FY05 - 06 Project Challenge Construction FY06 - 07 Project Challenge Construction FY07 - 08 Project Challenge Program Replace Cooling Tower at Roosevelt FY05 - 06 Service Contracts Summer 2006 Monsoons and Flooding FY06 - 07 Summer 2006 Monsoons and Flooding FY07 - 08 Uniform and Equipment Allowances Mine Inspector Abandoned Mine Safety Deposit from GF Administrative Adjustments Operating Lump Sum Appropriation Department of Building and Fire Safety Operating Lump Sum Appropriation Mines and Mineral Resources Administrative Adjustments Operating Lump Sum Appropriation Medical Student Loans Board Medical Student Financial Assistance Medical Student Financial Assistance Medical Student Financial Assistance Medical Student Financial Assistance Medical Student Loans Northern Arizona University NAU - Yuma Operating Lump Sum Appropriation Research Infrastructure Lease-Purch Pymt Teacher Training Navigable Streams Adjuication Commission Administrative Adjustments Operating Lump Sum Appropriation Operational Supplemental Personnel Board Administrative Adjustments Operating Lump Sum Appropriation State Capitol Post-Conviction Public Defender Administrative Adjustments Operating Lump Sum Appropriation Commission for Postsecondary Education Case Managers FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 70,259 0 0 1,940 170 81,202 166,445 0 0 0 1,708 1,848,900 1,910,332 0 154,595 183,494 500,000 100,000 1,704,800 50,000 0 563,058 732,628 250,000 1,463 203,681 206,968 1,940 170 81,202 166,445 403,477 69,909 354,558 1,708 1,636,691 1,625,332 826,068 154,595 183,494 500,000 100,000 1,804,800 50,000 1,215,000 563,058 732,628 134,957 1,463 203,681 59,106 0 170 81,176 157,198 403,477 69,909 354,558 0 1,631,125 1,620,071 826,068 2,079 183,494 500,000 100,000 1,804,793 0 1,215,000 386,508 3,258 134,957 182,000 0 1,382,800 182,000 7,173 1,285,500 173,056 7,173 1,161,281 3,764,000 3,128,300 3,112,783 0 839,900 38,502 883,000 38,502 881,947 1,500,000 0 154,539 833,887 3,944 1,121,000 309,800 154,539 833,887 3,944 1,001,000 0 0 456,183 0 2,489,500 158,979,100 0 2,000,000 2,074,582 116,374,192 4,916,666 1,666,400 2,074,582 116,374,192 4,916,666 1,666,400 0 180,000 157,513 1,041 160,100 157,513 1,041 124,501 157,513 0 357,900 67 329,100 67 328,027 0 721,700 759 759,000 759 753,330 100,000 0 0 The Notes to Required Supplementary Information are an integral part of this schedule. - 144 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Leveraging Educational Assistance Prtshp Postsecondary Education Grant Program Priv Postsecondary Ed Stu Fin Asst Prog Prescott Historical Society Maintenance and Workshop Facility FY06 - 07 Operating Lump Sum Appropriation Arizona Pioneers' Home All Other Operating Expenditures PS/Employee Related Expenses (ERE) PS/Employee Related Expenses (PS) Board of Executive Clemency Operating Lump Sum Appropriation State Parks Board Acquisition and Development Administrative Adjustments Administrative Adjustments Arizona Trail Cash Transfer to General Fund Kartchner Caverns State Park Land Conservation Fund-General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Tonto Lodge Roof Replacement FY04 - 05 Department of Public Safety Building Renewal - Proj 917051 FY06 - 07 Building Renewal - Proj 915013 FY04 - 05 Building Renewal - Proj 915014 FY04 - 05 Building Renewal - Proj 915015 FY04 - 05 Building Renewal - Proj 916003 FY05 - 06 Cash Transfer To General Fund DPS Carpet Replacement Project-Bldg Renewal DPS Headquarters Fire Alarm GITEM GITEM-County Attorneys For Prosecution GITEM-Gang Intelligence Team Enforcement GITEM-Gang Intelligence Team Enforcement FY07 - 08 GITEM-State Gang Intelligence Dbase Microwave Communication System Microwave Communication System FY06 - 07 Microwave Communication System FY07 - 08 Motor Vehicle Fuel Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Patrol Officers - SB1243 Year 2 Statewide HVACs Replacements Statewide Interoperability - Phase II Sworn Officer Salary Adjustments Department of Racing Administrative Adjustments Operating Lump Sum Appropriation Independent Redistricting Commission Operating Lump Sum FY03 - 04 The Notes to Required Supplementary Information are an integral part of this schedule. - 145 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 1,220,800 5,300,000 800,000 1,220,800 2,750,000 398,900 1,220,800 2,749,998 331,600 398,231 734,000 29,964 663,100 29,964 625,494 828,000 74,000 334,000 0 0 0 0 0 0 1,087,400 1,047,600 1,046,904 107,100 0 0 125,000 0 2,535,800 0 4,332,500 8,275,000 99,498 107,100 18,200 16,263 125,000 5,391,800 2,638,000 20,000,000 6,869,720 3,485,200 99,498 0 18,200 16,263 125,000 5,391,800 2,121,945 20,000,000 6,837,108 3,484,375 0 4,569 2 5,802 3,318 217 0 35,389 82,234 19,799,700 1,000,000 0 9,711,104 1,000,000 0 685,771 362,157 3,704,200 41,050,500 1,564,100 205,000 84,949,500 22,343,500 296,200 41,570 3,791 358,501 1,274,100 4,569 2 5,802 3,318 217 50,000 35,389 82,234 18,902,000 700,000 4,051,900 4,483,704 600,000 1,250,000 685,771 362,157 3,704,200 41,050,500 1,615,600 205,000 84,949,500 31,402,600 296,200 41,570 8,412 358,501 1,274,100 0 0 5,802 2,934 0 50,000 35,336 63,731 17,398,547 364,974 58,787 4,468,538 385,489 50,000 (166,244) (116,843) 3,217,711 41,050,500 1,615,600 76,616 84,949,500 31,402,600 292,820 0 8,412 0 1,274,100 0 2,747,900 132 2,280,200 132 2,278,863 931,391 930,491 256,354 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Real Estate Department Administrative Adjustments Operating Lump Sum Appropriation Rangers' Pension Operating Lump Sum Appropriation Department of Revenue Administrative Adjustments Administrative Adjustments BRITS Operations Cash Transfer To General Fund Cash Transfer To General Fund Data Center Charges Legal Arizona Workers Act - Employer Notice Operating Lump Sum Appropriation Operating Lump Sum Appropriation Tax Credit Administration Unclaimed Property Administration Unclaimed Property Contract Auditor Fees Schools for the Deaf and Blind Administrative Adjustments Operating Lump Sum - Phoenix Operating Lump Sum - Preschool/Outreach Operating Lump Sum - Tucson Operating Lump Sum-Regional Cooperatives School Bus Replacement-Phoenix School Bus Replacement-Tucson School Facilities Board Building Renewal Grant Full Day Kindergarten Capital Grants New School Facilities New School Facilities Debt Service Operating Lump Sum Appropriation Senate Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Supreme Court Administrative Adjustments Administrative Adjustments ADOA Building Renewal Fund Adult Intensive Probation Adult Standard Probation Automation Automation Case And Cash Management System Case And Cash Management System Cash Transfer To General Fund Cash Transfer To General Fund Commission on Judicial Conduct Community Punishment County Reimbursements Court Appointed Special Advocate Courts Building Design Chiller & Thermal Storage Domestic Relations Drug Court FY06 - 07 Drug Court FY08 - 09 Foster Care Review Board The Notes to Required Supplementary Information are an integral part of this schedule. - 146 - FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 0 4,438,500 6,924 3,686,700 6,924 3,685,317 13,700 13,700 13,700 0 0 2,223,700 0 0 0 102 69,595,500 413,800 0 1,608,600 1,770,000 53,371 132 2,223,700 1,352,600 986,500 1,570,000 102 62,179,500 422,000 30,000 1,634,000 1,770,000 53,371 132 2,223,313 1,352,600 986,500 394,858 0 62,056,187 407,646 30,000 1,401,331 698,583 0 5,160,200 3,024,800 10,338,200 1,420,100 461,300 276,700 1,535,873 3,671,200 2,009,935 10,383,000 5,209,565 0 0 1,535,873 3,231,001 1,747,362 9,727,272 5,110,155 0 0 20,000,000 484,205 0 79,268,400 1,944,400 20,000,000 484,205 117,000,000 79,151,400 1,614,100 20,000,000 484,205 0 79,151,400 1,611,823 9,193,000 1,651,552 8,635,000 1,651,552 7,724,033 937,520 0 0 0 11,338,000 15,060,600 7,855,300 4,565,100 1,365,600 151,700 0 0 436,800 541,300 208,800 102,000 52,725 586,400 96,877 1,013,600 2,429,800 12,516 9,012 140,000 11,086,470 14,477,530 7,776,700 4,539,000 1,365,600 151,700 1,230,700 222,600 416,600 0 187,900 102,000 52,725 510,500 96,877 1,013,600 2,405,000 12,516 9,012 16,459 11,025,839 14,402,069 7,627,089 4,311,575 1,351,607 151,699 1,230,700 222,600 394,368 0 187,900 102,000 34,535 507,429 35,555 996,279 2,373,773 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Fourth Floor Chiller FY01 - 02 Global Position and Monitoring System GPS HVAC Storage Tank FY01 - 02 Interstate Compact Judges Compensation Judicial Nomination and Performance Review Juvenile Family Counseling Juvenile Intensive Probation Juvenile Standard Probation Juvenile Treatment Services Model Court Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Probation Surcharge Progressively Increasing Consequences Repair/Rehab Cooling Tower, Courts Bldg FY04 - 05 Special Water Master State Aid Secretary of State Administrative Adjustments Election Services Help America Vote Act - Federal Funds Help America Vote Act - Federal Funds FY07 - 08 Operating Lump Sum Appropriation Operating Lump Sum Appropriation Office of Tourism Cash Transfer To General Fund City Of Yuma - Arizona Welcome Center City Of Yuma - Arizona Welcome Center FY06 - 07 State Treasurer Administrative Adjustments Community College Reimbursement ARS 15-1469.01 Corporate Income Tax Transfer Justice Of the Peace Salaries Operating Lump Sum Appropriation Operating Lump Sum Appropriation Rural County Reimbursement Subsidy Transfer to Tourism Fund Tax Appeals Board Administrative Adjustments Operating Lump Sum Appropriation University of Arizona Agriculture Arizona Cooperative Extension Clinical Rural Rotation Clinical Teaching Support Liver Research Institute Operating Lump Sum-Health Sciences Center Operating Lump Sum-Main Campus Phoenix Medical Campus Research Infrastructure Facilities Sierra Vista Campus Telemedicine Network Department of Veterans' Services Arizona State Veterans' Home FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 2,528 436,800 1,211 656,100 18,136,100 323,200 660,400 9,886,100 4,726,000 22,504,700 497,300 2,861,100 702,500 12,802,100 3,425,700 10,160,300 114 20,000 40,200 2,528 435,500 1,211 650,500 17,556,900 295,300 660,400 9,038,954 5,045,446 22,402,600 447,600 2,861,500 702,900 11,921,300 3,596,900 9,367,000 114 20,000 0 0 405,054 0 635,501 17,556,763 283,504 640,018 8,985,984 5,037,165 22,304,084 442,569 2,841,793 578,270 11,893,050 2,667,509 9,367,000 0 8,831 0 0 4,361,000 4,000,000 12,353,562 94,800 2,619,000 15,781 4,361,000 4,002,000 12,353,562 98,200 2,469,700 15,781 4,052,729 306,010 11,467,909 0 2,360,629 700 0 119,692 700 400,000 119,692 700 191,811 119,692 0 3,645,224 15,000,000 2,230,100 2,841,400 1,300 1,000,000 15,996,413 140,086 3,645,224 13,000,000 2,170,100 2,551,500 1,300 1,000,000 15,996,413 140,086 3,645,224 13,000,000 2,015,074 2,537,690 0 1,000,000 15,996,413 0 305,200 206 284,200 206 262,813 34,521,600 12,811,900 515,200 9,969,700 544,800 55,176,900 292,796,800 12,401,300 0 3,873,700 2,237,900 26,900,150 10,061,016 336,700 7,674,650 424,483 43,616,233 206,168,026 9,628,766 14,253,000 2,940,633 1,729,283 26,900,150 10,061,016 336,700 7,674,650 424,483 43,616,233 206,168,026 9,628,766 14,253,000 2,940,633 1,729,283 2,855,000 2,608,800 2,314,361 The Notes to Required Supplementary Information are an integral part of this schedule. - 147 - (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 10,000,000 15,291 2,007,300 272,100 10,000 3,047,000 29,200 0 15,291 2,097,000 279,100 10,000 2,947,400 29,200 0 0 2,096,459 279,100 0 2,941,042 12,600 2,105,000 0 2,000,000 1,700,000 500,000 491,200 1,565 15,372,400 1,999,100 666,014 1,106,100 3,146 0 1,300,300 506,300 491,500 1,565 6,721,000 1,507,100 666,014 1,101,647 3,146 0 769,247 505,166 465,761 0 6,700,386 743,272 666,014 0 1,640,200 1,231 1,387,900 1,231 1,379,270 16,835,599,709 16,780,593,743 15,157,661,925 Arizona State Veterans' Home Military Family Relief Fund Operating Lump Sum Appropriation Southern Arizona Cemetery Telemedicine Project Veterans Benefits Counselors Veterans' Organizations Contracts Department of Water Resources Adjudication Support Administrative Adjustments Arizona Water Protection Fund Deposit Assured and Adequate Water Supply Admin Automated Groundwater Monitoring Conservation and Drought Program Dam Repair - City Of Williams FY06 - 07 Operating Lump Sum Appropriation Rural Water Studies Rural Water Studies FY07 - 08 Department of Weights and Measures Administrative Adjustments Operating Lump Sum Appropriation Total General Fund Budgetary Expenditures before Adjustments Less: Department of Health Services' AHCCCS - appropriations for Children's Rehabilitative Services, Arnold v. Sarn, Assurance and Licensure, Title XIX State Match, Medicaid Special Exemption, and Contract Compliance that were duplicate expenditure authorizations Total General Fund Budgetary Expenditures after Adjustments (751,285,899) $ 16,084,313,810 The Notes to Required Supplementary Information are an integral part of this schedule. - 148 - (871,154,499) $ 15,909,439,244 0 $ 15,157,661,925 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES TRANSPORTATION AND AVIATION PLANNING, HIGHWAY MAINTENANCE AND SAFETY FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) TRANSPORTATION AND AVIATION PLANNING, HIGHWAY MAINTENANCE AND SAFETY FUND Department of Administration Administrative Adjustments Department of Transportation 2003 - Asbestos & Lead Inspections 2003 - East Valley Maintenance Yard 91 Douglas Maintenance Yard Adm Adj 98 - Arizona-Mexico Border Points Abandoned Vehicle Administration Administrative Adjustments Administrative Adjustments Airport Planning And Development Airport Planning And Development Alt Truck Route - Dougles Chino Rd Asbestos & Lead Inspections Asphalt Storage Tanks Attorney General Legal Services Building Renewal FY 06 - 07 Building Renewal FY 06 - 07 Building Renewal FY 07 - 08 Building Renewal FY 07 - 08 Building Renewal FY 08 - 09 Building Renewal FY 08 - 09 Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund De-Icer Buildings De-Icer Buildings De-Icer Buildings Far Southeast Valley Multiuse Facility Far Southeast Valley Multiuse Facility Far Southeast Valley Multiuse Facility Fraud Investigation Grand Canyon Airport Modular Housing Grand Canyon Airport Restroom Renovation Grand Canyon Airport Water Storage Tank Renov Highway Maintenance Highway Maintenance Highway Maintenance FY 07 - 08 Highway Maintenance FY 07 - 08 Highway to DPS Transfer Highway to DPS Transfer - Double Load HURF to DPS Transfer - Double Load Highway Infrastructure - Douglas Weigh Station Lump Sum Appropriation-Aeronautics Lump Sum Appropriation-Highways Lump Sum Appropriation-Motor Vehicle $ FINAL BUDGET (Appropriations) 0 589,466 135,517 2,000 569 1,039,800 0 0 31,200,000 8,665,445 250,000 97,998 184,771 3,052,600 12,264 612,529 83,394 1,571,150 156,900 4,052,000 0 0 0 0 0 0 0 125,717 1,799,129 1,825,000 5,184,495 2,350,000 1,510,256 788,300 2,460,217 208,944 606,467 131,468,300 558,700 3,204,965 64 0 41,050,500 84,949,500 178,000 2,353,900 137,855,000 101,888,900 The Notes to Required Supplementary Information are an integral part of this schedule. - 149 - $ 5,000 589,466 135,517 2,000 569 1,039,800 253 156,669 31,200,000 8,665,445 250,000 97,998 184,771 3,052,600 12,264 612,529 83,394 1,571,150 156,900 1,077,800 22,479,400 104,000,000 14,400 2,269,400 2,194,300 4,158,400 8,390,600 125,717 (50,871) 0 0 0 0 788,300 2,460,217 208,944 0 131,486,600 558,700 3,204,965 64 826,000 41,050,500 84,949,500 178,000 2,337,000 137,887,300 101,911,100 ACTUAL EXPENDITURE AMOUNTS $ 5,000 0 133,582 0 0 925,400 253 156,669 15,132,665 0 0 3,200 71,955 2,740,928 0 460,486 27,443 1,172,002 85,677 464,920 22,479,400 104,000,000 14,400 2,269,400 2,194,300 4,158,400 8,390,600 114,283 (50,871) 0 0 0 0 647,812 2,413,553 52,167 0 109,809,348 553,947 3,202,422 0 826,000 41,050,500 84,949,500 0 2,269,446 111,262,264 92,883,666 (Continued) STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE, EXPENDITURES TRANSPORTATION AND AVIATION PLANNING, HIGHWAY MAINTENANCE AND SAFETY FUND FOR THE YEAR ENDED JUNE 30, 2009 ORIGINAL (Expressed in Dollars) BUDGET (Appropriations) Lump Sum Appropriation-Motor Vehicle Lump Sum Appropriation-Motor Vehicle Lump Sum Appropriation-Motor Vehicle Lump Sum Appropriation-Motor Vehicle Lump Sum Appropriation-Motor Vehicle Lump Sum Appropriation-Motor Vehicle Modular Trailer Operating Expenses Motor Carrier Towing Regulation MVD Computer System Assessment MVD Electronic Certificate Of Title System MVD Electronic Certificate Of Title System MVD One-Time Trailer Fees Implementation MVD Security Enhancement Issues MVD Security Enhancement Issues New Third Party Funding New Third Party Funding New Third Party Funding New Third Party Funding Nogales Cyber Port Study Nogales Port Of Entry Oil And Asphalt Storage Tanks Oil And Asphalt Storage Tanks On-Line Verification Of Soc Sec Numbers Operating Lump Sum Appropriation Payson Motor Veh Division Service Center Relief Bill Cash Transfer FY 09 Safety, Security, Traffic Mgmt & Control Safford Vehicle Maintenance Shop San Luis Inspection Station San Luis Poe Connector Rd Self To DPS Transfer - Double Load Site Improve - Nogales Insp Station Special Projects FINAL BUDGET (Appropriations) 1,613,700 71,700 1,641,500 2,259,700 143,300 384,800 7,519 11,108 159 4,852 13,488 43,724 783,110 1 452,700 78,200 197,200 232,200 300,000 2 1,331,905 1,389,000 797 42,409,600 1,229,400 0 18,000 3,214,997 2,000,000 200,000 1,564,100 54,000 30,868 Sprinklers/Fire Alarms ACTUAL EXPENDITURE AMOUNTS 1,599,300 71,700 1,604,300 2,222,300 143,300 384,800 7,519 11,108 159 4,852 13,488 43,724 783,110 1 452,700 78,200 197,200 232,200 300,000 2 (33,095) 0 797 42,417,400 0 1,344 18,000 0 0 200,000 1,615,600 54,000 30,868 1,564,967 71,700 1,429,925 1,927,272 143,300 384,800 0 0 0 0 0 0 45,437 0 406,904 75,883 195,513 232,200 0 0 (33,095) 0 0 40,645,602 0 1,344 0 0 0 0 1,615,600 0 0 0 979,468 800,256 Statewide Highway Construction 305,582,000 305,582,000 235,285,236 Statewide Highway Construction 53,555,170 53,555,170 0 Surprise Motor Vehicle Division Service Center 3,956,124 82 82 Surprise Motor Vehicle Division Service Center 910,148 910,148 16,740 0 600,000 600,000 Vehicle and Heavy Equipment Fuel Surcharge 1,000,000 1,000,000 1,000,000 Vehicle Wash Systems 1,951,112 0 0 Vehicle Wash Systems 2,075,000 0 0 Traffic Safety Improvement Agreements Total Transportation and Aviation Planning, Highway Maintenance and Safety Fund Budgetary Expenditures $ 1,002,783,941 The Notes to Required Supplementary Information are an integral part of this schedule. - 150 - $ 1,115,404,406 $ 901,280,383 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2009 A. RECONCILIATION OF BUDGETARY TO GAAP EXPENDITURES The accompanying Budgetary Comparison Schedules for the General Fund and the Transportation and Aviation Planning, Highway Maintenance and Safety Fund present comparisons of the legally adopted budget with actual expenditure data on the budgetary basis. The original budget represents any appropriation bills passed by June 30, 2008 that affect available appropriations during fiscal year 2009. The final budget represents any appropriation bills passed during fiscal year 2009 for fiscal year 2009 plus the original budget. Appropriation bills passed after the end of fiscal year 2009 for fiscal year 2009 would also be included in the final budget. The Budgetary Comparison Schedules present actual amounts on the State’s budgetary basis for expenditures only. The Schedules include appropriations authorized in one fund and transferred, by legislation, to another fund. The State does not have a legally adopted budget for revenues; therefore, only expenditures are presented on the Budgetary Comparison Schedule, Expenditures for the General Fund and the Transportation and Aviation Planning, Highway Maintenance and Safety Fund. As the budgetary and GAAP presentations of actual data differ, a reconciliation of the two follows (amounts expressed in thousands): . General Fund Transportation & Aviation Planning, Highway Maintenance & Safety Fund Uses/outflows of resources Actual expenditure amounts (budgetary basis) “total charges to appropriations” from the budgetary comparison schedule $ 15,157,662 $ 901,280 Differences – budget to GAAP: Increase in unpaid incurred expenditures from fiscal year end 2008 to fiscal year end 2009. 372,040 390,827 Increase in unpaid payroll expenditures from fiscal year end 2008 to fiscal year end 2009. For budgetary reporting, final June 2009 payroll expenditures were charged to fiscal year 2010 budget. 7,415 - Distributions to counties and cities of sales taxes are recognized as expenditures on the modified accrual basis, but have no effect on budgetary expenditures. 936,140 - Distribution to counties and cities for Urban Revenue Sharing, derived from the State’s income tax collections, is recognized as an expenditure on the modified accrual basis, but has no effect on budgetary expenditures. 727,677 - Capital leases and installment purchase contracts initiated during the fiscal year, which are not reported in budgetary expenditures. 3,134 - Programs which are not controlled by legislative appropriations but have disbursed cash or incurred obligations during fiscal year 2009. 5,057,905 1,603,657 (1,126,584) (605,768) Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes. Total expenditures, as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances $ 21,135,389 $ 2,289,996 There were no expenditures in excess of appropriations or allotments in the individual budget accounts for the year. - 151 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2009 B. BUDGETARY BASIS OF ACCOUNTING Formulation of the budget begins with the preparation of estimates of expenditure requirements by the head of each budgeted agency and institution. These estimates are submitted no later than September 1 of each year to the Governor’s Office of Strategic Planning and Budgeting, unless an extension is granted for up to an additional 30 days. The budget is prepared by line item and/or program elements for each agency. The budget document, as finally developed by the Governor, must be submitted to the Legislature no later than five days after the regular session convenes. The Legislature must approve the budget by passing a general and a capital outlay appropriation bill and various omnibus reconciliation bills, which are used for statutory adjustments that must be implemented to carry out the budget. The Governor may veto any item in an appropriation bill. Such vetoes are subject to legislative overrides. The budget can be amended throughout the year by special legislative appropriations and/or budget transfers. The State’s Constitution prohibits the appropriation of certain state revenues (primarily tax and fee collections) from exceeding 7.41% of Arizona personal income as estimated by the Economic Estimates Commission. The State prepares its operating budget on the cash basis of accounting. Encumbrances as of June 30 can be liquidated during an administrative period of up to four weeks known as the 13th month. At the time of the appropriation bill’s passage, estimates prepared by legislative and executive branch professional staff assure the State Legislature that adequate revenues will be available to meet the level of appropriations approved. Anticipated revenue is estimated on the cash basis but is not part of the legally adopted budget. Consequently, the accompanying Budgetary Comparison Schedules only present budget to actual expenditure comparisons. The Budgetary Comparison Schedules present all appropriation line items as passed by the State Legislature in order to demonstrate compliance with the legal level of budgetary control. The State budgets on both an annual and biennial basis. Laws 1997, Chapter 210 required appropriated biennial budgets for all state agencies. In biennial budgets, an agency receives a separate appropriation for each of two fiscal years. For the “larger” seventeen state agencies, Laws 2002, Chapter 210 returned their budgets to a “one” year cycle beginning with the 2003 Legislative Session (fiscal year 2004 budget request). The budget format used by the State Legislature determines how an agency’s appropriation appears in the General Appropriation Act. A less detailed format provides an agency with more discretion in implementing the budget. Conversely, a more detailed format may require an agency to use formal processes for redirecting appropriated funding. Among the possible format choices are the following: Lump Sum – The appropriation of an agency for each fiscal year consists of a single dollar amount, thereby allowing the agency to direct funds to its activities at its own discretion, without further Legislative or Executive Branch review. Within this format, any programs or Special Line Items may be listed separately. Modified Lump Sum – The appropriation of an agency for each fiscal year consists of at least three lines: Personal Services, Employee Related Expenditures, and All Other Operating Expenditures. Any Special Line Items would be listed separately. Under this format, pursuant to ARS §35-173, an agency must seek approval of the Joint Legislative Budget Committee (JLBC) before moving any funding into or out of the Personal Services and Employee Related Expenditures line items. Any other funding transfers would require approval by the Arizona Department of Administration (ADOA), but not the JLBC. ADOA funding transfers require approval from the JLBC. Detailed Line Item – The agency appropriation for each fiscal year consists of each line item listed in the Appropriations Report including Professional and Outside Services, Travel, Other Operating Expenditures, Equipment, Food, and any Special Line Items. The same rules govern Personal Services and Employee Related Expenditures funding transfers as noted in the Modified Lump Sum description. This appropriation format requires an agency to seek ADOA approval before initiating funding transfers between all other line items. During the fiscal year, $465.198 million in supplemental appropriations, net of mid-year reversions and adjustments, were provided to major and non-major governmental funds primarily for fund transfers to the General Fund to address the State’s budget impact created by revenue shortfalls. The General Fund appropriations decreased by $55.006 million and the - 152 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY COMPARISON SCHEDULES JUNE 30, 2009 Transportation and Aviation Planning, Highway Maintenance and Safety Fund appropriations increased by $112.620 million, and those amounts are included in the Budgetary Comparison Schedules. State agencies are responsible for exercising budgetary control and ensuring that expenditures do not exceed appropriations. The ADOA’s General Accounting Office exercises oversight and does not disburse funds in excess of appropriations. The Governor shall have in continuous process of preparation and revision a tentative budget report for the next two ensuing years for which a budget report is required to be prepared. Whenever the expenses of any fiscal year shall exceed the income, the Legislature may provide for levying a tax for the ensuing fiscal year sufficient, with other sources of income, to pay the deficiency, as well as the estimated expenses of the ensuing fiscal year. All expenditures of the State’s money must be authorized by law. Authorization can be granted directly by law or contingent upon appropriation from the State Legislature. Periodically, the State Legislature may appropriate monies for program expenditures already authorized by law, resulting in duplicate spending authority. In appropriating monies, the State Legislature has, in some cases, included external funding sources as a portion of an agency’s total program expenditure authorization (budget) and has identified the external funding sources as an offset against the program appropriations total in order to reflect the State funding amount. An example of this is found in the $283.381 million Department of Health Services Children’s Behavioral Health State Match for Title XIX on page 141. Accordingly, sometimes program expenditures may not exhaust specific legislative appropriations. To properly present the total budget (appropriation) information, in relationship to “actual” expenditure amounts, duplicate expenditure authorizations have been eliminated from the General Fund’s budget (appropriation) totals on page 148. - 153 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2009 Information About Infrastructure Assets Reported Using the Modified Approach As allowed by Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments (GASB 34), the State of Arizona reports its roads and bridges using the modified approach. Assets accounted for under the modified approach include 6,753 center lane miles (18,544 travel lane miles) of roads and 4,648 bridges that the State is responsible to maintain. In order to utilize the modified approach, the State is required to: • Maintain an asset management system that includes an up to date inventory of eligible infrastructure assets • Perform condition assessments of eligible assets and summarize the results using a measurement scale • Estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the State • Document that the assets are being preserved approximately at or above the established condition level As adopted by the State Transportation Board on an annual basis, the Five-Year Transportation Facilities Construction Program (Program) contains estimated expenditures for highway system improvements and the preservation of existing roadways and bridges. Both of these factors impact the condition assessment of the roads and bridges as described in the following sections. The Program in effect for fiscal year 2010 and beyond was adopted by the Transportation Board on June 19, 2009. This Program is a dynamic instrument and adjustments are made to the annual plans based on the needs of the State to maintain the condition level of the roads and bridges at a level equal to, or greater than, the goals established by the State. In addition, not only are adjustments made during the life of the Program, circumstances may require that refinements to the individual components of the Program be made during the fiscal year. In comparing Estimated to Actual Expenditures in the tables that follow, significant variances can occur. These variances are primarily due to the methodology used in the preparation of the Program. In this Program, the Estimated Expenditures for the current year are based on “programmed” projects which may or may not be spent in the current year of the Program. “Programmed” expenditures consist of those items that are planned for the future and contracts that have not yet been awarded. Furthermore, the Actual Expenditures will include projects that were “programmed” for a prior year’s Estimated Expenditures but which did not occur, or were not completed, in the prior year. The following information pertains to the condition assessment and maintenance of infrastructure assets and reflects the State’s success in achieving condition levels that exceed the established levels. Roads The mission of the Arizona Department of Transportation’s (ADOT) Pavement Management Section (PMS) is to develop and provide a cost effective pavement rehabilitation construction program that preserves the State’s investment in its highway system and enhances public transportation and safety. The requirements of GASB 34 and the ADOT PMS both work toward the same basic goal, the efficient, effective management of the State’s assets to produce long-term benefits, while minimizing expenditures. The PMS has developed performance goals for the condition level of the pavement in the State’s highway system. These goals require periodic assessment of pavement conditions and the budget level needed to meet that goal. The goal is expressed as a measure called “Serviceability”, which can be defined as the ability of a pavement to serve the traveling public (as documented in 1961 after the American Association of State Highway and Transportation Officials (AASHTO) Road Test, 1956-1961). Serviceability is based on detailed measurements of objective features of the pavement and many surveys since the original road test have shown that these measurements closely track the subjective opinion of the traveling public. Most commonly, this number is called - 154 - STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2009 the “Present Serviceability Rating” (PSR). PSR is a five-point scale (5 excellent, 0 impassable), similar to the Weaver/AASHTO Scale shown as follows: Numerical Rating 5 4 3 2 1 0 PSR Excellent Good Fair Poor Very Poor Impassable Weaver/AASHTO Scale Perfect Very Good Good Fair Poor Very Poor The goal of the State is to maintain a condition level (PSR) rating of 3.23 or better for all roads in the State’s highway system. Annually, Transportation Material Technicians drive over the system with inertial profiling equipment and measure the roughness of the pavement. This process is continuous throughout the year in order to assess the condition level of all pavement on an annual basis. As of the end of fiscal year 2009, an overall rating of 3.74 was achieved, as shown in the following graph: Condition Level - Roads 5 PSR 4 3 Actual Level Desired Level 2 1 0 2005 2006 2007 2008 2009 Fiscal Year Figure 1 Preservation of the roads is accomplished through programs managed primarily by the ADOT PMS, as well as other units within the ADOT. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2005 through 2009 were as follows: Fiscal Year 2005 2006 2007 2008 2009 Estimated Expenditures (in millions) $235.7 $218.5 $216.4 $260.7 $264.4 - 155 - Actual Expenditures (in millions) $195.0 $211.5 $196.5 $247.9 $236.0 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2009 Bridges Bridges constitute a significant portion of all infrastructure assets in Arizona. As of June 30, 2009, the State owns and maintains 4,648 bridges with an approximate total deck area of 44,441,921 square feet. Bridges, for purposes of this report, include all structures erected over an opening or depression with a centerline of 20 feet or more. Information related to these bridges is stored and updated in the Arizona Bridge Information and Storage System (ABISS). This system is used to efficiently manage the bridge inventory through storing all bridge related data and assisting bridge engineers in arriving at appropriate bridge preservation decisions. Also, ABISS is used for reporting bridge inventory and condition, on a biennial basis, to the Federal Highway Administration (FHWA). A Condition Rating Index (CRI) is used to track the condition of the bridge network. The CRI is based on four selected bridge inspection condition ratings, which in turn are based on standards established in the FHWA’s “Recording and Coding Guide for the Structural Inventory of the Nation’s Bridges.” The four selected condition ratings that are included in the CRI computation are: the bridge joints condition, the deck condition, the superstructure condition, and the sub-structure condition. The bridge joints condition rating is an Arizona specific rating item not included in the FHWA condition rating guidelines, whereas the three other condition ratings are federally mandated condition ratings. The CRI is computed by subtracting from one, the ratio of the sum of the deck areas of all bridges with a condition rating of four or less, which indicates that the rated element is at best in a poor condition, to the total sum of the deck areas. The rating system in this guide is as follows: Numerical Rating 9 8 7 6 5 4 3 2 1 Condition Rating Excellent Very Good Good Satisfactory Fair Poor Serious Critical Imminent Failure Management of the bridge inventory is a major function of the ADOT’s Bridge Group and regularly scheduled biennial inspections are made of all bridges. A civil or structural engineer, licensed to practice in Arizona, performs these inspections. It is the policy of the State to maintain State highway bridges so that the CRI exceeds 92.5%. In fiscal year 2009, the CRI was computed at 93.4%. C o ndit io n Le ve ls - B ridge s 9 5% CRI 9 4% 9 3% A c tu al Le ve l D e sire d Le ve l 9 2% 9 1% 9 0% 2 005 200 6 20 07 2 008 Fisc al Y ea r Figure 2 - 156 - 200 9 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION INFRASTRUCTURE ASSETS JUNE 30, 2009 Bridges represent a major public investment and their inspection and maintenance is an essential function of the State in its mission of providing products and services for a safe, efficient, and cost effective transportation system. Figure 3 indicates that approximately 59% of the bridges in the State were constructed prior to the 1970s while only 21% have been constructed in the last two decades. Age of the ADOT's Bridge Population 30 % of bridges built in corresponding decade 25 20 15 10 5 0 < 1930 30s 40s 50s 60s 70s 80s 90s 2000s Figure 3 Preservation of the bridges is accomplished through programs managed by the Bridge Group. The estimated (as specified in the Program as programmed amounts) and actual expenditures for fiscal years 2005 through 2009 were as follows: Fiscal Year 2005 2006 2007 2008 2009 Estimated Expenditures (in millions) $ 7.4 $10.6 $17.1 $13.4 $14.3 - 157 - Actual Expenditures (in millions) $11.0 $11.3 $22.5 $18.1 $17.3 STATE OF ARIZONA REQUIRED SUPPLEMENTARY INFORMATION AGENT BENEFIT PLANS’ FUNDING PROGRESS JUNE 30, 2009 Analysis of the funding progress for each of the agent, multiple-employer defined benefit pension plans, as of the most recent actuarial valuations, is as follows (expressed in thousands): Plan PSPRS CORP Actuarial Valuation Date 6/30/2009 6/30/2008 6/30/2007 Actuarial Value of Plan Assets $ 564,000 547,255 537,999 6/30/2009 6/30/2008 6/30/2007 806,941 755,559 713,382 Actuarial Accrued Liability (AAL) $ 857,854 824,620 799,950 (Unfunded) AAL $ (293,854) (277,365) (261,951) Funded Ratio 65.7% 66.4% 67.3% Annual Covered Payroll $ 99,558 101,422 89,498 910,317 869,342 800,128 (103,376) (113,783) (86,746) 88.6% 86.9% 89.2% 373,674 376,819 369,337 (Unfunded) AAL as a Percentage of Covered Payroll (295.2)% (273.5)% (292.7)% (27.7)% (30.2)% (23.5)% Analysis of the funding progress for each of the agent, multiple-employer defined benefit post-employment plans, as of the most recent actuarial valuations, is as follows (expressed in thousands): Plan PSPRS CORP Actuarial Valuation Date 6/30/2009 6/30/2008 6/30/2007 Actuarial Value of Plan Assets - 6/30/2009 6/30/2008 6/30/2007 - Actuarial Accrued Liability (AAL) $ 26,141 30,584 31,344 (Unfunded) AAL $ (26,141) (30,584) (31,344) Funded Ratio 0.0% 0.0% 0.0% Annual Covered Payroll $ 99,558 101,422 89,498 43,951 40,596 38,753 (43,951) (40,596) (38,753) 0.0% 0.0% 0.0% 373,674 376,819 369,337 - 158 - (Unfunded) AAL as Percentage of Covered Payroll (26.3)% (30.2)% (35.0)% (11.8)% (10.8)% (10.5)% COMBINING FINANCIAL STATEMENTS AND SCHEDULES COMBINING FINANCIAL STATEMENTS AND SCHEDULES NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Debt Service Funds The Debt Service Funds account for the accumulation of resources for, and the payment of, long-term debt principal, interest, and related costs. Capital Projects Funds Capital Projects Funds account for financial resources used to acquire or construct major capital facilities (other than those financed by Proprietary Funds, Pension Trust Funds or Component Units). STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2009 (Expressed in Thousands) SPECIAL REVENUE FUNDS ASSETS Cash Cash and pooled investments with State Treasurer Collateral Investment Pool Receivables, net of allowances: Taxes Interest Other Due from others Due from other Funds Inventories, at cost Restricted assets: Cash and pooled investments with State Treasurer Cash held by trustee Other Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Due to local governments Due to others Due to other Funds Unavailable deferred revenue Unearned deferred revenue Total Liabilities $ $ CAPITAL PROJECTS FUNDS - $ TOTAL - $ 3,496 635,817 17,712 21,111 2,793 25,796 656,928 46,301 64,596 1,729 24,543 24 325,182 95 497 - 1,856 13 - 64,596 4,082 24,543 24 325,195 95 1,053 12 2,684 3,224 - 877,783 30,510 - 881,520 33,734 12 $ 1,074,259 $ 30,309 $ 935,958 $ 2,040,526 $ 38,074 31,274 $ 401 - $ 19,987 52 $ 58,462 31,326 Fund Balances: Reserved for: Highway construction Other construction Continuing appropriations Debt service Unreserved Total Fund Balances Total Liabilities and Fund Balances 3,496 DEBT SERVICE FUNDS $ 17,712 94,865 97 14,048 954 807 197,831 2,793 3,194 25,796 8 45,843 46,301 94,865 97 14,056 954 807 246,868 38,066 838,362 876,428 27,115 27,115 781,986 108,129 890,115 781,986 108,129 38,066 27,115 838,362 1,793,658 1,074,259 $ 30,309 - 162 - $ 935,958 $ 2,040,526 STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) SPECIAL REVENUE FUNDS REVENUES Taxes: Sales Income Tobacco Other Intergovernmental Licenses, fees, and permits Earnings on investments Sales and charges for services Fines, forfeitures, and penalties Gaming Other Total Revenues $ EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natural resources Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Capital lease and installment purchase contracts Bonds issued Grant anticipation notes issued Premium on debt issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 474,785 80 294,945 117,469 47,900 211,367 25,373 27,728 162,767 78,167 74,681 1,515,262 DEBT SERVICE FUNDS $ CAPITAL PROJECTS FUNDS 65,811 4,372 70,183 $ 18,942 18,942 TOTAL $ 540,596 80 294,945 117,469 47,900 211,367 48,687 27,728 162,767 78,167 74,681 1,604,387 147,030 263,604 119,423 620,778 103,003 132,524 - 44,119 - 147,030 263,604 119,423 620,778 103,003 44,119 132,524 5,697 894 32,572 1,425,525 174,805 175,957 350,762 3,967 593,507 641,593 180,502 180,818 626,079 2,417,880 89,737 (280,579) (622,651) (813,493) 154,598 (349,531) 922 (194,011) (104,274) 980,702 275,406 (2,948) 272,458 (8,121) 35,236 (17,632) 621,050 55,420 58,123 716,961 94,310 795,805 430,004 (370,111) 922 621,050 55,420 58,123 795,408 (18,085) 1,811,743 876,428 $ - 163 - 27,115 $ 890,115 $ 1,793,658 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The Public Safety and Correctional Programs Fund accounts for law enforcement, military, custody, and related services provided to the general public. The Environmental Protection Fund accounts for the protection of the State’s public health by administering the State’s environmental quality laws and delegating federal programs to prevent, control, and abate pollution of our air, water, and land resources. The Healthcare and Social Services Fund accounts for health and welfare services provided to the general public. The Tobacco Tax and Healthcare Fund accounts for the receipt of monies levied on tobacco products. The monies are used for health education programs; research, prevention and treatment of tobacco related diseases; to increase the quality of, and access to, the early childhood development and health system that ensures a child entering school comes healthy and ready to succeed; and for medically needy healthcare programs. The Judicial and Legal Services Fund accounts for the anti-racketeering, consumer protection, consumer fraud, anti-trust, and collections enforcement programs of the Attorney General’s Office and statewide court improvement functions supervised by the Arizona Supreme Court. The Regulating and Licensing Fund accounts for inspection and regulatory services provided to the general public. The Game and Fish Fund accounts for the receipt of monies collected by the Department of Game and Fish for various hunting and fishing licenses, for the purpose of conserving, enhancing, and restoring Arizona’s diverse wildlife resources and habitats, as well as providing safe watercraft and off-highway vehicle recreation. The State Parks Development Fund accounts for the receipt of monies collected by the State Parks Fund for the purpose of acquiring and developing State park lands, sites and facilities. The Business Development Fund accounts for the promotion of statewide economic and community development, which supports a globally competitive Arizona. The Educational Programs Fund accounts for supplemental building needs and instructional improvement programs specifically identified in a voter initiative that enacted a six-tenth of one percent statewide sales tax dedicated to education functions. The Educational Programs Fund supports programs from the kindergarten through university educational levels. The Groundwater Protection and Conservation Fund accounts for strategic water resources planning, Colorado River water management, drought management planning, dam safety, flood mitigation, administration of the Arizona Groundwater Management Code, and administration of water rights. These programs are the responsibility of the Department of Water Resources. The Clean Elections System Fund accounts for fines and fees collected to pay for campaign expenses of statewide candidates and State legislative candidates who choose not to accept private source campaign funds. The fund was established as a result of a voter initiative. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR SPECIAL REVENUE FUNDS JUNE 30, 2009 (Expressed in Thousands) PUBLIC SAFETY & CORRECTIONAL ENVIRONMENTAL PROGRAMS PROTECTION ASSETS Cash Cash and pooled investments with State Treasurer Collateral Investment Pool Receivables, net of allowances: Taxes Interest Other Due from others Due from other Funds Inventories, at cost Restricted assets: Cash and pooled investments with State Treasurer Other Total Assets $ $ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities $ Accrued liabilities Obligations under securities loan agreements Due to local governments Due to others Due to other Funds Unavailable deferred revenue Unearned deferred revenue Total Liabilities Fund Balances: Reserved for: Continuing appropriations Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 3,415 $ 14 HEALTHCARE & SOCIAL SERVICES $ - TOBACCO TAX & HEALTHCARE $ - JUDICIAL & LEGAL SERVICES $ REGULATING & LICENSING - $ 21 7,979 - 3,866 - 33,237 - 380,374 4,014 5,722 - 6,260 - 5,060 105 105 24 75,516 95 134 2 40,592 - 1,069 14 7,809 1,751 - 15,682 927 104 - 67 3 53,512 - 52 2,855 56,393 - - - 1,053 11 - - - 92,299 $ 44,608 $ 44,944 $ 401,101 $ 59,304 $ 65,581 12,417 681 $ 2,687 1,074 $ 1,906 21,602 $ 10,388 576 $ 3,933 1,179 $ 1,890 3,351 22 550 33 13,703 25 3,786 1,893 954 769 27,124 4,014 9,739 24,717 27 5,139 72 1,443 6,756 5,671 72,925 78,596 1,012 39,810 40,822 296 17,524 17,820 376,384 376,384 62 54,103 54,165 1,905 56,920 58,825 92,299 $ 44,608 - 166 - $ 44,944 $ 401,101 $ 59,304 $ 65,581 GROUNDWATER STATE PARKS BUSINESS EDUCATIONAL PROTECTION & DEVELOPMENT DEVELOPMENT PROGRAMS CONSERVATION GAME & FISH $ 45 $ 1 $ - $ - $ - CLEAN ELECTIONS SYSTEM $ - TOTAL $ 3,496 39,322 - 3,324 - 5,360 1,370 97,670 12,328 24,531 - 28,172 - 635,817 17,712 97 1,945 1 - 105 30,367 - 132 22 42,394 - 42,785 11 11,802 24,552 - 85 - - 64,596 1,729 24,543 24 325,182 95 - - 1 - - - 1,053 12 $ 41,410 $ 33,797 $ 49,279 $ 189,148 $ 24,616 $ 28,172 $ 1,074,259 $ 2,015 2,015 $ 2,031 249 $ 236 220 $ 172 202 $ 376 97 $ 23 28 $ 38,074 31,274 $ 3 361 4,394 5 2,285 1,370 3 5 1,834 12,328 94,865 107,567 2 475 51 17,712 94,865 97 14,048 954 807 197,831 6,038 30,978 37,016 2 31,510 31,512 47,445 47,445 23,080 58,501 81,581 24,141 24,141 28,121 28,121 38,066 838,362 876,428 41,410 $ 33,797 $ 49,279 $ 189,148 $ - 167 - 24,616 $ 28,172 $ 1,074,259 STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) PUBLIC SAFETY & CORRECTIONAL ENVIRONMENTAL PROTECTION PROGRAMS REVENUES Taxes: Sales Income Tobacco Other Intergovernmental Licenses, fees, and permits Earnings on investments Sales and charges for services Fines, forfeitures, and penalties Gaming Other Total Revenues $ EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Natural resources Debt service: Principal Interest and other fiscal charges Capital outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures $ $ 2,006 281 54,387 746 68 762 4,719 62,969 $ 6,272 9,270 15,417 10,487 147 498 11,201 20,907 48 74,247 TOBACCO TAX & HEALTHCARE $ 280,495 4,771 15 8 285,289 JUDICIAL & LEGAL SERVICES $ 1,721 9,127 492 16,029 41,891 808 70,068 REGULATING & LICENSING $ 62,401 1,229 75,037 428 589 3,974 9,238 6,050 158,946 33,174 102,988 15,801 1,049 59,884 1,459 1,030 3,424 77,773 - 661 125,947 31,152 - 61,596 5 - 1,669 117,959 15 - 4,845 14,374 171,182 135 63,557 1 554 81,752 191 157,951 6 591 62,198 81 695 120,419 (588) (7,505) 127,338 7,870 38,527 9,704 (99,186) 50,521 (54,802) 6,233 (12,465) 73 (8,661) 6,346 (9,030) 800 (57,030) (89,482) (48,254) 126,850 (4,281) (4,869) 45,691 (6,232) (13,737) 31,557 (8,588) 118,750 257,634 (2,684) 5,186 48,979 (56,230) (17,703) 76,528 41,228 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Capital lease and installment purchase contracts Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 17,762 5,180 53,062 66 16,663 1,159 6,756 94,201 17,561 212,410 HEALTHCARE & SOCIAL SERVICES 78,596 $ 40,822 - 168 - $ 17,820 $ 376,384 $ 54,165 $ 58,825 GAME & FISH $ $ 24,152 34,488 773 2,279 134 5,973 2,562 70,361 GROUNDWATER STATE PARKS BUSINESS EDUCATIONAL PROTECTION & DEVELOPMENT DEVELOPMENT PROGRAMS CONSERVATION $ 3,065 939 270 4,274 $ 2,284 2,522 682 394 30,026 35,908 $ 450,751 80 2,750 163 14,402 1,083 42,049 433 511,711 $ 5,428 834 32 4,045 10,339 CLEAN ELECTIONS SYSTEM $ 10,589 8,151 18,740 TOTAL $ 474,785 80 294,945 117,469 47,900 211,367 25,373 27,728 162,767 78,167 74,681 1,515,262 71,906 21,238 32,872 347 589,626 - 22,202 12,585 - 147,030 263,604 119,423 620,778 103,003 132,524 771 887 3,161 76,725 12,709 33,947 83 33,302 12 589,638 67 22,269 12,585 5,697 894 32,572 1,425,525 (6,364) (29,673) 2,606 (77,927) (11,930) 6,155 89,737 11,327 (6,144) 21,828 (28,461) 6,335 (47,105) 40,831 (487) 600 (19,130) (7,030) 154,598 (349,531) 922 6,105 (259) 37,275 (6,633) (36,306) 67,818 (40,770) (38,164) 85,609 40,344 (37,583) 119,164 (18,530) (30,460) 54,601 (7,030) (875) 28,996 922 (194,011) (104,274) 980,702 37,016 $ 31,512 $ 47,445 $ 81,581 $ - 169 - 24,141 $ 28,121 $ 876,428 STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) NON-MAJOR SPECIAL REVENUE FUNDS Board of Accountancy Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Department of Administration ADJC Ft Grant Landfill Closure FY01 - 02 Administrative Adjustments Administrative Adjustments Archives And History Building FY04 - 05 Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Government Building Defibrillators FY01 - 02 Government Building Defibrillators FY02 - 03 New Prison Complex FY99 - 00 Operating Lump Sum - Bus Subsidy Operating Lump Sum Appropriation Pioneers Home Plumbing Renovations FY01 - 02 Pioneers Home Plumbing Renovations FY03 - 04 Yuma Prison Water Treatment Upgrade FY06 - 07 Radiation Regulatory Agency Cash Transfer To General Fund MRTB Assistant Operating Lump Sum Appropriation Attorney General Administrative Adjustments Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Risk Management ISA Victims Rights Implementation Fund Victims Rights/Non Reverting - HB2427 FY 00 - 01 Department of Agriculture Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund $ FINAL BUDGET (Appropriations) 1,027,000 2,350,100 858,170 ACTUAL EXPENDITURE AMOUNTS $ 1,027,000 1,439,715 (7,104) 43,123 18,462 1,233 93,151 482,700 25,104,600 42,500 21,200 16 293 260,698 850,100 732,300 2,590 262,957 2,013,757 0 18,462 1,233 0 482,700 25,104,600 42,500 21,200 0 0 0 597,730 536,001 0 0 1,949,067 12,000 11,375 288,800 12,000 0 228,767 10,850 928 661 253,300 95,000 306,800 295,500 400 5,600 95,300 116,800 3,948,700 239,900 4,916,300 6,682,900 9,771,500 3,277,400 61,730 10,850 928 661 253,300 95,000 306,800 295,500 400 5,600 95,300 116,800 2,499,943 189,051 2,625,092 6,346,671 8,392,321 3,204,088 0 734 861 1,767 11,860 1,097 192 250,000 138,100 734 861 1,767 11,860 1,097 192 250,000 138,100 (Continued) - 170 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Service Fees Increase - General Service Fees Increase - Pesticide Wine Promotion Acupuncture Board of Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 State Board of Appraisal Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Automobile Theft Authority Automobile Theft Authority Grants Cash Transfer To General Fund Operating Lump Sum Appropriation Reimbursable Programs Board of Barbers Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Department of Financial Institutions Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Board of Behavioral Health Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 State Board of Nursing Cash Transfer To General Fund CNA Investigations Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 7,500 36,200 15,300 122,500 149,800 25,500 35,100 1,400 315,900 106,700 300,300 897,800 386,200 40,000 54,300 79,400 306,100 1,087,000 9,200 194,700 300,000 800,000 54,858 7,500 36,200 15,300 122,500 149,800 25,500 35,100 1,400 315,900 106,700 263,624 696,756 310,027 40,000 51,197 54,328 270,634 932,876 7,347 71,171 56,832 117,030 0 89,600 129,200 9,142 89,600 111,677 9,142 594,600 621,800 14,302 34,600 607,272 14,302 5,286,300 324,100 680,400 50,000 4,198,340 324,100 576,852 0 408,900 328,200 72,664 408,900 276,290 2,070 92,000 2,372,200 1,716,800 92,000 2,372,200 1,716,800 12,400 1,367,200 39,546 12,400 1,241,976 2,092 1,035,600 561,300 3,573,600 242,626 1,035,600 380,112 3,563,762 240,351 (Continued) - 171 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Board of Cosmetology Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Corporation Commission Administrative Adjustments Administrative Adjustments Annual Rev Public Access Fund ARS 10-122 Annual Reversion Per ARS 44-3298 Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfers Between Agency Funds Corporation Filings, Same Day Service Investigation & Prosecution of Securities Fraud Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Utilities, Audits, Studies, Invest, Hear Utilities, Audits, Studies, Invest, Hear FY03 - 04 Utilities, Audits, Studies, Invest, Hear FY04 - 05 Utilities, Audits, Studies, Invest, Hear FY05 - 06 Utilities, Audits, Studies, Invest, Hear FY06 - 07 Utilities, Audits, Studies, Invest, Hear FY07 - 08 Early Childhood Development and Health Board Cash Transfer To General Fund State Board of Chiropractic Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Department of Corrections Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Correctional Officer PS And ERE Correctional Officer PS And ERE Drug Treatment Pilot Program Health Care All Other Operating Exp New State Prisons Beds Non-Health Care All Other Operating Exp Non-Health Care All Other Operating Exp Non-Health Care All Other Operating Exp FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 1,820,200 1,747,800 11,993 1,820,200 1,360,988 2,989 21,740 740 545,047 642,253 3,676,000 144,300 1,798,200 604,300 1,125,200 239,200 400,400 165,599 14,087,900 3,946,000 4,431,600 928,600 380,000 343,471 380,000 380,000 380,000 380,000 21,740 740 545,047 642,253 3,676,000 144,300 1,798,200 604,300 1,125,200 239,200 0 0 13,655,957 3,153,003 3,463,267 881,584 0 343,471 380,000 203,070 0 0 7,000,000 7,000,000 71,600 520,400 5,809 71,600 452,871 5,807 1,204,457 5,901 72,885 83,103 324,478 182,666 1,200 15,600 1,330,000 100,000 170,500 909,400 69,563 310,937 358 10,432,500 2,822,000 599,300 600,000 817,500 1,204,457 5,901 72,885 83,103 324,478 182,666 1,200 15,600 1,330,000 100,000 170,500 909,400 8,801 34,893 0 10,432,500 0 392,598 270,194 758,854 (Continued) - 172 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Non-Health Care All Other Operating Exp Non-Health Care All Other Operating Exp Private Prison Per Diem Private Prison Per Diem Private Prison Per Diem Provisional Beds Provisional Beds Department of Economic Security Adm Attorney General Legal Services Adm Operating Lump Sum - Hsif Adm Operating Lump Sum-PAC Fund Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund DACS Domestic Violence Prevention DCYF Child Abuse Prevention DCYF Children Support Svcs - Cap DCYF Operating Lump Sum Appropriation DDD--Autism Training & Oversight DERS Independent Living Rehab Services DERS Jobs DERS Operating Lump Sum - Hsia DERS Operating Lump Sum Appropriation DERS Vocational Rehabilitation Services Commission for the Deaf and Hard of Hearing Administrative Adjustments Cash Transfer To General Fund Interpreters For Certification, Licensure Operating Lump Sum Appropriation Department of Juvenile Corrections Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Board of Dispensing Opticians Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 State Board of Dental Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Department of Education Achievement Testing - Prop 301 Achievement Testing - Prop 301 FY07-08 FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 198,700 1,240,500 28,674,300 800,000 1,000,000 3,000,000 1,056,200 188,886 1,208,723 25,460,667 800,000 1,000,000 1,937,888 229,950 108,800 39,500 407,800 294,996 752,340 67,945 248,221 214,106 2,989,500 787,500 182,100 230,300 1,006,100 550,000 2,400,000 826,900 750,000 209,600 200,000 1,797,700 1,500,000 523,800 74,400 204,700 15,970 0 166,740 294,996 752,340 67,945 248,221 214,106 2,989,500 787,500 182,100 230,300 1,006,100 550,000 2,153,850 43,099 750,000 165,138 0 1,592,382 1,046,300 428,885 0 58,390 15,523 2,553,500 418,912 5,441,100 15,523 2,553,500 123,155 3,794,444 231,600 686,600 4,298,600 231,600 615,101 4,073,548 1,100 124,300 4,944 1,100 123,860 4,944 1,498,000 1,102,800 34,933 1,498,000 1,081,453 34,489 2,340,300 1,764,166 130,298 1,764,166 (Continued) - 173 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Additional School Days-Prop 301 FY07 - 08 Additional School Days-Prop 301 FY08 - 09 Basic State Aid Entitlement Cash Transfer To General Fund Cash Transfer To General Fund Character Education - Prop 301 FY07 - 08 Character Education - Prop 301 FY08 - 09 Character Education FY05 - 06 Character Education FY06 - 07 Failing School Tutoring Fund - Prop 301 Failing School Tutoring Fund - Prop 301 School Accountability - Prop 301 School Accountability Fund - Prop 301 School Accountability Fund - Prop 301 School Accountability Fund - Prop 301 FY07 - 08 School Accountability-Sch Safety Prop301 School Accountability-Sch Safety Prop301 FY07 - 08 Department of Commerce Administrative Adjustments Administrative Adjustments Advertising And Promotion Arizona Sonora Trade Office Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund CEDC Commission Economic Development Matching Funds International Trade Offices Main Street Minority & Women Owned Business National Law Center/Free Trade Oil Overcharge Administration Operating Lump Sum Appropriation Reid Matching Grants Small Business Advocate Department of Environmental Quality Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Air Quality Management And Analysis Air Quality Management And Analysis Air Quality Program - Continuing FY01 - 02 Air Quality Program - Continuing FY02 - 03 Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 14,380,083 86,280,500 45,220,700 100,000 133,800 200,000 200,000 40,136 200,000 1,500,000 391,951 476,798 4,659,700 211 3,600,713 7,800,000 2,376 14,380,083 71,600,417 45,220,700 100,000 133,800 200,000 13,394 40,136 200,000 251,739 391,951 393,819 1,113,042 211 3,271,428 7,004,046 2,376 68 38,879 659,200 25,000 10,700 299,700 6,663,300 1,100 5,196,100 286,200 104,000 966,800 130,000 129,600 200,000 184,900 682,100 45,000 127,000 68 38,879 307,948 25,000 10,700 299,700 6,663,300 1,100 5,196,100 252,409 77,812 705,132 114,628 121,042 200,000 0 608,901 28,631 118,433 413 143,661 21,215 5,077 1,175 5,650,800 5,992,300 186,035 182,451 8,178,000 13,109,300 8,435,000 14,635,400 3,527,100 413 143,661 21,215 5,077 1,175 4,923,440 5,752,174 0 0 8,178,000 13,109,300 8,435,000 14,635,400 3,527,100 (Continued) - 174 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Clean Water Revolving Fund Supplemental Emissions Cap & Trading Program FY01 - 02 Emissions Cap & Trading Program FY02 - 03 Emissions Control - Contractor Payments Emissions Control Program-Administration Hazardous Waste Reserve Hazardous Waste Reserve Political Subdivisions Assistance FY01 - 02 Reversion Of Fund 2240 Roadside Diesel Emissions Testing Prog FY01 - 02 Roadside Diesel Emissions Testing Prog FY02 - 03 Service Fees Increase - Solid Waste Transfers To Counties Program Underground Storage Tank Assurance Underground Storage Tank Policy Comm FY00 - 01 Underground Storage Tank Policy Comm FY99 - 00 Underground Storage Tank Policy Commission Underground Storage Tank Tech Appeals FY00 - 01 Underground Storage Tank Technical Appeals Visibility Index Development FY01 - 02 Visibility Index Development FY02 - 03 Waste Control And Management Waste Control And Management Waste Control And Management Waste Control And Management Waste Tire Program Water Quality Program State Board of Funeral Directors & Embalmers Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Office of the State Forester Cash Transfer To General Fund Cash Transfer To General Fund Game and Fish Department Administrative Adjustments Administrative Adjustments Becker Lake Facilities Improvements Becker Lake Wildlife Area Bridge Bellemont Shooting Range FY05 Black Canyon Dam Modifications FY06 Black Canyon Dam Modifications FY07 Boat Registration Kiosks Boat Registration Kiosks Boat Shade Canopies Boat Shade Canopies Building Renewal FY02 - 03 Building Renewal FY06 - 07 FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 651,100 2,778,500 1,332,900 11,700 508,200 1,491,100 5,000,000 70,576 266,582 33,239,600 4,231,100 29,273 64,000 18,500 66,164 200,000 200,000 600,000 165,000 2,000 1 18,857 10,000 7,500 10,000 80,589 10,099 795,000 2,325,800 1,275,800 137,800 227,300 5,887,000 651,100 2,778,500 1,332,900 11,700 508,200 1,491,100 4,637,059 0 0 25,454,705 2,699,629 0 0 0 66,164 0 0 0 165,000 0 0 0 1,301 0 0 0 0 163,284 2,078,407 962,876 662 47,894 4,086,114 495,700 350,000 44 495,700 329,926 44 940,200 1,145,200 940,200 1,145,200 252,054 87,140 74,884 52,000 800,000 499,000 294,526 240,000 240,000 77,573 120,000 1 171 252,054 87,140 3,413 33,475 0 0 34,511 0 0 31,231 0 0 0 (Continued) - 175 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Building Renewal FY07 - 08 Building Renewal FY08 - 09 Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cluff Ranch Access Improvements Facility Improvements 01/02 Facility Improvements 02/03 Flagstaff Shooting Range Dev 00/01 Flagstaff Shooting Range Plng 01/02 Flagstaff Shooting Range Plng 02/03 Flood Warning System Headquarters Construction Headquarters Exp & Renovation 02/03 Headquarters Paving FY05 Headquarters Security System House Rock Driveway Surfacing Lake Havasu Shooting Range Development Lower Colorado Multi-Species Conservation Mesa Office Security System FY05 Microwave Communications System Migratory Waterfowl Dev 00/01 Migratory Waterfowl Development Migratory Waterfowl Development 01/02 Migratory Waterfowl Development 02/03 Migratory Waterfowl Habitat 93/94 Migratory Waterfowl Habitat FY06 Migratory Waterfowl Habitat FY07 Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Performance Based Incentives Program Performance Incentive Pay Program Performance Incentive Pay Program Performance Incentive Pay Program Pinetop Warehouse And Paving Pittman-Robertson/Dingell-Johnson Act Regional (Mesa) Office Remodel/Expansion Regional (Yuma) Office Remodel/Expansion Regional (Flagstaff) Office Remodel/Expansion Robbins Butte Levee Shade Canopies FY05 Shooting Range Access Improvements Shooting Range Dev/Grants Program FY08 Shooting Range Dev/Grants Program FY09 Shooting Range Development 02/03 Shooting Range Improvements Shooting Range Improvements Silver Creek Hatchery Improvement FY05 FINAL BUDGET (Appropriations) 135,422 531,000 2,994,500 1,900 3,300 264,600 197,900 100,000 6,407 30,292 5 33,349 459,179 499,900 98,465 80,000 1,649 1 4,188 5,001 297,502 350,000 4,024 207,000 62,979 65,215 69,500 78,119 1,302 93,761 100,000 27,970,500 4,152,600 329,900 43,400 16,000 322 300,000 46,800 1,076 11 2,808,000 250,000 954,000 1,050,000 147,934 1 198,749 25,309 100,000 1 18,418 150,000 475 ACTUAL EXPENDITURE AMOUNTS 135,110 317,004 2,994,500 1,900 3,300 264,600 197,900 100,000 6,407 30,292 0 0 22,500 0 68,848 80,000 1,646 0 2,413 4,972 0 350,000 4,000 207,000 19,870 3,500 13,000 25,000 0 15,766 225 24,694,045 1,834,484 292,642 18,658 0 0 300,000 46,800 0 0 2,808,000 0 0 138,507 9,480 0 198,747 25,309 82,242 0 18,416 149,625 292 (Continued) - 176 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Statewide Preventative Maintenance Statewide Preventative Maintenance Statewide Preventative Maintenance FY05 Statewide Preventative Maintenance FY06 Tonto Creek Hatchery Improvements FY05 Tri-State Shooting Range Dev. FY05 W.C. Performance Based Incentives Progrm Watercraft Grant Program Watercraft Safety Education Program Yuma Office Fence Yuma Office Security System Department of Gaming Administrative Adjustments Casino Operation Certification Joint Monitoring System Operating Lump Sum Appropriation Problem Gambling Problem Gambling Arizona Geological Survey Cash Transfer To General Fund Governor's Office Cash Transfer To General Fund Cash Transfer To General Fund Arizona Health Care Cost Containment System Administrative Adjustments Capitation Cash Transfer To General Fund Children's Health Insurance Program - Parents Children's Health Insurance Program - Services KidsCare Administration Prop 204 - Capitation Prop 204 - Capitation Prop 204 Medicare Arizona Department of Housing Cash Transfer To General Fund Cash Transfer To General Fund Operating Lump Sum Appropriation Homeopathic Medical Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Department of Health Services Administrative Adjustments Administrative Adjustments Administrative Adjustments Administrative Adjustments Alzheimer Disease Research Assurance And Licensure Attorney General Legal Services Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 110 30,000 7 1 133,134 300,000 2 250,000 1,175,000 10,000 30,000 0 29,996 0 0 0 351 0 0 0 0 0 613 2,247,200 2,442,100 8,686,600 300,000 2,885,100 613 1,891,155 145,775 7,789,712 300,000 1,716,555 21,300 21,300 60,300 31,500 60,300 31,500 645,010 49,692,700 195,700 24,764,400 90,270,900 8,735,600 4,045,400 13,644,300 9,687,500 645,010 47,730,888 195,700 24,699,594 89,500,933 7,731,098 2,962,863 13,644,300 8,487,501 3,875,300 29,073,300 944,800 3,875,300 29,073,300 911,300 900 117,300 1,541 900 115,677 1,541 861,495 215,582 653,532 89 1,000,000 38,000 50,000 25,798 4,600 1,813,200 1,781,300 1,079,300 861,495 215,582 653,532 89 1,000,000 0 50,000 25,798 4,600 1,813,200 1,781,300 1,079,300 (Continued) - 177 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Child Fatality Review Team Child Fatality Review Team Community Health Centers Ems Operations Folic Acid High Risk Perinatal Services Laboratory Services Loan Repayment Newborn Screening Fund - Indirect Costs Newborn Screening Program Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Seriously Mentally Ill Non-Title XIX Service Fees Increase Substance Abuse - Non Title XIX Substance Abuse - Non Title XIX Trauma Advisory Board Industrial Commission of Arizona Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Operating Lump Sum Appropriation Department of Insurance Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfers Between Agency Funds Cash Transfers Between Agency Funds Arizona Criminal Justice Commission Administrative Adjustments Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Crime Victim Comp Special Ag Transfer Drug And Gang Prevention Resource Center Operating Lump Sum Appropriation State Aid To County Attorneys State Aid To Indigent Defense Victim Compensation & Assistance Land Department Natural Resource Conservation Districts Department of Liquor Licenses and Control Cash Transfer To General Fund Division of Emergency Management & Military Affairs Operating Lump Sum-Em Response Fund FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 300 138,500 187,800 10,000 779,061 147,200 99,100 4,500,000 3,233,800 400,000 450,000 970,600 650,000 478,600 6,326,700 209,400 837,300 1,150,000 31,424,800 600,000 1,500,000 1,000,000 405,400 300 138,500 187,800 10,000 779,061 123,324 92,675 3,415,592 2,928,564 333,697 355,856 821,317 137,030 0 5,384,106 209,400 693,998 1,039,076 25,785,471 521,760 1,375,000 1,000,000 337,395 20,286 109,500 10,693,200 19,859,700 20,286 109,500 10,693,200 17,592,007 1,220,800 900 17,300 58,200 55,000 1,220,800 900 17,300 58,200 55,000 380 1,359 1,937,900 774,700 1,550,000 1,599,600 8,202 302,400 785,200 1,052,500 999,200 4,100,000 380 1,359 1,937,900 774,700 1,550,000 1,599,600 8,202 302,400 755,566 886,733 841,667 3,996,648 260,000 260,000 681,500 681,500 132,700 132,700 (Continued) - 178 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Medical Examiners Board Cash Transfer To General Fund Litigation Expenses Operating Lump Sum Appropriation Operating Lump Sum Appropriation Mine Inspector Reclamation Mines and Mineral Resources Cash Transfer To General Fund Naturopathic Physicians Board of Medical Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Nursing Care Examiners Board Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Board of Optometry Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Arizona Board of Osteopathic Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Board of Occupational Therapy Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Commission on Drug Education Cash Transfer To General Fund Commission for Postsecondary Education Administrative Adjustments Arizona College And Career Guide AZ Minority Ed Policy Analysis Center Cash Transfer To General Fund Family College Savings Program Leveraging Educational Assistance Prtshp Operating Lump Sum Appropriation Twelve Plus Partnership Arizona Pioneers' Home Administrative Adjustments All Other Operating Expenditures All Other Operating Expenditures Prescription Drugs PS/Employee Related Expenses (ERE) PS/Employee Related Expenses (ERE) PS/Employee Related Expenses (PS) PS/Employee Related Expenses (PS) State Board of Pharmacy Cash Transfer To General Fund FINAL BUDGET (Appropriations) 52,100 135,501 5,822,600 318,709 52,100 135,501 5,395,725 20,941 177,700 57,133 8,500 8,500 624,100 181,290 423,010 4,662 10,772 624,100 175,291 409,008 4,662 10,772 1,200 377,700 62,433 1,200 275,365 62,433 187,500 202,200 14,521 187,500 183,150 14,521 541,100 698,700 305 541,100 592,272 (1,152) 241,700 73,470 171,430 10,242 9,305 241,700 62,997 144,045 1,736 119 1,076,700 1,076,700 130 21,200 100,000 17,800 147,400 3,043,700 409,900 130,500 130 12,668 32,194 17,800 118,259 2,712,987 177,967 117,951 909 40,500 920,000 258,000 1,063,000 601,200 2,326,000 1,466,400 909 6,309 829,423 168,532 1,061,000 590,658 2,187,224 1,211,455 549,700 - 179 - ACTUAL EXPENDITURE AMOUNTS 549,700 (Continued) STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Board of Podiatry Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Parks Board Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfers Between Agency Funds Cash Transfers Between Agency Funds Off Highway Vehicle Parks Operations Operating Lump Sum Appropriation Operating Lump Sum Appropriation Parks Heritage Fund To Fire Suppression Parks Heritage Fund To Fire Suppression FY88-89 Pass Thru Grants FY89-90 Pass Thru Grants FY90-91 Pass Thru Grants Land, Buildings and Improvements FY89-90 Land, Buildings and Improvements FY89-90 Land, Buildings and Improvements FY90-91 Land, Buildings and Improvements FY90-91 Land, Buildings and Improvements FY90-91 Department of Public Safety Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund DNA Testing DNA Testing DNA Testing DNA Testing Motor Vehicle Fuel Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Operating Lump Sum Appropriation Photo Enforcement Fund-DPS Operating Photo Enforcement Fund-Vendor Payments FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 1,920,900 240,462 1,617,383 3,837 800 143,600 35,158 800 98,620 35,158 48,900 16,820,300 500,000 1,692,900 1,978,100 8,300 2,000,000 1,000,000 692,100 548,000 1,878,700 1,700,000 1,300,000 10,436 40,191 2,067,639 4,388 258,697 1,500 19,258 32,684 48,900 16,820,300 500,000 1,692,900 1,978,100 8,300 2,000,000 1,000,000 669,791 248,054 1,863,843 1,700,000 1,300,000 0 0 0 0 0 0 0 0 38,547 4,127,300 542,100 846,500 146,000 518,300 2,613,200 125,000 108,200 113,900 50,700 777,500 980,000 1,174,665 742,621 1,258,331 231,300 21,992,000 5,847,900 3,293,400 3,624,600 3,539,500 3,292,100 2,173,000 20,361,300 38,547 4,127,300 542,100 846,500 146,000 518,300 2,613,200 125,000 108,200 113,900 50,700 777,500 749,549 236,133 63,917 0 231,300 19,058,977 5,101,900 3,262,513 3,011,400 3,539,500 3,292,100 2,093,651 4,644,324 (Continued) - 180 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Photo Enforcement-Admin Office Of Courts Photo Enforcement-General Fund Reversion Public Safety Equipment Physical Therapy Examiners Board Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Private Postsecondary Education Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation FY07 - 08 Board of Respiratory Care Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Department of Racing Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Real Estate Department Cash Transfer To General Fund Registrar of Contractors Cash Transfer To General Fund Cash Transfer To General Fund Incentive Pay Incentive Pay Information Management System Information Management System Office Of Administrative Hearing Operating Lump Sum Appropriation Operating Lump Sum Appropriation Department of Revenue Operating Lump Sum Appropriation Structural Pest Control Commission Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Schools for the Deaf and the Blind Operating Lump Sum - Phoenix Operating Lump Sum - Preschool/Outreach Operating Lump Sum - Tucson Voucher Fund ADJC - Preschool/Outreach Voucher Fund Adjustment - Phoenix Voucher Fund Adjustment - Tucson Supreme Court Administrative Adjustments Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 4,056,600 4,879,732 3,000,000 3,075,196 4,879,732 500,000 3,400 360,200 27,056 3,400 334,556 13,836 145,900 334,700 30,188 145,900 327,728 29,700 2,700 261,600 34,240 2,700 256,798 34,065 200 13,100 318,200 415,100 66,800 446,800 200 13,100 318,200 415,100 58,932 427,659 5,000 5,000 2,133,200 6,600,000 113,700 62,712 506,500 3,089,054 1,002,300 10,524,500 643,787 2,133,200 6,600,000 113,700 62,711 209,163 1,666,271 1,002,300 8,904,781 104,072 662,800 661,484 581,700 2,774,300 383,926 581,700 2,205,536 22,469 4,727,200 2,534,800 6,554,900 519,000 299,800 59,700 4,727,200 2,534,800 6,554,900 519,000 299,800 59,700 1,000 2,764,100 507,200 154,400 1,308,500 1,000 2,764,100 507,200 154,400 1,308,500 (Continued) - 181 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Cash Transfer To General Fund Cash Transfer To General Fund Community Punishment Community Punishment Court Appointed Special Advocate Drug Study Juvenile Crime Reduction Operating Lump Sum Appropriation Photo Enforcement Fund Reg Activities - Conf Intermediary State Aid State Aid State Board of Psychologist Examiners Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation State Board of Technical Registration Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Residential Utility Consumer Office Administrative Adjustments Cash Transfer To General Fund Operating Lump Sum Appropriation Professional Witnesses Professional Witnesses FY01 - 02 Professional Witnesses FY02 - 03 Professional Witnesses FY03 - 04 Professional Witnesses FY04 - 05 Professional Witnesses FY05 - 06 Professional Witnesses FY06 - 07 Professional Witnesses FY07 - 08 Department of Veterans' Services Administrative Adjustments Operating Lump Sum Appropriation Veterinary Medical Examiners Board Cash Transfer To General Fund Operating Lump Sum Appropriation Operating Lump Sum Appropriation Water Resources Department Assured & Adequate Water Supply Admin Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund Cash Transfer To General Fund HB2209 Offset GF Reduction Water Banking Administrative Adjustments FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 719,600 256,300 1,820,400 500,000 3,449,200 38,514 5,197,800 484,600 4,056,600 147,839 3,053,500 2,945,300 719,600 256,300 1,498,615 494,926 2,713,659 0 4,137,887 319,762 2,369,887 0 2,947,996 2,847,497 567,600 407,900 19,065 567,600 305,758 19,065 992,200 1,745,200 297,388 992,200 1,392,745 1,144 757 173,400 1,157,000 145,000 2,909 5,617 16,194 53,761 128,373 119,576 114,464 757 173,400 1,049,472 31,151 2,909 4,855 0 41,833 82,804 0 0 250 747,500 250 739,870 613,800 468,300 28,161 613,800 376,797 (5,571) 1,119,100 2,213,300 15,227,500 464,800 645,900 324,800 66,300 87,600 6,900,000 3,000,000 34,044 1,011,783 2,213,300 15,227,500 464,800 645,900 324,800 66,300 87,600 6,900,000 3,000,000 34,044 (Continued) - 182 - STATE OF ARIZONA BUDGETARY COMPARISON SCHEDULE, EXPENDITURES NON-MAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Dollars) Weights and Measures Department Cash Transfer To General Fund Operating Lump Sum - Vapor Recovery Operating Lump Sum Appropriation Operating Lump Sum-Oxygenated Fuel Total Non-Major Special Revenue Funds Budgetary Expenditures FINAL BUDGET (Appropriations) ACTUAL EXPENDITURE AMOUNTS 118,100 651,550 324,000 891,350 $ - 183 - 1,207,695,036 118,100 622,499 293,446 787,824 $ 1,055,795,553 NON-MAJOR GOVERNMENTAL FUNDS DEBT SERVICE FUNDS The Department of Transportation Fund administers the payment of principal and interest on the Highway Revenue Bonds issued by the Arizona Department of Transportation Board and the retirement of previously issued revenue bonds. The Maricopa Regional Area Road Fund (RARF) administers the payment of principal and interest on the Arizona Transportation Excise Tax Revenue Bonds issued by the Arizona Department of Transportation Board and the retirement of previously issued revenue bonds. The Certificates of Participation Fund administers the payment of principal and interest on the certificates of participation issued by the State of Arizona (acting by and through the Director of the Department of Administration) and the retirement of previously issued certificates of participation. The School Facilities Debt Instrument Fund administers the payment of principal and interest on revenue bonds issued by the State of Arizona’s School Facilities Board and the retirement of previously issued revenue bonds. The Grant Anticipation Notes Fund administers the payment of principal and interest on grant anticipation notes issued by the Arizona Department of Transportation Board and the retirement of previously issued grant anticipation notes. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR DEBT SERVICE FUNDS JUNE 30, 2009 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION ASSETS Cash and pooled investments with State Treasurer Collateral Investment Pool Interest receivable Restricted assets: Cash and pooled investments with State Treasurer Cash held by trustee Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Obligations under securities loan agreements Total Liabilities $ 2,793 275 MARICOPA RARF $ CERTIFICATES OF PARTICIPATION 50 2,176 - SCHOOL FACILITIES DEBT INSTRUMENT $ 330 - 2,772 - $ 3,224 18,339 171 - $ 5,244 $ 380 $ 5,996 $ 18,510 $ - $ - $ 401 $ - 2,793 2,793 - 401 - Fund Balances: Reserved for debt service $ 2,451 $ 380 $ 5,595 $ 18,510 Total Liabilities and Fund Balances $ 5,244 $ 380 $ 5,996 $ 18,510 - 186 - GRANT ANTICIPATION NOTES $ TOTAL 1 $ 21,111 2,793 497 178 - 2,684 3,224 $ 179 $ 30,309 $ - $ 401 - - 2,793 3,194 $ 179 $ 27,115 $ 179 $ 30,309 - 187 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR DEBT SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) DEPARTMENT OF TRANSPORTATION REVENUES Sales taxes Earnings on investments Total Revenues $ EXPENDITURES Debt service: Principal Interest and other fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 2,000 2,000 MARICOPA RARF $ SCHOOL FACILITIES DEBT INSTRUMENT CERTIFICATES OF PARTICIPATION 191 191 $ 75 75 $ 65,811 2,101 67,912 64,190 89,872 154,062 13,825 17,202 31,027 22,215 16,362 38,577 50,525 38,031 88,556 (152,062) (30,836) (38,502) (20,644) 151,717 151,717 (345) 2,796 30,974 30,974 138 242 28,318 (750) 27,568 (10,934) 16,529 25,857 (2,198) 23,659 3,015 15,495 2,451 $ - 188 - 380 $ 5,595 $ 18,510 GRANT ANTICIPATION NOTES $ $ TOTAL 5 5 $ 65,811 4,372 70,183 24,050 14,490 38,540 174,805 175,957 350,762 (38,535) (280,579) 38,540 38,540 5 174 275,406 (2,948) 272,458 (8,121) 35,236 179 $ 27,115 - 189 - NON-MAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUNDS The Department of Transportation Financed Fund administers the proceeds from the Highway Revenue Bonds issued by the Arizona Department of Transportation Board. These monies are expended for the construction of federal, state, and local highways. The Grant Anticipation Notes Financed Fund administers proceeds from Arizona Transportation Board Grant Anticipation Notes. These monies are expended for the acquisition of right-of-way purchase, or construction of certain controlled access highways within Maricopa County. The Certificates of Participation Financed Fund administers the proceeds from the certificates of participation issued by the State of Arizona (acting by and through the Director of the Department of Administration). These monies are expended on various projects including new building construction and the development of the Human Resource Information System. The Maricopa Regional Area Road Debt Financed Fund (MRARF) administers the bond proceeds from the Transportation Board of the State of Arizona Transportation Excise Tax Revenue Bonds. These monies are spent on the construction of State highways within Maricopa County. STATE OF ARIZONA COMBINING BALANCE SHEET NON-MAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2009 (Expressed in Thousands) GRANT ANTICIPATION NOTES FINANCED DEPARTMENT OF TRANSPORTATION FINANCED ASSETS Collateral Investment Pool Receivables, net of allowances: Interest Due from other Funds Restricted assets: Cash and pooled investments with State Treasurer Cash held by trustee Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Due to other Funds Total Liabilities $ $ 2,107 $ 2,649 MRARF DEBT FINANCED $ - 755 - 148 - 394 - 559 13 225,615 - 69,975 - 93,516 30,510 488,677 - $ 247,410 $ 72,230 $ 127,069 $ 489,249 $ - $ 3,254 - $ 16,239 52 $ 494 - Fund Balances: Reserved for: Highway construction Other construction Total Fund Balances Total Liabilities and Fund Balances 21,040 CERTIFICATES OF PARTICIPATION FINANCED $ 21,040 21,040 2,107 8 5,369 2,649 18,940 494 226,370 226,370 66,861 66,861 108,129 108,129 488,755 488,755 247,410 $ 72,230 - 192 - $ 127,069 $ 489,249 TOTAL $ 25,796 1,856 13 877,783 30,510 $ 935,958 $ 19,987 52 25,796 8 45,843 781,986 108,129 890,115 $ 935,958 - 193 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR CAPITAL PROJECTS FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) GRANT ANTICIPATION NOTES FINANCED DEPARTMENT OF TRANSPORTATION FINANCED REVENUES Earnings on investments Total Revenues $ EXPENDITURES Current: Transportation Debt service: Interest and other fiscal charges Capital outlay Total Expenditures (Deficiency) of Revenues Over Expenditures 10,021 10,021 $ 3,576 3,576 $ 4,187 4,187 13,638 - 3,869 1,110 142,895 170,617 467 34,200 48,305 134,432 134,432 2,390 281,980 288,239 (160,596) (47,147) (130,856) (284,052) (17,632) 181,050 Grant anticipation notes issued Premium on debt issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning 7,550 170,968 10,372 215,998 $ 1,158 1,158 26,612 OTHER FINANCING SOURCES (USES) Transfers out Bonds issued Fund Balances - Ending $ MRARF DEBT FINANCED CERTIFICATES OF PARTICIPATION FINANCED 226,370 - - 55,420 7,087 62,507 15,360 51,501 $ - 194 - 66,861 440,000 (130,856) 238,985 $ 108,129 43,486 483,486 199,434 289,321 $ 488,755 TOTAL $ 18,942 18,942 44,119 3,967 593,507 641,593 (622,651) (17,632) 621,050 55,420 58,123 716,961 94,310 795,805 $ 890,115 - 195 - NON-MAJOR ENTERPRISE FUNDS Enterprise Funds account for operations (a) financed and operated in a manner similar to private business enterprises, where the State intends that the cost of providing goods or services to the general public be financed or recovered primarily through service charges, or (b) where the State decides that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Arizona Industries for the Blind Fund accounts for the manufacturing, sale, distribution, and marketing of products manufactured by employees at training centers, workshops, business enterprises and home industries programs for the training and employment of adaptable visually impaired persons. The Arizona Correctional Industries Fund employs prison inmates in its manufacturing, service, and agricultural operations for the sale of goods and services primarily to other State agencies (including the Arizona Department of Corrections) and political subdivisions. The Arizona Highways Magazine Fund publishes and markets the Arizona Highways Magazine and various other products that promote the State of Arizona. The Coliseum & Exposition Center Fund provides rental space to a variety of entertainment and promotional lessees, and sponsors the annual State Fair. The Highway Expansion & Extension Loan Program provides the State and communities in Arizona a new financing mechanism to stretch limited transportation dollars and bridge the gap between needs and available revenues. The Healthcare Group of Arizona administers prepaid medical coverage primarily to small, uninsured businesses with 50 or fewer employees and employees of political subdivisions. The Healthcare Group of Arizona processes premium billing, collections and fund disbursements, performs data analysis, and is responsible for the regulatory oversight of the health plans. The Other Enterprise Funds consist of the State Hospital Revolving Fund, the State Home for Veterans Trust Fund, and the Arizona Beef Council. STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS JUNE 30, 2009 (Expressed in Thousands) ASSETS Current Assets: Cash Cash and pooled investments with State Treasurer Restricted cash and pooled investments with State Treasurer Collateral Investment Pool Short-term investments Receivables, net of allowances: Interest Loans and notes Other Due from U.S. Government Due from other Funds Inventories, at cost Other current assets Total Current Assets ARIZONA ARIZONA COLISEUM & INDUSTRIES CORRECTIONAL HIGHWAYS EXPOSITION & EXTENSION FOR THE BLIND INDUSTRIES MAGAZINE CENTER LOAN PROGRAM $ Noncurrent Assets: Restricted assets: Loans and notes receivable, net of allowances Capital assets: Land and other non-depreciable Buildings, equipment, and other depreciable, net of accumulated depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Obligations under securities loan agreements Due to local governments Due to other Funds Unearned deferred revenue Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities Noncurrent Liabilities: Contracts payable Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Loans and other financial assistance: Expendable Other Unrestricted (deficit) Total Net Assets HIGHWAY ARIZONA $ 1,683 $ 62 $ - $ EXPANSION 21 $ - 420 5,722 1,531 5,395 - - - - 809 - 50,586 2,691 - 4 2,056 235 9 2,289 2 6,698 4 5,035 3,361 87 14,271 5 291 12 460 246 2,545 3 13 6,241 482 8,391 62,150 - - - - 15,660 182 804 8 179 - 732 914 7,612 2,704 3,508 17,779 124 132 2,677 8,502 8,681 14,922 15,660 77,810 573 449 3,782 607 128 82 75 119 7 194 1,216 520 83 332 5,324 2,614 131 2,955 194 2,691 31 12 2,741 72 72 1,288 226 226 5,550 2,955 168 168 362 2,741 914 3,199 132 8,681 - 5,410 9,030 (410) 5,879 75,069 - 6,324 $ 12,229 - 198 - $ (278) $ 14,560 $ 75,069 HEALTHCARE GROUP OF ARIZONA $ OTHER - $ 171 $ 1,937 11,676 391 25,135 - 103 51,395 2,691 103 257 11,933 1,878 65 2,608 495 8,391 9,520 235 86 6,110 348 106,446 - - 15,660 - 980 2,153 45 45 11,978 8,287 9,267 11,875 20,394 38,207 144,653 2,081 543 124 399 6,763 2,206 6,036 122 8,782 1 524 2,691 31 1 9,170 83 791 21,736 13,985 13,985 22,767 524 13,985 226 240 14,451 36,187 45 9,267 22,238 20 2,064 75,069 20 11,139 (10,834) $ TOTAL (10,789) $ 11,351 $ 108,466 - 199 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS NON-MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) HIGHWAY OPERATING REVENUES Sales and charges for services Intergovernmental Licenses, fees, and permits Earnings on investments Other Total Operating Revenues ARIZONA ARIZONA ARIZONA COLISEUM & INDUSTRIES CORRECTIONAL HIGHWAYS EXPOSITION & EXTENSION FOR THE BLIND INDUSTRIES MAGAZINE CENTER LOAN PROGRAM $ OPERATING EXPENSES Cost of sales and benefits Interest Personal services Contractual services Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) $ 31,943 31,943 11,396 5,556 2,288 344 1,019 20,603 (185) NON-OPERATING REVENUES (EXPENSES) Gain (loss) on sale of capital assets Investment income Other non-operating revenue Interest Expense Other non-operating expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers Change in Net Assets Total Net Assets - Beginning (147) 2,917 97 - (1,237) 6,324 12,229 - 200 - $ 39 (2) 37 403 1,680 10,549 $ 5,895 396 6,291 3,194 1,780 701 40 10 200 5,925 366 189 21 (48) (35) 127 (50) 6,374 $ $ 25,034 2,662 141 496 820 29,153 2,790 2 37 (1) 38 Transfers in Transfers out Total Net Assets - Ending 19,587 795 36 20,418 $ 10,820 896 11,716 EXPANSION $ 1,961 5,178 3,150 712 135 1,148 12,284 (568) 1,128 1,128 1,877 141 32 2 2,052 (924) 62 400 462 1,939 (59) 1,880 (106) 956 500 (1,483) (61) (580) 302 (167) 14,727 (278) $ 14,560 (2) 954 74,115 $ 75,069 HEALTHCARE GROUP OF ARIZONA $ 60,462 60,462 OTHER $ 53,495 2,425 764 58 563 57,305 3,157 199 (996) (797) 2,360 2,800 (152) $ TOTAL 12,763 60 633 40 13,496 $ 435 9,681 1,316 319 155 1,860 13,766 (270) 95,515 1,877 27,423 8,392 1,969 300 5,612 141,088 4,366 6 6 191 2,303 400 (49) (1,092) 1,753 (264) 6,119 - 5,008 (15,797) (264) 11,615 (10,789) $ 11,351 141,470 855 633 1,128 1,368 145,454 3,397 (2,935) 6,581 101,885 $ 108,466 - 201 - STATE OF ARIZONA COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 ARIZONA (Expressed in Thousands) INDUSTRIES FOR THE BLIND CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Receipts from grants and contracts Receipts from repayment of loans to local governments Receipts from other Funds Payments to suppliers or insurance companies Payments to employees Payments for loans to local governments Payments to other funds Other receipts (payments) Net Cash Provided (Used) by Operating Activities $ CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other Funds Payments of interfund loans Transfers to other Funds Other (payments) Net Cash Provided (Used) by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets Acquisition and construction of capital assets Interest paid on capital debt, installment purchase contracts, and capital leases Principal paid on capital debt, installment purchase contracts, and capital leases Other receipts Net Cash Provided (Used) by Capital and Related Financing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Interest Expense Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances Decrease in due from U.S. Government (Increase) decrease in due from other Funds Decrease in inventories, at cost Decrease in other assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase in due to local governments Increase (decrease) in due to other Funds Increase (decrease) deferred revenue Increase (decrease) in other liabilities Net Cash Provided (Used) by Operating Activities SCHEDULE OF NONCASH INVESTING, CAPITAL AND NON-CAPITAL FINANCING ACTIVITIES Change in fair value of investments Total Noncash Investing, Capital and Non-capital Financing Activities 19,245 $ 897 (10,781) (5,535) (3,290) 536 $ HIGHWAY EXPANSION & EXTENSION LOAN PROGRAM COLISEUM & EXPOSITION CENTER 5,731 $ (3,828) (1,791) 400 512 10,817 $ (6,360) (5,228) 896 125 1,145 14,067 33,900 (32) (142) (3,982) (20,000) (1) 24,955 96 - (1,237) (35) 500 (1,483) - (61) - (54,047) (2) - 96 (1,272) (983) (61) (54,049) (170) - - (48) - - (77) - - (3) 400 - (34) (295) - 173 - 40 23 40 62 2,109 (1) 39 23 (2) 38 62 2,691 (59) 4,741 4,692 1,092 (433) 1,964 299 5,926 (24,353) 77,630 637 1,466 $ ARIZONA HIGHWAYS MAGAZINE 31,797 $ (22,766) (2,795) 6,236 2 (36) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends from investments Change in cash collateral received from securities lending transactions Purchase of investments Other (payments) Net Cash Provided by Investing Activities Cash and Cash Equivalents - Ending ARIZONA CORRECTIONAL INDUSTRIES 2,103 (224) - - $ 5,784 $ 1,531 $ (185) $ 2,790 $ 366 $ 6,225 - $ (568) $ 53,277 (924) 344 - 496 - 40 - 712 - 1,877 (362) 102 653 (193) 180 (3) (598) 43 41 3,118 (209) 479 76 199 248 1 29 (11) (360) - (3) 68 (34) (12) (38) 10,072 33,900 1 31 (20,000) (2) $ 536 $ 6,236 $ 512 $ 125 $ 24,955 $ - $ - $ - $ - $ 366 $ - $ - $ - $ - $ 366 - 202 - HEALTHCARE GROUP OF ARIZONA $ OTHER 58,450 $ (61,358) (2,432) (5,340) 13,342 $ 60 (3,824) (9,670) 40 (52) 140,527 957 14,067 33,900 (108,949) (27,593) (3,982) (20,000) (1,955) 26,972 2,800 (152) - - 3,396 (54,047) (2,935) (35) 2,648 - (53,621) - - 2 (430) - - (48) - - (80) 400 - - (156) 199 6 2,479 199 (3) 3 2,691 (4) (61) 5,105 (49) 611 (21,700) 102,858 (2,493) 14,169 $ 11,676 $ $ 3,157 $ 58 - $ TOTAL 562 $ 81,158 (270) $ 4,366 319 - 1,969 1,877 (236) 757 (7,057) (2,011) (8) (17) (7) (59) 11 1 (30) - 9,055 102 33,893 944 110 3,618 (7,097) 31 (19,999) (1,922) 25 (5,340) $ (52) $ 26,972 $ - $ - $ 366 $ - $ - $ 366 - 203 - INTERNAL SERVICE FUNDS Internal Service Funds account for the financing of goods and services provided by one State department or agency to other State departments or agencies on a cost-reimbursement basis. The Risk Management Fund provides insurance coverage to all State agencies using an optimal combination of self-insurance and private excess insurance. It includes the Workers' Compensation section that receives monies from State agencies and uses these monies to pay for insurance and risk management services including loss control services and self-insured liability losses. The Transportation Equipment Fund administers the purchase, storage and distribution of supplies, equipment and furniture for other Department of Transportation Funds. The Employee Benefits Fund (HITF) administers the State’s benefits program available to State employees and retirees. The Telecommunication Fund receives monies from State agencies for services related to administering the State’s contracts for the installation and maintenance of telecommunications equipment through the Telecommunications Program Office. The Technology Fund receives monies from State agencies for services related to the implementation and operation of automation programs throughout the State. The Retiree Sick Leave Fund accounts for monies paid out to retirees for their accumulated sick leave. The Motor Pool Fund receives monies from State agencies for the use of State vehicles and uses these monies for operation of the State Motor Pool. STATE OF ARIZONA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2009 (Expressed in Thousands) ASSETS Current Assets: Cash Cash and pooled investments with State Treasurer Receivables, net of allowances: Interest Other Due from U.S. Government Due from other Funds Inventories, at cost Other current assets Total Current Assets RISK TRANSPORTATION EMPLOYEE TELE- MANAGEMENT EQUIPMENT BENEFITS COMMUNICATION $ Noncurrent Assets: Other long-term assets Capital assets: Land and other non-depreciable Buildings, equipment, and other depreciable, net of accumulated depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts payable and other current liabilities Accrued liabilities Due to other Funds Current portion of accrued insurance losses Current portion of long-term debt Current portion of other long-term liabilities Total Current Liabilities Noncurrent Liabilities: Accrued insurance losses Long-term debt Other long-term liabilities Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted (deficit) Total Net Assets $ - $ - $ - $ 732 TECHNOLOGY $ - 46,219 1,115 68,999 1,619 2,671 60 3 4,310 50,592 8 64 2,711 3,898 11,026 2,200 1,641 83,866 1,615 3,966 1,690 1,425 1,400 7,186 - - - 1,625 - - - - - 548 84 84 50,676 50,552 50,552 54,450 21 21 83,887 3,440 5,065 9,031 5,007 5,555 12,741 3,652 238 126 51,881 272 56,169 13 595 2,594 565 3,767 75,303 115 1,038 139 76,595 64 43 49 156 715 411 2 528 1,656 307,932 307,932 364,101 487 154 641 4,408 76,595 156 1,656 84 (313,509) 47,471 2,571 21 7,271 3,440 5,435 5,555 5,530 (313,425) $ 50,042 - 206 - $ 7,292 $ 8,875 $ 11,085 $ $ RETIREE MOTOR SICK LEAVE POOL - $ TOTAL - $ 732 4,369 3,425 128,417 4,369 432 887 36 8 4,788 8 14,887 2,200 3,956 2,747 5,718 158,665 - - 1,625 - - 548 4,369 12,812 12,812 17,600 71,916 74,089 232,754 7,823 7,823 445 39 1 32 517 80,192 1,441 1,167 51,881 2,594 9,408 146,683 104,155 104,155 111,978 517 307,932 487 104,309 412,728 559,411 (107,609) 12,812 4,271 (107,609) $ 17,083 69,383 (396,040) $ (326,657) - 207 - STATE OF ARIZONA COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) OPERATING REVENUES Sales and charges for services Other Total Operating Revenues RISK TRANSPORTATION EMPLOYEE TELE- MANAGEMENT EQUIPMENT BENEFITS COMMUNICATION $ OPERATING EXPENSES Cost of sales and benefits Personal services Contractual services Depreciation and amortization Insurance Other Total Operating Expenses Operating Income (Loss) $ 38,399 39 38,438 6,329 30,192 30 40,797 1,576 78,924 23,842 NON-OPERATING REVENUES (EXPENSES) Gain (loss) on sale of capital assets Investment income Interest expense Other non-operating revenue Other non-operating expense Total Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers Change in Net Assets Total Net Assets - Beginning $ $ 10,724 13,102 48 9,147 605 809 34,435 4,003 3 (272) (269) Capital grants and contributions Transfers in Transfers out Total Net Assets - Ending 102,766 102,766 (152) 93 (168) 259 32 711,085 1 711,086 $ 20,799 2 20,801 23 1,177 1,890 836 34 252 4,212 4,838 (9) (9) 1 1 (19,669) 4,839 2,004 1,087 (5,683) (2,613) 243 8,632 (609) 11,694 4,035 (29,624) 1,240 (10,834) (749) (6,051) (307,374) (5,559) 55,601 (20,418) 27,710 (313,425) $ 50,042 - 208 - 9,050 9,050 725,862 2,522 1,721 18 57 566 730,746 (19,660) 23,573 $ $ TECHNOLOGY 7,292 $ 8,875 426 9,242 1,660 1,321 217 5,929 18,795 2,006 (2) (2) $ 11,085 $ RETIREE MOTOR SICK LEAVE POOL 12,802 12,802 $ 38,085 87 4 4 30 38,210 (25,408) - $ TOTAL 10,245 13 10,258 $ 4,718 898 65 2,832 1,243 802 10,558 (300) 905,146 55 905,201 779,838 33,357 35,580 14,184 42,957 9,964 915,880 (10,679) 49 49 (104) 93 (168) 262 (281) (198) (25,408) (251) (10,877) (7,597) 889 (6,296) 2,129 1,087 (63,396) (33,005) (74,604) (5,658) 22,741 (71,057) (255,600) (107,609) $ 17,083 $ (326,657) - 209 - STATE OF ARIZONA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from interfund services / premiums Payments to suppliers or insurance companies Payments to employees Payments to retirees Other receipts Net Cash Provided (Used) by Operating Activities RISK MANAGEMENT $ CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers from other Funds Transfers to other Funds Other (payments) Net Cash (Used) by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets Acquisition and construction of capital assets Interest paid on capital debt, installment purchase contracts, and capital leases Principal paid on capital debt, installment purchase contracts, and capital leases Other receipts Net Cash Provided (Used) by Capital and Related Financing Activities TRANSPORTATION EQUIPMENT 102,765 $ (77,038) (6,356) 19,371 38,398 $ (11,363) (13,187) 1 13,849 (29,624) (269) 10,296 (4,450) (1,133) 4,713 (10,834) - (749) (9) 1,087 (5,683) - (29,893) (10,834) (758) (4,596) (21) 1,098 (4,083) - - (166) - - - (2,797) 258 (5,690) - - - 91 91 Cash and Cash Equivalents - Ending $ 46,219 $ 1,115 $ $ 23,842 $ 4,003 $ SCHEDULE OF NONCASH INVESTING, CAPITAL AND NON-CAPITAL FINANCING ACTIVITIES Contribution of capital assets from other Funds Total Noncash Investing, Capital and Non-capital Financing Activities 30 (2,584) 3,699 $ 9,147 (1) (1,307) 944 (13) 4 (4,114) (14) (2,499) - $ Net Cash Provided (Used) by Operating Activities (10,543) 56,762 $ (2,499) - Net (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Net changes in assets and liabilities: (Increase) decrease in receivables, net of allowances (Increase) in due from U.S. Government (Increase) decrease in due from other Funds Decrease in inventories, at cost (Increase) decrease in other assets Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in due to other Funds (Decrease) in accrued insurance losses Increase (decrease) in other liabilities TELECOMMUNICATION 705,817 $ (733,256) (2,504) (29,943) (21) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends from investments Net Cash Provided by Investing Activities EMPLOYEE BENEFITS - (30,701) 99,700 $ 68,999 $ 2,351 (19,660) $ 4,838 18 (38) 814 (23) (14) (1) (39) (2,382) 4,733 836 (3,237) (387) (1,641) (4,853) 14 (201) 4 1,196 50 (1,625) (626) 43 1 $ 19,371 $ 13,849 $ $ - $ 1,240 $ - $ - $ - $ 1,240 $ - $ - - 210 - (29,943) $ 4,713 RETIREE SICK LEAVE TECHNOLOGY $ 21,646 $ (8,611) (8,770) 4,265 MOTOR POOL 12,802 $ (8) (87) (11,040) 1,667 TOTAL 10,772 $ (7,227) (860) 13 2,698 902,496 (841,953) (32,897) (11,040) 14 16,620 (2,613) - (7,597) - (6,296) - 1,087 (63,396) (278) (2,613) (7,597) (6,296) (62,587) (2,310) - 279 - 1,377 (8,913) - - - (166) - - - (2,797) 258 - 279 (10,241) - - (2,310) - $ (658) 3,329 $ $ 2,671 $ $ 2,006 $ 1,321 (5,930) 10,299 $ 4,369 $ (25,408) $ - 1,255 (410) 30 (358) 411 (51) 61 91 91 (3,319) 6,744 $ 3,425 $ (300) $ 2,832 27,075 (56,117) 185,266 129,149 (10,679) 14,184 541 (14) 33 (433) 39 1 (1) (283) (387) (2,016) 847 (2,902) (5,349) 480 (248) (4,114) 27,087 $ 4,265 $ 1,667 $ 2,698 $ 16,620 $ - $ - $ 889 $ 2,129 $ - $ - $ 889 $ 2,129 - 211 - PENSION AND OTHER EMPLOYEE BENEFIT TRUST FUNDS Pension Trust Funds account for transactions of the four public employee retirement systems for which the State acts as trustee. The Arizona State Retirement System (ASRS) is a cost-sharing, multiple-employer pension system that benefits employees of public schools, the State and its political subdivisions. The Public Safety Personnel Retirement System (PSPRS) is an agent multiple-employer pension system that benefits fire fighters and police officers employed by the State and its political subdivisions. The Elected Officials' Retirement Plan (EORP) is a cost-sharing, multiple-employer pension plan that benefits all elected State and county officials and judges and certain elected city officials. The Corrections Officer Retirement Plan (CORP) is an agent multiple-employer pension plan that benefits town, city and county detention officers and certain employees of the State’s Department of Corrections and Department of Juvenile Corrections. Other Employee Benefit Trust Funds account for health insurance premium subsidies and long-term disability benefits paid by the ASRS to State employees and employees of other governmental entities participating in the plans. The Health Benefit Supplement Fund is a benefit cost-sharing, multiple-employer post-employment benefit plan that provides for health insurance premium subsidies to eligible retired and disabled members. The Long-Term Disability Fund is a benefit cost-sharing, multiple-employer post-employment benefit plan that provides for long term disability benefits to eligible participants. STATE OF ARIZONA COMBINING STATEMENT OF FIDUCIARY NET ASSETS PENSION AND OTHER EMPLOYEE BENEFIT TRUST FUNDS JUNE 30, 2009 (Expressed in Thousands) PENSION TRUST FUNDS ASRS ASSETS Cash Prepaid Benefits $ Receivables, net of allowances: Accrued interest and dividends Securities sold Forward contract receivable Contributions Court fees Due from other Funds Miscellaneous receivables Total receivables Investments, at fair value: Temporary investments Temporary investments from securities lending U.S. Government securities Corporate bonds Corporate stocks Real estate mortgages and contracts Collateral investment pool Other investments Total investments Property and equipment, net of accumulated depreciation Total Assets LIABILITIES Accounts payable and other current liabilitites Payable for securities purchased Obligation under securities loan agreements Due to other Funds Total Liabilities PSPRS 2,855 566 $ EORP 73,792 - $ CORP 4,536 - $ 16,516 - 58,873 221,857 537,983 40,954 1,632 3,168 7,078 16,044 2,862 445 495 833 35 1,659 3,817 36 864,467 25,984 1,808 5,512 1,105,075 - - - 3,275,929 2,753,952 2,402,063 12,854,992 553,695 434,081 202,697 1,052,903 2,242,153 632,722 523,571 12,747 66,211 140,997 39,598 32,948 47,510 246,790 525,538 148,495 122,408 23,379,787 4,654,046 292,501 1,090,741 - 3,943 263 695 24,247,675 4,757,765 299,108 1,113,464 588,803 500,163 650 8,692 630 547 1,916 2,037 3,275,929 2,327 632,722 - 39,598 - 148,495 - 4,367,222 642,064 40,775 152,448 NET ASSETS Held in Trust for Pension Benefits $ 19,880,453 $ 4,115,701 $ - 214 - 258,333 $ 961,016 OTHER EMPLOYEE BENEFIT TRUST FUNDS HEALTH $ $ BENEFIT LONG-TERM SUPPLEMENT DISABILITY FUND FUND 5,915 - $ TOTAL 6,548 - $ 110,162 566 2,636 9,935 24,091 2,284 446 78 2,380 459 2,611 70,691 231,792 562,074 65,974 833 2,537 8,790 39,470 5,450 942,691 53,552 8,194 1,166,821 146,694 121,666 110,586 570,914 24,097 19,208 28,871 18,376 159,710 - 3,422,623 3,167,443 3,896,929 16,494,304 577,792 820,815 1,132,216 1,046,717 215,151 30,678,943 - - 4,901 1,092,102 227,149 31,737,263 25,707 22,397 4,242 - 621,948 533,836 146,694 111 99 4,243,438 2,537 194,909 4,341 5,401,759 897,193 $ 222,808 $ 26,335,504 - 215 - STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS PENSION AND OTHER EMPLOYEE BENEFIT TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) PENSION TRUST FUNDS ASRS ADDITIONS: Member contributions Employer contributions Member purchase of service credit Court fees $ Investment income: Net (decrease) in fair value of investments Interest income Dividends Real estate 844,540 754,044 69,130 - $ (4,607,182) 239,293 264,331 (167,809) Other investment income (loss) Less investment expenses: Investment activity expenses Security lending expenses Net investment income (loss) Other additions DEDUCTIONS: Retirement and disability benefits Death benefits Refunds to withdrawing members, including interest Administrative expense Other deductions Total Deductions Change in net assets held in trust for pension benefits Net Assets - Beginning $ 101,184 316,222 7,626 - $ CORP 4,437 9,529 377 8,000 $ (67,630) 1,384 5,272 - - 53,098 53,807 429 - (246,296) 13,721 18,577 - - - 17,827 (4,307,610) 12,446 (849,861) 748 (60,226) 2,686 (211,312) 99,776 26,075 (4,433,461) 18,519 4,418 (872,798) 1,072 230 (61,528) 4,077 925 (216,314) 3,306 Total Additions EORP (991,713) 46,719 82,687 - (54,070) Securities lending income Total investment income (loss) Net Assets - Ending PSPRS 583 284 372 (2,762,441) (447,183) (38,901) (108,608) 1,888,931 30,378 444,352 - 34,178 - 55,489 - 120,689 27,322 6,973 7,643 4,352 50 132 521 - 14,879 1,065 531 2,074,293 456,397 34,831 71,964 (4,836,734) 24,717,187 (903,580) 5,019,281 (73,732) 332,065 19,880,453 $ 4,115,701 - 216 - $ 258,333 (180,572) 1,141,588 $ 961,016 OTHER EMPLOYEE BENEFIT TRUST FUNDS HEALTH $ BENEFIT LONG-TERM SUPPLEMENT DISABILITY FUND FUND 90,490 - $ (199,928) 10,692 11,471 (7,282) 47,213 47,213 - $ (47,920) 185 9 - (2,549) 1,050,472 1,271,305 77,562 8,000 (6,160,669) 311,994 382,347 (175,091) - (56,619) 774 (186,822) (47,726) 34,481 (5,663,557) 4,349 1,132 (192,303) (47,726) 127,793 32,780 (5,824,130) - - 4,545 (101,813) 46,700 (3,412,246) 87,723 - 65,781 - 2,576,454 30,378 1,223 34 2,851 431 143,343 37,334 8,019 88,980 69,063 2,795,528 (22,363) 245,171 (6,207,774) 32,543,278 (190,793) 1,087,986 $ TOTAL 897,193 $ 222,808 $ 26,335,504 - 217 - INVESTMENT TRUST FUNDS Investment Trust Funds account for assets held by the State in a trustee capacity for local governments and political subdivisions of the State of Arizona which have elected to invest idle cash with the State Treasurer’s Office. The Treasurer acts as trustee for the deposits made by participants. Central Arizona Water Conservation District is an Investment Trust Account composed of corporate debt and United States Government securities. The Central Arizona Water Conservation District is the only participant in the account. Local Government Investment Pool is an Investment Trust Account composed of corporate debt, negotiable certificates of deposit, and United States Government securities. Local Government Investment Pool – Long-Term is an Investment Trust Account composed of corporate debt, negotiable certificates of deposit, and United States Government securities. Local Government Investment Pool – Government is an Investment Trust Account composed of repurchase agreements and United States Government securities. All investments of the fund are backed by the full faith and credit of the United States Government. Lehman Brothers Pool is an Investment Trust Account composed of the Local Government Investment Pool’s share of the Lehman Brothers bond value that was transferred to this pool due to Lehman Brothers filing for Chapter 11 bankruptcy. The transfer was made to provide for the decline in fair value of the Lehman Brothers securities held by the Local Government Investment Pool. STATE OF ARIZONA COMBINING STATEMENT OF FIDUCIARY NET ASSETS INVESTMENT TRUST FUNDS JUNE 30, 2009 (Expressed in Thousands) CENTRAL ASSETS Receivables, net of allowances: Accrued interest and dividends Total receivables $ Investments, at fair value: U.S. Government securities Corporate bonds Corporate notes Collateral investment pool Repurchase agreements Money market mutual funds Total investments Total Assets LOCAL LOCAL ARIZONA LOCAL GOVERNMENT GOVERNMENT WATER GOVERNMENT INVESTMENT INVESTMENT LEHMAN CONSERVATION INVESTMENT POOL- POOL- BROTHERS DISTRICT POOL GOVERNMENT POOL 997 997 $ LONG-TERM 2,085 2,085 $ 470 470 $ 2,238 2,238 $ TOTAL - $ 5,790 5,790 53,873 6,607 42,118 3,867 11,308 117,773 810,376 416,149 13,260 264,509 1,504,294 47,906 18,975 623 3,184 70,688 443,388 53,000 96,784 2,088,966 2,682,138 4,802 4,802 1,355,543 6,607 535,044 114,534 2,353,475 14,492 4,379,695 118,770 1,506,379 71,158 2,684,376 4,802 4,385,485 LIABILITIES Payable for securities purchased Obligations under securities loan agreements Due to local governments 3,077 - - - - 3,077 3,867 1,128 13,260 3,321 623 642 96,784 4,673 - 114,534 9,764 Total Liabilities 8,072 16,581 1,265 101,457 - 127,375 NET ASSETS Held in trust for pool participants $ Net assets consist of: Participant shares outstanding Participants' net asset value (net assets/shares outstanding) 110,698 $ 110,698 $ 1.00 1,489,798 $ 1,489,798 $ 1.00 69,893 $ 68,860 $ - 220 - 1.02 2,582,919 $ 2,582,919 $ 1.00 4,802 32,534 $ 0.15 $ 4,258,110 4,284,809 STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS INVESTMENT TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) CENTRAL ADDITIONS: Investment income (loss): Net increase (decrease) in fair value of investments Interest income Securities lending income Total investment income (loss) LOCAL LOCAL ARIZONA LOCAL GOVERNMENT GOVERNMENT WATER GOVERNMENT INVESTMENT INVESTMENT LEHMAN CONSERVATION INVESTMENT POOL- POOL- BROTHERS DISTRICT POOL LONG-TERM GOVERNMENT POOL $ 829 4,507 5,336 $ 31,779 2 31,781 $ 1,146 2,452 1 3,599 $ (1,139) $ 19,889 27 18,777 TOTAL (27,732) $ (27,732) (26,896) 58,627 30 31,761 Less: Investment activity expenses Investment activity expenses 69 1,181 39 1,671 Securities lending expenses Net investment income (loss) 5,267 1 30,599 3,560 23 17,083 Capital share and individual account transactions: Shares sold Reinvested interest income Shares redeemed Shares transferred Net capital share and individual account transactions 11,714 4,722 (18,967) - 2,869,944 31,267 (4,036,447) (32,534) 16,002 2,359 (1,447) - (2,531) (1,167,770) 16,914 2,736 (1,137,171) Total Additions DEDUCTIONS: Dividends to investors Total Deductions Change in net assets held in trust for pool participants Net Assets - Beginning Net Assets - Ending 2,960 (27,732) 4,253,399 24,192 (3,791,182) - 24 28,777 32,534 7,151,059 62,540 (7,848,043) - 486,409 32,534 (634,444) 20,474 503,492 4,802 (605,667) 5,267 30,599 3,559 17,084 - 56,509 5,267 30,599 3,559 17,084 - 56,509 16,915 52,978 486,408 2,096,511 4,802 - (2,531) 113,229 $ - 110,698 (1,167,770) 2,657,568 $ 1,489,798 $ - 221 - 69,893 $ 2,582,919 $ 4,802 (662,176) 4,920,286 $ 4,258,110 AGENCY FUNDS Agency Funds account for the receipt and disbursement of various taxes, deposits, deductions, property collected by the State, and payment of the health insurance subsidy by the PSPRS, the EORP, and the CORP, where the State acts as an agent for distribution to other governmental units or organizations. The Treasurer Custodial Securities Fund consists of securities held by the State Treasurer for various State agencies as required by statute. The Other Treasurer Funds account for other various deposits that are required to be made by other governmental units or organizations with the State Treasurer. The Health Insurance Subsidy Fund accounts for other post-employment benefit payments of the health insurance subsidy by the PSPRS, the EORP, and the CORP for eligible retired and disabled members. The Other Funds consist of various funds where the State acts as an agent for distribution to other governmental units or organizations. STATE OF ARIZONA COMBINING STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS JUNE 30, 2009 (Expressed in Thousands) TREASURER CUSTODIAL SECURITIES FUND ASSETS Cash Cash and pooled investments with State Treasurer Short-term investments Receivables, net of allowances: Accrued interest Due from others Custodial securities in safekeeping Other assets Total Assets $ - OTHER TREASURER FUNDS $ OTHER FUNDS - $ 28,017 TOTAL $ 28,017 - 21,441 - 199,268 4,487 220,709 4,487 3,408,326 - 57 - 62 80,168 59,959 8,816 119 80,168 3,468,285 8,816 $ 3,408,326 $ 21,498 $ 380,777 $ 3,810,601 Due to local governments Due to others $ 3,408,326 $ 9,275 12,223 $ 146,443 234,334 $ 155,718 3,654,883 Total Liabilities $ 3,408,326 $ 21,498 $ 380,777 $ 3,810,601 LIABILITIES - 225 - STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) BALANCE JULY 1, 2008 TREASURER CUSTODIAL SECURITIES FUND Assets: Custodial securities in safekeeping Total Assets Liabilities: Due to others Total Liabilities OTHER TREASURER FUNDS Assets: Cash and pooled investments with State Treasurer Receivables, net of allowances: Accrued interest BALANCE JUNE 30, 2009 DELETIONS ADDITIONS $ 3,256,879 $ 6,328,324 $ 6,176,877 $ 3,408,326 $ 3,256,879 $ 6,328,324 $ 6,176,877 $ 3,408,326 $ 3,256,879 $ 6,328,324 $ 6,176,877 $ 3,408,326 $ 3,256,879 $ 6,328,324 $ 6,176,877 $ 3,408,326 $ 30,074 $ 311,072 $ 319,705 $ 21,441 57 57 57 57 Total Assets $ 30,131 $ 311,129 $ 319,762 $ 21,498 Liabilities: Due to local governments Due to others $ 11,716 18,415 $ 271,856 35,490 $ 274,297 41,682 $ 9,275 12,223 $ 30,131 $ 307,346 $ 315,979 $ 21,498 $ - $ 15,339 $ 15,339 $ - Total Assets $ - $ 15,339 $ 15,339 $ - Liabilities: Benefits payable $ - $ 15,339 $ 15,339 $ - $ - $ 15,339 $ 15,339 $ - Total Liabilities HEALTH INSURANCE SUBSIDY FUND Assets: Cash Total Liabilities (Continued) - 226 - STATE OF ARIZONA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) BALANCE JULY 1, 2008 OTHER FUNDS Assets: Cash Cash and pooled investments with State Treasurer Short-term investments Receivables, net of allowances: Accrued interest Due from others Other investments Custodial securities in safekeeping Other assets Total Assets $ 29,474 200,650 - ADDITIONS $ 83 78,655 13,362 87,498 - 745,111 5,462,347 4,487 BALANCE JUNE 30, 2009 DELETIONS $ 58 80,168 59,959 8,816 746,568 5,463,729 - $ 79 78,655 13,362 87,498 - 28,017 199,268 4,487 62 80,168 59,959 8,816 $ 409,722 $ 6,360,946 $ 6,389,891 $ 380,777 $ 161,016 $ 7,726,759 $ 7,741,332 $ 146,443 Liabilities: Due to local governments Due to others Total Liabilities COMBINED TOTAL ALL AGENCY FUNDS Assets: Cash Cash and pooled investments with State Treasurer Short-term investments Receivables, net of allowances: Accrued interest Due from others Other investments Custodial securities in safekeeping Other assets Total Assets Liabilities: Benefits payable Due to local governments Due to others Total Liabilities 248,706 1,142,551 1,156,923 234,334 $ 409,722 $ 8,869,310 $ 8,898,255 $ 380,777 $ 29,474 230,724 - $ 760,450 5,773,419 4,487 $ 761,907 5,783,434 - $ 28,017 220,709 4,487 140 78,655 13,362 3,344,377 - 115 80,168 6,388,283 8,816 136 78,655 13,362 6,264,375 - 119 80,168 3,468,285 8,816 $ 3,696,732 $ 13,015,738 $ 12,901,869 $ 3,810,601 $ 172,732 3,524,000 $ 15,339 7,998,615 7,506,365 $ 15,339 8,015,629 7,375,482 $ 155,718 3,654,883 $ 3,696,732 $ 15,520,319 $ 15,406,450 $ 3,810,601 - 227 - NON-MAJOR UNIVERSITIES – AFFILIATED COMPONENT UNITS Component units affiliated with the Universities are legally separate, tax-exempt organizations controlled by separate Boards of Directors that meet the criteria established in GASB 39, with the exception of the Collegiate Golf Foundation, University Public Schools, Inc. (UPSI), and University of Arizona Campus Research Corporation (CRC). The Collegiate Golf Foundation is included because it is a legally separate organization that the State believes would be misleading to exclude due to its financial relationship to the State. The UPSI is included because it is a legally separate, tax-exempt organization that the State believes would be misleading to exclude due to its close affiliation with the State. The CRC is included because the U of A appoints a majority of the board of directors and approves the budget; the U of A can thus impose its will on the CRC. The Northern Arizona University Foundation receives gifts and bequests, administers and invests securities and property, and disburses payments to and on behalf of the NAU for advancement of its mission. The Northern Arizona Capital Facilities Finance Corporation was established for the purpose of acquiring, developing, constructing, maintaining and operating student housing and other capital facilities and equipment for the use and benefit of the NAU's students. Mesa Student Housing, LLC provides facilities for use by students of the ASU. Sun Angel Foundation receives funds primarily through donations and dues, and contribute funds to the ASU for support of various programs. Sun Angel Endowment receives funds primarily through donations and dues, and contribute funds to the ASU for support of various programs. The Collegiate Golf Foundation operates an ASU-owned golf course. Arizona State University Research Park, Inc. is developing a research park to promote and support research activities in coordination with the ASU. The Arizona State University Alumni Association receives funds primarily through donations and dues, and contribute funds to the ASU for support of various programs. Downtown Phoenix Student Housing, LLC provides facilities for use by students of the ASU. University Public Schools, Inc. operates a public school designed to be on the forefront of education innovation and improvement, with the goal of developing educational models that can be scaled across the State and nation to improve the academic achievement of children. The University of Arizona Law College Association was established to provide support and financial assistance to the College of Law at the U of A. The Law Association funds provide support to the College on many levels, from endowed student scholarships to named faculty professorships. The University of Arizona Campus Research Corporation was established to assist the U of A in the acquisition, improvement, and operation of the U of A Science and Technology Park and related properties. The University of Arizona Alumni Association was established to serve the U of A and its graduates, former students, and friends by attracting, organizing and encouraging them to advance the U of A's missions - teaching, research, and public service. STATE OF ARIZONA COMBINING STATEMENT OF FINANCIAL POSITION NON-MAJOR UNIVERSITIES - AFFILIATED COMPONENT UNITS JUNE 30, 2009 (Expressed in Thousands) NORTHERN ARIZONA UNIVERSITY FOUNDATION ASSETS Cash and cash equivalent investments $ Receivables: Pledges receivable Other receivables Total receivables Investments: Investments in securities Investments held in trust for Universities Other investments Total investments Net direct financing leases Property and equipment, net of accumulated depreciation Licenses Other assets Total Assets LIABILITIES Liability under Universities' endowment trust agreements Bonds payable Unearned revenue Other liabilities Total Liabilities NET ASSETS Permanently restricted Temporarily restricted Unrestricted (deficit) Total Net Assets $ 3,772 NORTHERN ARIZONA CAPITAL FACILITIES FINANCE CORP. MESA STUDENT HOUSING SUN ANGEL FOUNDATION SUN ANGEL ENDOWMENT COLLEGIATE GOLF FOUNDATION $ $ $ $ $ 11 691 1,611 471 99 8,323 170 8,493 188 188 - 9,245 95 9,340 92 92 76 76 59,646 4,069 63,715 - 4,122 4,122 - 7,442 2,608 10,050 - - 48,560 - - - - 55 5,559 769 1,632 13,240 1,106 1,958 159 28 151 185 82,363 50,391 19,159 13,068 10,641 511 4,987 8,734 959 48,522 22 184 18,914 53 848 23 752 5,000 95 333 14,680 48,728 19,815 775 5,000 428 34,737 17,147 15,799 1,663 12,100 193 1,842 157 3,642 83 67,683 $ 1,663 - 230 - (656) $ (656) $ 12,293 $ 5,641 $ 83 ARIZONA STATE UNIVERSITY RESEARCH PARK, INC. ARIZONA STATE UNIVERSITY ALUMNI ASSOCIATION DOWNTOWN PHOENIX STUDENT HOUSING $ $ $ $ 1,829 530 1,239 UNIVERSITY OF ARIZONA LAW COLLEGE ASSOCIATION UNIVERSITY PUBLIC SCHOOLS $ 128 $ 3,085 UNIVERSITY OF ARIZONA CAMPUS RESEARCH CORPORATION UNIVERSITY OF ARIZONA ALUMNI ASSOCIATION $ $ 4,629 1,674 TOTALS $ 19,769 8,875 8,875 95 135 230 312 312 98 98 29,901 29,901 1,514 1,514 3,190 3,190 47,656 14,653 62,309 1,495 1,495 12,018 12,018 12,895 12,895 - 4,665 150 4,815 - 3,804 3,804 106,087 4,069 2,758 112,914 - - - - - - - 48,560 6,925 2,167 34 120,771 6,649 14 24 100 7 11,081 4,227 44 87 154,339 5,559 17,074 21,291 12,812 141,866 264 37,908 21,451 8,799 420,524 10,935 13,410 1,270 1,308 104 141,266 13 5,826 137 26 9,078 491 2,854 31 4,757 48 4,987 228,746 28,906 18,341 25,615 1,412 147,105 137 26 12,423 4,836 280,980 (4,324) 190 11,210 21 106 3,920 33,651 311 9,028 3,963 40,499 63,266 35,779 (4,324) $ 11,400 (5,239) $ (5,239) $ 127 $ - 231 - 37,882 $ 9,028 $ 3,963 $ 139,544 STATE OF ARIZONA COMBINING STATEMENT OF ACTIVITIES NON-MAJOR UNIVERSITIES - AFFILIATED COMPONENT UNITS FOR THE YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) NORTHERN ARIZONA UNIVERSITY FOUNDATION REVENUES Contributions Rental revenue Sales and services Net investment income Capital lease revenue Licensing revenue Other revenues $ Total Revenues MESA STUDENT HOUSING SUN ANGEL FOUNDATION SUN ANGEL ENDOWMENT COLLEGIATE GOLF FOUNDATION $ $ $ $ $ (996) EXPENSES Program services: Payments to Universities Leasing related expenses Payments on behalf of Universities Other program services Personal services, operations, and administrative expenses Fundraising expenses Interest Depreciation and amortization Other expenses Total Expenses Increase (Decrease) in Net Assets Net Assets - Beginning Cumulative effect of accounting change Net Assets - Ending 6,668 (10,665) 2,309 692 NORTHERN ARIZONA CAPITAL FACILITIES FINANCE CORP. $ 28 2,167 113 - 6,483 9 104 165 9,292 321 53 1,256 92 (1,112) 1 2,308 6,761 10,922 5,385 - - 9,746 - - 237 - 427 2,147 1,227 - 30 2,230 60 - 4,228 1,170 692 42 1,010 1,034 42 36 224 - 3,873 18 70 - 9,186 2,320 6,132 11,832 260 4,198 (10,182) 77,865 - (12) 1,675 - 629 (1,285) - (910) 13,203 - 67,683 $ 1,663 - 232 - $ (656) $ 12,293 (1,019) 340 4,032 1 4,373 (1,279) 6,920 $ 5,641 175 (92) $ 83 ARIZONA STATE UNIVERSITY RESEARCH PARK, INC. ARIZONA STATE UNIVERSITY ALUMNI ASSOCIATION DOWNTOWN PHOENIX STUDENT HOUSING $ $ $ $ 5,661 32 70 1,118 2,784 (2,402) 71 3,857 87 495 36 UNIVERSITY OF ARIZONA LAW COLLEGE ASSOCIATION UNIVERSITY PUBLIC SCHOOLS $ 20 177 1 1,544 $ 2,541 (996) 61 UNIVERSITY OF ARIZONA CAMPUS RESEARCH CORPORATION UNIVERSITY OF ARIZONA ALUMNI ASSOCIATION $ $ 12,651 9 1,167 TOTALS 193 $ 803 (663) 2,690 20,264 28,680 8,213 (12,976) 113 2,309 7,753 5,763 1,571 4,475 1,742 1,606 13,827 3,023 54,356 1,649 - - - - 2,980 - 8,883 475 - 2,893 - 11,632 8,883 6,348 5,385 1,238 468 595 150 4,054 107 1,642 5,089 2,622 377 1,615 - 56 121 48 1,658 - 657 120 - 20,524 3,422 9,199 5,266 766 4,100 4,161 9,730 1,615 3,205 11,016 3,670 71,425 1,663 (5,987) - (2,590) 13,990 - (5,255) 16 - 127 - (1,599) 39,486 (5) 2,811 6,217 - (647) 4,610 - (17,069) 156,618 (5) (4,324) $ 11,400 (5,239) $ 127 $ $ - 233 - 37,882 $ 9,028 $ 3,963 $ 139,544 STATISTICAL SECTION (Not Covered by the Independent Auditors’ Report) STATISTICAL SECTION STATISTICAL SECTION This part of the State of Arizona’s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the State’s overall financial health. Financial Trends – Schedules 1 thru 4 contain trend information to help the reader understand how the State’s financial performance and well-being have changed over time. Revenue Capacity – Schedules 5 thru 9 contain information to help the reader assess the State’s most significant own-source revenues, the sales tax, and personal income tax. Debt Capacity – Schedules 10 thru 21 present information to help the reader assess the affordability of the State’s current levels of outstanding debt and the State’s ability to issue additional debt in the future. Demographic and Economic Information – Schedules 22 and 23 offer demographic and economic indicators to help the reader understand the environment within which the State’s financial activities take place and to help make comparisons over time and among other governments. Operating Information – Schedules 24 thru 26 contain service and infrastructure data to help the reader understand how the information in the State’s financial report relates to the services the State provides and the activities it performs. STATE OF ARIZONA SCHEDULE 1 NET ASSETS BY COMPONENT (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2008 2009 GOVERNMENTAL ACTIVITIES: Invested in capital assets, net of related debt (3) Restricted for: Federal grants Capital projects (4) Debt service Permanent funds: Expendable Nonexpendable Other purposes Unrestricted Total Governmental Activities Net Assets BUSINESS-TYPE ACTIVITIES: Invested in capital assets, net of related debt Restricted for: Capital projects Unemployment compensation Debt service University funds: Expendable (5) Nonexpendable (5) Loans and other financial assistance (5) Other purposes (5) Unrestricted Total Business-type Activities Net Assets PRIMARY GOVERNMENT: Invested in capital assets, net of related debt Restricted for: Federal grants Capital projects Unemployment compensation Debt service Permanent funds / University funds: Expendable (5) Nonexpendable (5) Loans and other financial assistance (5) Other purposes (5) Unrestricted Total Primary Government Net Assets $ 15,094,719 $ 34,345 532,766 26,442 14,530,867 $ 53,212 970,202 36,496 93,302 2,866,103 437,636 (2,984,628) 69,305 3,523,725 334,425 (1,105,246) 2007, as 2006, as 2005, as restated restated restated 13,500,218 $ 12,878,151 40,737 1,003,824 38,804 63,219 561,795 44,846 21,290 3,467,467 161,917 614,606 19,244 2,785,419 86,345 733,455 $ 11,825,961 102,794 548,488 28,708 5,106 2,164,200 88,992 (463,515) $ 16,100,685 $ 18,412,986 $ 18,848,863 $ 17,172,474 $ 14,300,734 $ 1,328,658 $ 1,387,655 $ 1,186,177 $ 1,146,618 $ 1,172,613 3,578 619,003 27,293 6,207 1,072,996 10,045 8,505 1,075,038 11,119 6,106 949,919 9,198 2,657 820,383 8,203 203,806 156,630 75,069 20 376,908 264,466 153,383 74,115 188,354 210,635 199,471 71,211 12 295,377 189,746 178,001 67,423 62 179,524 171,976 163,922 64,875 84,248 $ 2,790,965 $ 3,157,221 $ 3,057,545 $ 2,726,597 $ 2,488,877 $ 16,423,377 $ 15,918,522 $ 14,686,395 $ 14,024,769 $ 12,998,574 34,345 536,344 619,003 53,735 297,108 3,022,733 75,069 437,656 (2,607,720) $ 18,891,650 $ 53,212 976,409 1,072,996 46,541 40,737 1,012,329 1,075,038 49,923 63,219 567,901 949,919 54,044 333,771 3,677,108 74,115 334,425 (916,892) 231,925 3,666,938 71,211 161,929 909,983 208,990 2,963,420 67,423 86,407 912,979 21,570,207 $ 21,906,408 $ (1) This schedule reports using the accrual basis of accounting. (2) The State implemented GASB Statement 34 in fiscal year 2002. Therefore, ten years of data is not available, but will be accumulated over time. (3) For fiscal year 2006, net assets for governmental activities were increased by the capitalization of $302,375 of capital assets that were previously recorded as transportation expenses. (4) For fiscal year 2007, the $442,029 increase was primarily due to the transfer of $245,000 of General Fund monies in order to accelerate the construction of certain critical projects on the State highway system, and $185,000 in unspent bond proceeds related to highway construction. (5) For fiscal year 2002, net assets restricted for expendable University funds of $130,735 and for nonexpendable University funds of $137,854 were classified as net assets restricted for loans and other financial assistance of $175,661 and for other purposes of $92,928. - 238 - 19,899,071 102,794 551,145 820,383 36,911 177,082 2,328,122 64,875 88,992 (379,267) $ 16,789,611 Fiscal Year $ 2004, as 2003, as 2002, as restated restated restated (2) 11,226,325 $ 10,690,782 73,466 414,113 31,302 108,268 495,663 30,470 1,550,247 31,447 (684,492) 20,082 1,395,750 21,080 (799,587) $ 10,043,985 158,424 589,996 51,861 56,697 1,243,389 24,132 358,806 $ 12,642,408 $ 11,962,508 $ 12,527,290 $ 1,169,198 $ 1,153,428 $ 1,165,306 3,023 796,119 16,940 21,842 893,470 24,715 33,515 1,055,543 30,153 157,595 153,073 63,500 115,986 143,683 141,281 63,249 2,763 251,415 258,954 95,146 277,195 $ 2,475,434 $ 2,695,846 $ 2,915,812 $ 12,395,523 $ 11,844,210 $ 11,209,291 $ 73,466 417,136 796,119 48,242 108,268 517,505 893,470 55,185 158,424 623,511 1,055,543 82,014 157,595 1,703,320 63,500 31,447 (568,506) 163,765 1,537,031 63,249 23,843 (548,172) 56,697 1,243,389 258,954 119,278 636,001 15,117,842 $ 14,658,354 $ 15,443,102 - 239 - STATE OF ARIZONA SCHEDULE 2 CHANGES IN NET ASSETS (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2009 EXPENSES Governmental Activities: General government Health and welfare Inspection and regulation Education Protection and safety Transportation (3) Natural resources Intergovernmental revenue sharing Interest on long-term debt Total Governmental Activities Expenses $ Business-type Activities: Universities Unemployment Compensation Industrial Commission Special Fund (4) Lottery Other Total Business-type Activities Expenses Total Primary Government Expenses PROGRAM REVENUES Governmental Activities: Charges for services: General government Inspection and regulation Transportation (5) Other activities Operating grants and contributions (6) Capital grants and contributions Total Governmental Activities Program Revenues Business-type Activities: Charges for services: Universities Lottery Other activities (7) Operating grants and contributions (8) Capital grants and contributions Total Business-type Activities Program Revenues Total Primary Government Program Revenues 928,485 12,055,439 176,354 6,084,342 1,514,282 695,070 228,430 2,755,710 222,851 24,660,963 2008 $ 3,290,033 1,086,330 30,055 395,950 142,229 4,944,597 982,382 10,884,297 185,996 6,242,173 1,510,615 670,173 250,258 3,023,836 179,795 23,929,525 $ 3,227,481 356,333 14,824 372,740 162,300 4,133,678 2007, as 2006, as restated restated 802,659 9,789,699 175,609 5,984,196 1,401,513 583,304 193,862 2,864,543 191,674 21,987,059 $ 2,960,790 248,111 23,669 363,508 176,486 3,772,564 781,542 9,057,733 159,766 5,304,555 1,279,129 386,777 187,947 2,658,636 172,439 19,988,524 2005 $ 2,762,557 226,171 (18,300) 377,104 136,894 3,484,426 646,452 8,494,206 149,238 4,853,458 1,171,340 589,966 184,538 2,335,828 182,852 18,607,878 2,540,193 292,127 106,295 317,226 120,629 3,376,470 $ 29,605,560 $ 28,063,203 $ 25,759,623 $ 23,472,950 $ 21,984,348 $ 199,011 153,642 138,520 315,660 10,620,642 553,198 $ 190,374 159,857 149,560 318,776 9,190,910 523,898 $ 200,495 158,022 158,019 281,796 8,536,030 354,255 $ 161,664 146,191 134,068 279,836 7,941,223 388,646 $ 139,486 133,073 88,296 256,804 7,544,370 497,140 $ 11,980,673 10,533,375 9,688,617 9,051,628 8,659,169 1,272,694 484,486 439,010 1,243,697 14,710 1,167,696 472,937 485,242 898,441 38,029 1,069,339 462,200 518,922 883,373 27,981 962,967 468,697 474,801 852,788 30,056 863,042 397,561 440,646 834,421 19,774 3,454,597 3,062,345 2,961,815 2,789,309 2,555,444 15,435,270 $ 13,595,720 $ 12,650,432 $ 11,840,937 $ 11,214,613 NET (EXPENSE) REVENUE Governmental activities Business-type activities $ (12,680,290) $ (1,490,000) (13,396,150) $ (1,071,333) (12,298,442) $ (810,749) (10,936,896) $ (695,117) (9,948,709) (821,026) Total Primary Government Net (Expense) $ (14,170,290) $ (14,467,483) $ (13,109,191) $ (11,632,013) $ (10,769,735) - 240 - Fiscal Year $ 2004, as 2003, as 2002, as restated restated restated (2) 726,525 7,717,148 138,281 4,703,685 1,059,047 731,522 162,366 2,144,438 176,035 17,559,047 $ 2,355,418 397,657 167,331 303,996 109,944 3,334,346 694,173 6,848,087 141,673 4,795,566 982,839 598,375 175,312 2,159,691 135,775 16,531,491 $ 2,181,311 455,685 73,586 263,321 107,740 3,081,643 852,417 5,960,399 135,784 4,277,635 931,292 411,108 152,772 2,190,160 131,206 15,042,773 2,039,832 406,406 57,503 239,648 95,164 2,838,553 $ 20,893,393 $ 19,613,134 $ 17,881,326 $ 140,791 133,510 114,097 248,446 6,981,748 421,251 $ 106,876 120,045 112,466 192,332 5,940,007 460,364 $ 120,514 117,606 112,725 230,409 4,996,539 471,020 8,039,843 6,932,090 6,048,813 778,047 366,582 305,221 836,076 18,513 675,089 322,267 259,676 810,549 23,090 639,050 294,848 254,984 737,170 48,180 2,304,439 2,090,671 1,974,232 $ 10,344,282 $ 9,022,761 $ 8,023,045 $ (9,519,204) $ (1,029,907) (9,599,401) $ (990,972) (8,993,960) (864,321) $ (10,549,111) $ (10,590,373) $ (9,858,281) (Continued) - 241 - STATE OF ARIZONA SCHEDULE 2 CHANGES IN NET ASSETS (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2009 GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS Governmental Activities: Taxes: Sales Income Tobacco (9) Property Motor vehicle and fuel (5) Other (9) Unrestricted investment earnings (10) Unrestricted grants and contributions Miscellaneous general revenues (6) Gain (loss) on sale of trust land Transfers Total Governmental Activities $ Business-type Activities: Sales taxes Unrestricted investment earnings Unrestricted grants and contributions (8) Miscellaneous general revenues (7) Contributions to permanent endowments Special items Extraordinary items Transfers Total Business-type Activities 2008 5,442,563 $ 3,126,076 370,073 32,564 1,643,276 574,030 92,957 12,440 222,712 (165,696) (983,006) 10,367,989 58,528 22,450 45,786 4,014 7,240 2,720 983,006 1,123,744 Total Primary Government $ 11,491,733 CHANGE IN NET ASSETS Governmental activities (8) Business-type activities $ Total Primary Government $ 6,270,419 $ 4,205,426 413,333 36,732 1,800,920 559,440 243,160 13,574 214,751 196,953 (994,435) 12,960,273 72,945 39,763 64,564 3,927 (20,100) 15,475 994,435 1,171,009 $ 14,131,282 2007, as 2006, as restated restated 2005 6,537,584 $ 4,636,447 358,205 43,736 1,826,893 529,629 243,328 11,711 212,253 451,501 (876,456) 13,974,831 6,322,311 $ 4,548,843 248,122 43,035 1,857,293 575,946 172,311 12,293 235,610 567,364 (774,492) 13,808,636 5,421,949 3,562,916 237,430 46,148 1,758,950 493,501 106,362 11,624 387,269 288,483 (707,597) 11,607,035 79,223 103,362 77,841 4,815 876,456 1,141,697 54,550 49,050 58,816 3,803 (7,874) 774,492 932,837 57,584 40,311 5 26,017 2,955 707,597 834,469 $ 15,116,528 $ 14,741,473 $ 12,441,504 (2,312,301) $ (366,256) (435,877) $ 99,676 1,676,389 330,948 $ 2,871,740 237,720 $ 1,658,326 13,443 (2,678,557) $ (336,201) $ 2,007,337 $ 3,109,460 $ 1,671,769 (1) This schedule reports using the accrual basis of accounting. (2) The State implemented GASB Statement 34 in fiscal year 2002. Therefore, ten years of data is not available, but will be accumulated over time. (3) For fiscal year 2006, net assets for governmental activities were increased by the capitalization of $302,375 of capital assets that were previously recorded as transportation expenses. (4) The Industrial Commission Special Fund's cost of sales and benefits expense decreased $125,828 during fiscal year 2006, primarily due to a decrease in insolvent carrier liabilities. During fiscal years 2005 and 2004, insolvent carrier liability increased, primarily as the result of $67,423 and $107,600, respectively, in Arizona workers' compensation claims from the defunct California domiciled Fremont Companies. (5) $31,804 of transportation's charges for services for fiscal year 2005 were classified as motor vehicle and fuel tax revenues. (6) Beginning in fiscal year 2004, operating grants and contributions included Indian gaming revenue and tobacco settlement revenue. For fiscal year 2004, gaming revenue was $57,517 and this was the first year that gaming revenue was earned, as a result of Proposition 202. For fiscal year 2004, tobacco settlement revenue was $91,601. Prior to fiscal year 2004, tobacco settlement revenue was included in miscellaneous general revenues. (7) Beginning in fiscal year 2005, settlement income for the Industrial Commission Special Fund is classified as a program revenue, charges for services. Prior to this, it was classified as a miscellaneous general revenue. In fiscal year 2005, settlement income was $41,554. (8) In fiscal year 2002, private gifts not restricted for capital purposes of $83,100 for the Universities were classified as general revenues. In future fiscal years, these gifts are classified as program revenues. (9) Prior to fiscal year 2004, tobacco tax revenue was included in other tax revenue. (10) Fiscal year 2007 unrestricted investment earnings were reduced by $17,771 due to reclassifying the Greater Arizona Development Authority from the primary government to a component unit. - 242 - Fiscal Year $ 2004, as 2003, as 2002, as restated restated restated (2) 5,016,585 $ 2,800,461 223,804 50,455 1,613,952 539,218 24,227 8,502 281,109 319,517 (678,726) 10,199,104 50,050 38,753 46,615 2,231 (6,880) 678,726 809,495 $ $ $ 11,008,599 43,450 32,527 3 26,985 3,037 665,004 771,006 $ 679,900 $ (220,412) 459,488 4,551,804 $ 2,371,005 37,470 1,563,876 632,896 77,914 7,222 319,873 137,563 (665,004) 9,034,619 $ 9,805,625 4,450,691 2,442,320 49,611 1,493,259 544,514 116,614 8,518 186,917 137,565 (709,916) 8,720,093 41,367 29,327 83,108 12,447 2,723 709,916 878,888 $ 9,598,981 (564,782) $ (219,966) (273,867) 14,567 (784,748) $ (259,300) - 243 - STATE OF ARIZONA SCHEDULE 3 FUND BALANCES, GOVERNMENTAL FUNDS (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2007, as 2009 GENERAL FUND: Reserved for: Budget stabilization fund School facilities improvements Continuing appropriations Other fund balance reservations Unreserved Total General Fund ALL OTHER GOVERNMENTAL FUNDS: Reserved for: Highway construction Other construction School facilities improvements Permanent funds Continuing appropriations Debt service Other fund balance reservations Unreserved, reported in: Special revenue funds Capital projects funds Total All Other Governmental Funds restated 2008 2006 2005 $ 2,767 $ 376,993 43,091 252 (1,401,381) 147,212 1,914 103,320 262 108,914 $ 673,531 4,931 162,657 272 1,081,708 $ 651,020 110,149 69,861 302 1,434,806 $ 160,873 107,260 55,727 374 986,168 $ (978,278) $ 361,622 $ 1,923,099 $ 2,266,138 $ 1,310,402 1,253,202 238,985 2,544,365 143,785 35,236 27,132 $ 976,488 5,288 2,454,564 94,602 34,421 17,702 $ 426,015 6,256 2,043,591 118,671 37,792 5,145 $ 419,072 7,307 5,386 1,716,404 120,752 21,992 25,375 $ 1,304,781 108,129 2,196,040 212,553 27,115 7,447 $ 767,258 $ 4,623,323 919,679 $ 5,162,384 793,890 $ 4,376,955 657,371 $ (1) This schedule reports using the modified accrual basis of accounting. (2) Due to changes in the State's fund structure initiated when GASB Statement 34 was implemented, the fund balance information is available only beginning in fiscal year 2002. - 244 - 3,294,841 574,938 $ 2,891,226 Fiscal Year 2002, as 2004 2003 restated (2) $ 13,545 96,714 74,973 377 561,029 $ 13,737 101,944 87,131 598 343,012 $ 67,700 105,816 611 574,146 $ 746,638 $ 546,422 $ 748,273 $ 321,401 41,165 17,808 1,361,366 114,948 27,693 25,138 $ 342,324 33,477 33,893 1,123,523 90,238 23,273 38,945 $ 277,321 53,088 262,654 1,082,018 103,312 61,123 38,382 463,738 $ 2,373,257 444,301 $ 2,129,974 634,710 29,661 $ 2,542,269 - 245 - STATE OF ARIZONA SCHEDULE 4 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 Fiscal Year (Expressed in Thousands) 2007, as REVENUES Taxes: Sales Income Tobacco (3) Property Motor vehicle and fuel Other (3) Intergovernmental Licenses, fees, and permits Earnings (loss) on investments (4,8) Sales and charges for services Fines, forfeitures, and penalties Gaming (5) Tobacco settlement (6) Proceeds from sale of trust land (9) Other (6) Total Revenues EXPENDITURES Current: General government Health and welfare Inspection and regulation Education Protection and safety Transportation (7) Natural resources Intergovernmental revenue sharing Debt service: Principal Interest and other fiscal charges Capital outlay (7) Total Expenditures Excess (Deficiency) of Revenues Over Expenditures $ 2009 2008 5,429,453 $ 3,137,794 370,073 32,564 1,672,151 574,030 11,316,023 410,002 (318,321) 154,671 203,337 84,140 125,571 143,674 253,868 23,589,030 6,278,181 4,174,966 413,333 36,732 1,802,572 559,440 9,499,419 447,090 135,879 167,329 167,309 94,004 115,587 263,443 24,155,284 913,266 11,959,640 174,633 6,031,605 1,460,692 608,631 220,030 2,764,776 966,512 10,874,581 184,451 6,240,862 1,447,372 630,283 242,893 3,026,563 879,519 9,679,226 173,897 5,983,513 1,358,439 524,318 185,592 2,863,218 861,373 8,995,430 157,401 5,302,942 1,247,508 373,603 178,832 2,661,894 758,149 8,419,913 146,523 4,852,099 1,132,473 564,574 175,593 2,335,828 235,971 238,430 1,295,530 25,903,204 261,228 210,856 1,106,951 25,192,552 220,473 195,317 992,000 23,055,512 261,277 176,933 1,066,815 21,284,008 381,512 200,731 710,688 19,678,083 (2,314,174) (1,037,268) 919,866 1,706,636 904,227 - 246 - restated $ 6,527,968 4,629,220 358,205 43,736 1,828,701 529,629 8,313,720 442,236 510,253 158,318 183,923 94,771 90,258 264,440 23,975,378 2006 $ 6,313,090 4,535,492 248,122 43,035 1,857,293 575,946 8,019,509 410,069 247,250 162,048 138,354 84,794 86,231 269,411 22,990,644 2005 $ 5,410,383 3,528,565 237,430 46,148 1,758,950 493,501 7,714,012 335,760 190,499 154,251 121,123 67,658 93,933 430,097 20,582,310 Fiscal Year 2002, as 2004 $ 4,985,424 2,818,778 223,804 50,455 1,613,952 539,218 7,159,976 349,938 131,715 161,170 120,032 57,517 92,550 313,220 18,617,749 2003 $ 4,555,389 2,387,369 37,470 1,563,876 632,896 6,141,218 320,564 111,771 111,438 96,192 337,930 16,296,113 restated (2) $ 4,424,528 2,410,342 49,611 1,493,259 543,055 5,182,770 330,041 136,761 157,912 98,791 324,433 15,151,503 718,229 7,733,516 136,189 4,702,609 1,028,134 717,463 153,533 2,144,438 689,603 6,652,661 139,863 4,882,516 925,667 463,756 163,946 2,159,691 511,167 5,788,774 133,584 4,188,501 892,986 401,372 140,600 2,190,211 327,595 188,247 695,289 18,545,242 297,508 140,613 1,041,038 17,556,862 270,912 125,594 1,127,411 15,771,112 72,507 (1,260,749) (619,609) (Continued) - 247 - STATE OF ARIZONA SCHEDULE 4 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS (1) FOR THE LAST EIGHT FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2007, as OTHER FINANCING SOURCES (USES) Transfers in Transfers out Proceeds from sale of trust land (9) Proceeds from sale of capital assets Capital lease and installment purchase contracts Proceeds from notes and loans Refunding bonds issued Payment to refunded bond escrow agent Bonds issued Refunding grant anticipation notes issued Grant anticipation notes issued Refunding certificates of participation issued Payment to refunded certificates of participation escrow agent Certificates of participation issued Premium on debt issued Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES DEBT SERVICE AS A PERCENTAGE OF NONCAPITAL EXPENDITURES 2009 2008 1,248,267 (2,168,964) 2,127 897,771 (1,874,084) 249,970 28,233 4,056 23,139 621,050 55,420 $ restated 23,556 19,529 82,880 (86,547) 563,950 68,000 - - 580,035 70,083 435,213 238,990 48,972 261,220 (1,878,961) $ 1.9% (776,048) $ 2.0% 910,605 (1,784,833) 199,089 10,162 132,985 325,000 - 2006 2005 812,083 (1,585,754) 284,293 11,118 1,011,456 (1,714,562) 274,127 - 3,543 596,160 (646,689) 118,250 - 5,350 224,283 (247,417) 210,577 104,385 - - 26,201 (180,791) 739,075 1.9% 59,711 (347,285) $ 1,359,351 2.2% (1) This schedule reports using the modified accrual basis of accounting. (2) Due to changes in the State's fund structure initiated when GASB Statement 34 was implemented, the changes in fund balance information is available only beginning in fiscal year 2002. (3) Prior to fiscal year 2004, tobacco tax revenue was included in other tax revenue. Increase from fiscal year 2006 to fiscal year 2007 primarily due to Proposition 203, implemented December, 2006. (4) Increase from fiscal year 2006 to fiscal year 2007 primarily due to increase in Land Endowment fair market value of investments, larger cash balances available to invest, and market interest rates. (5) Beginning in fiscal year 2004, Indian gaming revenue was earned as a result of Proposition 202. (6) Prior to fiscal year 2004, tobacco settlement revenue was included in other revenue. (7) For fiscal year 2006, transportation expenditures were reduced and capital outlay was increased by $302,375 for addition of capital assets that were previously recorded as transportation expenditures. (8) In fiscal year 2008, the Greater Arizona Development Authority Fund was reclassified from a special revenue fund to a component unit. Fiscal year 2007 earnings on investments has been restated to reflect this change. (9) In fiscal year 2009, "Proceeds from sale of trust land" was moved from "Other financing sources (uses)" to "Revenues." - 248 - 334,225 (363,052) 237,625 100,509 177,506 $ 1,081,733 3.1% Fiscal Year 2002, as $ 2004 2003 940,050 (1,616,105) 149,001 - 1,053,862 (1,690,443) 88,066 - 848,252 (1,549,833) 51,265 - 24,349 107,940 (145,965) 389,746 22,633 177,322 101,473 90,530 (107,735) 662,975 - 4,167 74,250 (77,135) 148,350 - 16,725 75,295 71,051 (17,273) 273,735 48,834 370,992 (80,713) 372,730 80,563 646,603 (65,087) 68,203 14,816 (411,701) 443,499 2.9% $ restated (2) (614,146) $ 2.7% (1,031,310) 2.7% - 249 - STATE OF ARIZONA SCHEDULE 5 NET TAXABLE SALES BY CLASSIFICATION (1) FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Fiscal Year 2009 CLASSIFICATION (9) Transporting (2) Mining, oil and gas Mining severance Timber severance (3) (11) Utilities Communications Private car and pipelines Publishing Job printing Local advertising (4) Restaurants and bars Amusements Commercial lease (5) Personal property rentals Contracting Feed wholesale (6) Retail Hotel/motel Rental occupancy tax (11) Use tax Use tax-utilities (10) Membership camping (11) Agriculture equipment (7) Other Total Direct sales tax rate (8) 2008 $ 37,920 175,743 729,482 9,236,366 2,928,433 7,743 102,457 307,581 9,094,485 1,053,048 1 3,552,696 14,882,706 46,174,068 2,117,242 (25) 5,882,942 38,653 11 - $ $ 96,321,552 $ 5.60% 2007 48,713 216,675 1,752,522 9,237,779 3,669,683 16,021 122,652 391,038 9,663,959 1,146,344 (443) 3,995,697 20,156,299 52,626,993 2,405,705 (2,669) 6,837,880 12,461 52 112,297,361 $ $ 2006 43,351 255,531 1,743,361 8,609,034 3,513,667 19,679 129,681 397,802 9,619,785 1,086,364 (2) 3,927,824 22,415,051 55,009,403 2,411,634 1,065 6,091,507 12,154 12 115,286,903 5.60% 5.60% $ $ 2005 59,801 321,538 1,219,984 7,679,982 3,220,062 25,751 133,680 403,686 8,933,459 998,767 (120) 3,633,374 20,487,917 53,147,971 2,268,776 3,471 6,155,959 16,582 2,785 108,713,425 5.60% 2004 $ 53,371 317,202 656,631 6,828,179 2,934,858 14,832 134,925 367,010 7,939,964 872,520 919 3,242,363 16,044,847 46,378,344 2,063,973 2,414 5,218,535 234 2,897 - $ 67,486 287,787 261,623 6,430,306 2,809,508 15,920 128,911 348,924 7,202,034 813,489 (6,518) 3,174,945 13,156,490 (8) 42,409,055 1,831,153 4,202 4,644,319 127 2,998 119 $ 93,074,018 $ 83,582,870 5.60% (1) Net taxable sales are based upon tax receipts. (2) The transporting/towing and railroads/aircraft business classifications have been combined into one category and renamed "transporting." (3) Effective July 13, 1995, the tax rate on timber severance was changed to a dollar amount per 1,000 board feet. Timber severance includes only sales subject to the repealed rate. (4) Local advertising was phased out on January 1, 1986. (5) Commercial lease rate dropped to 0% effective July 1, 1997. (6) Feed wholesale dropped to 0% effective July 17, 1994 and was repealed effective October 1, 1994. (7) Agriculture equipment was phased out on July 1, 1988 and is not a current business classification. (8) A significant portion of the revenue base was subject to a sales tax rate of 5.6% for fiscal years 2002 thru 2009 and 5.0% for most of fiscal year 2001 (rate increased to 5.6% during fiscal year 2001 on June 1, 2001). For fiscal years 2000 thru 2009, the tax rate for non-metal mining, oil and gas was 3.125%, the mining severance was 2.5%, the hotel/motel tax was 5.5%, and the jet fuel and jet fuel use tax was $.0305 per gallon. Per the Arizona Constitution, Article 9, Section 22, the Legislature can raise tax rates with an affirmative vote of two-thirds of the members of each house. (9) The names of the ten largest revenue payers are not available. Therefore, the categories are intended to provide alternative information regarding the sources of the State's revenue. (10) Use tax-utilities was not reported prior to fiscal year 2008. Fiscal years 2004-2008 were reported in fiscal year 2008. Information prior to 2004 is not available. (11) Effective November 1, 2006, timbering severance, membership camping and rental occupancy were repealed. Source: Arizona Department of Revenue Annual Reports for fiscal years 2009 and prior. - 250 - 5.60% Fiscal Year 2003 2002 2001 2000 $ 26,106 268,073 45,049 5,940,826 2,869,499 12,493 133,229 427,730 6,655,028 782,670 (7,579) 3,319,778 11,563,726 (67) 39,408,769 1,698,499 1,428 3,793,691 2,406 - $ 96,356 208,310 (4,264) 766 5,919,273 2,945,681 7,134 82,843 351,142 6,428,712 743,800 36,913 3,607,519 11,820,597 (1,806) 38,432,860 1,659,761 5,968 3,240,460 2,741 2,107 - $ 138,656 224,834 168,695 5,814,282 2,870,089 15,486 124,462 402,934 6,300,820 760,838 182,691 3,658,549 11,250,538 (42) 38,282,337 1,871,009 4,897 3,922,953 2,420 1,213 - $ 89,506 193,934 481,583 5,268,208 2,453,094 5,612 112,358 418,678 27 5,976,371 758,823 659,199 3,412,996 10,847,157 382 36,403,862 1,818,474 3,734 3,514,613 1,411 - $ 76,941,354 $ 75,586,873 $ 75,997,661 $ 72,420,022 5.60% 5.60% 5.00% 5.00% - 251 - (This page intentionally left blank) STATE OF ARIZONA SCHEDULE 6 SALES TAX REVENUE PAYERS BY CLASSIFICATION CURRENT YEAR AND NINE YEARS AGO (Expressed in Thousands) Fiscal Year 2009 CLASSIFICATION Transporting (1) Non-metal mining, oil and gas Mining severance Timbering severance - ponderosa (2) Timbering severance - other (2) Utilities Communications Railroads and aircraft (1) Private car and pipelines Publishing Printing Restaurants and bars Amusements Commercial lease (3) Personal property rentals Contracting Feed wholesale (4) Retail Hotel/motel Rental occupancy tax (2) Use tax utilities Use tax License fees Membership camping (2) Jet fuel tax Jet fuel use tax Non sufficient funds Telecommunications service assistance Miscellaneous fees Education tax (5) Total (6) Fiscal Year 2000 Tax Percentage Tax Percentage Collections (4) of Total Collections (5) of Total $ 1,894 5,488 18,210 461,583 146,339 387 5,119 15,370 454,518 52,627 177,547 743,604 2,307,440 116,404 3 1,932 292,698 470 1 4,041 680 (4) (208) 558,900 $ 5,365,043 0.04 % 0.10 0.34 8.60 2.73 0.01 0.10 0.29 8.47 0.98 3.31 13.86 42.98 2.17 0.04 5.46 0.01 0.08 0.01 - $ 2,831 6,060 12,040 8 4 263,410 122,655 1,644 281 5,618 20,934 298,818 37,941 14,529 170,650 542,358 2 1,820,193 100,016 112 175,731 471 71 5,197 836 40 10.42 100.00 % (414) 3 $ 3,602,039 0.08 % 0.17 0.33 7.31 3.41 0.05 0.01 0.16 0.58 8.30 1.05 0.40 4.74 15.06 50.53 2.78 4.88 0.01 0.14 0.02 (0.01) 100.00 % (1) Transporting/towing was combined with railroads/aircraft for confidentiality purposes beginning in fiscal year 2004. (2) Effective November 1, 2006 these rates were repealed. (3) Commercial lease rate dropped to 0% effective July 17, 1997. (4) Feed wholesale dropped to 0% effective July 17, 1994 and was repealed effective October 1, 1994. (5) The education tax is .6% of net taxable sales for most classifications. The ones that do not collect the education tax are nonmetal mining, oil and gas, mining and timbering severances, hotel/motel, rental occupancy, and jet fuel taxes. The Arizona Department of Revenue's annual report does not include the amount of education tax collected from each classification, rather it reports the total collected from all classifications. The education tax became effective June 1, 2001. (6) Does not reflect the balance of undistributed estimated payments at the end of fiscal year 2000. Source: Arizona Department of Revenue Annual Reports for fiscal years 2009 and 2000. - 253 - STATE OF ARIZONA SCHEDULE 7 PERSONAL INCOME BY INDUSTRY FOR THE LAST TEN CALENDAR YEARS (Expressed in Thousands) Calendar Year Ended December 31 2008 CLASSIFICATION Farm earnings Forestry and fishing Mining Utilities Construction Manufacturing Wholesale trade Retail trade Transportation and warehousing Information Finance and insurance Real estate, rental, and leasing Professional and technical services Managing companies/enterprises Administrative and waste services Educational services Health care and social assistance Arts, entertainment, and recreation Accommodation and food services Other services, except public administration Government and government enterprises Other (1) Total Average effective rate (2) $ $ 2007 618,927 426,599 1,311,077 1,505,190 12,525,217 13,908,066 8,594,935 12,858,257 4,957,980 3,158,796 10,150,600 4,249,809 12,925,592 2,436,698 9,369,460 2,041,812 17,544,727 1,798,454 5,978,310 $ 2006 804,272 451,399 1,018,776 1,435,839 14,820,092 13,906,976 8,657,237 13,342,203 4,995,433 3,182,305 10,653,097 4,539,357 12,638,065 2,381,522 9,503,964 1,848,662 16,148,470 1,716,630 5,997,127 $ 2005 692,283 448,533 903,040 1,330,098 15,438,164 13,656,708 7,924,846 12,967,991 4,778,258 3,144,112 10,547,147 5,321,210 11,795,487 2,016,086 9,219,474 1,711,762 14,945,405 1,697,223 5,507,255 $ 2004 966,562 392,423 717,889 1,181,096 13,453,380 12,736,884 7,209,873 11,909,557 4,375,950 2,977,675 9,680,158 5,320,830 10,295,791 1,694,602 8,326,832 1,572,715 13,342,839 1,487,796 5,162,857 $ 2003 1,005,583 398,258 652,564 1,077,131 11,524,499 12,241,302 6,643,795 10,755,773 4,073,329 3,035,060 8,358,294 4,854,340 8,975,667 1,908,177 7,186,639 1,439,838 12,318,173 1,438,709 4,750,837 $ 731,608 359,899 568,278 1,043,710 10,379,641 11,754,138 6,001,515 10,055,878 3,720,148 2,982,886 7,848,643 4,150,748 8,156,394 1,598,978 6,568,021 1,165,114 11,093,907 1,347,898 4,328,034 5,602,851 5,474,659 5,237,758 4,761,529 4,269,944 4,043,836 27,852,678 63,368,416 26,531,365 58,591,817 24,771,576 52,902,967 23,099,159 47,487,066 21,470,055 41,649,041 20,037,866 37,669,435 223,184,451 1.15% $ 218,639,267 $ 1.56% 206,957,383 1.77% $ 188,153,463 1.94% $ 170,027,008 1.68% (1) Includes dividends, interest, rental income, personal current transfer receipts, adjustment for residence, and deductions for government social insurance. (2) The total direct rate for personal income is not available. Average effective rate equals tax collections for the fiscal year, ending the following June 30, divided by personal income. (3) Personal income estimates for years 1999 through 2007 were revised to reflect revisions made by the U.S. Bureau of Economic Analysis. Source: U.S. Bureau of Economic Analysis and Arizona Department of Revenue Annual Report. - 254 - $ 155,606,575 1.49% Calendar Year Ended December 31 2002 $ $ 2001 763,907 348,540 562,242 1,036,530 10,159,027 11,581,992 5,900,156 9,368,279 3,520,402 2,962,772 7,240,812 4,129,856 8,039,619 1,429,896 6,203,543 1,029,270 10,050,149 1,344,317 4,129,811 $ 2000 746,773 354,692 629,836 960,134 9,762,082 12,169,075 5,915,014 9,050,471 3,488,777 2,980,889 6,988,682 3,756,910 8,068,423 1,467,964 6,204,100 816,618 9,206,683 1,266,419 4,050,905 $ 1999 807,189 292,986 655,056 838,388 9,250,550 12,568,167 5,660,202 8,605,358 3,314,360 3,060,789 6,288,781 3,699,083 7,427,982 1,226,338 5,762,071 783,387 8,535,472 1,144,351 3,869,720 $ 849,474 297,770 735,026 792,062 7,952,333 11,115,303 5,077,959 7,868,818 3,094,923 2,518,027 5,533,649 3,635,778 6,432,677 1,062,862 4,917,738 680,837 7,855,630 964,946 3,598,166 4,050,133 3,764,684 3,755,694 3,479,003 18,617,360 35,705,555 17,271,055 33,942,846 15,906,869 32,234,242 14,887,176 30,149,640 148,174,168 1.42% $ 142,863,032 1.46% $ 135,687,035 1.70% $ 123,499,797 1.86% - 255 - STATE OF ARIZONA SCHEDULE 8 PERSONAL INCOME TAX RATES FOR THE LAST TEN CALENDAR YEARS (Expressed in Thousands) Calendar Year Ended December 31 2008 AVERAGE EFFECTIVE RATE (3) Personal Income Tax Revenue (1) Personal Income (2) Average Effective Rate (3) TAX RATES ON THE PORTION OF TAXABLE INCOME IN RANGES (4) $0 - $10 $10 - $25 $25 - $50 $50 - $150 $150 and over $ $ 2007 2,575,453 223,184,451 1.15% 2.59% 2.88% 3.36% 4.24% 4.54% $ $ 2006 3,414,304 218,639,267 1.56% $ $ 2005 3,666,923 206,957,383 1.77% 2.59% 2.88% 3.36% 4.24% 4.54% $ $ 2.73% 3.04% 3.55% 4.48% 4.79% 2004 3,651,576 188,153,463 1.94% 2.87% 3.20% 3.74% 4.72% 5.04% $ $ 2,854,009 170,027,008 1.68% 2.87% 3.20% 3.74% 4.72% 5.04% (1) Personal income tax revenue includes income tax collections and refunds, on a cash basis, for the fiscal year ending the following June 30. (2) Personal income is reported on a calendar basis. Years 1999 through 2007 have been revised to reflect revisions made by the U.S. Bureau of Economic Analysis. (3) The total direct rate for personal income is not available. Average effective rate equals tax collections for the fiscal year, ending the following June 30, divided by personal income. (4) Amounts shown are for single and married filing separate returns. For all other filing status returns, double the amounts for the income tax ranges. Per the Arizona Constitution, Article 9, Section 22, the Legislature can raise tax rates with a vote of two-thirds of the members of each house. Source: Arizona Department of Revenue Tax Tables and the U.S. Bureau of Economic Analysis. STATE OF ARIZONA SCHEDULE 9 PERSONAL INCOME TAX FILERS AND LIABILITY BY INCOME LEVEL FOR THE TAXABLE YEARS 2006 AND 1999 (1) (Expressed in Thousands, Except Number of Filers) Taxable Year Ended December 31, 2006 Number of Percentage Filers of Total Percentage Liability (2) of Total FEDERAL ADJUSTED GROSS INCOME LEVEL (3) $50 and under $50 - $100 $100 - $500 $500 and over 1,756,430 549,506 275,381 18,582 67.56% 21.14% 10.59% 0.71% $ 471,328 716,077 1,206,579 1,293,229 12.79% 19.42% 32.72% 35.07% Total 2,599,899 100.00% $ 3,687,213 100.00% (1) The taxable year 2006 is the most recent year for which data is available, and combines the number of filers of the Arizona Forms 140, 140A, 140NR (nonresident), and 140PY (part year resident) Individual Income tax returns. (2) Liability, as reported on Arizona Forms 140, 140A, 140NR (nonresident), and 140PY (part year resident) Individual Income tax returns for tax year 2006, filed from January 2007 forward (or 1999, filed from January 2000 forward). (3) The names of the ten largest revenue payers are not available. Therefore, the categories are intended to provide alternative information regarding the sources of the State's revenue. Source: Arizona Department of Revenue Annual Reports. - 256 - Calendar Year Ended December 31 2003 $ $ 2002 2,316,040 155,606,575 1.49% 2.87% 3.20% 3.74% 4.72% 5.04% $ $ 2001 2,104,362 148,174,168 1.42% $ $ 2.87% 3.20% 3.74% 4.72% 5.04% 2000 2,090,646 142,863,032 1.46% 2.87% 3.20% 3.74% 4.72% 5.04% $ $ 1999 2,303,888 135,687,035 1.70% $ $ 2.87% 3.20% 3.74% 4.72% 5.04% Taxable Year Ended December 31, 1999 Number of Percentage Filers of Total Percentage Liability (2) of Total 1,480,260 380,723 133,539 7,999 73.92% 19.01% 6.67% 0.40% $ 441,905 545,689 641,556 505,804 20.70% 25.56% 30.05% 23.69% 2,002,521 100.00% $ 2,134,954 100.00% - 257 - 2,291,883 123,499,797 1.86% 2.87% 3.20% 3.74% 4.72% 5.04% STATE OF ARIZONA SCHEDULE 10 RATIOS OF OUTSTANDING DEBT BY TYPE FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands, Except Amount of Debt per Capita) Fiscal Year GOVERNMENTAL ACTIVITIES: Revenue bonds Grant anticipation notes Certificates of participation Capital leases Installment purchase contracts Notes payable Premiums and discounts on debt Deferred amount on refundings (2) Total Governmental Activities $ BUSINESS-TYPE ACTIVITIES: Revenue bonds Certificates of participation Capital leases Installment purchase contracts Notes payable Premiums and discounts on debt Deferred amount on refundings (2) Total Business-type Activities Total Primary Government $ Debt as a Percentage of Personal Income (3) Amount of Debt per Capita (3) 2009 2008 2007 2006 2005 3,251,580 $ 329,650 1,649,870 236,125 6,343 42,668 285,613 (9,171) 5,792,678 2,759,070 $ 298,280 1,135,640 249,876 8,908 22,838 242,816 (13,145) 4,704,283 2,328,840 $ 282,860 959,865 242,209 10,644 3,309 225,071 (14,266) 4,038,532 2,106,700 $ 325,430 1,020,810 129,808 6,815 219,958 (17,832) 3,791,689 2,170,845 363,970 1,054,677 126,676 6,926 197,479 3,920,573 1,239,675 872,829 175,453 16,418 674 43,112 (25,294) 2,322,867 902,255 903,843 179,052 13,024 1,022 38,211 (27,711) 2,009,696 868,565 935,127 166,780 9,544 1,354 39,582 (29,211) 1,991,741 802,600 946,766 113,388 10,279 38,331 (21,606) 1,889,758 768,000 860,759 120,361 7,276 30 36,133 (20,821) 1,771,738 8,115,545 $ 3.6% $ 1,249 6,713,979 $ 6,030,273 3.1% $ 1,057 $ 5,681,447 2.9% $ 976 $ $ 3.0% 953 $ 2004 5,692,311 $ 2,278,225 308,585 845,804 125,974 4,602 562 144,759 3,708,511 756,781 641,315 80,338 5,038 80 28,184 (10,970) 1,500,766 $ 3.3% 990 $ 5,209,277 3.3% 933 Note: Details regarding the State's outstanding debt can be found in the notes to the financial statements. (1) The State of Arizona implemented GASB 34 in fiscal year 2002. (2) For fiscal years 2001 and prior, some or all of the premiums, discounts, or deferred amounts on refundings are combined in the respective revenue bond, grant anticipation note, or certificate of participation line items. (3) See Schedule 22 for personal income and population data. These ratios are calculated using personal income and population data for the calendar year that ends during that fiscal year. For example, fiscal year 2008 contains data for the calendar year ending December 31, 2007. Personal income amounts were revised by the U.S. Bureau of Economic Analysis for 2000-2008, which affected 2004-2008 debt ratios compared to the debt ratios reported in the fiscal year 2008 CAFR. - 258 - Fiscal Year 2003 $ 2,173,055 169,145 582,511 104,644 6,188 10,301 108,732 3,154,576 $ 597,238 429,144 31,923 3,823 129 21,686 (11,305) 1,072,638 $ 4,227,214 2001, as restated (1) restated (2) 1,782,510 182,295 231,904 8,517 10,228 38,859 32,700 2,287,013 $ 596,403 422,010 37,758 3,832 20,794 (8,999) 1,071,798 $ 2.9% $ 2002, as 776 $ 3,358,811 1,882,765 182,295 186,447 9,390 9,767 19,766 2,290,430 2000 (2) $ 540,019 244,934 29,259 1,634 815,846 $ 2.4% 633 $ 3,106,276 1,337,108 201,639 21,115 6,415 1,566,277 567,659 191,899 12,525 9,835 781,918 $ 2.3% 601 $ 2,348,195 1.9% 467 - 259 - STATE OF ARIZONA SCHEDULE 11 LEGAL DEBT MARGIN INFORMATION ARIZONA TRANSPORTATION BOARD HIGHWAY REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Total Principal Outstanding Debt Limit (1) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Highest Total Applicable to Annual Principal and Principal the Limit as (3) Principal Interest Payment and Interest Applicable Debt Limit $ 1,300,000 1,300,000 1,300,000 1,300,000 1,000,000 800,000 800,000 $ Highest Annual Principal and Interest Payment Debt Limit (1), (2) Total Principal to Limit 1,740,765 1,623,905 1,490,600 1,223,425 1,161,355 1,017,360 932,700 734,155 700,280 608,500 $ Legal Debt a Percentage Debt Margin of Debt Limit - % 94.11 89.34 78.26 71.75 73.42 87.54 76.06 Limit 169,728 219,539 317,570 312,204 230,882 278,927 270,270 261,663 256,945 264,361 76,575 138,645 282,640 367,300 265,845 99,720 191,500 $ $ Payment 155,774 146,754 137,149 121,025 115,633 106,220 99,923 86,496 82,712 N/A Highest Annual Legal Debt $ N/A = Not available (1) As stated in House Bill 2206 of the Second Regular Session of the Forty-seventh Legislature, the $1.3 billion debt limit is eliminated from ARS §28-7510 and the amount that pledged monies are required to exceed the highest annual principal and interest payments is amended from two to three times. The general effective date of this change was September 21, 2006. Prior to September 21, 2006, Arizona Revised Statutes restricted the total principal amount of Arizona Highway Revenue Bonds that could be outstanding at any time, excluding refunded bonds, from exceeding $1.3 billion. Also, the monies subjected to pledge for the preceding twelve months must have exceeded, by two times, the highest annual principal and interest payments on all of the outstanding Arizona Highway Revenue Bonds for the highest one year period during the life of the outstanding bonds. (2) For fiscal years 2000, information for calculating the legal debt margin information for the highest annual principal and interest payment limit is unavailable. (3) The Highest Annual Principal and Interest Payment debt limit is calculated by dividing pledged revenues for the Arizona Transportation Board Highway Revenue Bonds (see Schedule 15) by three for Fiscal year 2009 and 2008 or by two for Fiscal years 2007 and prior. Fiscal year 2005 pledged revenues are net of a $118,000 distribution to the State General Fund. STATE OF ARIZONA SCHEDULE 12 LEGAL DEBT MARGIN INFORMATION ARIZONA STATE UNIVERSITY FOR THE LAST FOUR FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Projected Projected Amount of Total Projected Debt Service Projected Debt Debt Service as Fiscal Total Limit (8% of Service Applicable Legal a Percentage of Year (2) Expenditures Expenditures) (3) to Limit Debt Margin Debt Service Limit 2009 52,231 5.20 % 2008 $ 1,865,385 2,017,544 $ 149,231 161,404 $ 115,000 97,000 $ 46,404 5.70 % 2007 1,880,769 150,462 97,800 52,662 5.20 % 2006 1,724,528 137,962 91,400 46,562 5.30 % (1) Ten years of data is not available, but will be accumulated over time. (2) For fiscal years 2006, 2007, 2008 and 2009, projections are based upon the University's fiscal years 2008-2010, 2009-2011, 2010-2012, and 2011-2013 capital improvement plans, respectively. (3) Per ARS §15-1683, the projected debt service on bonds and certificates of participation outstanding and proposed to be issued, as shown in the University's most recent capital improvement plan reported to the Arizona Board of Regents, may not exceed, in any fiscal year shown in such capital improvement plan, more than eight percent of the University's total projected expenditures and mandatory transfers. - 260 - Margin 13,954 72,785 180,421 191,179 115,249 172,707 170,347 175,167 174,233 N/A as a Percentage of Debt Limit 91.78 % 66.85 43.19 38.76 50.08 38.08 36.97 33.06 32.19 N/A STATE OF ARIZONA SCHEDULE 13 LEGAL DEBT MARGIN INFORMATION UNIVERSITY OF ARIZONA FOR THE LAST THREE FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Projected Projected Amount of Total Projected Debt Service Projected Debt Debt Service as Fiscal Total Limit (8% of Service Applicable Legal a Percentage of Year (2) Expenditures Expenditures) (3) to Limit Debt Margin Debt Service Limit 2009 $ 1,681,818 $ 134,545 $ 92,500 $ 42,045 5.50 % 2008 1,681,132 134,491 89,100 45,391 5.30 2007 1,657,971 132,638 114,400 18,238 6.90 (1) Ten years of data is not available, but will be accumulated over time. (2) For fiscal years 2007, 2008 and 2009, projections are based upon the University's fiscal years 2009-2011, 2010-2012 and 2011-2013 capital improvement plans, respectively. (3) Per ARS §15-1683, the projected debt service on bonds and certificates of participation outstanding and proposed to be issued, as shown in the University's most recent capital improvement plan reported to the Arizona Board of Regents, may not exceed, in any fiscal year shown in such capital improvement plan, more than eight percent of the University's total projected expenditures and mandatory transfers. STATE OF ARIZONA SCHEDULE 14 LEGAL DEBT MARGIN INFORMATION NORTHERN ARIZONA UNIVERSITY FOR THE LAST THREE FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Projected Projected Amount of Total Projected Debt Service Projected Debt Debt Service as Fiscal Total Limit (8% of Service Applicable Legal a Percentage of Year (2) Expenditures Expenditures) (3) to Limit Debt Margin Debt Service Limit 4,656 6.89 % 2008 430,360 34,429 27,500 6,929 6.39 2007 410,811 32,865 30,400 2,465 7.40 2009 $ 419,448 $ 33,556 $ 28,900 $ (1) Ten years of data is not available, but will be accumulated over time. (2) For fiscal years 2007, 2008 and 2009, projections are based upon the University's fiscal years 2009-2011, 2010-2012 and 2011-2013 capital improvement plans, respectively. (3) Per ARS §15-1683, the projected debt service on bonds and certificates of participation outstanding and proposed to be issued, as shown in the University's most recent capital improvement plan reported to the Arizona Board of Regents, may not exceed, in any fiscal year shown in such capital improvement plan, more than eight percent of the University's total projected expenditures and mandatory transfers. - 261 - STATE OF ARIZONA SCHEDULE 15 PLEDGED-REVENUE COVERAGE ARIZONA TRANSPORTATION BOARD HIGHWAY REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (1), (2) Fiscal Pledged Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Revenue 509,183 658,616 635,140 624,408 461,763 557,854 540,540 523,326 513,890 528,721 $ Debt Service Principal $ 64,190 60,645 57,825 54,830 44,265 51,155 44,490 45,365 52,055 46,270 $ Interest 89,825 75,538 73,785 62,222 60,459 53,149 41,932 38,534 36,581 33,994 $ Total 154,015 136,183 131,610 117,052 104,724 104,304 86,422 83,899 88,636 80,264 Coverage 3.3 4.8 4.8 5.3 4.4 5.3 6.3 6.2 5.8 6.6 (1) The Highway Revenue Bonds are secured by a prior lien on and pledge of motor vehicle and related fuel fees and taxes. (2) Includes vehicle license tax revenues distributed directly to the State Highway Fund. Fiscal year 2005 is net of a $118,000 distribution to the State General Fund. Fiscal year 2009 is net of $66,000 distribution to the State General Fund. STATE OF ARIZONA SCHEDULE 16 PLEDGED-REVENUE COVERAGE ARIZONA TRANSPORTATION BOARD TRANSPORTATION EXCISE TAX REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (1) Fiscal Pledged Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Revenue $ 219,165 253,742 262,264 316,491 316,806 288,600 268,721 267,563 264,722 248,596 Debt Service Principal $ 13,825 19,045 80,375 208,625 199,400 190,415 163,455 156,865 128,805 $ Interest 17,193 10,673 1,566 14,318 23,553 31,533 35,445 40,035 42,609 $ Total 31,018 29,718 81,941 222,943 222,953 221,948 198,900 196,900 171,414 Coverage 7.1 8.5 N/A 3.9 1.4 1.3 1.2 1.3 1.3 1.5 (1) The Bonds are secured by transportation excise taxes collected by the Arizona Department of Revenue on behalf of Maricopa County. - 262 - STATE OF ARIZONA SCHEDULE 17 PLEDGED-REVENUE COVERAGE SCHOOL FACILITIES BOARD STATE SCHOOL IMPROVEMENT REVENUE BONDS FOR THE LAST EIGHT FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (2) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 (3) Pledged Debt Service Revenue $ 558,900 645,828 666,184 628,471 538,346 487,215 447,841 439,005 Principal $ 35,420 33,810 31,055 34,480 28,485 27,215 25,010 43,035 Interest $ 28,885 30,498 31,893 30,052 36,060 37,568 36,901 26,962 Total $ Coverage 64,305 64,308 62,948 64,532 64,545 64,783 61,911 69,997 8.69 10.04 10.58 9.74 8.34 7.52 7.23 6.27 (1) No debt service payments were due prior to fiscal year 2002. (2) Pledged revenues consist of education transaction privilege tax revenues. These revenues result from a .6% increase in the State transaction privilege and use tax rate that was approved by a statewide vote at the November 2000 election. (3) Principal does not include sinking fund deposits of $1,270 each year, beginning in fiscal year 2003 and ending in fiscal year 2007, that will be sufficient to retire bonds with a par amount of $6,350 upon maturity, in fiscal year 2016. STATE OF ARIZONA SCHEDULE 18 PLEDGED-REVENUE COVERAGE SCHOOL FACILITIES BOARD STATE SCHOOL TRUST REVENUE BONDS FOR THE LAST SIX FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (2) Fiscal Pledged Year Revenue 2009 2008 2007 2006 2005 2004 $ 72,263 72,263 72,263 72,263 72,263 64,903 (3) Debt Service Principal $ 15,105 14,470 13,980 13,440 13,740 - Interest $ 9,143 8,400 11,524 12,061 11,960 8,634 Total $ Coverage 24,248 22,870 25,504 25,501 25,700 8,634 2.98 3.16 2.83 2.83 2.81 7.52 (1) No debt service payments were due prior to fiscal year 2004. (2) Pledged revenues consist of expendable revenue from the State School Trust. This revenue includes the State Treasurer's formula distribution of earnings on permanent fund investments as specified in the Arizona Constitution. Additionally, the State Land Commissioner distributes interest received from financed sales of trust lands and revenue received from land trust leases, except that, under current statutes, the amount of State School Trust Revenues available to pay debt service on all State School Trust Revenue Obligations shall not exceed $72,263. Expendable trust revenues in excess of $72,263 must be deposited in the Classroom Site Fund. (3) Principal does not include sinking fund deposits of $1,538 each year, beginning in fiscal year 2006 and ending in fiscal year 2018, that will be sufficient to retire bonds with a par amount of $20,000 upon maturity, in fiscal year 2018. - 263 - STATE OF ARIZONA SCHEDULE 19 PLEDGED-REVENUE COVERAGE ARIZONA STATE UNIVERSITY REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) Debt Service Net Payments (1) Fiscal Pledged Year Revenue 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 638,707 580,102 505,890 458,177 383,756 325,626 297,691 274,596 261,328 242,764 (Receipts) On Principal $ 19,135 17,125 14,625 11,205 1,340 9,695 9,785 8,995 9,640 Interest $ 16,682 21,339 17,313 16,307 16,260 13,754 9,575 12,139 11,766 12,245 Swap Agreements $ 2,448 186 - (1) Pledged revenues include student tuition and fees, auxiliary enterprises revenue, investment income, and indirect cost recovery revenue. (2) Pledged revenues prior to payment date of 2004 have been restated to include West and Polytechnic campuses. - 264 - Total $ 38,265 38,650 31,938 27,512 17,600 13,754 19,270 21,924 20,761 21,885 Coverage 16.69 15.01 15.84 16.65 21.80 23.68 15.45 12.52 12.59 11.09 STATE OF ARIZONA SCHEDULE 20 PLEDGED-REVENUE COVERAGE UNIVERSITY OF ARIZONA REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (1) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ (1), (2) Direct Net Revenue Gross Operating Available for Revenues 1,044,354 1,113,954 982,559 897,706 830,077 778,939 726,258 670,326 710,423 674,330 $ Expenses 911,440 1,005,572 899,084 836,657 774,014 727,161 667,627 625,664 663,284 625,318 Debt Service $ 132,914 108,382 83,475 61,049 56,063 51,778 58,631 44,662 47,139 49,012 Debt Service $ Principal 22,725 21,235 17,440 12,355 11,815 10,970 12,625 9,946 12,415 11,700 $ Interest 15,437 14,978 14,166 13,433 11,817 11,706 12,156 15,500 16,359 13,081 $ (1) Gross Revenues and Direct Operating Expenses only include current operating unrestricted funds since these are the funds that are pledged for debt service payments under the System Revenue Bond Indentures. Also excluded from expenses is interest, depreciation, and amortization. Fiscal year 2002 Gross Revenues and Direct Operating Expenses include accounting changes applied to scholarship and allowance due to implementation of GASB Statements 34 and 35. (2) Payment of principal and interest on revenue bonds are secured by a pledge of student tuition and fees, auxiliary enterprise revenue, sales and service revenue, and other operating revenues, such as indirect cost recovery and certain investment income. STATE OF ARIZONA SCHEDULE 21 PLEDGED-REVENUE COVERAGE NORTHERN ARIZONA UNIVERSITY REVENUE BONDS FOR THE LAST TEN FISCAL YEARS FISCAL YEAR ENDED JUNE 30, 2009 (Expressed in Thousands) (1) Fiscal Gross Year Revenues 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 164,877 143,733 136,100 129,608 110,981 103,192 85,294 82,839 78,907 75,852 Debt Service Principal $ 6,570 10,455 9,610 10,310 10,065 10,294 9,426 6,932 6,214 6,119 Interest $ 7,383 6,628 5,943 6,603 6,060 5,778 5,066 3,949 5,246 5,488 Total $ 13,953 17,083 15,553 16,913 16,125 16,072 14,492 10,881 11,460 11,607 Coverage 11.82 8.41 8.75 7.66 6.88 6.42 5.89 7.61 6.89 6.54 (1) Payment of principal and interest on revenue bonds are secured by a pledge of student tuition and fees and certain auxiliary enterprise revenue, investment income and indirect cost recovery revenue. - 265 - Total 38,162 36,213 31,606 25,788 23,632 22,676 24,781 25,446 28,774 24,781 Coverage 3.48 2.99 2.64 2.37 2.37 2.28 2.37 1.76 1.64 1.98 STATE OF ARIZONA SCHEDULE 22 DEMOGRAPHIC AND ECONOMIC STATISTICS FOR THE LAST TEN CALENDAR YEARS Calendar Year Ended December 31 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Population (1) 6,500,180 6,353,421 6,178,251 5,961,239 5,750,475 5,585,512 5,449,195 5,303,632 5,166,810 5,023,823 Personal Income (2) (in thousands) $ 223,184,451 218,639,267 206,957,383 188,153,463 170,027,008 155,606,575 148,174,168 142,863,032 135,687,035 123,499,797 Per Capita Personal Income (3) $ 34,335 32,833 32,285 30,620 28,680 26,959 26,454 26,181 25,656 24,057 Unemployment Rate (4) 5.5 3.8 4.1 4.6 5.0 5.7 6.0 4.7 4.0 4.5 (1) These are midyear population estimates of the U.S. Bureau of the Census. (2) Personal income estimates for years 1999 through 2007 were revised to reflect revisions made by the U.S. Bureau of the Census. (3) Per capita personal income is total personal income divided by total midyear population estimates of the U.S. Bureau of the Census. Years 1999 through 2007 have been revised to reflect revisions in personal income and population estimates. (4) The unemployment rate for the year 1999 was revised. Sources: U.S. Bureau of Economic Analysis (for population, personal income, and per capita personal income figures). U.S. Bureau of the Census (also for population). Arizona Department of Transportation CAFR 2009 STATE OF ARIZONA SCHEDULE 23 PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Employer State of Arizona Wal-Mart Stores Inc. Banner Health (1) City of Phoenix Maricopa County Wells Fargo & Co. Arizona State University Honeywell Aerospace Raytheon Missile Systems University of Arizona U.S. Postal Service Motorola The Kroger Co. Total Calendar Year Ended December 31, 2008 Full-Time Percentage Equivalent of Total State Employees Rank Employment 50,936 1 1.72 % 32,814 2 1.11 23,100 3 0.78 17,068 4 0.58 14,014 5 0.47 14,000 6 0.47 13,005 7 0.44 12,600 8 0.43 11,539 9 0.39 10,575 10 0.36 10,545 10 0.36 210,196 7.11 (1) Formerly known as Samaritan Health Systems. Source: Arizona Department of Transportation CAFR 2009 - 266 - % Calendar Year Ended December 31, 1999 Full-Time Percentage Equivalent of Total State Employees Rank Employment 59,348 1 2.44 % 13,800 6 0.57 13,973 4 0.58 12,917 7 0.53 13,860 5 0.57 17,500 2 0.72 9,700 10 0.40 9,756 15,500 9,837 176,191 9 3 8 0.40 0.64 0.40 7.25 % STATE OF ARIZONA SCHEDULE 24 STATE EMPLOYEES BY FUNCTION (1) FOR THE LAST SIX FISCAL YEARS (2) FISCAL YEAR ENDED JUNE 30, 2009 FULL-TIME EQUIVALENT EMPLOYEES General government: Lottery Arizona State Retirement System Department of Revenue All other Health and welfare: Department of Economic Security Arizona Health Care Cost Containment System Department of Health Services All other Inspection and regulation Education: Universities All other Protection and safety: Department of Corrections Department of Juvenile Corrections Department of Public Safety All other Department of Transportation Natural resources Total Fiscal Year 2009 2008 2007 2006 2005 2004 110.0 236.0 1,164.0 2,989.2 110.0 235.0 1,164.0 2,999.2 110.0 231.0 1,148.0 2,957.5 110.0 221.0 1,146.0 2,898.6 110.0 199.0 1,024.0 2,944.3 110.0 197.0 1,134.0 3,003.0 4,201.0 1,635.8 1,699.1 981.5 1,943.1 4,099.2 1,629.0 1,702.1 981.5 1,930.1 3,874.4 1,617.3 1,680.4 859.9 1,853.7 3,953.7 1,583.5 1,735.5 858.5 1,827.3 3,902.7 1,574.5 1,734.5 924.2 1,818.5 3,592.9 1,530.1 1,701.5 933.2 1,815.3 17,353.5 1,003.4 17,138.8 1,001.4 16,975.0 969.0 16,419.5 913.8 16,027.5 949.5 15,467.4 948.1 9,932.5 1,163.7 2,114.8 134.9 4,748.0 1,009.7 9,755.9 1,163.7 2,108.8 133.9 4,744.0 1,007.7 9,726.9 1,195.7 2,065.8 125.4 4,703.5 967.3 9,726.9 1,160.5 1,901.8 127.4 4,649.0 926.9 10,322.4 1,151.5 1,872.0 120.6 4,626.0 903.2 10,295.4 1,214.4 1,853.0 149.6 4,605.0 856.9 52,420.2 51,904.3 51,060.8 50,159.9 50,204.4 49,406.8 (1) Full-time equivalent employees are categorized by the function of government that their respective agency generally serves. Information is not available to distinguish between governmental, business-type, or fiduciary activities. (2) Ten years of data is not available, but will be accumulated over time. Source: The Executive Budget (Detail). - 267 - STATE OF ARIZONA SCHEDULE 25 OPERATING INDICATORS BY FUNCTION FOR THE LAST TEN FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 2009 FUNCTIONS/PROGRAMS General government: Number of tax returns received (in millions) Health and welfare: Arizona Health Care Cost Containment System membership (2) Average monthly number of recipients of temporary assistance for needy families Average monthly number of persons receiving food stamp benefits Inspection and regulation: Nonfatal occupational injuries and illnesses: Total recordable cases (in thousands) (3) Incident rate per 100 full-time workers (3) Education: Public school enrollment, grades K-12 (4) Protection and safety: Number of miles patrolled by the Highway Patrol State prison adult inmate population (5) Transportation: Number of registered vehicles (6) Number of driver licenses issued (7) Natural resources: Game and Fish Department's license and tag sales (8) Universities: University full-time equivalent students (9) Unemployment compensation: Number of initial unemployment claims filed Industrial Commission special fund: No-insurance awards issued Number of vocational rehabilitation awards issued Lottery: Total lottery sales (in millions) Other business-type activities: Arizona Health Care Cost Containment System's Healthcare Group membership (10) 2008 2005 2004 2003 5.7 5.6 5.5 5.5 6.0 6.0 5.3 1,282,910 1,136,585 1,075,125 1,065,444 1,075,873 971,292 955,600 83,969 80,221 82,408 93,553 105,517 122,577 121,193 779,089 600,549 537,072 546,424 546,369 521,992 442,320 84.0 3.9 101.8 4.6 99.4 4.6 97.0 4.9 87.1 4.7 85.7 4.8 95.9 5.1 1,062,618 1,132,963 1,106,207 1,084,247 1,043,704 1,002,630 970,283 21,410,696 38,897 20,282,212 37,088 19,703,282 34,864 19,922,704 32,710 19,229,079 31,937 18,363,977 30,898 6,692,834 1,246,358 6,733,610 1,200,227 6,608,726 1,266,973 6,318,402 1,205,068 5,945,131 1,158,223 5,638,799 1,122,893 5,311,590 1,039,780 874,363 896,143 940,223 897,159 808,055 835,669 865,634 118,743 113,092 110,580 107,765 104,685 102,461 100,258 396,755 226,772 185,397 161,869 200,282 227,585 255,579 2,244 103 2,748 118 3,265 133 2,744 124 3,281 102 3,300 139 2,954 150 N/A 39,628 $ Fiscal Year 2006 2007 484.5 14,560 $ 472.9 21,646 $ 462.2 26,914 $ 468.7 21,600 $ 397.6 $ 14,626 N/A = Not available (1) Ten years of data may not be available for some statistics, but will be accumulated over time. Also, some figures may represent time periods other than a fiscal year (such as an academic or calendar year), as indicated in the notes below. (2) Approximate number of members enrolled as of June 1. Excludes membership in the Healthcare Group, which is listed separately as other business-type activities, beginning in fiscal year 2002. In November 2000, Arizona voters approved Proposition 204, the Healthy Arizona Initiative, which expanded eligibility to 100% of the federal poverty level. This added 142,800 members and accounted for 28.5% of the overall growth since March 1, 2001. (3) Numbers represent total recordable cases and incident rates for the calendar year ended December 31. The fiscal years above contain data for the calendar year that ends during that fiscal year. For example, fiscal year 2008 contains data for the calendar year ending December 31, 2007. One hundred full-time workers represent 200,000 hours worked (100 times 40 hours per week times 50 weeks per year). (4) These enrollment counts represent a head count of all active enrollments on October 1st of each school year. The fiscal years above contain data for the academic year that occurs during that fiscal year. For example, fiscal year 2009 contains data from the October 1, 2008 enrollment figures. Starting with the 2008-09 school year, due to federal requirements, new business rules were used to calculate enrollment so that counts are unduplicated. Prior to this, the counts were not unduplicated counts; concurrently enrolled students were counted as having an active membership in each school. Also, there was a change in data collection in 2003. From 2003 to 2008, concurrent enrollments in technology schools were included, which may have additionally overstated aggregated enrollment figures. (5) Beginning in 2007, the state prison inmate population on the 2 Year Prison Population Trend Report excludes the inmate count from the county jail. For fiscal years 2006 and prior, the number includes both the county jail and the outside count of inmates. (6) Count represents the total number of vehicles registered as of the end of the fiscal year. Starting with fiscal year 2002, a new category for "unassigned vehicles" was added to more fully reflect the total count of all registered vehicles. (7) Count represents the number of driver licenses issued during that fiscal year, beginning July 1 and ending June 30. (8) Numbers represent sales for licenses, stamps, and tags for the calendar year ended December 31. The fiscal years above contain data for the calendar year that ends during that fiscal year. For example, fiscal year 2008 contains data for the calendar year ending December 31, 2007. (9) Enrollment figures represent the number of full-time equivalent students for the fall semester. The fiscal years above contain data for the fall semester that occurs during that fiscal year. For example, fiscal year 2008 contains data for the fall 2007 semester. These figures are generated by calculating one full-time equivalent student for each 15 student credit hours produced in lower-division undergraduate courses, each 12 student credit hours produced in upper-division undergraduate courses, and each 10 student credit hours produced in graduate courses. (10) Approximate number of members enrolled as of June 1. Sources: The State Departments of Transportation, Public Safety, Corrections, Education, Game and Fish, Economic Security, Revenue, the Industrial Commission of Arizona, Arizona Lottery, Arizona Health Care Cost Containment System, Arizona Board of Regents, and the U.S. Department of Labor. - 268 - 366.6 11,218 $ 322.3 11,400 Fiscal Year 2001 2002 6.3 N/A 1999 N/A N/A N/A N/A 791,000 609,000 109,547 93,857 89,770 95,556 355,722 277,192 257,989 260,736 113.1 5.9 112.8 6.0 111.8 6.1 111.4 6.2 915,656 878,987 866,626 833,301 18,160,134 29,273 N/A 26,402 N/A 27,451 N/A 26,169 5,118,115 1,072,245 4,639,405 973,476 4,407,098 967,086 898,453 986,691 918,038 96,603 92,725 92,211 91,163 255,303 187,697 155,675 161,006 3,986 121 $ 2000 294.8 12,100 N/A N/A $ 272.7 N/A 4,159,576 1,293,425 N/A N/A N/A $ 255.6 N/A N/A N/A $ 268.3 N/A - 269 - STATE OF ARIZONA SCHEDULE 26 CAPITAL ASSET STATISTICS BY FUNCTION FOR THE LAST TEN FISCAL YEARS (1) FISCAL YEAR ENDED JUNE 30, 2009 Fiscal Year 2009 FUNCTIONS/PROGRAMS Protection and safety: Number of adult prison facilities (3) Transportation: Public road mileage (center lane miles) (2) Number of bridges (2) Natural resources: State Trust acres Universities: Number of facilities (4) Gross square feet (in thousands) (4) 2008 2007 2006 2005 2004 2003 10 10 10 10 10 10 10 6,753 4,648 6,785 4,637 6,817 4,648 6,922 4,676 6,816 4,608 6,912 4,488 6,801 4,463 9,259,296 9,260,253 9,262,781 9,267,377 9,269,723 9,271,580 9,279,243 1,670 37,186 1,669 36,000 1,663 34,946 1,002 20,154 N/A N/A N/A N/A N/A = Not available Note: No capital asset indicators are available for the general government, health and welfare, inspection and regulation, education, unemployment compensation, Industrial Commission special fund, Lottery, and other business-type activity functions. (1) Ten years of data may not be available for some statistics, but will be accumulated over time. Also, some figures may represent time periods other than a fiscal year (such as a calendar year), as indicated in the notes below. (2) These are the number of center lane miles and bridges that the Arizona Department of Transportation accounts for under the modified approach, which is discussed in the Required Supplementary Information portion of this report. (3) The Arizona Department of Corrections also contracts with private prison facilities to provide custody and treatment. (4) In addition to academic/support facilities, auxiliary enterprise facilities are also reported. These would include essentially self-supporting entities, such as residence halls and parking structures. Sources: The State Departments of Transportation, Land, and Corrections and the Universities. - 270 - N/A N/A Fiscal Year 2002 2001 10 6,650 4,378 9,266,158 N/A N/A 2000 10 10 N/A N/A N/A N/A 9,271,921 N/A N/A 9,273,846 N/A N/A - 271 - ACKNOWLEDGMENTS The Comprehensive Annual Financial Report was prepared by the Department of Administration, Financial Services Division, Financial Reporting Section: Ron Santa Cruz Michael J. Kallaur, CPA Chris Freitag Evan Chang, MBA Cody Johnson, MBA Celine Baker, MA, CPA Special acknowledgment goes to: All fiscal and accounting personnel throughout the Arizona State government, whose dedicated efforts and cooperation contributed to the compilation of financial information that appears in the report.