Financial Condition
Report
Fiscal Year 2008

Internal Audit
Department
Maricopa County
Arizona

The County Auditor is appointed by the Board of Supervisors. The mission of the
Internal Audit Department is to provide objective, accurate, and meaningful information
about County operations so the Board of Supervisors can make
informed decisions to better serve County citizens.

The mission of Maricopa County is to provide
regional leadership and fiscally responsible,
necessary public services so that residents can
enjoy living in a healthy and safe community.

Audit Team Members
Eve Murillo, CPA, CFE, MBA, Deputy County Auditor
Patra E. Carroll, CPA, CIA, Audit Supervisor
Paul Carolan, CPA, Senior Auditor
Scott Jarrett, Associate Auditor
Jenny Eng, Staff Auditor
Special Thanks to the Department of Finance’s Financial Reporting Division
and
Marcus Reinkensmeyer,
photographer of front cover photographs,
upper left (saguaro sunset) and bottom left (mountain landscape)

Copies of the County Auditor’s reports are available by request.
Please contact us at:
Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003
(602) 506-1585
Many of our reports can be found in electronic format at:
www.maricopa.gov/internal_audit

Maricopa County
Internal Audit Department

301 West Jefferson St
Suite 660
Phx, AZ 85003-2143
Phone: 602-506-1585
Fax: 602-506-8957
www.maricopa.gov

July 20, 2009
Max Wilson, Chairman, Board of Supervisors
Fulton Brock, Supervisor, District I
Don Stapley, Supervisor, District II
Andrew Kunasek, Supervisor, District III
Mary Rose Wilcox, Supervisor, District V
We have completed the Fiscal Year (FY) 2008 edition of the Maricopa County
Financial Condition Report based primarily on the County’s FY 2008
Comprehensive Annual Financial Report issued in March 2009 by the County’s
Department of Finance. This work, which is part of our Board-approved audit
plan, provides information on County financial trends.
For FY 2008, we again highlight the financial strength of the County’s General
Fund within the context of population growth that led the nation. The nation and
local economies are encountering severe financial challenges. The County,
because of conservative fiscal polices, has been able to ensure expenditures
did not exceed revenues. The General Fund unreserved fund balance
continued to grow, and long-term debt levels decreased. Key financial
indicators compare very favorably to national and local benchmarks.
This year, we again include a benchmark comparison of investment portfolios
yields between the County Treasurer and the Arizona State Treasurer.
We also provide updated information about County employee pension plans.
Public pension funds are experiencing severe fiscal challenges due to recent
investment losses, high benefit payments, actuarial methods used in longevity
projections, and insufficient employee and employer contribution rates.
We would like to commend the Board of Supervisors and County leadership for
the conservative fiscal policies that have led to the strong financial condition
highlighted throughout this report. The foresight and restraint applied in prior
years will significantly help soften the impact of the current economic downturn.
Sincerely,

Ross L. Tate
County Auditor

MARICOPA COUNTY BASICS
“Maricopa County is a recognized leader in local government innovation. We take pride in our
ability to think creatively to develop new ways of delivering results for our tax payers. Maricopa
County continues to lower the tax rate and use a “pay as you go” capital improvement plan. I
want to thank the Board for their continued leadership, as well as elected and appointed officials
of Maricopa County. I am recommending a budget that I believe will sustain the County during
this revenue slowdown and allow us to achieve excellent results for our County residents.”
David Smith, County Manager
FY 2007 – 2008 Annual Business Strategies

Population

(Source: U.S. Census Bureau)

3.95 million people call Maricopa County home, the 4th largest population in the nation
behind Los Angeles County (California), Cook County (Chicago, Illinois), and Harris County
(Houston, Texas).
The County’s Population increased by 89,550 from July 2007 to July 2008, the biggest county
population increase in the nation.
The County’s population grew by 882,449 from July 2000 to July 2009.

Size

(Source: Maricopa County website)

At 9,226 square miles, Maricopa County is larger than several states, including Connecticut,
Delaware, Hawaii, Massachusetts, New Hampshire, New Jersey, Rhode Island, as well as the
District of Colombia.

Financial

(Source: Maricopa County FY08 CAFR)

As of June 30, 2008, the County Treasurer held $3.9 billion in cash and investments, which
includes special districts and school districts along with County funds.
The County received $1.9 billion in revenue during FY 2008.
The Unreserved General Fund Balance exceeded $512 million in FY 2008, up $67 million from
the previous year.

History

(Source: Maricopa County website)

Established in 1871, Maricopa was the fifth county to be formed in what was then the
Arizona Territory.
Maricopa County Internal Audit

FY08 Financial Condition Report—July 2009

TABLE OF CONTENTS

General Fund Key Financial Indicators ................................. 1
General Fund Revenue and Expenditures ............................ 4
General Fund FY 2009 Update .............................................. 5
Governmental Funds ............................................................ 6
Governmental Funds Revenues and Expenditures ............. 8
Governmental Funds Budget‐to‐Actual Variance ............... 10
Primary Government (Net Assets and Long Term Debt) ... 12
County Treasurer .................................................................. 15
Arizona County Benchmarks ................................................ 19
Maricopa County Retirement Plans .................................... 23
Population Growth and Employment Rates ....................... 28
Report Methodology ............................................................ 30

Maricopa County Internal Audit

FY08 Financial Condition Report—July 2009

(Blank Page)

General Fund

General Fund Key
Financial Indicators

The General Fund is the County’s primary operating fund.
The General Fund accounts for all financial resources of
the general government, except for those required to be
accounted for separately in a different fund (such as
transportation, jail operations, etc.). Separate funds may
be used for legal requirements (federal and state) and for
financial administration purposes.

Maricopa County Internal Audit

1

FY08 Financial Condition Report—July 2009

Unreserved General Fund Balance
The unreserved fund balance represents the funds available to meet the County’s current
and future financial needs. It is a useful measure of a government’s liquidity. Conservative
budget strategies, combined with conservative revenue estimates, have resulted in General
Fund balance increases. Large amounts of the unreserved balance are designated for
various purposes including funds for the self-insured benefit program and cash flow to cover
tax collection cycles.
$600.0

Unreserved General Fund Balance
$500.0

$512.1

The County’s unreserved General Fund balance increased
15.1% in FY 2008 from $444 million to over $512 million
(In millions, not adjusted for inflation)

$400.0

$300.0

$200.0
$140.7
$100.0

FY
08

FY
07

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

FY
00

$‐
FY
99

General Fund

UNRESERVED BALANCE

SOURCE: Maricopa County Comprehensive Annual Financial Reports (CAFRs)

As of June 30, 2008, the unreserved General Fund balance rose to $512 million, an increase
of 15.1% from the prior year. Due to the economic downturn, the County collected less
revenue than the prior year; however was able to ensure expenditures did not exceed
revenues by employing a conservative approach to forecasting and budgeting. The County
utilized budget balancing tactics which included: hiring freeze, overtime restrictions, capital
purchase freeze, and administrative budget reductions of 5 percent.
The decrease in the FY 2007 fund balance was primarily due to operating transfers to fund
capital projects.

Maricopa County Internal Audit

2

FY08 Financial Condition Report—July 2009

FINANCIAL INDICATORS
For more than ten years, Maricopa County’s General Fund has maintained a healthy fund
balance in relation to its revenues. Maricopa has significantly surpassed the national
benchmark average for this financial measure for the past 10 years (see page 31 for a list of
national benchmark counties).
55%
50%

Unreserved General Fund Balance
As a percent of revenues

45%

45%

This measure reflects
the availability of
financial reserves to
meet unforeseen
needs.

40%
35%
30%
25%

22%
18%

20%
15%

15%
10%

Maricopa

FY
08

FY
07

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

FY
00

FY
99

5%

Avg of 10 Benchmark Counties

SOURCE: Maricopa County CAFRs

Credit rating agencies
review a government’s
unreserved fund
balance when
assessing credit
worthiness. Maricopa
County’s high
percentage of
unreserved General
Fund balance, when
compared to revenues,
could lower the
County’s cost of
borrowing money.

General Fund Liquidity
Liquidity Ratio

16.0

The liquidity ratio is a measure of the
County’s ability to pay current
obligations, and is measured by
dividing fund assets by fund liabilities.

14.0
12.0

10.7

10.0
8.0

6.6

6.0
4.0

2.6

2.6

2.0

Maricopa

FY
08

FY
07

FY
06

FY
05

FY
04

0.0

FY
03

Maricopa continues to significantly
outperform the national benchmark
average with a liquidity ratio of over
10-to-1. This means that there are
ample funds ($10.70) available in cash
or equivalents to pay every $1 in
current liabilities.

Maricopa County has a good liquidity ratio
with nearly $11 in cash for every $1 of
current liabilities

Benchmarks

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

3

FY08 Financial Condition Report—July 2009

General Fund

General Fund Balance as a Percent of Revenues

REVENUES & EXPENDITURES
General Fund

REVENUES
Where the Money Comes From (In millions)
The majority of the County’s General Fund
revenues come from intergovernmental
sources (53%) and taxes (38%).
Intergovernmental revenues are funds
received from federal, state and other local
government sources in the form of grants,
shared revenues, and payments in lieu of
taxes. Page 7 shows a detailed breakdown of
intergovernmental revenue sources.

Revenues vs. Expenditures

Charges
for svcs.
$43 (4%)

Intergv.
$614 (53%)

Taxes
$440 (38%)

Charges,
Misc. and
Other
$51 (4%)

SOURCE: Maricopa
County CAFRs

Three Year Trend

Since FY 2006 General Fund revenues have exceeded In FY 2008, General Fund revenues
decreased by $85 million, or 7.4%, to
expenditures by $868 million (In millions)
$1,148 billion.
$1,233

$1,200

$1,148

$1,148
$1,000

$943
$800

$902

$816

$600

Revenues

$400

Expenditures

Much of this revenue decrease was
due to a decrease
Xx% in distributions
from the State of Arizona for shared
sales tax and the elimination of
revenue that now goes directly to the
Maricopa County Special Health Care
District, a separate legal entity.
FY 2008 property tax increases offset
some of these revenue decreases.
Property taxes increased primarily
due to new home construction.

$200

FY06

FY07

FY08

SOURCE: Maricopa County CAFRs

EXPENDITURES
Where the Money Goes (In millions)
Nearly 80% of the County General Fund
expenditures are for public safety (49%)
and health (27%), with the remaining used
for general government (19%) and capital
outlay (5%). General Government consists
of a broad range of mandated services,
which include elections, property
assessment, revenue and expenditure accountability, and legal representation for the
County.
Maricopa County Internal Audit

Public
Safety
$446 (49%)

General
Gvm nt.
$167 (19%)

Capital
Outlay
$46 (5%)

Health
$240 (27%)
Other
$4 (0%)

SOURCE: Maricopa County CAFRs

4

FY08 Financial Condition Report—July 2009

FY 2009 UPDATE
Arizona and Maricopa County’s economy has experienced, and is projected to continue
to experience, economic turmoil. The County’s primary General Fund revenue sources
come from intergovernmental (state-shared sales and vehicle license taxes) and
property taxes. All three have declined since the end of FY 2008 as the nation’s, state’s,
and County’s economies experience recessionary pressures. The following charts
compare, unaudited, General Fund revenues and expenditures from April 30, 2008 to
April 30, 2009.

General Fund Revenues
$1,000

Major Revenues Source Variances
April 2008 vs. April 2009

(In millions)

$971

$20 Million
Decrease

Property Tax $31.8 Million Increase
$951

Sales Tax $45.9 Million Decrease

$800

VLT Tax $10.1 Million Decrease

$600

FY 2009 year‐to‐date total revenues
decreased more than $20 million
compared with the same period
during 2008.
2008
YTD
AprilFISCAL
30 2008

AprilFISCAL
30 2009
2009
YTD

SOURCE: May 2008 and 2009 Maricopa County Department of Finance Executive Variance Report

General Fund Expenditures
(In millions)
$600

Major Operational Expenditure
Variances (Personnel, Services, and
Supplies)
April 2008 vs. April 2009
Personnel $22.7 Million Decrease

$500
$515

$30 Million
Decrease

Services $7.2 Million Decrease
$485

Supplies $0.6 Million Decrease

$400

$300
2008
YTD
AprilFISCAL
30 2008

2009
YTD
AprilFISCAL
30 2009

The County implemented hiring and
capital purchase freezes, and budget
reductions to keep expenditures
in line with revenues.

SOURCE: May 2008 and 2009 Maricopa County Department of Finance Executive Variance Report

Maricopa County Internal Audit

5

FY08 Financial Condition Report—July 2009

General Fund

FY 2009 — Economic Downturn

Governmental Funds

Governmental Funds

The focus of the preceding pages was on the County’s
primary operating fund, the General Fund. The
following pages provide a more comprehensive look
at County financial trends by focusing on all
Governmental Funds, which include the:
General Fund
Special Revenue Funds
Debt Service Funds
Capital Projects Funds
Governmental funds are used to account for activities
that are principally supported by taxes and
intergovernmental revenues (governmental activities),
as opposed to other business‐type activities that are
supported primarily by user fees.

Maricopa County Internal Audit

6

FY08 Financial Condition Report—July 2009

REVENUE SOURCES
Nearly 83% of County
Governmental Fund revenues
consist of intergovernmental and
tax revenues.
Intergovernmental Revenues
are shared taxes and grants
passed through to the County
from other government entities.
In FY 2008 these revenues
accounted for nearly 47% of
County Governmental Fund
revenues and include:
♦

State-shared sales tax - $461

♦

Vehicle license tax - $149

♦

Highway user fuel tax - $103

♦

Grants (State and Federal)
and other payments - $192

Intergovernmental
$905 (47%)
Taxes
$672 (35%)

Special Assessments
$5 (.3%)
Fines
and Forfeits
$32 (2%)

Licenses and
Permits
$40 (2%)

Charges for
Services
$153
(8%)

Miscellaneous
$111 (6%)

SOURCE: FY08 CAFR

Tax Revenues are County generated taxes used to support County operations. Tax revenues
accounted for nearly 35% of the County’s total Governmental Fund revenue and include:
County Property Tax - $528, Jail Excise Tax - $138, other small tax sources - $6.

35%

State‐Shared Sales Tax and Property Tax
As a % of total Governmental Fund Revenues

32%

Property Tax

Sales Tax

State-Shared Sales Tax
and Property Tax as a
Percent of Total Revenues
The County’s two primary
revenue sources are stateshared sales tax (24%) and
the general property tax
(28%), which account for
over 50% of all governmental
fund revenue.

29%

26%

23%

20%
FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: FY08 CAFR

Maricopa County Internal Audit

7

FY08 Financial Condition Report—July 2009

Governmental Funds

FY 2008 Total Governmental Fund Revenues
by Source (In millions)

Revenues (millions):

, 91

5

9

$9

6

$6
26

69

42

$2

$2

$400

$3

40

01

72

$6

$6

05

6

$800

SOURCE: FY06, FY07, and FY08 CAFRs

, 01

3

FY08

$1

$2

FY07

, 10

, 02

$1,200

FY06

$1

$1,600

(In millions)

, 85

$2,000

Revenues by Source for Governmental Funds

$1

$2,400

$1

Governmental Funds

REVENUES & EXPENDITURES

$0

Intergovernmental

Taxes

Other

TOTALS

Revenues for Governmental Funds decreased nearly 5% in FY 2008 mainly due to the
elimination of $84.7 million in state disproportionate share revenue, which now goes
directly to the Maricopa County Special Health Care District, a separate legal entity.
Disproportionate share revenues previously were passed through the County to
compensate the special health care district for medical costs incurred to treat low income
populations. Other factors include reduced state-shared sales tax of over $19.5 million
and a $17.1 million decrease in capital project cost-sharing revenue in the Transportation
Capital Projects Fund.
Expenditures from Governmental Funds for FY 2008 decreased by $32 million (1.7%).
The most significant decreases were for capital outlay and health, welfare, and sanitation
expenditures. Capital outlay decreases were attributed to the reduction or postponement
of capital projects for transportation and justice related improvements. The decrease in
health, welfare, and sanitation expenditures was due to the elimination of the
disproportionate share revenues used to operate the Special Health Care District
mentioned above.

FY08

6

$1,600

13
$8

33
$7

27
$1

23
$1

19
$1

73
$1
3

$17

31
$1

3

79
$2

01
$3

$400

$23

79
$3

62
$4

31
$4

$800

83
$8

$1,200

SOURCE: FY06, FY07, and FY08 CAFRs

FY07

1
,84
$1
3

FY06

,64
$1

(In millions)

,87
$1

Expenditures by Function for Governmental Funds
$2,000

$0
Publ i c Sa fety

Maricopa County Internal Audit

Hea l th, Wel fa re
a nd Sa ni ta ti on

Ca pi ta l Outl a y

8

Genera l
Government

Other

TOTALS

FY08 Financial Condition Report—July 2009

REVENUES & EXPENDITURES
Revenues Per Person

Revenues Per Person
Governmental Funds
(Adjusted for inflation)

$550

$503

$542

$500

$500

$487
$467
$450

$481

Revenues per person
dropped over 11% to
$481 per person, nearly
the lowest level in the last
decade. This drop is a
reversal of the average
1.5% percent increase in
revenues per year since
FY 1999.

Revenues per Person
Revenues per Person (10 Year Average)

0

1

2

3

4

5

6

7

8

FY0

FY0

FY0

FY0

FY0

FY0

FY0

FY0

FY0

FY9

9

$400

Governmental Funds’
revenues include taxes,
intergovernmental revenues,
and other sources.

SOURCE: Maricopa County CAFRs

$550

Expenditures Per Person
Governmental Funds

Expenditures Per Person

(Adjusted for inflation)
$500

$503

$490

$450

$462

$457

Although the 10-year trend
shows slightly increasing
expenditures, expenditures
per person decreased more
than 8% over the last year to
$462 per person, and were
down from the 10-year
average of $472.

$449
Expenditures per Person
Expenditures per Person (10 Year Average)

9

0

1

2

3

4

5

6

7

8

FY9

FY0

FY0

FY0

FY0

FY0

FY0

FY0

FY0

FY0

$400

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

9

FY08 Financial Condition Report—July 2009

Governmental Funds

$600

$60

State‐Shared Sales Tax

$40

Variance between original budget
and actual (In millions)

$20

State-Shared Sales Tax
$50

Sales tax revenues can be difficult
to predict, as they are subject to
volatile economic forces.

$23

$22
$6
$(16)

$0

$(5)

$(36)

$(11)

‐$20

FY
08

FY
07

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

‐$40

Actual sales tax revenues fell
below budgeted amounts by $11
million in FY 2007, and $36 million
in FY 2008, despite a modest
budget projection for a 1.1%
increase in state-shared sales tax
for FY 2008. The previous 8 years
averaged 7.5% increases.

SOURCE: Maricopa County CAFRs and Annual Business Strategy (Budget) Books

$20
$15

Vehicle License Tax (VLT)

Vehicle License Tax
Variance between original budget
and actual (In millions)

$10
$6

VLT revenues can be difficult to
predict since citizens can prepay for
one or two years and volatile
economic forces affect VLT.

$13

$7

$6

$5

$5

$2

$(.07)

$(4)

$0

FY
08

FY
07

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

‐$5

In FY 2008, actual VLT revenues
fell short of the original budget by
nearly $4 million, or 2.3%, despite
conservative projections of a 0.05%
decrease in VLT revenues for FY
2008. The previous eight years
averaged 8.9% increases.

SOURCE: Maricopa County CAFRs and Annual Business Strategy (Budget) Books

$15
$10

$10

Property Tax

$11
$9

$7
$5

Variance between
original budget
and actual (In millions)

$5
$0
$(.6)
$(3)

‐$5

FY
08

FY
06

FY
05

FY
04

FY
03

FY
02

FY
07

$(8)

‐$10
FY
01

Governmental Funds

REVENUES BUDGET TO ACTUAL

Property Tax
Property tax revenues are typically
more predictable and are therefore
easier to budget than state-shared
sales and vehicle license taxes.
Despite a history of conservative
budgeting, revenue shortfalls
outpaced budgeted estimates since
FY 2006. In FY 2007, actual property
tax revenues fell short of budgeted
levels by over $8 million or 1.7%. In
FY 2008 property taxes also fell short
of budget by $640 thousand or 0.1%.

SOURCE: Maricopa County CAFRs and Annual Business Strategy (Budget) Books

Maricopa County Internal Audit

10

FY08 Financial Condition Report—July 2009

BUDGET TO ACTUAL / FY 2009 UPDATE

Major Revenues Combined
FY 2008 actual revenues for
combined state-shared sales
tax, property tax, and vehicle
license tax fell short of
projections by $40.7 million.
Due to the economic downturn,
the County has experienced a
period of revenue declines.

$50

Variance between original budget
and actual (In millions)

$25

Revenues Exceeded
Budget
$9.3

$33.2

$72.1

General Fund

Major Governmental
Fund Revenues

$75

$58.5

$29.3

$(.8)
$(40.7)
$0
$(9.6)
‐$25

Revenues Fell Short of
Budget

FY
08

FY
07

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

‐$50

SOURCE: Maricopa County CAFRs and Annual Business Strategy (Budget) Books

2009 Budget Update
As of March 2009, the Maricopa County Department of Finance reported that year-todate revenues were below budgeted amounts by nearly $34 million. This shortfall was
primarily due to continuing decreases in state-shared sales, property taxes, and vehicle
license tax, the three largest sources of funding for the County’s General Fund. The projected variances are shown in the chart below.

$20
$10

Year‐to‐Date Revenue Variance
$9.6

Budget‐to‐Actual (In Millions)

$$(1.9)

$(2.3)

$(10)

$(7.3)

$(20)
$(30)
$(40)

$(31.9)

$(50)
State-Shared
Sales Tax

County Property
Tax

Vehicle License
Tax

Detention Fund
Revenues

Other

SOURCE: Unaudited April 2009 Maricopa County Department of Finance Executive Variance Report

Maricopa County Internal Audit

11

FY08 Financial Condition Report—July 2009

Primary Government

Primary Government

The preceding pages reviewed the County’s general and
governmental and funds, which are used to account for
short‐term assets and liabilities.
The County’s long term assets and liabilities are accounted
for under Primary government. Primary government is a term
used to represent both Governmental Activities and Business
Type Activities, which includes hospitals, airports, water
facilities, and other activities that are primarily supported by
service fees. The following Primary Government financial
indicators are reviewed in the next section:
♦

Net Assets

♦

Long Term Debt

Maricopa County Internal Audit

12

FY08 Financial Condition Report—July 2009

NET ASSETS

$4,500
$4,000

Total Net Assets

$3,500
$3,000

$3,607

(In millions)

$3,841

$3,324

$2,942

$3,002

FY04

FY05

$2,500
$2,000
$1,500
$1,000
$500
$0
FY06

FY07

FY08

SOURCE: Maricopa County CAFRs

Net Asset Composition
Net assets have three components: (1) Investments in capital assets, net of related debt
(such as land, building, machinery, and equipment); (2) Restricted Net Assets (assets that are
subject to external restrictions on how they may be used); and (3) Unrestricted net assets
(assets not subject to external restrictions on how they may be used).
Just under 66% of net assets are invested in capital assets (net of related debt), 14% are
restricted (primarily for public safety and highways and streets functions), and 20% are
unrestricted (these assets can be used to meet the County’s ongoing obligations).

FY 2008 Composition of
Net Assets
Restricted Assets

(In millions)

14%

66%

$526.2 Million

Invested in Capital
Assets

20%

$2,542.2 Million

Unrestricted Assets
$772.8 Million
SOURCE: FY08 CAFR

Maricopa County Internal Audit

13

FY08 Financial Condition Report—July 2009

Primary Government

The County’s assets for the Primary Government exceeded liabilities at year-end by over
$3.8 billion (net assets). Over time, total net assets serve as a useful indicator of whether the
financial condition of the County is improving or deteriorating. Total net assets increased
30.6% from FY 2004 to FY 2008.

Maricopa County has extremely low debt levels compared to the national benchmark
average. The County’s low debt level is the result of a conservative “pay as you go” policy.
In FY 2008 the County’s long-term debt per person was under $100.
$1,200

FY 2008 Long‐Term Debt Per Person

$1,000

Maricopa County’s long‐term debt is under $100 per person
(shown in blue) and is lower than other, similar, Western
Counties

$1,135

$793

$800

$707
$565

$600

$728

$650

$596

$479
$420

$386

$400
$200

$96

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a
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r
C

nt
a

Sa

tn
o

ng
e
M
ul

e

O
ra

Sa

lt
L

ak

a
ico
p

m
ah

$0

M
ar

Governmental Activities

LONG TERM DEBT

SOURCE: Maricopa County CAFRs

Long‐Term Debt Per Person
FY 2003—FY 2008 compared to
national benchmarks
$800
$695
$651

$700

$624

$646

$609

This long-term debt comparison
includes only Governmental
Activities’ debt, not Business type
activities.

$600
$500
$400
$300
$200
$100

FY 2004 was the last year of the
County’s 1986 voter-approved
General Obligation debt financing
for capital projects. On July 1,
2004, Maricopa County paid off all
remaining General Obligation
debt.

$86

$81

$69

$95

$96

$0
FY04

FY05

Maricopa

FY06

FY07

FY08

Avg of 10 Benchmark Counties

Some national benchmarks
operate business activities, such
as hospitals, airports, water
facilities, or others, which may
increase their debt levels.
Business activities are primarily
supported by user fees. Maricopa
County did not have any business
activities during FY 2008.

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

14

FY08 Financial Condition Report—July 2009

Treasurer

County Treasurer

The County Treasurer pools deposits of the County,
school districts, and special districts. Cash not required
for liquidity is invested in accordance with State law and
under a strategy that gives highest priority to:
Safety of principal
Sufficient liquidity to meet the needs of the County
and its subdivisions
Return on investment

Maricopa County Internal Audit

15

FY08 Financial Condition Report—July 2009

Treasurer

CASH & INVESTMENTS

Cash and Investments
Held with the County
Treasurer
Total cash and investments
held by the Treasurer
increased to $3.9 billion in
FY 2008.

$5.0

Cash and Investments

$4.0

Cash and investments held with the Treasurer
increased to 3.9 billion in FY 2008.
$3.7

$3.0

$3.9

$3.1
$2.7

$2.0

$2.2
$1.0
$‐
FY04

FY05

FY06

FY07

FY08

SOURCE: Maricopa County CAFRs

Non‐County Funds
$2.5 Billion

County General Fund
$453 Million

12%
65%
23%

SOURCE: FY08 CAFR
Maricopa County Internal Audit

Fund Ownership
Non-County Funds
Arizona Statutes require
community colleges, school
districts, and other local
governments to deposit certain
public monies with the County
Treasurer.
County Funds
County funds totaled $1.4
billion, or 35% of the $3.9
billion held by the Treasurer as
of June 30, 2008.

$905 Million
Other County Funds
16

FY08 Financial Condition Report—July 2009

TREASURER INVESTMENTS
Treasurer

Investment Yields

Comparative Investment Yields

The Arizona State Treasurer’s
Office manages $12.5 billion in
total, $3.2 billion of which is
invested in a Local Government
Investment Pool (LGIP). The
LGIP provides professional,
short-term investment services
for a wide array of public entities.

7%

State Treasurer Local Government
Investment Pool
Maricopa County

6%
5%

4.45%

4%

The County Treasurer operates
an investment pool of $3.9 billion,
comparable in function to the
state’s LGIP fund.

4.10 %

3%

1.71%

2%

Over the past four years, the
County’s return on investment
has steadily increased from
1.71% in FY 2004 to 4.45%
in FY 2008.

1.45%

1%
0%
FY03

FY04

FY05

FY06

FY07

FY08

SOURCES: State Treasurer historical yield reports; County Treasurer Investment Officer

Investment Composition
As of March 31, 2009, the majority of the Treasurer's investments were held in U. S. Agency
Securities issued or guaranteed by a government sponsored enterprise (GSE). Examples of
GSEs include Fannie May, Freddie Mac, Sallie May, and the Federal Home Loan Banks.
Maricopa County’s investment composition as shown by the Treasurer’s March Summary
Report in these entities is shown below (in millions).
Other (Includes: Federal Farm Credit
Banks, Farm Credit Discount Note,
Federal National Discount Note)
$489

Federal Home Loan Banks
$307

Federal Home Discount Note
$1,180

15%
9%

35%

17%
Federal Home Loan Mortgage
Corporation (Freddie Mac)
$558

24%

Federal National Mortgage
Association (Fannie Mae)
$813

SOURCE: Maricopa County Treasurer’s Investment Summary for March 2009

Maricopa County Internal Audit

17

FY08 Financial Condition Report—July 2009

Maricopa County Internal Audit

18

FY08 Financial Condition Report—July 2009

Arizona Benchmarks

Arizona County
Benchmarks

To provide local context for Maricopa County’s
performance, the Financial Condition Report includes
comparisons to other Arizona counties. This information
is presented on the following three pages. (National
benchmark comparisons were presented earlier in the
report.)

Maricopa County Internal Audit

19

FY08 Financial Condition Report—July 2009

County
♦

Pima

1,014

♦

Pinal

351

♦

Yavapai

227

♦

Yuma

204

SOURCE: State of Arizona Department of
Economic Security, 7/1/2008

Unreserved General Fund Balance

50%

Unreserved Fund Balance

45%

Unreserved fund balances
represent the monies available to
meet the County’s current and
future needs. Maricopa County
continued to significantly
outperform each of the benchmark
counties in FY 2008 (right), as well
as the benchmark average for this
financial measure from FY 2003 to
FY 2008 (bottom).

40%

44.6%

As a percent of revenues

35%
30%

26.7%

25%

21.8%

20%
13.9%

15%
10%
5%

1.6%
a
Ma
ri

Pin

cop

al

a
Yum

Ya v

apa
i

0%
a

This year, Maricopa County
data was compared with four
benchmark Arizona counties.
In previous years, Cochise
and Mohave Counties were
shown in this analysis, but at
the time of this report their audited year-end financial statements were not available.

Population (in thousands)

Pim

Arizona Benchmarks

SOURCE: FY08 Maricopa and benchmark county CAFRs

FY 2008 Unreserved General Fund Balance
50%
40%

As a percent of revenues (Comparison to Arizona benchmarks)
Maricopa County

47.0%

44.6%

41.4%
30%

36.7%

36.8%

10%

15.7%

16.7%

18.3%

FY05

Benchmark Average

36.1%

FY04

20%

20.5%
17.2%

16.0%

FY08

FY07

FY06

0%
FY03

Arizona Benchmarks

AZ BENCHMARKS & GENERAL FUND BALANCE

SOURCE: Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

20

FY08 Financial Condition Report—July 2009

LIQUIDITY RATIO

Maricopa’s liquidity ratio
continues to surpass the
benchmark average.

Arizona Benchmarks

In FY 2008, Maricopa
County’s liquidity ratio
was very strong at
10.7-to-1, meaning that
there were $10.70 in
cash and equivalents for
every $1.00 in current
liabilities.

General Fund Liquidity Ratio
16
14

Historical comparison to
Arizona benchmark counties
14.3

12
10
8

13.4
10.7

Maricopa County
9.2
6.6

6

4.0

6.6
4.8

4.4

4.4
3.0

4

2.1

Benchmark Average
2
0
FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: Maricopa and benchmark county CAFRs

Maricopa County’s liquidity significantly surpasses the Arizona benchmark counties. FY
2008 individual liquidity ratios for Maricopa County and the Arizona benchmark counties are
shown below. Having a ratio of more than 1 to 1 is considered prudent.
12.0

10.0

10.7

FY 2008 General Fund Liquidity Ratio
(Comparison to Arizona benchmark counties)
Maricopa County’s liquidity ratio is very strong with nearly
$11 in cash for every $1 of current liabilities

8.0

6.0

3.7

4.0

2.3

2.4

Yuma

Pima

2.0

0.03
0.0

Yavapai

Pinal

Maricopa

SOURCE: FY08 Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

21

FY08 Financial Condition Report—July 2009

Arizona Benchmarks

LONG TERM DEBT
Long‐Term Debt Per Person
(Adjusted for inflation)
$600
Benchmark Average
Maricopa County

Maricopa County has a very
low level of debt per person
compared to Arizona county
benchmarks.

$493

$500

$419
$381

$375

$400

$340

Maricopa County’s long-term
debt per person has remained
below $100 per person since
FY 2004 when the County paid
the last of the voter-approved
General Obligation debt
(financing for capital projects).

$309
$300

$200

$105
$100

$86

$81

$69

$95

$96

$0
FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: Maricopa and benchmark county CAFRs

$700

FY 2008 Long‐Term Debt Per Person

$600

Maricopa County has the lowest long‐term debt per person
when compared to Arizona county benchmarks

$658

$519
$500

$383

$400

$410

$300
$200
$100

$96

$0
Ma ri copa

Yuma

Ya va pa i

Pi na l

Pi ma

SOURCE: FY08 Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

22

FY08 Financial Condition Report—July 2009

Retirement Plans

Maricopa County
Retirement Plans

County pension information is included in this report
due to deteriorating local and national financial trends
impacting retirement plans. The County participates in
two state retirement systems:
Approximately 9,000 County employees participate in
the Arizona State Retirement System (ASRS)
Approximately 4,000 County employees participate in
the Public Safety Personnel Retirement System
(PSPRS): Elected Officials, Corrections Officers, and
Public Safety Personnel
Information contained in the following section is based
on FY 2008 Comprehensive Annual Financial Reports
(CAFRs) for Maricopa County, the Arizona State
Retirement System, and the Public Safety Personnel
Retirement System. Information for FY 2009 was
obtained from other sources cited on the following
pages.

Maricopa County Internal Audit

23

FY08 Financial Condition Report—July 2009

Funded Status Defined
The most recognized measure of a retirement plan’s health is its funding ratio, derived by
dividing the actuarial value of plan net assets by the present value of accrued liabilities
(projected future retirement payments). A pension plan whose assets equal its liabilities is
100% funded, or fully funded. A plan with assets that are less than its liabilities is considered
to be underfunded.
The dollar difference between plan assets and accrued liabilities is the unfunded actuarial
accrued liability (UAAL), which is a common measure of a pension plan’s financial condition.
Methods used to value assets and liabilities can be complex and vary from plan to plan,
making direct comparisons among plans difficult or impossible. This report shows the
funding ratios based on the actuarial value of assets. The amount of accrued liabilities
depends on the assumptions and cost method. Actual calculations are very technical in
nature and are outside the scope of this report. It is noted, however, that ASRS discounts
future benefits at 8.0% per year.
ASRS Funding Status
ASRS reported a strong 17.8% rate of return on the total ASRS fund in FY 2007, as shown
on page 25, and was named a top performer in a nationwide pension plan study performed
by an independent nonprofit charitable trust. However, the unfunded actuarial accrued
liability (UAAL) has grown by over $500 million, or 9%, to $6 billion in FY 2008. This was
largely due to a 7.6% loss on investments in FY 2008 and increases in projected future
retirement payments. As a result the funded status of the total plan decreased from 82.8% in
FY 2007 to 82.2% in FY 2008.

FY 2008 ASRS (UAAL)

The funding ratio dropped
to 82.2 %

$4,000

Unfunded liabilities grew
to over $6 billion

FULLY FUNDED

$2,000

(above the line)

SURPLUS

90%

FY08

FY07

FY06

FY05

FY99

UNDERFUNDED
(below the line)

FY04

$0

100%

FY03

110%

FY02

120%

$6,000

FY01

120%

ASRS Funding Ratio

FY00

130%

($2,000)

82.2%

($6,000)

70%

DEFICIT

($8,000)

SOURCE: ASRS CAFRs and annual actuarial reports

Maricopa County Internal Audit

In millions

($4,000)

80%

FY
99
FY
00
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08

Retirement Plans

ASRS FUNDING STATUS

SOURCE: ASRS CAFRs and annual actuarial reports

24

FY08 Financial Condition Report—July 2009

ASRS INVESTMENTS & COUNTY CONTRIBUTIONS

During FY 2008, and as of
March 09, 2009, ASRS
experienced significant
investment losses. ASRS
attributes these losses to the
general downturn in the financial
markets. The total loss will not
be immediately evident in fund
performance because ASRS
smoothes gains and losses over
a 10 - year period.

Retirement Plans

17.8%

20%

ASRS Investment Returns

10%

0%
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
(7.6)%

‐10%

ASRS Investment Returns
‐20%

‐30%

Losses in FY 2008 and 2009 are
offset by gains carried forward
from prior years.

ASRS assumes a return on investment of 8%
annually. In FY 2008 and FY 2009 returns fell
7.6% and 22.7%. (
FY 2009 data is based
on unaudited figures released during a May
ASRS Investment Committee Meeting)

(22.7)%

‐40%

Actual Rate of Return

Assumed Rate of Return

SOURCE: ASRS Investment Committee Meeting, CAFRs and annual ASRS CAFR reports

County Contributions
Since FY 2000, total County pension plan contributions to ASRS have increased 360%,
from $10 million in FY 2000 to $46 million in FY 2008, as shown on the graph below.
County contributions are expected to rise because of recent poor investment performance
(shown above) and projected increases in future retirement payments. Projections for FY
2009 through FY 2014 are based on current employment levels and half percent increases
per year as projected by ASRS. (The chart below does not include employee contributions.)
$70
$60

Millions

$50

Maricopa County ASRS Contributions
County contributions are projected to increase
through at least FY 2014.
$43

$46

$45

$45

$47

$49

$52

$54

$40
$32

$30

$30

$26

Projections
$10

$11

$11

$12

FY00

FY01

FY02

FY03

$20
$10

FY14

FY13

FY12

FY11

FY10

FY09

FY08

FY07

FY06

FY05

FY04

$‐

SOURCE: ASRS CAFRs and ASRS’s Directors comments reported on AZCENTRAL on 3/3/09.

Maricopa County Internal Audit

25

FY08 Financial Condition Report—July 2009

Public Safety Personnel Retirement System
(includes PSPRS, CORP, and EORP)
PSPRS Funding Status
The funding ratios of the
three PSPRS plans have
declined significantly since
FY 2002. However, the
funding ratio for both the
Correction Officers and the
Elected Officials increased
slightly in FY 2008.

PSPRS Historical Funding Ratios
150%

In FY08 the 3 PSPRS plans remained underfunded

140%
FULLY FUNDED
(above the line)

130%

Public Safety
Corrections Officers

120%

Elected Officials
110%
100%

Funding ratios as of 6/30/08
were:

90%

66.5% - Public Safety
86.8% - Corrections Officers
76.6% - Elected Officials

70%

UNDERFUNDED
(below the line)

80%

60%
FY02

FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: FY07 PSPRS CAFR

PSPRS Unfunded Liabilities

$1,400

Unfunded Liability

Total PSPRS liabilities grew to over
$2.5 billion

$1,000

The UAAL (unfunded liability)
for each of the three PSPRS
plans as of 6/30/08 was:

$600

$2,310 - Public Safety
$130 - Corrections Officers
$94 - Elected Officials

$600

SURPLUS

$200
$200

DEFICIT

$1,000
$1,400

Public Safety

$1,800

Corrections Officers
Elected Officials

$2,200

08
FY

07
FY

06
FY

05
FY

04
FY

03
FY

02
FY

01
FY

00
FY

99

$2,600

FY

Retirement Plans

PSPRS FUNDING STATUS

SOURCE: PSPRS CAFRs

Maricopa County Internal Audit

26

FY08 Financial Condition Report—July 2009

PSPRS INVESTMENTS & COUNTY CONTRIBUTIONS
30%

Retirement Plans

PSPRS
Investment
Returns

PSPRS Investment Returns
Actual vs. Assumed Rate of Return

During FY 2008, all
three PSPRS plans
had investment
losses exceeding
7%. These losses
will not be
immediately evident
in fund performance
because PSPRS
smoothes gains
and losses over a
10 year period.
Losses in FY 2008
are offset by gains
carried forward
from prior years.

20%

10%

0%

‐10%
Public Safety
Elected Officials

Corrections Officers
Assumed Rate

‐20%
FY02

FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: FY08 PSPRS CAFR

PSPRS Contribution Rates
35%

PSPRS Combined Contribution Rates

30%

Public Safety (Weighted Avg)
Elected Officials
Corrections Officers

25%
20%
15%
10%
5%
FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

SOURCE: Maricopa County Human Resources; PSPRS staff

Plan
Public Safety Personnel
Elected Officials
Corrections Officers

Employee %
7.65%
7.00%
7.96%

Employee contribution rates
are fixed by statute, and
based upon a percentage of
employee compensation;
changes require legislation.
Thus, employee contribution
rates for the three plans
remain relatively stable.
However, employer
contribution rates have
increased significantly since
2003. The FY 2008
combined contribution rates
(employee + employer) for all
three PSPRS Plans are
shown below:
Employer %
18.32%*
12.84%
6.14%

*Weighted average
Maricopa County Internal Audit

27

FY08 Financial Condition Report—July 2009

Population and Employment

Population Growth
and
Employment Rates

Maricopa County Internal Audit

28

FY08 Financial Condition Report—July 2009

12,000,000

In 2008, Maricopa
County was ranked the
fourth most populous of
all 3,141 counties in the
nation.

Top Five Counties by Population
July 2008

9,862,049

10,000,000
8,000,000

5,294,664

6,000,000

3,984,349

3,954,598

4,000,000

3,010,759

2,000,000
0
Los Angeles
County, CA

Cook County, IL Harris County,
TX

Maricopa
County

Orange County,
CA

SOURCE: 2008 U.S. Census Bureau reports

In addition to having the
largest numerical
increase in population
from July 2007 to July
2008, Maricopa County’s
population increased by
882,449 people from
July 2000 to July 2008,
more than any other
county in the nation.

100,000

Top Five Counties with Largest Numerical Increase in
Population July 2007 to July 2008
89,550

80,000

72,153
54,179

60,000

41,338

40,842

San Diego
County, CA

Tarrant County,
TX

40,000
20,000
0
Maricopa
County, AZ

Harris County,
TX

Los Angeles
County, CA

SOURCE: 2008 U.S. Census Bureau reports

Maricopa County
continues to enjoy
unemployment rates
below national and
Arizona averages.
However, in FY 2008 and
FY 2009 unemployment
for all three increased due
to a downturn in the
national and local
economies.

Unemployment Rate History

7.0%
6.0%
5.0%
4.0%
3.0%

5.5 %
4.8 %

4.5 %

4.3 %

4.3 %
2.9 %

2.0%

March 2009 UPDATE

1.0%

National —

8.5%

0.0%

State —

7.7%

County

County —

7.0%

SOURCE: Maricopa County CAFRs

1999

2000

2001

2002

2003

2004

State

2005

2006

2007

2008

United States

2009 Update SOURCE: Arizona Department of
Economic Security and Bureau of Labor Statistics

Maricopa County Internal Audit

29

FY08 Financial Condition Report—July 2009

Population and Employment

POPULATION AND EMPLOYMENT DATA

Methodology

Report Methodology

Maricopa County Internal Audit

30

FY08 Financial Condition Report—July 2009

REPORT METHODOLOGY
Financial Condition is defined as a local government’s ability to finance services on a
continuing basis. A county in good financial condition can sustain existing services to the
public, withstand economic downturns, and meet the demands of changing service needs.
Objectives, Scope, and Methodology
The objective of this report is to evaluate Maricopa County’s financial condition using key
financial indicators. Indicators were selected from authoritative sources on evaluating
governmental entity financial condition, and were judged to be the most indicative of a
county’s overall financial health.
Our primary information sources were the audited Comprehensive Annual Financial
Reports (CAFR) issued by the Arizona State Retirement System, Public Safety Personnel
Retirement System, ten national benchmark counties, four Arizona counties, and
Maricopa County. The benchmark counties are:
National Benchmarks
(in millions)
County

Arizona Benchmarks
(in thousands)

Population Major Metro Area

Clark
Harris

1.9
4.0

Las Vegas, NV
Houston, TX

King

1.9

Seattle, WA

Los Angeles

9.9

Los Angeles, CA

Multnomah

0.7

Portland, OR

Orange

3.0

Santa Ana/Anaheim, CA

Pima

1.0

Tucson, AZ

Salt Lake

1.0

Salt Lake City, UT

San Diego

3.0

San Diego, CA

Santa Clara

1.8

San Jose, CA

County

Population

Pima

1,014

Pinal
Yavapai
Yuma

351
227
204

SOURCE: State of Arizona Department of
Economic Security, 7/1/2008

SOURCE: U. S. Census Bureau

Other sources include actuarial reports, the U.S. Census Bureau, Governmental
Accounting Standards Board, the International City/County Managers Association,
Arizona Department of Economic Security Research Administration, Maricopa County’s
Strategic Plans (budgetary documents), ASRS investment committee documents, Auditor
General Reports and correspondence with internal and external staff.
Trend analysis is used in this report. Trend analysis involves examining historical data.
Adjustments for inflation were made according to the “U.S. Consumer Price Index—All
Items.”
Maricopa County Internal Audit

31

FY08 Financial Condition Report—July 2009

Methodology

Definition

A picture of the Security building in the 1940s, taken from the corner of Van Buren and
Central Ave. Built in 1928, the building was purchased by the County in 2001 and is currently
undergoing historical renovations.

Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003
Telephone: (602) 506-1585
Facsimile: (602) 506-8957
E-Mail: Thielew@mail.maricopa.gov
Maricopa County Internal Audit

FY08 Financial Condition Report—July 2009