CITIZENS FINANCIAL
CONDITION REPORT
MARICOPA COUNTY
FISCAL YEAR 2010

Financial Highlights
Our Fiscal Year (FY) 2010 Citizens Financial Condition
Report highlights the financial strength of the County‟s
General Fund within the context of severe financial
challenges currently facing the national and local
economies.
Report highlights include:
FY 2010 total revenues fell below FY 2006 levels.

Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003
(602) 506-1585
www.maricopa.gov/internal_audit

Conservative fiscal policies have guided spending
and ensured expenditures did not exceed revenues.
The General Fund unreserved fund balance
remained healthy.
Key County financial indicators compared very
favorably to national benchmarks.
County net assets, an indicator of long term
financial health, continued to increase.

In This Issue

Funding for the County‟s primary employee
retirement plan decreased slightly.

Message From County Auditor...... 2
Maricopa County Basics ............... 3
Economic Outlook ......................... 4
General Fund Key Indicators ........ 5
Liquidity & Long Term Debt .......... 6
Revenues & Expenditures ............. 7
Revenues—Budget to Actual ........ 9
Property Taxes .............................. 10

About the Financial Condition Report
The FY 2010 edition of the Maricopa County Citizens
Financial Condition Report is based primarily on the
County‟s FY 2010 Comprehensive Annual Financial
Report issued December 2010 by the Department of
Finance.
This work provides information, trends, and comparisons
on County financial topics including:

Cash & Investments ...................... 11

Revenues and Expenditures

Net Assets ...................................... 12

Cash and Investments

Retirement Plans (ASRS) ............. 13

Long Term Debt and Liquidity

Population and Unemployment ... 15
Methodology & Sources .............. 16
PAFR Award ................................. 17

MESSAGE FROM THE COUNTY AUDITOR
January 28, 2011
Andrew Kunasek, Chairman, Board of Supervisors
Fulton Brock, Supervisor, District I
Don Stapley, Supervisor, District II
Max Wilson, Supervisor, District IV
Mary Rose Wilcox, Supervisor, District V
We have completed the Fiscal Year (FY) 2010 edition of the Maricopa County
Financial Condition Report based primarily on the County‟s FY 2010
Comprehensive Annual Financial Report issued in December 2010.
This work, which is part of our Board-approved audit plan, provides important
information on current and historical County financial trends.
For FY 2010, we again highlight the financial strength of the County‟s General Fund. While national and
local economies encountered severe financial challenges, the County (due to conservative fiscal policies)
acted to maintain expenditures below falling revenues. The General Fund unreserved fund balance
continued to grow. Expenditures per capita and long-term debt levels decreased. Key financial
indicators compare very favorably to national benchmarks.
In addition, we provide updated information on the County‟s primary pension plan. 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.
Sincerely,

Ross L. Tate
County Auditor
The County Auditor reports directly to the Maricopa County Board of Supervisors, with an advisory
reporting relationship to the Citizen‟s Audit Advisory Committee.
The Mission of the Internal Audit Department is to provide objective information on the County‟s
system of internal controls to the Board of Supervisors so they can make informed decision and protect
the interests of the County Citizens
Project Team Members
Eve Murillo, CPA, MBA, CFE, ITIL, Deputy County Auditor
Stella Fusaro, CIA, CGAP, CFE, CLEA, Audit Supervisor
Scott Jarrett, CIA, CGAP, ITIL, CLEA, Associate Auditor
Toni Sage, MBA, CLEA, Associate Auditor

Maricopa County Internal Audit

2

FY 2010 Citizens Financial Condition Report

MARICOPA COUNTY BASICS
Maricopa County
Maricopa County is located in the south-central
area of the State of Arizona. Approximately 60%
of the state‟s total population resides within the
County, which includes the cities of Phoenix,
Mesa, Tempe, Glendale, and Scottsdale.
State of Arizona

Maricopa County operates under a five member
elected Board of Supervisors representing five
districts divided geographically and by
population to include a mix of urban and rural
constituencies.

Maricopa
County

Board of Supervisors

Fulton Brock
District

Don Stapley
District

Andrew Kunasek
District

Max Wilson
District

Mary Rose Wilcox
District

1

2

3

4

5

Financial (Source: Maricopa County FY10 CAFR)

Population (Source: Maricopa County CAFR & U.S. Census Bureau)

As of June 30, 2010, the elected County
Treasurer held $3.7 billion in cash and
investments on behalf of the County, special
districts, and school districts.

Maricopa County is home to 4 million people, the
4th largest population in the nation after Los
Angeles County (CA), Cook County (Chicago,
IL), and Harris County (Houston, TX).

The County received $1.8 billion in revenue
during FY 2010.

The County‟s population grew by 950,964 from
July 2000 to July 2009, the biggest population
increase in the nation (2010 data unavailable).

The unreserved General Fund balance
exceeded $489 million in FY 2010, up $79
million from the previous year.

Size (Source: Maricopa County FY10 CAFR & FY10 Adopted Budget)
At 9,224 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.

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

3

FY 2010 Citizens Financial Condition Report

ECONOMIC OUTLOOK
Revenue Sources Continued to Decrease
$900

Since FY 2007, three of the four major County
revenue sources (state shared sales, vehicle
license, and jail excise taxes) have experienced
significant declines. Shown below are dollar
and percentage declines since FY 2007.

(in millions)
$779

$748

$145

$138

$600
$153

$647

$618

$117

$107

$135

$125

$149

$481

$461

$300

$395

$386

$-

Jail Excise:

$ 38 million

26%

Vehicle License:

$ 29 million

19%

State Shared Sales: $ 94 million

20%

Total decline:
FY07

FY08

FY09

$161 million

FY10

SOURCE: “Tax Revenues by Source” (Statistical Section Maricopa County CAFRs)

Assessed value in billions

With the current decline in Maricopa County
housing values, property tax revenues could
also see declines starting in FY 2011 if tax
rates are not increased.

Property Tax Revenues May Decline
Gen. property tax in millions

Property tax revenues continued to increase
during the current recession, offsetting the
other revenue declines shown above.
However, there is a two year lag between the
time property values are assessed and when
the County Assessor‟s valuations are used to
set the tax rate.

Assessed Value
Budget Estimates

FY11

FY12

FY13

SOURCE: “Tax Revenues by Source” (Statistical Section Maricopa County CAFRs) & OMB Budget Documents

Staffing Levels Decrease
County Population

Staffing

(In millions)

(In thousands)

4.2

4.0 million

15

4.0
3.8

14

3.6
13,647
thousand

3.4

13

Conservative budget strategies
kept the County financially
healthy despite Arizona‟s
economic turmoil. To offset
revenue declines, the County:

Capital Outlay Slowed
(In millions)

$300

$301

$279
$220

Maintained a hiring freeze
and reduced staffing (left)

$200

Canceled or delayed most
capital improvements (right)

$100

$212

3.2
3.0

$-

12
FY08

FY09

FY07

FY10

FY09

FY10

SOURCE: Maricopa County CAFRs

SOURCE: Maricopa County CAFRs & U.S. Census Bureau Reports
Maricopa County Internal Audit

FY08

4

FY 2010 Citizens Financial Condition Report

GENERAL FUND KEY INDICATORS
Unreserved General Fund Balance Increased
$600

(in millions)

$540

$500

$512

The Unreserved General Fund
Balance
$489

$445

$428

$410

$400

$289

$300
$200

$316

$249
$157

$100

$-

SOURCE: “Governmental Funds Balance Sheet” (Maricopa County CAFRs)

The Unreserved General Fund
Balance represents funds available
to meet current and future financial
needs. A significant portion is
designated for various purposes
including covering the self-insured
benefit program and smoothing
fluctuations in tax collection cycles.
During FY 2010 the unreserved
fund balance increased nearly $79
million (19%). The increase is due
to general fund revenues
exceeding expenditures.

Expenditure reductions can be attributed to budget balancing initiatives and receiving $78 million in Federal
Medical Assistance Percentages stimulus monies that reduced some health, welfare, and sanitation
expenses. Conservative budget strategies and revenue estimates have resulted in a healthy fund balance.
However, weaknesses in the local economy may reduce the fund balance if revenues continue to decrease.
General Fund Balance as a Percent of Revenues
For over ten years, Maricopa County‟s General Fund has maintained a healthy fund balance in relation to
revenues, and surpassed the national benchmark average (see page 16 for a list of benchmark counties).
This graph reflects the
availability of financial reserves
to meet unforeseen needs.
Credit rating agencies review
the health of 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.

Fund Balance Compares Well to Benchmarks
50%

45%

45%
40%
35%
30%
25%

22%

20%
15%

14%
16%

10%
5%

The General Fund is the primary
operating fund used to account for all
financial resources not required to be
accounted for in other funds.

Maricopa County Internal Audit

Maricopa County

Avg of 10 Benchmark Counties

SOURCE: “Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund
Balances Governmental Funds” (Maricopa & Benchmark County CAFRs)

5

FY 2010 Citizens Financial Condition Report

LIQUIDITY & LONG TERM DEBT
Liquidity Continued to Increase

General Fund Liquidity Ratio
19.3

20.0

15.0

14.3

10.0

5.0

1.7

2.6

The liquidity ratio is a measure of
the County‟s ability to pay current
obligations, comparing assets to
liabilities.
Maricopa County continues to
significantly outperform the
national benchmark average with
a liquidity ratio of almost 19-to-1.
This means that $19.30 is
available in cash for every $1 in
current liabilities.

0.0
Maricopa

Avg of 10 Benchmark Counties

SOURCE: Audit Analysis of “Governmental Funds Balance Sheet” (Maricopa & Benchmark CAFRs)

Long Term Debt
Maricopa County has extremely low debt levels compared to the national benchmark average. The
County‟s low debt is the result of a conservative “pay-as-you-go” policy. In FY 2010, the County‟s longterm debt was less than $90 per person.

Long Term Debt Per Person Is Low Compared to Benchmarks
$1,500

$1,352

$1,200

$900

$754

$656

$590

$600

$343

$415

$760

$776

$667

$472

$300

$85
$0

SOURCE: Maricopa County LTD for Governmental Activities “Note 13— Long Term Liabilities,”
Benchmark CAFRs & Internal Audit Analysis

Maricopa County Internal Audit

6

FY 2010 Citizens Financial Condition Report

REVENUES & EXPENDITURES
Sources of County Funds (in millions)

Intergovernmental
(State Shared Sales Tax,
Vehicle License Tax, Grants)

County Generated Taxes
(Property Tax, Jail Excise Tax,
& other small tax sources)

The majority of the County‟s Governmental Fund
revenues come from intergovernmental sources
(44%) and taxes (40%).

$773

$717

Intergovernmental revenues are funds received from
federal, state, and other local government sources in
the form of shared revenues, grants, and payments
Fines, Forfeits,
in lieu of taxes.
County-generated tax revenues such as property,
jail excise, and other small tax sources, accounted
for 40% of the County‟s total governmental revenue.

44%

40%

10%

& Special Assessments
$40 (2%)
Licenses & Permits
$38 (2%)

$35 (2%)
Miscellaneous

$177
Charges for Service

SOURCE: “Statement of Revenues, Expenditures, & Changes in Fund
Balances Governmental Funds” (Maricopa County FY10 CAFR)

Expenditures Cut to Match Revenues
(in millions)

Revenues
Expenditures

$2,015

$2,000

$1,873

$1,853

$1,919
$1,841

$1,819

$1,815

$1,646

$1,781
$1,687

$1,500

$1,000
FY06

FY07

FY08

FY09

FY10

In FY 2010, Governmental revenues
decreased by $39 million to $1.78 billion,
dropping below FY 2006 amounts.
This was due to a decrease in jail excise
taxes of $10 million, reduced distributions
from the State of Arizona for vehicle
license and shared sales taxes of $10
million and $9 million, and decreases in
various other revenue sources. However,
additional property taxes of $40 million
helped offset some revenue decreases.
To match revenue decreases, the County
reduced expenditures by more than $128
million (more detail on page 8).

SOURCE: “Statement of Revenues, Expenditures, & Changes in Fund Balances
Governmental Funds” (Maricopa County CAFRs)

Uses of County Funds (in millions)

Highway &
Streets

Nearly 70% of FY 2010 Governmental Fund
expenditures were for public safety (49%) and health
and welfare (19%), with the remaining amount for
general government (12%), capital outlay (13%),
highways (3%), and other uses (4%). General
government consists of a broad range of legally
mandated services including elections, property
assessment, revenue and expenditure accountability,
and legal representation for the County.

$53, 3%

General
Govt.

Other

Public Safety

$61, 4%

$825

49%

12%
13%

19%

$209

Capital Outlay
$212

Health, Welfare, &
Sanitation
$327

SOURCE: “Statement of Revenues, Expenditures, & Changes in Fund Balances Governmental Funds” (Maricopa County FY10 CAFR)

Maricopa County Internal Audit

7

FY 2010 Citizens Financial Condition Report

REVENUE & EXPENDITURES
Most County Expenditures Decreased (FY 2008—FY 2010)
(in millions)
$900

FY08

FY09

FY10

$600

$300

$0
Public Safety

Health, Welfare
and Sanitation

Capital Outlay

General
Government

Highway & Streets

Other

SOURCE: “Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds” (Maricopa County CAFRs)

Changes in Expenditures by Category
Since FY 2008, Governmental Fund expenditures decreased by $154 million (8%). Significant decreases
occurred in capital outlay (decreasing $67 million or 24%), and health, welfare, and sanitation (decreasing
$52 million or 14%). The capital outlay decreases were due to the completion of several capital projects and
to a capital purchasing freeze. Decreases in health, welfare, and sanitation resulted from receiving $78.1
million in Federal Medical Assistance Percentages (FMAP) stimulus funds which reduced the County‟s
contributions to Arizona‟s Long Term Care System (ALTCS) and Medicaid program (AHCCCS). The future of
FMAP stimulus funds is uncertain which may cause County health, welfare, and sanitation expenditures to
increase. Increases in general government are due to $9 million in American Recovery and Reinvestment
Act related expenditures, $19 million for anticipated legal claims, and a $19 million payment to help the State
as part of its 2010 budget- balancing initiatives.

Expenditures Per Person Decreased

Expenditures Per Person

(adjusted for inflation)
$1,074

$1,026

$1,000

For FY 2010, Maricopa County‟s $419
expenditures per person were $44
dollars, or 9%, below the County‟s
eight-year average of $463 per person.

$600
$483

$419

$200
FY03

Similar to the national benchmarks,
Maricopa County governmental
expenditures per person remained
consistent over the past eight years.

FY04

FY05

FY06

Benchmark Average

FY07

FY08

FY09

FY10

Maricopa County

SOURCE: Audit Analysis of “Changes in Fund Balances, Governmental Funds” &
“Population statistics” ( Statistical Section Maricopa County & Benchmark CAFRs)
Maricopa County Internal Audit

8

Governmental Funds are comprised of the
general, special revenue (legally restricted
for specified purposes), debt service and
capital project funds.

FY 2010 Citizens Financial Condition Report

REVENUES—BUDGET TO ACTUAL
Sales Taxes Exceed Budget Estimates
$65

State Share Sales Tax—Budget Variance

$50

(in millions)

$45

$22

$25

$23

$18

$6
$5
-$15

$(5)

FY 2010 actual sales tax revenues
exceeded budgeted amounts by nearly
$18 million. This was most likely due to a
conservative budget projection for a
19.7% decrease. The average increase
over the previous ten years was 3.9%.

$(11)

$(16)

-$35

$(36)

-$55

$(64)

-$75

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

SOURCE: “Tax Revenues by Source” (Statistical Section Maricopa County CAFRs) &
Adopted Budgets

Vehicle License Taxes Fall Short of Budget
$15
$10

$6

$7

$6

$5

Vehicle License Tax—Budget Variance

$13

(in millions)
$5
$2

$(.07) $(4)

$0
$(2)

-$5
-$10

$(12)

-$15

SOURCE: “Tax Revenues by Source” (Statistical Section Maricopa County CAFRs) &
Adopted Budgets

$15

Property Taxes Exceed Budget Estimates
(in millions)

$10
$5

$10

$7

$11
$9

$8

$5
$0
$(.6) $(.6)
-$5
-$10

$(3)

$(8)

Vehicle License Tax (VLT) revenues can
be difficult to predict since citizens can pay
the tax for one or two years. VLT revenues
have suffered as a result of the economic
downturn.
In FY 2010, actual VLT revenues fell short
of the original budget by nearly $2 million,
or 1.6%, despite the conservative
projection of a 14% decrease from FY 2009
totals. The average increase over the
previous ten years was 5.1%.

Property Tax—Budget Variance
Property tax revenues are typically more
predictable, and are therefore easier to
budget, than state-shared sales and
vehicle license taxes.
In FY 2010, property tax collections fell
short of budget by nearly $1 million.
However, revenues from tax penalties and
interest exceeded budget by more than $8
million, resulting in total property tax
revenues exceeding budget.

SOURCE: “Tax Revenues by Source” (Statistical Section Maricopa County CAFRs) &
Adopted Budgets
Maricopa County Internal Audit

9

FY 2010 Citizens Financial Condition Report

PROPERTY TAXES
Property taxes are major source of revenue for local governments in Maricopa County. The total FY 2010
allocation of property taxes for Maricopa County, school districts, cities, and towns was $4.6 billion.

Use of Property Tax Dollars
Cities/Towns/Special
Districts

Maricopa County

$864 Million

$588 Million

19%

See below for how the typical Maricopa
County property tax dollar is spent:

13%
68%

Schools &
Education
$3,135 Million

SOURCE: Department of Finance Property Tax Levy Reports

Tax Rates Reduced as Assessed Values Rise
The Maricopa County Board of Supervisors has
lowered property tax rates every year since
FY 2004. Even with lower tax rates, increases in
assessed property values resulted in property
taxes remaining a reliable source of revenue
during the economic downturn. However, as
shown on page four, assessed values are
projected to decline, placing downward pressure
on future property tax revenues.

Schools

$ 0.68

Cities and Towns

$ 0.14

County

$ 0.13

Special Districts

$ 0.05

Total

$ 1.00

Assessed Property Values (in billions)
County Direct Property Tax Rate

$60
$60

2.0%
$58

$40
1.47%

1.5%

$30
$20

1.16%

$-

1.0%
2005
2006
2007
2008
2009
2010
SOURCE: “Assessed Value & Estimated Market Value of Taxable Property” (Statistical Section Maricopa County CAFRs)

Property Tax Delinquency Rate Increased

5%

Unpaid property taxes for Maricopa County reached
their highest level since 1995 when the delinquency
rate was 4.6%. Maricopa County‟s FY 2010
delinquency rate of 4.34% surpassed the
benchmark average of 3.75%.

4%
3%
2%

1%

Uncollected property taxes negatively impacted the
County‟s operating revenues; over $25 million in
levied property taxes were not collected in FY 2010.

0%

4.47% 4.34%
3.64%
3.75%

2.61%
3.19%

2.37%
Maricopa County
Delinquency Rate
Benchmark Average

SOURCE: “Property Tax Levies and Collections” (Statistical Section Maricopa County & Benchmark CAFRs)
Maricopa County Internal Audit

10

FY 2010 Citizens Financial Condition Report

CASH & INVESTMENTS
Cash and Investments Increased Slightly

Cash and Investments

(in billions)

$4.0

$3.9

$3.7

$3.0

$3.6

$3.7

FY09

FY10

$3.1
$2.7

$2.0

$2.2

The County Treasurer pools
deposits for the County,
school districts, and special
districts. Total cash and
investments held by the
Treasurer increased slightly to
$3.7 billion in FY 2010.

$1.0

$FY04

FY05

FY06

FY07

FY08

SOURCE: “Note 6—Deposit and Investments” (Maricopa County CAFRs)

Investment Strategy and Returns

Investment Returns Continued to Fall
8%

Cash is invested under a strategy giving highest
priority to:

6.17%
6%

4.69%

Safety of principal

4.45%

Sufficient liquidity to meet County needs

4%

4.08%
2.60%
2%

1.71%

Return on investment

3.13%
3.00%

2.42%

Investment returns fell to 1.18% in FY 2010 due to
poor bond market earnings. Bonds are one of the
County‟s primary investments.

1.18%
0%
FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

SOURCE: Maricopa County Treasurer
Non-County Funds

Fund Ownership

County General Fund
$425 Million

$2.2 Billion

12%

Non-County Funds: Arizona statutes require
community colleges, school districts, and other
local governments to deposit certain public
monies with the County Treasurer. These
deposits represent 58% of the total funds held
with the Treasurer.

58%
30%

County Funds: $1.5 billion, or 42% of the $3.7
billion held by the Treasurer as of June 30,
2010, were County funds.

$1.1 Billion

SOURCE: “Balance Sheet”,
“Note 6—Deposit and Investments” (Maricopa County FY10 CAFR),
& Internal Audit Analysis
Maricopa County Internal Audit

11

Other County
Funds

FY 2010 Citizens Financial Condition Report

NET ASSETS
As of June 30 2010, the County‟s assets exceeded liabilities by more than $4.3 billion (net assets). The
increase in total net assets over time indicates the County‟s financial condition improved. Total net assets
increased 43% from FY 2005 to FY 2010.

Total Net Assets Continued to Increase
$4

(in billions)

$4.3

$3.3

$3

$3.6

$3.8

$4.0

$3.0
$2

$1

$0

FY05

FY06

FY07

FY08

FY09

FY10

SOURCE: “Statement of Net Assets” (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)
(3) Unrestricted net assets (assets not subject to external restrictions on how they may be used)
Over 66% of County FY 2010 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 (can be
used to meet the County‟s ongoing obligations).

Composition of Net Assets

Restricted

(in millions)

$601.2 Million

14%
Invested in Capital
Assets
$2,851.1 Million

66%
20%
Unrestricted
$848.6 Million

SOURCE: “Statement of Net Assets” (Maricopa County FY10 CAFR)

Maricopa County Internal Audit

12

FY 2010 Citizens Financial Condition Report

RETIREMENT PLANS
The County contributes to four retirement plans, as noted in the FY 2010 CAFR (page 64). Because 69% of
County employees (8,707 out of 12,655) contribute to the Arizona State Retirement System (ASRS), these
pages focus on ASRS.
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.
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.
Retirement Funding Status

Retirement Funding Ratio Weakens

Based on FY 2010 ASRS actuary reports, the
UAAL grew over $1.4 billion, or 18.3%, to $8.7
billion, as of June 30, 2010.

130.0%

This increase was largely due to delayed
recognition of losses that occurred in FYs 2002,
2003, 2008 and 2009. As a result, the funded
status of the total plan decreased from 79.3% in
FY 2009 to 76.7% in FY 2010.
According to a 2008 U.S. Government
Accountability Office report on government
pension plans, many experts believe an 80%
funding ratio is sufficient.

SURPLUS: FY00 $3.6 Billion

DEFICIT:
FY 2010 - 8.7 Billion

120%

120.0%
110.0%
100.0%
90.0%

FULLY FUNDED
(above the line)
UNDERFUNDED
(below the line)

79% 77%

80.0%
70.0%
60.0%
50.0%

SOURCE: ASRS CAFRs and annual actuarial reports

Retirement Contributions to ASRS Have Decreased
$50

(In
Millions)
Millions

$43

$46

$42

$40
$32

$30

$30

$39

$26

$11

County pension plan contributions
to ASRS decreased 5.8% from
FY 2009 to FY 2010.
The decrease is attributed to fewer
plan participants. From FY 2009
to FY 2010, the number of
participants decreased 3.1% from
8,983 to 8,707 due to a FY 2009
reduction in force and hiring freeze.

$20
$11

County Contributions

$12

$10
$FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

SOURCE: ASRS CAFRs
Maricopa County Internal Audit

13

FY 2010 Citizens Financial Condition Report

RETIREMENT PLANS
Employee Contributions

U.S. Contribution Rate Comparison

According to the Government Accountability
Office, government employees generally make
contributions to fund pension benefits, unlike
private sector employees.

10%
8%

5%

6%
The Center for Retirement Research at Boston
College said, unlike “the private sector, public
sector defined benefit plans are not financed
entirely by the employer. Public plans tend to rely
more heavily on employee contributions, invest
slightly more aggressively, and be about as well
funded as their private sector counterparts.”

8%

7%

4%
2%

0%

0%
Public Sector
Employer

Private Sector
Employee

SOURCE: Center for Retirement Research at Boston College, 2008

Ways to Make A Retirement Fund Sustainable
The Government Finance Officer‟s Association (GFOA) recommends the following practices be avoided
to limit the risk of under funding pension plans and imposing burdens on future stakeholders.

ASRS PENSION REPORT CARD

Practices that could undermine a pension plan’s sustainability
Practice to be Avoided

ASRS Practice

Status

Delaying or Skipping payments

State law requires annual contributions

PASS

Spiking Pension Payouts

ASRS limits methods used to spike payments

PASS

Early Retirements

Retirement eligibility age increased for new members

PASS

No Employee Contributions

Employees pay 50%, currently 9.85% of their pay, which
will rise to 10.75% on July 1, 2011.

PASS

Unfunded Cost of Living Adjustments

Adjustments are only paid if there are “Excess Investment
Earnings,” the last was in 2005 and none are planned

PASS

Unrealistic Investment Assumptions

Investment assumptions are actuarially determined

PASS

Deferred Retirement Option Plan

In FY 2010 this option was eliminated

PASS

Retroactive Benefit Increases

No retroactive increases since FY 2000 when the payment
multiplier increased slightly from 2% to 2.1%.

PASS

SOURCE: GFOA Advisory: “Responsible Management and Design Practices for Defined Benefit Pension Plans (2010),”
ASRS CAFRs, & Title 38 of the Arizona Revised Statutes
Maricopa County Internal Audit

14

FY 2010 Citizens Financial Condition Report

POPULATION & UNEMPLOYMENT
Maricopa County’s Population is 4th Largest in Nation
12,000,000

Population
Maricopa County has
been ranked the fourth
most populous of all
3,143 counties in the
nation.

9,848,011

10,000,000
8,000,000

5,287,037

6,000,000

4,070,989

4,023,132

4,000,000

3,053,793

2,000,000
0
Los Angeles
County, CA

Cook County,
IL

Harris County, Maricopa County,San Diego County,
TX
AZ
CA

SOURCE: 2009 U.S. Census Bureau Reports (2009 is the most recent report)

Maricopa County’s Population Growth is Fastest in Nation
Population Growth

950,964

In addition to adding
nearly 65,000 people from
July 2008 to July 2009,
Maricopa County gained
950,964 residents from
April 2000 to July 2009,
more than any other
county in the nation.

670,399

580,066

527,096
343,670

Maricopa
County, AZ

Harris County, TX

Riverside
County, CA

Clark County, NV Tarrant County,
TX

SOURCE: 2009 U.S. Census Bureau Reports

Unemployment Rates Increased
Unemployment
Maricopa County„s
unemployment rate
continues to remain below
national and Arizona
averages. However, since
2007 the national, Arizona,
and Maricopa County
unemployment rates have
increased significantly. In
2010, Maricopa County‟s
unemployment rate was
8.6%, a significant
increase over 2007‟s rate
of 2.9%.

10.0%

Maricopa County FY 10 Rate—8.6%
8.0%

State of Arizona

FY 10 Rate—9.6%

United States

FY 10 Rate—9.5%

6.0%

4.0%

2.0%
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

SOURCE: “Demographic & Economic Statistics” (Statistical Section, Maricopa County CAFRs)
Maricopa County Internal Audit

15

FY 2010 Citizens Financial Condition Report

METHODOLOGY & SOURCES
Definition
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.
Objective, 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 ten national benchmark counties and Maricopa County. Our analysis did not include the Housing Authority
a component unit and the non-major governmental funds. Below are the benchmark counties that were used
in this report.
National Benchmarks
County

Population

Major Metro Area

 Clark

1,902,834

Las Vegas, Nevada

 Harris

4,070,989

Houston, Texas

 King

1,916,441

Seattle, Washington

 Los Angeles

9,848,011

Los Angeles, California

 Multnomah

726,855

Portland, Oregon

 Orange

3,026,786

Santa Ana/Anaheim, California

 Pima

1,020,200

Tucson, Arizona

 Salt Lake

1,034,989

Salt Lake City, Utah

 San Diego

3,053,793

San Diego, California

 Santa Clara

1,784,642

San Jose, California

SOURCE:

2009 U.S. Census Bureau Reports

Other sources include Arizona State Retirement System (ASRS) CAFRs and actuarial reports, the U.S.
Census Bureau, Governmental Accounting Standards Board, the International City/County Managers
Association, Maricopa County‟s Strategic Plans (budgetary documents), ASRS investment committee
documents, Arizona State 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 CAFR
Maricopa County‟s 2010 CAFR and prior year CAFRs are available by visiting the Maricopa County
Department of Finance website at: http://www.maricopa.gov/Finance/CAFR.aspx.

Maricopa County Internal Audit

16

FY 2010 Citizens Financial Condition Report

PAFR AWARD
Outstanding Achievement Award
The Government Finance Officers Association of
the United States and Canada (GFOA) has given
an Award for Outstanding Achievement in Popular
Annual Financial Reporting to Maricopa County for
its Popular Annual Financial Report for the fiscal
year ended June, 30, 2009. The Award for
Outstanding Achievement in Popular Annual
Financial reporting is a prestigious national award
recognizing conformance with the highest
standards for preparation of state and local
government popular reports.
In order to receive an Award for Outstanding
Achievement in Popular Annual Financial
Reporting, a government unit must publish a
Popular Annual Financial Report, whose contents
conform to program standards of creativity,
presentation, understandability, and reader appeal.
An Award for Outstanding Achievement in Popular
Annual Financial Reporting is valid for a period of
one year only. We believe our current report
continues to conform to the Popular Annual
Financial reporting requirements, and we are
submitting it to GFOA.

Report Photos
Cover: Mountain butte (top right) taken at Superstition Mountains,
Lost Dutchman‟s State Park. Desert lake (bottom left) taken at
Saguaro Lake. Both locations are close to the borders of Maricopa
and Gila Counties.
Saguaro sunset (left) taken
at Superstition Mountains,
Lost Dutchman‟s State
Park.
All landscape photos taken
by Marcus Reinkensmeyer.

Maricopa County Internal Audit

17

FY 2010 Citizens Financial Condition Report