JLBC

MONTHLY FISCAL HIGHLIGHTS
December 2006
November General Fund revenue collections were $609.3
million, or 4.1% above November 2005. This amount was
$(10.6) million below the forecast for the month. The forecast
comparison is based on projected FY 2007 revenues from the
enacted budget. For the fiscal year-to-date, collections are
$87.1 million above the forecast. (See Table 3 on page 2.)
Following a strong October, collections slowed in November.
Of the major tax categories, November sales tax grew at a
healthy rate of 9.4%, while individual income collections only
increased 1.3%. For the year-to-date, total collections are
9.3% above last year. (See Table 6 on page 9 for details.)
In other fiscal news this month, the Finance Advisory
Committee (FAC) met on December 12th (page 4). The FAC
is a panel of 15 leading economists that advises the Legislature
3 times a year on the state’s economy. The FAC continued to
express a cautious outlook for the economy, and revised their
expectations for FY 2008 revenue growth downward. Based
on the FAC’s input and 3 other models, the largest revenue
categories are forecasted to grow 8.2% in FY 2007 and 4.8% in
FY 2008.
The Joint Legislative Income Tax Credit Review Committee
met on December 7th (page 4). The purpose of the Committee
is to evaluate existing state income tax credits on a periodic
schedule. This year the Committee reviewed 5 credits. The
Committee recommended adding an inflation index to the

Family Income Credit. The Committee also recommended
repealing the Solar Hot Water Heater Plumbing Stub Out and
Electric Vehicle Recharge Outlet Credit due to low usage of
the credit. The Committee recommended no changes to the
other credits.
The JLBC met on December 15th (pages 5 – 6). Highlights
included:
•

•

The JLBC approved a transfer of $6.7 million from the
Arizona Department of Corrections (ADC) operating
budget to fund additional overtime and compensatory time
costs.
The $6.7 million represents excess funding
allocated to ADC as a result of Correctional Officer
Retirement Plan employer contribution rates being lower
than budgeted for in FY 2007.
The JLBC approved the Calendar Year (CY) 2007 and
2008 operating budgets for the State Compensation Fund
(SCF). In CY 2007, the total SCF operating budget is
$104.5 million, an increase of 4.6% above CY 2006. The
budget would increase an additional 4.2% in CY 2007, for
a total of $108.9 million in that year.

The Monthly Fiscal Highlights also include a summary of
recent statutory reports to JLBC (pages 6 – 8). Of note, the
Department of Corrections has reduced its FY 2007 shortfall
estimate, reported as $28.5 million last month, to $5.2 million.

Table of Contents
Page #

Page #

November Revenues ................................................................2
Recent Economic Indicators ....................................................2
Finance Advisory Committee Meeting ....................................4
Joint Income Tax Credit Review Committee Meeting.............4

Summary of Recent Agency Reports
- AHCCCS – Semi-Annual Report on Healthcare Group........ 6
- Comm. Colleges – Workforce Development Expenditures .. 6
- ADC – Monthly Expenditures............................................... 6
- ACJC – Criminal Justice Enhancement Fund ....................... 6
- ACJC – Methamphetamine Interdiction Efforts.................... 6
- DES – Domestic Violence Funding ...................................... 7
- DEQ – Water Quality Assurance Revolving Fund................ 7
- DEQ – Alternative Testing and Compliance Study............... 7
- DHS – AIDS Drug Assistance Program Expenditures.......... 7
- DHS – Arnold v. Sarn ........................................................... 7
- ABOR – Enrollment Counting Day Report........................... 7
- ABOR/ACC – Transfer Articulation..................................... 8
- DOR – General Fund Enforcement Revenue ........................ 8
- DOR – Ladewig Expenditures .............................................. 8
- DWR – Assured and Adequate Water Supply Fees .............. 8
- DWR – Indian Firming Expenditure Plan ............................. 8

December 18 JLBC Meeting Summary
- AHCCCS – Medical and Dental Capitation Rates.................5
- ADC – Transfer of Appropriations ........................................5
- ASDB – School Bus Replacement Expenditure Plan ............5
- DES – Adoption Services – Family Preservation Projects ...5
- JLBC Staff – Strategic Program Area Review Topics...........5
- DPS – GITEM Expenditure Plan...........................................5
- DOR – Kerr Expenditure Plan ...............................................5
- State Comp. Fund – CY 2007 and 2008 Budgets ..................6
- Superior Court – Probation Officer Salaries Expenditures ....6
- ADOT – Third Party Quality Assurance and Transactions....6

This report has been prepared for the Arizona Legislature by the Joint Legislative Budget Committee Staff on December 29, 2006. This report can
also be found on our Website at http://www.azleg.gov/jlbc.htm
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Joint Legislative Budget Committee

Monthly Fiscal Highlights – December 2006

NOVEMBER REVENUES

RECENT ECONOMIC INDICATORS

Sales Tax collections were $365.4 million in November, or
9.4% above last November. The following table displays the
November and year-to-date growth rates for the major
categories.

“Final” 3rd quarter 2006 statistics indicated that U.S. Gross
Domestic Product (GDP) advanced at a 2.0% annual rate,
which was somewhat slower than the 5.6% and 2.6% growth
rates recorded for the first 2 quarters of the year. Declining
residential investment and a reduction in net exports were
offset by increased spending on personal consumption,
nonresidential structures, and equipment and software.

Table 1

Sales Tax Growth Rates
November
Year-to-Date
Retail
2.5%
4.5%
Contracting
22.2%
19.5%
Utilities
7.3%
11.7%
Use
8.4%
7.0%
Restaurant & Bar
20.7%
10.1%
Overall, sales collections continued to grow at a healthy pace,
though slower than FY 2006. Of note, restaurant and bar
collections increased significantly from last November, while
retail posted its lowest level of growth in over 3 years. For the
month, revenues were $6.0 million above the forecast.
Individual Income Tax collections were $249.5 million in
November, or 1.3% above last year. Table 2 displays the
November and year-to-date growth rates for the individual
income tax categories.
Table 2

Individual Income Tax Growth Rates
November
Year-to-Date
Withholding
3.2%
6.3%
Estimated + Final Payments
98.4%
46.0%
Refunds
99.3%
54.5%
Following a strong performance in October, withholding tax
collections slowed again in November. Final tax payments
continued to grow at a substantial rate from last year, while
refunds were again higher than anticipated. Monthly revenues
were $(17.1) million below the forecast.
Corporate Income Tax collections were $5.2 million in
November, or (11.8)% below last year. For the month,
corporate income tax revenues were $(1.0) million below the
forecast. Even though revenues declined for the month,
November accounts for only a small portion of overall
collections. Year-to-date, revenues are 21.9% above last year.

Semiconductor sales reached record levels for the 4th
consecutive month. The Semiconductor Industry Association
(SIA) reported that U.S. semiconductor billings (3-month
moving average) climbed 1.5% in October and were 9.9%
higher than the same period one year ago. Robust sales of
dynamic random access memory (DRAM) and digital signal
processing (DSP) devices led the latest improvement.
However, the SIA noted that slowing economic growth may
affect semiconductor sales in the months ahead.
Consumer sentiment, which edged down in October, dipped
again in November, falling (2.1)% from the prior month. The
Conference Board’s U.S. Consumer Confidence Index now
stands 4.7% above its level from a year ago. Consumers’
assessment of current conditions turned down and their view
of the job market also was less favorable than in October.
The U.S. Index of Leading Economic Indicators increased
0.1% in November, following revised increases of 0.4% and
0.1% in September and October, respectively. November’s
gain was led by improvements in vendor performance,
manufacturers’ new orders and stock prices, while
unemployment insurance claims, building permits and
consumer expectations posted negative results.
Meanwhile, inflation remained under control. The U.S.
Consumer Price Index (CPI) (3-month moving average)
dropped (0.4)% in November, reducing the year-over-year
change to just 1.8%. Although gasoline prices increased,
other fuel prices and transportation costs were falling while
food prices dipped slightly. Excluding food and energy prices,
the core CPI was unchanged in November and was 2.6%
higher than a year ago.

Table 3
General Fund Revenues
Compared to Enacted Forecast and FY 2006 Collections
($ in Millions)
FY 2007
Difference
Difference
Collections
From Forecast 1/
From FY 2006
November
$
609.3
$ (10.6)
$ 24.0
Year-to-Date
$ 3,635.6
$ 87.1
$ 310.6
____________
1/ Enacted FY 2007 budget (June 2006)

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – December 2006

The Census Bureau reported that Arizona’s population
swelled to 6.17 million in 2006, an increase of more than
213,000 from 2005. Arizona’s estimated 3.6% year-over-year
growth rate was the fastest in the nation, and only 4 other
states – Texas, Florida, California and Georgia – added more
people during the year.

The Arizona Leading Economic Indicators Index climbed
0.2% in October, signaling that moderate economic growth
may continue in the months ahead. New orders and the
money supply made positive contributions, while production,
employment and sensitive materials prices were among the
negative factors.

The 3rd quarter 2006 state personal income statistics showed
that Arizona ranked 7th in the nation with a 7.1% year-overyear growth rate. Arizona’s growth rate was down from the
revised 8.5% year-over-year gain posted in 2006’s 2nd quarter.
The state’ real estate sector was the only major industry to
register a decline in earnings from the prior quarter.

The Arizona Business Conditions Index (BCI) increased
5.0% to 63.8 in November and reached its highest level since
December 2005. Surges in the new orders and delivery time
components drove the index higher, while the inventories,
production, and employment components mitigated the
improvement.

Arizona’s job market continued to expand in November.
Non-farm employment increased by 116,400 jobs, or 4.5%,
from November 2005. Although manufacturing employment
was down slightly from a year ago, construction jobs
increased by more than 10% and the retail trade sector posted
a solid 5.7% year-over-year advance. The state’s seasonally
adjusted unemployment rate increased to 4.1% but remained
well below the 4.7% level reported in November 2005.

Arizona’s housing market continued to falter in recent months.
The number of single-family residential building permits
issued (3-month moving average) decreased (9.5)% in October
and was (47.0)% below the number reported a year ago. The
number of multi-family housing units authorized dropped
(15.6)% in October and was (60.6)% below the level from a
year ago.

Table 4
RECENT ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate
- Jobs
- Contracting Tax Receipts (3-month average)
- Retail Sales Tax Receipts (3-month average)
- Residential Building Permits - (3-month moving average)
Single-unit
Multi-unit
- Greater Phoenix Existing Home Sales
Single-Family
Townhouse/Condominium
- Greater Phoenix Median Home Sales Price
Single-Family
Townhouse/Condominium
- Arizona Tourism Barometer
- Phoenix Sky Harbor Air Passengers
- Arizona Average Natural Gas Price
($ per thousand cubic feet)
- Leading Indicators Index
- Business Conditions Index
(>50 signifies expansion)
- Consumer Confidence Index
- Business Leaders Confidence Index
- Arizona Personal Income
- Arizona Population
- AHCCCS Recipients
- TANF Recipients
- DOC Inmate Growth (3-month average)
United States
- Gross Domestic Product
(seasonally adjusted annual growth rate)
- Consumer Confidence Index
- Leading Indicators Index
- U.S. Semiconductor Billings (3-month moving average)
- Consumer Price Index (3-month moving average)

Change From
Prior Period

Change From
Prior Year

Time Period

Current Value

November
November
Sep-Nov
Sep-Nov

4.1%
2.70 million
$83.0 million
$158.9 million

0.2%
0.8%
0.5%
(3.4)%

(0.6)%
4.5%
20.0%
4.3%

Aug-Oct
Aug-Oct

3,533
531

(9.5)%
(15.6)%

(47.0)%
(60.6)%

November
November

5,040
920

1.1%
0.5%

(30.0)%
(42.5)%

November
November
August
October
September

$259,000
$172,000
102.8
3.4 million
$6.77

0.8%
(1.7)%
(1.2)%
10.7%
(6.2)%

(1.5)%
4.2%
(0.8)%
(2.4)%
(23.6)%

0.2%
5.0%

(0.5)%
(3.2)%

October
November

119.2
63.8

4th Quarter 2006
4th Quarter 2006
3rd Quarter 2006
July 1, 2006
December
October
Sep-Nov

105.3
48.1
$195.4 billion
6.17 million
1,026,550
86,562
35,614

3rd Quarter 2006

$11.4 trillion

2.0%

3.0%

November
November
Aug-Oct
Sep-Nov

102.9
138.2
$3.95 billion
202.1

(2.1)%
0.1%
1.5%
(0.4)%

4.7%
0.0%
9.9%
1.8%

2.5%
(3.0)%
1.8%
3.6%
(0.3)%
(1.2)%
217 inmates

7.3%
(12.1)%
7.1%
3.6%
(2.4)%
(12.6)%
2,436 inmates

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – December 2006

The Real Estate Center at Arizona State University estimated
that the Greater Phoenix single-family median resale home
price edged up 0.8% to $259,000 in November but remained
below the $267,000 record set in June 2006. The number of
existing single-family homes sold increased 1.1% from the
prior month but was (30.0)% less than the number sold a year
ago. The number of multi-family units sold fell (42.5)% on a
year-over-year basis. The townhouse-condominium median
price declined (1.7)% to $172,000 in November and was 4.2%
higher than a year ago.
The Arizona Tourism Barometer decreased (1.2)% in
August and was running (0.8)% below the reported results
from a year ago. High fuel costs may have played a role in
limiting tourism activity and air travel in general. Air
passenger traffic at Phoenix’s Sky Harbor Airport totaled 3.4
million in October but was down on a year-over-year basis for
the 4th month in a row.
The Department of Corrections’ inmate population
increased by an average of 217 inmates per month from
September through November. The total population increased
by 2,436 inmates from a year ago.
The number of TANF recipients decreased (1.2)% to 86,562
in October and was (12.6)% below the level from October
2005.
The AHCCCS caseload decreased (0.3)% in
December from the prior month and was (2.4)% below the
level from a year ago.
FINANCE ADVISORY COMMITTEE MEETING
At its December 12th meeting, the Finance Advisory
Committee (FAC) heard presentations on General Fund
revenue collections, the U.S. economy, and Arizona’s
economy. The FAC is a 15-member panel comprised of
leading economists in the state. The panel meets 3 times a
year and advises the Legislature on the state economy.
The Committee expressed a cautious view of the economy.
Housing and consumer spending have slowed, while wages,
employment, and corporate profits continue to be strong.
Over the next year, the Committee generally expects the
economy to grow at a slower pace.
The FAC panel members were also asked to provide their
FY 2007 – FY 2010 forecasts for the 3 largest revenue
categories: sales, individual income and corporate income
taxes. In FY 2008, the FAC projected that revenues
associated with these categories would increase 5.0%. This
forecast was more conservative than the prior Committee

meeting (September 2006). At that meeting, the FAC forecast
revenue growth of 6.9% for these categories.
The FAC is one of the 4 inputs into the JLBC Staff’s 4-sector
consensus forecast. The other 3 inputs are:
•
•
•

The University of Arizona Economic and Business
Research (EBR) General Fund baseline model;
The EBR conservative forecast model; and
JLBC Staff projections.

Based on the 4-sector consensus, the “Big 3” revenues are
forecasted to grow 8.2% in FY 2007 and 4.8% in FY 2008
(see Table 5). The FAC panel predicts similar growth rates to
the consensus forecast in both of those years.
JOINT INCOME TAX CREDIT REVIEW
COMMITTEE MEETING
Laws 2002, Chapter 238 established the Joint Legislative
Income Tax Credit Review Committee and specified a
schedule for review of corporate and individual income tax
credits. The Committee met December 7th.
The Committee is charged with determining the original
purpose of each of the existing income tax credits, and
establishing a standard for evaluating the success or failure of
the credit. The standard for evaluation of the credits may
include: 1) the history, rationale and revenue impact; 2) the
benefit to the state in various economic terms; and 3) the
complexity in the use and administration of the credit. The
JLBC Staff provided the Committee with background
information on each of the credits.
The Committee discussed the following 5 credits:
Family Income Tax Credit
The credit is provided to individual taxpayers below certain
income levels. The cost of the credit was $7.5 million in Tax
Year (TY) 2005. In that year, approximately 420,000
taxpayers claimed an average credit of $18. Although it is
labeled as a family credit, almost half of the claimants were
single households with no dependents. The Committee
recommended indexing for inflation the income level required
to qualify for the credit.
Private School Tuition Organization Credit
The credit is provided to individual taxpayers for contributions
to a school tuition organization (STO). An STO is a charitable
organization that allocates at least 90% of its revenues for

Table 5
4-Sector “Big 3” Consensus Forecast: FY 2007 – FY 2010

Sales Tax
Individual Income Tax
Corporate Income Tax
Overall Weighted Growth

FY 2007
6.8%
7.3%
18.6%
8.2%

FY 2008
4.6%
5.7%
2.1%
4.8%

FY 2009
4.9%
6.3%
(1.2)%
4.8%

FY 2010
6.1%
7.1%
1.8%
6.1%
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Joint Legislative Budget Committee

educational scholarships or grants to K-12 private schools. In
TY 2005, STO’s independently reported $42.2 million in
contributions. Almost 70,000 taxpayers contributed, with an
average contribution of $609. While the credit reduces state
revenues, it may also impact state K-12 education costs if
students attend private school who would otherwise attend
public school. The Committee recommended no changes to
the credit.
Public School Extracurricular Activity Fee Credit
The credit is provided to individual taxpayers for fees or
contributions to a K-12 public school in support of
extracurricular activities or character education programs. In
TY 2005, public schools independently reported $35.3 million
in contributions.
Approximately 215,000 taxpayers
contributed, with an average contribution of $164. The
Committee recommended no changes to the credit.
School Site Donation Credit
The credit is provided to individual and corporate taxpayers
for donations of real property and improvements to a K-12
public school for use as a school or as a site for construction of
a school. For individual taxpayers, the cost of the credit was
$2.9 million in TY 2001, but decreased over the next 2 years
to about $560,000 in TY 2003. The cost of the credit
associated with corporate taxpayers was about $615,000 in
TY 2004. The Committee recommended no changes to the
credit.
Solar Hot Water Heater Plumbing Stub Out and Electric
Vehicle Recharge Outlet Credit
The credit is provided to individual and corporate taxpayers
for installing solar water heater plumbing stub outs or electric
vehicle recharge outlets. The cost of the credit was only about
$5,000 in TY 2004. In that year, 12 taxpayers claimed an
average credit of $445. Due to the limited use of the credit,
the Committee recommended repealing it.
JLBC MEETING
At its December 18th meeting, the Joint Legislative Budget
Committee considered the following issues:
Arizona Health Care Cost Containment System – Review
of Comprehensive Medical and Dental Program (CMDP)
Capitation Rate Changes – The Committee gave a favorable
review to AHCCCS’ proposed capitation rates for the CMDP
Program, which provides medical and dental care to children
in the foster care. The capitation rate changes are expected to
save the General Fund approximately $(63,200) in FY 2007.
Arizona Department of Corrections – Consider Approval of
Requested Transfer of Appropriations – The Committee
approved a transfer of $6.6 million from the Department of
Correction’s
(DOC)
ERE
line
item
to
the
Overtime/Compensatory Time (OT/CT) line item. The $6.6
million represented excess monies allocated to the department
resulting from the actual Correctional Officer Retirement Plan
(CORP) employer contribution rates being lower than the
budgeted FY 2007 rates. The agency had requested the
approval of a $17.8 million transfer. However, it was not

Monthly Fiscal Highlights – December 2006

clear if the transfer of $17.8 million from the agency’s
employee benefits line would leave enough money for the
agency to cover their costs for FY 2007.
Arizona State Schools for the Deaf and Blind – Review of
School Bus Replacement Expenditure Plan – The Committee
gave a favorable review to the Arizona State Schools for the
Deaf and Blind’s (ASDB) expenditure plan for bus
replacement. ASDB plans to replace 10 gasoline buses with
10 diesel buses at a total cost of $913,700. ASDB plans to pay
for the buses with its appropriation for bus replacement
($850,000) and through its operating budget ($63,700).
Department of Economic Security – Review of Expenditure
Plan for Adoption Services – The Committee gave a favorable
review to a Department of Economic Security (DES)
expenditure plan for the $1 million appropriation to the
Adoption Services – Family Preservation Project line item in
the Division of Children, Youth and Families budget. The
Committee included a provision that DES restructure the
budget based on the reported priorities so it will not exceed the
$1 million budget in future years if the initiatives were to
continue. The initiatives include additional resources for the
adoption hotline, as well as training, counseling and other
support services for adoptive families. The proposed cost of
the initiatives would be about $600,000 in FY 2007, with an
annualized cost of $1.8 million in future years.
JLBC Staff – Consider Approval of Year 2007-2008 Strategic
Program Area Reviews – The Committee gave a favorable
review to Strategic Program Area Reviews (SPAR) of
substance abuse funding and debt and third-party financing in
calendar year 2007. SPARS are intended to review issues that
often involve multiple agencies and evaluate the efficiency,
effectiveness and necessity of these programs.
The
Legislature would receive the recommendations of JLBC Staff
and the Office of Strategic Planning and Budgeting for
consideration in the 2008 session.
Department of Public Safety – Review of the Expenditure
Plan for the Gang and Immigration Intelligence Team
Enforcement Mission – The Committee gave a favorable
review to the Gang and Immigration Intelligence Team
Enforcement Mission’s (GITEM) expenditure plan. The
Department of Public Safety will use $1.3 million to fund the
purchase of specialty equipment and the operating costs
associated with 10 federal Border Patrol agents and $5.5
million to fund the costs associated with adding an additional
37 DPS officers to GITEM.
Arizona Department of Revenue – Review of Kerr
Expenditure Plan – The Committee gave a favorable review of
the Department of Revenue’s (DOR) expenditure plan for
Kerr administrative costs. The case of Kerr v. ADOR
involved the state income tax treatment of federal employees’
retirement system contributions and Arizona’s employees’
contributions to the State Retirement System for the years
1985 – 1990. DOR was appropriated $975,000 in FY 2006 for
administrative costs of the lawsuit.

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Joint Legislative Budget Committee

State Compensation Fund – Consider Approval of Calendar
Year 2007 and 2008 Budgets – The Committee approved the
State Compensation Fund’s (SCF) budgets for Calendar Year
(CY) 2007 and 2009. The SCF operating budget of $104.5
million (and 530 employees) in CY 2007 represents a $4.6
million (4.6%) increase above CY 2006. The CY 2008 budget
of $108.9 million (and 531 employees) represents a $4.4
million (4.2%) increase above CY 2007.
Superior Court – Review of Expenditures of Judicial
Collection Enhancement Fund (JCEF) Balance for Probation
Officer Salaries – The Committee gave a favorable review of
the Superior Court’s JCEF expenditure, which was $700,000
above the agency’s appropriated amount. The Superior
Court’s FY 2007 JCEF original appropriation was $2,723,800.
The monies from the fund are used for salaries for county
probation officers. The Committee also discussed the onetime nature of the JCEF expenditures.
Department of Transportation – Review of Third Party
Quality Assurance Report and Percentage of Third Party
Transactions Report – The Committee gave a favorable review
to the Department of Transportation’s (ADOT) Third Party
Quality Assurance Report and the Percentage of Third Party
Transactions Report. Highlights of the 2 reports include: 1)
The backlog of title transactions decreased from 31 business
days in FY 2006 to 20 business days in the first quarter of FY
2007; 2) ADOT removed the moratorium on new third parties;
3) ADOT has developed a statistical sampling method which
the agency believes would reduce the percent of reviewed
third party transactions and still retain statistical validity.
The Committee requested that ADOT provide a progress
report on their statistical sampling method by April 30, 2007.
SUMMARY OF RECENT AGENCY REPORTS
AHCCCS – Semi-Annual Report on Healthcare Group –
Pursuant to A.R.S. § 36-2912, AHCCCS is submitting its
semi-annual report to the Committee on the number and types
of businesses participating in Healthcare Group (HCG). This
report also provides a description of HCG activities since its
last semi-annual report submitted July 2006. AHCCCS
reports that, as of October 7, 2006, total statewide HCG
enrollment was 23,444, with participating members from
8,294 private employers and 13 political subdivisions.
AHCCCS reports that since October 2005, enrollment has
increased by 6,820 people, or 41%. AHCCCS’ FY 2008
budget request projects June 2008 enrollment to be 35,500.

Monthly Fiscal Highlights – December 2006

workforce development account. Monies in the account are
derived from Proposition 301 sales tax revenues and shall be
used for workforce development and job training. Total
revenues in FY 2006 were $16,447,400 and total expenditures
in the same year were $11,880,300.
Arizona Department of Corrections – Report on
Expenditures – Pursuant to Laws 2006, Chapter 344 (General
Appropriation Act), the Arizona Department of Corrections
(ADC) is required to report on the monthly and year-to-date
expenditures for the current and prior fiscal year. The report is
also to include potential shortfalls, any estimated surpluses to
offset the shortfalls, and a plan for eliminating the shortfall.
Based on the October 2006 report, the department is now
estimating a FY 2007 shortfall of $(5.2) million. This is a
decrease of $(23.3) million from last month, when the
department projected a FY 2007 shortfall of $(28.5) million.
The overall shortfall is comprised of surpluses and deficits
within various line items; however, the deficit is primarily due
to overtime and compensatory time expenditures. To address
the overtime and compensatory time deficit, the department
has requested JLBC approval to transfer monies from the ERE
line item. At its December 18, 2006 meeting, the JLBC
approved a $6.7 million transfer to fund overtime expenses
though at least February 2007. (Please see the Department of
Corrections narrative in the JLBC Meeting section for more
information.)
Arizona Criminal Justice Commission – Report on Criminal
Justice Enhancement Fund – Pursuant to A.R.S. § 41-2401C,
the Arizona Criminal Justice Commission (ACJC) is required
to provide an annual report by December 1 on the receipt and
expenditures of Criminal Justice Enhancement Fund (CJEF)
monies distributed to law enforcement agencies. CJEF
consists of a 47% assessment on certain fines, penalties, and
forfeitures imposed and collected by the courts. CJEF monies
are statutorily distributed to various agencies for criminal
justice related activities. In FY 2006, CJEF revenues totaled
$42,033,900 and the total funds available (including the
beginning balance and adjustments) for the fiscal year was
$58,612,100. Total CJEF expenditures were $39,889,600 in
FY 2006, leaving an ending balance of $18,722,500. In FY
2006, CJEF revenues grew by 8.7%, expenditures increased
by 8.5%, and the overall ending balance increased by 16.7%.

HCG notes that member retention has increased from 96% in
October 2005 to 97% in October 2006, but decreased from the
98% retention experienced in June 2006.

Arizona Criminal Justice Commission – Report on
Statewide Methamphetamine Interdiction Efforts – Pursuant to
Laws 2006, Chapter 337, the Arizona Criminal Justice
Commission (ACJC) is required to report quarterly with a
summary outlining the use and effectiveness of $3 million
appropriated in FY 2007 for increased methamphetamine
interdiction efforts by the counties.

Arizona Community Colleges – Report on Workforce
Development Expenditures – The Arizona Community
Colleges are reporting on their previous year’s workforce
development plan activities and expenditures. A.R.S. § 151472 requires each community college district to establish a

ACJC reported that as of September 30, 2006, no monies had
been spent. ACJC also reported that 8 counties (Apache,
Coconino, Graham, Greenlee, La Paz, Mohave, Navajo and
Yuma) did not submit any information on the utilization or
effectiveness of the methamphetamine funding received. At

Page 6

Joint Legislative Budget Committee

least 7 counties, however, reported that they intend to
participate in the Arizona Meth Project (AMP). Modeled after
the Montana Meth Project, AMP is designed as a multi-media
public service program that targets youth, young adults and
their parents.
Of the counties that did report to ACJC, 5 (Cochise, Pima,
Pinal, Santa Cruz and Yavapai) were in planning stages to
identify other possible programs for Chapter 337 funding.
Department of Economic Security – Report on Available
State and Federal Domestic Violence Funding – Pursuant to a
General Appropriation Act footnote, the Department of
Economic Security is submitting its report to the Committee
on available state and federal domestic violence funds and the
fiscal agents receiving those monies. There is a total of $20.6
million currently used by 6 state entities for domestic violence
services.
Department of Environmental Quality – Report on Water
Quality Assurance Revolving Fund Program Improvements –
Pursuant to a General Appropriation Act footnote, the Water
Quality Assurance Revolving Fund Advisory Board is
required to report by December 1, 2006 on improvements to
the Water Quality Assurance Revolving Fund Program
(WQARF) which would result in efficiency savings of time or
funding, reduction of program costs not directly associated
with a listed site, and the enhancement of cost recovery from
responsible parties. The WQARF Program is similar to the
federal Superfund program in that it is designed to monitor,
contain, and remediate contaminated groundwater at specified
sites.
Rather than make new recommendations for improvements as
required by the footnote, the WQARF Advisory Board’s
response included 11 descriptions of current program practices
which the Board believes results in efficiencies.
Arizona Department of Environmental Quality – Report on
Arizona Alternative Testing and Compliance Study – Pursuant
to Laws 2000, Chapter 404, the Department of Environmental
Quality (DEQ) has submitted the Director’s report for the
Arizona Alternative Compliance and Testing Study
(AZACTS). The purpose of this study was to research and
evaluate the feasibility and effectiveness of alternative
technologies to identifying high pollutant vehicles and
requiring their repair prior to entrance into the Phoenix or
Tucson metropolitan areas. AZACTS was also required to
evaluate and identify methods to improve motorist compliance
with existing and alternative emissions inspection programs.
The report submitted by the Eastern Research Group included
23 recommendations to improve emissions reductions, cost
effectiveness, or public acceptance of the emissions control
program in place in the Phoenix and Tucson metropolitan
areas.
The department has accepted 4 of the report’s findings, 3
findings will require further analysis, and 3 were not

Monthly Fiscal Highlights – December 2006

recommended. The department did not comment on several of
the findings from the contractor’s report.
Department of Health Services – Report on AIDS Drug
Assistance Program Expenditures – The Department of Health
Services submitted information on the expenditures from its
AIDS Drug Assistance Program in FY 2006 pursuant to
Executive Orders 97-10 and 98-3. According to the report, the
program served an average of 860 clients a month in FY 2006.
This is a decrease of 6 clients a month from FY 2005 levels.
The average money spent per participant in FY 2006 was
$881, down 6.1% from FY 2005 levels.
In total, the program spent $9,090,600 on medications in FY
2006. This includes $8,090,600 from Federal Funds and
$1,000,000 in General Fund monies. The program expended
$9,736,300 in FY 2005.
Department of Health Services – Report on Arnold v. Sarn –
Pursuant to a footnote in the General Appropriation Act, the
Department of Health Services has submitted a quarterly
report to the Committee on the department’s progress toward
settling the Arnold v. Sarn lawsuit. The department reports
that on September 14, 2005 the plaintiffs filed a Motion for
Non-Compliance as a result of the Court Monitor’s 2005
Independent Review. As a result, the parties agreed to a Joint
Stipulation requiring the department to develop a plan that
increases service capacity for independent living skills,
housing support services, vocational/work supports, and
substance abuse services. The department will submit its
progress to the Court Monitor no later than December 29,
2006 and the Motion for Non-Compliance will be dismissed if
the Court Monitor certifies that the department has met its
obligation. The Court Monitor’s 2006 Independent Review is
expected to be completed before the next scheduled status
hearing on January 12, 2007. If scheduled progress is made,
the department is expected to have fulfilled the agreed upon
exit criteria by June 2008.
Arizona Board of Regents – Enrollment Counting Day
Report – Laws 2006, Chapter 352 required the Arizona Board
of Regents (ABOR), by December 1, 2006, to report on fulltime equivalent (FTE) student enrollment counts as of the 21st
day and the 45th day of the fall 2006 semester. Chapter 352
specified the 45th day because A.R.S. § 15-1466.01 requires
community colleges to conduct their enrollment counting at
that time.
Historically, the universities conduct their
enrollment counting on the 21st day.
ABOR reports that, throughout the Arizona University
System, enrollment dropped from 110,580 FTE students on
the 21st day to 108,769 FTE students on the 45th day, a decline
of (1,811) FTE students, or 1.6%. If the part-statutory, partconventional student enrollment funding formula used by
JLBC Staff were applied to the lower, 45th day enrollment
counts, General Fund support for the university system as a
whole would decline by $(13.4) million dollars, or (1.4)% of
the FY 2007 General Fund appropriation.

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Joint Legislative Budget Committee

Arizona Board of Regents/Arizona Community Colleges –
Report on Articulation and Transfer for Arizona Public
Postsecondary Education – Pursuant to A.R.S. § 15-1824, the
Arizona Board of Regents and the community colleges are
required to submit an annual report of their progress on both
articulation and meeting statewide postsecondary education
needs by December 15.
In response to this mandate, both the universities and the
community colleges continue to move toward the goal of
seamless course transfer and statewide access to higher
education.
This year’s progress in implementing the transfer model and
support systems include:
•

•

Approximately 5,000 community college students
completed the Arizona General Education Curriculum,
which satisfies lower division general education
requirements at the universities. This is a 25% increase
over last year, and a 250% increase over 2002.
The Course Applicability System (CAS) Web site
currently experiences 4,000 average “unique visitors” per
week. This new measure “unique visitors” is being used
instead of “website hits” as it is considered to be a more
reliable method of tracking, since “hits” can include
traffic generated by programs designed to simulate user
hits.

Department of Revenue – Report on General Fund
Enforcement Revenue – A footnote in the General
Appropriation Act requires the Department of Revenue (DOR)
to report quarterly on the effectiveness of the department’s
overall enforcement and collections program, including a
comparison of projected and actual General Fund revenue
enforcement collections for FY 2007. DOR had General Fund
enforcement revenues of $102.7 million in the first quarter of
FY 2007, which was $19.3 million above their goal of $83.4
million.
Department of Revenue (DOR) – Report on Ladewig
Expenditures – DOR reports monthly on the status of the
Ladewig litigation. DOR’s monthly status report shows
expenditures of $26,200 for Ladewig administrative costs in
November 2006. Expenditures and accounts forwarded to
Unclaimed Property totaled $97.7 million through November
2006, including $81 million of expenditures and $16.7 million
of accounts forwarded to Unclaimed Property. If individuals
entitled to a Ladewig refund cannot be located, their funds are
deposited in the Unclaimed Property Fund and eventually
returned to the General Fund. DOR was allocated a total of
$94.8 million for Ladewig expenses in FY 2007. DOR pays
Ladewig expenses which exceed the $94.8 million allocation
from the tax refund account in the General Fund. Any unused
amounts revert to the General Fund.

Monthly Fiscal Highlights – December 2006

Chapter 344), the Arizona Department of Water Resources
(DWR) is required to report quarterly on the amount of fees
collected by the Assured and Adequate Water Supply
(AAWS) Program.
Laws 2005, Chapter 217 established the AAWS
Administration Fund to provide for the costs of the AAWS
Program. New fees were approved in September 2006. As a
result, collections in the first quarter of FY 2007 amounted to
$74,500, making the fund balance as of September 2006
approximately $177,000. However, DWR anticipates that the
fees will eventually generate approximately $1,100,000 per
year for the operations of the AAWS program.
Arizona Department of Water Resources – Report on the
Indian Firming Expenditure Plan – Pursuant to the General
Appropriation Act (Laws 2006, Chapter 344), the Arizona
Department of Water Resources (DWR) has reported its
expenditure plan for the $13,500,000 appropriation to the
Arizona Water Banking Authority (AWBA) to carry out the
state’s obligations related to Indian water rights.
The Arizona Water Settlements Act (P.L. 108-451) was signed
in 2004 and identifies the responsibilities for the United States
Secretary of the Interior and the State of Arizona in
supplementing, or “firming,” Indian water supplies during
drought periods. The settlement includes a provision requiring
that approximately 60,600 acre-feet of water to be made
available for certain Indian tribes in times of shortage over a
100-year period. Of that amount, the State of Arizona agreed
to provide 23,700 acre-feet in years of shortage - 15,000 for
the Gila River Indian Community and 8,700 acre-feet for
future settlements.
In 2005, the Indian Firming Study Commission was created by
the Legislature to develop the Indian Firming program. The
Commission estimated that to ensure the state fulfill its
obligations under the agreement, approximately 550,000 acrefeet of storage credits would be required to deliver the state’s
obligation of 23,700 acre-feet in years of shortage.
AWBA’s expenditure plan for the $13.5 million is to spend
$2,700,000 per year from 2008 through 2012. AWBA
estimates that this will purchase a total of 259,400 storage
credits, or 47% of the state’s Indian firming obligation.

Arizona Department of Water Resources – Report on Fees
Collections in the Assured and Adequate Water Supply Fund –
Pursuant to the General Appropriation Act (Laws 2006,
Page 8

State of Arizona
General Fund Revenue: Change from Previous Year and June Forecast
November 2006
Current Month

FY 2007 YTD (Five Months)

Change From
Actual

November 2005

November 2006

Amount

Change from
Actual

Revised Forecast

Percent

Amount

Percent

November 2006

November 2006

Amount

Revised Forecast

Percent

Amount

Percent

Taxes
Sales and Use

365,372,337

$31,360,925

Income - Individual

249,526,954

3,129,038

- Corporate

5,165,061

(690,458)

9.4 %

$1,866,079,170

$161,872,199

1.3

(17,080,546)

$5,965,737

(6.4)

1.7 %

1,426,606,389

124,879,420

9.6

1,531,089

(11.8)

(1,017,539)

(16.5)

321,316,572

57,784,559

21.9

37,828,572

13.3

8,167,940

1,080,805

15.3

(1,432,060)

(14.9)

31,300,706

4,437,193

16.5

3,175,706

11.3

114,516,660

4,949,989

4.5

3,216,660

2.9

Property

6,841,102

1,803,019

35.8

41,102

0.6

Luxury

7,695,739

1,933,487

33.6

2,070,739

36.8

203,992

94,886

87.0

203,992

Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

(1,075,680)
51,968
$633,781,473

--

(1,378,124)

--

(1,075,680)

--

(6,008)

(10.4)

(13,157)

(20.2)

$36,246,765

6.1 %

($10,905,352)

(1.7) %

(997,129)
264,665
$3,767,254,973

9.5 %

$31,904,670

1.7 %
0.1

(10,328,385)

--

(1,197,129)

--

(10,671)

(3.9)

(60,960)

(18.7)

$344,665,109

10.1 %

$74,966,548

2.0 %

Other Revenue
Lottery

2,590,900

(66.8)

13,398,400

(5,324,200)

(28.4)

(6,201,600)

License, Fees and Permits

2,862,130

505,300

21.4

200,130

7.5

19,125,397

6,302,578

49.2

3,721,697

24.2

Interest

9,255,553

4,521,237

95.5

3,955,553

74.6

34,824,120

18,288,006

110.6

12,324,120

54.8

(4.5)

16,795,590

(3,607,869)

(17.7)

(2,139,510)

(11.3)

12,771,156

5,339,589

71.9

7,868,756

160.5

Sales and Services

3,627,638

Other Miscellaneous

2,923,614

Disproportionate Share
Transfers and Reimbursements
Sub-Total Other Revenue
TOTAL BASE REVENUE

(7,715,000)

(129,996)
1,034,750

0

0

157,103

26,587

21,416,938
$655,198,411

(1,757,122)
$34,489,643

(74.9)

(3.5)
54.8
-20.4
(7.6) %
5.6 %

(5,209,100)

(171,562)
2,082,114
0
(542,897)
314,238
($10,591,114)

247.4

(31.6)

--

0

0

--

0

--

(77.6)

1,093,199

(2,581,316)

(70.2)

(3,406,801)

(75.7)

1.5 %

98,007,862

18,416,788

23.1 %

12,166,662

14.2 %

(1.6) %

$3,865,262,835

$363,081,897

10.4 %

$87,133,210

2.3 %

One-Time Revenue
Urban Revenue Sharing
Sub-Total Transfers In
TOTAL REVENUE

(45,935,888)

(10,500,144)

29.6

0

0.0

(229,679,440)

(52,500,720)

29.6

0

0.0

(45,935,888)

(10,500,144)

29.6 %

0

0.0 %

(229,679,440)

(52,500,720)

29.6 %

0

0.0 %

4.1 %

($10,591,114)

(1.7) %

9.3 %

$87,133,210

2.5 %

$609,262,523

$23,989,499

$3,635,583,395

$310,581,177

Table 6