JLBC

MONTHLY FISCAL HIGHLIGHTS
January 2007
December General Fund revenue collections were $910.7
million, or 4.9% above December 2005. This amount was
$(9.8) 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
$77.3 million above the forecast. (See Table 3 on page 2.)
These surplus revenues have already been accounted for in the
JLBC Baseline revenue calculations for FY 2007

•

Collections continued to slow in December. Of the major tax
categories, December sales tax grew at a rate of only 6.0%,
while individual income collections actually decreased by
(1.6)%.
Corporate collections continued to be strong,
however, with growth of 25.4% above December 2005. For
the year-to-date, total collections are 8.4% above last year.
(See Table 8 on page 10 for details.)

The Committee unfavorably reviewed Arizona State
University’s proposal to enter into an agreement with a
private firm to develop housing for 1,200 students at the
Downtown Phoenix Campus. The private developer
would finance and operate the project, generating revenue
from dorm fees. The Committee unfavorably reviewed the
request since the full Legislature has not approved the
Downtown Phoenix Campus.
The Committee favorably reviewed Maricopa County
Community College District’s proposal to issue $240
million in General Obligation (GO) bonds for capital
projects. At the November 2004 election, Maricopa
County voters authorized the district to issue a total of
$951 million in GO bonds over 10 years. The current
issuance represents the second installment. The district
previously issued $191 million in 2005.

The decline in individual income tax collections seems to be
due to a timing issue related to when individual estimated tax
payments are received.
As evidence of this, January
collections in this category appear to have offset the December
losses.

The Monthly Fiscal Highlights also include a summary of
recent statutory reports to JLBC (pages 4 – 9). Of note, the
Arizona Department of Education (ADE) is now reporting a
net FY 2007 surplus of $9 million. Previously, the department
had reported a shortfall of $(9.7) million.

•

In other fiscal news this month, the JCCR met on January 23rd
(page 4). Highlights included:

Table of Contents
Page #

Page #

December Revenues.................................................................2
Recent Economic Indicators ....................................................2

Summary of Recent Agency Reports (cont’d)
- Homeland Security – Funding Allocations ........................... 6
- Intel Corporation – Fab 32 Construction Project................... 6
- JLBC Staff – Agency Credit Card Transactions ................... 6
- Land Dept. – Fire Suppression Activities.............................. 6
- Mine Inspector – Abandoned Mines Safety Fund ................. 7
- ABOR – Financial Aid.......................................................... 7
- ASRS – Information Technology Plan.................................. 7
- SFB – FY 2008 Funding Estimates ....................................... 8
- Sec. State – Elections System Improvement Fund ................ 8
- Supreme Court – Probation Funds ........................................ 8
- Supreme Court – Case and Cash Management System......... 8
- Supreme Court – Criminal Case Processing.......................... 8
- ADOT – LTAF II (Mass Transit).......................................... 9

January 23 JCCR Meeting Summary
- ASU – Downtown Campus Student Housing Project............4
- ASU – FY 2007 Building Renewal Allocation......................4
- ASU – Renovations and Maintenance Bond Projects............4
- Maricopa Comm. Coll. Dist. – Bond Projects ......................4
- DES – Prescott Property Conveyance ...................................4
Summary of Recent Agency Reports
- ADOA/GITA – AZNet Implementation ................................4
- AHCCCS – Interstate Agreement with Hawaii .....................4
- ACJC – State Aid to Counties Funds.....................................5
- DES – Child Care Subsidy Reforms ......................................5
- DES – Federal Work Participation Requirements .................5
- ADE – AIMS Contract Changes............................................5
- ADE – Budget Status Report .................................................5

Other Issues
- DEMA – Emergency Transfers ............................................. 9

This report has been prepared for the Arizona Legislature by the Joint Legislative Budget Committee Staff on January 31, 2007. 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 – January 2007

DECEMBER REVENUES

RECENT ECONOMIC INDICATORS

Sales Tax collections were $362.2 million in December, or
6.0% above last December. The following table displays the
December and year-to-date growth rates for the major
categories.

The Conference Board’s U.S. Consumer Confidence Index
climbed 3.5% in December, reflecting a better outlook across
the board. Consumers’ assessment of current conditions
improved, while sentiment about the job market and
expectations for the next 6 months also were rising.

Table 1

Sales Tax Growth Rates
December
Year-to-Date
Retail
6.2%
4.8%
Contracting
5.0%
17.0%
Utilities
12.9%
11.8%
Use
(6.9)%
4.7%
Restaurant & Bar
7.2%
9.6%

The U.S. Index of Leading Economic Indicators increased
0.3% in December. The advance was led by positive
contributions from building permits, stock prices,
manufacturers’ new orders, vendor performance, and
declining unemployment insurance claims. The recent pattern
of the leading index suggests that slow to moderate economic
growth is likely to continue in the months ahead.

Overall, sales collections grew at a slower rate than prior
months in FY 2007. The slower growth was largely due to
weak contracting collections for the month and a reduction in
year-over-year use tax collections. For the month, revenues
were $(1.3) million below the forecast.

Semiconductor sales remained at relatively high levels. The
Semiconductor Industry Association (SIA) announced that
U.S. semiconductor billings (3-month moving average)
edged (0.5)% lower in November but remained 6.5% above
the level from a year ago. The SIA reported that unit sales of
consumer electronic products such as digital cameras (up more
than 40% in the U.S. market for the first 11 months of 2006)
and flat panel displays were ahead of forecasts, resulting in
strong revenue growth.

Individual Income Tax collections were $360.5 million in
December, or (1.6)% below last year. Table 2 displays the
December and year-to-date growth rates for the individual
income tax categories.
Table 2

Individual Income Tax Growth Rates
December
Year-to-Date
Withholding
12.1%
7.4%
Estimated + Final Payments
(19.0)%
22.9%
Refunds
84.3%
60.9%
Following a weak November, withholding tax collections
rebounded in December. The gains in withholding were
offset, however, by a significant reduction in estimated tax
payments and the continued high growth in refunds. Monthly
revenues were $(43.4) million below the forecast.
With regard to the reduction in estimated tax payments, the
decrease is likely the result of when those payments are
received. So far in January, increased collections for
estimated tax payments have offset the decline in December.
Corporate Income Tax collections were $169.6 million in
December, or 25.4% above last year. For the month, corporate
income tax revenues were $19.9 million above the forecast.

Retail price inflation moderated toward the end of 2006. The
U.S. Consumer Price Index (CPI) (3-month moving
average) dipped (0.2)% in December, while the corresponding
year-over-year increase was 1.9%. For all of 2006, the CPI
increased at a 3.2% average annual rate. Excluding food and
fuel costs, the core CPI increased 2.6% during 2006.
Preliminary estimates showed that Arizona’s non-farm
employment increased by 4.5% on a year-over-year basis in
December 2006. The job count totaled 2.72 million, an
increase of 116,000 from the prior year.
Although
manufacturing employment was shrinking in recent months,
the other goods-producing sectors – construction and mining –
posted steady gains. The construction industry directly
accounted for 20% of all the jobs created in 2006. The state
finished the year with a 4.1% unemployment rate, an
improvement from the 4.7% rate reported a year ago.
The residential real estate market continued its downward
trend. The Realty Studies group at Arizona State University
estimated that the Greater Phoenix single-family median
resale home price dropped (1.2)% to $255,900 in December,

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
December
$
910.7
$ (9.8)
$ 42.6
Year-to-Date
$ 4,546.2
$ 77.3
$ 353.2
____________
1/ Enacted FY 2007 budget (June 2006)

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – January 2007

well below the record $267,000 median price reported for
June 2006. A total of 67,035 existing single-family homes
were sold in 2006, which was (40.0)% less than the 110,835
units sold in 2005 and the fewest sold since 2002.
The townhouse-condominium median price increased to
$175,000 in December but remained below the $179,000
record median price posted in July 2006. A total of 13,995
existing units were sold in 2006, down from 2005’s total of
21,290.
The Arizona Business Conditions Index, based on a survey
of supply chain managers and produced by Arizona State
University, decreased (14.5)% to 54.5 in December, slightly
higher than the mark of 50 associated with an expanding
economy. The new orders component was among the factors
leading December’s decline, with production and delivery
times also posting losses. The employment and materials
inventory components made small positive contributions.

A different measure of statewide business sentiment moved
into positive territory. The University of Arizona’s Business
Leaders Confidence Index (BLCI) for 2007’s 1st quarter rose
7.9% to 51.9, slightly above the neutral 50 reading. All 6
components moved higher, with the capital expenditures and
hiring categories registering the biggest increases from the
prior quarter. The sales expectations component continued to
post the highest results as it has consistently in recent surveys.
The Department of Corrections’ inmate population
increased by an average of 169 inmates per month from
October through December. The total population increased by
2,438 inmates from a year ago.
The number of TANF recipients decreased (2.7)% to 84,228
in November and was (13.1)% below the level from
November 2005. The AHCCCS caseload increased 0.3% in
January from the prior month but was (2.0)% 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

December
December
Oct-Dec
Oct-Dec

4.1%
2.72 million
$81.6 million
$160.1 million

0.0%
0.6%
(0.3)%
(1.9)%

(0.6)%
4.5%
16.1%
4.5%

Sep-Nov
Sep-Nov

3,030
500

(14.2)%
(5.9)%

(49.9)%
(51.1)%

December
December

4,620
880

(8.3)%
(4.3)%

(28.7)%
(37.1)%

December
December
August
October
October

$255,900
$175,000
102.8
3.4 million
$6.20

(1.2)%
1.7%
(1.2)%
10.7%
(8.4)%

(1.6)%
6.7%
(0.8)%
(2.4)%
(29.9)%

0.2%
(14.5)%

(0.5)%
(20.5)%

2.5%
7.9%
1.8%
3.6%
0.3%
(2.7)%
169 inmates

7.3%
(13.4)%
7.1%
3.6%
(2.0)%
(13.1)%
2,438 inmates

October
December

119.2
54.9

4th Quarter 2006
1st Quarter 2007
3rd Quarter 2006
July 1, 2006
January
November
Oct-Dec

105.3
51.9
$195.4 billion
6.17 million
1,029,702
84,228
35,783

3rd Quarter 2006

$11.4 trillion

2.0%

3.0%

December
December
Sep-Nov
Oct-Dec

109.0
138.0
$3.97 billion
201.7

3.5%
0.3%
(0.5)%
(0.2)%

5.0%
(0.4)%
6.5%
1.9%

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Joint Legislative Budget Committee

JCCR MEETING
At its January 23, 2007 meeting, the Joint Committee on
Capital Review (JCCR) considered the following issues:
Arizona State University Downtown Campus Student
Housing – The Committee gave an unfavorable review to the
downtown campus student housing project given that the
campus was not established by the Legislature.
The project would build student housing for approximately
1,200 students by August 2009. A private developer would
enter into a 30-year land lease with the City of Phoenix to
construct the completed project. The developer would finance
the project and collect student housing fees, thereby
eliminating the need for state financing. When the financing
is paid off in 23 to 30 years, the facilities and land would
become ASU property.
In exchange, ASU would:
1) guarantee limited funding to reach a 99% occupancy level
in the first 4 years of operation (would not exceed $1.2
million), 2) not solicit student housing from other developers,
provided performance levels are met, and 3) provide land for
future housing projects.
Other than the rent guarantees in the first 4 years, the state
would have no financial obligation.
Arizona State University FY 2007 Building Renewal – The
Committee gave a favorable review to the FY 2007 building
renewal plan. For FY 2007, the university was allocated $6.5
million of a $20 million appropriation to the Arizona Board of
Regents for building renewal. The plan allocates the $6.5
million among 10 projects.
Arizona State University Academic Renovations &
Deferred Maintenance and Revised Instructional/Research
Laboratory Renovations – The Committee gave a favorable
review to the issuance of $10 million in system revenue bonds
for phase IIB of academic renovations and deferred
maintenance. Of the $10 million, $6 million is allocated for 3
projects and $4 million remains unallocated. The issuance
will be repaid over 15 years with tuition and rent revenues.
The annual debt payment is estimated to be $963,400.
Maricopa Community College District General Obligation
Bond Issuance – The Committee gave a favorable review to
the issuance of $240 million in general obligation bonds, with
the provision that the college report to the Committee the
actual cost of the bond issuance when the district returns for
review of its next issuance. At the June 22, 2004 meeting the
Committee gave a favorable review to the entire $951.4
million bond proposal, with the provision that the Maricopa
Community College District (MCCD) return for Committee
review prior to each issuance. The voters of Maricopa County
subsequently approved the district’s bond program in
November 2004. After an initial $190.3 million issuance in
2005, the district plans to issue an additional $240 million in
2007.

Monthly Fiscal Highlights – January 2007

Of the $240 million, $152.7 million would be allocated for
capital projects, $17.7 million for district wide maintenance
and regulatory compliance, $26.7 million for district wide
occupation programs, and $42.9 million would be used to
purchase and upgrade technology and equipment. The bond
will be repaid over 14 years by increasing the secondary
property tax rate, as approved by the voters in 2004. For the
entire $951.4 million voter-approved package, the district
estimates that the average annual tax increase would be $14
for every $100,000 of property value.
Department of Economic Security Prescott Property
Conveyance – The Committee gave a favorable review to the
conveyance of the 4,500 square foot property to the City of
Prescott for the appraised value of $530,000. The favorable
review included a provision that the department report to the
Committee regarding the planned use of the proceeds from the
sale of the building prior to its expenditure. The department
will relocate to a leased building that will provide consolidated
services to the area. After purchasing the building, the City of
Prescott will transfer the property to Prescott College.
SUMMARY OF RECENT AGENCY REPORTS
ADOA / GITA – Quarterly Report on AZNet Implementation
– In December 2004, the Joint Committee on Capital Review
requested the Arizona Department of Administration (ADOA)
and the Government Information Technology Agency (GITA)
to report quarterly on the Arizona Network (AZNet), as
created by the Statewide Telecommunications Management
Contract. In the last quarterly report the agency reported that
the primary contractor had completed the migration of all state
users to the new network. This statement has been revised to
exclude the Exposition and State Fair Board (70 seats), the
Public Safety Personnel Retirement System (17 seats), and the
Power Authority (17 seats).
In addition to requiring the migration of all state agencies onto
AzNet, the contract also requires state agencies to install
22,000 new internet phones by April 2010. As of October 1,
ADOA reported 7,182 installations complete, of which 601
were completed during the 1st quarter of FY 2007. Also
during the 1st quarter of FY 2007, state agencies invested $1.1
million in 29 capital projects, of which 8 are still active in the
2nd quarter of FY 2007.
AHCCCS – Report on Interstate Agreement with Hawaii –
Pursuant to A.R.S. § 36-2925H and a General Appropriation
Act footnote, AHCCCS is submitting its annual report on the
status of an Interstate Agreement with the State of Hawaii.
This report summarizes the continued activities associated
with the agreement between AHCCCS and Hawaii for data
processing with the AHCCCS Prepaid Medicaid Management
Information System (PMMIS). Cost savings to AHCCCS
resulting from this agreement are deposited into a special
fund. This fund had an ending FY 2006 balance of
$1,615,600, including $156,500 deposited in FY 2006. As per

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Joint Legislative Budget Committee

Monthly Fiscal Highlights – January 2007

A.R.S. § 36-2926, these funds are limited to technology
projects and IT staff recruitment.

Assistance for Needy Families (TANF) work participation
requirements.

Arizona Criminal Justice Commission – Report on State
Aid to County Attorneys Fund and the State Aid to Indigent
Defense Fund – Pursuant to A.R.S. § 41-2409E, the Arizona
Criminal Justice Commission (ACJC) is required to report on
the expenditures of monies in the State Aid to County
Attorneys Fund and State Aid to Indigent Defense Fund by
January 8, 2007.

The federal Deficit Reduction Act (DRA) of 2005 changed the
calculation that determines a state’s required work
participation rate for clients receiving cash assistance under
TANF. Prior to Federal Fiscal Year (FFY) 2007, the required
work rate was reduced based on caseload decline since 1995.
With the implementation of the DRA, the reduction is based
on caseload decline since 2005. For FFY 2006, DES had a
work participation rate of 29.1% and a minimum required rate
of 20%. For FFY 2007, it is expected that the minimum
required rate will be between 40% and 45%. Failure to meet
the required rate will result in a federal corrective action plan,
and eventually in fines up to 5% of the total Federal TANF
Block Grant, about $10 million.

In FY 2006, the State Aid to County Attorneys Fund allocated
$1,005,500, of which $157,700 was the General Fund
appropriation and the remaining $847,800 was from fines and
penalties collected by the Supreme Court and Court of
Appeals. The State Aid for Indigent Defense Fund allocated
$955,100, of which $150,100 was from the General Fund and
$805,000 was from fines and penalties collected by the
Supreme Court and Court of Appeals.
ACJC reports that counties used the monies in three main
areas: additional staffing to process more cases, technological
purchases to improve case management, and specialized
courts such as DUI/drug courts and early disposition courts.
The specialty courts were funded to increase the speed in
handling cases that warranted treatment or plea bargains.
The legislation establishing the funds and the reporting
requirement included a legislative intent section that set
timelines for criminal case processing. The ACJC report
states that although Fill the Gap funding increased, case
processing times have not met the Supreme Court guidelines.
In addition to the growth in criminal case filings, many
counties cited a lack of qualified attorneys along with high
staff turnover as reasons for not meeting timelines.
Department of Economic Security – Report on
Implementation of Child Care Subsidy Reforms – The FY
2007 Health and Welfare Budget Reconciliation Bill (BRB)
(Laws 2006, Chapter 331) granted the Department of
Economic Security (DES) an exemption from the rulemaking
process in order to implement the child care subsidy reforms
included in the FY 2006 Health and Welfare BRB (Laws
2005, Chapter 328). Also included was a requirement that
these reforms be implemented by January 1, 2007. Failure to
implement these reforms on time would result in a reversion
of $800,000 to the General Fund from the Division of
Employment and Rehabilitation Services operating budget.
DES reports that the rules implementing these reforms were
filed with the Secretary of State on December 28, 2006 and
became effective on December 31, 2006. All of the required
reforms have now been implemented.
Department of Economic Security – Quarterly Report on
Progress in Meeting Federal Work Participation Requirements
– A footnote in the FY 2007 General Appropriation Act
requires the Department of Economic Security to report
quarterly on progress made in meeting federal Temporary

DES states that the privatization of the JOBS program, which
assists TANF clients in finding employment, creates a
challenge in meeting the participation requirements. This is
mainly due to increased turnover in the existing staff. The
report did not address how DES will respond to these
difficulties.
Department of Education – AIMS Contract Changes – A
General Appropriation Act footnote states that “Before
making any changes to the Achievement Testing program that
will increase program costs, the State Board of Education shall
report the estimated fiscal impact of those changes to the
JLBC.” This footnote requirement has not been met in recent
years.
The Arizona Department of Education (ADE),
however, recently sent a letter to the JLBC Staff with
information regarding changes in its current 5-year (FY 2005
– FY 2009) AIMS contract with the vendor for that test. In
that letter, ADE indicates that the vendor plans to charge ADE
almost $8 million more in FY 2008 than the $9,831,800
amount that ADE believes AIMS testing should cost that year
under the current contract.
ADE’s assumed $9,831,800 cost for FY 2008 equals the
original contract cost of $8,023,500 for that year plus
$1,808,300 for subsequent caseload and policy changes for the
program. The current vendor instead contends that those
changes would add $9,432,700 to FY 2008 contract costs,
resulting in a total cost of $17,456,200. The JLBC Staff has
requested additional detail from ADE regarding costs of
individual caseload and policy changes for the program since
the start of the current 5-year contract and will provide an
update on this topic after that information is received.
Department of Education – Budget Status Report – Pursuant
to A.R.S. § 35-131(D) and a footnote in the FY 2007 General
Appropriation Act, the Arizona Department of Education
(ADE) recently provided an update regarding its budget status
for FY 2007. In a previous report, ADE reported a shortfall of
$(9.7) million. ADE now reports a $9.0 million net funding
surplus for FY 2007, which includes an estimated $13.6
million surplus for Basic State Aid and other formula
programs combined and an estimated $(4.6) million shortfall

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Joint Legislative Budget Committee

for achievement testing. The estimated $13.6 million formula
surplus is based mostly on reported FY 2006 Average Daily
Membership (ADM) counts for school districts, since FY 2007
counts are not yet available. Basic State Aid costs in FY 2007
will depend on both FY 2006 and FY 2007 ADM counts,
since that funding is based on current year counts for growing
districts and prior year counts for non-growing ones. ADE’s
$9.0 million net surplus estimate therefore is subject to
considerable change once FY 2007 ADM counts become
available. This is not expected to occur until at least February
2007.
Arizona Department of Homeland Security – Quarterly
Report on Homeland Security Funding – The Arizona
Department of Homeland Security (DHLS), in response to a
request by the Joint Legislative Budget Committee, has
submitted a quarterly expenditure and allocation report for
homeland security grant monies.
In FFY 2004, approximately $55.7 million of homeland
security funding was awarded to Arizona. Of this amount,
$53.7 million was reported as obligated or expended, leaving a
balance of $2.1 million which has yet to be spent. In the
August report, the total amount of funds which were reported
as obligated or expended was $32.5 million, which represents
an overall increase of $21.2 million.
In FFY 2005, Arizona received $41.7 million in homeland
security grants, of which $41.6 million was reported as either
obligated or expended. The amount reported as obligated or
expended in the August report was $15.6 million, representing
an increase of $26.0 million.
In FFY 2006, Arizona received a total of $20.2 million in
homeland security funds. Pending federal approval, DHLS
has already allocated these monies. Final FFY 2006 projects
and awards will be included in the future quarterly reports as
they become available.
Intel Corporation – Status Report on the Fab 32 Construction
Project – Laws 2005, Chapter 289 provides that corporations
that meet the conditions of Chapter 289 may use an enhanced
sales factor in the calculation of business income for corporate
income tax purposes beginning in Tax Year 2007. Chapter
289 requires that corporations that have made capital
investment commitments on a project under the terms of
Chapter 289 are required to file a status report on the project
by December 31 of each year through 2008.
The Intel Corporation’s Fab 32 project, located at Intel’s
Ocotillo Campus in Chandler, is the only project that has met
the conditions of Chapter 289. The Intel Corporation’s annual
status report on their Fab 32 project was received by JLBC on
December 26, 2006. When completed, the Fab 32 building
will be approximately 1 million square feet, and will house an
estimated 184,000 square feet of clean room space. Intel
reports that the project is currently on schedule, and is
expected to be completed in the second half of 2007. The
project is expected to cost approximately $3 billion to

Monthly Fiscal Highlights – January 2007

complete. The report notes that approximately $812 million
has been spent on the completion of the project through the
end of 2006, and that construction-related employment
reached a peak of 3,000 on-site workers during the year.
JLBC Staff – FY 2006 Reports on Credit Card Transactions –
A.R.S. § 35-142, requires agencies that accept credit cards to
annually report the number and dollar amount of those
transactions, compared to the number and dollar amount of all
transactions. Statute also requires information on the total
dollar amounts of any discount, processing, or convenience
fees paid. Lastly, each agency must issue a cost benefit report
when its percentage of electronic transactions exceeds 30%.
The state universities, the Legislature, and the Office of the
Governor are exempt from this requirement.
Transaction volumes vary widely among the various
departments. For FY 2006, 23 agencies reported accepting
payment cards. Table 1 shows that most of the state’s
electronic transactions are attributable to the Arizona
Department of Transportation (ADOT).
Table 5

# of Electronic Transactions
$ of Electronic Transactions
Total $ Transaction Fees

Total Including
Other Agencies
1,934,870
1,096,565,970
(4,760,841)

ADOT
1,719,436
1,078,557,698
(4,454,451)

During FY 2006, agency transaction fee percentages ranged
from 0.4% to 7.0%, with an average of 2.0%.
State Land Department – Report on Fire Suppression
Activities – A.R.S. § 37-623.02(E) requires the State Land
Commissioner to submit a report by December 31 of each year
on the uses of monies authorized to be expended from the Fire
Suppression Revolving Fund and any additional monies
authorized by the Governor to prepare for periods of extreme
fire danger. The Fire Suppression Revolving Fund is a nonappropriated fund consisting of legislative appropriations,
reimbursements, and monies authorized through statutory
emergency provisions. In FY 2006, there was a total of
$16,867,100 in liability incurred by the fund for a variety of
authorized purposes. Of the liability, the department made
payments of $15,014,500 in FY 2006.
In terms of fire fighting activity, Fire Suppression Revolving
Fund monies were used to fight a total of 1,894 fires, resulting
in a paid liability of $10,574,300 and an unpaid liability of
$470,300, as shown in Table 1.
Table 6
FY 2006 Fire Suppression Activities
Paid
Location of Fire
Number
Liability
State & Private Land
854 $ 6,112,800
Federal Land - In State
277
3,987,200
Federal Land - Out of State
47
474,300
Total
1,178 $10,574,300
____________
1/ Numbers do not add due to rounding.

Unpaid
Liability
$296,200
149,500
24,600
$470,300

Total
Liability
$ 6,409,000
4,136,600
498,900
$11,044,500 1/

Page 6

Joint Legislative Budget Committee

Table 1 accounts for $11,044,500 of the total $16,867,100 in
total liabilities. The remaining $5,822,600 was expended as
follows:
•
•
•

•

$2,544,200 for the state's share of costs for 5 fires under
the jurisdiction of the Federal Emergency Management
Agency (FEMA) (15% of total liability).
$1,300,000 to preposition resources to prepare for
potential fires (8% of total liability).
$1,625,700 to pay for requested assistance with
Hurricanes Katrina and Rita. A.R.S. § 37-623.02 allows
the Fire Suppression Revolving Fund to be used for "all
risk activities." These activities include assistance with
hurricane and flood disasters (10% of total liability).
$352,800 to respond to 685 false alarms (2% of total
liability).

Out-of-state fire fighting is part of reciprocity agreements with
other western states. When a participating state needs
assistance fighting fires, they can request aid from the other
states. The liability incurred depends on the needs of other
participating states. All out-of-state costs are billed to and
reimbursed by the department.
Due to the complex billing arrangement created by the
interagency cooperative agreements used by the State Land
Department's Fire Management Division, not all of a year's
liabilities are paid in the current year. These unpaid liabilities
are paid in future years with monies remaining in the fund as
well as reimbursements to the fund, such as payments from the
federal government for fires that occurred on federal land.
After subtracting the amount of paid liability from the fund’s
total liability, a total FY 2006 unpaid liability of $1,852,600
remains.
State Mine Inspector – Report on Abandoned Mines Safety
Fund Expenditures and Contributions – The State Mine
Inspector is required by A.R.S. § 27-131 to establish a
program to locate, inventory, classify, and eliminate public
safety hazards at abandoned mines; A.R.S. § 27-131 created
the Abandoned Mines Safety Fund (AMSF) to fund the
program. The Mine Inspector must submit an annual report to
JLBC on or before December 1 detailing the contributions to
the AMSF and the expenditures by the fund during the
preceding fiscal year.
In December 2006, the State Mine Inspector reported that
there were no deposits or expenditures made during FY 2006.
There have been no expenditures from the AMSF since
FY 2003.
Arizona Board of Regents - Report on University System’s
Financial Aid – Pursuant to A.R.S. § 15-1650, the Arizona
Board of Regents is required to submit an annual report on
financial aid, which includes information from all 3
universities, comparisons to peer institutions, and summary
information for the entire university system.
Highlights from the FY 2006 report include:

Monthly Fiscal Highlights – January 2007

•
•

•
•
•
•
•
•

Approximately $932.9 million in total financial aid
dollars were provided to students.
Of this amount, $435.5 million (46.7%) came from
federal sources, $333.5 million (35.7%) came from state
institutional sources, $161.8 million (17.3%) came from
private sources, and $2.1 million (0.2%) came from state
scholarships/grants and loans.
A total of 90,170 students received aid.
Of these students, 4,529 students were awarded non needbased gift aid, and 30,269 students were awarded needbased gift aid.
62% of students who applied for need-based aid were
awarded need-based gift aid.
The average aid package was $8,019, which includes both
need and non need-based aid.
51.9% of undergraduate students and 48% of graduate
students have debt.
Upon graduation, the average undergraduate student debt
was $17,173, while the average graduate student debt was
$33,806.

Arizona State Retirement System – Semi-Annual Report on
the ASRS Information Technology Plan – Pursuant to a
footnote in the General Appropriation Act, the Arizona State
Retirement System (ASRS) is submitting its semi-annual
report on the ASRS Information Technology (IT) project.
ASRS received appropriations from FY 2002 to FY 2006
totaling $42,554,100, and through June 30, 2006 ASRS spent
a total of $32,146,600. Therefore, as of June 30, 2006, ASRS
has $10,407,500 in unspent appropriations from FY 2002
through FY 2006 for ASRS IT Plan development. Of the
remaining amount, $5,600,000 will be spent in FY 2007 and
$4,807,500 will be spent in FY 2008.
In FY 2005, there were some concerns as to the progress of
the IT plan.
These concerns caused the Government
Information Technology Agency (GITA) to change the project
status from “green,” indicating the project is expected to be
completed as planned, to “red,” indicating a serious risk to
project phase completion by the planned date. The status was
subsequently upgraded to “yellow.” The Joint Legislative
Budget Committee asked ASRS to provide a semi-annual
report on progress in returning to “green” status.
An independent assessment conducted by the Independent
Advisory Consultant (IAC) in July of 2006 discussed concerns
regarding the timeline for the transition to a new financial
management system and the staffing level for IT resources. In
the IAC assessment of October 2006, the transition to the new
financial management system was no longer a concern as it
had been completed in September 2006, but the concern
regarding the staffing level for IT resources remained. The
reason for this concern is that demand for staffing in this field
is high, and so the probability for future turnover is also high.
Turnover is currently lower than expected, however. Overall,
the IAC reports that the ASRS IT Plan remains on budget and
on schedule for completion by June 30, 2008. The project
status from GITA is still “yellow”.

Page 7

Joint Legislative Budget Committee

School Facilities Board – Report on Funding Estimates –
Pursuant to A.R.S. § 15-2002, the School Facilities Board
(SFB) is required to report the estimated amounts necessary in
FY 2008 for the New School Facilities, Building Renewal, and
Emergency Deficiencies Correction Programs. The board is
also reporting the estimated amounts necessary for these
programs for FY 2009.
In FY 2008, SFB estimates a total funding requirement of
$589.2 million, including $399.0 million for the New School
Facilities Program and $190.2 million for the Building
Renewal Program. The Building Renewal amount is based on
the current statutory formula.
For FY 2009, the board estimates it will need funding in the
amount $635.0 million. Of this total, $425.8 million is for the
New School Facilities Program and $209.2 million is for the
Building Renewal Program. SFB did not request to transfer
any monies from the New School Facilities Fund to the
Emergency Deficiencies Correction Fund in FY 2008 or
FY 2009 due to a sufficient cash balance.
Secretary of State – Report on Election Systems
Improvement Fund Expenditures – Pursuant to a footnote in
the FY 2007 General Appropriation Act, the Secretary of State
is reporting on actual expenditures from the Election Systems
Improvement Fund in FY 2006 as well as estimated
expenditures from the fund in FY 2007 and FY 2008.
Monies in the fund are to be used to implement the provisions
of the Help America Vote Act (HAVA). HAVA is federal
election reform legislation that imposes several requirements
on the states with respect to the conduct of federal elections.
In FY 2006 the Secretary of State’s office spent a total of
$9,866,500 from the Election Systems Improvement Fund,
including $9,588,700 provided from federal funding and
$277,800 provided from the state General Fund. Expenditures
included $2,362,200 for acquisition, maintenance, and support
of the voter registration system and $7,051,100 to reimburse
counties for making voting locations more accessible.
The Secretary of State’s office currently estimates spending
approximately $15 million in FY 2007 and FY 2008.
Approximately $10 million will be used to purchase accessible
voting systems, most of which will be spent in FY 2007, with
any remainder spent in FY 2008. Approximately $5 million in
FY 2007 will be spent on the finalization and ongoing costs of
a statewide voter registration system. Any remaining funding
will be spent in FY 2007 and FY 2008 on voter education,
making election sites more accessible, improvements to the
telephonic grievance system, administration, consulting, poll
worker and election official training, and telecommunications.
Supreme Court – Report on Adult Probation Services Fund
and the Juvenile Probation Fund – Pursuant to A.R.S. § 12262C, the Administrative Office of the Courts (AOC) is
required to report to the JLBC on the total receipts and
expenditures in each account of the Adult Probation Services

Monthly Fiscal Highlights – January 2007

Fund (A.R.S. § 12-267) and the Juvenile Probation Fund
(A.R.S. § 12-268). The report is to present the information by
county and include the amount of Personal Services expended
from each revenue source of each account. AOC submitted
the report for FY 2006 on November 2, 2006.
Adult Probations
AOC reports statewide Adult Probation Services Fund total
expenditures of $112,532,900 in FY 2006. Of this amount,
county funds represent 58.4% of all expenditures, state funds
represent 24.6%, Federal Funds represent 1.3%, and other
sources of revenue, such as probation fees and local fees,
represent 15.8%.
Juvenile Probation
Total FY 2006 expenditures for the Juvenile Probation Fund
were $141,712,600. Of this amount, county funds represent
57.6% of all expenditures, state funds represent 38.1%,
Federal Funds represent 2.4%, and other sources of revenue,
such as probation fees and local fee, represent 1.9%.
Supreme Court – Report on Case and Cash Management
System – Pursuant to a footnote in the General Appropriation
Act (Laws 2006, Chapter 344), the Administrative Office of
the Courts (AOC) is required to report to the JLBC on the
monies expended from the Case and Cash Management
System (CMS) Special Line Item (SLI) and progress related to
the development and deployment of the system. The report
also shall include a timeline and expenditure plan for the
project and identify the courts involved and their financial and
non-financial contributions.
Funding and Expenditure Plan
The Case and Cash Management SLI was established with
monies from the Supreme Court’s operating budget and
Automation SLI. Monies are to be used for the replacement of
the aging case management systems in the larger-volume
Superior and limited jurisdiction courts within Maricopa and
Pima Counties, as well as in 145 of the 180 state, county and
municipal courts throughout the state. AOC has estimated that
the upgrade of these systems will continue through FY 2010.
As of December 31, 2006, the report listed current
expenditures of $182,100 and planned expenditures of
$8,785,400.
Progress
AOC reports that Pima County released the first version of the
new general jurisdiction (Superior courts) CMS, called
AGAVE, in mid-2006. The program was limited to 3 court
functions: case initiation, document imaging, and receipt of
non-criminal cases.
Supreme Court – Report on Criminal Case Processing and
Enforcement Improvement Fund and the State Aid to the
Courts Fund – The Supreme Court is required to report on the
Criminal Case Processing and Enforcement Improvement
Fund and the State Aid to the Courts Fund annually by
January 8, pursuant to A.R.S. § 12-102.01 and 12-102.02. The
report includes an evaluation of statewide court collection

Page 8

Joint Legislative Budget Committee

Monthly Fiscal Highlights – January 2007

efforts and the progress of criminal case processing projects in
each Arizona county.
Court Collections
In FY 2006, statewide court revenue collections increased by
$39 million, or 13.7%, to $323.2 million. Total case filings
increased by 0.5%.

Of the $4 million allocated to the Governor’s Emergency Fund
in FY 2007, including the amounts above, a total of $3 million
has already been allocated. This leaves $1 million in the fund
for FY 2007 emergencies.

The Fines/Fees and Restitution Enforcement (FARE) program
contributed nearly 10% of the overall collections amounts.
Focusing on backlog cases, FARE recovered $30.5 million,
with an average payment of $207, with many cases dating to
the mid-1980s.
Case Processing
In FY 2006, a total of 59,941 criminal cases were filed in
Superior Courts throughout the state, which represents an
increase of 6.4% over FY 2005.
The report provides an overview of case processing
performance in the 14 counties that received monies from the
State Aid to the Courts Fund in FY 2006. In the FY 2003
report, the Supreme Court established performance goals for
criminal case dispositions of 90% of cases within 100 days
and 99% within 180 days. In FY 2005, no county met either
performance measure. However, no statistics relating to this
measure were provided for Maricopa County, despite having
received State Aid to the Courts Fund monies.
Department of Transportation – Report on Local
Transportation Assistance Fund II (Mass Transit) – A.R.S.
§ 28-8103 requires the Arizona Department of Transportation
(ADOT) to submit an annual report on the allocation of Local
Transportation Assistance Fund II (LTAF II) monies by
January 1st of each year. The statutory maximum annual
allocation is $18,000,000. ADOT reports that they allocated
$18,000,000 of FY 2006 LTAF II revenue to counties and
local governments. ADOT distributed the $18,000,000 of FY
2006 revenues the following fiscal year on November 7, 2006.
OTHER ISSUES
Emergency Transfers
The Governor is authorized by A.R.S. §35-192 to declare
emergencies in response to major disasters. This section also
allocates $4 million from the General Fund to the Governor’s
Emergency Fund every fiscal year for liabilities, expenses, and
reimbursements arising from these disasters. In December
2006, funding was approved for 4 emergency proclamations,
as described below:
Table 7
December 2006 Activity and Descriptions
Transfer
January 2005 Northern AZ Winter Storm
February 2005 Winter Storm & Flooding
August 2005 LaPaz County Summer Monsoon
Summer 2006 Monsoons & Flooding
TOTAL

Amount
$ 500,000
1,200,000
300,000
300,000
$2,300,000
Page 9

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

FY 2007 YTD (Six Months)

Change From
December 2005

Actual
December 2006

Percent

Amount

Change from
Forecast
Percent

Amount

December 2005

Actual
December 2006

Forecast

Percent

Amount

Percent

Amount

Taxes
Sales and Use

362,236,390

Income - Individual

360,467,690

$20,384,171
(5,761,180)

- Corporate

169,590,795

6.0 %

($1,344,610)

(1.6)

(43,390,010)

(0.4) %
(10.7)

$2,228,315,560

$182,256,370

8.9 %

$30,560,060

1,787,074,079

119,118,240

7.1

(41,858,921)

(2.3)

92,138,625

23.1

57,761,266

13.3

34,354,067

25.4

19,932,695

13.3

490,907,366

Property

5,321,421

(1,376,472)

(20.6)

1,021,421

23.8

13,489,360

Luxury

6,460,197

1,517,785

30.7

835,197

14.8

37,760,903

1,579,821

5.7

9,248,209

46.2

143,764,869

(1,000,871)

(95.7)

44,456

11.8

(15,520)

Insurance Premium

29,248,209

(410,640)

(3.0)

5,954,978

18.7

4,010,903

11.9

6,529,810

4.8

12,464,869

9.5

44,456

Other Taxes

49,605

5,238

$933,418,763

$49,702,559

Lottery

2,626,900

106,700

4.2

(573,100)

(17.9)

16,025,300

(5,217,500)

(24.6)

(6,774,700)

License, Fees and Permits

3,274,308

582,580

21.6

259,208

8.6

22,399,706

6,885,159

44.4

3,980,906

21.6

Interest

8,788,139

3,606,024

69.6

3,288,139

59.8

43,612,259

21,894,030

100.8

15,612,259

55.8

Sales and Services

3,813,125

(64,718)

(1.7)

(573,075)

(13.1)

20,608,715

(3,672,587)

(15.1)

(2,712,585)

(11.6)

Other Miscellaneous

2,837,083

(1,969,345)

(41.0)

295,483

11.6

15,608,239

3,370,244

27.5

8,164,239

109.7

5.6 %

($13,668,162)

(23.8)
(1.4) %

(952,673)

(2.1)

Estate

Sub-Total Taxes

--

(295,668)

1.4 %

314,270
$4,700,673,734

(11,329,257)

--

(1,152,673)

--

(5,433)

(1.7)

(76,480)

(19.6)

$394,367,665

9.2 %

$61,298,384

1.3 %

Other Revenue

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

0

0

1,839,698

1,168,106

--

23,179,253

3,429,347

17.4 %

$956,598,016

$53,131,906

5.9 %

173.9

0
1,139,698

-162.8

0
2,932,897

0
(1,413,210)

-(32.5)

0
(2,267,103)

(29.7)

-(43.6)

3,836,353

19.8 %

121,187,116

21,846,136

22.0 %

16,003,016

15.2 %

($9,831,809)

(1.0) %

$4,821,860,850

$416,213,801

9.4 %

$77,301,400

1.6 %

One-Time Revenue
Urban Revenue Sharing

(45,935,888)

(10,500,144)

29.6

0

0.0

(275,615,328)

(63,000,865)

29.6

0

0.0

'05 Budget Balancing Transfers

0

0

--

0

--

0

0

--

0

--

'07 Disproportionate Share

0

0

--

0

--

0

0

--

0

--

'06 In-Lieu Transfer

0

0

--

0

--

0

0

--

0

--

29.6 %

0

0.0 %

29.6 %

0

0.0 %

8.4 %

$77,301,400

1.7 %

Sub-Total Transfers In
TOTAL REVENUE

(45,935,888)
$910,662,128

(10,500,144)
$42,631,762

4.9 %

($9,831,809)

(1.1) %

(275,615,328)
$4,546,245,522

(63,000,865)
$353,212,936

Table 8