JLBC

MONTHLY FISCAL HIGHLIGHTS
March 2007
February General Fund revenue collections were $452.5
million, or 5.2% above February 2006. This amount was $19.6
million above the January JLBC Baseline FY 2007 forecast.
For the fiscal year-to-date, collections are $12.1 million above
the JLBC Baseline FY 2007 forecast. (See Table 3 on page 2.)
Among the major tax categories, performance was mixed.
Sales tax collections increased at a rate of 8.8%, while
individual income tax collections actually decreased (20.4)%,
the result of a high level of refunds. For the year-to-date, total
collections are 8.4% above last year. (See Table 6 on page 15
for details.)
In other fiscal news this month, the Finance Advisory
Committee (FAC) met on March 8th (page 4). The FAC is a
panel of 15 leading economists that advises the Legislature 3
times a year on the state’s economy. Members’ economic
outlook for the next year varied, with some projecting slow
economic growth, while others forecasted modest growth.
With regard to the future of Arizona’s construction industry,
some members believed the current decline in residential
housing permits will be offset by increased commercial
construction and population growth. Other members thought
that the reduction in residential permits will have a negative
impact on Arizona’s economy for at least the next 18 months.
Based on the FAC’s input and 3 other models, the largest
revenue categories are forecasted to grow 8.3% in FY 2007
and 4.3% in FY 2008.

The JLBC met on March 29th (page 5). The Committee gave
an unfavorable review to AHCCCS’ plan to seek additional
information from vendors prior to issuing a Request for
Proposal (RFP) to privatize its eligibility and redetermination
system. Legislation from the 2006 session required AHCCCS,
by March 31, 2007, to issue an RFP to solicit bids to privatize
its eligibility functions. AHCCCS believes that an initial
Request for Information (RFI) will help them design a better
RFP.
The Monthly Fiscal Highlights also include a summary of
recent statutory reports to JLBC (pages 5 – 9). Of note,
AHCCCS, DES, and DHS have submitted preliminary
FY 2008 actuarial estimates for Title XIX programs.
AHCCCS also submitted a report on potential recipient cost
sharing options that are permitted by the federal Deficit
Reduction Act. In addition, DES submitted a performance
report on the Child Protective Services (CPS) Division.
In national news, the President released a budget proposal for
Federal Fiscal Year (FFY) 2008. Excluding increases for
Medicaid, federal funding to Arizona increased by 3.2% in
FFY 2007, and would decrease by (1.8)% in FFY 2008 under
the President’s proposal (page 9).

Table of Contents
Page #

Page #

February Revenues...................................................................2
Recent Economic Indicators ....................................................2
Finance Advisory Committee Meeting ....................................4

Summary of Recent Agency Reports (cont’d)
- AHCCCS – Capitation Rate Increase Estimates................ 6
- DES – CPS Financial and Program Accountability........... 6
- DES – State-Funded Food Distribution............................. 7
- DES – Capitation Rate Increase Estimates ........................ 7
- ADE – Budget Status Report............................................. 7
- DEMA – Request to Conduct Training on the Border ...... 7
- DHS – Arnold v. Sarn ....................................................... 7
- DHS/DES – Autism Services ............................................ 8
- DHS – Capitation Rate Increase Estimates........................ 8
- Land Dept. – State Trust Land Activities .......................... 8
- ASRS – Efforts to Minimize the Contribution Rate .......... 8
- DOR – BRITS ................................................................... 9
- DOR – Enforcement Revenue ........................................... 9
- Supreme Court – Arizona Lengthy Trial Fund.................. 9

March 29 JLBC Meeting Summary
- AHCCCS – Medicaid Eligibility Privatization RFP..............5
- Attorney General – Allocation of Settlement Monies............5
- Pioneers’ Home – Transfer of Appropriations.......................5
- DPS – Arizona Public Safety Communications Advisory
Commission ......................................................................5
- DPS – GIITEM Expenditure Plan..........................................5
- ADOT – Third Party Progress Report ...................................5
- ASU – Transfer of Appropriations ........................................5
Summary of Recent Agency Reports
- ADOA/Treasurer – General Fund Balance Reconciliation....5
- ADOA – State Employee Health Insurance Program ............5
- AHCCCS – Federal Deficit Reduction Act Options..............6

Other Issues
- Federal Funds .................................................................... 9

This report has been prepared for the Arizona Legislature by the Joint Legislative Budget Committee Staff on March 30, 2007. This report can also be
found on our Website at http://www.azleg.gov/jlbc.htm
Page 1

Joint Legislative Budget Committee

FEBRUARY REVENUES
Sales Tax collections were $359.6 million in February, or
8.8% above last year. The table below displays the February
and year-to-date growth rates for the major categories.

Monthly Fiscal Highlights – March 2007

Corporate Income Tax collections were $21.1 million in
February, or $18.7 million above last year. The increase was
due to a large reduction in refunds, the result of a substantial
amount of non-recurring refund activity that occurred in
February 2006. For the month, corporate income tax revenues
were $14.7 million above the January JLBC Baseline forecast.

Table 1

Sales Tax Growth Rates
February
Year-to-Date
Retail
6.0%
4.3%
Contracting
12.2%
16.1%
Utilities
27.4%
12.2%
Use
(11.6)%
2.3%
Restaurant & Bar
9.8%
9.5%
Following two months of below average growth, sales tax
revenues rebounded to perform at a more healthy level in
February. Of the largest sectors, retail collections grew 6%
compared to only 1.0% last month. Contracting collections
continued to grow at a double digit pace. In addition, utilities
collections grew substantially from last year. Use tax
collections, however, actually declined. For the month,
revenues were $(0.7) million below the January JLBC
Baseline forecast.
Individual Income Tax collections were $83.5 million in
February, or (20.4)% below last year. Table 2 displays the
February and year-to-date growth rates for the individual
income tax categories.
Table 2

Individual Income Tax Growth Rates
February
Year-to-Date
Withholding
8.6%
9.0%
Estimated + Final Payments
0.2%
25.1%
Refunds
24.5%
44.7%
Withholding collections continued to grow at a healthy pace,
but these gains were again offset by a significant increase in
refunds. The high level of refunds witnessed to date in
FY 2007 is the result of the 5% individual income tax cut
enacted last year. It is difficult, however, to assess the
changes in payments and refunds in the middle of tax filing
season due to the timing of when those collections are actually
received. While total collections declined for the month,
compared with the January JLBC Baseline forecast, they were
$0.2 million higher than expected.

RECENT ECONOMIC INDICATORS
“Final” revised estimates indicated that U.S. Gross Domestic
Product (GDP) advanced at a 2.5% annual rate in 2006’s 4th
quarter. Personal consumption expenditures, exports, and
government spending were among the leading sectors
contributing to the economy’s performance. The 4th quarter’s
growth pace was a modest improvement from the 2.0%
annualized GDP increase reported for the 3rd quarter of 2006.
U.S. semiconductor billings dropped (2.5)% in January (3month moving average), mostly due to seasonal factors. Even
so, sales were (0.1)% below the level from a year ago. While
worldwide sales were growing at a 9.2% rate on a year-overyear basis, the Semiconductor Industry Association did not
indicate why domestic sales were not keeping pace.
The U.S. Index of Leading Economic Indicators slipped
(0.5)% in February, its 4th decline in the last 5 months.
Negative contributions from unemployment insurance claims,
building permits, and vendor performance were among the
factors pushing the index lower.
After climbing in February to its highest level since August
2001, the U.S. Consumer Confidence Index dipped (3.6)%
in March. The Conference Board reported that apprehension
about the short-term outlook, fueled by rising gasoline prices
and the volatile stock market, dampened consumer sentiment.
While their assessment of current conditions was mostly
unchanged, consumers’ view of the labor market in the
months ahead was growing more pessimistic.
The U.S. Consumer Price Index (CPI) (3-month moving
average) increased 0.3% in February, while the year-over-year
increase edged up to 2.3%. Although energy prices climbed at
a 14.9% annual rate during the last 3 months, they were down
(1.0)% from a year ago. Excluding food and fuel costs, the
core CPI increased 2.7% from a year ago.

Table 3
General Fund Revenues
Compared to Enacted and Revised Forecasts and FY 2006 Collections
($ in Millions)
FY 2007
Difference From
Difference From
Difference
Collections
June 2006 Forecast 1/
Jan 2007 Forecast 2/
From FY 2006
February
$ 452.5
$ 45.2
$ 19.6
$ 22.4
Year-to Date
$ 6,010.9
$ 149.5
$ 12.1
$ 466.1
____________
1/ Originally enacted FY 2007 budget (June 2006)
2/ JLBC January Baseline Budget

Page 2

Joint Legislative Budget Committee

Monthly Fiscal Highlights – March 2007

Revised statistics for 2006 showed that Arizona’s non-farm
employment expanded at a 5.4% annual average growth rate
in 2006, which matched the revised 5.4% growth rate posted
in 2005. Construction employment soared by 11.9% last year,
while manufacturing’s previously reported decline was revised
upward to reflect a modest 2.7% increase.
The state’s job market rebounded in February from January’s
losses, most of which were due to seasonal factors. More than
90% of the 37,900 jobs added in February were in serviceproviding sectors, with the hospitality industry among the
leading categories. Overall, non-farm employment was 4.3%
above its level from a year ago. January’s statewide
unemployment rate fell to 3.9%, which was well below the
4.5% U.S. average.
After dropping sharply in January, the construction industry
added 1,900 jobs in February. With the housing boom
winding down in recent months, construction employment
(which accounts for more than 9% of the state’s jobs) will be a
key indicator to watch in the months ahead.

Strong job growth in 2006 was reflected in the latest state
personal income estimates. Arizona personal income totaled
$198.1 billion (seasonally adjusted annual rate) in 2006’s 4th
quarter, an 8.0% increase from a year ago. The state’s income
growth averaged 8.5% in 2006 and ranked 5th among the
states. Arizona’s per capita personal income, which ranked
39th in the nation, was estimated to be $31,458 in 2006, a 4.8%
gain over 2005.
The number of single-family residential building permits (3month moving average) issued in Arizona increased 5.7% in
January but remained (43.7)% below the level from a year
ago. Multi-family permits decreased (26.4)% from the
previous month and fell (59.0)% on a year-over-year basis. In
2006, the total number of residential building permits issued in
Arizona fell by (27.6)%, which followed increases of 20.9%
and 0.2% in 2004 and 2005, respectively. Last year’s decline
in housing permits was the first reported since 2001.
The Realty Studies group at Arizona State University reported
that the Greater Phoenix single-family median resale home

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)

Time Period

Current Value

Change From
Prior Period

Change From
Prior Year

February
February
Dec-Feb
Dec-Feb

3.9%
2.72 million
$81.9 million
$180.1 million

(0.3)%
1.4%
(1.3)%
13.3%

(0.3)%
4.3%
10.7%
4.0%

Nov-Jan
Nov-Jan

3,138
353

5.7%
(26.4)%

(43.7)%
(59.0)%

February
February

4,280
1,050

(5.3)%
23.5%

(21.5)%
(16.7)%

February
February
December
February
December

$260,000
$175,000
107.5
3.28 million
$8.61

0.0%
0.0%
2.1%
(2.9)%
(4.9)%

(1.9)%
0.0%
2.1%
4.2%
(6.8)%

(0.7)%
12.9%

(1.3)%
(1.9)%

December
February

118.9
60.3

1st Quarter 2007
1st Quarter 2007
4th Quarter 2006
July 1, 2006
March
January
Dec-Feb

106.3
51.9
$198.1 billion
6.17 million
1,028,568
81,334
35,860

4th Quarter 2006

$11.5 trillion

2.5%

3.1%

March
February
Nov-Jan
Dec-Feb

107.2
137.3
$3.71 billion
202.6

(3.6)%
(0.5)%
(2.5)%
0.3%

(0.3)%
(0.4)%
(0.1)%
2.3%

0.9%
7.9%
1.4%
3.6%
0.4%
(3.4)%
40 inmates

(3.7)%
(13.4)%
8.0%
3.6%
(1.0)%
(11.6)%
2,299 inmates

Page 3

Joint Legislative Budget Committee

Monthly Fiscal Highlights – March 2007

price remained unchanged in February at $260,000, which
was (1.9)% below the median price for February 2006. The
number of single-family homes sold declined (5.3)% from the
prior month and by (21.5)% from a year ago.
The townhouse-condominium median price also was
unchanged at $175,000 in February, matching January’s
median price as well as the price reported for February 2006.
The number of units sold increased 23.5% from January to
1,050 in February, which the Realty Studies group attributed
to seasonal factors. February’s total was (16.7)% fewer than
the number sold in February 2006.
The Arizona Business Conditions Index (BCI) jumped
12.9% to 60.3 in February, well above the mark of 50
associated with an expanding economy. The improvement
was led by surges in new orders and in production, which
rebounded from a 2-year low. Overall, the BCI remained
(1.9)% lower than its level from a year ago.
Business confidence appears to be rising in the state. The
University of Arizona’s Business Leaders Confidence Index
(BLCI) moved up 2.1% to 53.0, based on the survey results
for 2007’s 2nd quarter. The sales expectations, state outlook,
hiring expectations, and capital expenditures components all
increased from the 1st quarter.
The national outlook
component was the only one to fall short of 50, the dividing
line between improving and deteriorating economic
conditions. The survey report indicated that the BLCI is
currently consistent with a regional economy that is growing
near its long-term average.
The Department of Corrections’ inmate population
increased by an average of 40 inmates per month from
December through February, significantly less than the
average increase of 188 inmates during the last 12 months.
The total population increased by 2,299 inmates from a year
ago.
The number of TANF recipients decreased (3.4)% to 81,334
in January and was (11.6)% below the level from last year.
The AHCCCS caseload increased 0.4% in March from the
prior month but was (1.0)% below the level from a year ago.
FINANCE ADVISORY COMMITTEE MEETING
th

At its March 8 meeting, the Finance Advisory Committee
(FAC) heard presentations on General Fund revenue
collections, the U.S. economy, and the implications of the
housing market on Arizona’s economy. The FAC is a 15member 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 guarded outlook for the economy.
Consumer expenditures and housing market activity have
slowed from the exceptional levels recorded in the preceding 2
years; however, the declines have not yet appeared to reduce
job and personal income growth. Opinions differed over the
future course of Arizona’s construction sector, which accounts
for 20% of overall employment when growth related home
furnishings, real estate, and financial activities are included.
Some members believed the current decline in residential
housing activity would be offset by increased commercial and
public works construction, and that population growth would
mitigate any long-term housing slow down.
Research
presented by Arizona Public Service showed that singlefamily housing vacancy rates were low and customer growth
and meter installments continued to be strong, prompting
expectations of any housing slowdown to be modest.
Other members thought the reduction in permitting and
construction-related employment would result in a prolonged
slump with negative impacts on job growth, income, and
household consumption. Residential permits have declined
for 17 months through December 2006. During past Arizona
housing slumps, negative impacts on construction employment
occurred after 24-28 months of permitting declines. Arizona
construction employment stands at an all-time high of 9.5% of
total employment. Past housing downturns caused the
proportion to drop to 6% or less.
Members’ overall economic outlook varied, with forecasts
ranging from slow growth to modest economic growth.
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. For FY 2008, the FAC projected that revenues
associated with these categories would increase 4.8%. This
forecast was more conservative than the prior Committee
meeting (December 2006). At that meeting, the FAC
forecasted revenue growth of 5.0% 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 8.3% in FY 2007 and 4.3% in FY 2008
(see Table 5).

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
7.8%
7.7%
13.1%
8.3%

FY 2008
3.8%
5.2%
2.9%
4.3%

FY 2009
4.5%
5.9%
(1.4)%
4.5%

FY 2010
6.3%
7.4%
1.2%
6.2%
Page 4

Joint Legislative Budget Committee

JLBC MEETING
At its March 29, 2007 meeting, the Joint Legislative Budget
Committee considered the following issues:
AHCCCS – Review of Medicaid Eligibility Privatization
Request for Proposal – The Committee gave an unfavorable
review to the proposal by AHCCCS to issue a Request for
Information (RFI) to privatize eligibility for Traditional and
Proposition 204 populations.
Laws 2006, Chapter 331 required AHCCCS to issue a Request
for Proposal (RFP), rather than an RFI, by March 31, 2007 to
privatize its eligibility functions. Whereas the purpose of an
RFP would be to solicit actual bids from vendors to perform
eligibility services, the purpose of the RFI is strictly to gather
additional information. Due to the complexity of the
eligibility process, AHCCCS chose to issue an RFI at this
time, rather than proceed with an RFP.
Attorney General – Review of Allocation of Settlement
Monies – The Committee gave a favorable review of the
Attorney General’s allocation plan for the Bayer Corporation
consent judgment. The Bayer Corporation settlement stems
from an investigation that revealed that the company did not
adequately disclose serious risks associated with the
cholesterol lowering drug Baycol. Arizona’s Consumer Fraud
Revolving Fund will receive $200,000 from this settlement.
Arizona Pioneers’ Home – Consider Approval of Requested
Transfer of Appropriations – The Committee approved a
transfer of up to $325,800 to Employee Related Expenses
(ERE) from the Personal Services line and the Prescription
Drug Special Line Item (SLI). The Personal Services line and
Prescription Drug SLI appear to have sufficient surpluses to
cover a shortfall in employee health insurance expenses.
Department of Public Safety – Review of Expenditure Plan
for the Gang and Immigration Intelligence Team Enforcement
Mission – The Committee gave a favorable review to the
proposal to expend $1.1 million to hire 11 additional officers
for the Gang and Immigration Intelligence Team Enforcement
Mission (GIITEM). The Committee has previously given a
favorable review of the use of $5.9 million to fill 37 GIITEM
positions.
Department of Public Safety – Quarterly Review of the
Arizona Public Safety Communications Advisory Commission
– The Committee gave a favorable review of the request from
the Department of Public Safety for expenditures related to the
Public Safety Communication Advisory Committee (PSCC).
The Arizona PSCC was established to develop a statewide
system that allows public safety personnel from one agency to
communicate with personnel from other agencies.
Expenditures in the second quarter of FY 2007 were $177,700
and targeted both short-term and long-term interoperability
solutions.

Monthly Fiscal Highlights – March 2007

Department of Transportation – Review of Third Party
Progress Report – The Committee gave a favorable review of
the third party progress report presented by the Arizona
Department of Transportation (ADOT). ADOT has reduced
the backlog of third party title transactions from 31 business
days in FY 2006 to 21 business days in FY 2007. In addition,
ADOT has removed the moratoriums on new title transaction
and new vehicle identification third parties.
Arizona State University – Review of Requested Transfer of
Appropriations – The Committee gave a favorable review to
the request to transfer $11.1 million from the ASU operating
budget to the Downtown Phoenix Campus (DPC) Special Line
Item in FY 2007. Of this amount, $9.3 million represents
existing costs associated with the DPC that were not initially
captured in the FY 2007 DPC Special Line Item appropriation.
The remaining $1.8 million transfer request represents
additional funding to enhance the budgets of DPC academic
units.
SUMMARY OF RECENT AGENCY REPORTS
Arizona Department of Administration/State Treasurer –
Report on General Fund Balance Reconciliation – Pursuant to
A.R.S. § 41-172 and A.R.S. § 35-131, the State Treasurer and
the Arizona Department of Administration (ADOA) are
required to annually report any differences between the
General Fund balance invested with the State Treasurer and
the General Fund balance estimated by ADOA. For June 30,
2006, the State Treasurer reported a modified General Fund
balance of $1,908,829,000 and ADOA reported a General
Fund balance of $1,773,058,000. By contrast, the JLBC
Baseline includes a General Fund balance of $1,053,935,000.
This amount differs from both the State Treasurer and ADOA
because they include the following items that are not
considered part of the regular General Fund balance in the
JLBC Baseline: a $651.0 million Budget Stabilization Fund
balance, a $16.8 million School Accountability Fund Balance,
and $58.4 million that is reserved for continuing
appropriations.
The difference between the $1.8 billion General Fund balance
reported by ADOA and the $1.9 General Fund balance
reported by the State Treasurer is primarily due to differences
in accounting methods. The State Treasurer uses the “Cash
Method” of accounting.
This method only recognizes
revenues and expenditures when cash is received or paid.
While ADOA uses cash accounting for most items, it employs
the “Accrual Method” of accounting for certain transactions.
This method of accounting recognizes revenues only when
they are earned, and expenditures are recognized when they
occur, not when they are paid. The ADOA balance is $134.3
million lower than the State Treasurer due to expenses the
state has incurred but not yet paid, and $1.7 million lower due
to revenue the state has received but not yet earned.
Arizona Department of Administration – Report on SemiAnnual State Employee Health Insurance – Pursuant to A.R.S.
§ 38-658, the Arizona Department of Administration (ADOA)
Page 5

Joint Legislative Budget Committee

is submitting their required semi-annual report of the health
insurance program. Statute requires ADOA to report on
performance standards for the program as well as customer
satisfaction. ADOA has indicated that customer satisfaction
will be addressed in the next report, as the annual survey
results are not yet ready. Performance standards are measured
by the agency against negotiated goals for each of the vendors.
Failure to meet goals by the vendor results in specific
penalties. In Plan Year (PY) 2006, nearly $500,000 in
penalties was assessed to vendors, with the largest amounts
coming from Harrington ($286,400) and Schaller Anderson
($172,000). The largest source of penalties dealt with client
satisfaction and response time performance measures.
AHCCCS – Report on Deficit Reduction Act – The Federal
Deficit Reduction Act (DRA) of 2005 granted states the ability
to require Medicaid recipients to participate in cost sharing for
services that were previously prohibited by federal law. A
footnote in the General Appropriation Act required AHCCCS
to report on the following issues:
1) The fiscal impact associated with enacting the maximum
amount of cost sharing allowable by the DRA. Cost sharing in
any form is limited to 5% of family income applied to certain
households with incomes above 100% of the Federal Poverty
Level (FPL).
AHCCCS reported different operational costs and revenues
associated with the implementation of premiums vs. copayments. AHCCCS estimates one-time start-up costs for
premiums at $5.1 million General Fund with ongoing net
revenues of $0.9 million General Fund. AHCCCS estimates
one-time start-up costs for co-payments at $0.5 million
General Fund with ongoing net revenues of $1.6 million
General Fund. As AHCCCS did not estimate staff costs for
co-payments, net revenues would be lower to the extent that
new staff is added. AHCCCS’ one-time start up costs involve
computer enhancements to expand their premium and copayment systems.
Subsequent to the report, AHCCCS has indicated that it is
unclear whether or not cost-sharing under the DRA would
apply to the Transitional Medical Assistance population. As a
result, these fiscal impact estimates may be revised.
2) The fiscal impact of cost sharing for non-preferred
prescription drugs and non-emergency care provided in a
hospital. AHCCCS estimates state revenues of $375,000 from
prescription co-payments. These estimates are included in the
figures above. AHCCCS was unable to determine specific
state revenues associated with non-emergency care provided
in a hospital. The specified allowable co-pay would range
from $3 to $6 per visit based on income and type of eligibility.
3) The fiscal impact of using an existing health plan as a
Medicaid substitute health plan. AHCCCS used the state
employee benefit plan as the alternative benefit package for
pricing the potential fiscal impact. AHCCCS contracted with
an actuary to determine the actuarial value of the AHCCCS
plan to the state employee benefit plan. On a per-member/per-

Monthly Fiscal Highlights – March 2007

month basis, the AHCCCS benefit plan is between $0.01 and
$0.12 more expensive than the state employee benefit
package. This analysis did not account for the federal
requirement that the state provide certain benefits for children
under the age of 19. Some benefits not covered under the state
plan (prescription lenses for children for example) would still
need to be provided if the state plan were implemented. Other
services covered under the state plan (chiropractic and speech
therapy for example) are already provided to children under
the age of 19 in the AHCCCS program.
AHCCCS reports that using the state employee benefit plan
for behavioral health services would result in per member per
month savings of $6.46, excluding the costs associated with
required EPSDT services for children. AHCCCS states that
the results of Arnold v. Sarn and J.K. v. Eden may limit
transfers to the state employee benefit plan.
AHCCCS – Report on Preliminary Actuarial Estimates of the
Capitation Rate Increases for the Following Fiscal Year –
Pursuant to a General Appropriation Act footnote, AHCCCS
has submitted preliminary actuarial estimates of the capitation
rate increases for the upcoming fiscal year.
Based on a review of historical encounter cost and utilization
trend data, capitation rates are estimated to grow
approximately 5%-7% for the Acute Care Program and 4.5%7% in the ALTCS Program beginning October 1, 2007. The
FY 2008 JLBC Baseline assumed capitation rate growth of
6.0% for the Acute Care Program and 6.0% in the ALTCS
Program.
The growth rates are based on the assumption that the
programs will not change prior to the October 1, 2007 date
when the new contract begins. Any programmatic changes or
expansions most likely would have an impact on the capitation
rate growth. Additionally, AHCCCS estimates that the voterinitiated minimum wage increase will impact the ALTCS
capitation rates, but believes this impact should be
accommodated by the rate increase range noted above.
Department of Economic Security – Semi-Annual Report on
CPS Financial and Program Accountability – Pursuant to
A.R.S. § 8-818, DES has submitted its semi-annual financial
and program accountability report. The report includes 7
measures specifically identified in the Special Session
legislation as well as 12 other measures requested by the
JLBC. According to the report, out-of-home placements
continue to decline, especially in congregate care settings.
Caseloads are above the department’s goals and turnover
increased over the previous report. Employee satisfaction is
stable at a 3.6 rating out of 5.0. The highlights of this report,
covering the first 6 months of FY 2007, are summarized
below.
•

The Child Protective Services (CPS) Training Academy
enrolled 195 new case managers and graduated 207, while
174 remain in the 22-week program. These numbers are
similar to those from 6 months ago.

Page 6

Joint Legislative Budget Committee

•

•

•
•

•

•

As of December 2006, the number of filled positions was
782 of 805 authorized and funded positions, excluding
those in training. This figure is 60 higher than last June.
Considering only filled positions, caseloads per worker
are considerably higher than caseload goals, with
investigations at 15 (goal: 10), in-home at 27.3 (goal: 19),
and out-of-home at 23.1 (goal: 16). These caseload
numbers, however, are slightly better than those in the
previous 6 months.
DES reports that annualized case manager turnover
during the first 6 months of FY 2007 was 29%, with 146
case managers leaving the Division of Children, Youth
and Families (DCYF). The turnover rate varies by
district, from a high of 46.2% in District 4 to a low of
23.9% in the CPS Hotline. For the previous 6-month
period, annualized turnover was at 21.4%, losing 102
employees. The report also shows that 176 new case
managers were hired over the same time period.
Employee satisfaction remains steady at an average rating
of 4.0 on a scale of 5 for training in the CPS Academy
and 3.6 for overall employee satisfaction.
The percent of CPS dependency cases denied or
dismissed in the last 6 months remained at the same level
(0.1%) as the previous 6 months, while the percent of
Office of Administrative Hearings decisions affirming
CPS case findings increased from 82.6% to 91.8%. The
percent of complaints validated by the Ombudsman also
increased from 3.0% to 3.3% (40 of 1,197 complaints).
The number of children in out-of-home family placements
fell from 7,462 in June to 7,236 in December, while the
number of congregate care placements declined from
1,791 to 1,684. DES also reports that from June to
December the number of children aged 0-3 in shelter care
decreased from 44 to 36, the number of children aged 0-6
in group homes decreased from 49 to 39, and the number
of children in shelter care for more than 21 days
decreased from 801 to 737. The June numbers are revised
from the previous report and the December numbers are
labeled as preliminary.
At its September 28, 2005 meeting, the Committee asked
DES to report on the participation of faith-based
organizations in providing services. DES reports that
they are continuing to encourage the participation of faithbased organizations in recruiting resource families and in
the Family to Family Program. The department provided
no specific details in this report.

Department of Economic Security – Report on State-Funded
Food Distribution – Pursuant to a FY 2007 General
Appropriation Act footnote, the Department of Economic
Security (DES) is reporting on food distribution efforts funded
through the Coordinated Hunger Special Line Item. For the
last 6 months of calendar year 2006, the 6 regional food banks
distributed 49.6 million pounds of food.
Additionally, the footnote required DES to include letters from
each participating regional food bank talking about its
satisfaction with the distribution process. All 6 participating

Monthly Fiscal Highlights – March 2007

food banks submitted letters indicating they were satisfied
with the distribution process.
Department of Economic Security – Report on Preliminary
Actuarial Estimates of the Long Term Care Developmental
Disabilities Capitation Rate Increases for the Following Fiscal
Year – Pursuant to a General Appropriation Act footnote, DES
has submitted preliminary actuarial estimates of the capitation
rate increases for the upcoming fiscal year for its Long Term
Care Developmental Disabilities program.
Based on a review of historical encounter cost and utilization
trend data, the Division of Developmental Disabilities
capitation rates are estimated by the Arizona Health Care Cost
Containment System to grow approximately 3.5%-6.5%
beginning July 1, 2007. The FY 2008 figures adopted by the
Joint Appropriations Subcommittees on February 19, 2007
assumed capitation rate growth of 3.0%, as recommended in
the Executive Budget. The estimated capitation rate increase
represents a range of additional funding of $800,000 to $7.4
million General Fund.
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 that report, ADE estimates that it will
experience an $8.3 million net funding surplus for FY 2007.
ADE had previously reported an estimated surplus of $10.1
million.
Arizona Department of Emergency and Military Affairs –
Report on Request to Conduct Training on the ArizonaMexico Border – Pursuant to the General Appropriation Act
(Laws 2006, Chapter 344), the Arizona Department of
Emergency and Military Affairs (DEMA) has submitted a
response to a footnote directing the department to request
permission from the U.S. Department of Defense (DOD) to
conduct training exercising along the State’s southern border.
DEMA reports that Arizona National Guard units are currently
training at the Arizona-Mexico border under Operation Jump
Start. This operation has deployed up to 6,000 members of the
National Guard along the U.S.-Mexico Border to support
efforts of the U.S. Border Patrol.
The department also responded that training locations for
guard units are selected by unit commanders and approved by
the Arizona National Guard, not by the DOD. Consequently,
DEMA did not request permission from the DOD to conduct
training along Arizona’s southern border.
Department of Health Services – Report on Arnold v. Sarn –
Pursuant to a footnote in the General Appropriation Act, the
Department of Health Services (DHS) has submitted a
quarterly report to the Committee on the department’s
progress toward settling the Arnold v. Sarn lawsuit. On
September 14, 2005, the plaintiffs filed a Motion for NonCompliance as a result of the Court Monitor’s 2005

Page 7

Joint Legislative Budget Committee

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. On December 22, 2006, the
department submitted its progress to the Court Monitor. The
progress plan is currently under review and the Motion for
Non-Compliance will be dismissed if the Court Monitor
certifies that the department has met its obligation.
On January 3, 2007, the Court Monitor’s 2006 Independent
Review was filed with the court. This report was then
discussed at a January 12, 2007 status hearing. The report
stated that while compliance has improved in some areas,
“these findings do not result in improved clinical practice or
better quality of care”. As was stated by the Auditor General
in a September 2006 performance audit, the department is also
concerned that the Court Monitor focuses too much on process
measures. Another status hearing is expected to take place in
the next 60-90 days. If scheduled progress is made, the
department is expected to have fulfilled the agreed upon exit
criteria by June 2008.
Department of Health Services/Department of Economic
Security – Report on Autism Services – Pursuant to Laws
2006, Chapter 331, DHS and the Department of Economic
Security (DES) are required to report on the $2.5 million
appropriated for autism services by March 1, 2007.
In February 2007, DHS signed a $500,000 contract with the
Southwest Autism Research and Resource Center (SARRC).
With those monies, SARRC will implement a school-based
setting toddler classroom for approximately 12-15 autistic
children, provide parent education to 24-60 parents, and
provide statewide training to 550 providers. The first provider
training took place in February with approximately 45
attendees, and the classroom is expected to open around April
2007.
DHS is still in the process of negotiating a $1.8 M contract
with the Center for Autism and Related Disorders, Inc.
(CARD) and anticipates its finalization by the end of March or
beginning of April. CARD reports that they have now secured
a location in Phoenix, hired staff, and initiated review of
potential clients. CARD will provide autism services that
utilize discrete trial and natural environment intensive
behavioral treatment for autistic children.
DES received $200,000 for (1) training and (2) supervision of
autism services. With regard to training, DES reports that 29
workers have completed their recently developed,
standardized curriculum training. Two contracted vendors are
currently providing the training with 5 other vendor
applications pending approval. With regard to supervision,
DES is processing 10 vendor applications to provide trained
supervision for the delivery of services to autism clients. DES
has indicated that as of early 2007, year-to-date spending is
$7,150. DES expects spending to accelerate with more
contracts in place.

Monthly Fiscal Highlights – March 2007

Department of Health Services – Report on Preliminary
Actuarial Estimates of the Capitation Rate Increases for the
Following Fiscal Year – Pursuant to a General Appropriation
Act footnote, DHS has submitted preliminary actuarial
estimates of the capitation rate increases for the upcoming
fiscal year. Based on a review of historical encounter cost and
utilization trend data, DHS estimates capitation rates growth
for the following categories:
Children’s Behavioral Health (CBH)
Seriously Mentally Ill (SMI)
General Mental Health/
Substance Abuse (GMH/SA)
Children’s Rehab. Services (CRS)

18.4% - 21.4%
6.6% - 9.6%
11.5% - 14.5%
9.4% - 12.4%

The FY 2008 JLBC Baseline assumed capitation rate growth
of 8.0% for the CBH, SMI and GMH/SA Programs, and 8.0%
for the CRS Program.
State Land Department – Quarterly Report on State Trust
Land Activities – The FY 2006 General Appropriation Act
(GAA) provided the State Land Department with $3.1 million
in additional monies for the planning and disposition of state
trust lands. A GAA footnote also required the department to
submit quarterly reports to the JLBC regarding State Trust
land activities. During the second quarter of FY 2007, the
State Land Department completed 3 sales auctions, selling
1,747 acres of Trust land valued at $63.2 million. The
department also completed 1 lease auction, leasing 11,978
acres which will generate $54.8 million over the 25-year term
of the lease. In addition, the department leased 591 acres of
State Trust land for right of way use valued at $14.1 million
and began or continued planning and engineering studies on
545,342 acres.
Fiscal year-to-date, the department has sold 1,804 acres of
state trust land valued at $79.1 million. For comparison,
through the first 2 quarters of FY 2006, the Land Department
had sold 1,165 acres valued at $292.7 million. FY 2006 was a
particularly strong year for sales.
Arizona State Retirement System – Report on Board
Discussion and Actions to Minimize the Contribution Rate –
A footnote in the General Appropriation Act requires that the
Arizona State Retirement System (ASRS) submit quarterly
reports to the Joint Legislative Budget Committee (JLBC) “on
the discussions and actions of the ASRS Board regarding their
efforts to minimize the retirement contribution rate.” ASRS
has submitted a report covering the first 2 quarters of FY 2007
as well as the final quarter of FY 2006. This is the first report
submitted since May 2006.
In the fall of 2007 ASRS published its current valuation
report. The report lists 3 changes that reduce the total
contribution rate contained in the current valuation by 0.95%.
These changes include 2004 legislative action changing
service purchases from normal cost to actuarial present value,
a 2005 ASRS Board rule to decrease the interest credited on
withdrawn contributions from 8% to 4%, and a restatement of

Page 8

Joint Legislative Budget Committee

the permanent benefit increase reserve, made by ASRS’
actuary in the 2004 valuation report.
In addition, 4 initiatives are expected to result in a cumulative
cost avoidance of 1.44% in future valuations. Passed in the
2006 legislative session, these initiatives include a service
purchase interest rate increase on payroll deduction
agreements from 0% to 8%, pop-up restrictions, early
retirement incentives, and rescinding the modified Deferred
Retirement Option Program (DROP).
The report also indicates that proposed design changes to the
Long-Term Disability Program would result in cost savings of
0.03% in future valuations. ASRS is pursuing this initiative as
a legislative change in the current legislative session (HB
2145). The bill is awaiting action in the Senate.
Department of Revenue – Quarterly Report on Business ReEngineering/Integrated Tax System (BRITS) – BRITS is the
new computer system being implemented by the Department
of Revenue (DOR) to integrate their separate tax systems,
improve enforcement, and increase revenues to the state.
The BRITS conversion of the individual income tax has been
delayed from September 2006 to December 2007. In addition,
the contractor estimates that implementation of the BRITS
desk audit system will be delayed 3 to 6 months beyond the
planned implementation date of February 2008. DOR expects
to have a revised completion date and estimate of additional
costs, if any, for the additional time to develop and test the
BRITS desk audit system before February 2008.
During the last quarter, $33 million was collected in BRITS
revenue. In total, DOR reports $217.4 million of total
cumulative BRITS additional revenue through December 31,
2006. Compared with the projected level $111.7 million, the
project is $105.7 million ahead of schedule. It is difficult,
however, to evaluate how much in additional revenues can be
directly attributed to BRITS, as other factors unrelated to
BRITS influence the level of collections.
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 $204.1 million in the first half of
FY 2007, which was $37.4 million above their goal of $166.7
million.
Supreme Court – Report on Arizona Lengthy Trial Fund –
Pursuant to A.R.S. § 21-222(F), the Supreme Court is required
to report annually on the amount of monies collected and
expended as well as the number of jurors receiving monies
from the Lengthy Trial Fund (LTF). The fund is intended to
reimburse jurors who lose their regular employment income
while serving as jurors. Eligibility of funding is limited to

Monthly Fiscal Highlights – March 2007

jurors serving on trials lasting in excess of 5 days. A $15
filing fee for civil complaints, answers and requests to
intervene is deposited into the LTF.
In FY 2006, LTF revenues totaled $735,800 and the total
amount reimbursed for trials completed in FY 2006 is
$223,100. Throughout FY 2006, 295 jurors serving on 73
trials were paid from the LTF.
OTHER ISSUES
Federal Funds
On February 5, 2007, the President released his budget
proposal for Federal Fiscal Year (FFY) 2008. The FFY 2007
budget increased funding for major federal grant-in-aid
programs in Arizona by $414 million, or 6.3%. The
President’s proposed budget would further increase spending
by $414 million, or 6.0%. As in recent years, Medicaid
spending is the primary reason for the higher funding.
Without the Medicaid adjustment, total federal funding would
have increased by only 3.2% in FFY 2007 and would decline
by (1.8%) in FFY 2008.
The President’s budget for FFY 2008 proposes increases for
defense and homeland security while reducing non-defense
and non-security discretionary programs. Several of these
program changes have been previously proposed by the
President, but not enacted. These include reductions or
eliminations to two major justice programs (criminal alien
assistance and justice assistance), the Community Services
Block Grant, the Clean Water State Revolving Fund, the
Commodity Supplemental Food Program and the Preventive
Health Block Grant. Under the President’s budget, total
funding for major federal grant programs in Arizona would
increase from $6.9 billion to $7.4 billion, or 6.0% from FFY
2007 to FFY 2008. (Please see attached table and program
descriptions.) The proposed $414 million increase in FFY
2008 follows another $414 million increase in FFY 2007.
The information is compiled from Federal Funds Information
for States (FFIS) data. FFIS is a joint effort of the National
Governors Association and the National Conference of State
Legislatures. They report on the largest federal grant-in-aid
programs, which reflect the overwhelming share of total
federal assistance to state governments. However, the
amounts do not include discretionary grants, competitive
grants or direct cash assistance to individuals (such as
Medicare and Social Security).
These grants reflect
appropriations rather than actual expenditures. In some cases,
state agency estimates for these grants may not match the
amounts shown in the table.
For an overview of all federal government expenditures in
Arizona, including expenditures from the grants discussed
here, please see the Consolidated Federal Funds Report found
at http://www.census.gov/prod/2005pubs/cffr-04.pdf. The
most recent data shows that total federal expenditures in

Page 9

Joint Legislative Budget Committee

Arizona, including Social Security, Medicare and military
contracts, were $42 billion in FFY 2004.
Education
Under the President’s budget, major grant programs
administered through the Department of Education would
increase overall by $3.6 million, or 0.7%, from FFY 2007 to
FFY 2008. This continues an increase of $9.8 million, or
1.8%, in Department of Education programs from FFY 2006
to FFY 2007.
• The President proposes an increase in Title I – Grants to
Local Education Agencies of $22.7 million, or 8.6% from
FFY 2007 to FFY 2008.
• As he did previously, the President proposes to greatly
reduce Vocational Education grants while increasing other
education programs. Thus, the $(13.8) million decrease
from FFY 2007 to FFY 2008 shown in the table is offset
by increases elsewhere.
Health and Human Services
Funding across all Health and Human Services programs
would increase by $433 million, or 7.9%, from FFY 2007 to
FFY 2008. These programs increased by $321 million, or
6.2%, from FFY 2006 to FFY 2007. As in previous years,
Arizona would show significant gains in Medicaid Vendor
Payments. Arizona would receive an increase of $450 million,
or 9.9%, from FFY 2007 to FFY 2008. This follows an
increase of $316 million, or 7.5%, in total Medicaid funding
from FFY 2006 to FFY 2007. If Medicaid is excluded,
funding for major federal programs in Arizona would decrease
by $(38.8) million, or (1.8)%, from FFY 2007 to FFY 2008.
Total funding excluding Medicaid increased by $66.4 million,
or 3.2%, from FFY 2006 to FFY 2007.
• The budget reduces Child Support Enforcement program
funding by $(5.6) million or (10.8%), from FFY 2007 to
FFY 2008. Most of the cut is accounted for in reduced
state administrative costs. The Deficit Reduction Act of
2005 (DRA) reduced program funding by repealing the
authority to use performance incentives as match for
federal funding, among other cost saving provisions.
• The budget eliminates the Community Services Block
Grant (CSBG), a reduction of $(5.1) million from FFY
2007 to FFY 2008. Instead of CSBG, the Administration
proposes to provide for the needs of the poor through other
federal programs specifically targeting employment,
housing, nutrition, and health care.
• The budget reduces Social Services Block Grant (SSBG)
funding by $(9.5) million, or (29.4%), from FFY 2007 to
FFY 2008.
• The President proposes no increase in funding for
Consolidated Health Centers in FFY 2008. Arizona
received an increase of $3.5 million, or 11.6% from FFY
2006 to FFY 2007 for this program.
• The President proposes no increase in funding for the State
Children's Health Insurance Program (SCHIP) in FFY
2008. Arizona’s KidsCare received an increase of $20.5
million, or 19.1% in federal funding from FFY 2006 to

Monthly Fiscal Highlights – March 2007

FFY 2007 for this program. Although this proposal does
not change funding levels, the President also proposes to
restrict the use of SCHIP monies to children in families
with incomes below 200% of the Federal Poverty Level.
Department of Justice
As in prior years, the President’s FFY 2008 budget eliminates
funding for the State Criminal Alien Assistance Program and
the Byrne Justice Assistance Grants. This would decrease
Justice Department funds by $(30.2) million from FFY 2007
to FFY 2008. The Administration proposes to combine
several criminal justice programs that are awarded to states
based on a formula into grants that awards funds
competitively.
Although the President proposed these
programs for elimination in FFY 2007, the final budget
included an increase of $4.5 million, or 17.3%, from FFY
2006 to FFY 2007.
Department of Labor
Also following the pattern of previous years, the President’s
FFY 2008 budget would merge the Department of Labor’s
Adult Training, Dislocated Workers, Employment Services,
and Youth Activities into a single grant program called Career
Advancement Accounts. Under the consolidated program,
funding would decrease by $(1.8) million, or (2.2)%, for
unemployment services from FFY 2007 to FFY 2008. These
proposals were not enacted in the FFY 2007 budget and
funding for employment programs increased by $2.7 million,
or 3.2%, from FFY 2006 to FFY 2007.
Other Programs
Base funding for the State Homeland Security Grant Program
would decrease by $(3.5) million, or (88.1%), from FFY 2007
to FFY 2008. This follows a previous decrease of $(4.7)
million, or (54.5%), from FFY 2006 to FFY 2007. Once
again, the President proposes to allocate funds to states based
on risk with each state receiving a minimum 0.25% base
allocation of the grant rather than the current 0.75% base
amount. This amount reflects Arizona’s base allocation and
does not estimate any risk based additional component.
Arizona funds from Community Development Block Grant
(CDBG) programs would decrease by $(8.5) million, or
(19.9%), from FFY 2007 to FFY 2008. Funding levels for this
program were unchanged from FFY 2006 to FFY 2007. The
Administration has proposed to reduce CDBG base funding in
order to more effectively direct funds to higher need
communities.
Funding for the Clean Water State Revolving Fund (SRF)
would decrease by $(2.7) million, or (36.6%), from FFY 2007
to FFY 2008. These funds increased by $1.3 million, or
22.2%, from FFY 2006 to FFY 2007.
Department of Transportation programs would increase by
$25.9 million, or 4.3%, from FFY 2007 to FFY 2008 under the
President’s proposal. These programs increased by $78.3
million, or 15.1%, from FFY 2006 to FFY 2007.

Page 10

Amount of Federal Grant-in-aid Money Distributed to Arizona for Major Programs
( Dollars in thousands)

Federal Agency

FY 2006

FY 2007

FY 2008

FY08 $
above FY07

FY08 %
above FY07

Department of Agriculture
Women, Infants & Children (WIC) Suppl. Feeding Program
Department of Education
Title I – Grants to Local Education Agencies
Vocational Rehabilitation – State Grants
Special Education – Basic State Grant
State Grants for Improving Teacher Quality
Vocational Education – State Grants
Department of Health and Human Services
Adoption Assistance
CDC: State and Local Capacity
Child Care and Development Block Grant
Child Care Entitlement – Mandatory and Matching
Child Support Enforcement Administration
Community Services Block Grant 1/
Consolidated Health Centers
Foster Care
Head Start
Low-Income Home Energy Assistance Program (LIHEAP)
Medicaid – Administration
Medicaid – Vendor Payments
Medicare Part D Clawback
Promoting Safe and Stable Families
Social Services Block Grant (SSBG)
State Children’s Health Insurance Program (SCHIP)
Substance Abuse and Prevention Block Grant
Temporary Assistance for Needy Families (TANF)
Department of Homeland Security
Homeland Security Formula Grants

95,434

97,220

97,834

614

0.6%

260,348
51,413
162,328
48,147
24,415

262,828
56,407
164,553
48,291
24,415

285,534
57,084
160,852
46,097
10,566

22,706
677
(3,701)
(2,194)
(13,849)

8.6%
1.2%
(2.2%)
(4.5%)
(56.7%)

37,146
15,469
49,967
56,066
48,888
5,128
30,453
94,357
102,352
15,400
101,131
4,233,713
-28,903
6,856
32,442
107,366
31,546
226,131

42,030
15,469
49,967
56,006
51,296
5,128
33,973
97,580
103,909
8,110
112,463
4,549,852
-64,422
6,856
32,442
127,858
31,546
226,131

44,767
13,104
50,263
56,006
45,739
0
33,973
99,867
102,401
6,115
115,063
4,999,803
-63,524
6,856
22,900
127,858
31,553
226,131

2,737
(2,365)
296
0
(5,557)
(5,128)
0
2,287
(1,508)
(1,995)
2,600
449,951
898
0
(9,542)
0
7
0

6.5%
(15.3%)
0.6%
0.0%
(10.8%)
(100.0%)
0.0%
2.3%
(1.5%)
(24.6%)
2.3%
9.9%
(1.4%)
0.0%
(29.4%)
0.0%
0.0%
0.0%

8,660

3,938

468

(3,470)

(88.1%)

Program Descriptions for Major Federal Grants

Department of Agriculture
Women, Infants & Children (WIC) Supplemental Feeding Program
To provide, low-income pregnant, breastfeeding and postpartum women, infants, and children to age five determined to be at nutritional risk,
at no cost, supplemental nutritious foods, nutrition education, and referrals to health care providers.
Department of Education
Title I – Grants to Local Education Agencies
To help local education agencies (LEAs) and schools improve the teaching and learning of children failing, or most at-risk of failing, to meet
challenging State academic standards.
Vocational Rehabilitation – State Grants
To assist States in operating programs of vocational rehabilitation; to provide vocational rehabilitation services for individuals with
disabilities so they may prepare for and engage in competitive employment.
Special Education – Basic State Grant
To provide grants to States to assist them in providing a free appropriate public education to all children with disabilities.
State Grants for Improving Teacher Quality
To provide grants to State Education Agencies (SEAs) on a formula basis to increase student academic achievement through strategies such
as improving teacher and principal quality and increasing the number of highly qualified teachers in the classroom and highly qualified
principals and assistant principals in schools and hold local educational agencies and schools accountable for improvements in student
academic achievement.
Vocational Education – State Grants
Basic grants assist States and outlying areas to expand and improve their programs of vocational education and provide equal access in
vocational education to special needs populations. The populations assisted by Basic Grants range from secondary students in pre-vocational
courses through adults who need retraining to adapt to changing technological and labor market conditions.
Department of Health and Human Services
Adoption Assistance
To provide Federal Financial Participation to States in adoption subsidy costs for the adoption of children with special needs and who meet
certain eligibility tests.
Centers for Disease Control and Prevention: State and Local Capacity
To ensure that state and local health departments, hospitals, and other health care entities are able to mount a collective response featuring
seamless interaction of their event-specific capabilities in areas related to bioterrorism.
Child Care and Development Block Grant (includes Entitlement – Mandatory and Matching program)
To make grants to States and Tribes to assist low- income families with child care and to: (1) Allow each State maximum flexibility in
developing child care programs and policies that best suit the needs of children and parents within State; (2) promote parental choice to
empower working parents to make their own decisions on the child care that best suits their family's needs; (3) encourage States to provide
consumer education information to help parents make informed choices about child care; (4) assist States to provide child care to parents
trying to achieve independence from public assistance; and (5) assist States in implementing the health, safety, licensing, and registration
standards established in State regulations.
Child Support Enforcement Administration
To enforce the support obligations owed by absent parents to their children, locate absent parents, establish paternity, and obtain child,
spousal and medical support.
Community Services Block Grant
To provide assistance to States and local communities, working through a network of community action agencies and other neighborhoodbased organizations, for the reduction of poverty, the revitalization of low-income communities, and the empowerment of low-income
families and individuals in rural and urban areas to become fully self-sufficient.
Consolidated Health Centers
To support the development and operation of health centers which provide preventive and primary health care services, supplemental health
and support services and environmental health services to medically underserved areas/populations.
Foster Care
To help States provide safe, appropriate, 24-hour, substitute care for children who are under the jurisdiction of the administering State agency
and need temporary placement and care outside their homes; and to provide Federal Financial Participation in costs related to the program.
Head Start
To promote school readiness by enhancing the social and cognitive development of low-income children, including children on federally
recognized reservations and children of migratory farm workers, through the provision of comprehensive health, educational, nutritional,
social and other services; and to involve parents in their children's learning and to help parents make progress toward their educational,
literacy and employment goals.

Low-Income Home Energy Assistance Program (LIHEAP)
To make Low Income Home Energy Assistance Program (LIHEAP) grants available to States and other jurisdictions to assist eligible
households to meet the costs of home energy.
Medicaid; Title XIX – Administration
Medicaid; Title XIX – Vendor Payments
To provide financial assistance to States for payments of medical assistance on behalf of cash assistance recipients, children, pregnant
women, and the aged who meet income and resource requirements, and other categorically-eligible groups. Financial assistance is provided
to States to pay for Medicare premiums, copayments and deductibles of qualified Medicare beneficiaries meeting certain income
requirements. More limited financial assistance is available for certain Medicare beneficiaries with higher incomes.
Medicare; Part D – Clawback
To share program costs for Medicare Part D prescription drug coverage between states and the federal government. The required state
payment has become known as the “clawback.”
Promoting Safe and Stable Families
To fund community-based family support services that promote the safety and well-being of children and families by enhancing family
functioning and child development; to fund family preservation services that serve families at risk or in crisis, including the following
services: reunification and adoption services, preplacement/preventive services, follow-up services after return of a child from foster care,
respite care, services designed to improve parenting skills; and infant safe haven programs; to fund time-limited family reunification services
to facilitate the reunification of the child safety and appropriately within a timely fashion; and to fund adoption promotion and support
services designed to encourage more adoptions out of the foster care system, when adoptions promote the best interests of children.
Social Services Block Grant (SSBG)
To enable each State to furnish social services best suited to the needs of the individuals residing in the State. Federal block grant funds may
be used to provide services directed toward one of the following five goals specified in the law: (1) To prevent, reduce, or eliminate
dependency; (2) to achieve or maintain self-sufficiency; (3) to prevent neglect, abuse, or exploitation of children and adults; (4) to prevent or
reduce inappropriate institutional care; and (5) to secure admission or referral for institutional care when other forms of care are not
appropriate.
State Children’s Health Insurance Program (SCHIP)
To provide funds to States to enable them to initiate and expand child health assistance to uninsured, low-income children. Assistance should
be provided primarily by two methods: (1) Obtain health insurance coverage that meets the requirements relating to the amount, duration,
and scope of benefits; or (2) expand eligibility for children under the State's Medicaid program.
Substance Abuse and Prevention Block Grant
To provide financial assistance to States and Territories to support projects for the development and implementation of prevention, treatment
and rehabilitation activities directed to the diseases of alcohol and drug abuse.
Temporary Assistance for Needy Families (TANF)
To provide grants to States, Territories, or Tribes to assist needy families with children so that children can be cared for in their own homes;
to reduce dependency by promoting job preparation, work, and marriage; to reduce and prevent out-of-wedlock pregnancies; and to
encourage the formation and maintenance of two-parent families.
Department of Homeland Security
Homeland Security Formula Grants
SHSP: The State Homeland Security Program (SHSP) enables states to prepare for and mitigate the effects of attacks from chemical,
biological, radiological, nuclear and explosive terrorist attacks. LETPP: The Law Enforcement Terrorism Prevention Program (LETPP) may
be used for law enforcement planning, organizational activities and equipment to enable information sharing, reducing vulnerability of
potential targets, threat recognition, intervention activities and interoperable communications. The LETPP is similar in structure to the prior
Critical Infrastructure Grants.
HUD and Independent Agencies
Community Development Block Grant (CDBG) – Entitlement
To develop viable urban communities, by providing decent housing and a suitable living environment, and by expanding economic
opportunities, principally for persons of low and moderate income.
Community Development Block Grant (CDBG) – Non-entitlement
This grant has the same basic objective as the previous CDBG. However grant recipients also must demonstrate that each activity funded
meets one of the program's National Objectives by either: benefiting low and moderate income families; aiding in the prevention or
elimination of slums or blight; or meeting other community development needs having a particular urgency because existing conditions pose
a serious and immediate threat to the health or welfare of the community where other financial resources are not available.
EPA – Clean Water SRF
To create State Revolving Funds (SRFs) through a program of capitalization grants to States which will provide a long term source of State
financing for construction of wastewater treatment facilities and implementation of other water quality management activities.

EPA – Drinking Water SRF
To create State Revolving Funds (SRFs) through a program of capitalization grants to make funds available to drinking water systems to
finance infrastructure improvements. The program also emphasizes providing funds to small and disadvantaged communities and to
programs that encourage pollution prevention as a tool for ensuring safe drinking water.
Department of Justice
State Criminal Alien Assistance Program
The State Criminal Alien Assistance Program (SCAAP) provides Federal assistance to states and units of local government incurring costs of
incarcerating illegal aliens convicted of one felony or two misdemeanor offenses and to expedite the transfer of custody for certain
deportable aliens.
Justice Assistance Grants
The Byrne Justice Assistance Grant (JAG) Program is a formula grant program created from the merger of the Byrne Formula Grant and the
Local Law Enforcement Block Grant. The JAG program is intended to help State and local law enforcement control violent and drug-related
crime, as well as improve operations and coordination.
Department of Labor
Workforce Investment Act – Adult Employment and Training Activities
To provide workforce investment activities that increase the employment, retention and earnings of participants, and increase occupational
skill attainment by the participants. This program is designed to increase employment, as measured by entry into unsubsidized employment,
retention in unsubsidized employment six months after entry into employment, and wage gain.
Workforce Investment Act – Dislocated Workers
This grant has the same basic objective as the prior program with an emphasis on employing dislocated workers.
Employment Service State Grants
To place persons in employment by providing a variety of placement-related services without charge to job seekers and to employers seeking
qualified individuals to fill job openings.
Unemployment – State Administration
To administer this program of unemployment insurance for eligible workers through Federal and State cooperation; to administer payment of
trade adjustment assistance; disaster unemployment assistance; unemployment compensation for Federal employees and ex-service
members.
Workforce Investment Act – Youth Activities
To design, with States and local communities, a revitalized, workforce investment system that will help low income youth between the ages
of 14 and 21 acquire the educational and occupational skills, training and support needed to achieve academic and employment success and
successfully transition to careers.
Career Advancement Accounts
The program is proposed by the President as a consolidation of Adult Employment and Training Activities, Dislocated Worker Employment
and Training Activities, Youth Activities and Employment Services into a single grant program. Career Advancement Accounts (CAAs)
would be self-directed accounts that workers could use to purchase education and training.
Department of Transportation
Federal Aid Highways – Bridge R & R
Federal Aid Highways – Interstate Maintenance
Federal Aid Highways – National Highway System
Federal Aid Highways – Equity Bonus
Federal Aid Highways – Surface Transportation Program
To assist State transportation agencies in the planning and development of an integrated, interconnected transportation system important to
interstate commerce and travel by constructing and rehabilitating the National Highway System, including the Interstate System; and for
transportation improvements to all public roads except those functionally classified as local; to provide aid for the repair of Federal-aid roads
following disasters; to foster safe highway design; to replace or rehabilitate deficient or obsolete bridges; and to provide for other special
purposes. The Federal Lands Highway Program provides assistance to the Federal Land Management Agencies for Federally-owned roads.

State of Arizona
General Fund Revenue: Change from Previous Year and January Baseline Forecast
February 2007
Current Month

FY 2007 YTD (Eight Months)

Change From
February 2006

Actual
February 2007

Percent

Amount

Change from
Revised Forecast
Percent

Amount

February2006

Actual
February 2007

Revised Forecast

Percent

Amount

Percent

Amount

Taxes
Sales and Use

359,643,938

$29,061,478

Income - Individual

83,536,034

(21,439,630)

(20.4)

- Corporate

21,126,878

18,718,718

879,244

519,078

Property

8.8 %

($728,862)

$3,027,955,909

$231,031,932

175,281

0.2

2,414,878,761

180,377,311

8.1

11,798,897

777.3

14,700,695

228.8

549,301,157

114,117,972

26.2

12,930,724

2.4

144.1

629,244

251.7

14,262,329

522,969

3.8

Luxury

2,968,373

(2,969,291)

(50.0)

Insurance Premium

3,958,613

2,603,494

192.1

(1,988,627)
658,613

Estate

71,962

(64,432)

(47.2)

71,962

Other Taxes

49,452

6,276

14.5

(27,673)

$472,234,494

$26,435,691

Lottery

6,086,000

2,577,500

License, Fees and Permits

1,981,681

Interest

9,890,190

Sales and Services

4,143,472

502,419

13.8

Other Miscellaneous

3,900,031

1,974,622

102.6

Sub-Total Taxes

5.9 %

$13,490,633

(0.2) %

(488,040)

8.3 %

(3.3)

($18,777,451)

(0.6) %
0.5

(40.1)

45,049,270

1,251,919

2.9

(2,625,633)

(5.5)

20.0

148,251,219

9,547,345

6.9

(3,069,650)

(2.0)

-(35.9)
2.9 %

(877,996)
437,163
$6,199,257,812

(11,905,063)

--

(3,793)

(0.9)

$523,929,583

9.2 %

74,677

(7.8)

(31,357)

(6.7)

$823,176

0.0 %

Other Revenue

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

0
210,647

(354,298)
2,373,406

0
(576,926)

73.5
(15.2)
31.6

-(73.3)

2,286,000
(95,619)
2,690,190
(282,528)
2,409,631
0
(939,353)

60.2

25,002,400

(2,907,100)

(10.4)

(622,900)

(4.6)

27,274,865

6,574,827

31.8

124,159

0.5

37.4

63,586,287

28,032,315

78.8

6,174,028

10.8

(6.4)

32,591,858

(2,830,785)

(8.0)

22,609,236

6,743,392

42.5

161.7

(866,257)
4,189,097

--

0

0

--

0

(81.7)

8,040,240

(9,453,425)

(54.0)

2,257,343

(2.4)

(2.6)
22.7
-39.0

26,212,021

6,496,723

33.0 %

6,068,321

30.1 %

179,104,886

26,159,224

17.1 %

11,255,470

6.7 %

$498,446,515

$32,932,414

7.1 %

$19,558,954

4.1 %

$6,378,362,698

$550,088,807

9.4 %

$12,078,646

0.2 %

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

(45,935,888)

(10,500,144)

29.6

0

0.0

(367,487,104)

(84,001,153)

29.6

0

0.0

(45,935,888)

(10,500,144)

29.6 %

0

0.0 %

(367,487,104)

(84,001,153)

29.6 %

0

0.0 %

5.2 %

$19,558,954

4.5 %

8.4 %

$12,078,646

0.2 %

$452,510,627

$22,432,270

$6,010,875,594

$466,087,654

Table 6