JLBC - Monthly Fiscal Highlights

1716 W. Adams
Phoenix, AZ 85007
Phone:
(602) 926-5491
Fax:
(602) 926-5416

What’s Inside
July General Fund revenue collections were
$688.2 million, or 4.4% above July 2006. July
collections were $(24.5) million below the
monthly forecast based on the recently enacted
state budget. (See page 11.)
The July performance of the major categories
was mostly disappointing:

www.azleg.gov/jlbc.htm

“July collections
were $(24.5)
million below the
monthly forecast
based on the
recently enacted
state budget.”

• Sales tax collections were 0.6% above last
year. Monthly collections were $(27.2) million
short of the forecast.
• Corporate income tax collections were
(13.4)% lower than last July, and $(6.9) million
below forecast.
The main bright spot was individual income tax
collections, which were 15.1% higher than last
year. This growth resulted in revenues being
$8.7 million above forecast. This high growth,
however, may reflect the timing of withholding
receipts, which unexpectedly declined (2.9)% in
June.
As reported in the July Monthly Fiscal Highlights,
preliminary FY 2007 figures (which are subject to
revision) indicate the state ended the year
$(226) million below the forecast. While the FY
2007 budget remains balanced, the shortfall
would reduce the carry forward into FY 2008
from $529 million to $303 million. Since the
enacted FY 2008 budget assumes an ending

balance of less than $1 million, this would result
in a FY 2008 cash shortfall unless other areas of
the budget perform better than expected.
With only 1 month of new fiscal year revenues, it
remains too early to project full fiscal year 2008
results. Any FY 2008 revenue shortfall would be
added to the FY 2007 carry forward loss in determining the overall FY 2008 budget problem.
The Monthly Fiscal Highlights include a summary
of the July JLBC and JCCR meetings (pages 56). Among the items considered:
• The JLBC gave a favorable review to the
Department of Health Services’ (DHS)
contract compliance expenditure plan, with
the provision that DHS only proceed with
hiring 44 of the proposed 73 positions.
• The JLBC gave a favorable review to the
Department of Public Safety’s (DPS) spending
plan for the Gang and Immigration
Intelligence Team Enforcement Mission
(GIITEM), with the provision that DPS only
provide the Pima County Sheriff’s Office with
11 positions and $1.3 million.
• The JCCR favorably reviewed a Parks Board
plan to spend $1.5 million to study developing
a new recreation area at Lake Havasu.
The Highlights also include a summary of recent
statutory reports submitted to JLBC (pages 7-

Table of Contents
July Revenues ................................................................... 2
Recent Economic Indicators .......................................... 3

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

August 2007

JLBC Meeting Summary
• Atty. Gen. – Settlement Monies (Purdue)................. 5
• Atty. Gen. – Settlement Monies (Warner Chilcott) . 5
• DES – DD Provider Rate Increase ............................... 5
• DES – WIA Expenditure Plan........................................ 5
• GITA – Web Portal Contract ....................................... 5
• DHS – Behavioral Health Capitation Rate ................ 5
• DHS – CRS Capitation Rate......................................... 5
• DHS – Contract Compliance Expenditure Plan....... 5
• Judiciary – Reimbursement Funds ............................. 5
• DPS – GIITEM Expenditure Plan................................... 6
• ASRS – IT Expenditure Plan .......................................... 6
JCCR Meeting Summary
• ADOA – Building Renewal Allocation Plan .............. 6
• Parks Board – SLIF Projects .......................................... 6
• SFB – New School Construction Report..................... 6
• ASU – Renovation and Maintenance Projects ........ 6

Summary of Recent Agency Reports
• Corporation Commission – Corporate Filings .......... 7
• ADC – Monthly Bed Plan Update .............................. 7
• ADC – Community Accountability Pilot Program ... 7
• ADC – Public vs Private Prison Comparison ............. 7
• ADC – Transition Release Program ............................ 8
• ADE – Budget Status Report ....................................... 8
• GITA/DOR – BRITS.......................................................... 8
• DHS – AIDS Drug Assistance Program........................ 8
• DHS – Arnold v. Sarn..................................................... 8
• DJC – Restitution Fund ................................................. 9
• Mine Inspector – Reclamation Consulting Costs..... 9
• Parks Board – Park Operating Expenditures............. 9
• Parks Board – Out-of-State Travel .............................. 9
• Commission for Postsecondary Education –
Postsecondary Education Fund................................. 9
• DPS – Staffing Levels..................................................... 9
• ADOT – MVD Wait Times............................................ 10
• ABOR/UA – Phoenix Medical Campus ................... 10
• DWR – Assured and Adequate Water Supply
Program Fees .............................................................. 10

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

“Overall, sales

What’s Inside (Continued)
10). Among the reports:

tax collections
increased only
slightly above
last year. The
two largest
categories, retail
and contracting,
were both lower
than last July.”

• The Department of Corrections (ADC) provided
an update on its bed plan. Regarding
provisional beds, ADC will contract for beds at
several out-of-state facilities over the next
several months. With regard to new beds, the
Department of Administration (ADOA) projects
that in early 2008 a contract will be awarded
for 2,000 new private beds, and construction

July Revenues
Sales Tax collections were $392.9 million in July,
or 0.6% above last year. Table 1 displays the
July growth rates for the major sales tax
categories.

growth in
individual
collections was
driven by the
14.9% increase in
withholding over
July 2006.”

Table 2

Individual Income Tax Growth Rates
July
Withholding
14.9%
Estimated +
(0.3)%
Final Payments
Refunds
(3.0)%

Table 1

Sales Tax Growth Rates
July
Retail
(0.6)%
Contracting
(5.2)%
Utilities
13.5%
Use
8.0%
Restaurant & Bar
3.8%

Overall, sales tax collections increased only
slightly above last year. The two largest
categories, retail and contracting, were both
lower than last July. These decreases, however,
were offset by strong growth in utilities and the
use tax.

“The overall

will begin on 4,000 new public beds.
• The Arizona Board of Regents provided an
update on the Phoenix Medical Campus
(PMC). This fall PMC opened with its first class
of 24 students. In addition, the Arizona
Biomedical Collaborative research building
was recently completed and now houses
researchers from both the University of
Arizona and Arizona State University.

In the past two years, sales tax collections have
been robust in the month of July. Collections
increased 13.4% in July 2005 and 12.3% in July
2006. Given those increases, it was difficult to
achieve a high level of growth for a third year
in a row. The resulting lower level of growth
drove sales to end up being $(27.2) million less
than forecast for July.
Individual Income Tax collections were $268.0
million in July. This amount was 15.1% higher
than last year, and $8.7 million above forecast.
Table 2 displays the July growth rates for
individual categories.

The overall growth in individual collections was
driven by the 14.9% increase in withholding over
July 2006. Withholding can increase in any one
month for a variety of factors, so it is difficult to
draw any conclusions from the July data. June
withholding payments, for example, actually
decreased (2.9)% from last year.
In addition to the growth in withholding, July
refunds declined from last July.
Corporate Income Tax collections were $33.8
million in July, or (13.4)% below last year. This is
the third month in a row that corporate collections have declined. As a result, corporate was
$(6.9) million below forecast for the month.
Insurance Premium Tax collections were $40.9
million in July, or 26.2% above July of last year.
This amount was $3.2 million above the forecast.
The large increase in July 2007 revenues was
actually due to a low level of collections
received in July 2006. This low level of revenues
was the result of payment processing delays that
arose from the implementation of new
technology.

Table 3

General Fund Revenues
Compared to Enacted Forecast and FY 2007 Collections
($ in Millions)
FY 2008
Difference From
Difference
Collections
Forecast 1/
From FY 2007
July
$ 688.2
$ (24.5)
$ 28.8
____________
1/ Enacted FY 2008 budget (June 2007).

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

3

Recent Economic Indicators
The U.S. Index of Leading Economic Indicators
continued to trace a saw-tooth pattern with a
0.4% advance in July. The index reversed
June’s decline with its 3rd increase in the last 6
months. The components making positive
contributions were led by consumer
expectations, vendor performance, and a
decrease in new unemployment insurance
claims, while building permits and interest rates
were among the negative influences.
U.S. semiconductor billings slipped (1.0)% in
June (3-month moving average) from the prior
period and were (6.8)% below the level
reported a year ago. June’s decline was the
7th in the last 8 months. For the year to date
through June 2007, U.S. sales totaled $19.9
billion, which was (8.8)% below the level
reported for 2006’s first half. Worldwide
semiconductor sales improved 2.1% on a yearto-date basis though June. Price competition
continues to curb revenue even as unit sales
of products such as cell phones and DRAM
(dynamic random access memory) devices
are showing strong growth.
The Conference Board’s U.S. Consumer
Confidence Index declined (6.2)% in August,
reversing the improvement reported the prior
month. It is likely that the recent turmoil in
financial markets touched off by the housing
slump contributed to the decline. Consumers’
assessment of current conditions, future
business conditions, and the labor market
outlook all faded since the previous survey.
The U.S. Consumer Price Index (CPI) (3-month
moving average) climbed 0.3% in July,
continuing a trend toward slower inflation in
recent months. July’s 2.6% year-over-year
increase compared favorably to the 3.4% and
3.2% average increases posted in 2005 and
2006, respectively. Although food prices
increased 0.3% in July, energy costs fell (1.0)%.
Excluding the impact of food and fuel prices,
the core CPI increased 0.2% in July and was
2.2% higher than a year ago.
Arizona’s labor market produced mixed results
in July. Total non-farm employment dipped by
(18,800), or (0.7)%, from the prior month, mostly
due to seasonal factors. The average July job
loss during the last 10 years was (27,100), or
(1.2)%. Overall, employment expanded 2.8%
on a year-over-year basis in July. Arizona’s
unemployment rate rose to 3.7% in July but
remained well below the 4.6% U.S. average.

The construction sector usually grows in July,
but this year’s increase of 900 jobs was well
below the average gain of 1,500 jobs posted
during the last 10 years. This left statewide
construction employment (1.6)% below the
level posted in July 2006. Meanwhile,
manufacturing was flat again in July and its job
count was (1,800), or (1.0)%, below the total
reported a year ago.
The other goods-producing sector was a bright
spot. Arizona’s mining industry added 300
workers in July, which is raised its year-overyear growth rate to 16.8%. High metals prices
appear to ensure that the mining sector will
continue to expand in the months ahead.
The Realty Studies group at Arizona State
University reported a Greater Phoenix singlefamily median sales price of $265,000 in July,
which was virtually unchanged from the
$264,900 median price in July 2006. The
number of existing single-family homes sold
decreased (11.8)% in July from June and was
(21.9)% below the number sold in July 2006.
The townhouse-condominium median sales
price edged down (0.1)% in July to $181,000,
which was 1.1% above the June 2006 median
sales price. The number of units sold dropped
(12.9)% from the prior month and was also
(12.9)% less than the number sold a year ago.
The housing slump was also reflected in new
home construction. Statewide single-family
residential building permits (3-month moving
average) were down (4.8)% from the prior
period and (32.8)% on a year-over year basis.
The multi-family segment had similar results,
with month-to-month and year-to-year
declines of (7.8)% and (28.5)%, respectively.
Through the first 6 months of 2007, a total of
30,055 housing units were authorized
statewide, which was (26.3)% less than the
number authorized in 2006’s first half. The total
value of housing units permitted was $4.99
billion for the year to date through June 2007,
a (29.3)% drop from a year ago.
The Arizona Business Conditions Index (BCI)
soared 12.3% in July to 65.1, the highest level
recorded since April 2006. July’s surge was
mostly due to increased production,
continued strength in new orders, and a
significant increase in delivery times. However,

“Meanwhile,
manufacturing
was flat again in
July and its job
count was
(1,800), or (1.0)%,
below the total
reported a year
ago.”

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

Recent Economic Indicators (Continued)
it was not clear whether longer delivery times
resulted from rising demand or were caused
by other supply chain constraints.
Arizona consumers were not as sanguine
about the outlook. The Behavior Research
Center’s (BRC) Arizona Consumer Confidence
Index dipped to 101.9 in 2007’s 3rd quarter
survey, which was (4.1)% below the previous
reading reported in January 2007. The BRC
observed that consumers’ concerns about
their current situation, labor market prospects,
and future business conditions were the forces
driving the decline in confidence.

The total population grew by 2,250 inmates
from a year ago. The budget for FY 2008
anticipates inmate population growth of 1,920,
or a net increase of 160 inmates per month.
The number of TANF recipients increased 0.4%
to 78,876 in June and was (8.1)% below the
level reported in June 2006. The FY 2008
budget projects the TANF caseload will grow
by 2.5%. The AHCCCS caseload jumped 0.7%
in August and now stands 3.0% higher than the
total from August 2006. The FY 2008 budget
projects growth of 1.9% from June 2007 to
June 2008.

The Department of Corrections’ inmate
population increased by an average of 236
inmates per month from May through July.

Table 4

RECENT ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate
- Non-Farm Employment – Total
Manufacturing
Construction
- 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
- 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

July
July
July
July
May-Jul
May-Jul

3.7%
2.67 million
186,700
245,600
$80.5 million
$171.1 million

0.3%
(0.7)%
0.0%
0.4%
7.0%
3.1%

(0.4)%
2.8%
(1.0)%
(1.6)%
(2.9)%
1.2%

Apr-Jun
Apr-Jun

3,953
755

(4.8)%
(7.8)%

(32.8)%
(28.5)%

July
July

4,330
980

(11.8)%
(12.9)%

(21.9)%
(12.9)%

July
July
June
May

$265,000
$181,000
3.66 million
$8.30

0.7%
(0.1)%
0.3%
7.0%

0.0%
1.1%
1.3%
19.1%

May
July

120.8
65.1

(0.3)%
12.3%

1.7%
18.0%

3rd Quarter 2007
3rd Quarter 2007
1st Quarter 2007
July 1, 2006
August
June
May-Jul

101.9
50.5
$202.3 billion
6.17 million
1,061,629
78,876
37,038

2nd Quarter 2007

$11.5 trillion

3.4%

1.8%

August
July
Apr-Jun
May-Jul

105.0
138.1
$3.30 billion
208.2

(6.2)%
0.4%
(1.0)%
0.3%

4.8%
0.4%
(6.8)%
2.6%

(4.1)%
(1.7)%
2.1%
3.6%
0.7%
0.4%
236 inmates

(0.8)%
1.8%
6.2%
3.6%
3.0%
(8.1)%
2,250 inmates

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

5

JLBC Meeting
At its August 16, 2007 meeting, the
Joint Legislative Budget Committee
(JLBC) considered the following issues:
Attorney General – Review of
Allocation of Settlement Monies –
State v. Purdue Pharma L.P., et. al. –
The Committee gave a favorable
review to the allocation of $717,500
from the Purdue Pharma L.P. consent
judgment. All of the funds will be
deposited into the Consumer Fraud
Revolving Fund. In May 2007, the AG
and 25 other states entered into a
consent judgment with Purdue
Pharma as a result of allegations the
company encouraged doctors to
prescribe the pain drug, OxyContin,
for uses not approved by the Federal
Drug Administration (FDA).
When this item first came up for
review during the June 2007 JLBC
Meeting, the Chairman requested
that the AG provide an estimate of
the costs incurred to litigate the case.
The AG estimated these costs to be
$28,000. After subtracting these costs,
the AG would use the remaining
settlement monies to pursue other
consumer fraud cases.
Attorney General – Review of Allocation of Settlement Monies – State v.
Warner Chilcott – The Committee gave
a favorable review to the allocation of
$128,000 from the Warner-Chilcott
settlement. Of the total, $95,000 in civil
penalties will be put into the Consumer
Revolving Fund for future consumer
fraud cases. The remaining $33,000 will
be put into the Antitrust Enforcement
Revolving Fund. In June 2007, the AG
entered into a multi-state settlement
agreement with Warner-Chilcott due
to allegations that Warner-Chilcott and
Barr Pharmaceuticals made an
agreement blocking generic distribution of Ovcon, an oral contraceptive.
Department of Economic Security –
Review of Proposed Implementation
of Developmental Disabilities Provider
Rate Increase – The Committee gave
a favorable review of the DES implementation plan for distributing a
developmental disabilities provider
rate increase totaling about $7 million

General Fund and $18.6 million Total
Funds. The plan calls for the
application of a 3.2% increase over
the FY 2007 benchmark and adopted
rates for most services, which would
fulfill the statutory requirement to raise
the rates paid to services providers
contracting with the division to at least
100% of the FY 2008 benchmarks.
Department of Economic Security –
Review of FY 2008 Expenditure Plan for
Workforce Investment Act Monies –
The Committee gave a favorable
review of DES’ spending plan for $2.9
million of the discretionary portion of
federal Workforce Investment Act
(WIA) monies. Recipients include the
Department of Education, Department
of Commerce, Local Workforce
Investment Areas, and DES.
Government Information Technology
Agency – Review of Web Portal
Contract – The Committee gave a
favorable review to the new State
Web Portal operation contract with
the provision that GITA provide a list of
discretionary projects and activities to
the JLBC Staff by October 15. The
Arizona @ Your Service web portal
works with state agencies to provide
electronic delivery of government
services such as licensing, permitting,
data sharing and access to
government information. Fixed
expenses include $1.9 million in the first
year for day-to-day operations and
$380,000 for transition from the old
contract. Since the GITA submission
did not include detailed information
on the discretionary projects, the
Committee asked for more
information.
Department of Health Services –
Review of Behavioral Health Title XIX
Capitation Rate Changes – The
Committee gave a favorable review
to the department’s capitation rate
adjustments with the conditions that
administrative costs remain within the
FY 2008 budgeted levels, and any
capitation rate savings be reverted
and not transferred for program
expansions. The proposed capitation
rates are currently expected to cost
$(4.6) million less than budgeted.

Department of Health Services –
Review of Children’s Rehabilitative
Services Capitation Rate Changes –
The Committee gave a favorable
review to the DHS Children’s
Rehabilitative Services (CRS)
capitation adjustments with provisions
that administrative costs remain within
the FY 2008 budgeted levels, and any
capitation rate savings be reverted
and not transferred for program
expansions. The proposed capitation
rates are currently expected to cost
$(338,000) less than budgeted.
Department of Health Services –
Review of the Contract Compliance
Special Line Item Expenditure Plan –
The Committee gave a favorable
review of the DHS $7.3 million expenditure plan of Contract Compliance
with the provisions that the favorable
review does not constitute an endorsement of General Fund support to
expand the program in the future, and
DHS proceed with hiring no more than
44 of the proposed 73 positions. The FY
2008 General Appropriation Act
included only the 44 positions. A
review of the remaining 29 positions will
occur after DHS submits additional
information. The Committee
requested that DHS report back by
September 13, 2007 with an
explanation of how the particular
staffing levels were derived, more
specific information on how the $1
million for indirect costs would be used,
and the performance measures
selected to assess the effectiveness of
additional staff. The purpose of the
funding is to improve contract
monitoring and compliance among
the Regional Behavioral Health
Authorities and to ensure DHS is
meeting its obligations in the Arnold v.
Sarn and JK v. Gerald lawsuits.
Administrative Office of the Courts –
Review of Reimbursement of Appropriated Funds – The Committee gave
a favorable review to the use of $3.8
million in projected reimbursements.
The reimbursements are monies received by AOC for services provided
to local courts and their personnel.

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

JLBC Meeting (Continued)
Department of Public Safety – Review
of the Expenditure Plan for the Gang
and Immigration Intelligence Team
Enforcement Mission – The Committee
gave a favorable review to the DPS
expenditure plan for the Gang and
Immigration Intelligence Team
Enforcement Mission (GIITEM), with the
provision that DPS reduce the Pima
County Sheriff’s Office (PCSO) initiative
to 11 positions and $1.3 million. The
favorable review included $5.9 million
for GIITEM local enforcement grants to
be distributed to PCSO, “Border
District” Sheriff’s Offices and Police
Departments, Southern Arizona prisons

for detention liaison and prison
officers, and the Arizona Fraudulent
Identification Task Force. The
favorable review also includes $3.6
million for 23 DPS GIITEM officers.
The Committee requested that DPS
report back on the establishment of
performance measures for PCSO as
part of its quarterly GIITEM report due
October 30, 2007. In addition, the
Committee requested that if the 11
PCSO positions are filled and if
established performance objectives
are met by January 1, 2008, DPS
notify the committee.

Arizona State Retirement System –
Review of FY 2008 Information
Technology Expenditure Plan – The
Committee gave a favorable review
of the $2.8 million FY 2008 IT
Expenditure for expenses associated
with upgrades to the IT system.
Implementation began in FY 2002
and is planned to reach completion
in FY 2008. The Committee also
requested that ASRS continue to
provide semi-annual progress reports
on the project status, with the next
report due by December 31, 2007.

JCCR Meeting
At its August 16, 2007 meeting, the
Joint Committee on Capital Review
(JCCR) considered the following
issues:

Contact Point. The review included a
provision that the Parks Board submit
the Request for Proposals (RFP) before
its release.

Arizona Department of Administration
– Review of FY 2008 Building Renewal
Allocation Plan – The Committee
gave a favorable review to the
Arizona Department of Administration
(ADOA) FY 2008 Building Renewal
Allocation Plan, with the provision
that ADOA allocate funds to address
health and safety issues at the 1616
W. Adams building. The $7.3 million
Building Renewal Allocation Plan
addresses roofing projects totaling
$2.0 million at 7 sites, 5 HVAC projects
totaling $321,000, 4 water and sewer
projects for $437,000, and 9
infrastructure projects for $3.2 million.
The plan also includes $1.3 million for
construction insurance, project
management, and contingencies.

The Parks Board would like to develop
Contact Point to relieve congestion at
the current Lake Havasu State Park.
The total estimated cost of the project
is $19 million. The Committee
expressed interest in: 1) whether the
Parks Board had considered having a
private entity construct and operate
the proposed marina; 2) how an
additional park on Lake Havasu would
affect boat densities; and 3) if the
current level of law enforcement on
the lake would be sufficient to address
additional boaters. The Committee
requested to see the draft RFP to
determine if it addressed the
concerns discussed above. In
addition, the Committee requested
information on how much revenue is
generated by boating at Lake Havasu
State Park, how much additional
revenue the Contact Point project is
expected to generate, and the effect
of this funding on other State Parks
projects.

Arizona State Parks Board – Review of
State Lake Improvement Fund
Projects – The Committee gave a
favorable review to the proposal for
$952,100 from the State Lake
Improvement Fund (SLIF) for upgrades
to existing facilities at Lake Havasu
State Park. The Committee also gave
a favorable review to the plan for a
$1.5 million study concerning the
development of a new recreation
area at Lake Havasu to be called

School Facilities Board – Review of FY
2008 New School Construction Report
– The Committee gave a favorable
review of the School Facilities Board’s
(SFB) new construction report for FY
2008. SFB estimates statewide

student growth at 3% in FY 2008, with
districts in growing areas of the state
experiencing increases of up to 20%.
To accommodate this growth in
enrollment, 85 new construction
projects are scheduled to be
underway in FY 2008, costing an
estimated $449 million. This includes
$35 million for land acquisition, $376
million for construction projects and
$38 million for expenditures that were
shifted from FY 2007.
The SFB currently projects a FY 2008
funding shortfall of $(73) million. This
shortfall was first reported in the June
edition of the Monthly Fiscal
Highlights. At that time, SFB was
estimating an $(80) million shortfall.
Arizona State University – Review of
Revised Scope of Academic
Renovations and Deferred
Maintenance Phase IIB Bond Projects
– The Committee gave a favorable
review to the scope revision for the
Nursing Backfill Renovations. The cost
for the Nursing Backfill Renovation
project will increase from $5.0 million
to $8.0 million, with the additional
$3.0 million funded with unallocated
funds from the Phase IIB bond
issuance, leaving the total cost of the
Academic Renovations and Deferred
Maintenance Phase IIB projects
unchanged.

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

7

Summary of Recent Agency Reports
Corporation Commission – Report on
Corporations Division Filings – Pursuant
to a footnote in the General
Appropriation Act, the Corporation
Commission submitted a quarterly
report on the status of reducing
processing delays in its Corporations
Division.
For expedited filings, the amount of
time required to process the filings fell
from an average of 42 business days
on March 25, 2005 to 3.8 business
days for the quarter ending June 30,
2007. By comparison, at the end of
the third quarter of FY 2007, the
turnaround time was 4.6 business
days. The commission’s goal for
processing expedited filings is 5
business days or less.
For regular filings, the amount of time
required to process the filings fell from
an average of 103 business days on
March 25, 2005 to 23 business days for
the quarter ending June 30, 2007. By
comparison, at the end of the third
quarter of FY 2007, the turnaround
time was 28 business days. The
commission’s goal for processing
regular filings is 30 business days or
less.
Arizona Department of Corrections –
Report on Monthly Bed Plan Update –
The Arizona Department of
Corrections (ADC) has been
providing monthly reports to JLBC
Staff updating the status of several
topics related to their bed plan. The
highlights include the following:
Provisional Beds
• Effective July 1, ADC gained access
to 720 minimum and medium
security level beds at the
Diamondback Facility in Watonga,
Oklahoma. Including the 1,440 beds
ADC previously contracted for, the
department now has access to a
total of 2,160 beds at this facility.
The department received sufficient
funding in the FY 2008 budget to
occupy all beds by August 13,
however, ADC now plans to occupy
all beds by mid-September.
• The transfer of inmates to the
Indiana New Castle Facility ceased
on April 24 due to security concerns
and a disturbance at the facility.
The department reports that the

security upgrades have been
completed and operations have
returned to normal. ADC plans to
restore the population to 630
inmates in the immediate future
and is prepared to resume
transferring the remaining 630
inmates. ADC received funding in
the FY 2008 budget to utilize all
1,260 beds at this facility for the
entire fiscal year.
• ADC has awarded a contract to a
private vendor for 1,340 minimum
and medium security beds at a
facility in Hinton, Oklahoma. The
department reports they will have
access to 916 medium custody beds
beginning in September and up to
an additional 1,084 beds beginning
in May. The FY 2008 budget
provided funding to the department
to fill 916 beds (at 105 beds per
week) beginning September 3 and
an additional 424 beds (not 1,084)
beginning in May 2008.
New In-State Construction
• The FY 2008 budget authorizes 2,000
new private prison beds. The
Arizona Department of Administration (ADOA) plans to award the
new contract by February 2008.
• The budget also authorized 4,000
new public beds. ADOA plans to
select a builder by late 2007 with
construction beginning early in
2008.
Private Beds
• The department received $3.7
million to fund a 4.6% increase for
in-state private prison contractors
and $1.1 million for an additional
4.5% increase for beds at the
Central Arizona Correctional Facility
(CACF). Due to a delayed opening,
the CACF did not receive a 4.5% per
diem increase provided to all
private prison facilities in operation
on July 1, 2006. As a result, the
additional monies provided to
CACF in FY 2008 bring the facilities
funding in line with the increase
provided to private prisons in FY
2007. The department reports the
$3.7 million has been allocated to
increase the per diem payments to
four in-state private providers.
Details relating to the additional
allocation of $1.1 million to the
CACF were not provided.

Arizona Department of Corrections –
Report on Community Accountability
Pilot Program – A.R.S. § 41-1609.05
required the Arizona Department of
Corrections (ADC) to establish a
Community Accountability Pilot
Program (CAPP). Statute authorizes
the department to contract with a
private or non-profit entity to provide
supervision and treatment services for
eligible offenders who have violated
the terms and conditions of
community supervision. The pilot
program is scheduled to end July 1,
2012.
The department awarded the CAPP
contract to a private vendor and the
program began on April 13, 2006.
Since the program’s inception, a total
of 157 eligible offenders have been
referred to the program and have
completed 3,593.1 hours of
programming and counseling services.
Of those referred to CAPP:
• 31 offenders, or 19.7%, have
successfully graduated;
• 106 offenders, or 67.5%, were
terminated due to committing new
crimes, failed urinalysis tests,
absconding, or failure to report to
parole officers; and
• 20 offenders remain enrolled in the
program.
Arizona Department of Corrections –
Report on FY 2005 Operating Per
Capita Cost Report and Public versus
Private Prison Cost Comparison –
Pursuant to A.R.S. § 41-1609.01, the
Arizona Department of Corrections
(ADC) is required to submit a biennial
public versus private cost and services
comparison. Further, the FY 2007
General Appropriation Act requires
ADC to provide the operating per
capita cost report for FY 2005. ADC
had previously indicated it contracted
with a private entity to complete the
reports. ADC indicated that they
would be submitting technical manuals
for both FY 2005 reports. The technical
manuals would provide details on the
methodology, assumptions,
procedures, time lines, and sources of
data. ADC anticipated these manuals
would be published in September.

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

Summary of Recent Agency Reports
The FY 2005 Operating Per Capita
Cost Report provides the total
operating costs, per day average
costs, and total daily per capita costs
incurred by the department to
incarcerate inmates at all prison
facilities. Based on the report, costs
vary by prison type, prison complex,
prison unit, custody level, and inmate
gender. The department reports the
overall operating cost per inmate to
be $58.21 per day.
The FY 2005 Public versus Private
Prison Cost Comparison is intended to
provide a cost comparison of the
services provided by private vendors
the department has contracted with
and the cost of equivalent services
provided by the state. In FY 2005,
contracts with private vendors were
entirely for Level 2 male inmates. As
a result, the report utilizes the per
capita cost of level 2 male inmates
identified in the Operating Per Capita
Cost Report and adjusts for
equipment and building depreciation, state central services, Work
Incentive Pay Plan, discharge costs,
transportation, and grants. Based on
the report, the per capita cost at
state operated facilities is $49.28 per
day, as compared to $53.06 for
private providers.
Arizona Department of Corrections –
Report on Transition Release Program
– Pursuant to A.R.S. § 31-285B, the
Arizona Department of Corrections
(ADC) is required to submit a
quarterly report that details the cost
reductions to the department from
an inmate early release Transition
Program and the number of
participants who did not receive an
early release under the Transition
Program. Statute requires ADC to
contract with a private or nonprofit
entity to provide eligible drug
offenders with transition services. The
ADC Transition Release Program
began in March 2004 and allows
eligible inmates in the Transition
Program to be released 3 months
earlier than the inmate's earliest
release date.
Between April 1 and June 30, 2007,
the department reports that 102
participants successfully completed
the Transition Program and their term

of community supervision while an
additional 139 participants
completed the Transition Program
and are continuing their term of
community supervision. During the
same period, 17 participants failed to
complete the early transition release
by violating their conditions of
supervision. In total, the program is
responsible for 9,771 bed days saved,
resulting in a savings of $166,107.
Department of Education – Budget
Status Report – Pursuant to A.R.S. § 35131(D) and a footnote in the FY 2007
General Appropriation Act, the
Arizona Department of Education
(ADE) recently provided an update
regarding its end-of-year budget
status for FY 2007. In that report, ADE
estimates that it will experience a net
formula funding surplus of $74.1 million
for FY 2007. ADE had previously
reported an estimated net formula
funding surplus of $39.1 million for FY
2007. The difference is primarily due to
lower than projected costs for current
year enrollment growth in FY 2007
under year-end data. The estimated
$74.1 million surplus includes $13.2
million in non-reverting Special
Education Voucher Fund monies.
ADE’s total formula funding
revertment to the General Fund from
FY 2007, therefore, is currently
estimated at $60.9 million.
Government Information Technology
Agency and Department of Revenue
– Report on Business Re-Engineering/
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. At the October 24, 2006
JLBC meeting, the Committee asked
that the Government Information and
Technology Agency (GITA) and DOR
provide joint monthly status reports on
the project until its conclusion.
The GITA/DOR Joint BRITS Oversight
Report for July 2007 reports that
individual income tax is on schedule
for a December 2007 implementation,
and that all of the Information
Technology Authorization Committee's
(ITAC) 7 conditions for the BRITS project
are being implemented. Specifically,

(Continued)

DOR began working on ITAC’s final 2
conditions in the past month. The final
2 items include providing GITA with a
plan and cost estimate for extension
of the BRITS data center hosting
contract, and reporting to GITA on
BRITS file server requirements to
support full BRITS implementation.
Department of Health Services –
Report on AIDS Drug Assistance
Program Expenditures – Pursuant to
Executive Orders 97-10 and 98-3, the
Department of Health Services
submitted information on the
expenditures from its AIDS Drug
Assistance Program in FY 2007.
According to the report, the program
served an average of 843 clients a
month in FY 2007. This is a decrease
of (17) clients a month, or (2.0)% from
FY 2006 levels. The average money
spent per participant in FY 2007 was
$980, up 11.2% from FY 2006 levels.
In total, the program spent $9,908,300
on medications in FY 2007. This
includes $8,915,600 from Federal
Funds and $992,700 in General Fund
monies. In comparison, the program
expended $9,090,600 in FY 2006.
Department of Health Services –
Report on Arnold v. Sarn – Pursuant to
a footnote in the FY 2007 General
Appropriation Act, the Department of
Health Services has submitted a
quarterly report to the Committee on
the department’s progress toward
settling the Arnold v. Sarn lawsuit. On
July 17, 2007 a status hearing was held
allowing parties involved in the case
and the Court Monitor to comment on
the transition of the Maricopa County
Regional Behavioral Health Authority
(RBHA) from ValueOptions to
Magellan. DHS reports that all parties
have been satisfied with DHS’s
technical assistance and involvement
in ensuring a smooth transition. An
agreement has also been reached
between ValueOptions and Magellan,
resulting in ValueOptions withdrawing
their protest for the criteria used to
award the RBHA contract.
During the past quarter, DHS
submitted information to the Court
Monitor to show compliance with the
2006 and 2007 Revised Completion

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

Summary of Recent Agency Reports
Date obligations. DHS is also still in the
process of developing a strategy
regarding the Good Shepherd
Properties. DHS had previously
purchased these properties with the
intention of housing 56 adults with
serious mental illness (SMI) at the
Good Shepherd Properties. In May,
the Superior Court ruled that this plan
violates the terms of the exit
stipulations related to housing and
that adults with SMI cannot occupy
more than 25% of the units.
At the August 16th JLBC meeting, DHS
informed the Legislature that June
2008 is still the proposed timeframe for
exiting the lawsuit. There will be
another audit performed by the Court
Monitor in October while they are
transitioning the Maricopa County
RBHA to Magellan. Although DHS
stated this endeavor will be
“challenging,” they are still “optimistic”
about meeting the June 2008
deadline.
Department of Juvenile Corrections –
Report on Restitution Fund – Pursuant
to A.R.S. § 41-2826(F), the Arizona
Department of Juvenile Corrections
(DJC) is required to submit an annual
report detailing all revenues and
expenditures made from the
department’s Restitution Fund. The
DJC submitted its latest report on
August 15, 2006.
These monies are used to pay
restitution and monetary assessments
on behalf of youth working in the
Committed Youth Work Program who
were unable to make these courtordered payments when they were
originally sentenced to DJC. As of
August 7, 2007, the DJC reports that
Restitution Fund revenues and
expenditures for FY 2007 totaled
$33,245, as compared to $40,780 in FY
2006. The 18.5% decrease is due to a
lower juvenile population in FY 2007.
State Mine Inspector – Mining
Reclamation Consulting Expenditures
Annual Report – Pursuant to A.R.S. §
27-1234B, the State Mine Inspector is
required to report annually on
payments made to consultants for

assistance in the review of sand and
gravel reclamation plans in order to
ensure that the lands used for mining
are properly reclaimed for public use
once mining is completed. In FY
2007, the State Mine Inspector
expended $174,800 on 8 consultants
for 104 mines that are currently in the
reclamation process. There is a
consulting fee of $2,775 for each
operation. The State Mine Inspector
initially pays 50% of consulting fees up
front ($1387.50) and the balance
upon publication of the review.
A.R.S. § 27-935B requires this same
report for payments made to
consultants for assistance in the review
of reclamation plans for materials
other than sand and gravel. In FY
2007, there were no plan submittals
that required consulting expenditures.
Arizona State Parks Board – Report on
Park Operating Expenditures –
Pursuant to a General Appropriation
Act footnote, the Arizona State Parks
Board is providing the park operating
expenditure report for FY 2007.
Operating expenditures for the 28
state parks and 3 regional offices
totaled $12,662,200 for FY 2007
compared to $12,328,200 in FY 2006.
Of the FY 2007 amount, $10,079,700, or
79.6%, was spent on Personal Services
and Employee Related Expenditures.
Kartchner Caverns State Park
represented approximately 21.1% of
the total operating expenditures, with
no other park representing more than
6.7%. The State Parks Enhancement
Fund (SPEF) provided $7,655,000, or
60.4% of the total operating
expenditures. This amount is a
decrease from the FY 2006 amount of
$10,035,700. Laws 2006, Chapter 344
shifted $2,650,000 from SPEF to the
General Fund to offset projected
shortfalls in park fee revenue.
State Parks Board – Annual Report on
Out-of-State Travel – Pursuant to a
FY 2007 General Appropriation Act
footnote, the State Parks Board is
submitting a report of out-of-state
travel expenses in FY 2007. The
footnote stipulates that during FY

9

(Continued)

2006 and FY 2007, out-of-state travel
expenses by State Parks Board staff
shall not exceed $5,000 each year
from appropriated or nonappropriated monies.
At a total of $4,300, out-of-state travel
expenses for Parks Board staff for
FY 2007 were within the $5,000 limit.
These expenses were incurred
primarily for attendance at
conferences and meetings.
Commission for Postsecondary
Education – Report on Postsecondary
Education Fund – A.R.S. § 15-1853
requires the Commission for
Postsecondary Education to report
quarterly on its Postsecondary
Education Fund.
Total revenues to the fund in FY 2007
were $2,082,700. A large portion of
this amount comes from intergovernmental revenue, a combination of
federal Leveraging Educational
Assistance Partnership (LEAP) funding
and institutional matching funds,
which totals $1,587,700.
Total expenditures from the fund in FY
2007 were $2,109,600. Of that total,
the commission allocated $263,300 to
its operating budget. The remaining
$1,846,300 was allocated to the
programs administered by the
commission. Of these remaining
monies, the commission spent
$1,122,400 on LEAP, a program which
provides financial aid to students at
an Arizona postsecondary
educational institution.
Arizona Department of Public Safety –
Report on Staffing Levels – Pursuant to
Laws 2007, Chapter 255 (General
Appropriation Act), the Arizona
Department of Public Safety (DPS) is
required to report quarterly on
staffing levels for both crime lab and
sworn personnel. DPS indicates they
currently have 143 authorized crime
lab positions. Of this amount, 134 (or
93.7%) are currently filled, as
compared to 127 filled positions at
the end of the prior quarter.
DPS currently has 1,306 authorized
sworn full-time positions, including 100
authorized sworn positions for the
Gang and Immigration Intelligence

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

Summary of Recent Agency Reports
Enforcement Mission (GIITEM). Of the
1,306 authorized sworn positions,
1,152 (or 88.2%) are currently filled,
representing a net increase of 21
positions in the 4th quarter.
Arizona Department of Transportation –
Quarterly Report on Motor Vehicle
Division Wait Times – The Motor Vehicle
Division (MVD) was appropriated an
additional 25 FTE Positions in FY 2007 for
MVD customer service staff to reduce
customer wait time. Laws 2006,
Chapter 344, requires the Arizona
Department of Transportation (ADOT)
to report to the Legislature quarterly
on customer wait times in MVD field
offices and vehicle registration
renewal by mail turnaround times.
The number of MVD counter clerks
increased by 104, or 14.9%, from 698
in FY 2006 to 802 in the 4th quarter of
FY 2007, with a resultant decrease of
(13.5) minutes, or (48.6)%, in customer
wait time from receiving a ticket until
arriving at the counter from 27.8
minutes in FY 2006 to 14.3 minutes in
the 4th quarter of FY 2007. ADOT
reports that there was an additional
wait time of 3.4 minutes from arrival at
the office until receiving a numbered
ticket.
Arizona Board of Regents/University of
Arizona College of Medicine – Report
on Phoenix Update – Pursuant to a
General Appropriation Act footnote,
the Arizona Board of Regents (ABOR),
with input from the University of
Arizona (UA) and Arizona State
University (ASU), is required to provide
an update to the JLBC on the
University of Arizona Phoenix Medical
Campus (PMC) and general efforts to
curb the statewide physician
shortage. According to the joint UA
and ASU Arizona Physician Workforce
Study, Arizona had a physician
shortage of 2,200 doctors in 2005
relative to the national average
physician-to-population ratio.
The Legislature first provided funding
for the operation of the PMC in FY
2006. In early August 2007, the
Phoenix Medical Campus welcomed
its first class of 24 students. The

campus is comprised of the
Translational Genomics Research
Institute (TGen) research building, the
three former Phoenix Union High
School buildings in which medical
students take classes, and the Arizona
Biomedical Collaborative research
building (ABC 1). ABC 1, which
opened in July 2007, houses
researchers from the ASU Department
of Biomedical Informatics on the first
two floors and UA researchers and lab
space on the top two floors.
ABOR previously submitted updates
on the Phoenix Medical Campus in FY
2007. The report submitted by ABOR
on August 15, 2007 includes updated
information on the following topics:
Formal Relationships with Area
Hospitals – In December 2006, the
College of Medicine entered into a
memorandum of understanding
(MOU) with Banner Health, under
which Banner Health will become the
College’s primary academic hospital
affiliation in Phoenix. Since this
partnership was forged, both entities
have formed an Executive Steering
Committee with several working
groups that will address various issues
affecting the campus, such as
financing, graduate medical
education, communication, faculty
practice organization planning,
facilities, and private practice
physician involvement. The College
of Medicine will hire a consulting firm
to develop a financial modeling
strategy to better define the most
advantageous relationship with
Banner Health.
Partnerships with Private Medical
Schools and Expansion of Medical
Services to Rural Areas – The UA
College of Medicine’s Rural Workforce
Taskforce began talks with the private
medical school Midwestern University
to expand residency opportunities at
rural sites that could potentially serve
as dual training sites for allopathic and
osteopathic students. Both organizations are considering the possibility of
establishing joint allopathic and
osteopathic accreditation in the first
year of residency at these locations.

(Continued)

Creation of New Residency Positions –
Several new residency programs
have been developed in various
health care facilities in Phoenix: an
orthopedics program at Banner
Health, a trauma surgery fellowship at
the Maricopa Integrated Health
System (MIHS), and new fellowships in
pediatric emergency and endocrinology at the Phoenix Children’s
Hospital. Additionally, new programs
are in the development phase at
various locations: a plastic surgery
fellowship at Banner Good Samaritan,
burn and critical care surgical
fellowships at Maricopa Medical
Center/ Scottsdale Healthcare, and a
surgery program at MIHS/Scottsdale
with planned training slots.
Additional Reporting Requirements –
ABOR’s report does not include
further updates from the February 15th
report on the availability of clinical
rotations for medical students in the
state and efforts to attract out of
state doctors. The UA College of
Medicine believes that by
establishing additional residency
positions, more out-of-state medical
students will be able to choose
Arizona to complete their residencies,
after which UA estimates one-half
would practice in Arizona.
Arizona Department of Water
Resources – Report on Fees Collections in the Assured and Adequate
Water Supply Fund – Pursuant to a FY
2007 General Appropriation Act
footnote, the Department of Water
Resources (DWR) provided its quarterly
report on the fees collected by the
Assured and Adequate Water Supply
(AAWS) Program.
Laws 2005, Chapter 217 established
the AAWS Administration Fund to
provide for the costs of the AAWS
Program. New fees were approved in
September 2006. Collections in the
last quarter of FY 2007 amounted to
$237,200. Total revenue in FY 2007
amounted to approximately $776,600.
DWR anticipates that the fees will
eventually generate approximately
$1,100,000 per year for the operations
of the AAWS program.

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2007

11

State of Arizona
General Fund Revenue

Change from Previous Year and Enacted Forecast
July 2007
Current Month

FY 2008 YTD (One Month)

Change From
Actual

July 2006

July 2007

Amount

Change from
Actual

Forecast
Percent

Amount

Percent

July 2006

July 2007

Amount

Forecast
Percent

Amount

Percent

Taxes
Sales and Use

392,889,822

$2,429,591

$392,889,822

$2,429,591

Income - Individual

268,029,537

35,146,944

15.1

8,680,337

3.3

268,029,537

35,146,944

15.1

8,680,337

3.3

33,803,209

(5,230,033)

(13.4)

(6,859,691)

(16.9)

33,803,209

(5,230,033)

(13.4)

(6,859,691)

(16.9)

- Corporate
Property
Luxury
Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

0.6 %

($27,245,378)

(6.5) %

0.6 %

($27,245,378)

(6.5) %

271,790

(30,528)

(10.1)

(78,210)

(22.3)

271,790

(30,528)

(10.1)

(78,210)

(22.3)

3,964,730

(1,083,894)

(21.5)

(1,950,270)

(33.0)

3,964,730

(1,083,894)

(21.5)

(1,950,270)

(33.0)

40,869,149

8,473,197

26.2

3,169,149

8.4

40,869,149

8,473,197

26.2

3,169,149

8.4

222,856

146,449

191.7

222,856

--

222,856

146,449

191.7

222,856

(1.0)

64,491

64,491
$740,115,584

(3,469)
$39,848,257

(5.1)
5.7 %

(634)
($24,061,841)

(3.1) %

$740,115,584

(3,469)
$39,848,257

(5.1)
5.7 %

(634)
($24,061,841)

-(1.0)
(3.1) %

Other Revenue
Lottery
License, Fees and Permits
Interest
Sales and Services
Other Miscellaneous
Disproportionate Share
Transfers and Reimbursements
Sub-Total Other Revenue
TOTAL BASE REVENUE

0
1,950,743

0
(56,152)

631,247

763,693

1,998,131

138,652

39,595

(1,141,551)

0

0

474,311

315,690

-(2.8)
--

0
(503,357)

0
1,950,743

0
(56,152)

--

631,247

763,693

7.5

(305,169)

(13.2)

1,998,131

138,652

(96.6)

(830,505)

(95.4)

39,595

--

0

0

474,311

315,690

-199.0

925,447

-(20.5)

0
264,311

125.9

(1,141,551)

-(2.8)
--

0
(503,357)
925,447

-(20.5)
--

7.5

(305,169)

(13.2)

(96.6)

(830,505)

(95.4)

-199.0

0
264,311

-125.9

5,094,027

20,332

0.4 %

(449,273)

(8.1) %

5,094,027

20,332

0.4 %

(449,273)

(8.1) %

$745,209,611

$39,868,589

5.7 %

($24,511,114)

(3.2) %

$745,209,611

$39,868,589

5.7 %

($24,511,114)

(3.2) %

One-Time Revenue
Urban Revenue Sharing

(57,044,910)

(11,109,022)

24.2

0

0.0

(57,044,910)

(11,109,022)

24.2

0

0.0

Sub-Total One-Time Revenue

(57,044,910)

(11,109,022)

24.2 %

0

0.0 %

(57,044,910)

(11,109,022)

24.2 %

0

0.0 %

TOTAL REVENUE

$688,164,701

$28,759,567

4.4 %

($24,511,114)

(3.4) %

$688,164,701

$28,759,567

4.4 %

($24,511,114)

(3.4) %