JLBC - Monthly Fiscal Highlights

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

This Month
September General Fund revenue collections
were $926.5 million, or (0.6)% below September
of last year. This amount was $(59.3) million
below the forecast based on the enacted state
budget.
For the first quarter of FY 2008, General Fund
collections are almost flat when compared to
last year, and are $(148.1) million less than
forecast. (See page 3.)
Each of the major categories was below the
forecast in September:

www.azleg.gov/jlbc.htm

“For the first
quarter of
FY 2008, General
Fund collections
are almost flat
when compared
to last year, and
are $(148.1)
million less than
forecast.”

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

October 2007

• Sales tax collections declined (3.4)%
compared to September 2006, and were
$(44.2) million short of the monthly forecast.

JLBC/JCCR Meetings – The Monthly Fiscal
Highlights include a summary of the October
JLBC and JCCR meetings (pages 6-8).
Among the items considered, the JLBC gave
a favorable review to AHCCCS’ proposed
capitation rate increases. The rate increases
are estimated to cost $9 million more than
budgeted for in FY 2008. In addition, the JLBC
approved a 2.2% increase in the cost-persquare foot amount allocated for K-12 new
school construction projects. The increase is
projected to result in an additional cost of
$9.6 million over the next five years, of which
$500,000 would be incurred in FY 2008.

• Individual income tax collections increased
1.9%, which was $(22.3) million below
forecast.

The Highlights also include a summary of
recent statutory reports submitted to the JLBC
(pages 9-13).

• Corporate income tax collections were
(7.1)% below last year, and $(17.2) million
less than forecast.

Federal Higher Education Changes – In other
fiscal news this month, recently enacted

Table of Contents
September Revenues ............................................ 2
Recent Economic Indicators................................ 4
JLBC Meeting Summary
• ADOA – Risk Management Deductible ......... 6
• ADOA – Loss Prevention Plans.......................... 6
• AHCCCS – Capitation Rate Changes ............ 6
• Arts Commission – Arts Endowment Fund ...... 6
• Atty. Gen. – Settlement Monies ....................... 6
• JLBC Staff – Construction Index ....................... 6
• AOC – CJEF and JCEF Expenditures ............... 6
• DPS – Interoperability Project ........................... 6
• DPS – GIITEM Expenditure Plan......................... 7
• DOR – BRITS .......................................................... 7
• ASU – Downtown Phoenix Campus ................ 7
JCCR Meeting Summary
• ADOA – ADC Door and Lock Replacement . 8
• ADOT – FY 2008 Building Renewal ................... 8
• ADOT – 5-Year Transportation Program.......... 8
• SFB – FY 2008 Building Renewal ........................ 8
Summary of Recent Agency Reports
• AHCCCS – Medicaid Direct Services Claims. 9
• AHCCCS – SAVE Program................................. 9

Summary of Recent Agency Reports (Cont’d)
• Atty. Gen. – Incarceration Costs Offset by
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Monetary Judgments......................................... 9
Community Colleges – Dual Enrollment .......10
ADC – Security Threat Group Unit ..................10
ADC/ADOA – Public and Private Beds .........10
ACJC – Methamphetamine Interdiction......11
DES – Annual Child Care Expenditures .........11
DES – Developmental Disabilities
Reimbursement Rates ......................................11
DES – Work Participation Requirements ........11
Game & Fish – Shooting Range Study...........12
DHS – Homeland Security Allocation and
Expenditure Report...........................................12
Dept. of Insurance – Cost Benefit Report .....12
Land Dept. – State Trust Land Activities ........13
DPS – Sworn Officer Salary Adjustments .......13
ABOR – Credit Hour Threshold ........................13
DWR – AAWS Program .....................................14
DWR – Interstate Water Banking ....................14

Other Issues
• DEMA Emergency Transfer..............................15
• Federal Student Aid Legislation......................15
• Estimated Revenues from Super Bowl XLII ....16

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

This Month

(Continued)

federal legislation made several changes to
higher education student aid programs.
Included among the changes, the family
income level under which a student becomes
eligible for a Pell grant was raised, and the
maximum grant award was increased. In
addition, interest rates on Stafford loans were
reduced. Funding was also added for certain
grant programs. (See page 14.)

2008 Super Bowl will generate direct visitor
spending of between $70 and $110 million,
which would result in a state General Fund
revenue gain of between $3.6 and $5.5
million. (See page 15).

Super Bowl Impact – The JLBC Staff, in
response to several inquiries, projects that the

September Revenues

“In the first
quarter of
FY 2008, sales tax
revenues are
only 0.2% above
the first quarter
of last year.”

Sales Tax collections were $366.8 million in
September. This amount was (3.4)% below
last year, and $(44.2) million below forecast.
In the first quarter of FY 2008, sales tax
revenues are only 0.2% above the first quarter
of last year. Table 1 displays the September
and year-to-date growth rates for the major
sales tax categories.
Table 1

Sales Tax Growth Rates

Retail
Contracting
Utilities
Use
Restaurant & Bar

September Year-to-Date
(3.8)%
(1.5)%
(6.2)%
(2.8)%
(9.6)%
2.2%
3.1%
8.3%
5.2%
5.0%

Retail and contracting collections, which
together account for two-thirds of all sales
revenues, both declined in September.
Table 2

Looking more closely at retail, in the first 2
months of FY 2008, taxable sales in this
category were down (1)% over the same
period last year. While there are a total of 17
retail subcategories, 3 subcategories, Motor
Vehicle Dealers, Miscellaneous Retail and
General Merchandise, make up half of all
taxable sales. Combined, sales in these 3
categories were down (5)%, weighted heavily
by a (13)% decline in the largest category,
Motor Vehicle Dealers. The other 2 categories
were essentially flat. Excluding Motor Vehicle
Dealers, taxable retail sales were up 2% over
the same period last year. Taxable retail sales
data for each category are shown in Table 2
below.
Individual Income Tax collections were $362.3
million, or 1.9% above last year. Table 3
displays individual category growth rates.

Taxable Retail Sales by Subcategory

Manufacturing
Motor Vehicle Dealers
Miscellaneous Automotive
Furniture, Home Furnishings
Bldg Hardware, Mfg Home
Food and Liquor Stores
Miscellaneous Retail
Clothing and Accessories
General Merchandise
Other Subcategories
Total

% of
Total Sales
5.6%
18.6%
5.5%
6.9%
8.1%
7.7%
11.7%
6.1%
16.7%
13.3%
100.0%

YTD % Change
Over FY 2007
(1.2)%
(12.8)%
(6.1)%
3.6%
(5.0)%
12.2%
0.7%
3.7%
0.6%
6.9%
(1.0)%

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

September Revenues
Table 3

Individual Income Tax Growth Rates
September Year-to-Date
Withholding
7.6%
6.6%
Estimated +
(4.6)%
(2.4)%
Final Payments
Refunds
12.6%
31.8%
September withholding was 7.6% above last
year. Although this is a positive level of
growth, withholding collections have been
inconsistent over the last few months due to
the timing of when they are processed. In
August, for example, withholding fell (1.1)%.

(Continued)

BFO’s are not to exceed $200 million.
Given the manner in which the BFO’s are
structured, the interest payments come
due to the State Treasurer every 4 years.
The September increase includes a $16.6
million BFO interest payment, partially offset
by less than anticipated earnings on the
General Fund operating balance. Total
BFO interest payments for FY 2008 are
anticipated to be $22.4 million, with the
remaining $5.8 million to be paid in June
2008.

While withholding increased in September,
estimated and final payments declined (4.6)%
from last year. Payments for the month were
just over $150 million. September is the first
month in which large estimated and final
payment revenues are received by the state.
Overall, individual collections were $6.8 million
above last year, which was $(22.3) million less
than forecast.
Corporate Income Tax collections were $177.6
million in September. This was (7.1)% below last
year, and $(17.2) million below the forecast for
the month. While payments were flat when
compared with last September, almost $13
million in refunds was recorded during the
month. September is also the first month of
large corporate collections. The next big
month for collections is December.
Interest income was $23.3 million, which was
$14.3 million over the estimate for the month.
Statute provides for State Transportation
Board Fund Obligations (BFO's), which are
loans from the General Fund operating
balance to the Department of Transportation
to accelerate highway construction. The

Table 4

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
September
$ 926.5
$ (59.3)
$ (5.3)
Year-to-Date
$ 2,300.6
$ (148.1)
$ 4.6
____________
1/ Enacted FY 2008 budget (June 2007).

“Overall,
individual
collections were
$6.8 million
above last year,
which was
$(22.3) million
less than
forecast.”

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Recent Economic Indicators
NATIONAL
The U.S. Index of Leading Economic Indicators
increased 0.3% in September, continuing the
trend of alternating monthly increases and
decreases since January that have essentially
offset each other. Seven of the 10
components that make up the composite
index increased in September. The building
permit component made the largest
negative contribution, but was offset by large
positive contributions from vendor
performance, stock prices, and
unemployment insurance claims.

“Contributing
factors to the
continued
weakness in real
estate include
the excess
supply of homes
and tighter
mortgage
underwriting
guidelines.”

U.S. semiconductor billings increased 3.2% in
August (3-month moving average) to $3.59
billion, though year over year chip sales were
down (6.3)%. The Semiconductor Industry
Association (SIA) states that flash memory
products are the leading product
contributing to sales growth in this month.
The U.S. Consumer Price Index (CPI) (3-month
moving average) remained unchanged in
September. The year-over-year increase was
2.4%. All sub-indices of the CPI increased
slightly in the month of September, but were
offset primarily by lower gasoline and natural
gas prices in the month of August. Excluding
the impact of food and energy prices, the
core CPI increased 0.2% in September and
was 2.1% higher than a year ago.
ARIZONA
September total statewide non-farm
employment increased, year over year, by
2.6%. By comparison, the September yearover-year average growth rate in the prior 10
years was 3.4%. Arizona’s unemployment rate
decreased by (10.8)% in September to 3.3%, a
historically low figure for Arizona’s jobless rate
and considerably below the 4.7% U.S.
average.
The construction sector continued to lose
ground with (2,200) jobs lost between August
and September, leaving statewide
construction employment (5.1)% below the
level reported a year ago. The average yearover-year growth rate for September in the
prior 10 years was 6.5%.

Manufacturing employment was essentially
flat again in September, but compared to the
same month last year, the industry is
employing (1,300) fewer workers.
The Greater Phoenix real estate market
exhibited continued weakness throughout
September as the market transitioned into a
period of the year when traditionally fewer
homes are being bought and sold.
Contributing factors to the continued
weakness in real estate include the excess
supply of homes and tighter mortgage
underwriting guidelines.
According to statistics released by the Realty
Studies group at Arizona State University
(ASU), the number of existing single-family
homes sold plummeted to 3,051 homes in
September, (28.1)% below August levels and
(37.4)% below sales in September 2006. To a
lesser extent, the single-family median home
sales price also decreased in September –
falling to $250,000 or (2.7)% below the median
September 2006 price.
Consistent with the decrease in sales of
existing single family-homes, sales of existing
townhouse-condominium units fell (28.3)%
from the prior month, to 685 units. This
reduction in sales activity adversely impacted
the prices in September as the price median
sales price fell (6.8)% to $170,000.
Statewide single-family residential building
permits (3-month moving average) fell (9.4)%
from the prior period and (26.6)% on a yearover year basis, to 3,440. However, despite
this decrease, the comparable number of
multi-family building permits authorized
increased to 789, resulting in month-to-month
and year-to-year increases of 7.0% and 18.9%,
respectively. Permitting activity of the multifamily segment of the market tends to have
significant volatility from month-to-month.
The Arizona Business Conditions Index (BCI)
dropped (6.0)% to 55.3 in September, marking
the third monthly decline in a row in this index.
The component of the overall index that has
dropped the most in the past two months is
the number of new orders recorded, which
was down by (21.2)% relative to July.
However, the overall index is still above the
critical 50-point mark.

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Recent Economic Indicators
The number of AHCCCS recipients increased
to 1,082,594, 1.2 % above September 2007
levels. This increase is the highest monthly
growth rate experienced since November
2004. While AHCCCS participation is now
5.1% above October 2006, the FY 2008
budget projected the AHCCCS caseload
would grow by 2.5%.

(Continued)

2006. The total population grew by 2,345
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 4.2%
to 82,417 in September, above August, and
was (6.2)% below the level reported in
September 2006. The FY 2008 budget projects
the TANF caseload will grow by 2.5%.
Between July and September, the
Department of Corrections’ inmate population
increased by an average of 182 inmates per
month, similar to the increase realized in FY

Table 5

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

September
September
September
September
Jul-Sep
Jul-Sep

3.3%
2.74 million
186,500
240,000
$79.6 million
$160.8 million

(10.8)%
1.1%
0.1%
(0.9)%
(2.8)%
(1.5)%

(17.5)%
2.6%
(0.7)%
(5.1)%
(2.8)%
(0.4)%

Jun-Aug
Jun-Aug

3,440
789

(9.4)%
7.0%

(26.6)%
18.9%

September
September

3,050
685

(28.1)%
(28.3)%

(37.4)%
(26.3)%

September
September
August
July

$250,000
$170,000
3.60 million
$7.46

(2.0)%
(6.8)%
(3.3)%
(8.0)%

(2.7)%
(2.0)%
3.7%
6.9%

July
September

121.1
55.3

1.0%
(6.0)%

2.3%
(10.2)%

3rd Quarter 2007
4th Quarter 2007
2nd Quarter 2007
July 1, 2006
October
August
Jul-Sept

101.9
42.5
$209.2 billion
6.17 million
1,082,594
82,417
37,489

2nd Quarter 2007

$11.5 trillion

3.8%

1.9%

September
September
Jun-Aug
Jul-Sep

99.8
137.9
$3.59 billion
208.2

(5.5)%
0.3%
3.2%
0.0%

(5.8)%
0.1%
(6.3)%
2.4%

(4.1)%
(15.8)%
1.1%
3.6%
1.2%
4.2%
182 inmates

(0.8)%
(11.6)%
7.5%
3.6%
5.1%
(6.2)%
2,345 inmates

5

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

JLBC Meeting
At its October 18, 2007 meeting, the Joint
Legislative Budget Committee considered the
following issues:
Arizona Department of Administration (ADOA)
– Review of Risk Management Deductible –
The Committee gave a favorable review to
the Arizona Department of Administration’s
(ADOA) plan to continue to apply a $10,000
deductible (the statutory maximum) in risk
management cases. Currently, ADOA may
charge a $10,000 deductible for each risk
management claim of $150,000 or more
unless the agency implements an ADOA
approved plan to limit or eliminate similar
future losses.
Arizona Department of Administration – Rule
14(3)(P) - Report on Loss Prevention Plans –
The JLBC Staff presented revisions to the
format of the loss prevention plans required of
agencies with settlements to be approved by
the Joint Legislative Budget Committee.
Members of the Committee asked staff to
provide recommendations on the format of
the loss prevention plans which are now
required by Committee rules. The
recommendations were developed with input
from ADOA Risk Management and will apply
to all future loss prevention plans.
AHCCCS – Review of Proposed Acute Care
and ALTCS Capitation Rate Changes – The
Committee gave a favorable review to the
capitation rate changes proposed by
AHCCCS for the Traditional Medicaid,
Proposition 204, KidsCare and KidsCare
Parents populations as well as the Arizona
Long-Term Care System (ALTCS) Elderly and
Physically Disabled population. The proposed
rates would cost $9 million more from the
General Fund than budgeted in FY 2008,
assuming budgeted caseload levels.
Arizona Commission on the Arts – Review of
the Arizona Arts Endowment Fund and Private
Contributions – The Committee gave a
favorable review of the Arizona Commission
on the Arts’ report on private monies that are
donated for use in conjunction with public
monies from the Arizona Arts Endowment
Fund. In CY 2006, private contributions were
$4.7 million.
Attorney General – Review of Allocation of
Settlement Monies – The Committee gave a

favorable review to the allocation plan for
monies received from the Guidant
Corporation consent judgment. The Attorney
General’s Office (AG) recently entered into a
multistate settlement agreement with Guidant
Corporation as a result of allegations that the
company continued to sell a specific model
of Implantable Cardioverter Defibrillators
(ICDs) after a potentially dangerous
malfunction was discovered in early 2002.
Arizona will receive $815,000 as its portion of
the settlement monies, which will be
deposited into the Consumer Fraud Revolving
Fund.
JLBC Staff – Consider Approval of Index for
School Facilities Board Construction Costs –
The Committee approved a 2.2% increase in
the cost-per-square-foot factors for new
school construction, which is based on the
Pinnacle One index. This adjustment is
projected to increase new construction
spending by $9.6 million from FY 2008 through
FY 2012. Of that amount, about 5%, or
$500,000, will be expended in the current
fiscal year.
Administrative Office of the Courts – Review of
Expenditures of Judicial Collection
Enhancement Fund and Criminal Justice
Enhancement Fund – The Committee gave a
favorable review to the expenditures of: 1)
$2.5 million above the Supreme Court Judicial
Collection Enhancement Fund (JCEF)
appropriation and $2.5 million above the
Criminal Justice Enhancement Fund (CJEF)
appropriation in FY 2008 to fund a new case
and cash management system, and 2)
$700,000 above the Superior Court JCEF
probation surcharge appropriation in FY 2008
for county Adult Probation officer pay raises.
Department of Public Safety – Quarterly
Review of the Arizona Public Safety
Communication Advisory Commission (PSCC)
– The Committee gave a favorable review to
the FY 2007 fourth quarter expenditures and
progress for the statewide interoperability
design project. Fourth quarter expenditures
totaled $524,100. For the entire fiscal year,
DPS expended $1.3 million of $4.3 million in
available FY 2007 funding. Activities in the
fourth quarter addressed projects identified in
the PSCC timeline relating to both the “shortterm” and “long-term” interoperable
solutions. The Arizona PSCC was established

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

JLBC Meeting

(Continued)

to develop a statewide standard-based
interoperability system that allows public
safety personnel from one agency to
communicate, via mobile radio, with
personnel from other agencies.
Department of Public Safety – Consider
Revision of the Gang and Immigration
Intelligence Team Enforcement Mission
(GIITEM) Expenditure Plan – The Committee
gave a favorable review to the revised GIITEM
expenditure plan. The JLBC Chairman
requested that the Committee recommend a
revision to the GIITEM expenditure plan to
increase the Maricopa County allocation by
$634,700. To date Maricopa has received
$1.5 million in funding. The funding will be
provided to the Maricopa County Sheriff’s
Office for transportation of illegal immigrants
and human smugglers to county jails or
Immigration and Customs Enforcement (ICE)
for processing.
Department of Revenue – Review of Business
Reengineering/Integrated Tax System (BRITS)
Contract Amendment – The Committee gave
a favorable review to the Department of
Revenue’s proposed $4 million contract
amendment, which includes $288,000 for 4
enhancements to individual income tax, and
$3.7 million for vendor operational support
through June 2008. BRITS is the computer
system being implemented by DOR to further
automate and integrate their separate tax
systems.
Arizona State University – Review of
Downtown Phoenix Campus (DPC)
Operational and Capital Plans – The
Committee gave a favorable review to the
DPC operational and capital plans. Some of
the highlights of the plan include:
• The College of Letters and Sciences
opened in fall 2007 under the auspices of
the University College and will offer liberal
arts classes and a bachelor’s degree in
interdisciplinary studies.
• According to 21st day counts for the fall
semester of 2007, 3,377 students are
enrolled in one or more courses at the DPC,
an increase of 22% from the prior year.
• ASU entered into an agreement with
Capstone Development to construct
student housing for 1,200 to 1,300 students
set to open in August 2009.

• City of Phoenix expenditures from the
$223 million bond issuance for campus
construction and development of civic
space now total $130.7 million.
• By FY 2012, ASU projects operational
expenses will be $90.6 million and will
support 790 FTE positions and 7,600
students enrolled in at least one course
downtown.
• By fall 2008, the City of Phoenix will
develop civic space for public events.

7

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

JCCR Meeting
At its October 18, 2007 meeting, the
Joint Committee on Capital Review
considered the following issues:

construction financing for ADOT to
use in the 5-year program as
needed.

Arizona Department of Administration
– Arizona Department of Corrections
Door and Lock Replacement Plan –
The Committee gave a favorable
review to the $5.2 million Prison Cell
Door and Lock Replacement Plan,
which will replace a control panel
and 408 doors at the Arizona State
Prison Complex Tucson, Rincon Unit.
This unit was identified by ADC as the
highest priority, and the project is
expected to be completed in 14
months. In addition to this $5.2
million, which was appropriated in FY
2007, the department received
another $5.2 million appropriation in
FY 2008.

Table 6 lists the 17 new projects of
$25 million or more added to the 5year plan.

Arizona Department of Transportation
– Review of FY 2008 Building
Renewal Allocation Plan – The
Committee favorably reviewed the
$3.9 million Building Renewal
allocation plan, which includes $3.8
million from the State Highway Fund
for 215 projects and contingencies,
and $141,100 from the State
Aviation Fund for 6 projects at the
Grand Canyon Airport.
Arizona Department of Transportation
– Report on 5-year Transportation
Plan – The Committee received the
ADOT 5-year Transportation Facilities
Construction Program for FY 2008 –
FY 2012. The information provided
estimated expenditures and
revenues by fiscal year for major
highway projects totaling $6.6 billion
over the 5-year period. The 5-year
highway plan did not include the
$62 million appropriated in the FY
2008 budget to accelerate certain
highway programs. It also does not
include the projects which will be
funded from the additional
resources associated with issuing 30year rather than 20-year highway
bonds. The Legislature approved
the longer bond period in the last
session, and it is expected to
generate $500 million in additional

The Committee requested that
ADOT report on the 5-year Transportation Facilities Construction Program
for FY 2009 – FY 2013 by July 31, 2008,
and that the report include
additional information on how much
of the estimated $500 million of
additional bonding capacity from
30-year highway bonds is included in
next year’s 5-year plan. The
Committee also adopted highway
congestion performance measures,
and requested that ADOT report on
spending plans for the $62 million
appropriation for state highway
acceleration in FY 2008 by
December 15, 2007.

Table 6

School Facilities Board – Review of
FY 2008 Building Renewal
Distributions – The Committee gave
a favorable review to the proposed
distribution of FY 2008 Building
Renewal Fund monies in 2 equal
installments of $43.1 million in
November 2007 and May 2008.
Prior to receiving building renewal
monies, statute requires districts to
submit a 3-year building renewal
plan to SFB by October 15. So far
SFB has received 101 building
renewal plans.

ADOT 5-Year Plan Major Projects

North Valley
I-17 – L101 to Jomax Rd, widen
I-17 – Jomax Rd to Carefree Hwy, widen
I-17 – Carefree Hwy to Anthem Way, widen (STAN advanced)
L303 (Estrella) – Happy Valley Rd to Lake Pleasant Rd, interim roadway
L303 (Estrella) –Lake Pleasant Rd to I-17, ROW & interim roadway
L303 (Estrella) – US 60 (Grand Ave) to I-17, ROW
East Valley
L202 (Red Mtn) – 48th St to Rural Rd, widen
L202 (Red Mtn) – Rural Rd to L101, widen
L202 (Red Mtn) – SR 51 to 48th St, widen

FY08 – FY12
($ in millions)
$ 95.0
95.0
30.5
177.0
174.0
70.0
46.3
61.6
51.9

Southwest Valley
L202 (South Mtn) – 51st Ave to I-10, new freeway
L202 (South Mtn) – I-10 to 51st Ave, ROW

450.0
200.0

West Valley
I-10 – Verrado Way to Sarival Rd, widen (STAN advanced)
L303 (Estrella) – I-10/L303, interchange
SR 85 – Southern Ave to I-10, widen

43.2
135.0
29.6

Tucson
Tucson I-10 – I-8 to Picacho Peak, widen
Tucson I-10 – Valencia Rd, interchange

126.0
25.0

Balance of State
Cottonwood SR 260 – Western Dr to Thousand Trails, widen
ROW – Right of Way

SR – State Route

25.0

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

9

Summary of Recent Agency Reports
AHCCCS – Report on Medicaid
Direct Service Claiming Program –
Pursuant to Laws 2007, Chapter 255
the Arizona Health Care Cost
Containment System (AHCCCS) is
providing its annual report on the
Medicaid Direct Service Claiming
(DSC) program, formerly known as
Medicaid in Public Schools (MIPS).
This program has been in operation
since January 1, 2001, and is
designed to provide funding for
certain Title XIX covered services
furnished through public school
special education programs.
To receive DSC services, children
must be between the ages of 3 and
22, be eligible under the federal
Individuals with Disabilities
Education Act for special
education, have a current
Individual Education Plan that
includes Medicaid eligible services,
and be enrolled in AHCCCS.
Covered services include nursing
services, health aide services
(attendant care), occupational
therapy, speech therapy, physical
therapy, transportation, behavioral
health services, and audiology
services.
In FY 2007, the DSC program
provided payments for 10.2 million
claims. This is a decrease of (48)%
from FY 2006. In FY 2007,
participating schools received a
total of $32,829,459 in Medicaid
Federal Financial Participation (FFP)
funds, which is a decrease of
$(17,146,234) or (34)% below FY
2006. AHCCCS reports that this
reduction primarily impacted Health
Table 7

Aide and Transportation services.
Audit findings indicated the
decrease was due to a lack of
documentation required of the
health aides, which has led to
additional training regarding
documentation and billing
practices. The U.S. Department of
Health and Human Services’ Office
of the Inspector General is also
conducting an audit of the
program for the period of January
1, 2004 through June 30, 2006. In
preliminary discussions, the office
has also identified documentation
issues, as well as services being paid
that are not authorized by the
Individual Education Plan. The
federal government also recently
published proposed rules
eliminating administrative cost
reimbursement and limiting
transportation cost reimbursement.
Table 7 details spending by service
type.
The total reimbursement represents
approximately 66% of the total cost
of the services, while the remaining
monies were provided by the
participating schools.
AHCCCS – Report on Systematic
Alien Verification for Entitlements
Program – Pursuant to A.R.S. § 362903.03, the Arizona Health Care
Cost Containment System
(AHCCCS) is providing its first
quarterly report on the collection
and verification of documentation
associated with the Systematic
Alien Verification for Entitlements
(SAVE) program. Laws 2006,

Direct Service Claiming Reimbursement Paid by Service
FY 2007

Service Type
Health Aid (Attendant Care)
Therapy
Transportation
Behavioral Health Service
Medical Services (Nursing)
Total

Amount
Reimbursed
$11,524,731
10,772,597
7,779,260
1,403,528
1,349,343
$32,829,459

Percentage of
Total Amount
35.1%
32.8%
23.7%
4.3%
4.1%

Percentage of
Total Claims
43.9%
5.7%
47.7%
0.8%
1.9%

Chapter 191 requires all AHCCCS
applicants to provide
documentation verifying their
immigration status to qualify for
AHCCCS services. If AHCCCS
determines this documentation to
be fraudulent, the applicant is
referred for prosecution.
AHCCCS, in conjunction with DES,
verified the immigration status of
14,534 individuals between April 1,
2007 and June 30, 2007. During this
period, AHCCCS and DES did not
identify any fraudulent documents
using the SAVE program. As a result,
no non-citizens were referred for
prosecution; however, 2 citizens
were referred for prosecution
pursuant to State and Federal law
regarding fraudulent schemes.
SAVE Immigration Status Verifications
April 1, 2007–June 30, 2007
Month
April
May
June
Total

AHCCCS
921
1,028
1,096
3,045

DES
3,583
4,225
3,681
11,489

Total
4,504
5,253
4,777
14,534

Attorney General – Report on
Incarceration Costs Offset by
Monetary Judgments – Pursuant to
A.R.S. § 31-238, the Office of the
Attorney General is required to
report semi-annually on the use of
monetary judgments awarded to
inmates to offset the costs of
incarceration. According to the
statute, if an inmate obtains a
monetary judgment against the
state, and the state offsets the cost
of incarceration from the total
amount of the judgment, 70% of the
monies set off are transferred to the
General Fund and 30% are
transferred to the Attorney
General’s office to cover the cost of
litigation. From January 1, 2007 to
June 30, 2007, the state did not
exercise its right to offset the costs of

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Summary of Recent Agency Reports
incarcerating inmates under this
statute, since no monetary
judgments were awarded during
this time period. The agency does,
however, indicate that it believes
the existing statute results in
reduced negotiated settlement
amounts, which also discourages
the filing of frivolous lawsuits.
Arizona Community Colleges –
Report on Dual Enrollment –
Pursuant to A.R.S. § 15-1821.01, the
Arizona Community Colleges are
reporting on dual enrollment
courses offered in FY 2007. Students
in a dual enrollment course can
earn both high school and
community college credit for
courses taught at their high school.
Laws 2007, Chapter 229 established
new requirements for this report,
which include: 1) a list of all
members of faculty advisory
committees, 2) course level data on
the performance of students dual
enrolled, 3) the number of grants or
scholarships awarded to students,
and 4) program costs of the
courses. Districts did not all report
the new information in the same
manner, which made comparison
between districts difficult.
Highlights of the FY 2007 report
include:
• 39,970 students were dual
enrolled (up from 36,750 in FY
2006).
• 1,108 courses were offered, of
which 479 courses were classified
as Academic and 629 were
Occupational (up from 937 total
courses in FY 2006).
• Courses were offered at 263
locations in 11 districts.
• 38,367 students, or 96% of those
enrolled, completed the course.
• 36,784 students earned a C or
better, qualifying those students
for both high school and
community college credit.
• 4,111 freshman and sophomore
students were dual enrolled (up

from 3,571 in FY 2006)
• 3,202 high school seniors who had
been dual enrolled in FY 2004
through FY 2005 continued their
studies at an Arizona Community
College or University in FY 2005
through FY 2006.
• Of those students, 85% received a
C or better in their dual
enrollment courses, while 96%
received a C or better when
attending courses at a
community college or university.
(The data represents prior years
due to availability of information
from the Arizona State System for
Information on Student Transfer
system.)
Department of Corrections – Report
on the Security Threat Group Unit –
The FY 2008 General Appropriation
Act (Laws 2007, Chapter 255)
includes a footnote requiring the
Arizona Department of Corrections
(ADC) to continue to maintain the
Security Threat Group (STG) unit and
report on funding and personnel
requirements to facilitate the
identification of gang members,
including the implementation of an
enhanced phone monitoring
system, and options for joining the
California gang intelligence system
(CalGang). The STG unit collects
information, gathers intelligence,
and validates inmates as being
members of prison gangs. Pursuant
to this requirement, the following
information is available:
• 5 new positions have been
added to the STG unit, including 3
investigators and 2 administrative
assistants. The additional positions
are a result of an agreement with
the Department of Public Safety
(DPS) whereby DPS will fund 85%
of the personnel costs and ADC
will fund the remaining 15%.
• ADC currently has access to the
Arizona gang intelligence system
(GangNet). Previous information
provided by DPS indicates
measures are underway to allow

(Continued)

GangNet users to connect with
CalGang.
• A Request for Proposal for an
enhanced inmate phone
monitoring system has been
issued and will be awarded
shortly. The system will be
operating 120 days after a
provider is selected.
Department of Corrections /
Department of Administration –
Report on the Status of Public and
Private Beds – Laws 2007, Chapter
255 (the Criminal Justice Budget
Reconciliation Bill) authorized the
construction of 4,000 new public
beds and 2,000 new private prison
beds. Chapter 255 also requires the
Arizona Department of
Administration (ADOA) and Arizona
Department of Corrections (ADC) to
report jointly to JCCR by the end of
each calendar quarter on the
status of the construction of the
new beds.
2,000 Private Beds
ADOA issued a Request for Proposal
(RFP) for 2,000 minimum custody
private prison beds in August and
held a pre-proposal conference in
September. While the solicitation
seeks proposals to build and
operate 2,000 minimum security
beds, ADOA has requested optional
pricing for a medium security
perimeter that would allow medium
security inmates to be housed at
the facility.
Chapter 255 specifies this RFP was
to differ from the previously issued
and canceled 3,000 bed RFP from
several perspectives, including
reducing the number of beds to
2,000, and eliminating ADC as an
eligible bidder and any opening
date requirements. While the initial
2,000 bed RFP was modified
beyond what was authorized in
Chapter 255, ADOA issued an
amendment to the RFP in October
to better conform to the previously
issued 3,000 bed RFP. Differences
remain between the 3,000 bed and

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Summary of Recent Agency Reports
2,000 bed RFP’s. Some of the key
changes are:
• Increased monitoring of private
facilities, including daily
management meetings, site visits,
and an annual review.
• ADC established minimum staffing
requirements/ratios for various
services provided by the
contractor.
• Expanded mental health and
substance abuse treatment
services.
• A requirement that the contractor
assume all healthcare costs.
4,000 Public Beds
ADOA and ADC have jointly
determined the construction sites
for the 4,000 public beds and
provided a project schedule/
timeline. Chapter 255 authorized
the use of lease-purchase financing
for the construction of the beds.
Based on the report, all beds will be
minimum custody beds with a
medium custody perimeter to
enable multi-custody use and are to
be constructed as follows: 1,000
female beds in Perryville, 1,000 male
in Tucson, and 2,000 male beds in
Yuma.
According to the schedule, ADOA
and ADC anticipate the leasepurchase financing to be available
January 2008 and construction
commencing August 2008. If
achieved, the units would open
between April 2009 and December
2009, however, ADOA and ADC
believe the construction may be
accelerated. If accelerated, the
units would open between February
2009 and July 2009.
Arizona Criminal Justice
Commission – Report on Statewide
Methamphetamine Interdiction
Efforts – Pursuant to Laws 2006,
Chapter 337, the Arizona Criminal
Justice Commission (ACJC) is
required to report quarterly on the
use of $3 million appropriated in FY

2007 for increased methamphetamine interdiction efforts by the
counties.
All monies have been allocated to
counties based on the formula in
Chapter 337. ACJC reported that
as of June, 31 2007, $1.6 million had
been spent by the counties. Of this
amount, 9 counties have spent a
total of $1.5 million in the Arizona
Meth Project, a prevention program,
modeled after the Montana Meth
Project, whose goal is to reduce firsttime methamphetamine use among
Arizona youth. Maricopa County
has taken on the role of project
coordinator and has finalized
intergovernmental agreements with
other counties to use Chapter 337
funding for the project.
The remaining $143,500 was spent
on various school meth education
programs, drug task forces, and
treatment programs. The remaining
unspent funds total $1.4 million and
are unencumbered as of the end of
FY 2007.
Department of Economic Security –
Report on Annual Child Care
Expenditures – A.R.S. § 46-810
requires the Department of
Economic Security (DES) to provide
an annual child care report to the
Committee. The FY 2007 report
shows that the average number of
children served increased to 44,609,
or 0.2% above FY 2006; the number
of families served also increased by
0.2%. Across categories, the number
of children served in the Low
Income Working category
increased 6.4% and CPS related
placements increased by 8.7%,
while the number of children
receiving transitional child care
decreased by (7.1)% and the
number of TANF-related children
decreased by (25.1)%.
The amount spent by DES on child
care subsidies increased to
$177,077,100, or 7.1% above FY
2006. The average monthly subsidy

11

(Continued)

paid per child increased 7%, to
$330.80. This represents a caseload
shift to more expensive placements,
rather than an increase in rates, as
most providers have rates near or at
the maximum DES reimbursement.
There will be a legislativelyauthorized provider rate increase of
approximately 5% in FY 2008. The
total amount of co-payments
increased 5.9% from FY 2005 to
$15,184,464.
No waitlist was implemented for FY
2007 and the department reports
that no waitlist is expected in
FY 2008.
Department of Economic Security –
Report on Adequacy and Appropriateness of Title XIX Reimbursement
Rates for Developmental Disabilities
Programs – Pursuant to A.R.S. § 362959, the Department of Economic
Security (DES) has provided its
annual study of the adequacy and
appropriateness of Title XIX
Medicaid reimbursement rates to
service providers in the
developmentally disabled (DD)
program. The firm DES hired to
conduct the study states that the
adopted rates are adequate and
appropriate for FY 2008. The
department’s inflationary change in
FY 2008 is 3.2%, which allows all
adopted rates to remain at 100% of
the benchmark rates. A provider
rate increase to fund this change
was included in DES’ FY 2008
budget. For CY 2008, inflation for
the Home Health Agency Market
Basket is estimated at 3.0%;
however, the Division of
Developmental Disabilities is
currently in the process of rebasing
the current published rate schedule
and the impact that this process will
have on the current published rate
schedule is unknown at this time.
Department of Economic Security –
Quarterly Report on Progress in
Meeting Federal Work Participation
Requirements – A footnote in the FY
2008 General Appropriation Act

12

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Summary of Recent Agency Reports
requires the Department of
Economic Security to report
quarterly on progress made in
meeting federal Temporary
Assistance for Needy Families
(TANF) work participation
requirements.
The federal Deficit Reduction Act
(DRA) of 2005 changed the
calculation that determines a
state’s required work participation
rate for clients receiving TANF cash
assistance. Prior to Federal Fiscal
Year (FFY) 2007, the required work
rate was reduced based on
caseload decline since 1995. With
the implementation of the DRA, the
reduction is based on caseload
decline since 2005. For FFY 2006,
DES had a work participation rate of
29.1% and a minimum required rate
of 20%. For FFY 2007, it is
anticipated that the minimum
required rate will be 41%. As of
June 30, 2007, the work
participation rate in FFY 2007 was
21.5%. Failure to meet the required
rate will result in a federal corrective
action plan, and potentially fines up
to 5% of the Federal TANF Block
Grant, about $10 million. In the
report, DES does not discuss what it
intends to do to meet the work
participation rate, nor what it will do
if it fails to meet the required rate.
Game and Fish Department – 2007
Sunflower Shooting Range Feasibility
Study – Pursuant to Laws 2007,
Chapter 257, the Arizona Game
and Fish Department (AGFD)
submitted its study to the Joint
Committee on Capital Review to
determine the feasibility of
developing a shooting range near
Sunflower, Arizona. The proposed
property was formerly operated by
the Department of Public Safety
(DPS) and has an existing pistol
range that DPS used for firearms
practice.
The AGFD feasibility study identified
several significant issues associated
with converting the current site.

First, Special Use permits from the
Forest Service on the current site
require reclamation and the
removal of DPS buildings at the end
of the permit cycle.
Additionally, the study determined
that the area behind the old range
does not have an adequate
backstop to stop bullets from hitting
a large power line. The range is also
proximate to Forest Road 393 and
several popular hiking trails. The
AGFD determined that they could
not sufficiently modify the existing
pistol berms for rifle use to protect
these features from downrange or
wayward bullets.
Also, the footprint of the proposed
site would not provide adequate
yardage for a rifle range. Further
expansion or development of a
shooting range at this particular
location would also result in adverse
impacts to environmental, riparian,
and wildlife habitat areas. Finally,
the AGFD cites studies that found
the maximum amount of time a
person is willing to travel to a
shooting range is 25 minutes. The
site does not meet this standard for
the nearest population centers,
including Mesa and Payson.
Based on these findings, AGFD does
not recommend this site for a
shooting range.
Department of Health Services –
Report on Homeland Security
Allocation and Expenditure Report –
Pursuant to A.R.S. § 41-4255, the
Department of Health Services
(DHS) has submitted a Homeland
Security Allocation and Expenditure
report. DHS receives 2 federal
grants related to bioterrorism and
emergency preparedness: the
Coordinating Office for Terrorism
Preparedness and Emergency
Response (COTPER) grant and the
Hospital Preparedness Program
(HPP) grant. The program years (PY)
for these grants run from September
1 through August 31.

(Continued)

Funding from the COTPER grant is
allocated to DHS, county
governments, and tribal regions for
preparedness planning,
surveillance, education, and
training. From PY 2003 to PY 2007,
Arizona was awarded $92.1 million,
of which $6.2 million was specifically
for pandemic influenza
preparedness. In PY 2007, the state
received $22.3 million, of which $7.7
million went to DHS and $14.6 million
was distributed to tribes and
counties. Arizona will receive $19
million from this grant in PY 2008;
DHS has not yet determined how
monies will be distributed.
The HPP grant provides funding for
emergency preparedness at
hospitals, community health
centers, and DHS. From PY 2003 to
PY 2007, Arizona was awarded $44.8
million. Monies are currently
awarded to 71 hospitals and 23
community health centers in
addition to DHS. In PY 2007, the
state received $8.7 million, of which
$2.7 million went to DHS and $6.2
million was distributed to hospitals
and community health centers.
Arizona will receive $8.3 million in PY
2008, but DHS has not yet
determined how monies will be
distributed.
Department of Insurance – Cost
Benefit Report for Electronic
Transactions – Pursuant to A.R.S. §
35-142 (O) all agencies are required
to submit a cost benefit report when
the percentage of electronic
transactions first exceeds at least
30% of an agency’s total
transactions. The cost benefit report
is required by statute to include the
costs of convenience fees, the
amount of revenue generated, and
any realized cost savings. In April
2007, during the second month in
which the Department of Insurance
began offering online renewals for
insurance licenses through their
Insurance Professional License
Update System (IPLUS), electronic
transactions exceeded 30% of total

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Summary of Recent Agency Reports
renewal transactions.
The Department of Insurance
reports that from April 1, 2007 to
August 31, 2007, it processed 3,460
license renewal transactions
through IPLUS, representing 47.4% of
the 7,307 total license renewal
transactions processed. Total costs
of electronic charges during this
period were $9,018.33, of which
$622.80 was due to web portal “pertransaction” processing charges
and $8,395.53 from credit card
discount fees, and total license
revenue generated through the
IPLUS system was $465,900. Overall
savings, due to a reduction in
processing times and fewer printing
and postage costs, was $16,015.64.
All information is based on renewals
from April 1 to August 31, 2007.
State Land Department – Quarterly
Report on State Trust Land Activities
– The FY 2007 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
fourth quarter of FY 2007, the State
Land Department completed 8
auctions, selling 448 acres valued at
$203.3 million. The department also
completed 2 lease auctions, leasing
151 acres with an appraised value
of $74.2 million. In addition, the
department leased 614 acres of
State Trust land for right-of-way use
valued at $9.8 million and began or
continued planning and
engineering studies on 786,400
acres.
For FY 2007 as a whole, the
department completed 16 land
sales auctions, selling 4,262 acres
valued at $453.7 million. At 5 lease
auctions, the department entered
into long-term leases for 151 acres
of land valued at $181.8 million. Of
the $453.7 million in total sales

value, $60 million was received in
the fiscal year as cash sales and
down payments on financed sales.
The balance was financed directly
through the Land Department and
will be paid off over time.
The department recorded FY 2007
revenues of $332.3 million. That
total includes the $60 million in cash
sales from FY 2006, plus principal
and interest payments on financed
sales from previous years, payments
on commercial and school leases,
special use permits, right-of-way
applications, natural resources
leases, and other revenue sources
for the department. Total revenues
in FY 2006 were $409.1 million.
Arizona Department of Public Safety
– Report on Sworn Officer Salary
Adjustments – Pursuant to Laws
2007, Chapter 255 (General
Appropriation Act), the Arizona
Department of Public Safety (DPS) is
required to report on the allocations
for Sworn Officer Salary Adjustments
from the Parity Compensation Fund.
In addition, DPS was required to
report a salary comparison, by
classification, of the 5 highest
paying law enforcement agencies
in the state and those that have an
excess of 100 sworn positions.
Pursuant to Chapter 255, $2,000,000
of the $2,672,900 appropriated in FY
2008 for sworn salary adjustments
was to be distributed to Officer 1,
Officer II, and Officer III
classifications. According to DPS, of
the $2,672,900, $2,062,000 was
distributed to the officer positions,
and $610,900 was distributed to
other sworn positions, as
determined by DPS.
Of the 14 other agencies with over
100 sworn personnel, starting
salaries for DPS officers are 1.7%
below the average and DPS
sergeants are 9.4% above the
average. DPS maximum pay for
Lieutenant, Commander and Chief
positions are, on average, 2.3% less

13

(Continued)

than the other agencies with over
100 sworn personnel.
Overall, DPS sworn salaries are 14.1%
behind the market average or the
average salaries in the 5 highest
paying law enforcement agencies
in the state.
Arizona Board of Regents – Credit
Hour Threshold FTE Student Counts –
Pursuant to A.R.S. § 15-1626, the
Arizona Board of Regents (ABOR) is
required to report on the number of
students that met or exceeded the
undergraduate credit hour
threshold at universities under
ABOR’s jurisdiction during FY 2007.
A.R.S. § 15-1626 states that the
Legislature shall not appropriate
monies to support, and ABOR may
differentiate tuition paid by,
university students who have
exceeded 155 credit hours in FY
2006, 150 credit hours in FY 2007,
and 145 credit hours in FY 2008 and
each year thereafter. A.R.S. § 151626 exempts certain types of
credits from the undergraduate
credit hour threshold, such as
credits earned in a degree program
that requires credits above the
threshold.
ABOR reports 224 full-time
equivalent (FTE) students over the
150 credit hour threshold throughout
the Arizona University System as of
the 21st day of the fall 2006
semester. Table 8 below
summarizes the number of FTE
students in excess of the 150 credit
hour threshold by campus:
Table 8

Credit Hour Threshold FTE Students
Fall 2006
Campus
FTE Students
ASU - Main
141
ASU - East
16
ASU - West
11
NAU
14
UofA - Main
42
UofA - HSC
0
Total
224

14

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Summary of Recent Agency Reports
Arizona Department of Water
Resources – Report on Assured and
Adequate Water Supply Program
Fees – Pursuant to a FY 2008
General Appropriation Act
footnote, the Arizona Department
of Water Resources (DWR) has
submitted the amount of fees
collected by the Assured and
Adequate Water Supply (AAWS)
program.
DWR reports that for the quarter
ending September 30, 2007, the
department received $121,282 in
revenues to the AAWS
Administration Fund. Laws 2005,
Chapter 217 established the fund to
provide for the costs and expenses
incurred by DWR when determining
and declaring assured and
adequate water supplies. The
AAWS Administration Fund consists
of monies that are paid to the DWR
for applications related to assured
and adequate water supplies.
Previously, fees were deposited into
the General Fund.
Actual collections have been lower
than expected, which DWR notes is
due to the declining housing
market. The department previously
estimated total FY 2008 revenues of
$1.1 million.
Arizona Department of Water
Resources – Report on Interstate
Water Banking – Pursuant to A.R.S. §
45-2473, the Arizona Department of
Water Resources has submitted a
report accounting for all monies
received through the Interstate
Water Banking Agreement with
Nevada and for all disbursements
made with those monies. In
addition, the report also includes
monies used to purchase or store
water or otherwise fulfill contractual
obligations, prepaid monies to the
Central Arizona Project, monies
received that are placed in an
account with the State Treasurer,
and any contract that obligates the
Arizona Water Banking Authority
(AWBA) to pay or disburse these

monies to any other entity, including
the Central Arizona Project.
In 2001, the AWBA entered into an
agreement with the Southern
Nevada Water Authority (SNWA) to
use its best efforts to store 1.25
million acre-feet of long-term water
storage credits for future use by
SNWA. In 2004, the agreement was
amended and required SNWA to
pay AWBA $230 million for delivery
and storage of the water. Equal
payments of $23 million per year
from Nevada to the AWBA will
begin in 2009 and continue through
2018.
In the 2004 agreement, SNWA also
agreed to pay an additional $100
million to AWBA to guarantee the
availability of the 1.25 million
storage credits for Nevada. The
$100 million may be used to
purchase water prior to receiving
the $230 million. If the additional
$100 million is not needed to
guarantee the credits in the short
term, Arizona may use this amount
for its own purposes, subject to
Legislative appropriation. Any
amount used from the $100 million
to purchase storage credits will be
repaid, with interest.
AWBA received the $100 million
from SNWA in 2 installments in 2005,
which were deposited in a
subaccount with the State
Treasurer. In FY 2007, the AWBA did
not receive any additional funds
from SNWA for the delivery and
storage of water pursuant to the
Amended Agreement. In FY 2007,
AWBA used $44.3 million to store
water for Nevada, compared to
$37 million spent in FY 2006 for this
purpose. By December 2007, the
AWBA expects to expend another
$6.3 million to store additional
water. The ending balance for FY
2007 is estimated to be $22.7 million.
As noted above, this $50.6 million
will be repaid with interest.

(Continued)

AWBA estimates that a total of
529,100 acre feet of water, or 42%
of the contractual amount, will
have been stored on behalf of
SNWA by the end of December
2007.

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

15

Other Issues
DEMA Emergency Transfer
The Governor is authorized by A.R.S.
§ 35-192 to declare emergencies in
response to major disasters. This
section also allocates $4 million from
the General Fund to the Governor’s
Emergency Fund every fiscal year
for liabilities, expenses, and
reimbursements arising from these
disasters. Through the end of
September $450,000 had been
allocated for 3 emergencies.

On August 28, 2007, $200,000 was
allocated from the Governor’s
Emergency Fund for damages
incurred from the August Nogales
Wash flood. An additional $200,000
was allocated on September 14,
2007, to aid in the repair of
infrastructure damage and other
emergency needs resulting from
July monsoon storms. Lastly, a
$50,000 allocation was made on

September 6, 2007, to help
reimburse the Arizona Department
of Emergency Management for
costs incurred while participating in
hazardous material cleanups.

Federal Student Aid Legislation
The College Cost Reduction and
Access Act was signed into law on
September 27, 2007 by President
Bush. The law makes several
changes to federal student aid
programs, which include: new
mandatory funding for Pell grants,
several changes to repayment
terms for student borrowers, a
reduction in interest rates on some
federal loans, and more funding for
grant programs.
The new legislation also reduces
government subsidies to for-profit
lenders and also provides an
increase in college aid. Below are
some highlights of the new
legislation.
Pell Grants
The Federal Pell Grant Program
provides need-based grants to lowincome undergraduate and certain
post baccalaureate students to
promote access to postsecondary
education. Below are some recent
changes to the grant program:
• Increases the maximum award
amount by 12.5% over the next 4
academic years (see Table 9).
• Eliminates the “tuition sensitivity”
provision, which currently
discourages low-income students
from attending low-cost
institutions in order to fully benefit

from the Pell grant.
• Increases the family income level
under which a student is
automatically eligible for the
maximum Pell grant from $20,000
to $30,000, and indexes this level
to the Consumer Price Index.
• Establishes Promise Grants,
provided to students with the
greatest need who are also
eligible for Pell grants.
Table 9

Pell Grant Award Amounts

Academic Year
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012

Maximum Amount
$4,310
$4,800
$4,800
$5,000
$5,400

Stafford Loans
Federal Stafford loans are fixedrate, low interest loans available to
undergraduate students attending
accredited schools at least half
time. Below are some recent
changes to the loans:
• Reduced interest rates from 6.8%
currently (in academic year 2007)
to 6% in 2008, 5.6% in 2009, 4.5% in
2010, and 3.4% in 2011.
New Program Funding
• Provides $57 million per year in FY
2008 through FY 2011 to restore

funding to Upward Bound
programs. These monies provide
support to low-income students in
their preparation for college
entrance. Funding for this
program was suspended in FY
2007.
• Provides funding for TEACH grants,
which allocate $4,000 per year for
high-achieving graduate and
undergraduate students who
commit to teaching a high-need
subject for 4 years.
• Provides $25 million per year for
College Access Challenge Grants
in FY 2008 and FY 2009. These
grants are meant to increase
postsecondary access to
underserved students through a
2:1 match with participating
states.

16

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

Other Issues

(Continued)

Estimated Revenues from Super Bowl XLII
On February 3, 2008 Arizona will host
Super Bowl XLII, at the University of
Phoenix Stadium. JLBC Staff has
received several inquires as to the
projected impact of the Super Bowl
on state revenues.
There have been many studies
done to estimate total economic
impact of such events, including this
upcoming Super Bowl. Many of
those estimates put the total impact
over $500 million. These estimates
include indirect and induced
effects, not all of which are easily
agreed upon, and in some cases
are not taxable.
JLBC Staff has limited its analysis to
the impact on state tax revenues.
We used several sources, including
a study by the Anderson Economic
Group (AEG) for the 2006 Super
Bowl in Detroit, an analysis from
Arizona State University of the 1996
Super Bowl held in Tempe, and a
2003 analysis by Elliot D. Pollack and
Company for the Phoenix Civic
Plaza.
Using these sources, we have
attempted to estimate direct
taxable spending by out-of-state
visitors who come for the Super Bowl.
We have estimated that visitor direct
spending would be between $70
and $110 million. This would produce
state General Fund revenue
between $3.6 and $5.5 million.
The analysis is based on the
following assumptions:
• 90% of fans attending the Super
Bowl will be from out of the state
(based on estimates from the AEG
and ASU studies).
• In addition to the 65,700 out-ofstate fans that attend the game,
17,000 fans will visit from out of
state without attending the game
(based on estimates from the ASU
study).

• 70% of visiting fans will rent
lodgings at an average room rate
of $200 per night with an
occupancy rate of 1.5 visitors per
room. The average stay will be
3.6 nights (based on blended
estimates from the AEG, ASU and
Elliot D. Pollack studies, as well as
information from the Arizona Hotel
and Lodging Association).
• Average daily spending by visitors
will be between $233 and $360,
including lodging, meals, local
travel, and other purchases
(based on estimates from the
AEG, ASU and Elliot D. Pollack
studies).
• The 5% transaction privilege tax
(TPT) receipts will be deposited to
the state General Fund.
The analysis also excludes the
following factors:
• Any increase in corporate or
individual income tax due to
increased profits or employment
resulting from the Super Bowl. It is
difficult to determine what
revenues are actually generated
by the event, especially
considering factors like the short
duration of the event and that
Super Bowl profits and
employment displace some
existing profit and employment.
• Any TPT collections on the
stadium grounds, as they are
retained by the Arizona Sports
and Tourism Authority (AZSTA).
• Spending by businesses or the
host committee associated with
the Super Bowl. It is harder to
estimate this spending and
determine what portion would be
taxable.
• Indirect or induced economic
activity, which requires difficult
economic assumptions.
• Any discount for tourism revenue
displaced by the Super Bowl. For
example, during January and

February, Phoenix area hotels are
generally about 80% full. Some of
these visitors and their associated
revenue will be displaced by
Super Bowl visitors.

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2007

17

State of Arizona
General Fund Revenue

Change from Previous Year and Enacted Forecast
September 2007
Current Month

FY 2008 YTD (Three Months)

Change From
Actual

September 2006

September 2007

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

September 2006

September 2007

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use

366,842,873

Income - Individual

362,262,598

6,760,138

177,587,061

(13,574,857)

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

71,007

($13,046,792)

(3.4) %

($44,197,727)

(10.8) %

$1,126,360,250

$2,543,897

0.2 %

1.9

(22,312,902)

(5.8)

897,965,536

25,990,098

3.0

(55,304,164)

(7.1)

(17,210,239)

(8.8)

240,490,933

(21,721,993)

(8.3)

(30,504,567)

(11.3)

427,381

(11,163)

(2.5)

(872,619)

(67.1)

24,218

51.8

6,856,567

1,339,416

31,468,468

9,497,799

0

(1,792)

$945,125,553

($9,042,375)

(7.1) %
(5.8)

21,007

42.0

24.3

941,567

15.9

14,481,615

(1,802,218)

(11.1)

(3,263,385)

(18.4)

43.2

8,768,468

38.6

118,226,506

13,652,225

13.1

6,726,506

6.0

--

254,076

108,857

75.0

254,076

(43.2)

140,879

(11,939)

(7.8)

(54,496)

(40,505) (100.0)

36,979

($86,205,850)

(4.6)
(0.9) %

0
(28,146)
($74,017,972)

(7.3) %

$2,398,347,176

$18,747,764

0.8 %

($169,224,499)

-(27.9)
(6.6) %

Other Revenue
Lottery

5,678,800

2,357,500

71.0

3,029,100

114.3

9,236,219

2,542,019

38.0

3,404,619

58.4

License, Fees and Permits

2,518,439

(2,523,071)

(50.0)

(1,851,561)

(42.4)

7,945,229

(4,554,222)

(36.4)

(3,381,471)

(29.9)

14,320,458

12,645,162

Interest

23,345,058

15,773,614

208.3

158.7

30,920,217

69.2

13,008,517

72.6

Sales and Services

4,563,544

233,212

5.4

(603,856)

(11.7)

9,771,630

(129,418)

(1.3)

(2,281,070)

(18.9)

Other Miscellaneous

1,752,951

(881,278)

(33.5)

(30,349)

(1.7)

3,342,644

(2,691,945)

(44.6)

(725,356)

(17.8)

--

0

0

--

0

--

(24.1)

12,194,367

11,397,185

--

11,064,367

--

21,089,606

40.3 %

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

0
539,014

0
(61,685)

-(10.3)

38,397,806

14,898,292

63.4 %

$983,523,359

$5,855,917

0.6 %

0
(170,986)
14,692,806
($59,325,166)

62.0 %

73,410,306

19,208,781

35.4 %

(5.7) %

$2,471,757,482

$37,956,545

1.6 %

($148,134,893)

(5.7) %

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

(57,044,911)
(57,044,911)
$926,478,448

(11,109,023)

24.2

(11,109,023)

24.2 %

($5,253,106)

(0.6) %

0
0
($59,325,166)

0.0
0.0 %
(6.0) %

(171,134,732)

(33,327,067)

24.2

(171,134,732)

(33,327,067)

24.2 %

$2,300,622,750

$4,629,478

0.2 %

0
0
($148,134,893)

0.0
0.0 %
(6.0) %