JLBC - Monthly Fiscal Highlights

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

This Month
Total October General Fund revenue
collections were $683.6 million, or (6.4)% below
October of last year. This amount was $(78.9)
million below the forecast based on the
enacted state budget.
For the first third of FY 2008, General Fund
collections are up 0.1% when compared to last
year, and are $(226.9) million less than forecast.
When factoring in Urban Revenue Sharing,
year-to-date collections are (1.4)% below last
year. (See page 11 for detail information).

www.azleg.gov/jlbc.htm

Two of the three major revenue categories
were below the forecast in October:
• Sales tax collections declined (0.8)%
compared to October 2006, and were
$(34.7) million short of the monthly forecast.

“For the first third
of FY 2008,
General Fund
collections are

November 2007

• Individual income tax collections were
down (9.7)%, which was $(49.0) million
below forecast.
• Corporate income tax collections were
4.1% above last year, and $2.6 million
above the forecast.
JLBC/JCCR Meetings - The Monthly Fiscal
Highlights include a summary of the November
JLBC and JCCR meetings (pages 5-6). Among

the items considered, the JLBC gave an
unfavorable review to DES' proposal to raise
the Division of Developmental Disabilities'
therapy rates and eliminate travel
reimbursements. Members expressed concern
that the change may result in a decrease in
the availability of therapy services for rural
clients. The JLBC also gave a favorable review
to a proposal by the State Treasurer to
eliminate their management fees with a
provision that the Legislature make statutory
changes allowing the Treasurer to fund the
office via a portion of earnings.
The JCCR reviewed a number of items,
including the Exposition and State Fair Board's
Coliseum roof repair expenditure plan. The
JCCR favorably reviewed the Board's request
to use $3.2 million of State Fair Fund monies to
repair 2 failed cables, install a new roof
membrane, and purchase an acoustical
monitoring system. The JCCR also gave a
favorable review to a University of Arizona
proposal for a $26 million expansion of its
Student Recreation Center funded primarily
with student recreation fees.
Recent Reports – The Highlights also include a
summary of recent statutory reports submitted

up 0.1% when
compared to last
year, and are

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

$(226.9) million
less than
forecast”

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

JLBC Meeting Summary
• ADOA – 911 Expenditure Plan...........................5
• ADOA – Telecommunications Rates ...............5
• DES – DDD Therapy Rates ..................................5
• DOR – FY 2008 Enforcement Goals ..................5
• Treasurer – Management Fee Changes .........5
JCCR Meeting Summary
• ADOA – DJC HVAC & Electrical Upgrades ....6
• ADOA – Naturopathic Rent Deferment ..........6
• AESF – Coliseum Roof Repair Expenditure ......6
• Game & Fish – FY 2008 Building Renewal .......6
• Lottery – FY 2008 Building Renewal ..................6
• UA – Hazardous Waste Facility Enclosure .......6
• UA – Student Rec Center Expansion................6
• UA – West Stadium Renovations.......................6

Summary of Recent Agency Reports
City of Phoenix – Convention Center.............. 7
ADOA/GITA – AZNet Report.............................. 7
AHCCCS – Healthcare Group Program ......... 7
Comm. Colleges – Annual Report ................... 7
ACJC - Criminal Justice Information System
Project................................................................... 7
• ADE – K-12 Aggregate Expenditure Limit........ 8
• ADE – Updated Budget Report ........................ 8
• DEQ – Vehicle Emissions Progress Report....... 8
• DEQ – WQARF Report........................................ 8
• DHS – MethSmart Prevention Program............ 8
• AZ Historical Society Expenditures.................... 9
• Supreme Court – Adult and Juvenile
Probation Receipts and Expenditures............. 9
• DOR – Ladewig Expenditures............................ 9
• ABOR - Report System’s Financial Aid...........10
•
•
•
•
•

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

“In the first third
of FY 2008, sales
tax revenues are
flat compared to

This Month

(Continued)

to the JLBC (pages 7-10). The Department of
Education reported that it estimates a net FY
2008 General Fund surplus of $61.1 million. Most
of that amount, $48.6 million, is for lower-thanbudgeted FY 2007 enrollment growth (which
affects FY 2008 formula funding). AHCCCS
reported in its semi-annual report that total
statewide Healthcare Group enrollment has

declined by 930 people to 25,984 people as of
October 13, 2007. AHCCCS also reported it
made other changes to the program including
increased premiums, copayments, and
deductibles.

last year.”

October Revenues
Sales Tax collections were $373.8 million in
October. This amount was (0.8)% below last
year, and $(34.7) million below forecast. In the
first third of FY 2008, sales tax revenues are flat
compared to last year. Table 1 displays the
October and year-to-date growth rates for the
major sales tax categories.
Table 1

Sales Tax Growth Rates

Retail
Contracting
Utilities
Use
Restaurant & Bar
“Individual
income tax
collections
were… $(49.0)
million less than
forecast.”

October
(2.3)%
(12.0)%
17.6%
7.8%
4.1%

Year-to-Date
(1.7)%
(5.2)%
6.1%
8.1%
4.7%

Retail and contracting collections, which
together account for two-thirds of all sales
revenues, both declined in October.
In the first 3 months of FY 2008, taxable sales in
the retail category are down (2.3)% over the
same period last year. Within retail, the largest
subcategory, General Merchandise and
Miscellaneous Retail, is down (1.0)%. The single
largest drag on retail continues to be Motor
Vehicle Dealers and Miscellaneous Automotive,
Table 2

with a (10.9)% decline from last year. Excluding
Motor Vehicles, taxable retail sales are up 0.6%
compared to the same period last year.
Taxable retail sales data by subcategory is
shown in Table 2 below.
Individual Income Tax collections were $275.5
million, or (9.7)% below last year. This collection
level was $(49.0) million less than forecast.
Table 3 displays individual category growth
rates.
Table 3

Individual Income Tax Growth Rates
October
Year-to-Date
Withholding
5.7%
6.4%
Estimated +
4.6%
(0.7)%
Final Payments
Refunds
198.2%
83.1%
October withholding was 5.7% above last year.
After some volatility in the first two months of the
fiscal year, year-to-date withholding collections
have leveled off at around 6% growth.
Estimated and final payments also increased
over October of last year. Payments for the
month were almost $61million, which is an
increase of 4.6%. Year-to-date, payments are

Taxable Retail Sales by Subcategory

General/Misc. Merchandise
Motor Vehicles/Misc. Auto.
Bldg Hardware, Mfg Home
Food and Liquor Stores
Furniture, Home Furnishings
Clothing and Accessories
Manufacturing
Other Subcategories
Total

% of
Total Sales
28.3 %
24.0 %
8.0 %
7.7 %
6.9 %
6.1 %
5.6 %
13.3%
100.0%

YTD % Change
Over FY 2007
(1.0)%
(10.9)%
(5.6)%
8.9 %
2.9 %
1.9 %
(2.9)%
3.3%
(2.3)%

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

October Revenues

3

(Continued)

almost flat compared to the first third of last
fiscal year.
Refunds of almost $(72) million were 3 times the
level of refunds made in October 2006. This
level of refunds is likely due to the “hangover
effect” of taxpayers requesting 6 month extensions in filing their 2006 tax returns, resulting in
the payment of refunds this year from a prior
tax year.

Corporate Income Tax collections were $56.1
million in October. This was 4.1% above last
year, and $2.6 million above the forecast for
the month. While October is not one of the
large collection months for corporate income
tax, the increase brings collections for the first
third of the fiscal year to $(27.9) million below
the forecast.

Table 4

General Fund Revenues
Compared to Enacted Forecast and FY 2007 Collections
($ in Millions)
FY 2008
Difference From
Difference
Collections
Forecast 1/
From FY 2007
October
$ 683.6
$ (78.9)
$ (46.8)
Year-to-Date
$ 2,984.4
$ (226.9)
$ (42.0)
____________
1/ Enacted FY 2008 budget (June 2007).

Recent Economic Indicators
NATIONAL
The Bureau of Economic Analysis’ initial 2007
3rd quarter estimate of U.S. Gross Domestic
Product (GDP) indicates the economy grew at
an annualized rate of 3.9%, a slight increase
over the 2nd quarter growth rate of 3.8%.
Personal consumption (consumer spending),
exports, and federal government spending
significantly contributed to the growth despite
negative contributions from residential
investment and imports.
The Conference Board’s U.S. Consumer
Confidence Index fell for the 4th straight month
in November, nearing lows not reached since
2005. The index currently totals 87.3, (8.3)%
below October 2007 levels and (17.1)% below
the index in November 2006. The ongoing
decrease has been attributed to deteriorating
consumer expectations, consumers’ negative
assessment of current conditions, and the
labor market.
The U.S. Index of Leading Economic Indicators
decreased (0.5)% in October, continuing the
yearlong pattern of alternating monthly
increases and decreases that have essentially
offset each other. Seven of the 10
components that make up the composite
index decreased in October. The building

permit component again made the largest
negative contribution, followed by
unemployment insurance claims and the
index of consumer expectations.
U.S. semiconductor billings increased 6.1% in
September (3-month moving average) to
$3.81 billion, though year over year chip sales
were down (6.3)%. The increase in sales is
consistent with yearly historical patterns as
consumers gear up for the holiday season.
Demand was particularly strong for
traditional consumer applications in the third
quarter.
The U.S. Consumer Price Index (CPI) (3month moving average) remained
essentially unchanged in October. The year
over year increase was 2.7%. All sub-indices
of the CPI increased slightly in the months of
September and October. Excluding the
impact of food and energy prices, the core
CPI increased 0.2% in October and was 2.2%
higher than a year ago.
ARIZONA
October total statewide non-farm
employment increased, year over year, by
1.9%. By comparison, the October yearover-year average growth rate in the prior 10

“The Conference
Board’s U.S.
Consumer
Confidence
Index fell for the
4th straight
month in
November,
nearing lows not
reached since
2005.”

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

Recent Economic Indicators

(Continued)

years was 3.4%. Arizona’s unemployment rate
increased from 3.3% in September to 3.5% in
October.
Construction employment decreased by
(7.4)% compared to October 2006, with losses
reported in all major subsectors. The average
year-over-year growth rate for October in the
past ten years was growth of 6.5%.
Despite a few areas of improvement in
October over the previous month, the Greater
Phoenix real estate market remains weak.
While the number of existing single-family
homes sold in October increased by 18.4%
over the prior month, the number of homes
sold in October is (27.6)% below sales in
October 2006. Despite the month-over-month
increase in sales volume, the single-family
median home sales price fell by (3.2)% in
October to $242,000, or (5.8)% below the
median price a year ago.

Sales of existing townhouse-condominium units
also rose in October – totaling 710 units or 3.6%
more units sold than the previous month. The
median sales price remained unchanged at
$170,000.
Statewide, the number of statewide singlefamily residential building permits (3-month
moving average) further decreased by (19.7)%
from the prior period and (29.2)% on a yearover year basis, to 2,764. The comparable
number of multi-family building permits
authorized increased to 791, resulting in a
year-over-year increases 25.8%. While
permitting activity in the multi-family segment
of the market has increased, this segment of
the market tends to have significant volatility
from month-to-month.
The Arizona Business Conditions Index (BCI)
dropped (12.8)% to 48.2 in October. A reading
of over 50 corresponds to local economic
growth, while a reading below 50 suggests a

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

October
October
October
October
Aug-Oct
Aug-Oct

3.5%
2.74 million
186,100
235,800
$77.1 million
$156.3 million

6.1%
0.4%
(0.2)%
(1.7)%
(3.3)%
(2.8)%

(14.6)%
1.9%
(0.9)%
(7.4)%
(5.2)%
(2.1)%

Jul-Sept
Jul-Sept

2,764
791

(19.7)%
0.3%

(29.2)%
25.8%

October
October

3,610
710

18.4%
3.6%

(27.6)%
(22.4)%

October
October
September
August

$242,000
$170,000
3.27 million
$7.11

(3.2)%
(0.0)%
(9.3)%
(4.7)%

(5.8)%
(2.9)%
7.0%
(1.5)%

August
October

121.3
48.2

0.2%
(12.8)%

1.8%
(19.8)%

3rd Quarter 2007
4th Quarter 2007
2nd Quarter 2007
July 1, 2006
November
October
Aug-Oct

101.9
42.5
$209.2 billion
6.17 million
1,081,555
83,715
37,611

3rd Quarter 2007

$11.6 trillion

3.9%

2.6%

November
October
Jul-Sep
Aug-Oct

87.3
136.9
$3.81 billion
208.4

(8.3)%
(0.5)%
6.1%
0.1%

(17.1)%
(1.0)%
(2.1)%
2.7%

(4.1)%
(15.8)%
1.1%
3.6%
(0.1)%
1.6%
122 inmates

(0.8)%
(11.6)%
7.5%
3.6%
5.0%
(4.4)%
2,214 inmates

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

Recent Economic Indicators

(Continued)

slowdown in the overall level of economic
activity in the near term. Of all components
comprising this index, the sharpest decline
occurred in new orders.

September and (4.4)% below the level
reported in October 2006. The FY 2008
budget projects the TANF caseload will grow
by 2.5% to 84,700 recipients.

In November, the number of AHCCCS
recipients totaled 1,081,555, a (0.1)% decrease
from October 2007 levels. As a result of the
small decrease, AHCCCS participation is 5.0%
above November 2006 levels. The FY 2008
budget projected the AHCCCS caseload
would grow by 2.5%.

The Department of Corrections’ inmate
population increased by an average of 122
inmates per month between August and
October, below the budgeted increase of
160 net new inmates per month. This
increase results in a 3-month average inmate
population of 37,611, or 2,214 more inmates
than the same period in FY 2006.

The number of TANF recipients increased to
83,715 in October, which is 1.6% above

JLBC Meeting
At its November 20, 2007 meeting, the Joint
Legislative Budget Committee considered the
following issues:
Department of Administration – Review of
Telecommunications Contractor and Carrier
Cost Rate Structure – The Committee gave a
favorable review to the contractor and carrier
cost rate structure of the Statewide
Telecommunications Management Contract,
with the provision that the favorable review did
not constitute an endorsement of any FY 2009
General Fund appropriations to cover higher
AZNet costs or additional funding requests, nor
does it constitute an endorsement of the ADOA
expenditure plan.
Department of Administration – Review of
Emergency Telecommunication Services
Revolving Fund Expenditure Plan – The
Committee gave a favorable review to the $8.5
million wireless portion of the Emergency
Telecommunications Services Revolving Fund
(ETSF) expenditure plan. In FY 2008, ADOA
expects to distribute $25.9 million from the ETSF
to support 911 emergency services in
communities across the state.
Department of Economic Security – Review of
Increase to Division of Developmental
Disabilities’ Therapy Rates – The Committee gave
an unfavorable review to the department’s
proposal to raise the Division of Developmental
Disabilities’ (DDD) therapy rates. The DES
proposal eliminated provider travel reimbursements and increased provider rates in rural
areas. The rate increase is estimated to have

an annual $1.6 million General Fund cost. DES
has proposed this rate change to improve
service availability by encouraging more
locally-based provision of services. Committee
members expressed concern that therapy
providers may not be willing to relocate to rural
areas to provide services locally to clients in
those areas, and that may result in a decrease
in the availability of services for those clients.
Department of Revenue – Review of General
Fund Revenue Enforcement Goals for FY 2008
– The Committee gave a favorable review of
the report on the enforcement goals of the
Department of Revenue (DOR). DOR’s
General Fund revenue enforcement goal for
FY 2008 is $369.8 million, which is $(57.2)
million, or (13.4)%, below their FY 2007 actual
collections. DOR believes that the FY 2007
collections include one-time items that will not
be replicated in FY 2008.
State Treasurer – Review of Changes to
Management Fees – The Committee gave a
favorable review of the Treasurer’s proposal
to eliminate their management fees with the
provision that the Legislature make statutory
changes allowing the Treasurer to retain a
portion of earnings to fund the office. The
Committee also gave a favorable review of
the Treasurer’s plan to immediately reduce
the management fee from the current 8 basis
points to 6 basis points. The Treasurer expects
this plan to attract more assets from local
governments and increase yields.

5

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

JCCR Meeting
At its November 20, 2007 meeting,
the Joint Committee on Capital
Review considered the following
issues:
Arizona Department of
Administration – Review of the
Department of Juvenile Corrections
HVAC and Electrical Upgrades –
The Committee gave a favorable
review for the Department of
Juvenile Corrections (DJC) to spend
$835,000 on HVAC upgrades and
electrical repairs. Of this amount,
$530,000 will be spent on HVAC
repairs at the Adobe Mountain,
Catalina Mountain, and Black
Canyon Mountain Schools, $125,000
will be spent on electrical repairs at
the Catalina Mountain and Black
Canyon Mountain Schools, and the
remaining $180,000 will be spent on
engineering costs and for project
contingencies.
Arizona Department of
Administration – Consider
Recommending Rent Deferment for
the Naturopathic Physicians Board
of Medical Examiners – The
Committee recommended the
$6,600 partial rent exemption for FY
2008 and FY 2009 requested for the
Naturopathic Physicians Board of
Medical Examiners.
Arizona Exposition and State Fair
Board – Review of Coliseum Roof
Repair Expenditure Plan – The
Committee gave a favorable
review to the Arizona Exposition and
State Fair Board’s (AESF) request to
use $3.2 million from the Arizona
Exposition and State Fair Fund to
finish repairing the Coliseum roof. In
May, the Committee favorably
reviewed AESF’s plan to spend $3.0
million on roof repairs. This $3.2
million amount will be spent on
repairing the 2 remaining failed
cables, installing a new membrane
covering on the roof, and
purchasing and installing an
acoustical monitoring system.

Arizona Game and Fish Department
– Review of FY 2008 Building
Renewal Allocation Plan – The
Committee gave a favorable
review to the $474,200 FY 2008
Building Renewal Allocation Plan.
The plan includes $101,200 for fish
hatchery projects, $141,000 for a
shooting range project, and
$232,000 for office renovation and
replacement projects.
Arizona State Lottery Commission –
Review of FY 2008 Building Renewal
Allocation Plan – The Committee
gave a favorable review to the
$60,000 FY 2008 Building Renewal
Allocation Plan with the provision
that the Commission report on the
use of its contingency monies. Of
this amount, $25,000 will be used to
replace the elevator controller,
$20,000 will be used for 4 smaller
projects, and the remaining $15,000
will be used for project
contingencies.
University of Arizona – Review of
Hazardous Waste Facility Enclosure
Bond Project – The Committee gave
a favorable review with the 3
standard university bonding
provisions to the proposal to finance
the Hazardous Waste Facility
Enclosure project with a $2.8 million
system revenue bond issuance. The
project will build an enclosed 6,556
square foot facility that is protected
from the elements and provides
environmental control and
respiratory protection for workers.
The facility will provide additional
space for waste processing,
segregated waste storage,
analytical testing, supply storage,
office support, and expansion
space for future hazardous waste
output.
University of Arizona – Review of
Student Recreation Center
Expansion Bond Project – The
Committee gave a favorable
review with the 3 standard university
bonding provisions to the proposal
to finance the Student Recreation

Center Expansion project with a
$26.1 million system revenue bond
issuance and $1.5 million from
retained student fees. The $26.1
million in revenue bonds will be paid
for with student recreation fees. The
project will expand the existing
facilities to include additional fitness
facilities, a Multipurpose Athletic
Court gymnasium, landscaped
outdoor space for casual recreation
activities, and additional space for
the Outdoor Adventures program,
which organizes university
recreational trips and provides
rental equipment.
University of Arizona – Review of
West Stadium Renovations for the
Laboratory of Tree-Ring Research
Bond Project – The Committee gave
a favorable review with the 3
standard university bonding
provisions to the proposal to finance
the West Stadium Renovations
project with a $2.4 million system
revenue bond issuance and
$800,000 from Federal grants. The
project will accommodate the
growing size of the faculty and staff
and the increasing sophistication of
tree-ring science. The renovation
project will occur in 2 phases and
encompass 16,300 square feet.
Completion of the project will allow
the Laboratory of Tree-Ring
Research to vacate the
Mathematics East Building.

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

7

Summary of Recent Agency Reports
City of Phoenix – Report on the
Phoenix Convention Center
Expansion Project – The City of
Phoenix has issued its seventh
progress report on the Convention
Center expansion project.
The state’s obligation for the
Convention Center expansion
project is to pay the debt service
and related costs on $300 million in
construction bonds, beginning in FY
2010.
Based on the City’s report, the
following items are highlighted:
♦ The project is being completed in
2 phases. Phase 1 of the project,
consisting of a new West Building,
has been completed and hosted
its first convention in July 2006.
♦ Phase 2, consisting of a new North
Building and a renovated South
Building, has begun and is on
schedule to be completed by
December 2008.
ADOA/GITA – Quarterly Report on
AZNet Implementation – In
December 2004, the Joint
Committee on Capital Review
requested the Arizona Department
of Administration (ADOA) and the
Government Information
Technology Agency (GITA) to report
quarterly on the Arizona Network
(AZNet), as created by the
Statewide Telecommunications
Management Contract. The report
also included results from a survey
of AZNet agencies showing a
customer satisfaction score of 5.5
on an 8 point scale. In the first
quarter report, the AZNet program
reported carrier cost savings of
$949,000. ADOA also indicated
contract amendments have been
agreed to that adjusted the
targeted carrier savings schedule
and increased office space in state
buildings for AZNet staff.
AHCCCS – Semi-Annual Report on
Healthcare Group – Pursuant to

A.R.S. § 36-2912, AHCCCS is
submitting its semi-annual report to
the Committee on the number and
types of businesses participating in
Healthcare Group (HCG). This
report also provides a description of
HCG activities since its last semiannual report submitted in June
2007. AHCCCS reports that, as of
October 13, 2007, total statewide
HCG medical plan enrollment was
25,984, with participating members
from 9,136 private employers and 19
political subdivisions. Since May
2007, enrollment has decreased by
930 people.
The FY 2008 budget included
several reforms to the Healthcare
Group program including a onetime $8 million General Fund subsidy
and freezing enrollment levels as of
September 19, 2007. AHCCCS
administration has also made
several changes to the Healthcare
Group program. As of September
2007, premiums were increased by
8.4% - 31.7% depending on the size
of the employment group and the
specific type of medical plan
selected. Copayments and
deductibles were also increased in
September. These changes will not
take effect for an individual until the
individual’s yearly renewal. As of
January 2008, members will no
longer be able to enroll or renew
membership in $0 deductible plans.
AHCCCS indicates that other cost
savings measures are being
implemented including moving to
electronic renewal processing to
decrease staff, printing, and mailing
costs.
Arizona Community Colleges –
Annual Report – Pursuant to A.R.S. §
15-1427, the Arizona Community
Colleges are required to report on
their progress during the previous
year. The FY 2007 report includes
the following summary information
on the state system:

• 207,027 students (headcount)

were enrolled for credit, resulting

•
•

•

•

in a Full-Time Student Equivalent
count of 118,308.
90% of enrolled students resided
within the district, while 9% did not
reside within the district.
Total number of instructors
employed was 9,926, of which
2,499 (25%) were full-time and
7,427 (75%) were part-time.
Total operating revenues were
$1.3 billion (this amount excludes
bond proceeds and fund
balance which total $412 million).
Total expenditures were $1.3
billion.

In addition, districts are statutorily
required to provide a listing and
description of both credit and noncredit courses. All districts except
Northland Pioneer Community
College provided this information.
The districts also included a
description of their major
accomplishments in FY 2007.
Arizona Criminal Justice Commission
– Quarterly Report on Criminal
Justice Information System Project –
Pursuant to Laws 2007, Chapter 255,
the Arizona Criminal Justice
Commission (ACJC) is required to
report on the expenditure of monies
and the progress of the Criminal
Justice Information System project.
In FY 2008 and 2009, ACJC was
appropriated a total of $1.7 million
to fund an upgrade to the Criminal
Justice Information System, also
known as the Arizona Disposition
Reporting System (ADRS). ADRS
facilitates the movement of criminal
justice data from law enforcement
through the court system. Funding
was appropriated to allow more
automation of data entry as
defendants proceed through the
state’s judicial system. The
automation is intended to increase
the completeness of criminal
background data, which is stored

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

Summary of Recent Agency Reports
centrally at the Department of
Public Safety (DPS).
As of October 2007, Phase I of the
project was completed using
federal grants. Phase I established
a web interface to justice agencies,
thereby eliminating the need for
submittal of the paper disposition
forms to DPS for data entry.
Currently, DPS is drafting a Project
Investment Justification; Phase II of
the project will begin after the
approval of the Project Investment
Justification by the Government
Information Technology Agency
(GITA). To date, none of the
appropriated funds have been
expended.
Department of Education – Report
on K-12 Aggregate Expenditure
Limit – Pursuant to A.R.S. § 15-911,
Subsection B, the State Board of
Education reported on October 29,
2007 that currently budgeted
expenditures for all school districts
collectively statewide for FY 2008
exceed by $146,596,600, the
aggregate expenditure limitation
(AEL) defined in Article IX, Section
21, subsection (4) of the Constitution
of Arizona. The AEL, which was
established in the State Constitution
in 1980, limits growth in statewide K12 expenditures to the combined
rate of growth for enrollment and
inflation, with exceptions for items
like bonding and Proposition 301
monies. (The latter were exempted
from the AEL through voter
enactment of Proposition 104 in
November 2002.) The AEL
apparently is being exceeded for FY
2008 due to increases in per pupil
funding for the year that are above
and beyond amounts required for
enrollment growth and inflation (the
2 factors involved in computing the
AEL). These increases include the
additional $46 million in inflation
funding and $80 million in new
Kindergarten weight funding that
were appropriated for FY 2008.

The State Constitution permits the
Legislature to authorize K-12
expenditures above the AEL for the
current year with a 2/3rds majority
vote on or before March 1, 2008
(Article IX, Section 21, Subsection 3).
Otherwise on or before March 5,
2008, the State Board of Education
is required to instruct each school
district to reduce its expenditures on
a pro rata basis in order to get
statewide K-12 spending below the
AEL (A.R.S. § 15-911.E).
The Legislature previously authorized
AEL exemptions for FY 2007 and FY
2002. The FY 2007 exemption was
authorized by HCR 2008 from the
2007 Regular Session.
Department of Education – Budget
Status Report – Pursuant to A.R.S. §
35-131(D) and a footnote in the FY
2008 General Appropriation Act,
the Arizona Department of
Education (ADE) recently provided
an update regarding its budget
status for FY 2008. In that report,
ADE estimates that it will experience
a $76.6 million surplus for FY 2008.
Some of those monies, however,
remain in a dedicated fund if they
are unused and do not revert to the
General Fund. After adjusting for
that factor, the net surplus is $66.1
million. The latter total includes
$28.9 million for lower than
budgeted district enrollment growth
in FY 2007 (which affects formula
costs in FY 2008), $19.7 million for
lower than budgeted charter
growth in FY 2008, $19.1 million for
higher than budgeted “local share”
(K-12 “QTR”) revenues and $(1.6)
million for other factors. Enrollment
growth costs, however, are subject
to considerable change once
Average Daily Membership (ADM)
counts for the current school year
become available, as those counts
also will affect Basic State Aid costs
for FY 2008. School district ADM
counts for the current school year
probably will not become available
until at least March 2008.

(Continued)

Department of Environmental
Quality – Report on Vehicle
Emissions Inspections Contract Pursuant to A.R.S § 49-545H1, the
Department of Environmental
Quality has submitted a report
describing progress on the new
Vehicle Emissions Inspection (VEI)
contract. The VEI program tests
vehicles in Maricopa and Pima
Counties to ensure compliance with
air quality standards. The new
contract has been awarded to
Gordon-Darby, which has been the
VEI contractor since 2000. It will go
into effect on January 1, 2009 and
run through July 25, 2014. The
contract includes new testing
stations in Goodyear and Apache
Junction, which will be operational
when the contract takes effect on
January 1, 2009.
Department of Environmental
Quality – Report on Water Quality
Assurance Revolving Fund for FY
2007 - Pursuant to a General
Appropriation Act footnote, the
Department of Environmental
Quality (ADEQ) is required to report
annually by September 1 to the
Joint Legislative Budget Committee
(JLBC) on the progress of activities
in the Water Quality Assurance
Revolving Fund (WQARF) Program.
The WQARF Program is similar to the
federal Superfund program in that it
is designed to monitor, contain, and
remediate contaminated groundwater at specified sites. Based on
the report, actual expenditures for
the year were $16,516,200.
Unexpended funds at the end of FY
2007 totaled $10,835,100.
The WQARF Program maintains a list
of contaminated sites, called the
Registry. According to the report,
as of December 31, 2006 there were
35 sites on the WQARF Registry. Sites
on the registry have not changed
since 2004. The report contained
no information regarding the
expected duration or total
remediation costs for these sites.

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

Summary of Recent Agency Reports
In FY 2008, program expenditures for
individual sites are projected to be
$12,577,100, with an average per
site cost of $358,800.
The report includes information
about cost recovery and cleanup
activities at both the site and
program level of detail. Table 6
provides a breakdown of cleanup
results in FY 2007.
The program showed large increases
in volatile organic compounds
removed in FY 2007 due to increased
remediation activity at state-lead
federal superfund sites.
A different General Appropriation
Act footnote requires ADEQ to
report to JLBC the remediation
status of each site listed on the
Water Quality Assurance Revolving
Fund (WQARF) registry at the end of
FY 2007, and expected progress in
FY 2008 and FY 2009.
There are 10 steps in the WQARF
process, beginning with a
preliminary investigation, continuing
through various studies and
remediation once a site has been
placed on the registry, and ending
with the delisting of a site once the
investigation or cleanup has been
completed.
The report contained a listing of the
38 sites. In addition to the 35 sites
on the WQARF registry, the report
also includes 3 sites for which
WQARF provides oversight, but not
funding. Of the 38 reported sites, 21
were listed in the Early Response
Action phase at least partially
during FY 2007. Three sites had
advanced to the Implementation of
Remedy Phase or further during this
same period.
Table 6

(Continued)

By the end of FY 2009, the
department anticipates 3 sites will
be delisted, 28 sites will advance
through at least 1 phase of the
WQARF process, and 6 sites are
anticipated to remain in the same
phase through the end of FY 2009.
DHS – Report on MethSMART
Prevention Program – Pursuant to a
FY 2008 General Appropriation Act
footnote, the Department of Health
Services (DHS) has submitted a
quarterly report on the youth
methamphetamine programs. DHS
issued a request for proposals for
the $500,000 appropriation in
September; the deadline for
proposal submission was October
26. DHS plans to form a team of 5 to
review the submitted proposals and
make funding recommendations.
The General Appropriation Act
specifies that this money is to be
awarded to a statewide alliance of
community-based organizations
with a proven track record in
providing substance abuse prevention programming to children. Last
year, the monies were provided to
15 Boys and Girls Clubs across the
state to implement the MethSMART
prevention program.
Arizona Historical Society – Report
on Non-Appropriated Expenditures
– Pursuant to A.R.S. § 41-821E, the
Arizona Historical Society is required
to report on non-appropriated fund
expenditures for the society. Nonappropriated expenditures for FY
2007 were $714,200, a decrease of
$(378,400) below the FY 2006 total
of $1,092,600.
Supreme Court – Report on Adult
Probation Services Fund and the
Juvenile Probation Fund. – Pursuant

Activity
Groundwater Treated (in billions of gallons)
Volatile Organic Compounds Removed (in pounds)
Metals Removed (in millions of pounds)
Contaminated Soil Removed (in tons)

FY 2004
10.5
32,299
3.3
91.6

9

FY 2005
13.4
28,573
3.3
248.2

to A.R.S. § 12-262C, the Administrative Office of the Courts (AOC) is
required to report to the JLBC on
the total receipts and expenditures
in each account of the Adult
Probation Services Fund (A.R.S. § 12267) and the Juvenile Probation
Fund (A.R.S. § 12-268). The report is
to present the information by
county and include the amount of
Personal Services expended from
each revenue source of each
account. AOC submitted the
report for FY 2007 on November 6,
2007.
Adult Probations – AOC reports
statewide Adult Probation Services
Fund total expenditures of $127.6
million in FY 2007. Of this total,
county funds represent 58.2% of all
expenditures, state funds represent
24.2%, Federal Funds represent 0.8%,
and other sources of revenue, such
as probation fees and local fees,
represent 16.8%.
Juvenile Probation – Total FY 2007
expenditures for the Juvenile
Probation Fund were $156.8 million.
Of this total, county funds represent
72% of all expenditures, state funds
represent 24%, Federal Funds
represent 2%, and other sources of
revenue, such as probation fees
and local fee, represent 2%.
Department of Revenue (DOR) –
Report on Ladewig Expenditures –
DOR reports monthly on the status
of the Ladewig litigation. DOR
completed the 5-year Ladewig
project on June 30, 2007 at a total
cost of $304 million, as shown in the
table below. The $304 million
includes $268 million for taxpayer
refunds, $20.2 million for plaintiff
attorney fees, and $15.8 million for

FY 2006
16.3
113,946
3.4
2,816.4

FY 2007
7.9
310,148
1.5
1,755

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

Summary of Recent Agency Reports
DOR administration. The $268
million for taxpayer refunds includes
$47 million of accounts deposited in
the Unclaimed Property Fund, and
eventually returned to the General
Fund, for individuals entitled to a
Ladewig refund who could not be
located.
DOR worked on the Ladewig
project from FY 2002 through FY
2007, including 3 years of taxpayer
refunds from FY 2005 through FY
2007. The project was based on the
2001 Arizona Supreme Court
decision in the Ladewig v. State of
Arizona case, in which the state was
required to refund individual
income taxes paid on non-Arizona
dividends earned for the years 1986
through 1989. Payments and
related costs associated with this
case were capped not to exceed

$350,000,000 over 5 years.
Table 7

Summary of Ladewig
FY 2003 - FY 2007 Expenditures

DOR Administration
Attorney Fees
Taxpayer Payments
Total

Expenditures 1/
($ in millions)
$ 15.8
20.2 2/
268.0 3/
$304.0

____________
1/ In addition, DOR reports operating budget
expenditures of $134,900 in FY 2002 for
Ladewig administration.
2/ $2,000,000 was reimbursed in FY 2004 to DOR
by Department of Administration Risk
Management.
3/ Refunds to taxpayers were made in FY 2005
through FY 2007. Includes unclaimed
taxpayer payments totaling $47,000,000,
which were transferred to the General Fund.

Arizona Board of Regents - Report
on University System’s Financial Aid
Pursuant to A.R.S. § 15-1650, the
Arizona Board of Regents is required
to submit an annual report on
financial aid, which includes
information from all 3 universities,
comparisons to peer institutions,
and summary information for the
entire university system. Students
can receive a variety of both need
and non-need based aid.

Examples of need-based aid
include scholarships, grants, and
gifts from any state, federal or
institutional source in which a
student must demonstrate financial
need to qualify. Examples of non
need-based gift aid include
scholarships and grants, gifts, or
merit-based aid from institutional,
state federal or other sources
awarded solely on the basis of
academic achievement, merit, or
any other non-need-based reason.
Highlights from the FY 2007 report
include:
• Approximately $988.9 million in
total financial aid dollars were
provided to students.
• Of this amount, $429.5 million
(43.4%) came from federal
sources, $372.9 million (37.7%)
came from state institutional
sources, $184.4 million (18.6%)
came from private sources, and
$2.1 million (0.2%) came from
state scholarships/grants and
loans.
• A total of 93,646 students
received aid.
• Of those students awarded aid,
4,818 were awarded non needbased gift aid, 30,962 were
awarded need-based gift aid,
and 64,107 were awarded
miscellaneous types of non-gift
aid (i.e. work study).
• The average aid package was
$8,165, which includes both need
and non need-based aid.
• 52.4% of undergraduate students
and 51.6% of graduate students
have debt.
• Upon graduation, the average
undergraduate student debt was
$18,029, while the average
graduate student debt was
$35,880.

(Continued)

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2007

11

State of Arizona
General Fund Revenue

Change from Previous Year and Enacted Forecast
October 2007
Current Month

FY 2008 YTD (Four Months)

Change From
Actual

October 2006

October 2007

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

October 2006

October 2007

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use

373,831,498

($3,058,982)

(0.8) %

Income - Individual

275,455,820

(29,648,178)

(9.7)

(49,041,680)

(15.1)

56,130,889

2,192,304

4.1

2,609,389

4.9

Property

1,513,860

625,566

70.4

Luxury

4,519,952

(2,801,182)

Insurance Premium

2,717,831

(7,020,556)

- Corporate

Estate

($34,717,802)

(8.5) %

$1,500,191,747

($515,086)

(0.0) %

1,173,421,357

(3,658,079)

(0.3)

(104,345,843)

296,621,822

(19,529,689)

(6.2)

(27,895,178)

(8.6)

46.3

(1,558,760)

(44.5)

1,941,240

614,403

($120,923,653)

(7.5) %
(8.2)

(686,140)

(31.2)

(38.3)

(1,395,048)

(23.6)

19,202,105

(4,402,862)

(18.7)

(4,457,895)

(18.8)

(72.1)

(1,882,169)

(40.9)

120,944,337

6,631,669

5.8

4,844,337

4.2

198.9

234,762

(19,314)

47,354

(71.0)

(19,314)

--

234,762

156,211

56,791

(3,088)

(5.2)

(8,334)

(12.8)

197,671

(15,025)

$714,207,327

($39,666,762)

$3,112,755,041

($20,718,458)

Lottery

2,290,600

(1,822,700)

(44.3)

(666,100)

(22.5)

11,526,819

6.7

2,738,519

31.2

License, Fees and Permits

4,354,233

590,417

15.7

694,833

19.0

12,299,462

(3,963,805)

(24.4)

(2,686,638)

(17.9)

Interest

8,514,155

1,220,643

16.7

1,820,555

Sales and Services

3,515,067

248,163

7.6

Other Miscellaneous

6,346,311

2,533,359

66.4

0

0

1,382,556

1,243,642

Other Taxes
Sub-Total Taxes

(5.3) %

($85,141,098)

(10.7) %

(7.1)
(0.7) %

(62,829)
($254,165,059)

-(24.1)
(7.5) %

Other Revenue

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

26,402,922
$740,610,249

4,013,524
($35,653,238)

-895.3
17.9 %
(4.6) %

(710,133)
3,889,711
0
1,172,556
6,201,422
($78,939,676)

719,319

27.2

39,434,371

13,865,804

54.2

14,829,071

60.3

(16.8)

13,286,696

118,744

0.9

(2,991,204)

(18.4)

158.3

9,670,165

(177,377)

48.2

-558.4

(1.8)

3,145,565

0

0

--

0

--

13,576,923

12,640,827

--

12,236,923

--

27,272,236

37.6 %

30.7 %

99,794,436

23,203,512

30.3 %

(9.6) %

$3,212,549,477

$2,485,054

0.1 %

($226,892,823)

(6.6) %

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

(57,044,911)
(57,044,911)
$683,565,338

(11,109,023)

24.2

(11,109,023)

24.2 %

($46,762,261)

(6.4) %

0
0
($78,939,676)

0.0
0.0 %
(10.4) %

(228,179,642)
(228,179,642)
$2,984,369,835

(44,436,088)

24.2

(44,436,088)

24.2 %

($41,951,034)

(1.4) %

0
0
($226,892,823)

0.0
0.0 %
(7.1) %