JLBC - Monthly Fiscal Highlights

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

This Month
Total January General Fund revenue
collections were $849.3 million, or (16.1)%
below January of last year. This amount was
$(226.2) million below the forecast based on
the June enacted state budget
For the first 7 months of FY 2008, General Fund
collections are down (3.5)% when compared
to last year, and are $(619.2) million less than
the enacted forecast. When factoring in
Urban Revenue Sharing, year-to-date
collections are (5.1)% below last year. (See
page 13 for detail information).

www.azleg.gov/jlbc.htm

“For the first
7 months of
FY 2008, General
Fund collections
are down (3.5)%

February 2008

The January decrease represents the largest
percentage year over year decline since April
2002. The dramatic drop in January revenues
was across the board in all 3 main revenue
categories:
• Sales tax collections were down (7.5)%
compared to January 2007, and were
$(74.0) million short of the monthly forecast.
This is the largest percentage year over
year decrease since at least FY 1991.
• Individual income tax collections were
down (11.9)%, which was $(98.7) million
below forecast.

• Corporate income tax collections were
(138.9)% below last year, and $(50.2) million
below the forecast.
The FY 2008 General Fund revenue forecast
released last month as part of the JLBC
Baseline was based on the 4-sector consensus,
including input from the Finance Advisory
Committee (FAC), two University of Arizona
econometric models, and the JLBC Staff
forecast. The Baseline projected revenues
were $9.38 billion (excluding the balance
forward), which was $(697.9) million less than
the enacted budget forecast. As noted
above, the significant January downturn now
results in year-to-date collections already
being down $(619.2) million compared to the
budget forecast.
Based on the January data, the FY 2008
Baseline revenue projection appears
substantially overstated. The JLBC Staff now
estimates that General Fund revenues will only
reach $9.15 billion, which is $226.5 million less
than the January Baseline. This revenue level
would translate into a (0.7)% decline
compared to FY 2007 revenues prior to tax law
changes, and (3.2)% after tax law changes.

when compared
to last year, and
are $(619.2)
million less than
the forecast”.

This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
February 29, 2008.

Table of Contents
January Revenues.................................................. 3
Recent Economic Indicators ................................ 4
JLBC Meeting Summary
• ADOA – Review of HSA/HRA............................. 6
• Auditor General – ELL Modifications ............... 6
• Comm Colleges – Dual Enrollment IGA.......... 6
• DEQ – Indirect Cost Recovery Fund ................ 6
• DEQ – Water Quality Processing Times ........... 6
• DPS – Interoperability Project............................ 6
• ADOT – 3rd Party Progress Report ..................... 6
Summary of Recent Agency Reports
• ADOA/GITA – Quarterly Report/AZNet ........... 7
• AHCCCS – Payment Methodology ................. 7
• ASRS –ASRS IT Plan............................................... 7
• Attorney General - Incarceration Costs ......... 7
• DOC – Monthly Bed Plan Update.................... 7

ACJC – CJIS Project............................................ 8
ACJC – State Aid ................................................ 8
DES – Federal Work Participation ..................... 8
ADE – AIMS Contract Changes........................ 8
Land Dept. – Fire Suppression Activities.......... 9
Land Dept. – Mineral Leasing Report .............. 9
DPS – GITEM ......................................................... 9
DPS – Sworn Personnel .....................................10
Supreme Court – Case/Cash Mgmt Syst ......10
Supreme Court – Criminal Case Processing/
State Aid to Courts Funds................................10
• ADOT – MVD Wait Times ..................................10
• ABOR/UA College of Medicine – Report on
Phoenix Update ................................................11
•
•
•
•
•
•
•
•
•
•

Other Issues
• State Appropriations Limit ...............................12
• Truth in Taxation K-12 Property Taxes.............12

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

This Month

(continued)

Given the current volatility of the economy,
these latest revenue estimates could change
again. Any large adjustments, however, would
not likely occur until May, when the level of
2007 individual and corporate income tax
filings becomes clearer.
The FAC will add their perspective on the state
of Arizona’s economy at the next of its three
meetings throughout the year. The FAC is
scheduled to meet on March 6th at 11:30 a.m.
in Senate Hearing Room 1.

“While previously
estimated at
$(970) million in
January, the
revision increases
the size of the
shortfall to $(1.2)
billion”.

The revision in the General Fund forecast also
affects the projected FY 2008 General Fund
budget shortfall. While previously estimated at
$(970) million in January, the revision increases
the size of the shortfall to $(1.2) billion. The
Executive has recently re-estimated their FY
2008 shortfall estimate from $(870) million to
$(1.15) billion. The Executive’s revenue
estimates are actually $110.0 million higher
than the revised JLBC estimate, which is
somewhat offset by $56 million in higher
spending.
JLBC/JCCR Meetings – The Monthly Fiscal
Highlights include a summary of the February
JLBC meeting (page 6). There was no JCCR
meeting in February.
Other Issues – the Highlights also include an
update on two statutorily required reports by
JLBC Staff (page 12):
•

The Arizona Constitution limits certain state
spending to no more than 7.41% of
personal income. The JLBC Staff has
calculated that spending would be 6.59%
of personal Arizona income in FY 2008 and
6.79% in FY 2009 under the JLBC Baseline.
The Baseline represents the current
spending level plus funding formula growth
for FY 2009. Since spending is likely to be
adjusted downward to resolve the budget
shortfalls in both years, these appropriation
limit percentages are likely overstated.

•

The JLBC Staff released its calculation of
the Truth in Taxation (TNT) adjustments to
property tax rates. Each year the K-12
Qualifying Tax Rate (QTR) is adjusted
downward to offset increases in the value
of existing property. Based on January 1,
2007 property valuations, existing property
values grew by 9.5%. As a result, the K-12

QTR will decline from $1.60 in FY 2008 to
$1.46 in FY 2009 for non-unified school
districts. The unified rate will decline from
$3.20 to $2.92. Based on updated
information, these adjustments will cost
$16.1million less than expected in the FY
2009 JLBC Baseline.

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

“In the first
7 months of FY
2008, sales tax
revenues are
down (1.2)%
compared to last
year”.

January Revenues
Sales Tax collections were $406.9 million in
January. This amount was down (7.5)%
compared to last January, and $(74.0) million
below the enacted budget forecast. In the
first 7 months of FY 2008, sales tax revenues
are down (1.2)% compared to last year.
Table 1 displays the January and year-to-date
growth rates for the major categories.
Table 1
Sales Tax Growth Rates
Retail
Contracting
Utilities
Use
Restaurant & Bar

January
(3.8)%
(24.1)%
(0.3)%
5.7%
(11.3)%

Year-to-Date
(2.0)%
(7.6)%
6.7%
8.3%
0.3%

There were significant variations in January
collections by sector. Retail and contracting
collections together account for two-thirds of
all sales tax revenues. The retail sector
declined by (3.8)% and contracting by
(24.1)%. The restaurant and bar category also
decreased by (11.3)%. The only positive
growth in the major categories was in use tax,
which increased 5.7%.
“Year to date,
income tax
collections are
(3.4)% below last
year”.

3

Individual Income Tax collections were $479.6
million, or (11.9)% below last year. Year-todate, income tax collections are (3.4)% below
last year. January collections were $(98.7)
million less than the enacted budget forecast.
Table 2 displays individual category growth
rates.

year. The January decrease brings year-todate collections down to 2.5% over the prior
year.
Estimated and final payments decreased
from the previous year for the third month in a
row. Payments declined (18)% compared to
last January. December and January are
substantial collection months as tax filers
make their quarterly estimated payments in
advance of the January 15th due date.
December and January payments combined
were almost (22)% below the same period last
year, and are down (13.9)% year-to-date.
January refunds were approximately $4
million over the prior year. After 7 months,
refunds are 20.2% over the first 7 months of last
fiscal year.
Corporate Income Tax collections were a
negative $(14.5) million as refunds exceeded
collections. This amount was (138.9)% below
January of last year, and $(50.2) million below
the forecast for the month. Gross corporate
collections were over (25.1)% below the prior
year. Refunds were $(44.9) million for the
month compared to only $(3.3) million last
January. Although January is not a large
collection month for corporate, January’s
decrease brings the category to $(125.9)
million or (24.3)% below the enacted budget
forecast.

Table 2
Individual Income Tax Growth Rates
January
Year-to-Date
Withholding
(4.9)%
2.5%
Estimated +
(18.3)%
(13.9)%
Final Payments
Refunds
12.2%
20.2%
January withholding was (4.9)% below last

Table 3

General Fund Revenues
Compared to Enacted Forecast and FY 2007 Collections
($ in Millions)
FY 2008
Difference From
Difference
Collections
Forecast 1/
From FY 2007
January
$ 849.3
$ (226.2)
$ (162.8)
Year-to-Date
$ 5,277.1
$ (619.2)
$ (281.2)
____________
1/ Enacted FY 2008 budget (June 2007).

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Recent Economic Indicators
NATIONAL
According to the Bureau of Economic Analysis’
advance 2007 4th quarter estimate of U.S. Real
Gross Domestic Product (GDP), the economy
grew by 0.2% over the 3rd quarter. This quarterly
growth is the lowest since 2002. The common
definition of a recession is two consecutive
quarters of negative change in the GDP.
Positive contributions from personal
consumption expenditures, nonresidential
structures, state and local government
spending, exports, and equipment and
software were largely offset by negative
contributions from private inventory investment
and residential fixed investment.
In January, the Conference Board’s U.S.
Consumer Confidence Index totaled 87.9,
(0.8)% below December 2008 levels and (20.3)%
below levels a year ago. The decrease is
attributed to consumers’ negative view of
current and future business conditions as well as
the expectation that employment will further
deteriorate.
The U.S. Index of Leading Economic Indicators
decreased again in January by (0.1)% and is
down (1.9)% year over year. Six of the 10
components that make up the composite
index decreased in January. Stock prices
made the largest negative contribution to the
index, followed by housing permits.
The U.S. Consumer Price Index (CPI) (3-month
moving average) increased by 0.3% in January.
The year over year increase was 4.2%. All CPI
sub-indices increased in January. The energy,
housing, and food sub-indices reported the
largest increases.
ARIZONA
The Department of Commerce (DOC) released
revised employment data in February and the
report indicates a substantial downward
revision. Previously, DOC reported that
nonfarm employment grew by 1.3% in
December 2007. The revised figure shows a
decline of (0.2)%.
January total statewide non-farm employment
increased, year over year, by 0.6%. Arizona’s
unemployment rate increased from 4.2% in
December to 4.3% in January.
Ten of the 11 major industries reported job losses
in January. The professional and business

services industry reported the largest
number of job losses of all industries at
(10,000) fewer jobs in January. Construction
employment decreased by (9.0)% over the
previous year. The average year-over-year
growth rate for January in the past 10 years
was 5.6%.
Statewide, the number of single-family
residential building permits (3-month moving
average) fell (46.6)% from the prior year to
1,586 permits- a level not seen since 1991.
Comparably, the number of multi-family
building permits authorized increased by
72.9% on a year-over-year basis to 829.
Permitting activity in the multi-family
segment however, continues to have
significant volatility.
The most recent press release by the Real
Estate Center at Arizona State University
indicates that year-over-year, the
townhouse-condominium median price held
up relatively well, totaling $174,500, or (0.3)%
below January 2007 levels. This slight
decrease was despite a (24.7)% year-overyear decrease in the number of townhousecondominium units sold.
In addition, the single-family median resale
home price declined for the sixth straight
time in January, totaling $230,000. At this
level, the single-family median resale home
price has declined by (0.9)% from last month
and (11.5)% from levels a year ago. Monthover-month, the number of single-family
homes sold in January increased by 1.8% to
3,350 homes. Year-over-year however, the
number of single family homes sold fell
(25.9)%. A bright spot for those purchasing
homes however, is that the median square
footage for a single-family home increased
on a year-over-year basis by 100 square feet
to 1,800. As a result, home buyers in January
purchased larger homes at lower prices.
The months supply of housing indicator
measures the supply and demand of homes
in the Phoenix real estate market. The
measure is the ratio between the number of
homes listed for sale on the Phoenix multiple
listing service (MLS) and the number of
homes sold in a given month. Based on
December MLS data, it would take 14.9
months to sell the current inventory of
homes, 1 month less than November levels.
In December 2006 the measure stood at 7.1
months.

“The singlefamily median
resale home
price declined
for the sixth
straight time in
January, totaling
$230,000.”

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Recent Economic Indicators
The Arizona Business Conditions Index (BCI)
increased 4.0% in January to 49.6 but is still
(8.7)% below last year. A reading below 50
suggests a slowdown in the overall level of
economic activity in the near term. The
month over month increase is attributable to
positive gains in the production and new
orders sub-indices.
The Behavior Research Center’s Arizona
Consumer Confidence Index began the year
with a reading of 79.8, a (21.7)% decrease
from July 2007 levels. The index in Pima and
Maricopa Counties were at their lowest levels
since July 2002 and 2003, respectively. The
decrease is attributed to a deteriorating view
current economic conditions as well as
expectations which were driven by the belief
that employment opportunities, business
conditions and job availability will worsen.

(continued)

however, the AHCCCS caseload has
increased by 5.7%, or 58,915 members from
prior year totals.
The number of TANF recipients decreased
again in December by (2.0)% to 81,760
recipients and is (2.9)% below the December
2006 count. The state budget projects
84,700 recipients in FY 2008.
From November 2007 to January 2008, the
Department of Corrections’ (ADC) inmate
population increased by 67 inmates per
month to an average population of 37,667
inmates. Fiscal year-to-date, ADC’s inmate
population growth totals 107 inmates,
significantly less than the budgeted increase
of 160 inmates per month.

In February, AHCCCS caseload’s totaled
1,083,830 members, or (2,643) members less
than January 2008 totals. At current levels

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
- S&P/Case-Shiller Home Price Index (Phoenix)
- Months Supply of Housing (Phoenix)
- 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
- Real 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

January
January
January
January
Nov-Jan
Nov-Jan

4.3%
2.65 million
180,000
206,300
$75.2 million
$174.7 million

2.4%
(1.7)%
(0.3)%
(2.5)%
(2.0)%
10.9%

10.3%
0.6%
(0.9)%
(9.0)%
(10.7)%
(2.3)%

Oct-Dec
Oct-Dec

1,586
829

(10.2)%
(30.3)%

(46.6)%
72.9%

January
January

3,350
640

1.8%
(0.8)%

(25.9)%
(24.7)%

January
January
November
December
December
November

$230,000
$174,500
194.45
14.9 months
3.2 million
$10.13

(0.9)%
4.5%
(3.1)%
(1) month
(4.5)%
44.3%

(11.5)%
(0.3)%
(12.9)%
7.8 months
(4.7)%
11.9%

September
January

120.4
49.6

(0.9)%
4.0%

4th Quarter 2007
1 st Quarter 2008
3rd Quarter 2007
July 1, 2007
February
December
Nov-Jan

79.8
40.4
$210.9 billion
6.34 million
1,083,830
81,760
37,734

4th Quarter 2007

$11.7 trillion

0.2%

2.5%

January
January
Oct-Dec
Nov-Jan

87.9
135.8
$3.65 billion
210.4

(0.8)%
(0.1)%
(4.5)%
0.3%

(20.3)%
(1.9)%
(3.9)%
4.2%

(21.7)%
(4.9)%
1.4%
173,066
0.2%
(2.0)%
67 inmates

0.8%
(8.7)%
(24.2)%
(22.2)%
5.9%
2.8%
5.7%
(2.9)%
1,914 inmates

5

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

JLBC Meeting
Department of Administration – Review of
HSA/HRA – The Committee decided not to
take action at this time regarding the
department’s report on health reimbursement
accounts (HRAs) and health savings accounts
(HSAs) for state employee health benefits.
The Chairman appointed a subcommittee to
follow up on the report from the HRAs and
HSAs for state employee health benefits.
HRAs and HSAs are employee accounts
maintained by employers or a third party used
to pay-health-related costs.

Department of Public Safety – Quarterly
Review of the Interoperability Project- The
Committee gave a favorable review to the
Department of Public Safety’s (DPS) FY 2008
first quarter expenditures and progress report
for the statewide interoperability design
project. The statewide interoperability design
project is an effort to develop a statewide
standard-based interoperability system that
allows public safety personnel from one
agency to communicate with personnel from
other agencies.

In their proposal, the Department of
Administration (ADOA) outlined 4 options that
would, on average, lower employer costs by
3% from current levels excluding
implementation costs. ADOA anticipated
that 2% of state employees would use these
new plans. ADOA has not decided whether
to offer these options in the future.

Department of Transportation – Review of Third
Party Progress Report – The Committee gave
a favorable review of the Department of
Transportation’s (DOT) semiannual progress
report regarding increasing third party
transactions. Motor Vehicle Division (MVD)
third parties allow the public to conduct
certain transactions through the private
sector. With the exception of traffic survival
schools, DOT continues to increase its number
of third parties.

Auditor General – Review of ELL Modifications
– The Committee gave a favorable review to
the Auditor General’s modifications to the
public school accounting system due to Laws
2006, Chapter 4 (the English Learner bill from
the 2006 Legislative Session).
Community Colleges – Review of Dual
Enrollment IGA Template – The Committee
gave a favorable review to the Community
Colleges uniform intergovernmental
agreement template for dual enrollment.
Department of Environmental Quality – Review
of Intended Use of Monies in the Indirect Cost
Recovery Fund – The Committee gave a
favorable review to the DEQ’s intended uses
of Indirect Cost Recovery Funds in excess of
$10.8 million. DEQ anticipates spending a
total of $12.5 million for the entire fiscal year.
The Indirect Cost Recovery Fund is used to
pay administrative and overhead expenses
for DEQ programs.
Department of Environmental Quality – Review
of Water Quality Processing Times – The
Committee gave a favorable review to the
Department of Environmental Quality (DEQ)
report documenting water quality permit
processing times for FY 2007 and FY 2008. The
department is projecting average time for all
types of permits will be within the specified
permit processing timeframe for FY 2008.

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

7

Summary of Recent Agency Reports
ADOA/GITA – Quarterly Report on
AZNet Implementation – In December
2004, the Joint Committee on Capital
Review requested the Arizona
Department of Administration
(ADOA) and the Government
Information Technology Agency
(GITA) to report quarterly on the
Arizona Network (AZNet), as created
by the Statewide Telecommunications Management Contract. The
report has now been reformatted
and includes an executive summary
of the status of the program.
AZNet has moved staff to newly
renovated office space and
completed large projects with the
Arizona Game and Fish Department,
the Registrar of Contractors, and the
Department of Revenue.
End-of-life equipment replacement
continues to be an issue of concern
to ADOA as AZNet seeks to upgrade
the state’s older telephone and data
infrastructure. ADOA reports that
current funding levels are not
sufficient to replace this equipment in
a timely manner.
AHCCCS – Report on Appropriateness
of Payment Methodology – Pursuant
to Laws 2007, Chapter 263, the
Arizona Health Care Cost
Containment System (AHCCCS) is
providing a report on whether certain
types of procedures or services should
be excluded from outlier payment or
paid under a different methodology.
Laws 2007, Chapter 263 requires that
the report include a fiscal impact
analysis and a review of statutory
changes required to implement any
proposed recommendations.
AHCCCS believes that it may be
appropriate for implantable devices,
including those used for orthopedic
services and cardiology services, and
high-cost pharmaceuticals to be paid
under a separate methodology.
The report does not include a fiscal
impact analysis as required by Laws
2007, Chapter 263. However,

AHCCCS has commissioned a full
study on the adequacy of the current
overall reimbursement system. The
report is expected to be completed
during the 2008 session.
AHCCCS believes it would be
premature to amend the current
methodology until the report has
been released. The report does state
that any revisions to the methodology
would require a statutory change.
Arizona State Retirement System –
Semi-Annual Report on the ASRS
Information Technology Plan –
Pursuant to a footnote in the General
Appropriation Act, the Arizona State
Retirement System (ASRS) is submitting
its semi-annual report on the ASRS
Information Technology (IT) project.
ASRS received appropriations from FY
2002 to FY 2008 totaling $48.4 million;
and through December 31, 2007,
ASRS spent a total of $43.5 million.
The remaining amount will be spent
by FY 2009.
In FY 2005, there were some concerns
as to the progress of the IT plan.
These concerns caused the
Government Information Technology
Agency to change the project status
from “green,” indicating the project is
expected to be completed as
planned, to “red,” indicating a serious
risk to project phase completion by
the planned date. The status was
subsequently upgraded to “yellow.”
The Joint Legislative Budget
Committee asked ASRS to provide a
semi-annual report on progress in
returning to “green” status.
The Independent Advisory Consultant
(IAC) reports that overall, the ASRS IT
Plan remains on budget and on
schedule for completion by June 30,
2008. The project status was stated to
be 91% complete as of September
30, 2007.

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 July 1, 2007 to December 31,
2007, the state did not exercise its
right to offset the costs of
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.
DOC – Report on Monthly Bed Plan
Update - The Department of
Corrections (ADC) has provided a
report to JLBC Staff with updated
information related to their bed plan.
The highlight of the report includes
the award of a contract to build and
operate the 2,000 new private prison
beds authorized by Laws 2007,
Chapter 261. On February 15, 2008,
the Arizona Department of
Administration (ADOA) awarded the
contract to Management & Training
Corporation (MTC).
In addition to the private beds,
Chapter 261 also authorized the
construction of 4,000 new public beds
which are to be funded via a 20-year,
$200 million lease-purchase
agreement. Currently, ADOA is
finalizing its awards to design and
build these beds.

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Summary of Recent Agency Reports
Arizona Criminal Justice Commission–
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
centrally at the Department of Public
Safety (DPS).
As of December 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. Due to the project’s
status as a potential budget
reduction option, ACJC has placed a
hold on the monies appropriated for
the project. To date, none of the FY
2008 and FY 2009 appropriation has
been expended.
Arizona Criminal Justice Commission
– Report on State Aid – Pursuant to
A.R.S. § 41-2409E, the Arizona Criminal
Justice Commission (ACJC) is
required to report on the
expenditures of monies in the State
Aid to County Attorneys Fund and
State Aid to Indigent Defense Fund by
January 8, 2007.
In FY 2007, the State Aid to County
Attorneys Fund was allocated $1.0
million. The State Aid for Indigent

(Continued)

Defense Fund was allocated
$983,300.
ACJC reports that counties used the
monies in three main areas:
additional staffing to process more
cases, technological purchases to
improve case management, and
specialized courts such as DUI/drug
courts and early disposition courts.
The specialty courts were funded to
increase the speed in handling cases
that warranted treatment or plea
bargains.

required rate for all families has not
been finalized yet, but is estimated to
be 25%. In its previous quarterly
report, DES estimated this rate at 41%.
DES reports that the lower than
previously estimated rate is a result of
the department using a federal
provision that allows the state to use
excess TANF maintenance-of-effort
expenditures above the grant’s
minimum requirement toward
increasing the caseload reduction
credit.

The legislation establishing the funds
and the reporting requirement
included a legislative intent section
that set timelines for criminal case
processing. The ACJC report states
that although Fill the Gap funding
increased, case processing times
have not met the Supreme Court
guidelines. Counties cite lack of
qualified attorneys, high staff
turnover, increased case
requirements, and growth in criminal
case filings as reasons for not meeting
timelines.

DES had a work participation rate of
26.1% in FFY 2007, and as a result,
appears to have met the
requirements of the DHHS. Failure to
meet the required rate would result in
a federal corrective action plan and
potentially fines up to 5% of the
Federal TANF Block Grant, about $10
million. DES does not discuss the
estimated rates for FFY 2008.

Department of Economic Security –
Quarterly Report on Federal Work
Participation Requirements – A
footnote in the FY 2008 General
Appropriation Act requires the
Department of Economic Security
(DES) 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, which ended
September 30, 2007, the minimum

Arizona Department of Education —
Report on AIMS Contract Changes –
A General Appropriation Act
footnote states that “Before making
any changes to the Achievement
Testing program that will increase
program costs, the State Board of
Education shall report the estimated
fiscal impact of those changes to the
JLBC.” In this regard, the Arizona
Department of Education (ADE)
recently reported that overall (5-year)
AIMS contract costs are now
estimated at $54.7 million through FY
2009, which would be $4.8 million
higher than ADE estimated in January
2007.
The projected $4.8 million change
includes an increase of $3.2 million for
FY 2008 and a further increase of $1.6
million for FY 2009. Approximately half
of the FY 2008 increase is due to
higher caseloads, with most of the
remainder being attributable to
design changes for the new AIMS
science test required by No Child Left
Behind. The projected FY 2009
change would be due to higher
caseloads only.

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Summary of Recent Agency Reports
The original 5-year AIMS contract
signed in March 2004 was for $44.7
million, or $10.0 million less than the
currently projected amount. ADE
indicates that the $10 million
cumulative 5-year increase is
attributable mainly to the following
factors: 1) increased caseload, 2)
“live equating” of test scores (to
make scoring comparable among
years), 3) increased page counts due
to integration of “dual purpose
testing,” 4) change in test format for
greater security, and 5) development
of a new science test (funded with
federal monies).
It is unclear whether additional
General Fund funding would be
needed for AIMS in FY 2008 under the
revised ADE estimates, as federal and
Proposition 301 funds may be able to
cover at least part of the additional
costs. Any potential transfer of
monies from Basic State Aid or other
formula programs to Achievement
Testing to cover a potential shortfall
would require JLBC review pursuant
to A.R.S. § 15-901.03.
State Land Department – Report on
Fire Suppression Activities – A.R.S. §
37-623.02(E) requires the State Land
Commissioner to submit a report by
December 31 of each year on the
uses of monies authorized to be
expended from the Fire Suppression
Revolving Fund. In FY 2007, there was
a total of $7.9 million in liability
incurred by the fund. Of the liability,

(Continued)

the department made payments of
$7.1 million in FY 2007.
In terms of fire fighting activity, Fire
Suppression Revolving Fund monies
were used to fight a total of 857 fires,
resulting in a total liability of $6.4
million. Table 1 displays the FY 2007
fire suppression activities by category.
State Land Department – Report on
Mineral Leasing – Laws 2007, Chapter
255 requires the State Land
Department to report on the activity
of 2 additional FTE Positions
appropriated for mineral leasing. The
department filled the positions in July
and October of 2007.
As of December 31, 2007, the
department had received 409 lease
applications; the average processing
time was 93 days; and there were 264
outstanding lease applications. The
average processing time of 93 days is
up from 62 days in FY 2007. The
department reports that the increase
was due to the completion of several
very old lease applications, which
would not otherwise be included in
that average.
There are some outstanding mineral
lease applications that are as many
as 20 years old. According to the
department, applications may go
unprocessed for so long because the
department has determined that it is
not in the best interest of the State
Land Trust to process the application.

There may also be related legal and
environmental reasons. The 2 new
employees are still in the process of
being trained, so they have not yet
made a noticeable impact on the
lease processing time.
Arizona Department of Public Safety –
Quarterly Report on GIITEM –
Pursuant to Laws 2007, Chapter 255
(General Appropriation Act), the
Arizona Department of Public Safety
(DPS) is required to report quarterly on
the expenditures and progress of 2
appropriations for the Gang and
Immigration Intelligence Team
Enforcement Mission (GIITEM),
including FY 2008 funding for DPS
personnel and local law enforcement
grants.
DPS Personnel
In the first quarter of FY 2008, DPS
spent or encumbered $1.7 million of
the $10 million appropriation for the
100 DPS immigration staff. Of the 100
DPS personnel, at least 50 sworn DPS
positions are to be used for
immigration and border security and
up to 50 DPS positions are to expand
GIITEM’s public awareness,
investigation and intelligence efforts.
As of September 30, 2007, 55 of the
100 DPS positions were filled, of which
26 were assigned to immigration
enforcement, 27 work with gang
enforcement, and 2 are civilians.
During the first quarter, DPS hired 11
new DPS sworn officers and 2 civilians
for GIITEM efforts.

Table 1

FY 2007 Fire Suppression Activities
Location of Fire
State & Private Land
Federal Land - In State
Federal Land - Out of State
Pre-positioning of Resources
False Alarms
Other
Total

Number
403
280
174
1
741
1
1,600

9

Total Liability
$1,007,300
4,021,200
1,400,400
1,300,000
183,200
1,600
$7,913,700

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Summary of Recent Agency Reports
Local Law Enforcement Efforts
In the first quarter of FY 2008, DPS
spent or encumbered $846,400 of the
$10 million for local law enforcement
grants. As of September 30, 2007, 14
agencies statewide contributed one
detention officer to the Detention
Liaison (DLO) Program that assists with
collection of gang and human
smuggling intelligence information at
various correctional facilities. In
addition, 18 local and county law
enforcement agencies provided 26
officers to GIITEM efforts, another 6
have agreements but are unable to
provide GIITEM staff, and agreements
with Immigration and Customs
Enforcement (ICE) and the Phoenix
Police Department are pending.
Arizona Department of Public Safety –
Report on Sworn Personnel Staffing –
Pursuant to Laws 2007, Chapter 255
(General Appropriation Act), the
Arizona Department of Public Safety
(DPS) is required to report quarterly on
sworn personnel staffing levels. DPS
currently has 1,355 authorized sworn
full-time positions, including 100
authorized sworn positions for the
Gang and Immigration Intelligence
Team Enforcement Mission (GIITEM).
Of the 1,355 authorized sworn
positions, 1,176 (or 86.8%) are
currently filled, representing a net
increase of 24 positions in the 1st
quarter.
Supreme Court – Report on Case and
Cash Management System – Pursuant
to a footnote in the FY 2008 General
Appropriation Act (Laws 2007,
Chapter 255), the Administrative
Office of the Courts (AOC) is required
to report to the JLBC on the monies
expended from the Case and Cash
Management System (CMS) line item
and progress related to the
development and deployment of the
system. Monies are to be used for the
replacement of the aging case
management systems in the largervolume Superior and limited
jurisdiction courts within Maricopa
and Pima Counties, as well as in 145
of the 180 state, county and

municipal courts throughout the
state.
Funding and Expenditure Plan
AOC has estimated that the upgrade
of these systems will continue through
FY 2012. As of December 31, 2007,
the report listed current expenditures
of $1.6 million and planned expenditures of $23.5 million through FY 2012.
Progress
AOC reports that the Pima County
general jurisdiction (Superior Courts)
CMS, called AGAVE, is no longer a
viable statewide option and has
been terminated from further
statewide consideration. AOC along
with several Superior Courts
participated in the RFP review
process of the new software
package. A vendor was selected
from a field of 10 possible vendors
and ITAC approved the Project
Investment Justification (PIJ) in
September 2007. AOC is evaluating
whether to use this same system to
address the needs of the Limited
Jurisdiction Courts. A decision will be
made in the first quarter of FY 2009.
Supreme Court – Report on Criminal
Case Processing and the State Aid to
the Courts Fund – The Supreme Court
is required to report on the Criminal
Case Processing and Enforcement
Improvement Fund and the State Aid
to the Courts Fund annually by
January 8, pursuant to A.R.S. § 12102.01 and 12-102.02. The report
includes an evaluation of statewide
court collection efforts and the
progress of criminal case processing
projects in each Arizona County.
Court Collections
In FY 2006, statewide court revenue
collections increased by $35.3 million,
or 10.9%, to $358.5 million. Total case
filings increased by 4.5%.
The Fines/Fees and Restitution
Enforcement (FARE) program
contributed 8.4% of the overall
collections amounts. Focusing on
backlog cases, FARE recovered $30.2

(Continued)

million, with an average payment of
$198, with many cases dating to the
mid-1980s.
Case Processing
In FY 2007, a total of 61,715 criminal
cases were filed in Superior Courts
throughout the state, which
represents an increase of 2.96% over
FY 2006.
The report provides an overview of
case processing performance in the
14 counties that received monies
from the State Aid to the Courts Fund
in FY 2007. In the FY 2003 report, the
Supreme Court established
performance goals for criminal case
dispositions of 90% of cases within 100
days and 99% within 180 days. In
FY 2007, no county met either
performance measure. However, no
statistics relating to this measure was
provided for Maricopa County
despite having received State Aid to
the Courts Fund monies.
Arizona Department of Transportation
– Quarterly Report on Motor Vehicle
Division Wait Times – A FY 2008
General Appropriation Act footnote
requires the Arizona Department of
Transportation (ADOT) to report to the
Legislature quarterly on customer
wait times in Motor Vehicle Division
(MVD) field offices and vehicle
registration renewal by mail
turnaround times. Customer wait
time from receiving a ticket until
arriving at the counter decreased
from 14 minutes in the 1st quarter of FY
2008 to 11.3 minutes in the 2nd quarter
of FY 2008. Customer wait times in
metropolitan areas ranged from just
over 5 minutes in the Mesa East office
to more than 21 minutes in the
Glendale office.
For FY 2008, the footnote also required
ADOT to report the amount of time it
takes to receive a numbered ticket.
ADOT reports that they have been
unable to reliably document the wait
time to get a numbered ticket from an
MVD employee, despite trying several
different methods.

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Summary of Recent Agency Reports
In the metropolitan areas, including
all of Maricopa County, Apache
Junction, Tucson and Flagstaff, MVD
field offices handled 1.08 million
transactions, or 59.4%, of the total 1.8
million transactions in the 2nd quarter
of FY 2008, and third parties handled
738,100 transactions, or 40.6%. Total
transactions include both primary
transactions (driver licenses, titles, and
vehicle registrations) and secondary
transactions (all others). In the
nonmetropolitan areas, MVD field
offices handled 534,600 transactions,
or 95.5%, of the total 559,900
transactions in the 2nd quarter of FY
2008, and third parties handled
25,300 transactions, or 4.5%.
Arizona Board of Regents/University of
Arizona College of Medicine – Report
on Phoenix Update – Pursuant to a
General Appropriation Act footnote,
the Arizona Board of Regents (ABOR)
is required to provide an update on
the University of Arizona Phoenix
Medical Campus (PMC) and general
efforts to curb the statewide
physician shortage.
The Legislature first provided funding
for the operation of the PMC in FY
2006. In early August 2007, the
Phoenix Medical Campus welcomed
its first class of 24 students and is
preparing to accept a second class
of 48 students in the fall 2008. The
campus is comprised of the
Translational Genomics Research
Institute (TGen) research building, the
three former Phoenix Union High
School buildings in which medical
students take classes, and the Arizona
Biomedical Collaborative research
building (ABC 1). ABC 1, which
opened in July 2007, houses
researchers from the ASU Department
of Biomedical Informatics on the first 2
floors and UA researchers and lab
space on the top 2 floors.
The report submitted by ABOR on
February 15, 2007 includes updated
information on the following topics:
Formal Relationships with Area
Hospitals – In December 2006, the
College of Medicine entered into a

memorandum of understanding
(MOU) with Banner Health to
construct a comprehensive cancer
center, a teaching hospital, and an
outpatient facility. Ultimately, both
parties were unable to reach an
agreement. The College of Medicine
has issued a Request for Information
(RFI) from area hospitals and health
systems and national academic
medical centers. The College’s
immediate plan is to focus on clinical
faculty development and building a
patient base, rather than a major
hospital construction project.
The Expansion of Medical Services in
Arizona’s Rural Areas – The Rural
Health Professions Program, which
allows current medical students to
work with rural physician preceptors
for a 4 to 6 week period, received
additional funds from the Arizona
Area Health Education Centers
(Arizona AHEC) to expand by 7
additional slots. More than 60 UA
medical students participate in this
program at any one time.
The additional General Fund
appropriation of $1 million in FY 2008
for the telemedicine programs is
currently being used to further
develop telemedicine initiatives
statewide. Funding has been used
specifically to deliver clinical services
to rural areas from the Phoenix THealth facility.
Additional Reporting Requirements –
ABOR’s report does not include
further updates from the February 15th
report on partnerships with private
medical schools, the availability of
clinical rotations for medical students,
the creation of new residency
positions, and the attraction of out-ofstate medical students to practice in
Arizona. The UA College of Medicine
believes that by establishing
additional residency positions, more
out-of-state medical students will be
able to choose Arizona to complete
their residencies, after which UA
estimates one-half would be
expected to practice in Arizona.

(Continued)

11

12

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

Other Issues
State Appropriations Limit
A.R.S. § 41-1273 requires JLBC Staff to
annually report on how state
spending compares to the
constitutional appropriations limit.
The Arizona Constitution limits the
appropriation of certain state
revenues to no more than 7.41% of
Arizona personal income. Under the
January JLBC Baseline budget, total
FY 2008 state appropriations (both
General and Other Funds) would be
$14.32 billion, or 6.59% of personal
income. The FY 2009 JLBC Baseline
includes spending of $15.57 billion,
which is 6.79% of personal income.
Revenues subject to the limit include:
1) taxes, 2) university collections, and
3) licenses, fees, and permits. These
revenues may either be deposited in
the General Fund or used for a
dedicated purpose. The following
appropriated revenues are not
subject to the limit: 1) interest and
dividends earnings, 2) sales, rentals,
and service receipts, 3) federal
grants, 4) gifts and donations, and 5)
monies received by the state as a
trustee, custodian, or agent.
Truth in Taxation K-12 Property Tax
Rates
A.R.S. § 41-1276 requires the JLBC
Staff to annually calculate and report
the Truth in Taxation (TNT) adjustments
to the K-12 property tax rates. The K12 property tax rates consist of the
Qualifying Tax Rate (QTR) and the
County Equalization Tax Rate;
however, the County Equalization Tax
Rate was suspended from FY 2007
through FY 2009.
Each year these rates are adjusted to
offset increases in the valuation of
existing property, with the intended
result of producing no change in
statewide property tax liability. The
following table displays the current

rates, as well as the new rates after
making the adjustment.

Table 7
K-12 Education Tax Rates
FY 2008

FY 2009

Unified QTR

$3.2040

$2.9244

Non-Unified QTR

$1.6020

$1.4622

Based on the most recent information
submitted by county assessors,
statewide assessed values are
expected to increase by 15.7% in FY
2009, of which 6.2% would be due to
new construction, and 9.5% would be
due to the higher value of existing
properties. The TNT adjustment is
made to only offset growth in the
assessed valuation of existing
property.
Since the state share of K-12
education costs depends on the
amount of revenues generated from
the QTR, any reduction in this rate
requires the state to provide the
Arizona Department of Education
(ADE) with additional funding for
Basic State Aid. Based on the
forecasted rates, the FY 2009 JLBC
Baseline already included additional
funding to ADE for Basic State Aid.
Due to the difference between the
forecasted and actual rates, the
JLBC Baseline would need to be
adjusted downward by $16.1 million
to reflect the revised rates.

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2008

13

State of Arizona
General Fund Revenue

Change from Previous Year and Enacted Forecast
January 2008
Current Month

FY 2008 YTD (Seven Months)

Change From
Actual

January 2007

January 2008

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

January 2007

January 2008

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use

406,881,740

($33,114,671)

Income - Individual

479,613,994

(64,654,653)

(14,503,302)

(51,770,213)

- Corporate
Property
Luxury
Insurance Premium
Estate

591,262

697,537

6,696,048

2,376,054

187,293

(340,444)

(7.5) %

($74,034,360)

(11.9)

(98,687,006)

--

(50,160,502)

-55.0
(64.5)

591,262
781,048
(3,812,707)

(15.4) %

$2,635,262,680

($33,049,291)

(17.1)

2,252,484,333

(78,858,394)

--

399,568,076

--

11,184,474

(1.2) %

($258,769,320)

(8.9) %

(3.4)

(262,893,967)

(10.5)

(128,606,202)

(24.3)

(125,900,724)

(24.0)

(2,198,612)

(16.4)

(6,315,526)

(36.1)

13.2

37,025,858

(5,055,039)

(12.0)

(4,379,142)

(10.6)

(95.3)

152,432,163

8,139,557

5.6

7,332,163

5.1

--

268,122

1,218,079

(2.4)

350,723

(36,988)

$5,488,576,429

($238,446,890)

7,344

4,628

170.4

7,344

63,532

(9,909)

(13.5)

(1,593)

$879,537,911

($146,811,671)

Lottery

2,328,900

(562,200)

(19.4)

(1,371,900)

(37.1)

19,343,619

(548,781)

(2.8)

License, Fees and Permits

2,325,785

(567,693)

(19.6)

(930,315)

(28.6)

20,809,546

(4,483,638)

(17.7)

(3,561,354)

(14.6)

(2,652,343)

(26.3)

(2,028,205)

(21.4)

64,308,776

10,612,679

19.8

14,051,176

28.0

(560,142)

(6.7)

30,479,414

2,031,027

7.1

(3,256,386)

(9.7)

17,573,694

(1,135,511)

(6.1)

4,460,294

34.0

Other Taxes
Sub-Total Taxes

(14.3) %

($225,316,514)

(20.4) %

-(9.5)
(4.2) %

268,122
(105,152)
($650,763,546)

-(23.1)
(10.6) %

Other Revenue

Interest

7,431,495

Sales and Services

7,859,458

19,786

0.3

Other Miscellaneous

4,503,206

1,402,240

45.2

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

0
2,332,228

0
(2,564,468)

2,355,606

--

0

(52.4)

1,622,228

109.7
-228.5

427,219

0

0

35,345,673

27,516,080

26,781,072

(4,924,678)

(15.5) %

(912,728)

(3.3) %

187,860,722

$906,318,983

($151,736,349)

(14.3) %

($226,229,242)

(20.0) %

$5,676,437,151

34,967,856
($203,479,034)

2.3

-351.4
22.9 %
(3.5) %

0
20,375,673
31,520,622
($619,242,924)

-136.1
20.2 %
(9.8) %

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

(57,044,911)
(57,044,911)
$849,274,072

(11,109,023)

24.2

(11,109,023)

24.2 %

($162,845,372)

(16.1) %

0
0
($226,229,242)

0.0
0.0 %
(21.0) %

(399,314,374)
(399,314,374)
$5,277,122,777

(77,763,155)

24.2

(77,763,155)

24.2 %

($281,242,189)

(5.1) %

0
0
($619,242,924)

0.0
0.0 %
(10.5) %