JLBC - Monthly Fiscal Highlights

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

www.azleg.gov/jlbc.htm

“Year-to-date
through May,
General Fund
revenue
collections are
$(278.4) million
below forecast”.

June 2008

Summary
Total May General Fund revenue collections
were $696.6 million, or (5.2)% below May of
last year. This amount was $(196.5) million
below the forecast used for the recently
enacted FY 2008 budget revisions. Year-todate through May, General Fund revenue
collections are $(278.4) million below forecast.
(See Table 1 for summary information).
For the first 11 months of FY 2008, General Fund
collections are down (6.9)% when compared
to last year. When factoring in Urban Revenue
Sharing, the year-to-date collections of $8.03
billion are (6.5)% below last year. The May
decline in revenues includes each of the 3
main tax categories:
• Sales tax collections were down (1.0)%
compared to May 2007, and were $(24.8)
million short of the monthly forecast.
• Individual income tax collections were
down (52.9)% compared to May 2007 and
were $(136.8) million below forecast.
• Corporate income tax collections were
down (44.4)% from May 2007, which was
$(27.1) million below forecast.
(See page 10 for detail information).
FY 2008 Budget Update
The FY 2008 budget revision legislation (Laws
2008, Chapter 53) envisioned the possibility of

revenue collections coming in below forecast
for the year. Chapter 53 provides a
contingency of $364 million to address any
year-end shortfalls.
The $364 million includes $152 million in surplus
cash funds. (Chapter 53 generated budget
solutions greater than the anticipated shortfall
at the time.) In addition, Chapter 53 permits
the use of the $212 million remaining in the
Budget Stabilization Fund (BSF).
With revenues $(278) million below forecast,
through May, the state would still have $86
million in contingency funds to address any
June shortfall ($364 million less $278 million).
At this time, JLBC Staff does not anticipate that
June revenue losses would exceed the
remaining $86 million in contingency funds. As
of this writing, June corporate income tax and
individual income tax estimated payments and
refunds collectively exceed the monthly
forecast. The June projections for sales tax and
income tax withholding are more speculative
at this time, but those 2 categories are unlikely
to require the use of the remaining reserve
funds.
Revenues by themselves will not determine the
overall General Fund surplus or shortfall. The

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

This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on June
30, 2008.

JLBC Meeting Summary
• Atty General – Antitrust Fund Allocation ........ 6
• Atty General – Tucson College Settlement.... 6
• Atty General – Merck Settlement .................... 6
• ADC – Transfer of Appropriations..................... 6
• ACJC – Victim Compensation ........................ 6
• DES – Transfer of Appropriations....................... 6
• DPS – Gang & Immigration Enforcement ....... 6
JCCR Meeting Summary
• ADOA – Tucson Office Renovation ................. 7
• ASU – Energy Services Contract ....................... 7
• NAU – Network Facility Bond Project............... 7

• NAU – Rec Field & Multipurpose Building........ 7

Summary of Recent Agency Reports
• AHCCCS –Capitation Rate Increases ............. 7
• AHCCCS –Healthcare Group ........................... 7
• AHCCCS – SAVE Program ................................. 8
• DOC – Monthly Bed Plan Update .................... 8
• ACJC – Information System Project................. 8
• DES – Child Support ............................................ 8
• ADE – Budget Status Report.............................. 9
• DEQ – Vehicle Emissions Inspections .............. 9
• City of Phoenix – Convention Center ............ 9

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JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

Summary

(Continued)

level of spending below appropriations
(otherwise known as “revertments”) also
affects the year-end balance. The current
budget assumes $85 million in revertments.
While these unspent appropriations are difficult
to predict in advance, it is unlikely that the final
numbers will absorb much, if any, of the
reserve funds.
JLBC/OSPB Estimate – Chapter 53 provides
that, by July 28, 2008, JLBC and OSPB shall
jointly notify the Governor, the President of the
Senate, and the Speaker of the House whether
the preliminary FY 2008 ending balance is less

than $0, and if so, the ending balance
amount. If the balance is less than $0, the
State Treasurer is required to transfer an
amount equal to the negative ending
balance plus $1 million from the Budget
Stabilization Fund to the General Fund. This
joint notification will determine precisely how
much of the $212 million in remaining BSF
monies are used to balance the budget.
JLBC/JCCR Meetings – The Monthly Fiscal
Highlights include a summary of the June
JLBC meeting (page 6) and the June JCCR
meeting (page 7).

May Revenues
Table 1

General Fund Revenues
Compared to Enacted Forecast and FY 2007 Collections
($ in Millions)
FY 2008
Difference From
Difference
Collections
Chapter 53 Forecast
From FY 2007
May
$ 696.6
$(196.5)
$ (38.5)
Year-to-Date
$8,025.1
$(278.4)
$(554.6)

Sales Tax collections were $354.0 million in
May. This amount was down (1.0)% compared
to last May, and $(24.8) million below forecast.
In the first 11 months of FY 2008, sales tax
revenues are down (2.0)% compared to last
year. Table 2 displays the May and year-todate growth rates for the largest categories.
Table 2

Sales Tax Growth Rates
May
Year-to-Date
Retail
(13.1)%
(4.3)%
Contracting
(12.0)%
(10.0)%
Utilities
13.6%
7.4%
Use
345.3%
17.6%
Restaurant & Bar
(3.7)%
(0.1)%
There were significant variations in May
collections by sector. Retail and contracting
collections together account for two-thirds of
all sales tax revenues. The retail sector
declined by (13.1)%, and contracting fell by
(12.0)%. Both retail and contracting continue
the negative trend begun last year, with the 3month rolling average for contracting down
(15.4)% from the prior year, and retail down
(7.8)%.

The large increase in the use tax category is
due primarily to a low collection month in
May of 2007, resulting from a large taxpayer
refund.
Individual Income Tax collections were
$146.1 million, or (52.9)% below last year.
Year-to-date, income tax collections are
(9.6)% below last year. May collections were
$(136.8) million less than the recently enacted
budget forecast. Table 4 displays individual
category growth rates.
Table 4

Individual Income Tax Growth Rates
May
Year-to-Date
Withholding
(2.5)%
1.5%
Estimated +
(81.2)%
(12.8)%
Final Payments
Refunds
10.8%
16.8%
May withholding was (2.5)% below last year.
This decline brings year-to-date withholding
collections down to 1.5% over the prior year.
Estimated and final payments decreased
year-over-year by (81.2)% in May. This

“Sales Tax
collections were
… $(24.8) million
below forecast”.

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

May Revenues

“Individual
Income Tax
collections were
$146.1 million, or
(52.9)% below
last year”.

3

(Continued)

decrease can be attributed to faster
depositing of payments during April
compared to last year. Since payment
growth in April and May is largely influenced
by the processing of tax returns, it is often
more instructive to use the combined growth
rate for the two months. May’s (81.2)%
decline, along with April’s 5.0% increase,
provides a combined reduction of (13.2)% for
the two months compared to the previous
year.
May refunds of $168.5 million were $16.5
million, or 10.8% over the prior year. This
amount was only $1.4 million greater than the
forecast for the month.
Corporate Income Tax collections were $26.5
million, or (44.4)% below last year. This
amount is $(27.1) below the recently enacted
budget forecast for the month of May.

Collections through 11 months are down
(25.7)% from the prior year. While May is not
one of the large collection months for
corporate income tax, the May results
continue the trend seen throughout the fiscal
year of reduced collections and increased
refunds. Through 11 months, payments are
down (11.1)%, while refunds have increased
by almost 154%.
Budget Plan Transfers – the budget revision
legislation (Laws 2008, Chapter 53) included a
provision for the transfer of $296 million in
agency fund sweeps to the General Fund.
Through May, $190.4 million of those transfers
have been processed, and are included on
the revenue schedule on page 10 of this
document.

Recent Economic Indicators
NATIONAL

“In June, the
Conference
Board’s U.S.
Consumer
Confidence
Index declined
by (13.3)% to
50.4 which is
the fifth lowest
reading ever.”

According to the third and final release of the
U.S. Real Gross Domestic Product (GDP) for
the 1st quarter of 2008, the nation’s economy
grew at annual rate of 1.0% during this period,
an upward revision of 0.1% from last month’s
preliminary estimate. The small increase was
mainly attributable to higher exports and
personal consumption expenditures.
In June, the Conference Board’s U.S.
Consumer Confidence Index declined by
(13.3)% to 50.4, which is the fifth lowest
reading ever. At its current level, the index
stands (52.1)% below June 2007’s reading of
105.3. The increasingly pessimistic assessment
by consumers reflects both a deteriorating job
market and rapidly rising energy prices.
The U.S. Index of Leading Economic Indicators
increased by 0.1% for the second straight
month in May, following a steady decline that
began in the middle of last year. Four of the
10 components that make up the composite
index increased in May. The interest rate
spread was the largest positive contributor
followed by stock prices and manufacturers’
new orders for consumer goods and nondefense capital goods. The negative
contributors to the composite index were real

money supply, consumer expectations,
building permits, vendor performance, and
average weekly claims for unemployment
insurance.
U.S. semiconductor billings (3-month moving
average) increased by 1.3% in April and by
6.0% compared to last year. The
Semiconductor Industry Association reports
that the increase in demand for
semiconductors is primarily driven by unit sales
of personal computers and handsets.
The U.S. Consumer Price Index (CPI) (3-month
moving average) increased by 0.8% in May.
The year-over-year increase was 4.0%. Most
of the increase in the CPI was energy related.
ARIZONA
Arizona Personal Income grew by 3.8% in the
1st quarter of 2008 compared to the same
quarter in the prior year. This was the slowest
reported growth rate since the 1st quarter of
2003. On annualized basis, Arizona personal
income growth ranked 42nd in the nation.
Arizona’s unemployment rate increased from
3.9% to 4.4% in May. The last time the state’s
unemployment rate increased, month over
month, by 0.5% or more was in August of 1991.

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JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

Recent Economic Indicators
May total statewide non-farm employment
decreased, year-over-year, by (0.6)%. In
comparison, the average year-over-year
growth rate for May in the past 10 years was
3.1%. May marked the third consecutive
month with negative job growth.
Construction employment decreased by
(1.1)% in May and by (12.7)% year-over-year.
The state has shed 49,000 construction jobs
since employment in this sector peaked in
June 2006. Employment in the construction
sector is now comparable to the levels
recorded in the fall of 2004.
Manufacturing employment growth
decreased by (0.3)% in May and by (2.0)%
year-over-year. May was also the 19th
consecutive month with a negative yearover-year growth rate for this sector.
Between February and April, the number of
building permits authorized (3-month moving
average) statewide, totaled 2,494, including
1,877 single-family residential building permits
and 617 multi-family building permits. The
number of permits authorized in the single
family segment increased 9.5% over the prior
period, while the number of permits in the
multi-unit segment declined (11.7)%.
Compared to the same period last year,
permitting activity in the single-family and
multi-family segments are down (53.9)% and
(57.5)%, respectively.
The Real Estate Center at Arizona State
University reported statistics in May that reflect
both traditional transactions and foreclosed
transactions. Foreclosed transactions
represent a transfer of ownership to the lender
of record, or other person or entity, via a
successful bid during the auction process.
Based on the report, The Greater Phoenix
single-family median resale home price in
May for traditional and foreclosed properties
totaled $223,500 and $179,465, respectively.
The number of single-family homes sold fell
(13.2)% from a year ago in the traditional
market, to 4,265 homes. Sales of foreclosed
homes however, totaled 1,475—an increase
383.6% from a year ago.
In May, the townhouse-condominium median
price totaled $169,900 for traditional
transactions and $136,000 for foreclosed
transactions. At these levels, the median price
for traditional sales fell (8.2)% from a year ago,

(Continued)

while the average price for foreclosed
transactions increased 2.4%. Year-over-year,
the number of townhouse-condominium
units changing ownership included 680
traditional sales and 130 foreclosed sales.
The 810 combined transactions fell (34.9)%
from May 2007 levels.
Since February, the Phoenix metropolitan
area supply of housing indicator has
improved. This trend continued in May,
indicating it would take 9.5 months to sell
the current inventory of homes-- 10 months
fewer than a January high (19.6 months),
and less than 1 month longer than a year
ago. This indicator uses the ratio between
the number of homes listed for sale on the
Arizona Regional Multiple Listing Service
(ARMLS) and the number of homes sold in a
given month to gauge the supply and
demand of homes.
The Arizona Business Conditions Index (BCI)
fell by (7.5)% in May to 48.3 and is down
(16.6)% compared to last year. The index
has been below the critical threshold of 50
points in 6 of the last 8 months. A reading
below 50 suggests a slowdown in the overall
level of economic activity in the near term.
Of the 5 components that make up the
composite index, all but one
(production/business activity) had a reading
of less than 50.
June AHCCCS caseload’s totaled 1,110,428
members, 6,947 members, above the May
totals. Year-over-year, the AHCCCS
caseload has increased by 5.8%, or 60,411
members.
There were a reported 78,713 TANF
recipients in the state in April, a (0.4)%
reduction from the prior month. As of April,
the number of TANF recipients was virtually
the same as last year. The state budget
projects 84,700 recipients in FY 2008.
The Department of Corrections’ (ADC) inmate
population increased by an average of 218
inmates per month to an average population
of 38,592 inmates. The department’s FY 2008
budget includes funding for an increase of
160 inmates per month—slightly above the
actual fiscal year-to-date growth of157
inmates per month.

“Since
February, the
Phoenix
metropolitan
area supply of
housing
indicator has
improved”.

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

Recent Economic Indicators

(Continued)

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, Traditional Sales
Single-Family, Foreclosed Sales
Townhouse/Condominium, Traditional Sales
Townhouse/Condominium, Foreclosed Sales
- Greater Phoenix Median Home Sales Price
Single-Family, Traditional Sales
Single-Family, Foreclosed Sales
Townhouse/Condominium, Traditional Sales
Townhouse/Condominium, Foreclosed Sales
S&P/Case-Shiller Home Price Index
- Months Supply of Housing (ARMLS)
- 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)

Time Period

Current Value

Change From
Prior Period

Change From
Prior Year

May
May
May
May
Mar-May
Mar-May

4.4%
2.66 million
178,300
200,200
$64.4 million
$159.2 million

0.5%
(0.3)%
(0.3)%
(1.1)%
1.3%
2.7%

0.8%
(0.6)%
(2.0)%
(12.7)%
(15.4)%
(7.8)%

Feb-Apr
Feb-Apr

1,877
617

9.5%
(11.7)%

(53.9)%
(57.5)%

May
May
May
May

4,265
1,475
680
130

13.4%
(19.2)%
N/A
N/A

(13.2)%
383.6%
(44.3)%
420.0%

May
May
May
May
March
May
April
March

$223,500
$179,465
$169,900
$136,000
166.97
9.5 months
3.5 million
$9.86

January
May

N/A
N/A
(0.9)%
(8.1)%
(3.3)%
(1.9) months
(9.3)%
12.2%

(15.7)%
(17.4)%
(8.2)%
2.4%
(23.0)%
0.7 months
(2.6)%
3.5%

119.1
48.3

0.3%
(7.5)%

(0.6)%
(16.6)%

4th Quarter 2007
2 st Quarter 2008
1st Quarter 2008
July 1, 2007
June
April
Mar-May

79.8
36.9
$213.9 billion
6.34 million
1,110,428
78,713
38,592

(21.7)%
(8.7)%
1.1%
173,066
0.63
(0.4)%
218 inmates

(24.2)%
(30.4)%
3.8%
2.8%
5.8%
0.0%
2,039 inmates

1st Quarter 2008

$11.7 trillion

1.0%

June
May
Feb-Apr
Mar-May

50.4
102.1
$3.46 billion
215.0

(13.3)%
0.1%
1.3%
0.8%

2.5%
(52.1)%
N/A
6.0%
4.0%

5

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JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

JLBC Meeting
At its June 18, 2008 meeting, the Joint
Legislative Budget Committee considered the
following issues:
Attorney General – Review of Antitrust
Enforcement Revolving Fund Allocation – The
Committee gave a favorable review to the
Attorney General’s (AG) intended expenditures of $307,300 in Antitrust Enforcement
Revolving Fund monies. The AG will use this
funding on 5 non-attorney staff positions,
investigation and court costs associated with
multi-state antitrust cases, and other
operating expenses to support the Antitrust
Unit.
Attorney General – Review of Allocation of
Settlement Monies – State v. Tucson College –
The Committee gave a favorable review to
the allocation plan for approximately
$475,000 received by the state from the
Tucson College consent judgment. Tucson
College will pay about $275,000 to reimburse
the 57 students enrolled in the Criminal Justice
Program as restitution for misrepresenting the
requirements of the program and the
qualifications earned upon completion. In
addition, Tucson College will pay the AG
$150,000 for the costs of the investigation.
Attorney General – Review of Allocation of
Settlement Monies – State v. Merck – The
Committee gave a favorable review to the
AG’s allocation plan for the $2.3 million that
Arizona will receive as a result of the multistate suit brought against Merck for the sale
and marketing of the anti-inflammatory drug,
Vioxx. The suit alleged that Merck had not
fully disclosed the adverse effects of the drug
and failed to adequately inform consumers
and medical professionals of conflicts of
interest. The AG will receive $2.3 million for
attorney’s fees and investigative costs,
consumer fraud education, and for
investigations and enforcement of the
Consumer Fraud Act.
Arizona Department of Corrections – Approval
and Review of Requested Transfer of
Appropriations – The Committee gave a
favorable review to the Department of
Corrections’s (ADC) request to transfer nearly
$20.8 million within ADC’s line items and
Special Line Items (SLI).

Arizona Criminal Justice Commission –
Review of Use of Victim Compensation
Fund (VCAF) – The Committee gave a
favorable review to the additional
expenditure of $300,000 above the FY 2009
appropriation from the VCAF. This would
maintain the amount of funding available
from FY 2008 for distribution by county crime
victim compensation boards.
Department of Economic Security – Review
of Requested Transfer of Appropriations –
The Committee gave an unfavorable
review to the proposed Division of Benefits
and Medical Eligibility operating budget
transfer of $1,500,000 due to concerns
about using money from declining
entitlement benefits to fund administrative
costs. The Committee gave a favorable
review of the remaining transfers with the
provision that DES use non-appropriated
fund sources and savings first to mitigate
the projected shortfalls. The remaining
increase included a $1.5 million General
Fund transfer from Temporary Assistance for
Needy Families (TANF) Cash Benefits to
Adoption Services.
Department of Public Safety – Discussion of
the Expenditure Plan for the Gang and
Immigration Intelligence Team Enforcement
Mission – The Department of Public Safety
(DPS) notified the Committee of its intent to
spend $1.6 million of their $10 million multijurisdictional GIITEM appropriation for a new
felony and fugitive task force. DPS also
indicated that they would not renew a
Maricopa County Sheriff’s Office contract
for illegal immigration enforcement and
transportation in order to reallocate these
funds to the new task force. Discussion
ensued between the Department of Public
Safety and the Committee. This item was
for discussion only.

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

7

JCCR Meeting
At its June 25, 2008 meeting, the Joint
Committee on Capital Review considered the
following issues:
Arizona Department of Administration –
Review of Tucson Office Complex Renovation
Project – The Committee gave a favorable
review for the Arizona Department of
Administration to spend $1.5 million from the
Risk Management Fund to repair the State of
Arizona Tucson Office Complex. The repairs
will include mold abatement and replacement of damaged carpet.
Arizona State University – Review of Energy
Services and Performance Contract – The
Committee gave a favorable review of
Arizona State University’s proposal to enter
into an Energy Services and Performance
Contract. In conjunction with Arizona Public
Service (APS), an ASU subsidiary will issue $45.2
million in revenue bonds to purchase energy
conservation equipment. The annual debt
service payments will be paid from annual
utility cost avoidances.

Northern Arizona University – Review of
Distance Learning Project – The Committee
gave a favorable review of Northern Arizona
University’s (NAU) new distance learning
facility to be financed with a $12.5 million
system revenue bond issuance. NAU will use
this bond issuance to renovate and construct
a total of 38,000 square feet that will house a
new television studio, production space, and
offices for distance learning staff. The debt
service will be paid from the Technology and
Research Initiative Fund, locally retained
tuition revenues and general university funds.
Northern Arizona University – Review of
Recreation Field Expansion and Multipurpose
Building – The Committee gave a favorable
review for NAU to expand its recreation field
and construct a multipurpose building. The
project is to be financed with an $8.3 million
revenue bond issuance, which will be funded
with auxiliary fees such as a recreation and
wellness fee.

Summary of Recent Agency Reports
AHCCCS – Report on Preliminary Actuarial
Estimates of FY 2009 Capitation Rate Increases –
Pursuant to a General Appropriation Act
footnote, AHCCCS has submitted preliminary
actuarial estimates of the capitation rate
increases for FY 2009. AHCCCS reported the
estimated increase for the ALTCS Program in
March 2008 but delayed reporting the
estimated increase for the Acute Care Program
until after the new Acute Care contract was
awarded in May 2008.
Based on a review of historical encounter cost
and utilization trend data, capitation rates are
estimated to grow approximately 8.2% for the
Acute Care Program. One group within the
Acute Care Program, known as the Proposition
204 Title XIX Waiver Group, is estimated to
experience capitation rate growth of 21%. This
group is primarily composed of childless adults
under 100% of the federal poverty line.
AHCCCS reports that the large increase is due
to cost trends and the elimination of the
loss/profit cap for this group. Under the new
contract, plan losses and profits for this group

will no longer be capped at +/- 2%. The
remaining Acute Care Program populations
will experience average capitation rate
growth of 4%. The FY 2009 budget assumes
capitation rate growth of 6.0% for the Acute
Care Program. Based on the caseload
assumptions included in the FY 2009 budget,
an increase of 8.2% is estimated to cost an
additional $16 million from the General Fund
above the budgeted amount.
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). AHCCCS reports that, as of May 13,
2008, total statewide HCG medical plan
enrollment was 21,646, with participating
members from 7,846 private employers and
16 political subdivisions. Since October 2007,
enrollment has decreased by (4,338) people.
The FY 2008 budget included several reforms
to the HCG program including a one-time $8

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

Summary of Recent Agency Reports
million General Fund subsidy and
freezing enrollment levels as of
September 19, 2007. In accordance
with the enrollment freeze HCG has
not conducted marketing or
outreach activities in the past 6
months. HCG has developed a
waiting list of approximately 1,100
businesses who would like to enroll in
HCG if the freeze is lifted. AHCCCS
administration has also made several
changes to the Healthcare Group
program. As of September 2008,
premiums will increase by 11% - 30%
depending on the size of the
employment group and the specific
type of medical plan selected. As of
January 2008, members are no
longer able to enroll or renew their
membership in $0 deductible plans.
AHCCCS indicates that other cost
savings measures have been
implemented including moving to
electronic renewal processing to
decrease staff, printing, and mailing
costs.
The FY 2009 Health and Welfare
Budget Reconciliation Bill, HB 2275,
includes several reforms to HCG. The
bill eliminates eligibility for 1-person
employer groups but specifies that 1person groups currently enrolled will
remain eligible. The bill also reduces
the amount of time that groups must
be uninsured from 180 days to 90
days and limits the increase in the
number of employer groups to no
more than 5% above the prior year.
The legislation also requires HCG to
adjust premiums based on actuarial
reviews, and to submit quarterly
financial reports and an annual
financial audit to JLBC.
AHCCCS – Report on Systematic
Alien Verification for Entitlements
Program – Pursuant to A.R.S. § 362903.03, the Arizona Health Care
Cost Containment System (AHCCCS)
is providing its quarterly report on the
collection and verification of
documentation associated with the
Systematic Alien Verification for
Entitlements (SAVE) program. A.R.S.
§ 36-2903.03 requires all AHCCCS
applicants to provide

documentation verifying their
immigration status to qualify for
AHCCCS services. If AHCCCS
determines this documentation to
be fraudulent, the applicant is
referred for prosecution.
AHCCCS, in conjunction with DES,
verified the immigration status of
18,965 individuals between
January 1, 2008 and March 31,
2008. During this period, AHCCCS
and DES did not identify any
fraudulent documents using the
SAVE program. In addition, in the
January 1 through March 31 time
period, 4 citizens were referred for
prosecution pursuant to State and
Federal law regarding fraudulent
billing, schemes, and forgery.
Arizona Department of Corrections
– 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. Some highlights of the report,
as of May 31, 2008, are as follows:
•

•

•
•

4,464 ADC inmates were in
custody in private facilities
located in the state, 200 beds
more than previously. These
replace a portion of the 1,260
beds no longer filled in Indiana.
With the exception of 19
inmates pending trial and
sentencing following last years
disturbance at the New Castle
Correctional Facility in Indiana,
all inmates previously held at
the facility have been
transferred back to Arizona.
ADC is issuing a Request for
Proposal seeking up to 600 low
custody provisional beds.
Laws 2007, Chapter 261
authorized an additional 4,000
state operated prison beds
and 2,000 private prison beds.
The Arizona Department of
Administration has secured
certificates of participation to
design and build the 4,000
state operated prison beds
and has authorized

(Continued)

Management and Training
Corporation to proceed with
financing for the additional 2,000
private prison beds.
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.
The Arizona Disposition Reporting
System (ADRS) is intended to
increase the completeness of
criminal background data, which is
stored centrally at the Department
of Public Safety (DPS). As of March
2008, 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
In FY 2008 and 2009, ACJC was
appropriated a total of $1.7 million
to fund an upgrade to the Criminal
Justice Information System, but due
to the budget shortfall, this funding
has been eliminated.
Department of Economic Security –
Report on Use of State Share of
Retained Earnings, Fees & Federal
Incentives – A footnote in the FY 2008
General Appropriation Act allows
the Department of Economic
Security (DES) to expend retained
earnings, fees and federal incentives
in the Division of Child Support
Enforcement above the
appropriated amount. DES reports
that in FY 2008 it intends to use
$2,200,000 plus federal matching
monies above the appropriated
$14,690,900 for improvements to the
Division’s online community interface
program and document generation
systems. The Division will use the
remaining monies for various onetime projects, which include

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

Summary of Recent Agency Reports
upgrades to its case management
system, capital improvements and
the launch of an electronic debt
calculator.
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 net General
Fund surplus of $22.3 million after
adjusting for the FY 2008 K-12 rollover
and non-reverting monies. This
estimate is $5.0 million higher than
was reported by ADE in April 2008
using comparable adjustments. The
$22.3 million estimate is based on
data submitted to ADE as of March
31, 2008 and, therefore, does not
reflect late-year adjustments for
current year enrollment growth.
Based on available information and
prior year trends, the JLBC Staff
anticipates that the final General
Fund surplus for ADE will be roughly
$25 - $40 million.
Department of Environmental Quality
– Report on Vehicle Emissions
Inspections Contract – Pursuant to
A.R.S § 49-545H1, the Arizona
Department of Environmental Quality
has submitted a report describing
progress on the new Vehicle
Emissions Inspection (VEI) contract.
The contractor is developing 3 new
emissions test stations which are on
schedule to be ready by the start of
the new contract on January 1, 2009.
The new stations are in Apache
Junction, Goodyear and north
Phoenix. The contractor is also
upgrading software and improving
data handling and reporting
capability, as required by the
contract.
City of Phoenix – Report on the
Phoenix Convention Center
Expansion Project – The City of
Phoenix has issued its eighth 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.
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.

A.R.S. § 9-602 provides that the
state’s financial obligation begins in
the fiscal year after a certificate of
completion for the project has
been filed. Based on the expected
completion date of December
2008, the state’s obligation would
begin in FY 2010. The payment
schedule would be $5 million in FY
2010, and increases by $5 million
each year through FY 2013. The
state’s obligation would eventually
equal $30 million annually.

(Continued)

9

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – JUNE 2008

State of Arizona
General Fund Revenue:

Change from Previous Year and Enacted Forecast
May 2008
Current Month

FY 2008 YTD (Eleven Months)

Change From
Actual

May 2007

May 2008

Amount

Change from
Actual

Forecast
Percent

Amount

Percent

May 2007

May 2008

Amount

Forecast
Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate
Property
Luxury
Insurance Premium
Estate
Other Taxes

$353,973,221

($3,636,843)

146,068,114

(164,200,013)

26,544,852
1,958,840

(1.0) %

$4,054,770,020

($82,080,499)

(2.0) %

($79,511,571)

(1.9) %

(48.4)

3,105,510,652

(330,140,465)

(9.6)

(134,130,526)

(4.1)

(27,139,248)

(50.6)

634,059,582

(219,285,438)

(25.7)

(50,729,094)

(7.4)

(2,841,160)

(59.2)

15,218,459

(2,611,612)

(14.6)

(2,474,753)

(14.0)

1.0

56,040,017

(4,263,559)

(7.1)

(1,010,993)

(1.8)

(6.9)

331,536,600

3,795,141

1.2

(7,151,763)

(2.1)

--

320,003

891,460

(17.6)

1,289,653

(588)

$8,198,744,986

($633,695,560)

(136,818,843)

(21,208,590)

(44.4)

(876,812)

(30.9)

5,304,145

(18,805)

(0.4)

33,741,695

(3,845,610)

(10.2)

0

($24,764,401)

(52.9)

0

--

0

--

51,881

19.3

737,646

133.6

(11,285)

$567,632,334

($193,797,958)

Lottery

2,150,200

(1,363,700)

(38.8)

(375,000)

(14.9)

33,805,319

(2,762,281)

(7.6)

License, Fees and Permits

2,847,691

(141,664)

(4.7)

(353,109)

(11.0)

33,775,440

(3,185,046)

(8.6)

(25.5) %

(8,854)

(0.0)

41,467

Sub-Total Taxes

(21.4)

51,145
(2,514,505)

(6.5) %

($194,035,866)

(25.5) %

(7.2) %

($274,219,173)

(3.2) %

Other Revenue
1,426,200
(813,506)

Interest

4,261,819

(1,894,942)

(30.8)

1,903,519

80.7

85,475,497

(2,058,908)

(2.4)

Sales and Services

3,197,381

(3,585,000)

(52.9)

(2,931,219)

(47.8)

44,630,273

(5,548,554)

(11.1)

(7,955,483)

(15.1)

Other Miscellaneous

1,842,090

2,426,938

--

450,145

32.3

11.1

4,459,673

16.3

0

0

--

0

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

227,628

(574,895)

(71.6)

(1,164,372)

31,861,106

3,174,931

--

0

0

(83.6)

33,898,225

21,237,626

14,526,809

(5,133,263)

(26.1) %

(2,470,036)

(14.5) %

263,445,860

$582,159,143

($198,931,221)

(25.5) %

($196,505,902)

(25.2) %

$8,462,190,846

10,857,768
($622,837,792)

-167.7

371,021

4.4
(2.4)

0
(555,269)

0.4

-(1.6)

4.3 %

(3,067,364)

(1.2) %

(6.9) %

($277,286,537)

(3.2) %

Other Adjustments
Urban Revenue Sharing

(57,044,911)

(11,109,023)

Budget Plan Transfers

171,526,372

171,526,372

Sub-Total Other Adjustments
TOTAL REVENUE

114,481,461
$696,640,604

160,417,349
($38,513,872)

24.2
--- %
(5.2) %

0

0.0

(627,494,018)

(122,199,246)

0

0.0

190,402,551

190,402,551

0
($196,505,902)

0.0 %
(22.0) %

(437,091,467)
$8,025,099,379

68,203,305
($554,634,487)

24.2
--

0
(1,123,821)

0.0
(0.6)

(13.5) %

(1,123,821)

0.3 %

(6.5) %

($278,410,358)

(3.4) %