JLBC - Monthly Fiscal Highlights

1716 W. Adams
Phoenix, AZ 85007

November 2008

Summary

Phone:
(602) 926-5491
Fax:
(602) 926-5416

October General Fund revenue collections
were $599.6 million, or (12.3)% below October
2007. October collections were $(120.9)
million below forecast.

which was $(36.4) million below forecast.
October is not a large collection month for
corporate income tax; however, collections
were less than half of last year.

For the first 4 months of FY 2009, General Fund
collections are down (9.4)% when compared
to last year (excluding Urban Revenue Sharing
and one-time transfers). The year-to-date
shortfall through the first 4 months of the fiscal
year is $(442.1) million. (See Table 1 and page
12 for more information).

As we have explained in previous months,
revenues would need to grow by 6.1% for the
entire year to meet the budget forecast.
Given the decline of (9.4)% in the first 4 months,
revenues will fall significantly short of forecast.
Last month we reported a projected shortfall of
from $(700) million to $(1.1) billion based on the
October 4-sector consensus forecast range.
Based on deteriorating economic conditions
and discussion with the Governor’s Office, the
FY 2009 General Fund shortfall is now estimated
to be $(1.2) billion.

There were declines in all 3 major revenue
categories, with sales tax representing the
largest dollar decline:

www.azleg.gov/jlbc.htm

• October sales tax collections were down
(9.8)% compared to October 2007 and
were $(56.6) million short of the monthly
forecast. October marked the 10th
consecutive month of year-over-year
reductions.

“October
collections were
$(120.9) million

Economic Indicators – The job market in
Arizona continues to weaken (See page 4).
The October job loss of (2.6)% was the largest
since August 1975, and the October increase
in initial claims for unemployment insurance
was the largest since at least January 1971.

• October individual income tax collections
were down (5.4)% compared to October
2007 and were $(36.4) million below forecast.

below forecast”.

JLBC/JCCR Meetings – The Monthly Fiscal
Highlights include summaries of the November
JLBC and JCCR meetings (page 7).

• October corporate income tax collections
were down (62.3)% from October 2007,

Table of Contents
October Revenues ................................................. 2

Summary of Recent Agency Reports

Economic Indicators .............................................. 3

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JLBC Meeting Summary
•
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JLBC Staff – Construction Index........................ 7
AHCCCS – Capitation Rate Changes ............ 7
ABOR – FY 2009 Tuition Revenues..................... 7
State Compensation Fund – Budget............... 7

JCCR Meeting Summary
This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
November 28, 2008.

• ADOA – FY 2009 Building Renewal Projects ... 7
• ADOT – FY 2009 Building Renewal Projects..... 7
• Universities – Lottery Bond Projects .................. 7

ADOA – Alternative & Clean Burning Fuels.... 8
ADOA/GITA – AZNet Quarterly Report ........... 8
AHCCCS – SAVE Program................................. 8
Community Colleges – Dual Enrollment......... 8
DES – DD Reimbursement Rates ...................... 9
DES –- Annual Child Care Expenditures.......... 9
ADE – K-12 Aggregate Expenditure Limit .... 9
ADEQ – WQARF Report ..................................... 9
DHS – Arnold v. Sarn........................................... 9
DHS –Crisis Intervention Training..................... 10
DHS – MethSMART Prevention Program ....... 10
Superior Court – Probation Services .............. 10
Supreme Court – Probation Funds ................ 10
Land – Comm. Protection Initiative Fund..... 10
ADOT – MVD Wait Times.................................. 11

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

October Revenues
Table 1

October General Fund Revenues
Compared to Enacted Forecast and FY 2008 Collections
($ in Millions)
FY 2009
Difference From
Difference
Collections
June ‘08 Forecast
From FY 2008
October
$599.6
$(120.9)
$(84.2)
Year-to-Date
$2,883.4
$(442.1)
$(99.4)
Sales Tax collections were $337.3 million in
October. These revenues were down (9.8)%
compared to last October, and were $(56.6)
million below forecast. Table 2 displays the
October growth rates for the largest
categories.
“Sales Tax
collections
were…down
(9.8)% compared
to last October,
and were $(56.6)
million below
forecast”.

Table 2

Table 4

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Utilities
Use
Restaurant & Bar

Oct
(8.1)%
(17.9)%
(7.2)%
(3.4)%
(7.7)%

YTD
(8.4)%
(17.9)%
7.2%
(0.4)%
(5.0)%

As noted in previous months, retail and contracting together account for two-thirds of all
sales tax revenues. The retail sector decreased
by (8.1)% and contracting fell by (17.9)%.
For September (the latest available
subcategory data), taxable sales in the retail
category are down (8.4)% from the prior year.
The largest subcategory within retail is the
General Merchandise and Miscellaneous
Retail category, which is down (2.1)%. The
largest subcategory decline is in Motor
Vehicles, which represents over 21% of the
total, and is down over (27)% compared to the
prior year. Taxable retail sales by category are
shown in Table 3. (Eric Jorgensen)
Table 3

Individual Income Tax collections were $260.6
million in October, or (5.4)% below last year.
October collections were $(36.4) million less
than forecast. Table 4 displays October and
year-to-date growth rates for individual
categories.
Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated +
Final Payments
Refunds

October
(1.6)%
(21.6)%
(6.3)%

0.2%

The volatility in withholding tax collections
reported over the last 2 months due to
variance in the number of processing days has
leveled off, with year-to-date collections down
(0.7)% from the first 4 months of last year.
Payments continue down almost (20)% from
last year, while refunds remain essentially the
same. (Hans Olofsson)
Corporate Income Tax collections were $21.2
million, or (62.3)% below last year’s collections,
and $(36.4) million below the forecast for the
month of October. Although October is a
relatively small collection month for corporate
income tax, the decrease brings total
corporate collections through the first 4

September Taxable Retail Sales by Subcategory

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

YTD
(0.7)%
(19.2)%

% of
Total Sales
30.1%
21.6%
7.5%
7.3%
6.9%
5.8%
5.6%
15.2%
100.0%

% Change
Over FY 2008
(2.1)%
(27.4)%
(13.7)%
0.1%
(12.1)%
(9.0)%
(9.9)%
7.4%
(8.4)%

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JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

October Revenues

(Continued)

months of the fiscal year to $195.7 million, or
$(109.8) million less than the forecast. (Martin
Lorenzo)
The Lottery Commission reports that ticket sales
for the month of October were 6.0% higher
than October of last year. Year-to-date, ticket
sales are down (1.3)% compared to last year.
Based on Laws 2008, Chapter 287, the General
Fund is expected to receive a total of $57
million in lottery revenue distributions in FY 2009.
Through October, a total of $14.4 million has
been deposited into the General Fund.
Interest income for the first 4 months of the
fiscal year is (83.3)% below the same period in
the prior year, and is ($8.0) million below
forecast. The reduction reflects significantly
lower operating balances through the period,
as well as reduced rates of returns on
investments.

The enacted FY 2009 budget includes $300.9
million in budgeted fund transfers. As reported
in the September MFH, transfers of $215.5
million were deposited into the General Fund
in August, including fund balances from
various state agencies and $20 million from
the Budget Stabilization Fund.
The Governor’s Office of Strategic Planning
and Budgeting (OSPB) has indentified a total
of $16.4 million of the $300.9 million in
budgeted transfers which will not be made in
FY 2009 primarily due to federal restrictions on
the transfer of Department of Environmental
Quality Water Funds. The total year-to-date
revenue shortfall amount of $(442.1) million
includes this reduced level of budgeted fund
transfers.

Economic Indicators
NATIONAL
The federal Bureau of Economic Analysis
(BEA) has released a second estimate of the
Gross Domestic Product for the 3rd quarter of
2008. According to this report, 3rd quarter real
GDP declined at an annual rate of (0.5)%
compared to (0.3)% under the previous
estimate. The downward revision was
primarily attributable to a steeper decline in
consumption expenditures than previously
estimated.
The Conference Board’s U.S. Consumer
Confidence Index increased by 6.1 points in
November to a reading of 44.1. While this was
a moderate improvement from October (a
month in which the index had the lowest
reading ever), it is still believed that consumer
confidence will remain at low levels for some
time due to declining employment, real
incomes, and household wealth combined
with frozen credit markets and falling stock
prices. Year over year, the index is down by
(48.9)%.
The Conference Board’s U.S. Index of Leading
Economic Indicators declined by (0.8)% in
October. Year over year, the index is down by

(3.5)%. October’s survey was the first to
reflect a full month of data since the financial
crisis deepened. The October reading was
pulled down by a sharp drop in stock prices
and building permits combined with a further
weakening of consumer expectations and
vendor performance. According to the
Conference Board, the decline would have
been significantly sharper if it were not for the
Fed’s large injection of liquidity into the
banking system in recent time. Money supply
and interest rate spread were the only
positive contributors to the index in October.
The U.S. Consumer Price Index fell by (1.0)% in
October, the largest monthly decline in the
history of the index (CPI series dates back to
January 1947). The record-large decline of
the index was primarily attributable to a (8.6)%
fall in energy prices. The core CPI, which
excludes food and energy prices, fell by
(0.1)%, the first such decline since December
1982. The sharp drop in consumer prices in
October, as reported by the federal Bureau of
Labor Statistics (BLS), has raised the specter of
long-term deflation among a number of
analysts.

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Economic Indicators
ARIZONA

“This was the
largest job loss
in percentage
terms since
August 1975
when the state
experienced a
year-overyear job
decline of
(2.7)%.”

Economic indicators released in October
point to increasingly deteriorating conditions
in both the state’s job and housing markets.
The Arizona Department of Commerce
reported that the state lost (70,900) or (2.6)%
of nonfarm jobs in October compared to the
same month last year. This was the largest job
loss in percentage terms since August 1975
when the state experienced a year-over-year
job decline of (2.7)%. The largest recorded
job decline during the 16-month long
recession of 1981and 1982 was (2.4)%.
While the construction sector continues to
shed jobs, the year-over-year losses have
stayed largely unchanged (slightly fewer than
38,000 jobs) over the last 3 months. Data
released over the next few months will help to
better gauge whether job losses in this industry
are bottoming out or not.
The manufacturing sector showed continued
weakness in October with a year-over-year
job loss of (1.8)%. The only silver lining in the
24-month long contraction of the
manufacturing industry is that job losses have
moderated somewhat over the last few
months.
While the construction and manufacturing
industries are seeing some early signs of a
potential tapering off in job losses, there are
indications that conditions in other sectors of
the economy, especially retail and
employment services, are rapidly
deteriorating. Year-over-year, the retail and
employment services industries have shed
17,600 and 10,800 jobs, respectively.
October marked the 6th straight month with
rising unemployment. The state’s
unemployment rate increased to 6.1% from
5.9% in the prior month. The nation’s
unemployment rate in October was 6.5%.
The Department of Commerce reported that
30,666 initial claims for unemployment
insurance were recorded in October, an
increase of 80.2% over last year. According to
data provided on BLS’ web site, this was the
highest number of monthly claims since at
least January 1971. (Data prior to this date
was not available.)

Between July and September, the number of
authorized building permits (3-month moving
average) statewide totaled 1,980, including
1,435 single-family residential building permits
and 545 multi-family building permits.
Compared to the prior month, permitting
activity in the single family and multi-family
segments have decreased by (17.5)% and
(14.3)%, respectively. Year-over-year,
authorized permits in the single family
segment are down by (48.1)%, while permits in
the more volatile multi-family segment are
down by(31.2)%.
Housing data for October released by ASU’s
Realty Studies shows that foreclosures
comprise an increasing share of the total sales
of existing homes in Greater Phoenix.
According to this data, 45.6% of all singlefamily homes resold last month were
foreclosures. The comparable figure in
October 2007 was 28.8%.
The total number of single-family homes
resold in October was 8,210, including 4,465
traditional sales and 3,745 foreclosures. The
year-over-year increase for traditional home
sales was 58.1% compared to 227.1% for
foreclosed properties. These significant
increases should be interpreted in the context
of the historically low sales volume recorded
last year.
While existing home sales have been trending
up over the last 3 quarters, new home sales
have actually declined. According to ASU’s
Realty Studies, a total of 3,915 new single
family homes were sold in Greater Phoenix in
the 3rd quarter of 2008, which was a decline
of (34.5)% over the prior year. This number of
new home sales represents a (49)% decline
relative to the average volume of thirdquarter sales in the previous 13 years. New
single family home sales comprised less than
15% of total sales in the third quarter. The
comparable figures for the same periods in
2006 and 2007 were 38% and 32%,
respectively.
Based on the October report, the Greater
Phoenix single-family median resale home
price was $175,000 for traditional homes and
$159,775 for foreclosed properties. Year over
year, the median resale price has fallen by
(30.0)% for traditional single-family units and
(26.8)% for foreclosed properties. Monthly

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Economic Indicators
median price data for new single family
homes was not available.

“…45.6% of all
single-family
homes resold last
month were
foreclosures.”

The S&P/Case-Shiller Home Price Index, which
measures the change in housing prices based
on repeat sales, points to a continued erosion
of home prices in all of the nation’s major
metropolitan areas, including Phoenix.
According to the most recent release of the
index, home prices in Phoenix fell by (31.9)% in
September compared to last year. This was
the second month that Phoenix experienced
the largest price decline among the 20
metropolitan areas included in the index.
Home prices in Phoenix, as reflected by the
index, are now comparable to levels
recorded in August 2004.
Based on MLS data released in October, the
month’s supply of housing increased to 9.7
months from 8.8 months in September. This
increase of was due to a reduction in the
number of homes sold on the MLS. In a
normal market there is typically no more than
4 to 5 months’ supply of housing on the MLS.
The Phoenix Sky Harbor International Airport
publishes passenger statistics monthly. In
September, a total of 2.9 million passengers
entered and exited aircraft, which was a

(Continued)

decline of (11.9)% compared to the same
month last year. September was the 7th
consecutive month with year-over-year
declines in flight passenger traffic. Year to
date, 30.6 million passengers have enplaned
and deplaned at Sky Harbor, which is a level
comparable to that reported for the same
period in 2005.
AHCCCS caseloads in November increased by
0.6%, or 6,356 members, to 1,136,468. At
current levels, the AHCCCS caseloads are 5.1%
above November 2007 levels. The FY 2009
budget funded a projected caseload growth
of 2.6%, or a total of 1,189,224 members.
There were a reported 81,718 TANF recipients
in the state in September, an increase of
1.2% from the prior month. Year over year,
caseload is down (2.4)%. The FY 2009
budget assumes the TANF caseload will grow
by 2.5%.
The Department of Corrections’ (ADC) inmate
population increased by an average of 210
inmates per month between August and
October. ADC has now an average
population of 39,301 inmates, or 1,717 more
inmates than in the same period last year.
(Hans Olofsson, Martin Lorenzo)

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Economic Indicators

(Continued)

Table 5

ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate
- Initial Unemployment Insurance Claims
- 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 (Jan. 2000 = 100)
- Months Supply of Housing, SA (ARMLS)
- Phoenix Sky Harbor Air Passengers
- Arizona Average Natural Gas Price
($ per thousand cubic feet)
- Consumer Confidence Index (1985 = 100)
- 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 (1985 = 100)
- Leading Indicators Index (2004 = 100)
- U.S. Semiconductor Billings (3-month moving average)
- Consumer Price Index, SA (1982-84 = 100)

Time Period

Current Value

Change From
Prior Period

Change From
Prior Year

October
October
October
October
October
Aug-Oct
Aug-Oct

6.1%
30,666
2.61 million
177,100
182,900
$63.6 million
$144.3 million

0.2%
26.7%
(0.1)%
(0.1)%
(1.9)%
(2.8)%
(1.9)%

2.2%
80.2%
(2.6)%
(1.8)%
(17.1)%
(17.5)%
(7.6)%

Jul-Sept
Jul-Sept

1,435
545

(17.5)%
(14.3)%

(48.1)%
(31.2)%

October
October
October
October

4,465
3,745
495
355

(3.5)%
2.5%
(1.0)%
18.3%

58.1%
227.1%
(28.8)%
343.8%

October
October
October
October
September
October
September
August

$175,000
$159,775
$136,750
$119,375
139.79
9.7 months
2.9 million
$7.53

2nd Quarter 2008
4th Quarter 2008
2nd Quarter 2008
July 1, 2007
November
September
Aug-Oct

73.4
42.4
$216.6 billion
6.34 million
1,136,468
81,718
39,301

(8.0)%
10.1%
1.6%
173,066
0.6%
1.2%
210 inmates

(31.0)%
(0.2)%
4.6%
2.8%
5.1%
(2.4)%
1,717 inmates

3rd Quarter 2008

$11.7 trillion

(0.5)%

0.7%

November
October
July-September
October

44.9
99.6
$3.21 billion
216.71

15.7%
(0.8)%
(3.4)%
(1.0)%

(48.9)%
(3.5)%
(15.7)%
3.7%

(2.8)%
4.4%
(5.7)%
1.6%
(3.5)%
0.9 months
(13.7)%
(16.2)%

(30.0)%
(26.8)%
(21.2)%
(20.8)%
(31.9)%
(6.1) months
(11.9)%
5.9%

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

JLBC Meeting
At its November 13, 2008 meeting, the Joint
Legislative Budget Committee considered the
following issues:
JLBC Staff – Consider Approval of Index for
School Facilities Board Construction Costs –
The Committee approved a 1.98% increase in
the cost-per-square-foot factors for new
school construction. This excludes the
implementation of full day kindergarten (FDK)
capital costs. An annual inflation adjustment
is required by law. If the existing construction
moratorium is continued, this adjustment will
not have a short-term budget impact.
AHCCCS – Review of Proposed Acute Care
and ALTCS Capitation Rate Changes – The
Committee gave a favorable review to the
capitation rate changes with the caveat that
these policy changes may need to be
reconsidered in the future. The proposed rates
would cost $27 million more from the General
Fund than budgeted in FY 2009.
Arizona Board of Regents – Review of FY 2009
Tuition Revenues – The Committee
unfavorably reviewed the Arizona Board of
Regents (ABOR) expenditure plan for FY 2009
tuition revenues that are greater than the
amounts appropriated for FY 2009.
Appropriated tuition collections in FY 2009 are

expected to be $538.1 million, representing a
$69.7 million increase above the FY 2008 total,
and $56.7 million above the original FY 2009
budget. In addition, non-appropriated tuition
collections are estimated at $391.4 million.
Total tuition collections are $929.5 million.
Committee members were concerned that
the proposed tuition expenditure plan could
not be sustained in light of possible FY 2009
budget reductions.
State Compensation Fund – Consider
Approval of CY 2009 and CY 2010 Budgets –
The Committee took no action on the State
Compensation Fund’s (SCF) budgets for
Calendar Year (CY) 2009 and 2010. The SCF
operating budget of $142.1 million (and 580
employees) in CY 2009 represents a $33.2
million (30.5%) increase above CY 2008.
Statute requires JLBC approval of the SCF
budget.
Due to a prior court ruling preventing the
state from transferring funds from SCF, they
traditionally have not remained within the
JLBC approved budget. As a result, the
Committee chose not to take any action.

JCCR Meeting
At its November 13, 2008 meeting, the Joint
Committee on Capital Review considered the
following issues:
Arizona Department of Administration $735,000 FY 2009 Building Renewal Projects
and $1.3 Million FY 2008 Building Renewal
Reallocation - The Committee gave a
favorable review of the $735,000 in critical FY
2009 Building Renewal projects for 2 roofing
projects. These monies will be used to
replace the partially collapsed kitchen roof
at the Department of Juvenile Correction’s
Catalina Mountain School and repair the
roof at the Arizona School for the Deaf and
the Blind’ s Apache dormitory. The
Committee also favorably reviewed ADOA’s
request to allocate $1,296,610 of the FY 2008
Building Renewal appropriation to the
elevator project at 1600 W. Monroe.

Arizona Department of Transportation $984,700 FY 2009 Building Renewal Projects The Committee gave a favorable review of
the $984,700 in critical FY 2009 Building
Renewal projects. These monies will fund 115
projects for a total of $984,700, which is
comprised of $920,400 from the State
Highway Fund and $64,300 from the State
Aviation Fund.
Universities – University Lottery Bond Projects –
Building Renewal - The Committee gave a
favorable review of $64.6 million (Arizona
State University $20.8 million, University of
Arizona $17.5 million, Northern Arizona
University $26.3 million) in fire, life, and safety
building renewal projects. These issuances
represent a portion of the $1 billion University
Lottery Bonding package as authorized by
Laws 2008, Chapter 287. The proposed debt

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

JCCR Meeting

(Continued)

service is designed to be funded with 2
separate revenue streams. Approximately
$4.4 million, or 80%, will come from state

Lottery proceeds, while $1.1 million will come
from local university funds.

Summary of Recent Agency Reports
Arizona Department of Administration - Report
on the Use of Alternative Fuels and Clean
Burning Fuels in the State Motor Vehicle Fleet Pursuant to A.R.S. § 41-803R, the Arizona
Department of Administration reported on the
FY 2008 year-end inventory of state-owned
alternative fuel vehicles. Of the 12,715 state
vehicles, 5,483 or 43.1% are subject to the
alternative fuel vehicle requirements.
Of the 5,483 state vehicles subject to the
alternative fuel vehicle requirements, 3,554 or
64.8% are alternative fuel vehicles. This is an
increase of 5.1% from the prior year and
exceeds the 40% target established by
statute.
Statute also requires 90% of the state vehicles
in Maricopa County to be capable of using
alternative fuels. The state reports that 79.1%
of its Maricopa County vehicles are
alternative fuel vehicles.
Notwithstanding the quantity of vehicles
capable of using alternative fuel, only 6.8% of
the fuel budget was for alternative fuels.
(Dan Hunting)
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) report quarterly on the Arizona
Network (AZNet), as created by the Statewide
Telecommunications Management Contract.
In the fourth quarter of FY 2008, AZNet
completed replacement of end-of-life
equipment at the last 6 of 142 Arizona
Department of Transportation sites statewide
and added a geographically redundant data
connection between Phoenix and Tucson for
the Magnet-2 network. In the first quarter of
FY 2009, AZNet completed migration of
telephone systems at the Departments of
Agriculture and Education to the new IP
Telephony system. However, a similar project

at the Department of Economic Security has
been put on hold due to Local Area Network
upgrade requirements. (Dan Hunting)
AHCCCS – Report on Systematic Alien
Verification for Entitlements Program –
Pursuant to A.R.S. § 36-2903.03, 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 the Department
of Economic Security (DES), verified the
immigration status of 18,177 individuals
between April 1, 2008 and June 30, 2008.
During this period, AHCCCS and DES did not
identify any fraudulent documents using the
SAVE program. In addition, in the April 1
through June 30 time period, 3 citizens were
referred for prosecution pursuant to state and
federal law regarding fraudulent billing,
schemes, and forgery. (Amy Upston)
Arizona Community Colleges – Report on
Dual Enrollment – Pursuant to A.R.S. § 151821.01, the Arizona Community Colleges are
reporting on dual enrollment courses offered
in FY 2008. Students in a dual enrollment
course can earn both high school and
community college credit for courses taught
at their high school.
Highlights of the FY 2008 report include:
•
19,899 students were dual enrolled (down
from 20,018 in FY 2007).
•
1,317 courses were offered, of which 552
courses were classified as Academic and
765 were Occupational (up from 1,108

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Summary of Recent Agency Reports
total courses in FY 2007).
(Marge Zylla)
Department of Economic Security Report on Adequacy and
Appropriateness of Title XIX
Reimbursement Rates for
Developmental Disabilities Programs
- Pursuant to A.R.S. § 36-2959, the
Department of Economic Security
(DES) has provided its annual study
of Title XIX Medicaid reimbursement
rates to service providers in the
developmentally disabled (DD)
program. The study states that the
adopted rates are “in the range of
adequate and appropriate” for FY
2009. The adopted rates will be at
96.8% of the benchmark rates. (Jay
Chilton)
Department of Economic Security –
Report on Annual Child Care
Expenditures – A.R.S. § 46-810
requires the Department of
Economic Security (DES) to provide
an annual child care report to the
Committee. The FY 2008 report
shows that the average number of
children served increased to 45,367,
or 2% above FY 2007; the number of
families served also increased by
2%. Across categories, the number
of children served in the Low
Income Working category
increased 5.9%, CPS-related
placements increased by 3.6%, and
the number of TANF-related
children increased by 0.9%, while
the number of children receiving
transitional child care decreased by
(11.5)%.
The amount spent by DES on child
care subsidies increased to
$192,109,000, or 8% above FY 2007.
The average monthly subsidy paid
per child increased 6.7%, to $352.88.
These increases are due in part to a
5% increase in maximum
reimbursement rates funded by the
Legislature in the FY 2008 budget.
The total amount of co-payments
increased 1.8% from FY 2007 to
$15,464,652. (Jay Chilton)

Arizona Department of Education –
Report on K-12 Aggregate
Expenditure Limit – Pursuant to
A.R.S. § 15-911B, the State Board of
Education reported on October 29,
2008 that currently budgeted
expenditures for all school districts
collectively statewide for FY 2009
exceed by $98,198,000 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 State Constitution permits the
Legislature to authorize K-12
expenditures above the AEL for the
current year with a two-thirds
majority vote on or before March 1,
2009 (Article IX, Section 21,
Subsection 3). Otherwise on or
before March 5, 2009, 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 2008, FY 2007
and FY 2002. The FY 2008
exemption was for $146.6 million
and was authorized by HCR 2005
from the 2008 Regular Session.
(Steve Schimpp)
Arizona Department of
Environmental Quality (ADEQ) –
Report on Progress of Water Quality
Assurance Revolving Fund Sites –
Pursuant to a General
Appropriation Act footnote, ADEQ is
required to report the status of each
site listed on the Water Quality
Assurance Revolving Fund (WQARF)
registry.

(Continued)

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. (Dan Hunting)
The report contained a listing of the
35 WQARF sites on the registry.
Progress goals were met at 16 of
these sites. Of the 35 reported sites,
17 were listed in the Early Response
Action phase at least partially
during FY 2008. Four sites had
advanced to the Implementation of
Remedy Phase or further during this
same period.
The department had estimated that
3 sites would be delisted by the end
of FY2008, but the sites remain on
the report. (Dan Hunting)
Department of Health Services –
Report on Arnold v. Sarn – Pursuant
to a FY 2009 General Appropriation
Act footnote, the Department of
Health Services (DHS) has submitted
the 1st quarter report (JulySeptember 2008) on settling the
Arnold v. Sarn lawsuit.
DHS reports that while the
contractor (Magellan) has made
some progress in meeting the goals
outlined in the court-ordered
Performance Improvement Plan
(PIP), it has not demonstrated full
compliance in the service areas
requiring clinical supervision and
utilization of an unmet needs
database. As result of its inability to
comply with these provisions, the
contractor was sanctioned by DHS
in September 2008. The contractor
has appealed the sanction for the
unmet needs database. DHS, the
contractor, the Plaintiffs and the
Court Monitor continue to hold
monthly meetings to discuss the
implementation of the PIP and
compliance with court orders.

10 JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Summary of Recent Agency Reports
DHS reports that it has worked with
the contractor in assisting the Court
Monitor in conducting Annual
Independent Reviews, in which
approximately 400 consumer charts
have been audited. The final report
on the reviews is expected to be
completed in December 2008.
(Art Smith)
Department of Health Services –
Report on Crisis Intervention Training
– Pursuant to a FY 2008 General
Appropriation Act footnote, the
Department of Health Services
(DHS) has submitted a report on the
progress made in crisis intervention
training (CIT). The CIT monies are a
one-time appropriation of $250,000
that is non-lapsing through June 30,
2009.
As of September 30, 2008, DHS was
in the process of entering into an
Intergovernmental Agreement
(IGA) with Arizona State University
(ASU) to serve as the contracted
provider for the CIT program.
However, the Arizona Department
of Administration (ADOA)
subsequently denied DHS’ request
to enter the IGA; thus, none of the
monies have been disbursed.
Under the terms of the IGA, ASU
would have partnered with regional
law enforcement entities, family-run
agencies, behavioral health
advocacy groups, and behavioral
health providers to assess the need
for CIT trainings. (Art Smith)
Department of Health Services –
Report on MethSMART Prevention
Program – Pursuant to a FY 2008
General Appropriation Act
footnote, the Department of Health
Services (DHS) has submitted its 4th
quarter follow-up report on youth
methamphetamine programs. DHS
issued a request for proposals for
the $500,000 appropriation in
September 2007. The FY 2008
General Appropriation Act specifies
that this money is expected to be
awarded to a statewide alliance of

community-based organizations
with a proven track record in
providing substance abuse
programming to children.
On February 8, 2008, $499,800 of
these monies were awarded to 3
contractors: The Arizona Alliance of
Boys & Girls Clubs ($400,000), South
Eastern Arizona Behavioral Health
Services ($60,800) and Apache
County Public Health Services
District ($39,000). DHS has indicated
that during the months of March
through June 2008, the 3
contractors served 7,300
participants and expended
$461,400 of the monies awarded.
The remaining balance of $38,600
will revert to the General Fund.
(Art Smith)
Superior Court - Report on Probation
Services - Pursuant to Laws 2008,
Chapter 285, the Administrative
Office of the Courts (AOC) is
required to report to the JLBC on
several probation items:
Case Carrying and Non-Case
Carrying Positions
Adult Probation and Juvenile
Probation maintained 389.3 and
188.5 case carrying positions, and
478.8 and 404.8 non-case carrying
positions, respectively. Between
78.1% and 97.2% of these positions
were filled.
Total Receipts and Expenditures
Total spending from all funds for
Adult and Juvenile Probation
Services was $304.7 million,
including $44.4 million of state
funding. This represents an increase
in total spending of 7.1% and in
state funding of 3.5% over FY 2007.
Retained Funding
The AOC retained a total of $8.4
million in FY 2008 to support local
probation departments and the
state level probation staff through
training, certification, and research.
(Jon McAvoy)

(Continued)

Supreme Court – Report on Adult
Probation Services Fund and the
Juvenile Probation Fund – Pursuant
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. § 12-267) 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 2008 on
November 3, 2008.
Adult Probations
AOC reports statewide Adult
Probation Services Fund total
expenditures of $129.0 million in
FY 2008. Of this total, county funds
represent 60.2% of all expenditures,
state funds represent 22.8%, Federal
Funds represent 0.8%, and other
sources of revenue, such as
probation fees and local fees,
represent 16.2%.
Juvenile Probation
Total FY 2008 expenditures for the
Juvenile Probation Fund were
$165.7 million. Of this total, county
funds represent 64% of all
expenditures, state funds represent
30%, Federal Funds represent 2%,
and other sources of revenue, such
as probation fees and local fee,
represent 4%. (Jon McAvoy)
State Land Department – Annual
Report on the Community
Protection Initiative Fund – A.R.S. §
37-643 requires the State Forester to
provide an annual report on the
status of the Community Protection
Initiative Fund. The fund was
created in FY 2008 with a $1,000,000
deposit from the General Fund. The
fund is used by the State Forester to
track communities at risk of wildfire
and to issue grants to at-risk
communities to prepare wildfire
protection plans. The Forester has

11 JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

Summary of Recent Agency Reports
expended $53,000 related to a fire
map to track the progress of at-risk
communities. The Forester has also
obligated grant funding in the
amount of $850,000 to 10 at-risk
communities, and $20,000 to the
University of Arizona. The grants
have not yet been disbursed.
(Jay Chilton)
Arizona Department of
Transportation – Quarterly Report on
Motor Vehicle Division Wait Times –
A FY 2009 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
increased from 11.1 minutes in the
4th quarter of FY 2008 to 13.0
minutes in the 1st quarter of FY 2009.
Customer wait times in metropolitan
areas ranged from 4.6 minutes in
the Mesa East office to 30.4 minutes
in the South Mountain office.
For FY 2009, 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. (Juan
Beltran)

(Continued)

12 JLBC – MONTHLY FISCAL HIGHLIGHTS – NOVEMBER 2008

State of Arizona
General Fund Revenue:

Change from Previous Year and Enacted Forecast
October 2008
Current Month

FY 2009 YTD (Four Months)

Change From
Actual

October 2007

October 2008

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

October 2007

October 2008

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use

337,313,340

($36,518,158)

$1,381,021,104

($119,170,644)

Income - Individual

260,640,863

(14,822,276)

(5.4)

(36,408,637)

(12.3)

1,113,074,995

(58,493,294)

(5.0)

(123,797,905)

(10.0)

21,161,425

(34,969,464)

(62.3)

(36,378,375)

(63.2)

195,690,596

(100,931,226)

(34.0)

(109,813,704)

(35.9)
(15.0)

- Corporate

(9.8) %

($56,581,060)

(14.4) %

(7.9) %

($201,659,396)

Property

2,043,577

529,717

35.0

467,677

29.7

2,314,246

373,006

19.2

(408,754)

Luxury

4,791,206

9,869

0.2

(480,794)

(9.1)

19,412,422

(51,068)

(0.3)

(673,578)

Insurance Premium

2,073,115

--

126,928,367

Estate
Other Taxes
Sub-Total Taxes

0

(644,716)

(23.7)

19,314

(100.0)

0

(2.9)

2,666

55,166

(1,625)

$628,078,692

($86,397,339)

(12.1) %

2,073,115

($127,305,408)

-5.1
(16.9) %

5,984,030

4.9

15,701,567

4,196

(230,566)

(98.2)

4,196

186,108

(11,563)

(5.8)

(23,892)

$2,838,632,034

($272,531,325)

(8.8) %

($420,671,466)

(12.7) %

(3.4)
14.1
-(11.4)
(12.9) %

Other Revenue
Lottery

9,563,400

License, Fees and Permits

3,604,293

(749,940)

(17.2)

Interest

1,465,863

(7,048,292)

(82.8)

(3,026,337)

Sales and Services

3,289,568

(225,499)

(6.4)

(1,533,632)

70.2

6,322,194

141.1

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

7,272,800

10,802,194

4,455,883

0

0

3,422,475

2,039,919

32,147,793
$660,226,485

5,744,871
($80,652,468)

317.5

-147.5
21.8 %
(10.9) %

3,336,800
(444,807)

0
1,762,475
6,416,693
($120,888,715)

53.6

14,386,400

(11.0)

11,378,964

(920,498)

(7.5)

(67.4)

6,590,320

(32,844,051)

(83.3)

(8,038,180)

(54.9)

(31.8)

12,115,369

(1,171,327)

(8.8)

(5,537,431)

(31.4)

19,750,761

10,061,806

10,747,661

119.4

0

0

-106.2

7,550,567

2,859,581

(6,026,356)

24.8

103.8

0
(3,088,536)

--

0

(44.4)

910,567

0.0
(21.3)

-13.7

24.9 %

71,772,381

(28,040,845)

(28.1) %

(5,005,919)

(6.5) %

(15.5) %

$2,910,404,415

($300,572,170)

(9.4) %

($425,677,385)

(12.8) %

Other Adjustments
Urban Revenue Sharing
Budget Plan Transfers
Sub-Total Other Adjustments
TOTAL REVENUE

(60,639,783)
0
(60,639,783)
$599,586,702

(3,594,872)
0

6.3
--

(3,594,872)

6.3 %

($84,247,340)

(12.3) %

0
0
0
($120,888,715)

0.0
-0.0 %
(16.8) %

(242,559,133)

(14,379,491)

215,546,792

215,546,792

(27,012,341)
$2,883,392,074

6.3
--

0

0.0

(16,404,600)

(7.1)

201,167,301

(88.2) %

(16,404,600)

154.6 %

($99,404,869)

(3.3) %

($442,081,985)

(13.3) %