JLBC - Monthly Fiscal Highlights

1716 W. Adams
Phoenix, AZ 85007

April 2009

Summary

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

www.azleg.gov/jlbc.htm

“March
collections
were… $(2.8)
million below the

March General Fund revenue collections were
$563.6 million. This amount included $114.6
million in budgeted fund transfers from the
January Special Session. Excluding these
transfers and Urban Revenue Sharing, March
collections were (12.4)% below the prior year,
and $(2.8) million below the January revised
budget forecast.

Interpreting the March and April results is
especially challenging given that we are in the
middle of the tax filing season. At this time of
year, the state can receive income tax
payments or issue refunds in a single day that
exceed $100 million. If processing is ahead or
lags last year’s pace, this can affect year over
year comparisons by a substantial amount.

For the first 9 months of FY 2009, General Fund
collections are down (13.4)% when compared
to last year (excluding Urban Revenue Sharing
and one-time transfers). The year-to-date
shortfall is $(158.2) million below the January
revised budget forecast. (See Table 1 and
page 2 for more information).

The Department of Revenue indicates that
they are currently up to date on processing
returns that have been received by the
department. The number of returns is down
from last year, however, and the department is
receiving an increased number of returns with
no payment or partial payment.

Sales taxes and individual income tax
withholding are the 2 main sources of revenue
collections. Sales tax revenues are (19.3)%
below March of last year, and withholding tax
collections are down (5.9)%. These decreases
are partially offset by decreased individual
income tax refunds. This decrease in refunds is
likely a function of the timing of refund
processing by the Department of Revenue.

FY 2009 Revenue Projections
The Legislature enacted a revised FY 2009
budget during the 1st Special Session in the last
week of January. This January base revenue
estimate was $8.54 billion, excluding Urban
Revenue Sharing and one-time financing
sources. This amount would be a (9.7)%
reduction in base revenues compared to
FY 2008.

While the March revenue loss was small,
preliminary April results suggest that the
forecast loss will be at least $(400) million in
April. The dollar level of individual income tax
refunds in April may exceed last year by 30%,
and the level of payments may decline by
over 30%. If the preliminary projection holds,
the year-to-date revenue loss through April
would be approximately $(550) million relative
to the January forecast.

January revised
budget
forecast”.

At the March Finance Advisory Committee
meeting, JLBC Staff recommended that the
budget forecast be based on a (14.5)%
decline in FY 2009 revenues (see FAC Meeting
summary on page 7). This would equate to
General Fund base revenues of $8.05 billion,
excluding fund transfers and Urban Revenue
Sharing.

Table of Contents
March Revenues .....................................................3
Economic Indicators ..............................................4
Finance Advisory Committee Meeting...............7
This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on April 30,
2009.

JLBC Meeting Summary
•
•
•
•

AHCCCS – Capitation Rates.............................7
AG – Settlement Monies ....................................7
Comm Colleges – Diné Compact ...................8
Fund Transfer Exchanges ...................................8

• ASDB – Voucher Fund Expenditures ................ 8
• ADEQ – Indirect Cost Recovery Fund ............. 8
• Pioneers Home – Appropriations Transfer....... 8

Summary of Recent Agency Reports
•
•
•
•

ADOA – Health Insurance Report .................... 9
DHS – Arnold v. Sarn ........................................... 9
Phoenix Convention Centerr ............................ 9
DWR – Assured & Adequate Fund................... 9

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

Summary

(continued)

FY 2009 Shortfall
With the recent March adjustments to the
January Special Session, the state had a
projected FY 2009 ending balance of $50
million. With a March forecast of a (14.5)%
revenue loss, the year-end revenue shortfall
would be $(487) million. After adjusting for the
$50 million ending balance, the net shortfall
would be $(437) million. The net shortfall was
estimated at $(510) million in the March
Monthly Fiscal Highlights, however, Laws 2009,
Chapter 2 increased the state’s withholding
tax rates to solve the $(73) million withholding
problem which was included in that amount.
If the preliminary April year-to-date loss of
$(550) million holds true, the projected yearend forecast loss of $(487) million will need to
be revised substantially upward, potentially in
the range of $200-$300 million. The JLBC Staff is
in the process of further refining this estimate.

Economic Indicators – The release of new
economic data suggests that the state’s
already weakened economy is further
deteriorating. The decrease in March sales tax
collection of (19.3)% is the largest decrease
relative to last year so far this fiscal year. The
Arizona Department of Commerce’s March
employment report indicates that the state has
lost (183,100) jobs or (6.9%) of its workforce in
the last 12 months. The current level of payroll
employees in the state, 2.48 million, is roughly
the same as in June 2005. The state’s
unemployment rate of 7.8% in March is the
highest since August 1983 and is expected to
increase for some time.
JLBC/JCCR Meetings – The Monthly Fiscal
Highlights includes a summary of the April JLBC
meeting (page 7). There was no JCCR
meeting in April.

March Revenues
Table 1

General Fund Revenues
Compared to Forecast and FY 2008 Collections
($ in Millions)
FY 2009
Difference From
Difference From
Collections
June ’08 Forecast 1/
Jan ’09 Forecast 2/
$ 563.6
$ (160.6)
$ (2.8)
$ 5,757.8
$ (1,301.2)
$ (158.2)

March
Year-to-Date
____________
1/ Enacted FY 2009 budget (June 2008).
2/ Revised JLBC Baseline

Sales Tax collections were $282.2 million in
March. These revenues were down (19.3)%
compared to last March, and were $(39.4)
million below the budget forecast. Sales tax
collections are down (12.2)% through the first 9
months of the fiscal year. The March decline
marked the 15th consecutive month of yearover-year reductions, and the 5th consecutive
month of double digit declines compared to
the previous year.
Table 2 displays the March growth rates for the
largest categories.

Table 2

Difference
From FY 2008
$ 23.9
$ (431.1)

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Utilities
Use
Restaurant & Bar

Mar
(15.7)%
(32.4)%
(17.4)%
(23.8)%
(5.1)%

YTD
(11.5)%
(22.5)%
0.5%
(9.3)%
(5.1)%

As noted in previous months, retail and contracting together account for two-thirds of all
sales tax revenues. The retail sector decreased

3

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

March Revenues

(Continued)

by (15.7)% in March, and contracting fell by
(32.4)%.
As noted in Table 3, through March, taxable
sales in the retail category are down (11.5)%
from the prior fiscal year. The largest
subcategory within retail is the General
Merchandise and Miscellaneous Retail
category, which is down (6.5)%. The largest
subcategory decline is in Motor Vehicles,
which represents 20.9% of the total, and is
down (32.7)% compared to the prior year.
“The U.S.
Consumer Price
Index (CPI)
declined by
(0.1)% in March.
The year-overyear decrease of
(0.4)% was the
largest since
August 1955.”

Individual Income Tax net revenues were $71.8
million in March. Collections were up 16.0%
compared to the prior year, and were $23.1
million greater than the budget forecast.
Table 4 displays March and year-to-date
growth rates for individual categories.
Table 4

Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated +
Final Payments
Refunds

March
(5.9)%
(14.9)%

YTD
(5.9)%
(24.1)%

(12.2%)

4.9%

March net individual income tax collections
were above the prior year and the budget
forecast due to a significantly lower than
anticipated amount of refunds processed
during the month. Refunds were $35 million
below last March, and $44 million below the
forecast for the month. As noted above, this
decrease in refunds is likely due to the timing of
refund processing by the Department of
Revenue. Preliminary April refunds are
significantly greater than the prior year.

Table 3

Withholding tax collections were down (5.9)%
compared to March last year. This decrease is
an improvement from the double-digit losses in
the last 2 months.
It is difficult to draw conclusions from payment
and refund data during March and April due
to processing differences between this year
and last. However, if the trends seen so far
during the month of April continue, April
collections will lag significantly below April of
last year, as well as the budget forecast.
Corporate Income Tax collections were $44.8
million in March, or (26.9)% below last year.
Collections were $5.4 million above forecast for
the month. March collections were above
forecast, however March is a relatively small
collection month for corporate income tax.
Year-to-date, collections are (21.1)% below last
year. Final results for the fiscal year will be
largely determined by April and June
collections.
The Lottery Commission reports that ticket
sales for the month of March were $45.6 million,
which was $(7.5) million below sales in March
2008. Year-to-date, ticket sales have
decreased by (0.3)% compared to last year.
Through March, a total of $30.0 million in lottery
revenues has been deposited into the General
Fund.

YTD (9-Month) 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

% of
Total Sales
30.5%
20.9%
7.4%
7.4%
6.9%
5.8%
5.6%
15.5%
100.0%

% Change
Over FY 2008
(6.5)%
(32.7)%
(14.8)%
(3.0)%
(15.1)%
(12.9)%
(11.4)%
3.6%
(11.5)%

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

Economic Indicators
NATIONAL
According to the federal Bureau of Economic
Analysis, real GDP (Gross Domestic Product)
contracted by (6.1)% in the 1st quarter of 2009
following a (6.3)% reduction in the prior
quarter. The sharp decline in real output was
primarily due to a (51.8)% reduction in private
investments.

“Since the start
of the national
recession in
December 2007,
Arizona’s
economy has
lost (230,400)
jobs. More than
half of those job
losses have
occurred in the
last 6 months.”

The Conference Board’s U.S. Consumer
Confidence Index, a measure based on a
survey of 5,000 U.S. households, increased
from a reading of 26.9 in March to 39.2 in
April. The index reached its highest level since
November 2008 and posted the largest gain
(12.3 points) since November 2005.
Consumers’ assessment of both current and
future conditions improved in April, with a
more optimistic short-term outlook for jobs
and business conditions leading the advance.
The Conference Board’s U.S. Index of Leading
Economic Indicators decreased by (0.3)% in
March, following a (0.2)% decline in February.
Year-over-year, the index is down by (3.8)%.
Positive contributions from the increase in
money supply and a steepening of the yield
curve were more than offset by plunging
building permits, sharp drops in stock prices,
and faster vendor performance (i.e., quicker
delivery time, which is typically associated with
decreases in demand for manufacturing
supplies).
The U.S. Consumer Price Index (CPI) declined
by (0.1)% in March. The year-over-year
decrease of (0.4)% was the largest since
August 1955. The reduction in CPI is mainly
attributable to falling energy prices. The core
CPI, which excludes food and energy prices,
has remained relatively stable over the last 4 to
6 months.
ARIZONA
New economic data made available since
the release of last month’s Monthly Fiscal
Highlights points to a further deterioration of
the state’s economy. The decline is broadbased, as evidenced by continued job losses,
increased unemployment, record-high claims
for jobless benefits, rapidly declining housing
prices, sharply reduced air passenger traffic,
and either record-low or near record-low
confidence among both consumers and

business leaders.
The only silver lining in the current economic
malaise is that the sharp drop in home prices
has increased housing affordability in the
metro-Phoenix area to levels not seen since at
least the first quarter of 1995. (The
affordability index released by ASU’s Realty
Studies Group goes back to 1995.) Another
benefit of the sharp reduction in housing
prices is that the sales volume of existing
homes has increased significantly in recent
months. As a result, the months’ supply of
housing (i.e., the number of months required
to sell the current inventory of homes) has
fallen by almost half over the last 12 months.
According to the Commerce Department’s
most recent Workforce Report, nonfarm
payroll employment in March declined by
(6.9)% when compared to the same month in
the prior year. This figure translates into a net
loss of (183,100) jobs over the last 12 months.
Since the start of the national recession in
December 2007, Arizona’s economy has lost
(230,400) jobs. More than half of those job
losses have occurred in the last 6 months. The
current level of payroll employees in the state
(2.48 million) is roughly the same as in June
2005.
The month of March marked the 27th
consecutive month with year-over-year job
losses in the construction sector. With 143,000
employees on their payrolls In March, the
construction sector was back to the level
recorded in April 1998. The construction
sector has shed (55,200) jobs or (27.9)% of its
workforce over the last 12 months.
The manufacturing sector is also experiencing
continued job losses. In the month of March,
the industry lost another (200) jobs and as a
result employed (9,300) fewer workers than a
year ago. The last time the manufacturing
industry reported year-over-year job gains
was in October 2006. The industry now
employs fewer individuals than at any time
during the 1990/1991 recession.
The state’s unemployment rate increased
from 7.4% in February to 7.8% in March, the
highest rate since August 1983. The state’s
unemployment rate in March 2008 was 4.7%.
The national unemployment rate last month
was 8.5%.

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

Economic Indicators
The Department of Commerce reported that
a record-high 39,174 initial claims for
unemployment insurance were filed in March,
an increase of 117.1% over last year. For the
week ending on April 4, a new record-high of
98,092 Arizona residents filed continued claims
for jobless benefits.
According to the U.S. Census Bureau, an
average of 625 single-family residential
building permits were issued between
January and March 2009. In percentage
terms, single-family permitting activity fell by
(63.6)% from the same 3 month period a year
ago. Year-over-year, Multi-family permits, on
average, also fell over the last three months
to a total of 204, or (70.8)% below levels a
year ago.
ASU’s March real estate report indicates the
Greater Phoenix single-family median resale
home price was $133,640 based on 8,610
transactions. For the second straight month,
the median resale price for foreclosed
properties ($146,880) was greater than those
for traditional transactions ($127,000).
According to the report, however, the
relatively high resale price for foreclosed
transactions in March continues to be due to;
1) a large number of more expensive homes
being foreclosed on (there were three
transactions with values over $2 million and
roughly 187 sales were in the $300,000 range),
and 2) previously purchased foreclosed
homes are being resold at prices (15.0)%
lower. Of the 8,610 single-family existing
home sales, their were 5,940 traditional sales
or more than double the 2,670 foreclosed
transactions. Year-over-year, the number of
traditional and foreclosed transactions
increased 81.9% and 29.9%, respectively.
The S&P/Case-Shiller Home Price Index
measures the change in housing prices based
on repeat sales. In February, the home price
index in Phoenix was (4.5)% below January
levels. Compared to last year, the index is
down by (35.2)%-- the greatest drop among
all 20 metropolitan areas tracked. At its
current level, the index, and therefore
average home prices, are similar to levels
seen in 2002.
Based on MLS data released in April, the
month’s supply of housing in March was 8.1
months. On a seasonally adjusted basis, this

(Continued)

was the lowest supply of unsold homes since
January 2007. The comparable figure in
March 2008 was 14.8 months.
A total of 2.8 million passengers entered and
exited aircraft at the Phoenix Sky Harbor
International Airport in March. This was a
decrease of (14.4)% from last year and the
third largest year-over-year decline in
passenger traffic since November 1980.
In April, AHCCCS caseloads increased to a
total of 1,196,699 members, a 1.8% increase
over the prior month. At current levels, the
AHCCCS caseloads are 8.7% above April 2008
levels. The revised FY 2009 budget funded a
projected caseload growth of 7.8%, or a total
of 1,234,901 members.
There were a reported 86,218 TANF recipients
in the state in February, a decrease of (0.6)%
from the prior month. Year-over-year,
caseload is up by 8.0%. The FY 2009 budget
assumes the TANF caseload will grow by
2.5%.
The Supplemental Nutrition Assistance
Program (SNAP), formerly known as Food
Stamps, provides assistance to low-income
households to purchase food. In February,
there were a total 801,339 food stamp
recipients in the state, an increase of 3.1%
over the prior month. Compared to the
same month last year, food stamp
participation was up by 26.9%.
Between January and March 2009, the
Department of Correction’s (ADC) inmate
population increased by an average of 178
inmates per month. ADC now has an average
population of 39,868 inmates, or 1,747 more
inmates than in the same period last year.
(Hans Olofsson, Martin Lorenzo)

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

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, (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
- SNAP (Food Stamps) Recipients
- DOC Inmate Growth (3-month average)
United States
- Gross Domestic Product
(Chained 2000 dollars, seasonally adjusted)
- 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

March
March
March
March
March
Jan-Mar
Jan-Mar

7.8%
39,174
2.48 million
166,400
143,000
$47.0 million
$143.8 million

0.4%
12.1%
(0.3)%
(0.1)%
(2.3)%
(8.9)%
(2.6)%

3.1%
117.1%
(6.9)%
(5.3)%
(27.9)%
(28.5)%
(13.7)%

Jan-Mar
Jan-Mar

625
204

2.7%
6.4%

(63.6)%
(70.8)%

March
March
March
March

5,940
2,670
605
295

40.9%
(37.8)%
33.0%
(39.2)%

81.9%
29.9%
(5.5)%
126.9%

March
March
March
March
February
March
February
January

$127,000
$146,880
$115,000
$105,075
111.89
8.1 months
2.8 million
$8.71

(4.5)%
(10.7)%
(5.0)%
(18.2)%
(4.5)%
(0.6) months
(6.2)%
5.3%

(44.8)%
(22.4)%
(32.7)%
(27.1)%
(35.2)%
(6.7) months
(14.4)%
(1.0)%

1st Quarter 2009
2nd Quarter 2009
4th Quarter 2008
July 1, 2008
April
February
February
Jan-Mar

44.2
33.0
$213.4 billion
6.50 million
1,196,699
86,218
801,339
39,868

N/A
2.8%
(0.7)%
146,759
1.8%
(0.6)%
3.1%
178 inmates

(58.4)%
(10.6)%
1.0%
2.3%
8.7%
8.0%
26.9%
1,747 inmates

1st Quarter 2009

$11.3 trillion

(6.1)%

(2.6)%

April
March
Dec-Feb
March

39.2
98.1
$2.45 billion
212.714

45.7%
(0.3)%
(4.1)%
(0.1)%

(37.5)%
(3.8)%
(24.9)%
(0.4)%

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

FAC Meeting
At its March 31st, 2009 meeting, the Finance
Advisory Committee (FAC) heard
presentations on General Fund Revenue
collections, U.S. economy, and Arizona
employment. The FAC is a 15-member panel
comprised of leading economists in the state.
The panel meets 3 times a year and advises
the Legislature on the state economy.
JLBC Staff provided members with the latest
4-sector consensus estimates for “Big 3”
revenue collections. The 4-sector consensus
estimate is a composite of equally weighted
estimates from:
•
•
•
•

The University of Arizona Economic
and Business Research (EBR) General
Fund baseline model;
The EBR conservative forecast model;
The FAC panel; and
JLBC Staff.

Based on the 4-sector consensus, revenues
are projected to decline by (13.0)% in FY 2009,
prior to any tax law changes. This is down
from the January FAC meeting, at which time
the 4-sector consensus projected a FY 2009
growth rate of (9.7)%. Year-to-date
collections through February are down
(13.5)% as compared to the same period last

year. Based on the year-to-date decline and
poor revenue performance in January and
February, it was recommended that a (14.5)%
decline be used for FY 2009 rather than the
consensus forecast.
For FY 2010, each component of the 4-sector
consensus showed improvement from FY
2009, however the overall forecast still called
for a further decline of (2.1)%.
Panel members heard formal presentations
from Elliott Pollack, Dennis Doby, and the
State Treasurer, Dean Martin, in addition to
comments from Marshall Vest.
The presenters generally expected economic
growth to bottom out sometime in FY 2009 or
FY 2010. The presenters also agreed that the
recovery is likely to be gradual and the
imbalances in the housing and credit markets
will take several years to correct.
Beyond FY 2010, the 4-sector consensus
projects a modest recovery beginning in FY
2011, with a return to trend revenue growth in
FY 2012.

JLBC Meeting
At its April 28, 2009 meeting, the Joint
Legislative Budget Committee considered the
following issues:
AHCCCS – Review of Revised Acute Care
Capitation Rate Changes – The Committee
gave a favorable review to 3 capitation rate
changes: reducing the physician services
portion of Acute Care capitation rates,
eliminating dental sealants for primary teeth
as a covered service, and shifting costs for the
Department of Economic Security’s state –
only Developmental Disabilities program to
AHCCCS’ Acute Care program. The
proposed rates would allow AHCCCS to
reduce their costs consistent with the January
budget revisions.

Attorney General – Review of Allocation of
Settlement Monies
Eli Lilly
The Committee gave a favorable review to
the Attorney General’s (AG) $2.2 million
allocation plan for attorney’s fees and
consumer fraud activities. The settlement is a
result of the investigation of the marketing of
a drug used for the treatment of bipolar
disorders.
Pfizer, Inc.
The Committee gave a favorable review to
the AG’s $2.5 millionallocation plan for
attorney’s fees and consumer fraud
activities. The settlement is a result of the
investigation of the marketing and sale of a
pain medication.

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

JLBC Meeting

(Continued)

Countrywide
The Committee gave a favorable review to
the AG’s $4.3 million allocation plan as a
result of the multistate suit brought against
Countrywide Financial Corporation, based
on an investigation of their lending practices.
Of the settlement amount, $4,098,300 will be
distributed to Arizona consumers: half to
borrowers who have experienced a home
foreclosure and the other half to be used for
foreclosure relief and mitigation programs
that are administered by the AG. In
addition, the AG will receive $200,000 for
attorney’s fees and consumer fraud
activities.
Great Expectations – The Committee gave a
favorable review to the AG’s $525,000
allocation plan as a result of the consent
agreement with Great Expectations, a
referral dating service. Of the settlement
amount, $250,000 will be paid to Arizona
consumers whom have already filed
complaints with the AG. In addition, the AG
will receive $275,000 for their consumer fraud
unit.
Community Colleges – Review Renewal of
Diné College’s Funding Compact – The
Committee gave a favorable review to the
10-year renewal of the funding compact
between the state and the Navajo Nation.
Consistent with statute, the compact allows
10% of transaction privilege tax (TPT) revenues
that are generated within the Navajo Nation
to be used for Diné College.
Fund Transfer Exchanges – Review of
Requested Exchange of Fund Transfers – The
Committee gave a favorable review to the
requested exchange of fund transfers for
the Corporation Commission, the Arizona
Department of Housing, the Department of
Insurance and the Arizona State Parks Board.
Subject to JLBC review, the Special Session
budget legislation permits agencies to revise
their fund transfers downward if other fund
transfers are increased by the same amount.
In the single largest shift, the Committee
favorably reviewed replacing a $3 million
transfer from the State Parks Enhancement
Fund with a $2 million transfer from the State
Lake Improvement Fund and a $1 million
transfer from the Heritage Fund.

Arizona State Schools for the Deaf and Blind –
Review of Intended Use of Voucher Fund
Expenditures – The Committee gave a
favorable review to the Arizona State Schools
for the Deaf and Blind’s (ASDB) expenditure
plan for the $878,500 appropriation to the
Voucher Fund to pay for expenses associated
with projected enrollment growth and
inflation. ASDB plans to use the monies for
personnel and supplies.
Department of Environmental Quality – Review
of Intended Use of Monies in the Indirect Cost
Recovery Fund – The Committee gave a
favorable review to the Department of
Environmental Quality’s (DEQ) intended uses
of the Indirect Cost Recovery Fund in excess
of their FY 2009 appropriation of $11.9 million.
The Committee favorably reviewed the
option to increase Indirect Cost Recovery
Fund expenditures to 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.
Arizona Pioneers’ Home – Consider Approval
of Requested Transfer of Appropriations – The
Committee approved the agency’s request
to transfer up to $100,000 from the Personal
Services line to the Employee Related
Expenditures (ERE) line in FY 2009. The agency
projects that total ERE costs will be $1.6 million
for FY 2009, exceeding the appropriated
amount of $1.5 million.

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

Summary of Recent Agency Reports
Arizona Department of
Administration – Semi-Annual State
Employee Health Insurance Report –
Pursuant to A.R.S. § 38-658, the
Arizona Department of
Administration (ADOA) is submitting
their required semi-annual report on
the health insurance program. The
Health Insurance Trust Fund had
receipts of $714 million for Plan Year
(PY) 2008, with expenses of $716
million, decreasing the balance by
$(2) million to $116 million as of
September 30, 2008. The program
provides health insurance for
133,099 active state employees,
retirees, and dependents. Of this
amount, 57,908 are active
employees, including university
employees, and 9,046 are retirees.
The total annual cost per member
averaged $4,577 for active
employees and their dependents
and $7,886 for retirees and their
dependents. These costs are
covered by both member and
employer premiums.
Statute requires ADOA to report on
performance standards for the
program, as well as customer
satisfaction. In PY 2008, nearly
$55,000 in penalties was assessed to
vendors, an improvement from the
$98,000 in penalties assessed for PY
2007. Penalties were imposed for
failure to meet goals for claims
processing and customer service.
(Eric Jorgensen)
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 2nd quarter report on settling the
Arnold v. Sarn lawsuit.
DHS reports that since the adoption
of the court ordered Performance
Improvement Plan (PIP) in April 2008,
the contractor (Magellan) has
successfully accomplished 35 out of
41 goals outlined in the PIP. The
contractor has achieved particular
goals in staff training, improved

Individual Service Plan (ISP)
functional assessment quality and
case management team
treatment. To date, DHS has
imposed sanctions totaling $112,000
against the contractor, including
$18,500 in January 2009 for not
demonstrating full compliance with
the provisions of the ISP.
In January 2009, the Court Monitor
filed her 2008 Independent Review
with the court. The Court Monitor
found “serious deficiencies in the
provision of clinically sound
practices” arising from 3 systemic
problems:
•

•

•

The behavioral health
management system is re-bid
every 3 years, which leads to
instability.
The behavioral health system
lacks local control as a result of
contractors that are located
outside of Maricopa County.
Guaranteed profits for the
contractors means that monies
needed for care are taken out
of the system.

DHS states that it was not given an
opportunity to comment on the
Court Monitor’s findings prior to the
release of her report. DHS has the
following comments on the Court
Monitor’s report:
•

•

•

The perceived instability is
lessened by the fact that DHS
has the option to extend
contracts for 1 year or 2 years
beyond their original 3-year
term.
The contractor has established
a local presence through
partnerships with behavioral
health agencies within
Maricopa County.
Contractors are not
guaranteed profit, as contracts
with DHS stipulate a risk corridor
that range between a profit of
up to 4% and a loss of up to 4%.

Following the release of the Court

Monitor’s report, a status hearing
was set for February 23, 2009. This
hearing has since been
rescheduled for May 18, 2009. The
court also issued an order requiring
the Governor to file a brief by May
4, 2009 that proposes solutions to
systemic problems in the Maricopa
County behavioral health system.
(Art Smith)
Phoenix Convention Center –
Certificate of Completion – The City
of Phoenix has submitted the
Certificate of Completion (dated
March 25, 2009) for the Convention
Center expansion project to the
State Treasurer. Per A.R.S. § 9-622,
the certificate includes:

•
•
•
•

A certification that the project
was completed as of January
11, 2009.
A list of agreements entered
into by the city that require
future scheduled payments.
A certification that the project
meets all of the eligibility
requirements of A.R.S. § 9-605.
A certification that the total
cost of the project is $600
million, with $300 million funded
from municipal sources.

The submittal of the Certificate of
Completion triggers the state’s
obligation to begin paying the debt
service and related costs on $300
million in construction bonds
beginning in FY 2010. The FY 2010
obligation is for $5 million. Debt
service will grow to maximum of $30
million per year by FY 2033. (Tim
Everill)
Department of Water Resources –
Report on Fees Collections in the
Assured and Adequate Water
Supply Fund – Pursuant to a FY 2008
General Appropriation Act
footnote, the Department of Water
Resources (DWR) has submitted the
amount of fees collected by the
Assured and Adequate Water
Supply (AAWS) program. The AAWS
Administration Fund consists of

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2009

Summary of Recent Agency Reports
monies that are paid to DWR for
applications related to assured and
adequate water supplies. DWR
reports that for the quarter ending
March 31, 2009, the department

(Continued)

collected $47,100. This amount is
$(141,800), or (75)%, below
collections for the same period in
FY 2008. (Leah Kritzer)

State of Arizona
General Fund Revenue:

Change from Previous Year and January Baseline Forecast
March 2009
Current Month

FY 2009 YTD (Nine Months)

Change From
Actual

March 2008

March 2009

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

March 2008

March 2009

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate
Property
Luxury - Tobacco
- Liquor
Insurance Premium

282,169,633

$2,921,921,381

($405,037,167)

(12.2) %

($85,106,339)

(2.8) %

71,833,625

($67,464,946)
9,904,736

16.0

23,147,754

47.5

2,016,557,577

(334,800,188)

(14.2)

(101,061,089)

(4.8)

44,822,051

(16,519,333)

(26.9)

5,395,851

13.7

380,351,810

(101,949,356)

(21.1)

17,773,085

4.9

618,877

(92,489)

(13.0)

5,477

0.9

11,599,195

(949,202)

(7.6)

402,409

3.6

($39,431,267)

(12.3) %

2,600,696

447,935

20.8

92,504

3.7

22,776,245

(1,410,796)

(5.8)

(237,962)

(1.0)

2,329,898

1,304,198

127.2

1,248,098

115.4

21,476,028

1,090,298

5.3

651,418

3.1

89,883,281

8,700,415

10.7

3,205,081

3.7

253,775,092

13,451,548

5.6

3,681,227

1.5

Estate

(2,151)

(2,151)

Other Taxes

42,682

7,488

Sub-Total Taxes

(19.3) %

-21.3

$494,298,592

($63,714,147)

(11.4) %

Lottery

1,377,100

(1,977,000)

(58.9)

License, Fees and Permits

3,366,611

1,014,958

43.2

(2,151)

--

123,182

(144,940)

(54.1)

18,869

18.1

(4,318)

(9.2)

429,385

(2,995)

(0.7)

21,276

5.2

$5,629,009,895

($829,752,798)

($6,342,971)

(1.3) %

(12.8) %

($163,857,106)

(2.8) %

Other Revenue

Interest

1,377,100
123,611

28,311,100

2,957,581

11.7

1,377,100

5.1

24,962,143

(1,491,018)

(5.6)

(1,074,758)

(4.1)
(30.5)

146,571

(6,236,466)

(97.7)

(90.8)

9,942,613

(66,336,524)

(87.0)

(4,353,172)

Sales and Services

3,124,052

(66,569)

(2.1)

124,052

4.1

33,684,200

(3,295,770)

(8.9)

1,744,226

5.5

Other Miscellaneous

7,182,327

(878,491)

(10.9)

4,253,227

145.2

32,454,996

4,674,109

16.8

4,496,534

16.1

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

0
155,931

0
(222,975)

-(58.8)

15,352,592

(8,366,543)

(35.3) %

$509,651,184

($72,080,690)

(12.4) %

(1,443,029)

-3.8

0
(844,069)
3,590,892
($2,752,079)

--

0

(84.4)

28,467,794

0
(3,366,114)

--

0

(10.6)

3,425,329

30.5 %

157,822,846

(66,857,736)

(29.8) %

(0.5) %

$5,786,832,741

($896,610,534)

(13.4) %

5,615,259
($158,241,847)

-13.7
3.7 %
(2.7) %

Other Adjustments
Urban Revenue Sharing

(60,639,781)

(3,594,870)

6.3

0

0.0

(545,758,050)

(32,353,854)

'09 Budget Plan Transfers

18,872,407

3,872,407

25.8

0

0.0

245,645,598

226,769,419

'09 Budget Revision Transfers

95,705,361

95,705,361

--

0

0.0

271,085,637

271,085,637

--

0

0.0

53,937,987

95,982,898

-- %

0

0.0 %

(29,026,815)

465,501,202

-- %

0

0.0 %

$563,589,171

$23,902,208

4.4 %

Sub-Total Other Adjustments
TOTAL REVENUE

($2,752,079)

(0.5) %

$5,757,805,926

($431,109,332)

6.3
--

(7.0) %

0

0.0

0

0.0

($158,241,847)

(2.7) %