JLBC - Monthly Fiscal Highlights

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

Summary
General Fund revenues exceeded spending
by $226 million in September. The state
reversed the trend of shortfall months by
shifting $270 million in K-12 school payments
from the General Fund to federal funds.

September, as there was no significant use of
federal funds as there had been in
September. For the month of October, the
highest daily borrowing is $450 million on
October 23 and the average daily balance is
$(226) million.

Fiscal year-to-date, General Fund revenues are
$1.80 billion compared to spending of $2.81
billion, for a 3-month deficit of $(1.01) billion.
Based on the results of the most recent
consensus forecast, the fiscal year-end shortfall
is now projected to be $(2.0) billion.
www.azleg.gov/jlbc.htm

“September
collections
were…$(152.9)
million below the
budget
forecast”.

October 2009

This issue of the Monthly Fiscal Highlights also
includes an update on K-12 cash balances
(see page 3) and a summary of the Finance
Advisory Committee meeting (see page 11).
FY 2010 Revenues

The net September surplus, however, masked a
very poor revenue collection month.
September General Fund revenue collections
were $706.7 million. Excluding budgeted
transfers and Urban Revenue Sharing,
September collections were (23.0)% below the
prior year, and $(152.9) million below the
budget forecast. (See Table 1below and
Table 6 on page 5 for more information.)

The (16.1)% decline in September revenues
reflects the 14th consecutive month of doubledigit declines in General Fund revenue
collections compared to the prior year.
Among the major revenue categories:

•

Year-to-date, revenues are (16.1)% below the
prior year, and $(233.4) million below the
budget forecast.
In comparison, September 2009 General Fund
spending was $480.7 million. (See Table 2.)
Year-to-date spending is ($252.5) million less
than the prior year.

•

The net September surplus improved the
state’s cash flow and reduced the level of
daily borrowing. While the highest borrowing
was $166 million on September 1, the average
daily balance was a positive $9 million.
October cashflow declined significantly from

September sales tax collections were
down (15.9)% compared to September
2008, and were $(28.5) million short of the
monthly forecast. Year-to-date, sales tax
collections are down (17.0)% from the prior
year, and are $(72.0) million below
forecast.
September individual income tax
collections were down (24.9)% compared
to September 2008, and were $(82.8)
million below forecast. September is a
large estimated payment month for both
corporate and individual income taxes.
However, September payments in the
individual income tax category were
down almost (40)% below last year.

Table of Contents
September Revenues.............................................3
Economic Indicators ..............................................6
This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
October 30, 2009.

Finance Advisory Committee Meeting.............11
Summary of Recent Agency Reports
• DES –TANF Grant Diversion Program .............12
• DES - Title XIX Reimbursement Rates for DD .12

•
•
•
•

DES - Annual Child Care Expenditures.......... 12
DEMA – Camp Navajo Fund .......................... 12
ADEQ – Progress of WQARF Sites ................... 12
SFB - Energy & Water Savings Program......... 13

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Summary
Table 1

(continued)

General Fund Revenues
Compared to Forecast and FY 2009 Collections
($ in Millions)

September
Year-to-Date

•

“Year-to-date
spending is
($252.5) million
below 2009”.

FY 2010
Collections
$ 706.7
$ 1,803.9

September corporate income tax
collections were $(47.2) million below the
forecast for the month. Year-to-date,
corporate collections are down (38.4)%
from the prior year, and are $(45.2) million
below forecast.

Difference From
Budget Forecast
$ (152.9)
$ (233.4)

•

stimulus legislation.
University spending was $56 million higher
in September, as they received $100
million in a payment rolled over from FY
2009. Adjusting for the rollover, FY 2010
year-to-date spending is $(52.3) million
less than FY 2009.
The School Facilities Board spent $(80.0)
million less in September as the result of
technical changes.

FY 2010 Spending

•

September 2009 spending of $480.7 million
was ($378.8) million below September 2008.
Year-to-date spending is ($252.5) million
below 2009 (See Table 2 below and Table 8
on page 14). The notable September
changes included:

FY 2010 Status

•

•

The Arizona Department of Education
(ADE) spent $(269) million less than 2009.
In September, $270 million in federal
stabilization monies from the stimulus
legislation was used to pay the month’s K12 formula payment.
Spending in AHCCCS, DHS, and DES
remained virtually unchanged from
September 2008. The cost of caseload
growth in those agencies is being offset
by higher federal match from the federal

Difference
From FY 2009
$ (123.3)
$ (479.9)

The Finance Advisory Committee (FAC) met
on October 22nd. (See FAC Summary on
page11). Based on the 4-sector consensus
forecast presented at the meeting, FY 2010
revenue collections are projected to decline
by (7.2)% for the Big 3 revenue categories.
However, JLBC Staff recommended using a
more conservative (8.7)% forecast. After
adjusting for the smaller tax categories, the
overall decline would be (8.2)%.
As noted above, FY 2010 revenue collections
are down (16.1)% year-to-date. Given this first

Table 2

General Fund Spending
($ in Millions)
Agency
Education
AHCCCS
Economic Security
Universities
Corrections
Health Services
School Facilities Board
Other
Total

Sept 09

Change from
Sept 08

Year-toDate

YTD Change
from FY ‘09

$ 96.6
121.3
17.6
147.3
36.9
16.2
0.1
44.7

$(269.1)
2.1
4.9
56.1
(38.7)
(3.8)
(79.8)
(50.5)

$1,083.2
402.9
328.7
321.3
193.0
152.9
81.9
248.9

$ (39.9)
0.1
(108.6)
47.7
(33.0)
7.9
(98.0)
(28.6)

$480.7

$(378.8)

$2,812.9

$(252.5)

3

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Summary

(continued)

quarter performance, revenues could decline
by no more than (4.9)% in the remainder of
the year to meet the revised forecast.
“Based on the
revised revenue
forecast, the
overall budget
shortfall at the
end of FY 2010
increased from
the $(1.5) billion
noted in last
month’s MFH to
$(2.0) billion.”

While total collections are expected to
remain relatively flat, percentage declines
are expected to moderate in the second half
of the fiscal year. The revenue base in the
second half of FY 2009 was significantly lower
than in the first half, which will make it easier
to show smaller percentage reductions.
The revised forecast would result in a FY 2010
revenue shortfall of $(698) million compared
to the enacted budget. Year-to-date, the
shortfall stands at $(233) million.
Based on the revised revenue forecast, the
overall budget shortfall at the end of FY 2010
increased from the $(1.5) billion noted in last
month’s MFH to $(2.0) billion.
The main factors in the shortfall are an FY 2009
ending balance shortfall ($478 million), the
impacts of the FY 2010 budget vetoes ($483
million), lower than anticipated revenue
collections in FY 2010 as noted above ($698
million), and changes in other FY 2010 budget
projections ($300 million).
Other FY 2010 Projections – This $300 million
shortfall includes $135 million for supplemental
spending in AHCCCS and DHS due to higher
than budgeted caseloads. The shortfall
estimate also includes $165 million for
potential unrealized budget savings assumed
in the FY 2010 budget, including AHCCCS
fraud savings and the prison concession
agreement.

of fraud, neither statutory changes nor
significantly revised administrative procedures
have been enacted, making substantial new
fraud savings unlikely. The budget also
assumed $100 million in an upfront payment
from a private vendor in exchange for a long
term contract to operate existing state prison
facilities. Preliminary feedback suggests that
the procurement process will take most of the
fiscal year and may prove difficult to
generate an upfront payment of that size.
K-12 Cash Balances
The FY 2009 budget included $300 million in
savings from requiring school districts to use
their cash balances in place of General Fund
monies for that year. If their balances prove
insufficient, the state is required to pay the
difference by November 2. Districts were
required to use cash balances in their 3 main
operating and capital funds that exceeded
allowable “carry forward” levels. All other
funds, such as federal and debt service funds,
were exempted.
ADE indicates that districts were able to draw
down $184 million in cash balances. As a
result, the state owes the remaining $116
million by November 2.
The ADE appropriation for FY 2010 includes an
estimated $126 million in surplus funding due
to an overestimation of student counts and
other technical factors. ADE can use those
monies to make the $116 million payment.

The budget assumed $50 million in savings
from reducing fraudulent AHCCCS
expenditures. Regardless of the actual level

September Revenues
Sales Tax collections were $287.8 million in
September. These revenues were down (15.9)%
compared to last September, and were $(28.5)
million below the budget forecast. The
September decline marked the 20th consecutive
month of year-over-year reductions, and the 11th
consecutive month of double digit declines
compared to the previous year. Table 3 displays
the September growth rates for the largest
categories.

Table 3

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Utilities
Use
Restaurant & Bar

Sept
(12.2)%
(40.5)%
(3.6)%
(12.9)%
(6.6)%

YTD
(12.2)%
(39.4)%
(1.1)%
(24.9)%
(5.1)%

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

September Revenues

“The September
[sales tax]
decline marked
the 20th
consecutive
month of yearover-year
reductions, and
the 11th
consecutive
month of double
digit declines
compared to the
previous year”

As noted in previous months, retail and contracting together account for about 30% of all
sales tax revenues. The retail sector decreased
by (12.2)% in September, and contracting fell
by (40.5)%.
As noted in Table 4 below, September taxable
sales in the retail category are down (12.2)%
from September of the prior year. The largest
subcategory within retail is the General
Merchandise and Miscellaneous Retail
category, which is down (8.1)%. Motor
Vehicles, which represents 20.5% of the total, is
down (12.4)% compared to September of the
prior year.
Sales tax collections in the Motor Vehicles
subcategory declined less than in the
preceding 2 months, perhaps resulting from
the “cash for clunkers” vehicle program,
which began in late July. The (12.4)%
decrease in this category is a slight
improvement from the (16.0)% decrease in the
prior month.
Individual Income Tax net revenues were
$267.0 million in September. Collections were
down (24.9)% compared to the prior year, and
were $(82.8) million below the budget forecast.
Year-to-date collections are down by (14.0)%
and are $(45.2) million off the forecast amount.
Table 6 displays September growth rates for
individual categories.
As indicated in the table below, withholding
tax payments declined by (10.9)% in
September, the 12th consecutive month of
year-over-year declines. The state has not
suffered that many months of year-over-year
declines since at least 1960.

Table 4

(Continued)
Table 5

Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated +
Final Payments
Refunds

September
(10.9)%
(38.3)%

YTD
(6.1)%
(35.4)%

53.2%

21.2%

As noted Table 5 above, September payments
in the individual income tax category were
almost (40)% below last year, and fell $(42.2)
million short of projections.
Year-to-date, individual income tax collections
are down by (14.0)% compared to the same
period last year, and are $(113.6) million below
forecast.
Corporate Income Tax collections were $67.9
million in September, or (48.6)% below last year.
Collections were $(47.2) million below forecast
for the month. As noted above, September is
a large estimated payment collection month
for the corporate income tax category.
However, collections were significantly below
forecast. Year-to-date, corporate collections
are (38.4)% below last year, and $(45.2) million
below the budget forecast.
The Lottery Commission reports that ticket sales
for the month of September were $41.8 million,
which was $2.9 million above sales in
September 2008, an increase of 7.0%. A total
of $9.2 million has been transferred to the
General Fund as of September 30th.

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

% of
Total Sales
30.7%
20.5%
7.5%
7.4%
6.9%
5.8%
5.5%
15.7%
100.0%

% Change
Over FY 2009
(8.1)%
(12.4)%
(11.0)%
(9.8)%
(27.5)%
(11.4)%
(16.7)%
(14.1)%
(12.2)%

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Table 6

State of Arizona
General Fund Revenue:

Change from Previous Year and Budget Forecast
September 2009
Current Month

FY 2010 YTD (Three Months)

Change From
Actual

September 2008

September 2009

Amount

Change from
Actual

Forecast

Percent

Amount

Percent

September 2008

September 2009

Amount

Forecast

Percent

Amount

Percent

Taxes
Sales and Use

287,828,224

($54,447,081)

Income - Individual

267,006,805

(88,386,236)

67,946,447
35,987

- Corporate
Property
Luxury - Tobacco
- Liquor
Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

(15.9) %

($28,453,662)

(24.9)

(82,807,030)

(64,137,055)

(48.6)

(47,191,853)

(7,363)

(17.0)

2,770,000

52,019

2,200,000

68,853

45,583,042

7,209,130

0

18,466

(100.0)

33,767

(4,033)

(10.7)

$673,404,272

($199,633,300)

$866,060,935

($177,646,829)

(17.0) %

($72,048,861)

(23.7)

(9.0) %

732,901,225

(119,532,907)

(14.0)

(113,615,698)

(13.4)

(7.7) %

(41.0)

107,443,432

(67,085,739)

(38.4)

(45,157,368)

(29.6)

19,987

124.9

264,245

(6,424)

(2.4)

(19,755)

(7.0)

1.9

0

0.0

7,498,679

(437,275)

(5.5)

(633,321)

(7.8)

3.2

0

0.0

6,161,918

(523,344)

(7.8)

(728,082)

(10.6)

18.8

8,368,042

22.5

4.0

203,739

0.2

(22.9) %

0
(18,733)
($150,083,249)

129,828,739

4,973,487

--

294,106

289,910

(35.7)

124,318

(6,623)

$1,850,577,597

($359,975,744)

(18.2) %

-(5.1)
(16.3) %

294,106
(33,182)
($231,738,422)

-(21.1)
(11.1) %

Other Revenue
Lottery

3,447,000

License, Fees and Permits

1,827,124

(642,812)

Interest

1,030,500

42.6
(26.0)

347,000
(1,432,876)

6,206,200
6,833,157

1,383,200
(941,514)

28.7
(12.1)

6,200
(2,441,843)

0.1
(26.3)

10,487

(2,905,344)

(99.6)

--

1,176,475

(3,947,982)

(77.0)

1,176,475

Sales and Services

3,266,877

(581,263)

(15.1)

(1,283,123)

(28.2)

7,630,728

(1,195,073)

(13.5)

(2,589,272)

(25.3)

Other Miscellaneous

3,385,184

(783,011)

(18.8)

1,385,184

69.3

10.2

3,860,735

64.3

--

0

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

0
597,000

0
(1,225,361)

(67.2)

10,487

11.2
(44.0)

(1,803,000)

9,860,735

912,169

--

0

0

(75.1)

5,555,605

1,427,513

-34.6

0
(1,644,395)

--

-(22.8)

12,533,672

(5,107,291)

(29.0) %

(2,776,328)

(18.1) %

37,262,900

(2,361,687)

(6.0) %

(1,632,100)

(4.2) %

$685,937,944

($204,740,591)

(23.0) %

($152,859,577)

(18.2) %

$1,887,840,497

($362,337,431)

(16.1) %

($233,370,522)

(11.0) %

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

(52,387,052)

8,252,731

--

0

0.0

(157,161,157)

24,758,193

73,188,960

73,188,960

--

0

0.0

73,188,960

(142,357,832)

20,801,908
$706,739,852

81,441,691
($123,298,900)

-- %
(14.9) %

0
($152,859,577)

0.0 %
(17.8) %

(83,972,197)
$1,803,868,300

--

0

0.0

(66.0)

0

0.0

(117,599,639)

-- %

($479,937,070)

(21.0) %

0
($233,370,522)

0.0 %
(11.5) %

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Economic Indicators
NATIONAL

“The most recent
release of the
[coincident]
index shows that
economic
activity in Arizona
fell by (0.5)% in
September. This
was the 23rd
consecutive
month the
Arizona
coincident index
declined.”

According to the first (“advance”) estimate of
the U.S. Real Gross Domestic Product (GDP) for
the 3rd quarter of 2009, the nation’s economy
grew at an annual rate of 3.5% following 4
consecutive quarters of decline. With the
economy growing again, many economists
believe that the recession probably ended in
June this year. A little less than 1% of real GDP
growth was due to a slower rate of inventory
decumulation than in the prior quarter.
Consumer and business spending, as well as
residential fixed investment, and exports all
returned to growth in the 3rd quarter.
In October, the Conference Board’s U.S.
Consumer Confidence Index, a measure
based on a survey of 5,000 U.S. households,
stood at 47.7, down (5.7) points from a revised
September level of 53.4. Despite the sharp
decline, which is due to a deteriorating view of
both the present conditions and future
expectations, the measure is up 8.9 points from
October 2008 levels. Playing a major part in
the decline is consumers’ current and future
view of the labor market.
The Conference Board’s U.S. Index of Leading
Economic Indicators rose for the sixth
consecutive month in September, with a
month-over-month increase of 1.0%. The index,
which is designed to anticipate economic
activity 3 to 6 months in advance, indicates
that the national economy has begun to
recover. Eight of the 10 components that
make up the index improved in September.
The largest positive contribution came from the
interest rate spread between the yield of 10year Treasury Bonds and the Federal Funds
rate, which is primarily the result of the Fed’s
ongoing monetary stimulus programs.
Consumer prices, as measured by the U.S.
Consumer Price Index (CPI), increased by 0.2%
in September. The rise in energy, vehicle, and
medical-care prices was partly offset by falling
food prices and rent. The CPI is now (1.3)%
below last year’s level. Excluding food and
energy, core consumer prices inched up 0.2%
in September. The core CPI has risen by 1.5%
over the last 12 months.
The Semiconductor Industry Association (SIA)
reported that Semiconductor Billings (3-month
moving average) in the U.S. totaled $3.25
billion in August, the largest amount since July
2008. The decline in year-over-year sales has

now fallen from a high of (26.2)% in December
2008 to a low of (2.3)% in August this year. The
outlook for the semiconductor industry has
improved markedly over the last few months.
ARIZONA
While the Arizona economy still appears to be
in a recession, there are indications that
suggest that the decline in economic activity is
moderating. This can be inferred from a
number of economic measures, such as
personal income, nonfarm employment, initial
claims for unemployment insurance, consumer
confidence, and air passenger traffic.
However, any improvement in coming months
will be largely dependent on the conditions in
the housing market. A strong and sustainable
recovery will likely not occur until foreclosurerelated sales return to more normal levels.
As reported in the last 2 issues of Monthly Fiscal
Highlights, the Federal Reserve Bank’s
coincident index is a relatively new measure
designed to gauge current economic activity
in the nation’s 50 states, including Arizona. The
index combines four state-level indicators into
a single statistic: nonfarm payroll employment,
average hours worked in manufacturing,
unemployment rate, and inflation-adjusted
wages.
The most recent release of the index shows
that economic activity in Arizona fell by (0.5)%
in September. This was the 23rd consecutive
month the Arizona coincident index declined.
The index was (8.3)% below the reading in
September 2008. By way of comparison, the
national index declined by (0.1)% in September
and was (3.4)% below last year’s level. The Fed
reported that the index increased in 9 states
nationwide.
The graph below, which shows the history of
the Arizona coincident index, suggests that
economic activity in the state has not yet
reached its bottom.

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Economic Indicators

(Continued)

Arizona Coincident Economic Activity Index
230
225

(July 1992 = 100)

220
215
210
205
200
195
190
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10

“The state has
lost (305,000)
jobs since
employment
peaked in
December
2007.”

The federal Bureau of Economic Analysis (BEA)
recently released revised state personal
income figures going back to 1969. The BEA
revision revealed that both the previous level
and growth of personal income in Arizona
were understated. For example, under the
revised estimate, the amount of Arizona
personal income was understated by more
than 3% in the period between 1999 and 2008.
The BEA release also indicated that Arizona
personal income declined at a seasonally
adjusted annual rate of (0.3)% in the second
quarter of 2009. This should be compared to
the much steeper decline of (8.0)% in the prior
quarter.
The most recent employment report by the
Arizona Department of Commerce shows that
the state added 10,600 nonfarm payroll jobs in
September. This was only a third of the job
gains that are typically reported for this month,
as teachers and other individuals hired by
schools and universities return to work.
September’s year-over-year loss in nonfarm
employment was (7.5)%, or (195,800) jobs.
Employment data indicates that labor market
conditions have remained largely unchanged
in the last 5 months. The state has lost (305,000)
jobs since employment peaked in December
2007.
The construction sector shed (900) jobs in
September. The industry now employs (45,800)
or (26.4)% fewer workers than a year ago. At
the height of the housing boom, the
construction sector employed 9.5% of the
state’s workforce compared to 5.7% today.
The manufacturing sector incurred a net loss of
(300) jobs in August. Some segments of the
manufacturing industry faired better than
others. For example, the nondurable goods

manufacturing sector (e.g., food and paper
production) added 500 new jobs in
September: whereas, the durable goods
manufacturing sector (e.g., computer and
aerospace production) shed (800) jobs in the
same month. The manufacturing industry as a
whole employs (13,300) or (7.7)% fewer workers
than a year ago.
The average weekly hours of production
workers in manufacturing industries is a leading
indicator since “factory hours” tends to lead
the business cycle as employers usually adjust
work hours before increasing or decreasing
the size of their workforce. According to the
Department of Commerce, average weekly
hours in September remained unchanged at
38.1 hours. This was (6.8)% below the level
recorded one year ago. Manufacturing
employment is not expected to improve until
the average workweek begins to increase.
The state’s unemployment rate in September
was 9.1%, the same as in the prior month.
While this is a slight improvement from the
9.2% unemployment rate reported for the
month of July, it is important to note that most
economists still expect unemployment to rise
as the economy begins to recover. The
reason for this is that as the economy begins
to improve, discouraged workers who
previously opted to leave the labor force will
now resume their job search. This helps to
explain why the unemployment rate is
considered a lagging indicator.
Under an alternative measure of labor
underutilization provided by the federal
Bureau of Labor Statistics (BLS), the state’s
unemployment rate reached 17.2% between
the 4th quarter of 2008 through the 3rd quarter
of 2009. This is a broader measure that also
includes underemployed (individuals who are
working part time for economic reasons but
who would prefer full time employment) and
discouraged workers.
The Department of Commerce reported that
30,654 initial claims for unemployment
insurance were filed in September, an
increase of 26.7% over last year. On the
bright side, however, this was the lowest
number of claims since November 2008.
Claims for initial unemployment insurance
appear to have peaked in April when more
than 41,000 individuals filed for benefits. For
the week ending on October 3, a total of

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Economic Indicators
104,228 Arizona residents filed for continued
claims for jobless benefits. Claims appear to
have peaked in the first week of August when
116,600 residents filed for continued benefits.
Based on data released by the U.S. Census
Bureau, an average of 1,472 building permits
were issued each month between July and
September 2009. This amount includes an
average of 1,317 single-family residential
building permits authorized and 154 multifamily permits. On a month-over-month basis,
the number of single-family permits issued
decreased (11.8)% while the number of multifamily permits issued increased 29.0. Yearover-year, activity in the single family segment
decreased (8.2)%, while permits in the multifamily segment is down (71.7)%.
Based on ASU’s September real estate report,
the single-family median resale home price
was $139,800 based on 9,070 single-family
existing home sales. The median resale price
in the single family segment remained
relatively unchanged for the third strait
month. Relative to a year ago, however,
prices have fallen (17.3)%. Since the June
2006 high of $267,000, prices have fallen
(47.6)%. The 9,070 transactions were similar to
August levels but were 9.5% above levels a
year ago.
In the multi-family segment, ASU’s report
indicates there were 1,175 townhousecondominium median transactions with an
average sales price of $102,430. The total
number of units bought and sold represents an
increase of 46.9% above levels a year ago,
while the year-over-year median resale price
decreased (26.4)%.
The S&P/Case-Shiller Home Price Index
measures housing prices based on repeat
sales. Utilizing August data, the index for the
Phoenix metropolitan area measured
108.41— similar to the levels seen in May 2001.
At its current level, the index, and therefore
housing prices, increased 1.6% relative to the
prior month (July). This increase marks the
third consecutive month-over-month rise in
housing prices. These increases, however, are
following decline in the index that lasted for
35 straight months. Year-over-year, the index
suggests prices have declined (25.1)%.
Relative to peak in June 2006 (227.42), the
index is down (52.3)%. For comparison, the 20
metropolitan area index is down (30.1)% from
its peak in July 2006.

(Continued)

Based on MLS data, the seasonally adjusted
month’s supply of housing indicator fell by
(0.2) months between August and
September. The measure currently suggests
that it would take 5.7 months to deplete the
current inventory of unsold homes. At this
level, the supply of housing is (3.0) months less
than it was a year ago and (11.0) months
below the September 2007 high of 16.7
months.
A total of 3.17 million passengers entered and
exited aircraft at the Phoenix Sky Harbor
International Airport in August. This was a
decline of (4.3)% from the same month in the
prior year. Year to date, air passenger traffic
is down by (8.1)%. Although air passenger
traffic is still significantly below pre-recession
levels, the year-over-year declines have
moderated considerably over the last few
months.
According to the Behavior Research Center’s
September Arizona Consumer Confidence
Index report, consumer confidence increased
16.9 points (relative to January’s report) to a
level of 60.2. The significant increase is
primarily attributed to consumer’s belief that
current business conditions as well as
employment opportunities will improve late
this year and early next year. Arizona
consumer confidence reached an all time
low of 44.2 in January 2009. The consumer
confidence level at this time a year ago was
not available.
The sharpest and longest recession in postwar
history has not only resulted in record-large
declines in tax receipts but also led to a surge
in the demand for state health and welfare
services, evident from the caseload data
presented below.
In October, AHCCCS caseloads increased to a
total of 1,329,721 members, 0.2% above the
number of recipients in the previous month.
AHCCCS caseloads are currently 17.7% above
October 2008 levels. The FY 2010 budget
funded a projected June caseload growth of
10.7%, for a total of 1,388,147 members.
There were a reported 85,799 TANF recipients
in the state in August, which represented a
monthly caseload increase of 1.1%.
Augusts’ year-over-year increase was 6.3%.
The FY 2010 budget assumed that the June
2010 TANF caseload would be 84,287.

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Economic Indicators
The Supplemental Nutrition Assistance
Program (SNAP), formerly known as Food
Stamps, provides assistance to low-income
households to purchase food. In August,
there were a total 948,214 food stamp
recipients in the state, an increase of 2.4%
over the prior month. Compared to the
same month last year, food stamp
participation was up by 35.5%. The number
of food stamp recipients began increasing
steadily in July 2007, after several years in the
550,000 to 575,000 range.
The Department of Correction’s (ADC) inmate
population increased to a 3-month average
count of 40,579 inmates between July and
September 2010. This equates to an average
monthly increase of 63 inmates and a year
over year increase of 1,488 inmates. In FY 2010,
the department was funded for growth of 151
inmates per month.
With the exception of Maricopa County, the
state and counties throughout the state
typically share the costs of adult and juvenile
probation programs. Maricopa County,
however, has assumed all costs associated
with adult and juvenile probation programs.
Utilizing adult and juvenile probation data
from June from August, respectively, the nonMaricopa probation caseload was 20,145
individuals, virtually unchanged from the prior
period and a decrease of 274 probationers
from a year ago. In Maricopa County, there
were 26,421 probationers during the period,
(778) less than the prior month and (4,854) less
than a year ago.

(Continued)

10 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Economic Indicators

(Continued)

Table 7

ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate
- Initial Unemployment Insurance Claims
- Non-Farm Employment – Total
Manufacturing
Construction
- Average Weekly Hours, Manufacturing
- Contracting Tax Receipts (3-month average)
- Retail Sales Tax Receipts (3-month average)
- Residential Building Permits (3-month moving average)
Single-unit
Multi-unit
- Greater Phoenix Existing Home Sales
Single-Family
Townhouse/Condominium
- Greater Phoenix Median Home Sales Price
Single-Family
Townhouse/Condominium
S&P/Case-Shiller Home Price Index (Jan. 2000 = 100)
- Months Supply of Housing, (ARMLS)
- Phoenix Sky Harbor Air Passengers
- Arizona Average Natural Gas Price
($ per thousand cubic feet)
- Arizona Consumer Confidence Index (1985 = 100)
- Arizona Coincident Index (July 1992 = 100)
- Arizona Personal Income
- Arizona Population
- AHCCCS Recipients
- TANF Recipients
- SNAP (Food Stamps) Recipients
- ADC Inmate Growth (3-month average)
- Probation Caseload (Adult/Juvenile)
Non-Maricopa
Maricopa County
United States
- Gross Domestic Product
(Chained 2005 dollars, SAAR)
- 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

September
September
September
September
September
September
Jul-Sep
Jul-Sep

9.1%
30,654
2.41 million
160,000
137,700
38.1
$39.6 million
$129.2 million

0.0%
(6.4)%
0.4%
(0.2)%
(0.6)%
0.0%
(5.9)%
(2.7)%

3.1%
26.7%
(7.5)%
(7.7)%
(25.0)%
(6.8)%
(39.4)%
(12.2)%

Jul-Sept
Jul-Sept

1,317
154

(11.8)%
29.0%

(8.2)%
(71.7)%

September
September

9,070
1,175

(0.1)%
3.1%

9.5%
46.9%

September
September
August
September
August
July

$139,800
$102,430
108.41
5.7 months
3.17 million
$6.27

3rd Quarter 2009
September
2nd Quarter 2009
July 1, 2008
October
August
August
Jul-Sep

60.2
197.72
$217.3 billion
6.50 million
1,329,721
85,799
948,214
40,579

26.6%
(0.5)%
(0.1)%
146,759
0.2%
1.1%
2.4%
63 inmates

NA
(8.3)%
(3.3)%
2.3%
17.7%
6.3%
35.5%
1,488 inmates

June/August
June/August

20,145
26,421

8
(778)

(274)
(4,854)

3rd Quarter 2009

$13.0 trillion

3.5%

(2.3)%

October
September
Jun-Aug
September

47.7
103.5
$3.25 billion
215.79

(10.7)%
1.0%
5.4%
0.2%

22.9%
2.9%
(2.3)%
(1.3)%

0.6%
(1.0)%
1.6%
(0.2) months
(5.9)%
11.8%

(17.3)%
(26.4)%
(25.1)%
(3.0) months
(4.3)%
(30.3)%

11 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

FAC Meeting
At its October 22, 2009 meeting, the Finance
Advisory Committee (FAC) heard presentations
on General Fund revenues and the state
budget, along with an outlook on both the
national and state economy. The FAC is a 15member panel comprised of leading
economists in the state. The panel meets 3
times a year and advises the Legislature on the
state economy.

“The presenters
generally opined
that the national
recession has
come to an end
whereas the
Arizona
economy is still
contracting,
albeit at a slower
rate than in
previous
months.”

JLBC Staff provided members with the latest 4sector 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.
As described earlier, the 4-sector consensus
forecasts a (7.2)% decline for FY 2010. For FY
2011, each component of the 4-sector
consensus showed improvement over FY 2010,
from a low growth of 5.7% to a high growth of
13.0%. The weighted average of the 4
components of the consensus forecast was
7.8%.
Based on current trends, this rate of revenue
growth would result in an estimated budget
shortfall for FY 2011 of $(3.3) billion. This
estimate assumes no carryover of the FY 2010
shortfall. To the extent that any FY 2010
solutions were on-going, the FY 2011 shortfall
would be reduced.
Panel members heard formal presentations
from Jim Rounds and the State Treasurer, Dean
Martin, in addition to comments from Pete
Ewing, Lisa Danka, Brian Carey, Randie Stein,
and Marshall Vest.
The presenters generally opined that the
national recession has come to an end
whereas the Arizona economy is still
contracting, albeit at a slower rate than in
previous months. They noted that the national
recovery will likely pull along the Arizona
economy as it begins to improve.
Some presenters also noted that the economy
may initially generate some impressive growth
rates in such areas as permitting activity and

retail sales due to the fact that such measures
fell to record low levels during the recession,
and that there is some limited pent-up
demand which was built up during the
downturn.
Beyond FY 2011, the 4-sector consensus
projects 7% to 8% annual growth through FY
2013. These growth rates would result in an
estimated structural balance of about $(3.7)
billion for each year.

12 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Summary of Recent Agency Reports
Department of Economic Security – Annual
Report on Temporary Assistance for Needy
Families Grant Diversion Program - Pursuant to
A.R.S. § 46-298, the Department of Economic
Security (DES) has provided the first annual
report on the Temporary Assistance for Needy
Families Grant Diversion Program. The Grant
Diversion Program’s purpose is to divert
applicants from long-term TANF cash
assistance by offering immediate, one-time
assistance to resolve a financial crisis. In FY
2009, 2,952 applicant households chose the
grant diversion option and were diverted from
long-term assistance. A total of 1,879
households obtained employment within 90
days of receiving assistance under the
diversion program in FY 2009. Through
January 2009, the most recent month for
which data is available, 188 households
reapplied for long-term assistance within 180
days of their participation in the diversion
program. (Jay Chilton)
Department of Economic Security - Report on
Adequacy and Appropriateness of Title XIX
Reimbursement Rates for Developmental
Disabilities Programs - Pursuant to A.R.S. § 362959, 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 rates
may no longer be clearly adequate and
appropriate or clearly consistent with Title XIX
principles; however, the rates are “in the
range where they could be judged to be on
either side of the ‘measurement line’ ” of
adequate and appropriate for FY 2010.
For FY 2010, DES did not adjust the benchmark
rates for inflation, but the study states that the
current adopted rates are at 85.5% of
hypothetical benchmark rates, which are
estimates of what the benchmark rates would
be had they been adjusted for inflation. In FY
2009, the rates were at 95% of the
hypothetical benchmark rates. The decline
compared to the benchmark rates is largely
due to a 10% reduction in the rates paid to
providers implemented by DES in response to
the funding reduction adopted by the
Legislature in the midyear FY 2009 budget
revisions. The study also notes that since the
benchmark indicators were not developed in
the context of the current economic
downturn, it is not appropriate to compare
them to current actual rates to determine the
actual rates’ appropriateness. The study
states that rates should not inoculate

providers against the effects of the economic
recession, and it is not clear that the current
rates will drive providers out of the network to
the extent that DES will be unable to provide
services to its customers. (Jay Chilton)
Department of Economic Security – Report on
Annual Child Care Expenditures – A.R.S. § 46810 requires the Department of Economic
Security (DES) to provide an annual child care
report to the Committee. The FY 2009 report
shows that the average number of children
served increased to 45,957, or 1.3% above FY
2008; the number of families served increased
by 1.4%. Across categories, the number of
children served in the Low Income Working
category increased 1.2%, CPS-related
placements increased by 5.1%, and the
number of TANF-related children increased by
21.4%, while the number of children receiving
transitional child care decreased by (10.7)%.
The amount spent by DES on child care
subsidies increased to $193,751,359, or 0.9%
above FY 2008. The average monthly subsidy
paid per child declined 0.4%, to $351.33. The
total amount of co-payments increased 1.3%
from FY 2008 to $15,670,911. (Jay Chilton)
DEMA – Report on Camp Navajo Fund –
Pursuant to A.R.S. § 26-152, the Department of
Emergency and Military Affairs (DEMA) is
required to submit an annual report
describing the activity in the Camp Navajo
Fund by August 31 of each year. The Camp
Navajo Fund pays for the National Guard to
operate a regional training site and storage
facility located at Bellemont. The fund’s
revenues consist of monies received from
federal and other government sources for
storage of government commodities and
services provided by the camp. DEMA
reports that the Camp Navajo Fund received
revenues of $10.2 million and had
expenditures of $10.6 million in FY 2009. This
left a fund balance of $1.9 million at the end
of the fiscal year due to a beginning balance.
(Eric Billings)
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 sites.
There are 10 steps in the WQARF process,
beginning with a preliminary investigation,

13 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Summary of Recent Agency Reports
continuing through various studies
and remediation once a site has
been placed on the registry, and
ending with the delisting of a site
once the investigation or cleanup
has been completed.
The report contained a listing of the
35 WQARF sites on the registry.
Progress goals were met at 18 of
these sites. Of the 35 reported sites,
15 were listed in the Early Response
Action phase at least partially
during FY 2009. Five sites had
advanced to the Implementation of
Remedy Phase or further during this
same period.
The department had estimated that
2 sites would be delisted by the end
of FY 2009, but the sites remain on
the report. (Dan Hunting)
School Facilities Board – Report on
Energy and Water Savings Pilot
Program – Pursuant to Laws 2007,
Chapter 266, the School Facilities
Board (SFB) shall report by October
1, 2008 and October 1, 2009 on
active grants made from the Energy
and Water Savings Grant Fund,
energy and water savings, cost
savings, and other benefits resulting
from the grants. Of the $2.5 million
appropriated to the fund in FY 2008,
SFB has awarded $2.25 million in
development and implementation
grants, while the remaining $0.25
million was used for administrative
and technical assistance costs.
Development grants are used to
assess existing school facilities and
develop recommendations for
improvements, while
implementation grants are used to
implement energy savings projects.
Based on preliminary energy savings
data from 6 school districts, SFB
estimates that these school districts
saved $22,300 in energy costs
between September 2008 and
December 2008. (Jack Brown)

(Continued)

14 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Table 8

General Fund Spending
($ in Millions)
Agency
Department of Administration
Office of Administrative Hearings
Department of Agriculture
AHCCCS
Arizona Commission on the Arts
Attorney General
Capital Post Conviction Public
Defender
State Board of Charter Schools
State Bd. of Chiropractic Exam.
Community Colleges
Department of Commerce
Corporate Commission
Department of Corrections
AZ Criminal Justice Commission
AZ St. Schools for the Deaf & Blind
Dept. of Economic Security
Department of Education
DEMA
Dept. of Environmental Quality
DEQ-WQARF
Office of Equal Opportunity
State Board of Equalization
Board of Executive Clemency
Dept. of Financial Institutions
Dept. of Fire, Life and Bldg. Safety
State Board of Funeral Directors
Arizona Geological Survey
Government Information Tech.
Governor
Department of Health Services
Arizona Historical Society
Prescott Historical Society of AZ
Independent Redistricting Comm
AZ Commission of Indian Affairs
Department of Insurance
Judiciary
Supreme Court
Court of Appeals
Court of Appeals Div. II
Dept. of Juvenile Corrections
State Land Department
Law Enforcement Merit System

820.7
120.4
1,470.4
121,261.8
51.7
4,608.1
62.4

Change from
Sept 08
(3,947.2)
(19.5)
(159.5)
2,112.2
(57.0)
(625.5)
(50.4)

Year-to-Date
6,040.0
276.8
2,725.9
402,870.5
153.7
7,497.7
206.2

YTD Change
from FY ‘09
(6,610.7)
(156.8)
(564.9)
109.2
(140.6)
(3,099.6)
(48.0)

139.5
110.3
(28.2)
36,908.3
810.6
17,553.6
96,586.4
684.2
353.0
7,000.0
12.6
84.3
289.5
415.4
163.4
100.0
144.7
75.6
568.8
16,209.7
1,395.2
37.7
7.7
1,110.8

.2
(545.8)
(759.1)
(38,740.3)
(1,961.5)
4,853.7
(269,063.3)
(269.5)
(385.8)
7,000.0
(22.0)
(51.6)
(19.3)
(85.6)
(128.3)
100.0
29.4
(141.8)
(190.3)
(3,837.2)
879.0
(2.2)
(7.6)
(7.3)
1.7

228.9
148.0
33,106.6
347.3
145.3
192,986.4
(4.6)
5,189.7
328,672.5
1,083,246.3
1,953.4
1,248.4
7,000.0
48.0
179.8
439.8
939.5
523.6
100.0
248.7
177.4
2,106.9
152,945.9
1,903.5
161.0
24.8
8.2
2,404.8

(119.6)
148.0
(3,452.4)
(1,176.7)
(1,554.8)
(33,008.4)
(135.2)
(2,852.3)
(108,575.6)
(39,949.9)
(583.3)
(1,379.0)
(6,000.0)
(20.2)
(124.5)
(31.6)
(431.1)
(529.5)
100.0
(27.1)
(116.1)
(179.2)
7,865.9
(421.2)
18.2
(39.7)
(44.4)
(239.4)

2,557.1
664.6
593.0
4,173.7
992.7
5.4

(2,297.8)
24.6
(444.8)
(6,373.7)
248.7
(5.1)

Sept 09

27,332.3
2,331.3
1,263.1
16,136.3
4,760.2
20.6

(4,865.6)
94.8
(436.3)
(8,068.5)
(1,355.7)
(3.5)

15 JLBC – MONTHLY FISCAL HIGHLIGHTS – OCTOBER 2009

Agency
Legislature
Auditor General
House of Representatives
Joint Legislative Budget Comm.
Legislative Council
AZ Library, Archives
Senate
Dpt. of Liquor Licenses
Board of Medical Student Loans
Mine Inspector
Dpt. of Mines & Mineral Resources
Nav. Streams & Adjudication
State Board of Nursing
Board of Osteopathic Examiners
Arizona State Parks Board
Personnel Board
Arizona State Board of Pharmacy
Comm. for Postsecondary Ed.
State Board of Psychologist Exam.
Department of Public Safety
Arizona Department of Racing
Radiation Regulatory Agency
Arizona Rangers Pension
Real Estate Department
Department of Revenue
School Facilities Board
Secretary of State
Tax Appeals Board
Office of Tourism
Department of Transportation
State Treasurer
Universities
Board of Regents
Arizona State University
Northern Arizona University
University of Arizona
Department of Veteran Services
Veterinary Examining Board
Department of Water Resources
Dept. of Weights & Measures
Other
Grand Total

Sept 09
1,787.7
2,026.3
402.7
738.6
784.1
1,591.5
165.3
185.6
191.5
93.8
6.1
100.0
(.3)
200.0
332.3
300.0
2,717.7
279.5
55.3
1.2
178.8
741.3
106.9
203.8
40.7
200.0
3.1
198.7
4,153.5
63,760.6
22,841.4
56,594.2
399.9
1,043.9
100.4
39.2
$480,680.2

Change from
Sept 08

Year-to-Date

YTD Change
from FY ‘09

916.8
(36.5)
6.6
(681.2)
(325.6)
180.4
(556.6)
(78.0)
(128.5)
34.8
(39.6)
(11.8)
100.0
(21,582.2)
(47.0)
200.0
(171.7)
300.0
(6,015.7)
(89.1)
(214.6)
(392.9)
(10,928.9)
(79,781.5)
(426.8)
13.8
200.0
(19.7)
(27.6)

5,015.2
4,116.4
786.8
1,685.5
1,742.6
3,062.6
537.8
383.1
457.8
170.5
54.2
100.0
21,900.3
200.0
582.4
300.0
42,925.6
2,709.6
413.6
3.5
685.2
10,494.1
81,925.6
684.1
83.5
200.0
10.6
1,087.0

484.7
12.1
(59.2)
(3,172.0)
(906.0)
205.1
(1,180.3)
119.5
(77.6)
24.5
(20.0)
(42.8)
100.0
(1,058.0)
(117.8)
200.0
(1,246.5)
300.0
23,527.0
1,969.6
(298.9)
(508.1)
(13,868.0)
(98,004.0)
(423.1)
(23.4)
200.0
(13.2)
(276.0)

3,631.2
24,930.1
9,875.0
17,626.8
(698.2)
735.0
(176.5)
(217.7)
$(378,846.9)

4,837.1
141,381.6
48,784.9
126,313.1
1,835.7
250.0
3,962.9
309.2
14,835.1
$2,812,921.6

(3,719.1)
24,950.2
9,887.1
16,537.4
(566.7)
250.0
484.5
(217.1)
11,535.9
$(252,463.8)