JLBC - Monthly Fiscal Highlights

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

Summary
The initial collection of the temporary 1 cent
sales tax helped increase July General Fund
revenue collections by 8.6% over the prior
year. Without the tax increase, however,
base revenues would have actually fallen
(4.5)% compared to the prior year.
July is the second consecutive month of
revenue declines followed by positive growth
in April and May. These latest collections may
be evidence that the economic recovery
may be slower than anticipated.

www.azleg.gov/jlbc.htm

“July General
Fund revenue
collections of
$622.1 million
were $(26.3)
million below
forecast.”

August 2010

July General Fund revenue collections of
$622.1 million were $(26.3) million below
forecast. Of the $622.1 million, the 1 cent
sales tax generated $64.6 million, which was
$(7.5) million below forecast.
In comparison, July 2010 General Fund
spending was $1.5 billion, or $(254) million
below July 2009. Given shifts in rollover and
payment deferral schedules, however, it is
difficult to draw any conclusions from the
decline in spending.
With $622.1 million in revenues and $1.5 billion
in spending, the state's operating fund
balance fell dramatically in July. After ending
June with more than $1.5 billion in the
operating fund, the balance fell to $800
million by the beginning of August. The state

pays its bills out of the operating fund
balance, which consists of General Fund
monies and certain dedicated funds.
As measured by the operating fund, the state
is in a better financial position than a year
ago. During August, the balance has not
fallen below $600 million. Last year, the
operating fund was negative and the state
had to borrow as much as $397 million on a
single day.
Budget Update
In early August, the federal government
enacted legislation providing additional
federal assistance to Arizona. In total, it
would provide an estimated $448 million of
additional funding to Arizona in FY 2011.
Of this amount, $236 million is due to an
extension of the enhanced Medicaid match
rate, which was originally scheduled to expire
January 1, 2011. The remaining $212 million
comes from the creation of the “Education
Jobs Fund”, which would provide additional
funds to Arizona to retain or create education
jobs.
In the July Monthly Fiscal Highlights (MFH),
JLBC estimated the FY 2011 shortfall to be
between $0 and $(1.0) billion. Because of the
recently enacted federal assistance

Table of Contents
Summary

• ASU – Building Acquisition Bond Project ......... 8

• Budget Update……………..… ...........................1

• ASU – Building Renewal Bond Projects............ 8

July Revenues..........................................................2
Economic Indicators ..............................................4
JLBC Meeting
• Attorney General – Settlement Monies...........8
• DHS – Capitation Rates ......................................8
This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
August 27, 2010.

JCCR Meeting
• ADOA – Building Renewal .................................8
• ADOA – Capitol Mall Fire Alarm Project..........8
• ADOA – Lewis Prison Water Project..................8
• ADOA – Quarterly Rent Payments ...................8

• Game & Fish – Flagstaff Shooting Range ....... 9

Summary of Recent Agency Reports
• ADOA/ABOR – Private Leases .......................... 9
• DOC – Expenditures ........................................... 9
• DOC – Transition Release Program.................. 9
• DPS - GIITEM ....................................................... 10
• DPS – Photo Enforcement ............................... 10
• ADOT – STAN Annual Report........................... 10

July Spending........................................................ 11

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Summary

(Continued)

Table 1

July
Year-to-Date

General Fund Revenues ($ in Millions)
FY 2011
Difference From
Difference
Collections
Budget Forecast
From FY 2010
$ 622.1
$ (26.3)
$ 49.1
$ 622.1
$ (26.3)
$ 49.1

legislation, the upper-end of the FY 2011
shortfall is now estimated at approximately
$(700) million.

“Excluding the
temporary 1¢
increase, base
[sales tax]
collections were
down (3.1)%
compared to last
July.”

See the JLBC Staff Federal Assistance Update
and the Budget Status Slideshow for
additional information.

July Revenues
Sales Tax collections were $346.3 million in July,
consisting of $281.7 million in base revenues
and $64.6 million from the temporary 1¢
increase. July collections reflect June sales,
which was the first month of the 1¢ increase.
Excluding the temporary 1¢ increase, base
collections were down (3.1)% compared to last
July. Including the 1¢ increase, collections
were $(24.9) million below the forecast.
Table 2 displays the July growth rates for the
largest categories
Table 2

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Utilities
Use
Restaurant & Bar

July
(0.7)%
(27.2)%
(9.0)%
17.7%
0.5%

YTD
(0.7)%
(27.2)%
(9.0)%
17.7%
0.5%

Retail and contracting together account for
about 60% of all sales tax revenues.
Contracting continued its poor performance,
with a (27.2)% decrease compared to July of
last year, while the retail category fell by
(0.7)%.
The temporary 1¢ increase generated $64.6
million for July, or $(7.5) million below forecast.
Collections of the temporary tax are
expected to increase over the next several
months as the impact of exemptions to the
rate decreases. For most sales tax categories,
there is a 120-day exemption to the new rate
for any purchase under contract prior to the
effective date of the tax increase.
For the Prime Contracting category, any
contract signed prior to the effective date of

the increase is exempt from the tax increase
for the duration of the contract. In July,
about half of the contracting collections were
exempt from the new rate.
Individual Income Tax net revenues were
$237.8 million in July, or 1.3% above the prior
year. Collections were $0.5 million above the
forecast.
As indicated in Table 3 below, withholding tax
payments decreased by (1.8)% in July, a
second month of decline after 4 months of
increases. Throughout the year, it will be
difficult to interpret the withholding collections,
due to changes in the state withholding
system.
Prior to July 1, 2010, employees’ state
withholding amount was based on a
percentage of their federal withholding. As a
result, each time the federal government
changed its withholding tables, state
withholding amounts would automatically
change as well.
To prevent future one-time shifts in state
withholding receipts resulting from federal tax
legislation, the Legislature authorized the
Department of Revenue (DOR) to establish
new state withholding tables as of July 1.
Under the new table, employee state
withholding amounts are calculated as a
percentage of their gross taxable wages
(generally between 1.8% and 5.1%). DOR
designed the withholding table to be revenue
neutral.
It is still unclear how this change is affecting
state withholding revenue. A small sample of
payroll data that was analyzed for the first
pay period after July 1 suggests that the new
withholding calculation may have initially

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JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

July Revenues

(Continued)

resulted in larger collections than under the old system.
However, anecdotal information indicates that a
number of employees promptly adjusted their
withholding rates in response to the smaller take-home
pay under the new DOR table. Thus, comparisons to
withholding collections before July 2010 should be
interpreted with caution.

Corporate Income Tax net collections were $23.4 million
in July. This amount was (30.3)% below July 2009, but $1.1
million above the forecast for the month.
The Lottery Commission reports that July ticket sales
were $42.5 million, which is 11.6% above sales last year.
No transfers of lottery proceeds were made to the
General Fund in the month of July.

Table 3

Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated +
Final Payments
Refunds

July
(1.8)%
(7.3)%

YTD
(1.8)%
(7.3)%

(26.9)%

(26.9)%

Highway User Revenue Fund (HURF) revenues consist of
gasoline and use fuel (diesel) tax, motor carrier fees
(commercial carriers), vehicle license tax and
registration fees, and various other fees.
HURF collections of $100.3 million in July were Up $2.6
million or 2.6% compared to July of last year.

Table 4

General Fund Revenue:
Change from Previous Year and Enacted Budget Forecast
July 2010
Current Month

FY 2011 YTD (One Months)

Change From
July 2009

Actual
July 2010

Percent

Amount

Change from
Forecast
Percent

Amount

July 2009

Actual
July 2010

Forecast
Percent

Amount

Percent

Amount

Taxes
Sales and Use w/o 1¢ *
Income - Individual
- Corporate
Property
Luxury - Tobacco
- Liquor
Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

$281,714,731

($8,913,903)

237,766,843

2,987,559

1.3

23,446,669

(10,194,042)

(30.3)

198,694

(3.1) %

($17,337,889)

$281,714,731

($8,913,903)

475,446

(5.8) %
0.2

237,766,843

2,987,559

1.3

1,072,269

4.8

23,446,669

(10,194,042)

(30.3)

29,492

17.4

38,694

24.2

198,694

2,568,000

339,887

15.3

0

0.0

2,500,000

(201,953)

(7.5)

0

0.0

40,998,702

(881,486)

(2.1)

(0.0)

0

0

52,019

(7,862)

$589,245,657

($16,842,309)

-(13.1)
(2.8) %

(1,298)
0
(481)
($15,753,260)

($17,337,889)
475,446

(5.8) %
0.2

1,072,269

4.8

29,492

17.4

38,694

24.2

2,568,000

339,887

15.3

0

0.0

2,500,000

(201,953)

(7.5)

0

40,998,702

(881,486)

(2.1)

--

0

(0.9)

52,019

(7,862)

$589,245,657

($16,842,309)

(2.6) %

(3.1) %

0

-(13.1)
(2.8) %

(1,298)
0
(481)
($15,753,260)

0.0
(0.0)
-(0.9)
(2.6) %

Other Revenue
Lottery
License, Fees and Permits
Interest

0
1,981,635

0
381,635

0
(526,969)

0
381,635

--

914

(16.0)

1,175,648

(570,575)

(32.7)

(224,352)

(16.0)

Other Miscellaneous

1,979,943

(1,686,768)

(46.0)

(3,320,057)

(62.6)

1,979,943

(1,686,768)

(46.0)

(3,320,057)

(62.6)

--

0

Sub-Total Other Revenue
TOTAL BASE REVENUE

0

(77.1)

185,743

2,585,743

(8,729,696)

7,723,884

(11,512,638)

(59.8) %

(2,976,116)

$596,969,541

($28,354,947)

(4.5) %

($18,729,376)

7.7

0

--

914

-23.9

(224,352)

--

1,369

-(21.0)

(32.7)

Transfers and Reimbursements

914

0
1,981,635

(570,575)
0

--

-23.9

1,175,648
0

1,369

-(21.0)

Sales and Services
Disproportionate Share

914

0
(526,969)

--

0

(77.1)

185,743

--

--

2,585,743

(8,729,696)

7.7

(27.8) %

7,723,884

(11,512,638)

(59.8) %

(2,976,116)

(27.8) %

(3.0) %

$596,969,541

($28,354,947)

(4.5) %

($18,729,376)

(3.0) %

Other Adjustments
Urban Revenue Sharing
1¢ TPT Increase*
Sub-Total Other Adjustments
TOTAL GENERAL FUND REVENUE

(39,500,543)

12,886,509

--

(1,643)

0.0

(39,500,543)

12,886,509

--

(1,643)

64,609,954

64,609,954

--

(7,548,334)

(10.5)

64,609,954

64,609,954

--

(7,548,334)

(10.5)

0.0

25,109,411

77,496,463

-- %

(7,549,977)

(23.1) %

25,109,411

77,496,463

-- %

(7,549,977)

(23.1) %

$622,078,952

$49,141,516

8.6 %

($26,279,353)

(4.1) %

$622,078,952

$49,141,516

8.6 %

($26,279,353)

(4.1) %

$100,345,000

$2,582,000

2.6 %

1.6 %

$100,345,429

$2,582,285

2.6 %

Non-General Funds
Highway User Revenue Fund

$1,621,000

$1,621,429

1.6 %

__________
* Sales and Use line excludes revenue from the temporary 1¢ increased approved by the voter in May 2010. That revenue is shown under One-Time Revenues. Total collections including the 1¢ increase were $346.3
million. This amount is $55.7 million, or 19.2%, above July 2009 and $(24.9) million, or (6.7)%, below forecast.

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Economic Indicators
According to the U.S. Department of
Commerce Bureau of Economic Analysis (BEA),
the second estimate of the U.S. Real Gross
Domestic Product (GDP) for the second quarter
of 2010 was revised down from 2.4% to 1.6%.
The downward revisions came, as expected,
in foreign trade and manufacturing
inventories, but there were partial offsets from
higher energy consumption and inventories.

“Private sector
employment
experienced the
first year-overyear increase
(2,100 jobs or
0.1%) since
November 2007.”

The Conference Board’s U.S. Index of Leading
Economic Indicators rose 0.1% in July, reversing
a portion of June’s (0.3)% loss. An expanding
workweek, greater delivery times, and a
favorable interest rate spread outweighed the
negative contributions from fewer building
permits and declining consumer expectations.
The forward-looking measure has only
retreated once in the last 16 months,
suggesting that the turnaround that began in
April 2009 is not yet over.
Consumer prices, as measured by the U.S.
Consumer Price Index (CPI), rose by 0.3% in
July, following 3 months of price declines. The
increase in consumer prices was primarily due
to higher energy prices. The core CPI, which
excludes food and energy prices, edged up
0.1% in July and is now 1.0% above last year’s
level. The absence of inflationary pressures is
primarily the result of significant excess
capacity in the economy.
The Semiconductor Industry Association (SIA)
reported that Semiconductor Billings (3-month
moving average) in the U.S. reached $4.58
billion in June, the best performance in more
than 9 years. This was a 4.3% improvement
from the prior month and a 55.5% increase
over June 2009 levels. SIA expects the
exceptionally robust growth rate to start
moderating in the second half of 2010.
ARIZONA
The Federal Reserve Bank of Philadelphia’s
coincident index gauges current economic
activity in each state. The index combines 4
indicators: employment, average hours
worked in manufacturing, unemployment rate,
and inflation-adjusted wages.

The state coincident index for Arizona rose by
0.1% in July, following June’s (0.2)% decline.
Arizona was one of 43 states nationwide for
which the measure improved last month. As
seen in the graph below, the Arizona
coincident index has remained essentially
unchanged since May following 5 months of
consecutive gains. This suggests that the
recovery seen earlier in the year has
weakened. See Tracking Arizona’s Recovery,
for additional historical information.
Arizona Coincident Economic Activity Index
230

220
(July 1992 = 100)

NATIONAL

210

200

190
Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Employment
According to latest release of employment
data by Arizona Department of Commerce,
the state had (16,000) or (0.3)% fewer nonfarm
payroll employees in July than in the previous
month. By way of comparison, the average
job loss for July in the 10-year period preceding
the start of the recession was (1.2)%.
Private sector employment experienced the
first year-over-year increase (2,100 jobs or 0.1%)
since November 2007. While this is good news,
it is also worth noting that private sector
employment has shrunk by (13.0)% since this
time. The government sector continued to
shed jobs, however, and employed (8,900) or
(2.3)% fewer employees in July than in the prior
year.
July 2010 total nonfarm employment was
down by (0.3)%, or (6,800) jobs compared to
July 2009. This was the 30th straight month with
year-over-year job losses in the state, the
longest streak in recorded history (data
available from 1939). Year-over-year job losses
peaked in June 2009 when there were
reportedly (217,200), or (8.4)%, fewer people
on the payrolls than in the previous year.
Since the onset of the recession in December
2007, the state has lost (364,500) jobs, or (13.4)%
of its workforce. This figure overstates the

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Economic Indicators
impact of the recession, however, since the
state’s employment level tends to be lower
during the summer months. Seasonally
adjusted employment figures released by the
federal Bureau of Labor Statistics shows a net
job loss of (10.2)% for this period. See Tracking
Arizona’s Recovery, for additional historical
information.
“The number of
new Maricopa
County
foreclosure
notices – the
initial step in the
foreclosure
process – spiked
31.8% in July to
8,138."

The average weekly hours of production
workers in manufacturing industries is a leading
indicator since “factory hours” tend to lead
the business cycle as employers usually adjust
work hours before increasing or decreasing
the size of their workforce. According to the
Arizona Department of Commerce,
preliminary data indicates that the average
work week in July was 39.7 hours, a 0.8%
improvement over the prior month. This was a
sharp reversal from the previous month’s
decline of (1.5)%. Due to seasonal factors,
however, this indicator can vary considerably
from month to month. For this reason, it is
more useful to focus on the trend over the last
6 to 12 months, which shows that the measure
has been gradually improving.
The state’s unemployment rate remained
unchanged at 9.6% in July, for the third month
in a row. The jobless rate is essentially at the
same level as one year ago. The unemployment rate for the nation as a whole was 9.5%.
The Department of Commerce reported that
30,859 initial claims for unemployment
insurance were filed in July. At this level, there
were (140), or (0.5)%, fewer claims than in the
prior month. July marked the 9th consecutive
month with year-over-year declines in firsttime claims. Claims peaked in April 2009
when more than 41,000 individuals filed for
initial jobless benefits. See Tracking Arizona’s
Recovery, for additional historical information.
Housing
The number of new Maricopa County
foreclosure notices – the initial step in the
foreclosure process – spiked 31.8% in July to
8,138. This increase follows 3 months of
declines in the measure. The number of
pending foreclosures – inventory at risk of
being sold by the trustee at some point in the
future – declined for the 5th straight month to
42,152. Pending foreclosures are currently
(10.6)% below last year’s levels and are
(18.1)% below the December 2009 peak of
51,466. See Tracking Arizona’s Recovery, for
additional historical information.

(Continued)

In Metropolitan Phoenix, the single-family
median resale home price totaled $144,000
with a total of 8,945 existing home sales.
Relative to the prior month, these measures
were down (2.4)% and (16.6)%, respectively.
Year-over-year, the median resale price rose
2.9% while the total number of units bought
and sold declined (22.2)%. In the single family
segment, the sale of foreclosed homes
accounted for 43.2% of total transactions.
Over the past 12 months, foreclosures ranged
from 32.4% (September 2009) to 45.3%
(January 2010) of total sales.
Based on MLS data released in July, the
month’s supply of housing indicator increased
to 7.8 months in July, 1.8 months above June
levels. Relative to last July, the measure is up
2.3 months. The increase appears to be
consistent with what is being reported
nationally and is due to a relatively large
decrease in the number of sales, as opposed
to an increase in the number of listings.
Between May and July 2010, an average of
931 single-family residential building permits
were authorized per month based on data
released by the U.S. Census Bureau. In
percentage terms, single-family permitting
activity is down (37.3)% from a year ago.
While Multi-family permits are up on a monthto-month basis, they are down (38.7)% from
last year.
State Agency Data
Participation in income driven programs has
either moderated or declined somewhat in
the last few months, as evidenced by the
data presented below.
In August, AHCCCS caseloads equaled 1.35
million members, a 0.01% increase over the
prior month. AHCCCS caseloads are currently
3.9% above August 2009 levels. Total
enrollment has stayed essentially unchanged
since December 2009. The FY 2011 budget
funded a projected August 2010 caseload
growth of 6.5% above August 2009 levels, for a
total of 1.39 million members.
There were 68,750 TANF recipients in the
state in June, a monthly caseload decrease
of (5.1)%. Year-over-year, the number of
TANF recipients has declined by (17.5)%.
This decline is the result of DES instituting a
more aggressive diversion program. The
diversion program provides a lump sum
payment to those at risk of needing cash
assistance in order to divert them from the

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Economic Indicators
TANF program. The FY 2011 budget assumed
that the June 2010 TANF caseload would be
84,287.

“Compared to
the same
month last
year, food
stamp
participation
was up by
16.9%.”

The Supplemental Nutrition Assistance
Program (SNAP), formerly known as Food
Stamps, provides assistance to low-income
households to purchase food. In June, there
were a total 1.05 million food stamp
recipients in the state, an increase of 0.7%
over the prior month. Compared to the
same month last year, food stamp
participation was up by 16.9%. The number
of food stamp recipients began increasing
steadily in July 2007, after several years in the
550,000 to 575,000 range.
The 3-month average count of the Department
of Correction’s (ADC) inmate population
totaled 40,512 inmates between May and July
2010 - an average decline of (62) inmates per
month during the period. Year-over-year, the
3-month average count increased by 72
inmates.
Adult and juvenile probation caseload in May
and June, respectively, totaled 27,771
individuals in Maricopa County – (198) fewer
probationers than the prior month and 576
probationers more than a year ago. The nonMaricopa probation caseload was 19,939
probationers during the period, (29) less than
the prior month and (208) less than a year
ago. With the exception of Maricopa
County, who assumes all costs related to
probation programs, the state and counties
share the costs of probation programs.

(Continued)

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Economic Indicators

(Continued)

Table 5

ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate
- Initial Unemployment Insurance Claims
- Unemployment Insurance Claimants
- 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
- Foreclosure Activity, Maricopa County
Foreclosure Notices (Notice of Trustee’s Sales Recorded)
Pending Foreclosures (Active Notices)
Greater Phoenix S&P/Case-Shiller Home Price Index
(Jan. 2000 = 100)
- Arizona 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

July
July
June
July
July
July
July
May-Jul
May-Jul

9.6%
30,859
87,787
2.35 million
149,400
114,200
39.7
$31.5 million
$133.8 million

0.0%
(0.5)%
4.4%
(0.7)%
(0.5)%
(0.3)%
0.8%
2.1%
3.7%

0.2%
(20.5)%
(23.4)%
(0.3)%
(1.4)%
(10.9)%
2.3%
(24.8)%
(1.5)%

May-Jul
May-Jul

931
73

(7.1)%
6.3%

(37.3)%
(38.7)%

July
July

8,945
1,470

(16.6)%
(14.8)%

(22.2)%
(0.3)%

July
July

$144,000
$94,500

(2.4)%
(5.4)%

2.9%
(12.1)%

July
July
May

8,138
42,152
111.0

31.9%
(0.4)%
0.9%

(11.2)%
(10.6)%
7.2%

July
May
May

7.8 months
3.31 million
$6.13

3rd Quarter 2010
July
1st Quarter 2010
July 1, 2009
August
June
June
May-Jul

49.1
198.67
$220.0 billion
6.60 million
1,352,987
68,750
1,047,023
40,512

(1.0)%
0.1%
1.1%
N/A
0.0%
(5.1)%
0.7%
(62) inmates

(18.4)%
0.1%
1.0%
1.5%
3.9%
(17.5)%
16.9%
72 inmates

May/June
May/June

19,939
27,771

(29)
(198)

(208)
576

2nd Quarter 2010
(Second Estimate)
July
July
Apr-Jun
July

$13.2 trillion

1.6%

3.0%

50.4
109.8
$4.58 billion
217.6

(7.2)%
0.1%
4.3%
0.3%

6.3%
7.1%
55.5%
1.3%

1.3 months
(2.1)%
12.5%

2.3 months
3.3%
(0.5)%

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

JLBC Meeting
At its August 11, 2010 meeting, the Joint
Legislative Budget Committee considered the
following issues:
Attorney General – Review of Allocation of
Settlement Monies – The Committee gave a
favorable review of the AG’s allocation plans
for the $350,000 that the AG will receive from
2 settlements related to enforcement of
consumer protection and consumer fraud
statutes. The amounts to be deposited into
the Consumer Protection-Consumer Fraud
Revolving Fund are: $327,500 from Dey, Inc.,
a pharmaceutical company, and $100,000
from Avondale Automotive, an auto
dealership. An additional $22,500 will be paid
by Dey Inc. to compensate outside counsel.

Department of Health Services – Review of FY
2011 Behavioral Health Capitation Rates – The
Committee gave a favorable review to the
department’s proposed Children's Behavioral
Health and General Mental Health/Substance
Abuse capitation rates, but gave an
unfavorable review to the department's
proposed Seriously Mentally Ill rates.
At the budgeted caseload level, the
proposed rates would cause a $15 million
shortfall in DHS' General Fund budget.
However, Title XIX caseload growth has
begun to slow. At its current level, caseload
savings would offset approximately 50% of the
capitation rate shortfall. If this slowing trend
continues throughout the year, the entire
shortfall could be offset by caseload savings.

JCCR Meeting
At its August 10, 2010 meeting, the Joint
Committee on Capital Review considered the
following issues:
Arizona Department of Administration –
Review of FY 2011 Building Renewal Allocation
Plan – The Committee gave a favorable
review to the department’s $5.0 million
FY 2011 Building Renewal Allocation Plan with
the provision that the department report any
change in the spending plan to the JLBC
Staff, including reallocations between
projects and allocations from the
contingency plan.
Arizona Department of Administration –
Review of FY 2009 Capitol Mall Fire Alarm
Replacement Project – The Committee gave
a favorable review to the department’s
request to spend $491,000 to replace fire
alarm systems in 2 Capitol Mall office
buildings.
Arizona Department of Administration –
Review of Lewis Prison Water Project – The
Committee gave a favorable review to the
department’s request to expend the
remaining $2.2 million in lease-purchase
proceeds to construct a new water well at
the Lewis prison. The Committee favorably
reviewed and approved the $6.8 million
lease-purchase issuance at its December
2007 meeting and subsequently favorably
reviewed the use of $4.6 million of these
monies at its October 2008 meeting.

Arizona Department of Administration –
FY 2011 Quarterly Rent Payments – The
Committee recommended FY 2011 quarterly
rent payments instead of 1 annual payment
for 11 agencies to facilitate their cash flow.
Arizona State University – Review of Building
Acquisition Bond Project – The Committee
favorably reviewed the university’s request to
issue an $11.5 million revenue bond to acquire
an office building in the Centerpoint
Commercial Complex adjacent to the Tempe
campus with the provision that the university
not issue the bond unless the appraisals are at
or below the requested $11.5 million issuance,
along with the standard university financing
provisions.
The expected annual debt service payments
of $1.1 million would mainly be paid by
redirecting the current rent the university pays
for this building to bond payments.
Arizona State University – Review of Building
Renewal Bond Projects – The Committee
favorably reviewed the university’s request to
issue a $28.2 million revenue bond to fund 20
building renewal projects, along with the
standard university financing provisions.
The expected annual debt service payments
of $2.3 million will be paid from indirect cost
recovery monies (25%) and from tuition
monies (75%).

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

JCCR Meeting

(Continued)

Arizona Game and Fish Department – Review
of Remaining Flagstaff Area Shooting Range
Project – The Committee gave a favorable
review to the department’s request to
expend $607,600 in remaining funds to begin
construction of the Flagstaff Area Shooting

Range. A total of $1.8 million was
appropriated for this project of which $1.2
million was favorably reviewed by the
Committee at its March 2010 meeting to
purchase the land for the shooting range.

Summary of Recent Agency Reports
Arizona Department of Administration/Arizona
Board of Regents – Report on Private Leases –
Pursuant to A.R.S. § 41-792D, the Arizona
Department of Administration (ADOA) and
Arizona Board of Regents (ABOR) submitted
biennial reports of all approved office leases
that exceeded the Lease Cost Review
Board’s (LCRB) estimated average cost per
square foot for privately-owned office space
in FY 2009 and FY 2010. The LCRB estimated
that the average cost per square foot for
privately-owned office space would be
$20.35 in FY 2009 and $23.50 in FY 2010.
ADOA approved 9 lease contracts that
exceeded the LCRB estimated target rate in
FY 2009 and none in FY 2010. According to
ADOA, the FY 2009 actual costs exceeded
the average rate due to limited office space
in rural areas, geographic restrictions for
agency offices, and amortized tenant
improvement costs.
ABOR approved 40 lease contracts in FY 2009
that exceeded the LCRB estimated target
rates and 28 lease contracts in FY 2010.
According to ABOR, the actual costs
exceeded the target rates due to high
market rates in certain areas, specific
geographical parameters or requirements,
and unique space requirements such as
laboratories. (Leatta McLaughlin)
Arizona Department of Corrections – Report
on Expenditures – Pursuant to a footnote in
the FY 2011 General Appropriation Act, the
Arizona Department of Corrections (ADC) is
required to report on the monthly and yearto-date expenditures for the current and prior
fiscal year. The report is also to include
potential shortfalls, any estimated surpluses to
offset the shortfalls, and a plan for eliminating
the shortfall. Highlights of the report are as
follows:

•

Excluding further administrative
adjustments for health care and other
expenses, ADC expended $960.3 million
(including $50 million in Federal Funds for
correctional officer personal services. This
compares to $966.0 million expended in
FY 2009).
•
ADC estimates FY 2010 expenditures, after
all administrative adjustments to be
$972.8 million, $(11.2) million less than their
FY 2010 appropriation.
•
ADC has indicated there is a revenue
shortfall in the Corrections Fund in the
amount of $(513,200). The Corrections
Fund receives revenues from luxury taxes
on liquor and tobacco.
(Martin Lorenzo)
Department of Corrections – Report on
Transition Release Program – Pursuant to A.R.S.
§ 31-285, the State Department of Corrections
(ADC) is required to submit a quarterly report
that details the cost reductions to the
department from an inmate early release
Transition Program and the number of
participants who did not receive an early
release under the Transition Program. Statute
requires ADC to contract with a private or
nonprofit entity to provide eligible drug
offenders with transition services. The ADC
Transition Release Program began in March
2004 and allows eligible inmates in the
Transition Program to be released 3 months
earlier than the inmate's earliest release date.
In FY 2010, the department reports that 855
participants successfully completed the
Transition Program and their term of
community supervision while an additional
1,010 participants completed the Transition
Program and are continuing their term of
community supervision. A total of 45
participants failed to complete the early
transition release by violating their conditions
of supervision. In total, the program is

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Summary of Recent Agency Reports
responsible for 78,886 bed days
saved which translates to a savings
of $1,341,062.
(Martin Lorenzo)
Department of Public Safety –
Quarterly Report on GIITEM –
Pursuant to the General
Appropriation Act, the Department
of Public Safety (DPS) is required to
report quarterly on the Gang and
Immigration Intelligence Team
Enforcement Mission (GIITEM). In
FY 2010, DPS spent or encum-bered
$8.6 million of the $9.4 million
appropriation for the direct DPS
immigration staff. In terms of local
law enforcement grants, DPS had
spent $228,400 of the FY 2010 $2.6
million appropriation and all of the
remaining $4 million in non-lapsing
FY 2009 monies. The $2.4 million in
remaining FY 2010 local law
enforcement grants will be
available for use in FY 2011. (Eric
Billings)
Department of Public Safety –
Quarterly Report on Photo
Enforcement – Pursuant to a
footnote in the General
Appropriation Act, the Department
of Public Safety (DPS) is required to
report quarterly on the Photo
Enforcement program in FY 2010.
During the fourth quarter of FY 2010,
the Photo Enforcement Program
issued 70,952 Notices of Violation
(NOVs) and 80,183 citations from 40
mobile units and 36 stationary units.
Of these NOVs, 41,962 became
either civil or criminal citations. A
total of 14,926 NOVs were paid
within 40 days of issuance with an
additional 11,608 citations also
receiving payment.
Since the inception of the program
in September 2008, a total of
1,635,953 NOVs and citations have
been issued and 427,812, or 26.2%,
have been paid.
The NOVs and citations issued by
the Photo Enforcement Program
generated $12 million in revenue for

the fourth quarter of FY 2010 and
$68 million since the program’s
inception. The General Fund share
was $5.2 million in the fourth quarter
and $39.9 million since the
program’s start.
DPS ended the photo radar
program effective July 15. (Eric
Billings)
Arizona Department of
Transportation – STAN Annual Report
– Pursuant to A.R.S. § 28-7009M, the
State Transportation Board has
submitted their fourth annual report
on the Statewide Transportation
Acceleration Needs (STAN) account
activities.
The STAN account was originally
funded with $245 million from the
General Fund and $124 million from
the State Highway Fund (SHF). The
Legislature subsequently reduced
the General Fund appropriation by
$(104) million and the SHF
appropriation by $(42) million. As of
June 30, 2010, the STAN account
has also generated $33.4 million in
interest.
The Arizona Department of
Transportation (ADOT) indicates that
of the remaining $256.4 million, all
funding has already been
committed and 11 projects have
been completed or are near
completion.
ADOT reports that as a result of the
FY 2009 transfer of $(104) million
from the STAN account to the
General Fund, STAN funding for 3
projects in Maricopa County was
eliminated. Of these 3 projects, 2 of
them have now been selected for
funding with American
Reinvestment and Recovery Act
funds and are currently under
construction. The remaining project
is near the Williams Gateway
Airport. The project is now funded
by the city of Mesa through the
issuance of Highway Project
Advancement Notes along with $10
million in restored STAN funding.
(Juan Beltran)

(Continued)

11

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

July Spending
FY 2010 Spending

•

Spending by AHCCCS, DHS and DES in
July is large compared to the agencies’
overall annual appropriation due to the
draw down of federal Medicaid
matching funds. At the beginning of
each quarter, these Medicaid agencies
transfer significant amounts of General
Fund monies in order to draw down
matching federal funds for the entire
quarter.

•

University spending was $55.1 million in
July, or $(32.0) million lower than the prior
year. The decreased expenditure
amount reflects the payment deferral
from FY 2010 being paid later than a year
ago.

July 2010 spending of $1.5 billion was $(254)
million lower than July 2009 (See Table 6).

•

“July 2010
spending of $1.5
billion was ($254)

In July, the Arizona Department of
Education spending was $(299.0) million
lower than the prior year. July 2010
expenditures were lower than the prior
year due to rollover payments being
made to school districts later in the year.
Current year spending includes 1 regular
state aid payment and 1 rollover
payment, compared to 1 regular
payment and 2 rollover payments in the
prior year.

million lower
than July 2009.”
Table 6

General Fund Spending ($ in Millions)

Agency

July 11

AHCCCS
Corrections
Economic Security
Education
Health Services
Public Safety
School Facilities Board
Universities
Other
Total

202.7
56.5
326.1
622.4
101.8
20.5
0.8
55.1
(646.3)
1,505.0

Change
from July 10
55.3
(7.0)
15.6
(299.0)
(21.1)
0.3
0.6
(32.0)
(519.4)
(254.4)

Year to
Date
202.7
56.5
326.1
622.4
101.8
20.5
0.8
55.1
(646.3)
1,505.0

YTD Change
from FY 10
55.3
(7.0)
15.6
(299.0)
(21.1)
0.3
0.6
(32.0)
(519.4)
(254.4)

12

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Table 7

Agency
Department of Administration
Office of Administrative Hearings
Department of Agriculture
AHCCCS
Arizona Commission on the Arts
Attorney General
AZ Capital Post Conviction Public
Defender
State Board of Charter Schools
Department of Commerce
Community Colleges
Corporation 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
Office of Equal Opportunity
State Board of Equalization
Board of Executive Clemency
Dept. of Financial Institutions
Department of Fire, Life, Bldg Safety
Office of the State Forrester
Arizona Geological Survey
Government Information Tech.
Governor
Gov. - OSPB
Department of Health Services
Arizona Historical Society
Prescott Historical Society of AZ
Independent Redistricting Comm.
Department of Insurance
Judiciary
Supreme Court
Superior Court
Court of Appeals
Dept. of Juvenile Corrections
State Land Department
Law Enforcement Merit System
Legislature
Auditor General
House of Representatives
Joint Legislative Budget Comm.

General Fund Spending
($ in Thousands)
Change from
July 10
July 09
1,886.5
505.0
231.6
134.8
2,765.4
2,036.4
202,721.5
55,312.6
51.4
(22.2)
1,298.1
(256.2)
72.6
(5.5)

Year-to-Date
1,886.5
231.6
2,765.4
202,721.5
51.4
1,298.1
72.6

YTD Change from
FY 10
505.0
134.8
2,036.4
55,312.6
(22.2)
(256.2)
(5.5)

129.8
181.6
33,106.6
46.1
56,451.7
2,056.5
326,084.5
622,438.4
1,018.4
0.1
16.7
49.2
53.1
453.8
127.0
323.0
48.8
74.6
560.8
192.1
101,837.5
286.5
51.8
1,687.1

81.6
38.8
33.1
(6,987.9)
2.5
(418.7)
15,626.5
(299,028.8)
13.3
(529.2)
(3.0)
(0.2)
(44.9)
134.1
(88.5)
323.0
0.9
18.8
(61.1)
(9.0)
(21,070.0)
35.1
(17.5)
(24.6)
1,216.2

129.8
181.6
33,106.6
46.1
56,451.7
2,056.5
326,084.5
622,438.4
1,018.4
0.1
16.7
49.2
53.1
453.8
127.0
323.0
48.8
74.6
560.8
192.1
101,837.5
286.5
51.8
1,687.1

81.6
38.8
33.1
(6,987.9)
2.5
(418.7)
15,626.5
(299,028.8)
13.3
(529.2)
(3.0)
(0.2)
(44.9)
134.1
(88.5)
323.0
0.9
18.8
(61.1)
(9.0)
(21,070.0)
35.1
(17.5)
(24.6)
1,216.2

1,434.50
14,903.60
2,833.8
14,764.9
626,2
14.9

(153.70)
(1,433.20)
1,460.0
8,281.2
(1,940.7)
5.6

1,434.50
14,903.60
2,833.8
14,764.9
626,2
14.9

(153.70)
(1,433.20)
1,460.0
8,281.2
(1,940.7)
5.6

3,826.5
1,106.9
198.3

2,212.9
(209.9)
(34.0)

3,826.5
1,106.9
198.3

2,212.9
(209.9)
(34.0)

13

JLBC – MONTHLY FISCAL HIGHLIGHTS – AUGUST 2010

Agency
Legislative Council
AZ Library and Archives
Senate
Dpt. of Liquor Licenses
Mine Inspector
Dpt. of Mines & Mineral Resources
Nav. Streams & Adjudication
Arizona State Parks Board
Personnel Board
Pioneers’ Home
Comm. for Postsecondary Ed.
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
Department of Transportation
State Treasurer
Universities
Board of Regents
Arizona State University
Northern Arizona University
University of Arizona
Department of Veteran Services
Department of Water Resources
Dept. of Weights & Measures
Other
Grand Total

July 10
1,091.2
30.5
1,956.7
180.3
37.4
8.1
20,000.0
130.6
20,466.1
447.5
389.5
1.2
504.3
4,740.8
766.2
859.0
67.0
8.7
414.7

Change from
July 09
526.3
(543.6)
1,026.0
(214.0)
88.5
(8.8)
0.2
19,999.5
(17.8)
130.6
(41.9)
31.9
254.1
270.9
0.0
242.4
83.4
552.9
579.7
43.4
6.1
143.3

Year-to-Date
1,091.2
30.5
1,956.7
180.3
37.4
8.1
20,000.0
130.6
20,466.1
447.5
389.5
1.2
504.3
4,740.8
766.2
859.0
67.0
8.7
414.7

YTD Change from
FY 10
526.3
(543.6)
1,026.0
(214.0)
88.5
(8.8)
0.2
19,999.5
(17.8)
130.6
(41.9)
31.9
254.1
270.9
0.0
242.4
83.4
552.9
579.7
43.4
6.1
143.3

175.9
24,194.9
8,551.9
22,135.0
1,223.6
789.8
80.2
219.4
1,504,981.1

(286.5)
(14,615.6)
(4,419.8)
(12,724.4)
368.9
(773.7)
(40.0)
-317.6
(254,484.8)

175.9
24,194.9
8,551.9
22,135.0
1,223.6
789.8
80.2
219.4
1,504,981.1

(286.5)
(14,615.6)
(4,419.8)
(12,724.4)
368.9
(773.7)
(40.0)
-317.6
(254,484.8)