JLBC - Monthly Fiscal Highlights

February 2014

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

January General Fund revenue collections
totaled $819.1 million. Base revenues, which
exclude one-time adjustments, were 0.1%
above January 2013. The year-over-year
change excludes the temporary 1-cent sales
tax which expired at the end of May 2013.
The January forecast loss occurred in each of
the state’s 3 main revenue categories (Sales,
Individual Income, and Corporate Income
Taxes). Each major category ended up
approximately $(5) million below forecast.

www.azleg.gov/jlbc.htm

“Overall January
General Fund
collections were
$(18.5) million
below the
Baseline
forecast. Yearto-date,
revenues are
2.7% higher than

Beginning with the February report, the Monthly
Fiscal Highlights compares actual revenue
collections to the Baseline consensus forecast
published last month. The Baseline forecast is
based on estimates presented at the January
Finance Advisory Committee meeting.
Overall January General Fund collections were
$(18.5) million below the Baseline forecast.
Year-to-date, revenues are 2.7% higher than
last year.
In comparison to revenue of $819.1 million,
January 2013 spending was $613.7 million
which is a decrease of $(99.1) million from the
prior year.
Fiscal year-to-date, General Fund revenues of
$5.08 billion have been offset by $6.08 billion of
expenditures.
The state’s fiscal health can also be measured
by the operating fund balance. The state pays
its bills out of the operating fund balance,

last year.”

State Appropriations Limit Report
JLBC Staff is required to annually report by
February 15 on how state spending compares
to the constitutional appropriations limit. The
Arizona Constitution limits the appropriation of
certain state revenues to no more than 7.41% of
Arizona personal income. Total FY 2014 state
appropriations (both General and Other Funds)
are $14.55 billion, or 5.77% of personal income.
Under the JLBC Baseline, projected FY 2015
spending is $14.63 billion, which would be 5.54%
of personal income.
Truth in Taxation (TNT Report
JLBC Staff recently reported the new Truth in
Taxation (TNT) rates for FY 2015, as required by
A.R.S. § 41-1276. Due to the growth in values for
existing properties being significantly slower
than expected, the JLBC Staff now estimates
that the TNT decrease of the Qualifying Tax Rate
(QTR) and State Equalization Tax Rate (SETR) will
be smaller than assumed in the FY 2015 Baseline.
The purpose of TNT is to offset the annual
change in the value of existing property
statewide with a proportional QTR and SETR
changes.
Because the slower than expected property
value growth is offset by higher than expected
TNT rates this change is projected to have a
minimal impact on the state budget.

Table of Contents
Summary
 State Appropriations Limit Report.....................1

This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
February 20, 2014.

which consists of the General Fund and certain
dedicated funds. The operating balance is at
$2.3 billion as of mid-February 2014. In addition,
the state’s Budget Stabilization Fund has a
balance of $453.8 million.

 AHCCCS – KidsCare II Distributions.................. 8
 AHCCCS – Safety Net Care Pool Program ... 8

 Truth in Taxation (TNT) Report ............................1

 DHS – Medical and Dental Program ............... 8

January Revenues ..................................................2

 DHS – Report on Arnold v. Sarn ........................ 9

Economic Indicators ..............................................4

 DPS – Quarterly Report on the GIITEM Fund .. 9

Summary of Recent Agency Reports

 SOS - Election Systems Improvement Fund .... 9

 ADOA/Treasurer – Report on GF Balance ......7
 ADOA – Working Capital Surplus Report .........7
 AHCCCS – Health Insurance Exchange ..........7

January Spending ................................................ 10
Tracking Arizona’s Recovery............. Appendix A

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

January Revenues
Table 1

General Fund Revenues ($ in Millions)

January
Year-to-Date

FY 2014
Collections
$ 819.1
$ 5,076.7

Sales Tax collections of $367.6 million were 2.7% above
January 2013 and $(4.8) million below the forecast for the
month. The year-over-year change amounts exclude the
temporary 1-cent sales tax which expired at the end of
May 2013.
For the first 7 months of the fiscal year, sales tax collections
are 6.0% above the prior year and are $(4.8) million below
forecast.
January sales tax collections reflect a $40 million technical
adjustment made by the Department of Revenue, which
moved a portion of use tax collections from an extended
period of time into the retail category for January. This
adjustment artificially reduced January collections, since
the state retains all of the use tax category, but only a
portion of the retail category. Before this adjustment,
January sales tax collections would have increased 5.6%
over the prior year, rather than the 2.7% noted above.
Table 2 displays the January growth rates for the largest
sales tax categories.
Retail and contracting together account for about 60%
of all sales tax revenues. January retail, which reflects
December sales, increased by 16.9%. Year-to-date, retail
sales are up almost 10%.
As noted above, however, the January technical
adjustment artificially increased the retail category. Prior
to the adjustment, the retail category would have grown
by only 2.4%, with a year-to-date increase of 7.2%
Contracting collections have generally been much more
volatile than retail. However, contracting has shown
double digit increases every month during the current
fiscal year.
Table 2

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Use
Restaurant & Bar

January
16.9%
13.4%
N/A
0.3%

YTD
9.9%
15.7%
(15.3)%
3.3%

Individual Income Tax net revenues were $434.3 million in
January, which was (1.7)% below the prior year.
Collections were $(5.3) million below the forecast for the
month. Year-to-date, revenue has grown 2.4% over the
prior year.

Difference From
Budget Forecast
$ (18.5)
$ (18.5)

Difference
From FY 2013
$ (94.3)
$ (332.7)

As indicated in Table 3, withholding increased by 4.3% for
the month. The January increase brings withholding tax
collections for the fiscal year to 2.1% over the prior year.
This amount is $(9.3) million below the Baseline forecast.
January estimated and final payments were (17.8)% below
last year. Year-to-date, payments are up 4.1% compared
to the prior year, and are $(11.8) million below the Baseline
forecast.
January refunds were (58.7)% below last year, and were
$2.5 million below forecast. Year-to-date, refunds are 3.4%
greater than the prior year.
Table 3
Individual Income Tax Growth Rates
Compared to Prior Year
Withholding
Estimated +
Final Payments
Refunds

January
4.3%
(17.8)%
(58.7)%

YTD
2.1%
4.1%
3.4%

Corporate Income Tax net collections were $16.3 million in
January, which is $(4.5) million less than January of the prior
year. Year-to-date, collections are down (15.3)% compared
to the prior year, and are $(5.5) million below the Baseline
forecast.
January Corporate Income Tax collections include a $(9.5)
million reduction due to a technical correction made by the
Department of Revenue. Luxury tax collections were
incorrectly coded as Corporate Income Tax revenue in a
previous month, and the correcting adjustment was made
in January.
The Lottery Commission reports that January ticket sales
were $60.1 million, which is $4.7 million, or 8.5%, above sales
in the prior year. Year-to-date ticket sales are $409.6
million, which is 7.9% above last year’s sales.
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 $107.2
million in January were up $6.9 million, or 6.9%, compared
to January of last year. Year-to-date revenues are 3.1%
above collections in the prior year, and are $14.9 million
above the Baseline forecast.

3
Table 4

General Fund Revenue:
Change from Previous Year and January Baseline Forecast
January 2014
Current Month

FY 2014 YTD (Seven Months)

Change From
Actual

January 2013

January 2014

Amount

Change from
Baseline Forecast

Percent

Amount

Actual

Percent

January 2013

January 2014

Amount

Baseline Forecast

Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate
Property
Luxury - Tobacco
- Liquor
Insurance Premium
Estate
Other Taxes
Sub-Total Taxes

$367,609,390

$9,548,066

434,280,367

(7,333,476)

(1.7)

2.7 %

($4,774,387)
(5,303,333)

16,281,881

(4,544,837)

(21.8)

(5,518,701)

(1.3) %

$2,353,032,347

$133,867,859

(1.2)

2,353,924,581

55,181,262

2.4

(0.2) %

(5,303,333)

(0.2)

(5,518,702)

(2.0)

(25.3)

267,923,432

325,904

55.4

613,717

204.6

10,657,146

2,459,051

30.0

613,717

2,677,256

1,218,308

83.5

1,277,256

91.2

15,585,980

1,024,205

7.0

1,277,257

8.9

4,479,211

2,239,786

100.0

1,979,211

79.2

19,892,204

1,800,096

9.9

1,979,211

11.0

22,108,090

4,754,751

27.4

(2,891,910)

(11.6)

153,387,476

4,548,623

3.1

(2,891,910)

(1.9)

0

0

--

0

0

(2.5)

313,458

73,126

(3,301)

(4.3)

$848,423,038

$6,205,201

0.7 %

11,434,750

6,864,610

150.2

2,594,880

14,835

0.6

0
(1,874)
($14,620,021)

(1.7) %

(3,416)

$5,174,716,625

$150,664,646

5,103,278

(15.3)

($4,774,388)

913,717

--

(48,213,035)

6.0 %

-(1.1)
3.0 %

0
(1,874)
($14,620,021)

6.1

-(0.6)
(0.3) %

Other Revenue
Lottery
License, Fees and Permits
Interest

1,523

Sales and Services

1,524,000

Other Miscellaneous

1,443,631

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

0

(4,890,347) (100.0)
147,085
(1,710,791)
0

352,369

(5,444,753)

$17,351,153

($5,019,361)

$865,774,191

10.7
(54.2)
-(93.9)

6,434,750

128.7

26,721,618

(505,120)

(16.3)

17,313,222

(622,886)

(3.5)

(505,120)

(2.8)

(1,998,477)

(99.9)

13,364

(4,891,151)

(99.7)

(1,998,477)

(99.3)

(476,000)

(23.8)

9,341,557

(206,850)

(2.2)

(475,999)

(4.8)

(1,656,369)

(53.4)

7,207,447

(10,008,133)

(58.1)

(1,656,369)

(18.7)

0
(5,647,631)

--

0

(94.1)

15,501,122

(3,250,124)
($13,875,866)

(22.4) %

($3,848,847)

(18.2) %

$76,098,330

$1,185,840

0.1 %

($18,468,868)

(2.1) %

$5,250,814,955

(3,910,660)

9.1

0

$136,788,780

23.6

-(17.3)

6,434,750

0
(5,647,631)

31.7

-(26.7)

(15.4) %

($3,848,846)

(4.8) %

2.7 %

($18,468,867)

(0.4) %

Other Adjustments
Urban Revenue Sharing
One-Time Transfers
Sales Tax - 1¢ Increase
Sub-Total Other Adjustments
TOTAL GENERAL FUND REVENUE

(46,709,330)
5,001
0
(46,704,329)
$819,069,862

(327,454,543)

(27,863,853)

--

5,001

--

150,696,562

114,696,562

318.6

(91,603,569) (100.0)

0

--

2,611,367

(556,339,869)

(99.5)

5,001

(95,509,228)

-- %

($94,323,388)

(10.3) %

(0)

5,001
($18,463,867)

0.0

(0.0) %

(174,146,614)

(2.2) %

$5,076,668,341

5.8 %

$713,881,991

9.3

(0)

0.0

5,001

0.0

0

0.0

(469,507,160)

-- %

5,001

(0.0) %

($332,718,380)

(6.2) %

($18,463,866)

(0.4) %

3.1 %

$14,875,634

2.1 %

Non-General Funds
Highway User Revenue Fund

$107,185,777

$6,895,545

6.9 %

$5,892,643

$21,796,488

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Recent Economic Indicators
NATIONAL

“(GDP)
increased at an
annual rate of
3.2% in the fourth
quarter of
2013…a
deceleration
from 4.1% growth
in the third
quarter.”

According to the U.S. Department of
Commerce Bureau of Economic Analysis, the
U.S. Real Gross Domestic Product (GDP)
increased at an annual rate of 3.2% in the
fourth quarter of 2013. This estimate represents
a deceleration from the 4.1% growth in the third
quarter. The deceleration was largely due to a
slowdown in inventory accumulation and nonresidential investment and decreases in federal
government spending and residential
investment. Accelerations in consumption
expenditures and exports helped bolster growth
in the quarter.
The Conference Board’s U.S. Consumer
Confidence Index increased 4.1% in January
and 38.2% since January 2013. The growth over
last year’s reading represents the largest
percentage increase experienced in 15
months. Some economists however, have
attributed this large annual increase to the
especially low levels of confidence in early
2013, following the expiration of the 2% payroll
tax cut.
The Conference Board’s U.S. Leading Economic
Index modestly grew by 0.1% in December,
following strong growth of 1% in November. Out
of the index’s 10 components, 5 improved
during the month. During the month,
improvement in several measures of financial
markets more than offset negative
contributions to the index from worsening
consumer confidence, building permit creation,
and orders of manufactured goods.
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.
In December, 41 out of 50 states had increases
in their coincident indexes. Arizona’s coincident
index increased by 0.2% compared to the prior
month. Year-over-year, the Arizona index is 2.4%
above last year, which is the 33rd highest growth
rate in the country. While this is a significant
improvement, Arizona’s index is still (8.7)% below
its peak, which occurred in August 2007. See
Appendix A – Tracking Arizona’s Recovery for
additional historical information.

The Federal Reserve Bank of Philadelphia also
publishes a leading index for each state that
forecasts economic conditions for the next 6
months. In addition to the coincident index,
Arizona’s leading index is based on Arizona
housing permits, Arizona initial unemployment
insurance claims, national manufacturing
delivery times, and the interest rate spread
between the 3-month and 10-year Treasury
instruments.
Using a 3-month average, Arizona’s leading
index projects that state GDP will grow at an
annualized rate of 3.2% over the next 6 months.
This is higher than the revised 2.7% growth
projection in November and higher than the
2.9% projection in December 2012.
Housing
The number of Maricopa County pending
foreclosures decreased from 5,974 in
December to 5,698 in January. The January
total is significantly below the peak in
December 2009 (51,466). See Appendix A –
Tracking Arizona’s Recovery.
The total housing inventory in the Greater
Phoenix area increased from 22,090 in
January 2013 to 28,464 in January 2014, a
28.9% increase.
In the Metropolitan Phoenix area, the median
price of a single family home was $205,000 in
December. This represents a 2.5% increase
from November, and a 25.0% increase from
December of last year.
Another measure of the health of the Arizona
real estate market is permitting activity. For
the 3-month period through December, a
total of 1,303 single-family building permits
had been issued statewide, a 12.8% increase
from last year. While permitting activity has
seen gains, the current level of permitting
remains far below a more normal 3-month
average of 3,000 to 4,000 permits. See
Appendix A – Tracking Arizona’s Recovery.
In the 3-month period ending in December, a
total of 580 multi-family building permits were
issued in the state. This figure remains well
below the peak of activity in April 2007.

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Recent Economic Indicators (Continued)
Employment

expansion and

Due to the annual revision of employment
date (also known as “benchmarking”),
January’s employment and unemployment
figures will not be released until the second
week of March. For this reason, this month’s
issue of Monthly Fiscal Highlights does not
include any updated employment statistics.

restoration that

State Agency Data

began January

At the beginning of February, total AHCCCS
caseloads increased to 1.28 million members.
Overall, AHCCCS caseloads are currently
0.9% above February 2013 levels. The
traditional acute care AHCCCS population,
which consists primarily of lower income
children and their parents, increased by 2.6%
since last month while decreasing (0.5)% since
last year. The total population in this program
is approximately 877,000.

“As part of
Medicaid

1, 2014, the
[childless adult]
program again
allowed new
participants.
Since the
December MFH,
the population
has increased by
63,862 to reach a
level of 131,632.”

From July 2011 through December 2013, the
childless adult program did not allow new
participants. As part of Medicaid expansion
and restoration that began January 1, 2014,
the program again allowed new participants.
Since the December MFH, the population has
increased by 63,862 to reach a level of
131,632. As a whole, the Proposition 204
program has increased 35.9% compared to
the prior month, and 56.4% from the prior
year.
Medicaid expansion also resulted in the
creation of a new member population
consisting of adults from 100% to 133% of the
Federal Poverty Level (FPL). At the beginning
of February, 3,043 individuals had enrolled
under this new population.
KidsCare I provides coverage for 2,290
children with incomes above those in the
traditional population. Its enrollment has
declined since a freeze was implemented in
January 2010. On February 1, 2014,
approximately 3,300 children on the KidsCare
I program with family income up to 133% of
the FPL were also transferred to the Traditional
acute care program. Including that transfer
of children, enrollment in the program
declined (71.0)% from the prior year.
From May 1, 2012 to January 31, 2014,
AHCCCS administered the KidsCare II
program, in which state matching funds for

expanded coverage for children to 200% of
the FPL were provided by voluntary payments
from political subdivisions. On February 1,
2014, the approximately 23,000 children in the
program with family income up to 133% of the
FPL were transferred to the Traditional acute
care program. Coverage was eliminated for
the approximately 14,000 children with family
income from 134% to 200% of the FPL.
There were 33,336 TANF recipients in the state
in December, a monthly caseload decrease
of (3.6)%. Year-over-year, the number of TANF
recipients has declined by (19.0)%. The
statutory lifetime limit on cash assistance is
24 months.
The appropriation for TANF cash assistance in
the FY 2014 budget funds an average
monthly caseload of approximately 34,346
recipients in FY 2014. The 33,336 TANF
recipients includes 1,652 tribal recipients.
These recipients belong to tribes that operate
their own TANF program but contract with the
state for program administration, meaning
there were 31,684 state-funded TANF
recipients in December.
The Supplemental Nutrition Assistance
Program (SNAP), formerly known as Food
Stamps, provides assistance to low-income
households to purchase food. In December,
there were a total 1.1 million food stamp
recipients in the state, a (1.9)% decrease over
the prior month. Compared to the same
month last year, food stamp participation was
down by (5.3)%.
The 3-month average count of the
Department of Corrections (ADC) inmate
population increased to 41,126 inmates in
January 2014. Relative to the prior 3-month
period, the population has increased by 118
inmates. Compared to a year ago, the
population has increased by 1,051 inmates.

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Recent Economic Indicators

(Continued)

Table 5

ECONOMIC INDICATORS
Indicator
Arizona
- Unemployment Rate (SA)
- Initial Unemployment Insurance Claims
- Unemployment Insurance Recipients
- 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-family
Multi-unit
- Greater Phoenix Home Sales
Single-Family
Townhouse/Condominium
- Greater Phoenix Median Home Price
Single-Family
Townhouse/Condominium
- Greater Phoenix S&P/Case-Shiller Home Price Index
(Jan. 2000 = 100)
- Foreclosure Activity, Maricopa County
Pending Foreclosures (Active Notices)
- Greater Phoenix Total Housing Inventory, (ARMLS)
- Phoenix Sky Harbor Air Passengers
- Revenue Per Available Hotel Room
- Arizona Average Natural Gas Price
($ per thousand cubic feet)
- Arizona Consumer Confidence Index (1985 = 100)
- Arizona Coincident Index (July 1992 = 100)
- Arizona Leading Index -- 6 month projected growth rate
- Arizona Personal Income
- Arizona Population
- AHCCCS Recipients
Acute Care Traditional
Prop 204 Childless Adults
Other Prop 204
Adult Expansion
Kids Care I
Kids Care II
Long-Term Care – Elderly & DD
Emergency Services
- TANF Recipients
- SNAP (Food Stamps) Recipients
- ADC Inmate Growth (3-month average)
- Probation Caseload
Non-Maricopa
Maricopa County
United States
- Gross Domestic Product
(Chained 2009 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

December
December
December
December
December
December
December
Oct-Dec
Oct-Dec

7.6%
18,554
34,824
2.57 million
154,400
122,800
41.0
$40.7 million
$190.0 million

(0.2) %
4.5%
(1.0)%
0.3%
(0.1)%
(0.7)%
0.7%
(2.0)%
17.7%

Oct-Dec
Oct-Dec

1,303
580

0.9%
341.9%

12.8%
(18.6)%

December
December

6,596
1,055

12.8%
9.8%

(17.1)%
(11.1)%

December
December
November

$205,000
$120,000
144.86

2.5%
0.1%
0.3%

25.0%
20.1%
16.7%

January

5,698

(4.6)%

(48.8)%

January
November
December
November

28,464
3.22 million
$55.81
$5.16

1st Quarter 2014
December
Oct-Dec
3rd Quarter 2013
July 1, 2013
February

December
December
Nov-Jan

68.9
184.50
3.2%
$246.5 billion
6.63 million
1,276,226
877,018
131,632
143,389
3,043
2,290
54,652
64,202
33,336
1,064,596
41,126

3.0%
0.2%
0.5%
0.9%
N/A
1.4%
2.6%
35.9%
(0.4)%
122.3%
(59.0)%
(100.0)%
0.2%
(1.1)%
(3.6)%
(1.9)%
118 inmates

N/A
2.4%
0.3%
4.5%
1.2%
0.9%
(0.5)%
56.4%
(2.8)%
N/A
(71.0)%
(100.0)%
2.6%
2.0%
(19.0)%
(5.3)%
1,051 inmates

December
December

17,502
24,667

(33)
91

(481)
(614)

4th Quarter 2013
(Advance Estimate)
January
December
Oct.-Dec.
January

$16.0 trillion

3.2%

2.7%

80.7
99.4
$5.8 billion
Rel. 2/20

4.1%
0.1%
(1.3)%
0.3%

38.2%
5.4%
17.3%
1.5%

* Excludes the temporary 1¢ increase that expired at the end of May 2013.

12.2%
(2.7)%
(21.1)%
21.7%

Change From
Prior Year
(0.3)%
1.2%
(8.6)%
2.0%
(1.6)%
4.2%
1.0%
12.9%*
12.0%*

28.9%
(2.5)%
9.7%
(5.7)%

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Summary of Recent Agency Reports
ADOA/Treasurer – Report on Reconciliation of General
Fund Balance for FY 2013 – Pursuant to A.R.S. § 41-172A
and A.R.S. § 35-131F the Office of the State Treasurer and
the Arizona Department of Administration (ADOA) are
required to submit reports reconciling any difference
between agencies in the year-end General Fund
balance. ADOA and the Treasurer currently report FY 2013
year-end General Fund balances (including dedicated
subaccounts and excluding claims payable) of $1,015.6
million and $1,015.2 million, respectively. The difference
leaves an unreconciled General Fund balance of
$392,000. ADOA and the Treasurer report that they will
continue to try to isolate the source of the difference.
(Eric Billings)
ADOA – Working Capital Surplus Report – In January, the
Arizona Department of Administration (ADOA) reported
on the FY 2013 working capital surplus requirements for the
$1.45 billion of tax-exempt deficit financing entered into in
FY 2010. The financing consisted of the sale/leaseback of
state properties totaling $1.0 billion and lottery revenue
bonds totaling $450 million.
Because the state used tax-exempt debt financing to
eliminate a budget shortfall, the federal government
requires that certain provisions be included in the official
financing agreements. Under the current terms of the
agreements, the state is essentially required to purchase
tax-exempt securities if the year-end General Fund
balance (or “working capital”) exceeds 5% prior to FY
2015.
Beginning with the FY 2015 ending balance, the current
agreements would require the state to begin repayment
of the deficit financing agreements if it were determined
that working capital exceeded 5%. Working capital is
defined as the fiscal year ending balance in the following
funds: the state General Fund, the Budget Stabilization
Fund, and any Department of Revenue clearing
accounts.
In its report, ADOA calculates that the excess working
capital surplus above the 5% level is $995.4 million for FY
2013. ADOA has indicated that under the financing
agreements, the state is allowed to monitor its cash
balance on a monthly basis, and would only be required
to purchase the securities if monthly cash surpluses were
sustained through the fiscal year.
Given this monthly monitoring and the state’s typical cash
flow throughout a given fiscal year, the process of
purchasing tax-exempt securities in an effort to reach the
$995.4 million amount determined in the annual Working
Capital Surplus report would likely begin within the next 2
to 3 months.

However, in order to avoid both the short-term
requirements relating to the tax-exempt securities
purchase and the longer-term mandatory repayment, the
Executive has recently identified an alternative means of
complying with the federal rules regarding tax exempt
issuances.
While not currently contained in the 2010 agreements, this
alternative would relieve the state of its short-term
investment and long-term repayment requirements. The
state would instead agree to limit the investment yield on
a significant portion of its cash reserves to approximately
4%, which is the interest rate associated with the 2010
operating financing. Moving the state to the yield
restriction mechanism would require the Executive to
modify the existing financing agreement through a filing
with the third party bond trustee. This modification would
not require legislative approval.
AHCCCS – Report on Health Insurance Exchange
Interaction and Eligibility Modifications – Pursuant to an FY
2014 General Appropriation Act footnote, AHCCCS
submitted its second quarterly report on the required
automation interaction with the health insurance
exchange and eligibility modifications. The federal
Affordable Care Act requires state agencies to make a
number of changes to eligibility and enrollment in order to
standardize eligibility across states, simplify and expedite
enrollment, and share eligibility and enrollment
information to and from the federal exchange. It further
requires users to be able to use the same system to apply
for other federal benefits including the Supplemental
Nutrition Assistance Program (formerly known as food
stamps), and cash assistance (TANF). AHCCCS has
updated its previous enrollment system, titled Health-eArizona Plus (HEAplus) to meet these standards.
As of January 31, 2014 AHCCCS reports that the majority
of the changes have already been implemented, and
they have met the requirements to obtain enhanced
federal funding for their eligibility requirements.
Completed items are as follows:
1.
2.
3.

4.

Requiring first time users to prove their identity by
answering a series of questions about themselves,
An additional security check for state workers,
community assisters and state vendors,
Connecting with data from Homeland Security, the
Social Security Administration, and Work Number
(payroll information from certain employers) through
the federal data hub. AHCCCS has declined to use
IRS data due to the expense of securing the data, in
combination with what they believe to be limited
value of the data due to its age.
Transferring the accounts of applicants with incomes
too high for AHCCCS to the federal exchange.

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Summary of Recent Agency Reports (Continued)
AHCCCS further reports that they are waiting on the
federal government before completing the remaining
changes. There are 2 main issues:
1.

The integration of the security check for state
workers, community assisters, and state vendors has
not yet been integrated with the federal exchange
since the federal exchange has not made testing of
the integration available.
2. The federal exchange is supposed to be able to
transfer applicants to its system to AHCCCS if their
income is low enough. Due to problems on the
federal end, account transfers from the exchanges to
AHCCCS have only been occurring on a limited basis
since January 22, 2014.
(Jon Stall)
AHCCCS – Report on KidsCare II Distributions – Pursuant to
an FY 2014 General Appropriation Act footnote, the
Arizona Health Care Cost Containment System (AHCCCS)
is required to notify the JLBC before expending any
KidsCare II monies in excess of $26.8 million in FY 2014.
AHCCCS reports that they intend to distribute $48.2 million
in total funds in FY 2014. The original amount did not take
into account monies from the Phoenix hospital
assessment and additional spending to delay the
program end date from December 31, 2013 to January
31, 2014. The KidsCare II program expanded KidsCare
from May 1, 2012 to January 31, 2014. The program was
funded by voluntary payments from political subdivisions
and monies collected by a Phoenix hospital assessment.
These payments received an approximate 3:1 match
from the Federal government. (Jon Stall)
AHCCCS – Report on Safety Net Care Pool Program –
Pursuant to an FY 2014 General Appropriation Act
footnote, the Arizona Health Care Cost Containment
System (AHCCCS) reported on the monies received from
local government hospital assessments for the Safety Net
Care Pool (SNCP) program through December 31, 2013.
The SNCP program funds unreimbursed costs incurred by
hospitals in caring for uninsured and AHCCCS recipients.
Local governments or public universities provide the state
match, and the voluntary contributions receive an
approximate 2:1 match from the federal government. As
a federal condition of participating in the program, some
of the monies must be used for coverage expansion of
the KidsCare and the childless adult population.
In April 2012, AHCCCS received federal approval to
establish the SNCP program. The program was
expanded a year later using monies collected from a
City of Phoenix hospital assessment. The agency reports
these payments resulted in an additional $406.0 million in
total fund distributions to hospitals plus $50.3 million in
total funds expended for coverage expansion through
December 31, 2013. In December 2013, this resulted in

an additional 40,578 children covered through the
KidsCare II program and 3,822 additional persons
covered through the childless adult program. More
detail on FY 2014 year-to-date payments and coverage is
provided in the table below.
AHCCCS recently received approval to extend the SNCP
program for the Phoenix Children’s Hospital, through
December 31, 2014. The agency additionally received
approval to extend the KidsCare II coverage expansion
through January 31, 2014. The remainder of the SNCP
program ended on January 1, 2014. (Jon Stall)
Table 6
FY 2014 SNCP and Coverage Expansion
(YTD through December; $ in Millions)
State
Match
Original SNCP Agreement
City of Phoenix SNCP
Agreement
Sub-total SNCP Payments to
Hospitals
KidsCare II and Childless
Adult Coverage Expansion
Grand Total

Federal
Match

Total
Funds

$58.7

$125.9

$184.6

74.5

146.9

221.4

133.2

272.8

406.0

9.8

40.5

50.3

$143.0

$313.3

$456.3

Department of Health Services - Quarterly Report on
Individuals in the Comprehensive Medical and Dental
Program (CMDP) – Pursuant to Laws 2013, Chapter 220,
the Arizona Department of Health Services (DHS) is
required to report quarterly, through December 31, 2015,
on financial and program accountability trends of CMDP,
the foster care medical program.
DHS states that between July 1 and September 30, 2013,
61%, or 9,134 of the 15,026 CMDP eligible members
received behavioral health services. The service level
ranged from 55% to 92% across the 6 geographic service
areas. On average, 623 new behavioral health cases
were opened each month, while an average of 8,369
behavioral health cases continued to remain open from
the prior month. An average of 581 behavioral health
cases were closed each month.
The most widely used services by CMDP members during
the first quarter of FY 2014 were support services
(including case management), treatment services, and
medications. Of all members served, 97% used support
services, 72% used treatment services, and 19% received
medications. The most expensive service per capita was
inpatient services. DHS states that 165 CMDP members,
or 2% of the total CMDP population, received nearly $3.3
million in inpatient services ($19,800 per capita). Inpatient
services consist of detoxification and treatment at
hospitals and sub-acute facilities that provide 24-hour
supervision, an intensive treatment program, and on-site
medical services. (Matt Gress)

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Summary of Recent Agency Reports (Continued)
Department of Health Services – Report on Arnold v. Sarn
– Pursuant to a FY 2014 General Appropriation Act
footnote, the Department of Health Services (DHS) has
submitted the first and second quarter report on settling
the Arnold v. Sarn lawsuit.
The state has been a longstanding defendant in the
Arnold v. Sarn litigation concerning the level of services
provided to the Seriously Mentally Ill (SMI) population. In
January 2014, both parties filed a joint agreement with
the court to terminate the lawsuit. The agreement, which
awaits court approval, requires expansion of certain
services and continued monitoring of service capacity
and quality. Prior to this proposed 2014 settlement, the
parties had an interim agreement in place. The first and
second quarter report addresses this interim agreement.
The interim agreement focuses on the conditions for
admission and the length of stay for Arnold class
members at the Arizona State Hospital (ASH). DHS and
the Regional Behavioral Health Authorities (RBHAs) have
continued to coordinate discharges to provide
appropriate community support and services, in addition
to ensuring that ASH has a census of 55 or fewer class
members. DHS did not exceed this limit at any time
during the first or second quarters.
As agreed upon by the parties, DHS has not provided
funding for class members in supervisory care homes, as
the department has secured alternative housing. During
the second quarter, 23 additional class members
received community based housing.
The interim agreement further provided that DHS develop
a system of peer support services that are delivered in
individual and group settings by individuals who have
person experience with mental illness, substance abuse,
and recovery to help SMI individuals develop skills to aid
in their own recovery. At the end of the second quarter,
DHS estimates there are approximately 800-1,200
individuals that are part of the peer support specialist
workforce.
The interim agreement also focuses on employment
support for class members. During the second quarter,
DHS reports that the Maricopa County RBHA maintained
an employment rate for class members of 14.7%, which is
above the statewide rate of 13.4%. This RBHA trained 95
provider staff and 8 Behavioral Health Recipients on
Social Security Work Incentives and Disability Benefits.
This RBHA has also worked with other providers to
implement a Substance Abuse and Mental Health
Administration (SAMHSA) fidelity tool to monitor outcome
measures. SAMHSA monitoring is a key feature of the
2014 proposed agreement.
The interim agreement further states that DHS will
implement Quality Service Reviews (QSR) in order to
evaluate network sufficiency, identify service gaps, and

maximize customer satisfaction. The August 2013 QSR
concluded that services matched SMI individuals’ needs
82% of the time, that SMI individuals reported 81% of
services were provided within 30 days upon identification
of need, and that service location and service times were
convenient for approximately 86% of the SMI population.
The QSR recommended areas for further monitoring that
include better documenting individuals’ needs, improving
outcomes in employment and meaningful daily activities,
and possibly expanding several services, including
supported housing, supported employment, living skills,
and family and peer support. (Matt Gress)
Department of Public Safety – Quarterly Report on the
GIITEM Fund – Pursuant to A.R.S. § 41-1724, the
Department of Public Safety (DPS) is required to report
quarterly on Gang and Immigration Intelligence Team
Enforcement Mission (GIITEM) Fund expenditures. In FY
2014, the GIITEM Fund was appropriated $2.6 million in
General Fund monies for grants to local law enforcement
agencies to help with border security. During the second
quarter of FY 2014 DPS expended $650,900 in GIITEM
Immigration Enforcement Grant monies bringing the yearto-date total to $1.3 million. These monies were
distributed to the Maricopa County Sheriff’s Office per
statute.
Additionally, the GIITEM Border Security and Law
Enforcement Subaccount received $575,607 in criminal
fine and fee revenues in the second quarter of FY 2014
bringing the year-to-date total to $1.1 million. DPS
expended $317,100 in the second quarter, which
represents the total expenditures for the year. The monies
were granted to 10 local law enforcement agencies and
the Arizona Department of Corrections for border security
purposes. (Eric Billings)
Secretary of State - Report on the Election Systems
Improvement Fund – Pursuant to a General Appropriation
Act footnote and A.R.S. § 41-129C, the Secretary of State
submitted a report on the expenditures from the Election
Systems Improvement Fund to implement the Help
America Vote Act. The expenditures in FY 2013 were $1.7
million and are projected to be $2 million in FY 2014 and
FY 2015. The Secretary of State reports that FY 2013
expenditures were used as follows: 59% for voter
registration, 14% on voter accessibility 11% for
administration, 10% for poll workers, 5% on voter
education, and 1% for telecommunication and training.
A similar distribution is expected to continue for FY 2014
and FY 2015. (Krista MacGahan)

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

January Spending
January 2014 General Fund spending of $613.7 million
was $(99.1) million lower than January 2013. Year-todate, spending is $6.1 billion, or $(80.5) million below last
year.



Department of Economic Security expenditures are
$55.2 million greater through January due to increased
funding levels for the agency in FY 2014.

(See Tables 7 & 8).


During January 2014, the Department of Education
spent $(76.8) million less than January 2013 due to
technical timing issues, due in part to the schedule of
adjustments made relating to the K-12 rollover.

Table 7
General Fund Spending ($ in Millions)
Change From

YTD Change

Jan 14

Jan 13

Year-to-Date

from FY 13

AHCCCS

102.1

(11.2)

788.1

(9.2)

Corrections

81.4

7.2

550.8

20.6

Agency

Economic Security

69.5

(15.5)

579.8

55.2

Education

217.0

(76.8)

2,511.7

14.9

Health Serv ices

10.5

(3.8)

471.0

(39.6)

Public Safety

2.6

0.2

19.9

1.2

School Facilities Board

30.6

1.0

188.2

15.9

Univ ersities

48.8

2.5

518.0

16.6

Leaseback Debt Serv ice

0.0

0.0

84.1

0.0

Other

51.2

(2.7)

368.3

43.9

Total

613.7

(99.1)

6,079.9

119.5

0.0

0.0

0.0

(200.0)

613.7

(99.1)

6,079.9

(80.5)

Budget Stabilization
Fund Deposit
Grand Total

11

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Table 8

General Fund Spending
($ in Thousands)
Agency
Dept. of Admin./Automation Projects Fund
ADOA – Sale/Leaseback Debt Service
Office of Administrative Hearings
Department of Agriculture
AHCCCS
Attorney General
AZ Capital Post Conviction Public
Defender
State Board of Charter Schools
AZ Commerce Authority
Community Colleges
Corporation Commission
Department of Corrections
County Funding
AZ State Schools for the Deaf & Blind
Department of Economic Security
Department of Education
DEMA
DEQ – WQARF
Office of Equal Opportunity
State Board of Equalization
Board of Executive Clemency
Department of Financial Institutions
Department of Fire, Bldg and Life Safety
State Forester
Arizona Geological Survey
Governor/OSPB
Department of Health Services
Arizona Historical Society
Prescott Historical Society of AZ
Independent Redistricting Comm.
Commission of Indian Affairs
Department of Insurance
Judiciary
Supreme/Superior Court
Court of Appeals
Department of Juvenile Corrections

Jan 14
907.7
70.1
774.5
102,104.1
1,665.3
-

Change from
Jan 13
(137.7)
(31.3)
96.2
(11,237.0)
(174.9)
-

Year-to-Date
25,424.6
84,119.8
518.4
5,076.3
788,065.3
12,202.8
-

YTD Change
from FY 13
9,801.4
(13.5)
538.2
(9,166.9)
(662.3)
(4.1)

87.1

25.0

519.3

61.8

2,625.0
16,129.0
35.9
81,369.6
1,924.6
69,545.4
216,993.0
587.6
27.8
39.1
61.3
216.6
126.2
256.9
50.4
482.5
10,501.8
230.4
49.3
55.7
3.9
393.1

(129.0)
(11.0)
7,167.3
675.5
(15,472.9)
(76,768.9)
(439.0)
27.4
18.9
(28.4)
15.6
(60.5)
(1,378.3)
(72.6)
(202.9)
(3,836.2)
(16.4)
4.5
(269.0)
0.9
(7.3)

18,375.0
49,061.0
280.4
550,800.9
7,150.5
13,490.2
579,846.5
2,511,692.2
4,051.0
7,000.0
125.8
367.3
480.2
1,700.7
1,179.6
1,850.0
406.0
5,830.8
471,004.0
1,984.0
410.3
860.2
33.6
3,182.2

(2,040.9)
(52.2)
20,570.3
7,150.5
90.3
55,167.6
14,870.5
(1,009.5)
70.2
8.1
14.6
97.4
96.6
(1,928.5)
(182.0)
1,104.6
(39,555.9)
(0.2)
18.5
(199.9)
3.2
279.3

10,491.5
1,185.9
2,892.9

614.0
134.9
(168.4)

56,518.8
8,120.0
22,660.8

1,507.3
229.7
(1,643.4)

12

JLBC – MONTHLY FISCAL HIGHLIGHTS – FEBRUARY 2014

Agency
State Land Department
Law Enforcement Merit System
Legislature
Auditor General
House of Representatives
Joint Legislative Budget Comm.
Legislative Council
Senate
Mine Inspector
Nav. Streams & Adjudication
Occupational Safety and Health Review
Phoenix Convention Center
Pioneers’ Home
Comm. for Postsecondary Ed.
Department of Public Safety
Public Safety Personnel Retirement System
Arizona Department of Racing
Radiation Regulatory Agency
Real Estate Department
Department of Revenue
School Facilities Board
Secretary of State
Tax Appeals Board
Office of Tourism
Department of Transportation
Commission on Uniform State Laws
Universities
Board of Regents
Arizona State University
Northern Arizona University
University of Arizona
Department of Veteran Services
Department of Water Resources
Department of Weights & Measures
Other - JP Salaries Distribution
Other
Total
Budget Stabilization Fund Deposit
Grand Total

Jan 14
783.3
-

Change from
Jan 13
699.7
(5.4)

Year-to-Date
6,812.1
-

YTD Change
from FY 13
6,180.1
(38.5)

1,487.5
1,041.5
191.5
564.3
748.1
83.1
9.2
367.9
88.0
2,586.4
85.0
229.1
200.8
1,208.9
30,630.9
635.1
17.8
526.0
1.4
-

187.2
90.4
45.8
(24.2)
100.2
13.7
0.8
339.4
195.0
1.4
(12.2)
44.6
(2,000.7)
991.0
(664.1)
0.4
148.5
1.4
-

10,998.8
6,956.9
1,187.6
4,236.5
4,685.4
700.8
68.8
2.3
20,449.0
1,179.3
786.4
19,862.1
5,000.0
1,874.9
976.7
1,521.6
30,750.1
188,190.7
7,335.5
162.3
3,451.8
2.6
55.7

1,095.4
625.5
131.0
(456.0)
314.9
19.3
(2.3)
2.3
14,854.0
561.5
1,168.6
5,000.0
0.8
6.4
148.1
6,057.8
15,856.8
(4,783.9)
3.9
412.2
(16.2)
55.7

6,021.2
19,640.4
6,562.5
16,596.4
414.8
885.4
102.5
154.3
613,747.4
613,747.4

(1,126.5)
2,259.2
638.3
725.6
(212.8)
126.1
(10.6)
40.8
(99,068.5)
(99,068.5)

18,399.5
228,058.4
76,432.4
195,104.4
3,009.5
6,025.8
694.6
526.1
0.4
6,079,887.7
6,079,887.7

(8,716.5)
15,814.5
4,468.2
5,079.4
(256.0)
764.2
(108.9)
31.6
0.4
119,495.4
(200,000.0)
(80,504.6)

Total Non-Farm Employment

Tracking Arizona’s Recovery
February 2014
Appendix A

2,800

2,700

Thousands of Jobs

Slide:
2……Total Non-Farm Employment
3……Initial Claims for Unemployment Insurance
4……State Sales Tax Collections – Retail Category
5……State Sales Tax Collections – Contracting
Category
6……Single Family Building Permits
7……Maricopa County Pending Foreclosures
8……Coincident Index

2,600

2,500

2,400

2,300

2,200

2002

2003

2004

2008

2011

JUL

JAN

JULY

JUL

2010

JAN

JUL

2009

JAN

JUL

JAN

JUL

2007

JAN

JUL

2006

JAN

JUL

JAN

JUL

2005

JLBC

Initial Claims for Unemployment Insurance

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

2001

1

JLBC

JAN

JAN

2,100

2012 2013

2

Not seasonally adjusted

State Sales Tax Collections – Retail Category
$225

40,000
35,000

$200

$ in Millions

30,000
25,000
20,000
15,000

$150

$125

Not seasonally adjusted

2011

2012 2013

Oct-13

* Jan-14

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Jan 12

Apr 12

Oct 11

July 11

Jan 11

Apr 11

Oct 10

July 10

Jan 10

Oct 09

Apr 10

Apr 09

July 09

Jan 09

Oct 08

Jan 08

Apr 08

July 08

Oct 07

July 07

Apr 07

JUL

JAN

JULY

JUL

JAN

JUL

2010

JAN

JUL

2008 2009

JAN

JUL

JAN

JUL

2007

JAN

JUL

2006

JAN

JUL

2005

JAN

JUL

2004

JAN

JUL

2003

JAN

JUL

2002

JAN

JUL

JAN

JAN

2001

Jan 07

$100

Oct 06

10,000
5,000

JLBC

$175

July 06

Total Monthly Claims for UI Benefits

45,000

Excludes temporary 1 ¢ sales tax

3

JLBC

* January 2014 collections reflect the reclassification of approximately $40
million of revenue from other tax categories to retail collections

4

State Sales Tax Collections – Contracting Category

Single Family Building Permits
100,000

$100

Single Family Building Permits

90,000

$50

$25

70,000
60,000
50,000
40,000

30,000
20,000

2001

5

Excludes temporary 1 ¢ sales tax

JLBC

2003

2004

JLBC

2007

2008

2009

2010

2011

2012

JUL

JAN

JULY

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

2006

JAN

JUL

2005

JAN

JUL

JAN

JUL

JAN

JUL

2002

2013

6

12-Month Moving Sum

Maricopa County Pending Foreclosures

Economic Activity Index
210

50,000

200

Coincident Index Value

60,000

40,000

30,000

20,000

10,000

190
180
170
160
150

2003

2005

2006

2008

2009

An initial notice of trustee sale has been recorded but final sale has not yet occurred

2012

2001

7

JLBC

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Coincident Index – Federal Reserve Bank of Philadelphia. Combines four state-level indicators
(employment, average hours worked in manufacturing, the unemployment rate, and wage and salary
disbursements) to summarize current economic conditions.

JUL

JAN

JULY

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JAN

JUL

JUL

JAN

2013

JAN

140

JAN

JUL

JAN

JAN

2011

JULY

JUL

JUL

2010

JAN

JAN

JUL

JAN

JUL

JUL

2007

JAN

JAN

JUL

JUL

JAN

JUL

2004

JAN

JAN

JUL

JUL

2002

JAN

JAN

0

JLBC

JAN

JUL

0
JAN

Jul-13

Jan-14

Oct-13

Apr-13

Jul-12

Jan-13

Oct-12

Jan 12

Oct 11

Apr 12

Jan 11

July 11

Oct 10

Apr 11

Jan 10

Apr 10

July 10

Oct 09

Jan 09

Apr 09

July 09

Oct 08

July 08

Jan 08

Oct 07

Apr 08

Jan 07

July 07

Oct 06

Apr 07

10,000
July 06

$0

80,000

JAN

$ in Millions

$75

2013

8