JLBC - Monthly Fiscal Highlights

March 2016

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

www.azleg.gov/jlbc.htm

“Year-to-date,
base General
Fund revenues
are 3.4%
above the
prior year, and
are $31.9
million above
the Baseline
forecast.”

February 2016 General Fund collections of
$398.1 million were 11.7% above the prior year,
and were $38.4 million above the Baseline
forecast.
Individual income tax was $44.2 million above
forecast in February, while all other tax
categories were $(5.8) million below
forecast. While strong withholding growth of
8.8% contributed $12.0 million of the forecast
overage, the primary driver was a $27.4 million
gain from lower-than-expected refunds.
In the middle of tax filing season, however, it is
difficult to draw any conclusions from the
refund data. The refund gain may simply be
due to the timing of tax return processing. For
example, refund processing started in late
January this year, while last year it did not begin
until February. As a result, the lower level of
February 2016 refunds may reflect spreading
the returns over 2 months.
Transaction Privilege Tax (TPT) collections were
3.9% above February 2015, but were $(4.9)
million below forecast. The February data also
provides us with the first opportunity in a year to
review the subcategory Sales Tax detail on an
“apples to apples” basis.
During the last 12 months, year-over-year retail
and contracting subcategory growth rates
have been misleading due to the
implementation of the TPT simplification
legislation in January 2015. That legislation
essentially shifted a portion of TPT collections
out of contracting and into retail, so the growth
rates of these two subcategories have not
been representative of economic activity over
the past 12 months.

The year-to-date data demonstrates this
point. Retail has grown 7.8% since July, but only
3.7% in February. That result is not surprising
since the first half FY 2016 retail returns were
boosted by the shift from contracting. February
may then reflect a more normal level of
activity.
In the opposite direction, year-to-date
contracting sales are down (16.4)% as some of
those transactions shifted to the retail
subcategory. In February, contracting was still
down (7.6)%. That result was surprising,
however, since contracting activity was
thought to be on the upswing. For example,
construction employment has increased 5.4% in
the last year. The contracting results bear
watching in future months to see if this
seemingly contradictory trend continues.
Year-to-date, base General Fund revenues are
3.4% above the prior year, and are $31.9 million
above the Baseline forecast.
In comparison to revenue collections of $398.1
million, February 2016 spending was $510.6
million, which is a decrease of $(37.0) million
from the prior year.
Fiscal year-to-date, General Fund revenues of
$5.79 billion have been offset by $6.89 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,
which consists of the General Fund and certain
dedicated funds. The operating balance as of
mid-March 2016 is $1.9 billion. In addition, the
state’s Budget Stabilization Fund has a balance
of $460.0 million.

Table of Contents
Summary
This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
March 21, 2016.

February Revenues ................................................ 2
Monthly Indicators.................................................. 4
JLBC Meeting .......................................................... 7
Summary of Recent Agency Reports
 AHCCCS – Hospital Assessment Report .......... 7

 AHCCCS – Interstate Agreement..................... 7
 ADC – IT System Replacement Report ............ 7
 DHS – Arnold v. Sarn Report .............................. 8

February Spending ................................................. 9
Tracking Arizona’s Recovery ............ Appendix A

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

February Revenues
Table 1

General Fund Revenues ($ in Millions)

February
Year-to-Date

FY 2016
Collections
$ 398.1
$ 5,788.3

Difference From
Budget Forecast
$
38.4
$
31.9

Sales Tax collections of $337.9 million were 3.9% above
February of last year but $(4.9) million below forecast for
the month. Year to date, sales tax collections are up by
2.8% compared to last year and $(20.5) million below
forecast.
Table 2 below includes the major categories of the state’s
sales tax, which together account for approximately 90%
of total collections.
Among the major sales tax categories, only the
restaurant and bar category performed well in February
compared to the same month in the prior year.
However, the 17.4% year-over-year increase in tax
collections from restaurant and bar sales was overstated
for 2 reasons: (1) a technical adjustment that
understated February 2015 collections by $3.2 million
and (2) one-time increase from the College National
Championship Game that overstated February 2016
collections by an unknown amount.
February represents the first full year since the
implementation of the change in the taxation of
construction materials under the 2013 “TPT Simplification”
legislation. Materials used for maintenance, repair,
replacement, and alteration of property are no longer
taxed under prime contracting TPT but rather under retail
TPT.
As discussed in the summary section, the continued
decline in prime contracting tax revenue in February
was somewhat surprising considering the simultaneous
5.4% year-over-year increase in construction
employment. This suggests that there may be a
“disconnect” between contracting tax collections and
contracting employment.
Table 2

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Use
Restaurant & Bar
Utilities

February
3.7%
(7.6)%
3.4%
17.4%
2.5%

YTD
7.8%
(16.4)%
(1.0)%
5.5%
2.0%

Individual Income Tax net revenues were $77.5 million in
February, which were $40.7 million more than the prior
year and $44.2 million above forecast for the month.
Year-to-date, revenue has grown 6.6% over the prior year.
As indicated in Table 3, withholding increased by 8.8%
above last year and was $12.0 million above the

Difference
From FY 2015
$
41.8
$
217.3

forecast. The strong monthly growth is partly explained
by an increase in processing days relative to February
2015. Year-to-date withholding collections are 3.5%
above FY 2015.
February estimated and final payments of $25.4 million
were 24.7% above last year and $4.8 million above the
forecast. Year-to-date, payments are 24.1% above
those collected during the same period of FY 2015.
February Individual Income Tax refunds totaled $(284.4)
million – this compares to $(292.9) million in February
2015 and a forecasted amount of $(311.8) million. The
drop in refunds during the month may have been the
result of a timing issue that accelerated some refunds to
January.
Table 3

Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated/Final Payments
Refunds

February
8.8%
24.7%
(2.9)%

YTD
3.5%
24.1%
7.8%

Corporate Income Tax net collections were $12.3 million
in February, which was $11.1 million more than the prior
year and $11.2 million above the forecast. Year to date,
collections are $(36.1) million below prior year
collections. This decrease is probably the result of the
decline in the Corporate Income Tax rate.
The Lottery Commission reports that January ticket sales
were $138.4 million, which is $67.8 million, or 95.9%,
above sales in the prior year. Powerball ticket sales
comprised $62.4 million of the increase compared to
last year, having been spurred by a $1.5 billion recordbreaking jackpot during the month. Year-to-date ticket
sales are $518.4 million, which is 26.7% above last year’s
sales. General Fund distributions associated with the
January sales are not expected to occur until April.
Insurance Premium Tax collections of $2.1 million in
February were $(3.1) million below the prior year and
$(3.0) million below the forecast. Year-to-date,
collections are 6.6% above last year.
Due to the implementation of a new accounting
system, DOR has made technical adjustments to prior
month collection figures. For February, DOR has
decreased the amount of prior General Fund revenue
collections by $(0.8) million, and the adjustment has
been included in the reported year-to-date results.

3
Table 4

General Fund Revenue:
Change from Previous Year and Budget Forecast
February 2016
Current Month

FY 2016 YTD (Eight Months)

Change From
Actual

February 2015

February 2016

Amount

Change from
Baseline Forecast

Percent

Amount

Actual

Percent

February 2015

February 2016

Amount

Baseline Forecast

Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate
Property
Luxury - Tobacco

$337,926,114

$12,548,839

77,521,976

40,713,948

12,260,403

11,124,188

300,944

(203,906)

3.9 %
110.6
-(40.4)

($4,854,888)
44,189,339
11,177,459

(1.4) %
132.6

$2,856,590,327

$77,104,445

2.8 %

2,612,612,480

161,156,379

6.6

(36,083,541)

(11.0)

($20,521,436)
56,502,320
13,443,963

290,739,438

(491,605)

(62.0)

23,586,497

2,170,439

10.1

(179,429)

(0.8)
1.5

1,194,145

189.8

347,267

23.5

15,950,226

1,276,249

8.7

240,329

3,276,932

1,057,039

47.6

1,096,561

50.3

21,860,591

280,161

1.3

22,902

Insurance Premium

2,067,262

(3,077,420)

(59.8)

(2,983,047)

(59.1)

193,086,786

12,000,693

6.6

Other Taxes

1,393,963

(153,998)

(9.9)

(84,113)

(5.7)

4,114,279

Sub-Total Taxes

$436,570,868

$63,202,835

16.9 %

2.2

--

1,823,275

- Liquor

(0.7) %

$48,396,973

12.5 %

(747,427)

$6,018,540,623

$217,157,397

27,544,450

2,954,650

(15.4)
3.7 %

4.8

0.1

(4,721,458)

(2.4)

(400,110)

(8.9)

$44,387,080

0.7 %

Other Revenue
Lottery
License, Fees and Permits
Interest
Sales and Services
Other Miscellaneous
Disproportionate Share
Transfers and Reimbursements
Sub-Total Other Revenue
TOTAL BASE REVENUE

0
2,325,522
2,759

(9,263,200) (100.0)
764,256

25.9

0
48,666

12.0

(931,072)

(4.5)

1,833,547
(308,452)

13,393

(7,970)

(37.3)

(89.9)

10,517,906

(9,519,305)

(47.5)

(8,453,802)

(44.6)

2,347,449

1,249,992

113.9

1,262,577

116.4

26.1

(3,049,753)

(13.1)

0

0

1,237,067

(2,819,768)

$6,848,901

($19,601,035)

(74.1) %

($10,022,259)

$43,601,800

10.9 %

$38,374,714

$443,419,769

(69.5)

(3,007,366)

20,225,852

4,184,318

--

0

0

(70.9)

19,517,046

(11,517,674)

(59.4) %

$97,553,727

($14,837,053)

9.5 %

$6,116,094,350

$202,320,344

-(37.1)
(13.2) %
3.4 %

457

7.1
(1.5)

(8,327,030)
0

48.0

19,735,079

(91.1)
--

894

-2.1

(9,532,882)

936,105

567

49.0

0
(2,471,079)
($12,449,081)
$31,937,999

3.5

-(11.2)
(11.3) %
0.5 %

Other Adjustments
Urban Revenue Sharing
One-Time Transfers
Sub-Total Other Adjustments
TOTAL GENERAL FUND REVENUE

(50,469,528)
5,168,200
(45,301,328)

275,114
(2,086,256)
(1,811,142)

-(28.8)
4.2 %

(6)

0.0

0

0.0

(6)

0.0 %

(403,756,222)
75,943,900
(327,812,322)

2,200,918
12,820,398

-20.3

15,021,316

-- %

(6)

0.0

0

0.0

(6)

0.0 %

$398,118,441

$41,790,659

11.7 %

$38,374,707

10.7 %

$5,788,282,028

$217,341,660

3.9 %

$31,937,993

0.6 %

$113,786,424

$4,652,421

4.3 %

$3,591,977

3.3 %

$889,925,825

$46,514,920

5.5 %

$6,470,787

0.7 %

Non-General Funds
Highway User Revenue Fund

4

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

Monthly Indicators
NATIONAL

ARIZONA

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 1.0% in the
fourth quarter of 2015. This estimate represents a
slowdown from the 2.0% growth in the third quarter of
2015. The deceleration was primarily due to slower
growth in consumption and decreases in business
investment, exports and state and local government
spending. Declining performance in these categories
was partly offset by deceleration in imports and a pickup in federal government spending.

Housing
Single-family housing construction is accelerating, while
multi-family construction has peaked. Arizona’s 12month total of single-family building permits is 22,971,
or 31.3% more than a year ago. The comparable
single-family permit growth rate for the entire U.S. is
9.7%. See Appendix A – Tracking Arizona’s Recovery for
historical information.

The Conference Board’s U.S. Consumer Confidence
Index decreased (5.6) points in February to a level that is
(6.7)% below the February 2015 level. The decrease
reflected a widespread drop of consumer confidence in
current economic circumstances and in the economic
outlook six months in the future. Economists believe the
monthly drop reflected anxiety over stock market
volatility and an unimpressive employment report. As
this negative activity have since eased, it is expected
that consumer confidence will return to growth in the
index’s next release.
The Conference Board’s U.S. Leading Economic Index
decreased by (0.2)% in January but still stands 2.2%
above its January 2015 reading. Of the index’s 10
components, 5 made positive contributions in January
while 4 made negative contributions and 1 was neutral.
The greatest drag on the index came from stock prices
and initial claims for unemployment insurance. These
impacts were partly offset by movement in interest rates
and improvement in manufacturing orders and hours
worked.
According to the U.S. Department of Commerce Bureau
of Economic Analysis, the U.S. Personal Consumption
Expenditure Price Index (PCEPI) increased 0.1% in
January, relative to December. The measure stands
1.3% above the January 2015 level. While this amount
represents the index’s strongest year-over-year growth
since October 2014, it is still well below the Federal
Reserve Bank’s 2% annual inflation target. The low
measure is largely due to a (5.2)% year-over-year
decrease in energy prices. Annual growth in the core
index (all items except food and energy), however, has
grown by a steadier 1.7% through January.

The 12-month total of multi-family building permits was
increasing strongly compared to last year, but has
recently leveled off. Arizona’s total of 9,808 multifamily building permits is (5.2)% below 2015. Arizona’s
rate of increase is now significantly less than the
comparable multi-family permit growth for the U.S. as a
whole, which is 21.0% above 2015.
Employment
As a result of the annual benchmarking revision of
establishment survey data, the Department of
Administration (DOA) reported in March that Arizona
added more nonfarm jobs in 2014 and 2015 than
previous estimates indicated. By incorporating
comprehensive data from unemployment insurance
records, the federal Bureau of Labor Statistics (BLS)
determined that the state added, on average, 2,000
and 5,900 more jobs per month in 2014 and 2015,
respectively, than previously reported. On an average
annual basis, the job growth in 2015 was 0.2% higher
than previously estimated. Overall, the state had a net
increase of 66,000 (+2.6%) nonfarm jobs in 2015, which
was largest net gain since 2006.
The latest estimate of nonfarm employment showed
that the state shed (48,600) jobs in January over
December in the prior year. Job losses typically occur
in January when the holiday season comes to an end.
The average job reduction for the month of January in
the prior 10 years was (57,000). Compared to January
2015, nonfarm employment was up by 3.0%, or 78,100
jobs.
In January, the Average Weekly Hours worked by
individuals in Arizona’s private sector was 34.2 hours.
This workload is (0.3)% below the prior month level and
(0.6)% below the January 2015 level.
The Average Hourly Earnings received by these private
sector workers was $23.42, which is 0.7% above the
average in the prior month. January earnings were
2.2% above the average in January 2015 and represent
the 10th consecutive month of positive year-over-year
increases in average wages.

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

Monthly Indicators (Continued)
The household survey data used to estimate the state’s
unemployment rate was also recently revised. The
historical revision, which included the period from 1976
through 2015, was relatively small on an annualized
basis. The state’s seasonally adjusted jobless rate fell
from 5.9% in December to 5.6% in January. The U.S.
unemployment rate in January was significantly lower at
4.9%.
Tourism
Revenue per available room reached $75.82 in January,
which was (6.3)% below the amount in January 2015.
Arizona state park visitation in December 2015 was up
3.6% from visitation in December 2014.
State Agency Data
At the beginning of March 2016, the total AHCCCS
caseload was 1.8 million members. Since the federal
health care expansion in January 2014, the overall
AHCCCS population has grown by 546,400 members.
Total monthly enrollment increased by 3,300 members,
or 0.2%, during February. The monthly increase offsets
the majority of decreases experienced during the prior 2
months. The overall increase in February was spread
among most enrollment populations. The Traditional
population of lower income children and their parents
increased 800 (0.1%) during the month to a level of
1,050,300 members. This was accompanied by an
enrollment increase of 500, or 0.3%, in the Proposition
204 Parent population.
In January 2014, the state started accepting new
enrollment to the Proposition 204 childless adults
program. In February 2016, the childless adult
population increased by 1,300, or 0.4%. At 308,400, this
population is 10.5% higher than a year ago.
The state also opted to expand adult Medicaid
coverage to 133% of FPL. Their enrollment increased by
400 in February and now totals 83,700 individuals.
Enrollment is 99.4% higher than a year ago. The federal
government is currently paying 100% of this cost.
There were 21,526 TANF recipients in the state in
February, representing a (1.0)% decrease in monthly
caseloads from January. The year-over-year number of
TANF recipients has declined by (16.4)%. The statutory
lifetime limit on cash assistance is 24 months.
The Supplemental Nutrition Assistance Program (SNAP),
formerly known as Food Stamps, provides assistance to
low-income households to purchase food. This

February, there were 962,037 food stamp recipients in
the state, representing a (1.3)% decrease from
January caseloads. Compared to February of last
year, food stamp participation declined by (4.7)%.
On February 29, 2016, ADC reported an inmate
population of 42,663. Down by 22 inmates from
January, this marked a decrease of (0.1)%. Since last
February, the population increased by 1.4%.
Based on revised information that the Department of
Child Safety provided for November 2015, reports of
child maltreatment totaled 51,136 over the last 12
months, an increase of 5.8% over the prior year. There
were 18,815 children in out-of-home care as of
November 2015, or 10.5% more than in November
2015. Compared to the prior month, the number of
out-of-home children decreased by (0.5)%.

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016
Table 5

MONTHLY INDICATORS
Indicator
Arizona
Employment
- Regular Unemployment Rate
- Total Unemployment Rate (discouraged/underemployed)
- Initial Unemployment Insurance Claims
- Unemployment Insurance Recipients
- Non-Farm Employment - Total
Manufacturing
Construction
- Average Weekly Hours, Private Sector
- Average Hourly Earnings, Private Sector
Sales
- Retail Taxable Sales
Motor Vehicles/Misc. Auto
Furniture/Home Furnishings
Building Material/Lawn & Garden
Building
- Residential Building Permits (12-month avg)
Single-family
Multi-family
- Maricopa County/Other, Home Sales (ARMLS)
Single-Family (Pending Sales)
- Maricopa County/Other, Median Home Price (ARMLS)
Single-Family (Pending Sales)
- Phoenix S&P/C Home Price Index (2000 = 100)
- Maricopa Pending Foreclosures
- Greater Phoenix Total Housing Inventory, (ARMLS)
Tourism
- Phoenix Sky Harbor Air Passengers
- National Park Visitors
- State Park Visitors
- Revenue Per Available Hotel Room
General Measures
- Arizona Consumer Confidence Index (1985 = 100)
- Arizona Coincident Index (July 1992 = 100)
- Arizona Leading Index -- 6 month projected growth
- Arizona Personal Income
- Arizona Population
- State Debt Rating
Standards & Poor’s/Moody’s
Outlook
Agency Measures
- AHCCCS Recipients
Acute Care Traditional
Prop 204 Childless Adults
Other Prop 204
Adult Expansion
Kids Care I
Long-Term Care – Elderly & DD
Emergency Services
- Department of Child Safety (DCS)
Annual Reports of Child Maltreatment (12-month total)
DCS Out-of-Home Children
Filled Caseworkers (1406 Budgeted)
- ADC Inmate Growth
- Department of Economic Security
- TANF Recipients
- SNAP (Food Stamps) Recipients
- Judiciary Probation Caseload
Non-Maricopa
Maricopa County
United States
- Gross Domestic Product
(Chained 2009 dollars, SAAR)
- Consumer Confidence Index (1985 = 100)
- Leading Indicators Index (2010 = 100)
- Consumer Price Index, SA (1982-84 = 100)
- Personal Consumption Price Index (2009 = 100)

Time Period

Current Value

Change From
Prior Period

Change From
Prior Year

January
4th Q 2015
January
August
January
January
January
January
January

5.6%
12.8%
19,143
29,157
2,674,100
160,100
129,100
34.2
$23.42

(0.3)%
(0.8)%
19.5%
(23.0)%
(1.8)%
(0.3)%
(0.7)%
(0.3)%
0.7%

(0.8)%
(1.9)%
1.2%
(32.2)%
3.0%
2.6%
5.4%
(0.6)%
2.2%

November
November
November

$976.0 million
$303.1 million
$387.3 million

5.1%
(11.5)%
8.6%

15.0%
(2.0)%
16.1%

January
January

22,971
9,808

1.7%
7.5%

31.3%
(5.2)%

January

4,515

16.2%

2.5%

January

$229,000

(0.4)%

8.8%

December
January
January

157.22
4,156
25,886

0.5%
(2.5)%
13.1%

6.3%
(26.8)%
(4.5)%

December
December
December
January

3.71 million
601,364
121,800
$75.82

4.8%
(5.5)%
(31.1)%
46.3%

(0.7)%
0.0%
3.6%
(6.3)%

1st Q 2016
December
December
3rd Q 2015
July 2015

81.6
223.38
7.0%
$269.5 billion
6,828,065

May
May

0.5%
0.6%
0.1%
1.4%
N/A

3.2%
4.4%
3.5%
5.2%
1.5%

AA / Aa2
Stable

N/A
N/A

N/A
N/A

March 1st

1,804,530
1,050,251
308,445
188,476
83,745
711
57,693
115,209

0.2%
0.1%
0.4%
0.3%
0.5%
(2.6)%
0.1%
0.2%

13.2%
10.1%
10.5%
11.7%
99.4%
(56.4)%
1.8%
25.2%

Nov. 2015
November
January
February

51,136
18,815
1,273
42,663

0.0%
(0.5)%
(36)
(0.1)%

5.8%
10.5%
(80)
1.4%

February
February

21,526
962,037

(1.0)%
(1.3)%

(16.4)%
(4.7)%

December
December

18,598
27,559

19
118

491
1,060

$16.5 trillion

1.9%

1.0%

92.2
123.2
238.1
110.0

(5.7)%
(0.2)%
0.0%
0.1%

(6.7)%
2.2%
1.3%
1.3%

4th Q, 2015
(2nd Estimate)
February
January
January
January

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

JLBC Meeting
At its February 25, 2016 meeting, the Joint Legislative
Budget Committee considered the following issues:

with FY 2015 expenditures, to cover FY 2016 premium
tax increases in the DDD Operating Budget line, and
to fund FY 2016 case manager pay adjustments.

Arizona Department of Administration/Department of
Child Safety – Review of CHILDS Automation Project The Committee gave a favorable review of the
department’s $4.4 million expenditure plan from the
transition appropriation for CHILDS infrastructure to
migrate DCS data to a private vendor. The
Committee included a provision in its review
requiring DCS to report on any conditions required by
the Information Technology Authorization Committee
(ITAC) and to submit quarterly independent thirdparty reports.
Department of Economic Security – Review of
Appropriation Transfers – The Committee gave a
favorable review of a portion of the requested
transfers into the Division of Developmental Disabilities
(DDD) Operating Budget and Case Management
lines. The Committee favorably reviewed $11.5
million in transfers sufficient to align appropriations

Summary of Recent Agency Reports
AHCCCS – Report on the FY 2015 Hospital Assessment –
Pursuant to A.R.S. § 36-2901.08, the Arizona Health Care
Cost Containment System (AHCCCS) is required to
establish an assessment on hospital revenue, discharges,
or bed days for the purpose of funding the state match
portion of the Medicaid expansion (adults from 100%133% of the Federal Poverty Level) and the entire
Proposition 204 population. In addition, A.R.S. § 362903.08 requires AHCCCS to annually report the amount
of estimated Medicaid payments each hospital
received for services provided to populations whose
coverage is funded by the assessment.
AHCCCS estimates that hospitals received coverage
payments of $795.9 million in FY 2015, or $525.4 million
above the $270.5 million in assessments these hospitals
paid. Out of 108 hospitals that served Medicaid
enrollees in FY 2015, AHCCCS estimates that 103
received at least as much in coverage payments as
they had paid in hospital assessments. The remaining 5
hospitals received an estimated $3.0 million less in
combined payments than they had paid in assessments.
Due to reporting lags between providers and AHCCCS
health plan contractors, payments can take upwards of
3-6 months before paid claims appear in AHCCCS’
database. Because of this lag, AHCCCS was not able
to report the FY 2015 estimated Medicaid payments

each hospital received by the August 1 reporting date
in A.R.S. § 36-2903.08. (Jon Stall)
AHCCCS – Report on Interstate Agreement with Hawaii –
Pursuant to A.R.S. § 36-2925H, the Arizona Health Care
Cost Containment System (AHCCCS) has submitted its
annual report on the status of an Interstate Agreement
with the State of Hawaii.
This report summarizes the continued activities
associated with the agreement between AHCCCS and
Hawaii for Medicaid data processing. In FY 2015,
Arizona received $8.8 million in revenues from Hawaii, of
which $8.1 million was expended for staffing and
automation costs associated with implementing the
agreement. The remaining $761,700 was deposited into
2 funds with a combined balance of $2.9 million. (Jon
Stall)
State Department of Corrections – Third-Party Report on
the Adult Inmate Management System (AIMS)
Replacement – Pursuant to a FY 2015 General
Appropriation Act footnote, the Arizona Department of
Corrections (ADC) provided a quarterly update of the
progress of the AIMS replacement project. The project
has been appropriated $16.0 million; both the JLBC
Baseline and the Executive budget include $8.0 million
for FY 2017 to complete the project. The FY 2015

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

Summary of Recent Agency Reports (Continued)
appropriation required ADC to provide the third-party
reports upon expenditure of the FY 2015 monies.
The third-party reviewer noted that ADC and the vendor
continue to “collaborate efficiently and effectively” and
the “project’s fiscal status remains good.” ADC is
customizing an off-the-shelf system for the inmate
management needs of the department. ADC and the
vendor are simultaneously developing and testing
different functions and areas of the new system. In order
to facilitate this process, the report details how the
vendor and department instituted tracking and decisionmaking procedures to ensure that the project is
completed on time, and developed protocols for testing
both newly-completed modules and the overall project.
The reviewer indicated that the vendor and ADC shifted
the documentation, monitoring, and reporting standards
to align with the communication and development
processes that emerged as both parties worked on the
project. ADC has accepted the risk associated with
changing the initial standards.
The vendor and department continue to work to mitigate
risk in the testing period, transfer legacy data, and
develop the model for final testing and the full
operational use by the department. The pilot
implementation is still scheduled for February 2017 and
the full implementation for March 2017. (Micaela Larkin)
Department of Health Services – Report on Arnold v. Sarn
– Pursuant to a FY 2016 General Appropriation Act
footnote, the Department of Health Services (DHS) has
submitted the report for the first and second quarter of FY
2016 on implementing the Arnold v. Sarn joint agreement.
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
received court approval in February 2014, requires
expansion of certain services by June 2016. These
services include Assertive Community Treatment (ACT),
Peer Support, Supported Employment, and Supportive
Housing.
Assertive Community Treatment (ACT): The joint
agreement requires DHS to establish 8 additional ACT
teams. ACT teams include more than 10 specialized
health care professionals that provide community-based
services that are tailored to the client’s needs. DHS
estimates that the cost per team added is approximately
$1.5 million. As a result, DHS expects that the Total Fund
cost of adding all 8 teams is $11.6 million, including $8.7

million from the General Fund. DHS added 1 team in
September 2015, increasing the total number of ACT
teams to 21. Since the beginning of FY 2015, DHS has
added a total of 6 ACT teams.
Peer Support: The joint agreement requires DHS to
provide peer support services to an additional 1,500
SMI clients. Peer support services are delivered in
individual and group settings by individuals who have
personal experience with mental illness, substance
abuse, and recovery. DHS estimates that the cost per
client for such services is approximately $1,100. As a
result, DHS expects that the Total Fund cost of adding
1,500 SMI clients is $1.6 million, including $1.2 million
from the General Fund. DHS has added a total of
1,802 clients since the beginning of FY 2015, increasing
the total number of Class Members receiving peer
support services to 4,125.
Supported Employment: The joint agreement requires
DHS to provide supported employment services to an
additional 750 SMI clients. Supported employment
services include assistance in attaining employment,
job coaching, transportation, specialized job training
and individually tailored supervision. DHS estimates
that the cost per client for such services is
approximately $1,600. As a result, DHS expects that
the Total Fund cost of adding 750 clients is $1.2 million,
including $923,000 from the General Fund. DHS has
added 741 clients since the beginning of FY 2015,
increasing the total number of Class Members
receiving supported employment services to 1,214.
Supportive Housing: The joint agreement requires DHS
to provide supported housing services to an additional
1,200 SMI clients. Supportive housing includes financial
assistance such as rental subsidies as well as support
services to help clients obtain and maintain housing.
DHS estimates that the cost per client for such services
is approximately $26,300. As a result, DHS expects that
the Total Fund cost of adding 1,200 SMI clients is $31.5
million, including $26.8 million from the General Fund.
DHS has added 2,805 clients since the beginning of FY
2015, increasing the total number of Class Members
receiving supportive housing services to 2,805. (Patrick
Moran)

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

February Spending
February 2016 General Fund spending of $510.6 million was
$(37.0) million less than February 2015. Year to date,
spending is $6.89 billion, or $(159.0) million below last year.
(See Tables 6 & 7).



Even after accounting for issues relating to DCS, the
significant decline in DES spending year-to-date is
due to technical timing issues relating to the
disbursement of Medicaid matching funds.



Year to date, the Department of Education has spent
$44.2 million more than the prior year.





Due to technical reporting issues with the newlycreated Department of Child Safety (DCS) in FY 2015,
the figures reported below for DCS and the Department
of Economic Security do not accurately reflect changes
in spending levels from the prior year.

During FY 2016, Universities spending has declined by
$(75.3) million. This is related to changes enacted in
the FY 2016 budget, which contained a $(99.0)
million spending reduction for the Universities system.

Table 6
General Fund Spending ($ in Millions)
Change From

YTD Change

Feb 16

Feb 15

Year-to-Date

from FY 15

AHCCCS

81.4

(44.6)

856.6

(84.0)

Corrections

77.9

1.3

690.7

44.9

Child Safety

14.0

14.0

260.8

181.0
(215.7)

Agency

Economic Security

4.4

(2.4)

418.5

Education

221.5

(5.8)

2,917.5

44.2

Health Serv ices

15.5

(0.0)

544.5

(3.7)

Public Safety

1.8

(0.8)

56.8

1.1

School Facilities Board

23.9

6.7

185.9

12.6

Univ ersities

36.5

(9.1)

511.3

(75.3)

Leaseback Debt Serv ice

0.0

0.0

84.1

(0.0)

Other

33.7

3.7

367.5

(64.1)

Total

510.6

(37.0)

6,894.2

(159.0)

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

Table 7

General Fund Spending
($ in Thousands)
Agency

Feb 16

Change from
Feb 15

Year-to-Date

YTD Change
from FY 15

Dept. of Admin./Automation Projects Fund
ADOA – Sale/Leaseback Debt Service
Office of Administrative Hearings
Commission of African-American Affairs
Department of Agriculture
AHCCCS
Attorney General
State Board of Charter Schools

4,815.0
61.7
10.6
282.5
81,376.4
2,701.5
75.5

1,266.9
(3.8)
4.9
(71.3)
(44,646.9)
1,000.6
14.2

17,678.9
84,114.6
576.3
81.2
5,253.3
856,550.2
14,658.4
716.9

(26,152.3)
(7.1)
(25.9)
74.0
172.2
(83,959.0)
147.8
140.2

Department of Child Safety

13,951.6

13,951.6

260,848.8

180,950.7

2,283.3
215.2
1.5
77,880.6
1,911.7
4,430.2
86.4
221,538.4
727.7
21.5
22.3
79.3
207.0
212.0
291.7
79.6
692.6
15,515.2
195.3
88.4
238.4
1.1
336.4

(416.7)
(90.1)
(51.9)
1,323.1
1,078.2
(2,360.4)
86.4
(5,814.2)
239.5
8.3
(1.3)
15.1
(27.6)
41.6
(732.5)
26.4
124.5
(12.8)
(21.2)
(55.1)
158.8
(0.1)
3.4

17,891.4
38,678.1
288.2
690,713.1
6,000.5
18,178.3
418,453.5
743.0
2,917,546.0
5,721.2
7,000.0
125.8
380.5
625.3
1,990.5
1,465.4
3,539.9
1,794.4
685.2
6,326.0
544,521.9
2,265.4
587.8
1,154.9
22.0
3,318.8

(3,333.6)
(14,853.1)
(118.4)
44,938.0
(1,650.0)
4,072.6
(215,655.7)
743.0
44,207.1
(206.4)
25.0
10.2
4.3
(23.5)
37.9
473.5
1,794.4
37.9
(790.9)
(3,722.9)
15.8
32.5
428.4
(19.0)
(205.5)

2,047.0
1,025.0
1,534.2

(584.8)
(65.4)
(1,142.0)

56,552.5
9,197.8
16,960.6

(3,308.5)
(34.1)
(9,018.1)

AZ Commerce Authority
Community Colleges
Corporation Commission
Department of Corrections
County Funding
AZ State Schools for the Deaf & Blind
Department of Economic Security
State Board of Education
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
Department of Gaming
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

11

JLBC – MONTHLY FISCAL HIGHLIGHTS – MARCH 2016

Table 7 (Continued)

Agency
State Land Department
Legislature
Auditor General
House of Representatives
Joint Legislative Budget Comm.
Legislative Council
Senate
Mine Inspector
Nav. Streams & Adjudication
Occupational Safety and Health Review
Arizona State Parks Board
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
Rio Nuevo Distribution
School Facilities Board
Secretary of State
Tax Appeals Board
Office of Tourism
Department of Transportation
Universities
Board of Regents
Arizona State University
Northern Arizona University
University of Arizona
Department of Veteran Services
Department of Water Resources
Water Infrastructure Finance Authority
Department of Weights & Measures
Other - JP Salaries Distribution
Other
Total

Feb 16

Change from
Feb 15

Year-to-Date

YTD Change
from FY 15

634.3

(91.1)

7,073.2

(927.5)

1,491.8
1,247.8
165.1
495.3
613.5
85.8
7.8
2.5
1,763.5
6.5
169.7
4,058.4
23,929.5
2,994.3
17.1
-

5.1
(26.2)
(43.6)
62.1
(286.0)
11.3
(2.0)
2.5
(4.3)
(849.7)
(49.8)
9.5
2,239.3
6,675.8
1,330.0
0.4
(0.1)

13,076.2
9,130.4
1,516.6
4,249.3
4,977.3
743.1
79.8
2.5
277.8
20,449.0
1,396.8
56,805.5
6,000.0
1,190.3
1,663.4
27,484.1
185,892.3
9,036.0
180.3
6,399.4
-

(128.8)
555.2
8.2
(1,804.5)
(608.0)
(17.3)
(29.2)
1.6
277.8
(1,022.4)
1,098.3
(1,869.6)
158.4
(18.7)
(3,566.5)
12,561.2
(848.7)
(1.0)
(1,994.0)
(0.1)

22.2
16,554.5
5,826.9
14,080.3
438.0
866.5
4.2
89.1
95.0
510,596.5

1.8
(5,004.7)
(1,488.6)
(2,586.1)
84.3
(64.0)
(73.5)
(175.5)
95.0
(36,982.9)

19,078.4
223,522.9
77,110.0
191,571.9
3,404.0
6,933.2
820.9
817.7
136.8
6,894,225.5

(3,224.3)
(39,526.1)
(11,909.1)
(20,689.1)
384.8
(227.4)
(1,000.0)
(42.6)
131.7
98.3
(158,957.3)

JLBC
Jul 14

Jul-15

3

JLBC
Jul 14
Jul 15
Jan 16

35,000

Jan 15

8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%

Jul 13

Jan 16

Jul 15

Jan 15

Jul 14

Jan 14

2,200

Jul 13

Jan 13

Jul 12

Jan 12

Jul 11

Jan 11

Jul 10

Jan 10

Jul 09

Jan 09

Jul 08

Jan 08

Jul 07

Jan 07

Jul 06

Jan 06

Jul 05

Jan 05

Jul 04

Jan 04

Jul 03

Jan 03

Jul 02

Jan 02

Jul 01

Jan 01

Thousands of Jobs
2,300

Jan 14

Jan 01
Jul 01
Jan 02
Jul 02
Jan 03
Jul 03
Jan 04
Jul 04
Jan 05
Jul 05
Jan 06
Jul 06
Jan 07
Jul 07
Jan 08
Jul 08
Jan 09
Jul 09
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
Jan 14
Jul 14
Jan 15
Jul 15
Jan 16

Year Over Year Growth (%)

2,400

Jan 13

Jul 12

Jan 12

Jul 11

Jan 11

Jul 10

Jan 10

Jul 09

Jan 09

Jul 08

Jan 08

Jul 07

Jan 07

2.2% Y/Y Growth
(January 2016)

Jul 06

$19

Jan 06

$20

Jul 05

$23.42 / Hour
(January 2016)

Jan 05

$23

Jul 04

$25

Jan 04

Average Hourly Earnings – Private Sector

Jul 03

$22

Total Monthly Claims for UI Benefits

Jan-16

Jul-15

Jan-15

Jul 14

Jan 14

Jul 13

Jan 13

Jul 12

Jan 12

JLBC

Jul 02

Jan 11
July 11

1

Jan 03

Jan 10
July 10

2……Total Non-Farm Employment
3……Average Hourly Earnings – Private Sector
4……Initial Claims for Unemployment Insurance
5……State Sales Tax Collections – Retail Category
6……State Sales Tax Collections – Contracting
Category
7……Residential Building Permits
8……Economic Activity Index

Jan 02

Jan 09
July 09

March 2016
Appendix A

Jul 01

Jan 01

Jan-16

12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%

Jan-15

Jan 08
July 08

$21

Jan 14

Jul 13

Jan 13

Jul 12

Jan 12

July 11

Jan 11

July 10

Jan 07
July 07

$ / Hour

Page:

Jan 10

July 09

Jan 09

July 08

Jan 08

July 07

Jan 07

Year Over Year Growth (%)

Tracking Arizona’s Recovery

Total Non-Farm Employment

2,800

2,700

2,600

2,500

$22.73 / Hour
(Octoberjobs
2014)
2,674,100
(January 2016)

2,100

3.0% Y/Y Growth
(January 2016)

2

Initial Claims for Unemployment Insurance

$24

45,000

40,000

30,000

19,143 Claims
(January 2016)

25,000

20,000

15,000

10,000

5,000

Not seasonally adjusted

4

State Sales Tax Collections – Retail Category

State Sales Tax Collections – Contracting Category
$100

$225
$75

$ in Millions

$175

$150

$25

$175.1 million
(February 2016)

5

* January 2014 estimate adjusted downward by $30 million to reflect onetime category shift.

Excludes temporary 1 ¢ sales tax

Jul 15

Jan 16

Jul 14

Jan 15

Jul 13

Jan 14

Jul 12

Jan 13

Jan 12

Jan 11

July 11

Jan 10

July 10

Jan 09

July 09

Jan 08

July 08

Jan 07

Jul 15

Jan 16

Jul 14

Jan 15

Jul 13

Jan 14

Jan 13

Jul 12

Jan 12

Jan 11

July 11

Jan 10

July 10

Jan 09

Jan 08

Economic Activity Index
240

100,000

223.4 Index Value
(December 2015)

230

90,000

220

80,000

Coincident Index Value

70,000
60,000

Single Family Unit - 22,971 Permits
Multi-Family Unit - 9,808 Permits

50,000

(Jan. 2016)
40,000
30,000

210
200
190
180
170
160

20,000

150

10,000

7

JLBC

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 15

Jan 15

Jul 14

Jul 13

Jan 14

Jul 12

Jan 13

Jul 11

Jan 12

Jan 11

Jul 10

Jul 09

Jan 10

Jan 09

Jul 08

Jan 08

Jul 07

Jul 06

Jan 07

Jul 05

Jan 06

Jul 04

Jan 05

Jul 03

Jan 04

Jan 03

Jul 02

Jul 15

Jan 16

Jan 15

Jul 14

Jul 13

Jan 14

Jul 12

Jan 13

Jan 12

Jul 11

Jan 11

Jul 10

Jul 09

Jan 10

Jul 08

Jan 09

Jan 08

Jul 07

Jul 06

Jan 07

Jul 05

Jul 04

Jan 05

Jul 03

Jan 04

Jan 03

Jul 02

Jan 02

Jul 01

Jan 01

Jan 06

12-Month Moving Sum

Jan 02

Jan 01

140

0

Jul 01

Building Permits

6

Excludes temporary 1 ¢ sales tax

Residential Building Permits

JLBC

July 09

JLBC

July 07

July 06

(7.6)% Y/Y Growth
(February 2016)
July 08

Jul 15

Jan 16

Jul 14

Jan 15

Jul 13

Jan 13

Jul 12

Jan 12

Jan 11

July 11

Jan 10

July 10

Jan 09

July 09

Jan 08

July 08

* Jan 14

JLBC

July 07

Jan 07

3.7 % Y/Y Growth
(February 2016)

40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%

July 07

Year Over Year Growth (%)

Jul 15

$0

Jan 16

Jul 14

Jan 15

Jul 13

* Jan 14

Jul 12

Jan 13

Jan 12

Jan 11

July 11

Jan 10

July 10

Jan 09

July 09

Jan 08

July 08

Jan 07

July 06

20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
July 06

Year Over Year Growth (%)

July 07

$100

Jan 07

$125

$28.2 million
(February 2016)

$50

July 06

$ in Millions

$200

8