JLBC - Monthly Fiscal Highlights

April 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 3.0%
above the
prior year, and
are $27.0
million above
the Baseline
forecast.”

March 2016 General Fund collections of $696.9
million were 17.0% above the prior year, and
were $(5.0) million below the Baseline forecast.
The large overall revenue growth rate was
entirely due to one-time fund transfers which
were enacted as part of the FY 2016 budget.
Excluding those transfers, the state’s ongoing
revenues were essentially unchanged from the
prior year.
Within ongoing revenues, 2 of the state’s large
revenue categories (Individual Income Tax and
Insurance Premium Tax) posted significant
changes from March 2015, but for technical
timing reasons that are unrelated to overall
economic activity.
The significant decline in Individual Income
Taxes was the result of a large increase in the
amount of refunds processed – most refunds
are processed and sent to taxpayers only on
Wednesday of each week and March 2016
had one additional Wednesday compared to
the prior year.
In terms of the significant increase in Insurance
Premium Tax, the state’s new accounting
system has allowed certain transactions to be
processed in March that were usually done in
April. With certain transactions being pulled into
March, it would be expected that the April
2016 results for the category would show an
offsetting decline.
Year-to-date, base General Fund revenues are
3.0% above the prior year, and are $27.0 million
above the Baseline forecast.

In comparison to revenue collections of $696.9
million, March 2016 spending was $569.7 million,
which is an increase of $114.4 million from the
prior year.
Fiscal year-to-date, General Fund revenues of
$6.49 billion have been offset by $7.48 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-April 2016 is $2.7 billion. In addition, the
state’s Budget Stabilization Fund has a balance
of $460.0 million.
April FAC Summary
The Finance Advisory Committee (FAC) met on
April 13, 2016 to update its 4-sector revenue
forecast. The FAC is a 14-member panel of
private and public sector economists and their
views serve as one of the 4 equal inputs into
JLBC’s Baseline revenue forecast. The
remaining 3 inputs are the JLBC Staff forecast
and 2 University of Arizona (UA) econometric
models.
The FAC heard presentations on General Fund
Revenue collections, the U.S. and Arizona
economy, and state cash flows. The JLBC Staff
provided members with revised FY 2016 – FY
2019 revenue estimates based on the updated
April 4-sector revenue forecast.
In comparison to the January base revenue
forecast, the April FAC projections are higher
for FY 2016 but lower for FY 2017 and FY
2018. The projected revenue growth rate for
FY 2019 remains unchanged (See Table 1).

Table of Contents

This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
April 21, 2016.

Summary

Summary of Recent Agency Reports

March Revenues..................................................... 3

 AHCCCS/DES/DCS – Actuarial Report ............ 9

Monthly Indicators.................................................. 5

 ADE – Budget Status Report .............................. 9

JLBC Meeting .......................................................... 8

 DEQ – E-Licensing Report ................................... 9

JCCR Meeting ......................................................... 8

 DHS – Medical and Dental Program................ 9

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

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Summary (Continued)
The upward revision to FY 2016 was primarily due to an
increase in UA’s “low scenario” model owing to the fact
that year-to-date collections are known for all but the
last 3 months of the current fiscal year. The downward
revision to FY 2017 was also mostly attributable to UA’s
“low scenario” model, which incorporates the risk of a
mild national recession occurring in the latter half of
2016 that would be caused by slowing global growth
and a significant stock market decline.
Table 1
Comparison of January and April FAC Forecasts

January
April

FY 16

FY 17

FY 18

FY 19

3.5%
3.9%

4.0%
3.4%

4.6%
4.0%

4.6%
4.6%

Compared to the January Baseline, the estimates under
the April FAC update would reduce revenues by $(8)
million in FY 2017, $(66) million in FY 2018, and $(69)
million in FY 2019. Under the assumed January Baseline
spending level, the projected cash balance would
increase from $625 million to $660 million in FY 2017,
primarily due to a higher carry forward balance from FY
2016.
Department of Education – Classroom Site Fund Report –
The JLBC Staff is required to annually determine by
March 30 of each year the estimated K-12 Classroom
Site Fund (CSF) per pupil amount for the upcoming
budget year. The CSF is funded from the Proposition 301
0.6¢ sales tax and from K-12 trust land endowment
earnings.
Under these parameters, public schools will receive $332
per weighted pupil from the CSF for FY 2017. The $332
per pupil amount would be higher than the $327 per
pupil amount anticipated for FY 2016 because of
projected growth in Proposition 301 sales tax revenues
and land trust earnings for FY 2017.

3

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

March Revenues
Table 2

General Fund Revenues ($ in Millions)

March
Year-to-Date

FY 2016
Collections
$ 696.9
$ 6,485.2

Difference From
Budget Forecast
$
(5.0)
$
27.0

Sales Tax collections of $353.2 million were 1.6% above
March of last year but $(11.6) million below forecast for
the month. Year to date, sales tax collections are up by
2.6% compared to last year and $(32.1) million below
forecast.
Table 3 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, use tax and
restaurant and bar categories performed well in
March. The use tax category increased by 6.6%, year
over year, whereas the restaurant and bar sales tax
grew 6.3%.
March marked the fourteenth consecutive month of
positive year-over-year retail collections and negative
year-over-year contracting collections. This pattern had
largely been explained by the change in the taxation of
construction materials under the 2013 “TPT Simplification”
legislation, during the twelve months following initial
implementation. Beginning in January 2015, the tax
base for building materials changed from contracting to
retail. Continued decreases in contracting collections
following the 12 month phase-in of TPT Simplification are
surprising given the 7.2% year-over-year growth in
construction employment.
Table 3

Sales Tax Growth Rates
Compared to Prior Year

Retail
Contracting
Use
Restaurant & Bar
Utilities

March
3.8%
(5.2)%
6.6%
6.3%
4.7%

YTD
7.4%
(15.3)%
(0.3)%
5.6%
2.3%

Individual Income Tax net revenues were $67.6 million in
March, which were $(67.7) million less than the prior year
and $(9.1) million below forecast for the month. Year-todate, revenue has grown 3.6% over the prior year.
As indicated in Table 4, withholding decreased by (2.7)%
below last year and was $(1.3) million below the
forecast. The monthly decrease is largely explained by a
reduction in processing days relative to March 2015.
Year-to-date withholding collections are 2.7% above FY
2015.
March estimated and final payments of $67.6 million
were 1.0% above last year and $(0.1) million below the

Difference
From FY 2015
$
101.2
$
318.6

forecast. Year-to-date, payments are 21.1% above
those collected during the same period of FY 2015.
March Individual Income Tax refunds totaled $(340.9)
million – this compares to $(281.9) million in March 2015
and a forecasted amount of $(333.2) million. The
increase in refunds during the month was largely the
result of an increase in the number of refund batches
processed relative to March 2015.
Table 4

Individual Income Tax Growth Rates
Compared to Prior Year

Withholding
Estimated/Final Payments
Refunds

March
(2.7)%
1.0%
20.9%

YTD
2.7%
21.1%
13.0%

Corporate Income Tax net collections were $71.9 million
in March, which was $(3.4) million less than in the prior
year and $(1.3) million below the forecast. Year to date,
collections are $(39.5) 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 February ticket sales
were $70.6 million, which is $(7.1) million, or (9.1)%, below
sales in February 2015. Year-to-date ticket sales are
$589.0 million, which is 20.9% above last year’s sales.
General Fund distributions associated with the February
sales are not expected to occur until April.
Insurance Premium Tax collections of $126.5 million in
March were $60.2 million above the prior year and $10.6
million above the forecast. The large increase above
March 2015 collections is likely the result of shorter
processing times of payments received during the
month. Year-to-date, collections are 29.2% above last
year.
Highway User Revenue Fund (HURF) collections of $119.0
million in March were up 9.8% compared to March of
last year and were $9.8 million above forecast. Year-todate collections are 6.0% above last year.
Due to the implementation of a new accounting
system, DOR has made technical adjustments to prior
month collection figures. For March, DOR has increased
the amount of prior General Fund revenue collections
by $13,200, and the adjustment has been included in
the reported year-to-date results.

4
Table 5

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

FY 2016 YTD (Nine Months)

Change From
Actual

March 2015

March 2016

Amount

Change from
Baseline Forecast

Percent

Amount

Actual

Percent

March 2015

March 2016

Amount

Baseline Forecast
Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate

$353,201,322

$3,209,791,649

$82,688,896

67,619,406

(67,676,606)

$5,584,451

(50.0)

1.6 %

($11,559,711)
(9,108,717)

(11.9)

(3.2) %

2,680,231,886

93,479,773

2.6 %
3.6

($32,081,148)
47,393,603

(1.0) %

71,913,922

(3,374,312)

(4.5)

(1,287,248)

(1.8)

362,653,359

(39,457,854)

(9.8)

12,156,715

(572,186)

(31.6)

24,825,658

2,410,652

10.8

(751,615)

(2.9)

1.8
3.5

Property

1,239,161

240,213

24.0

Luxury - Tobacco

2,070,451

(222,118)

(9.7)

0

0.0

18,020,677

1,054,131

6.2

240,329

1.4

3,064,747

260,696

9.3

0

0.0

24,925,338

540,857

2.2

22,902

0.1

126,501,590

60,247,580

90.9

10,647,923

9.2

319,588,376

72,248,273

29.2

5,926,465

(96.6)

(1,343,639)

(1,669,563)

(28.7)

(1,743,749)

- Liquor
Insurance Premium
Other Taxes
Sub-Total Taxes

32,934

(922,136)

$625,643,533

($5,862,232)

(0.9) %

($13,223,579)

(97.6)
(2.1) %

4,147,212
$6,644,184,156

$211,295,165

3.3 %

$31,163,501

1.9
(29.6)
0.5 %

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
2,622,883

(5,952,800) (100.0)
381,219

17.0

0

--

119,031

4.8

27,544,450

(2,998,150)

(9.8)

22,357,963

(549,854)

(2.4)

(5,099)

(21.9)

1,833,547
(189,421)

4,820

2,871

147.3

2,773

135.5

18,213

12,313,773

10,188,976

479.5

10,280,703

505.7

22,831,679

669,671

3.0

1,826,901

8.7

1,407,678

1,435,957

682,800

94.2

21,646,737

5,633,482

35.2

(2,353,745)

(9.8)

0
1,710,520
$18,059,674
$643,703,207

0
(2,921,023)

--(63.1)

0
(2,835,781)

--

0

(62.4)

21,227,566

(14,438,697)
($11,688,647)

$3,135,200

21.0 %

$8,249,526

84.1 %

$115,626,608

($2,727,032)

(0.4) %

($4,974,054)

(0.8) %

$6,759,810,764

0

$199,606,519

-(40.5)
(9.2) %
3.0 %

3,231

7.1
(0.8)

0
(5,306,860)
($4,186,348)
$26,977,152

21.6

-(20.0)
(3.5) %
0.4 %

Other Adjustments
Urban Revenue Sharing

(50,469,528)

275,114

--

(6)

0.0

(454,225,749)

One-Time Transfers

103,653,355

103,653,355

--

0

0.0

179,597,255

116,473,752

53,183,827

103,928,469

-- %

(6)

(0.0) %

(274,628,494)

118,949,785

-- %

$696,887,034

$101,201,437

17.0 %

($4,974,060)

(0.7) %

$6,485,182,270

$318,556,304

5.2 %

$26,977,140

0.4 %

$119,020,434

$10,657,776

9.8 %

$9,825,987

9.0 %

$1,008,946,259

$57,172,695

6.0 %

$16,296,774

1.6 %

Sub-Total Other Adjustments
TOTAL GENERAL FUND REVENUE

2,476,033

-184.5

(13)
0
(13)

0.0
0.0
0.0 %

Non-General Funds
Highway User Revenue Fund

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Monthly Indicators
NATIONAL
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 1.4% 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 a downturn in imports and a pick-up
in federal government spending.
The Conference Board’s U.S. Consumer Confidence
Index increased 2.2 points in March, reversing part of the
(3.8) point decrease in the prior month. The March
increase reflected improvement in the economic
outlook 6 months in the future. However, consumers
thought that their current economic and financial
circumstances became worse during the month.
Economists expect consumer opinion of the current
situation may improve next month, if financial markets
continue their recent stability.
The Conference Board’s U.S. Leading Economic Index
increased by 0.1% in February and stands 1.9% above its
February 2015 reading. Of the index’s 10 components, 4
made positive contributions in February while 5 made
negative contributions and 1 was neutral. The greatest
positive contribution came from reduced claims for
unemployment insurance. This impact was partly offset
by decreases in building permits and manufacturing
orders.
According to the U.S. Department of Commerce Bureau
of Economic Analysis, the U.S. Personal Consumption
Expenditure Price Index (PCEPI) decreased (0.1)% in
February, relative to January. The drop was driven by a
(6.4)% monthly decrease in energy prices. The overall
index stands 1.0% above the February 2015 level, which
is well below the Federal Reserve Bank’s 2% annual
inflation target. The low measure is largely due to a
(12.3)% year-over-year decrease in energy prices.
Annual growth in the core index (all items except food
and energy) has grown by a steadier 1.7% through
February.
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.
Arizona’s coincident index increased by 4.5% compared
to February 2015. Over the same time period, the U.S.
coincident index increased by 3.2%. See Appendix A –
Tracking Arizona’s Recovery for additional historical
information.
Housing
Single-family housing construction is accelerating, while
multi-family construction has peaked. Arizona’s 12month total of single-family building permits is 23,390,
or 33.0% more than a year ago. The comparable
single-family permit growth rate for the entire U.S. is
10.8%. See Appendix A – Tracking Arizona’s Recovery
for historical information.
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 9,632 multifamily building permits is (2.7)% 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 19.0% above 2015.
Employment
According to the latest employment report released by
the Department of Administration, the state added
12,200 net new nonfarm jobs in March compared to
the prior month. This was more than the 10-year
average net job gain for March of 10,200 jobs. Most of
the month-over-month job gains occurred in the
Leisure and Hospitality industry (+7,300).
Compared to the same month in the prior year,
Arizona added 84,300 net new jobs in March. This
represents a year-over-year job growth rate of 3.2%.
This was the largest year-over-year net employment
gain (in terms of both absolute numbers and
percentage growth) since December 2006. The largest
year-over-year job gains in March came from the
following industries: Education and Health Services
(+19,500), Professional and Business Services (+17,300),
and Financial Activities (+13,400).
The state’s regular unemployment rate decreased from
5.5% in February to 5.4% in March, the lowest jobless rate
since April 2008. The U.S. unemployment rate increased
from 4.9% to 5.0% in March.
In February, the Average Weekly Hours worked by
individuals in Arizona’s private sector was 34.2 hours.
This workload is 0.3% above the prior month level but
(2.6)% below the February 2015 level.

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Monthly Indicators (Continued)
The Average Hourly Earnings received by these private
sector workers was $23.64, which is 0.4% above the
average in the prior month. February earnings were
2.7% above the average in February 2015 and represent
the 11th consecutive month of positive year-over-year
increases in average wages.

The state also opted to expand adult Medicaid
coverage to 133% of FPL. Their enrollment increased
by 2,400 in March and now totals 86,200 individuals.
Enrollment is 69.2% higher than a year ago. The
federal government is currently paying 100% of this
cost.

The U.S. Department of Commerce Bureau of Economic
Analysis quarterly releases estimates of annual Personal
Income received in each state. This measure includes
wages and salaries, proprietors’ income, dividends,
interest, rent, transfers from the government and various
supplements to income while excluding capital gains,
contributions for government social insurance, and
pension benefit payments. In 2015, Arizona’s estimated
personal income increased by 4.6%, to $266.8 billion,
while personal income grew 4.4% nationwide. The
increase in Arizona was largely driven by 4.1% growth in
wages and salaries and 6.4% growth in government
transfer receipts. The large increase in government
transfer receipts was the result of 12.9% growth in
Medicaid benefits, which coincided with expanded
enrollment in the program. Excluding government
transfer receipts, personal income in 2015 grew 4.1% in
Arizona and 4.2% nationwide.

There were 20,495 TANF recipients in the state in
March, a monthly caseload decrease of (4.8)%. Yearover-year, the number of TANF recipients has
declined by (16.9)%. The statutory lifetime limit on
cash assistance is 24 months.

Tourism
Revenue per available room reached $99.30 in
February, which was 2.9% above the amount in
February 2015. Year-to-date, revenue per available
room is (1.6)% below the 2015 year-to-date amount
through February. Ridership during January through
Phoenix Sky Harbor Airport increased 1.2% above the
level in January 2015.

As of January 2016, the Department of Child Safety
received 50,891 reports of child maltreatment in the
last 12 months, which was an increase of 4.4% over
the prior year. There were 18,861 children in out-ofhome care in January 2016, or 0.7% more children
than in December 2015. Year-over-year, the number
of out-of-home children is up by 9.2%.

State Agency Data
At the beginning of April 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 539,500 members.
Total monthly enrollment decreased by (6,900)
members, or (0.4)%, during March. The overall decrease
in March was largely due to enrollment of Traditional
population of lower income children and their parents.
Enrollment in this population fell (8,500) (0.8%) in March
to a level of 1,041,700 members. This drop was
accompanied by an enrollment decrease of (2,400), or
(1.3)%, in the Proposition 204 parent population.
In January 2014, the state started accepting new
enrollment to the Proposition 204 childless adults
program. In March 2016, the childless adult population
increased by 800, or 0.3%. At 309,300, this population is
9.9% higher than a year ago.

The Supplemental Nutrition Assistance Program
(SNAP), formerly known as Food Stamps, provides
assistance to low-income households to purchase
food. In March, there were a total 958,155 food stamp
recipients in the state, a (0.4)% decrease over the
prior month. Compared to the same month last year,
food stamp participation was down by (4.2)%.
The Arizona Department of Corrections reported an
inmate population of 42,785 inmates at the end of
March. This was a 0.4% increase since February, and
a 1.3% increase since March 31, 2015.

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016
Table 6

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

March
4th Q 2015
February
March
March
March
March
February
February

5.4%
12.8%
15,551
25,271
2,712,600
158,900
133,700
34.2
$23.64

(0.1)%
(0.8)%
(18.8)%
(1.9)%
0.5%
0.1%
1.5%
0.3%
0.4%

(0.8)%
(1.9)%
6.0%
(14.0)%
3.2%
1.5%
7.2%
(2.6)%
2.7%

February
February
February

$900.6 million
$321.7 million
$340.9 million

(8.8)%
(24.4)%
(4.2)%

3.2%
(5.7)%
6.5%

February
February

23,390
9,632

1.8%
(1.8)%

33.0%
(2.7)%

February

6,388

41.5%

17.6%

February

$229,900

0.4%

7.0%

January
February
February

156.86
4,157
27,395

(0.2)%
0.0%
5.8%

6.1%
(26.8)%
0.2%

January
December
February
February

3.9 million
601,364
271,500
$99.30

(5.7)%
(5.5)%
41.0%
31.0%

1.2%
0.0%
1.8%
2.9%

1st Q 2016
February
January
2015
July 2015

81.6
224.6
6.3%
$266.8 billion
6,828,065

May
May

0.5%
0.5%
1.8%
N/A
N/A

3.2%
4.5%
2.1%
4.6%
1.5%

AA / Aa2
Stable

N/A
N/A

N/A
N/A

April 1st

1,797,618
1,041,738
309,278
186,116
86,176
665
57,775
115,870

(0.4)%
(0.8)%
0.3%
(1.3)%
2.9%
(6.5)%
0.1%
0.6%

11.1%
8.6%
9.9%
8.4%
69.2%
(48.4)%
1.6%
20.8%

Jan. 2016
January
March
March

50,891
18,861
1,282
42,785

(0.3)%
0.7%
33
0.4%

4.4%
9.2%
(70)
1.3%

March
March

20,495
958,155

(4.8)%
(0.4)%

(16.9)%
(4.2)%

February
February

18,609
27,517

15
(2)

517
888

$16.5 trillion

2.0%

1.4%

96.2
123.2
237.7
109.8

2.3%
0.1%
(0.2)%
(0.1)%

(5.1)%
1.9%
1.0%
1.0%

4th Q, 2015
(3rd Estimate)
March
February
March
February

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

JLBC Meeting
At its April 7, 2016 meeting, the Joint Legislative Budget
Committee considered the following issues:

At its April 12, 2016 meeting, the Joint Legislative
Budget Committee considered the following issues:

Arizona Department of Administration – Review of ASET
Projects – The Committee gave a favorable review of
the FY 2016 expenditure plan from the Automation
Projects Fund for Arizona Strategic Enterprise
Technology’s (ASET) project a “single sign-on”.

Department of Child Safety – Review of FY 2016 Third
Quarter Benchmarks – The Committee gave
favorable review of the FY 2016 Third Quarter
Benchmarks for assessing progress made in increasing
the department’s number of FTE Positions and in
reducing the number of backlog cases.

Arizona Department of Administration – Review of
Department of Economic Security Network Access
Control – The Committee gave favorable review of the
FY 2016 expenditure plan from the Automation Projects
Fund for a Department of Economic Security (DES)
Network Access Control project.
Arizona Department of Administration – Review of
Department of Environmental Quality Phase 3 Web
Portal Expenditure Plan – The Committee gave a
favorable review of FY 2016 expenditures from the
Automation Projects Fund for Phase 3 of the
development of the Department of Environmental
Quality (DEQ)’s web portal with the provision that the
results of quarterly third-party review are to be
provided to the Chairman of the JLBC, JLBC Staff, and
any member of the Committee who requests a copy.
Arizona Department of Administration – Review of
Guidelines for Lodging Rate Waivers – At a prior
meeting, the Committee approved ADOA’s lodging
reimbursement rates. These reimbursements
compensate state employees traveling on official state
business. As part of its review, the Committee included
a provision requiring ADOA to submit its written
guidelines for review and approving lodging rate
waivers to the Committee for review. The Committee
gave a favorable review of the submitted guidelines
for reviewing and approving lodging rate waivers.

Northern Arizona University – Review of Expenditure
and Performance Report of Nonprofit Biotechnology
Research Appropriation – The Committee gave
favorable review of NAU’s expenditure and
performance report of the nonprofit biotechnology
research appropriation.
Attorney General – Review of Allocation of Settlement
Monies – Standard & Poor’s Settlement – The
Committee gave favorable review of an allocation
from a legal settlement with the Standard & Poor’s
Financial Services, LLC (S&P). The AG proposes to
spend $3.0 million on homeless assistance programs
and $500,000 on consumer fraud education. The
review included 2 provisions: 1) The favorable review
does not constitute an agreement to fund these
projects once these one-time monies are depleted;
and 2) The Attorney General report to the Committee
on how it plans to allocate the funding and how the
program interacts with other state agencies’
homeless assistance efforts.

JCCR Meeting
At its April 5, 2016 meeting, the Joint Committee on
Capital Review considered the following issues:
Northern Arizona University – Review of Dining
Renovation Financing Project – The Committee gave a
favorable review of Northern Arizona University’s (NAU)
$14.0 million in system revenue bond issuances to fund a
$22.0 million renovation of the South Dining DuBois
Center facilities. Auxiliary revenues from NAU’s
contracted food services operation will pay for the debt
service on the $14.0 million. NAU’s food service vendor
will pay the remaining $8.0 million of the $22.0 million

renovation cost with an upfront cash payment. The
favorable review includes 2 standard University
financing provisions.
Arizona Department of Administration – Consider
Recommending FY 2016 Partial Rent Exemptions – The
Committee recommended a partial rent exemption of
$(3,200) for the Attorney General (AG) and $(5,800) for
ADOA to be replaced by a corresponding rent
payment of $9,000 for the Department of Emergency
and Military Affairs (DEMA) in FY 2016.

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Summary of Recent Agency Reports
AHCCCS, DES, & DCS – Report on Preliminary Actuarial
Estimates for FY 2017 Capitation Rate Changes – Pursuant
to FY 2016 General Appropriation Act footnotes, the
Arizona Health Care Cost Containment System
(AHCCCS) has submitted a report on preliminary
Medicaid capitation rate increases for contract year
(CY) 2017. Their submission includes information for
AHCCCS, the Department of Economic Security (DES),
and the Department of Child Safety (DCS).
In their report, AHCCCS provided information on
components of potential CY 2017 capitation rate
changes. The report listed no specific preliminary
capitation rate adjustment amounts. Potential changes
included:










Increases based on medical expense trends, utilization
trends, and reinsurance changes. AHCCCS’ actuaries
have observed growth in brand-name drugs that
exceeds 10% and growth in generic drugs that
exceeds overall inflation. AHCCCS will continue to
analyze rate adjustments and utilization trends
through the summer of 2016.
Implementation of a rate differential for hospitals and
nursing facilities that meet requirements under a
value-based performance program to be
implemented in CY 2017. In the long run, AHCCCS
expects that the rate differential will incentivize
provider behavior that reduces capitation rate
growth.
Annualization of a mid-year rate increase for inpatient
care provided to children with a severe physical
illness. The mid-year increase previously received a
favorable review at the JLBC meeting held on
September 24, 2015.
Potential capitation adjustments if stakeholder
recommendations are implemented on care for
individuals in foster care, with autism spectrum
disorder, or with substance addiction.
No change related to reimbursement of a nationwide
health insurer fee included in the federal Affordable
Care Act (ACA), as the assessment amount is
unchanged from the prior year.

The enacted FY 2016 budget requires AHCCCS to limit
capitation rate growth to no more than 1.5% in FY 2017
and FY 2018. In their report, AHCCCS “has concerns
about the actions that would need to be taken to meet
the 1.5% target.” (Jon Stall)
Department of Education – Budget Status Report –
Pursuant to a General Appropriation Act footnote and
A.R.S. § 35-131D, the Arizona Department of Education
(ADE) recently provided an update regarding its budget
status for FY 2016. In that report, ADE estimates that it will

experience an $(18.9) million net funding shortfall for
formula programs for FY 2016. This consists of an
estimated $(7.6) million shortfall for Basic State Aid and
$(11.3) million shortfall for Additional State Aid (the
Homeowner’s Rebate and 1% Cap programs).
These estimates do not reflect a pending $19.8 million
adjustment for 1% cap reforms required by Laws 2015,
Chapter 15, for which timing is uncertain. With that
adjustment ADE would have a projected surplus of
$900,000 rather than a projected shortfall of $(18.9)
million. ADE’s current estimates are subject to further
revision as additional data become available. (Steve
Schimpp)
Department of Environmental Quality – Third-Party
Report on E-Licensing Project – Pursuant to a FY 2015
General Appropriation Act footnote, the Department
of Environmental Quality (DEQ) has provided a
quarterly update of the E-Licensing project. In the
report, the vendor gave an overall favorable
evaluation of DEQ’s progress in incorporating
recommendations from the previous third-party report.
The report stated that DEQ’s increased need for an
enterprise data management strategy and framework
is surfacing as a real risk and challenge but these
challenges will be addressed by the recent
identification of an Enterprise Data Architect. No
foreseeable end date to the project was provided.
(Josh Hope)
Department of Health Services – Quarterly Report on
the Comprehensive Medical and Dental Program
(CMDP) – Pursuant to Laws 2013, Chapter 220, the
Department of Health Services (DHS) is required to
report on the financial and program accountability
trends of CMDP, the foster care medical program. This
report is required quarterly through the second quarter
of FY 2016, or through December 31, 2015.
DHS administers behavioral health services for CMDP
enrollees. In the first quarter of FY 2016, 68% of foster
care children received behavioral health services, a
9% increase compared to the fourth quarter of FY
2015. The percent of members served varied by region
from a low of 60% in Maricopa County (GSA 6) to a
high of 84% in GSA 3, which includes Cochise, Graham,
Greenlee, and Santa Cruz Counties. Maricopa County
and GSA 3 were also the lowest and highest service
users in the fourth quarter of FY 2015.
The services most highly utilized by CMDP enrollees in
the first quarter of FY 2016 included support services,
treatment services, and rehabilitation services, with
98% receiving support services, 70% receiving

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Summary of Recent Agency Reports (Continued)
treatment services, and 17% receiving rehabilitation
services. Support services for foster children include
case management, peer support, and transportation
to appointments. Treatment services include
individual and group counseling as well as behavioral
health diagnostic evaluations. Rehabilitation services
include living skills training, cognitive rehabilitation
(such as memory training or anger management),
and behavioral health education and prevention
activities. Together, these 3 service categories
represent 76% of CMDP behavioral health spending.
Support services represented the largest spending
category, accounting for 42% of total CMDP
behavioral health spending.

Residential services cost $12,900 per capita, the
highest per capita cost of all service categories, but it
was only the fourth highest spending category due to
relatively low utilization. Only 1% of foster children
received residential services in the first quarter.
Between the fourth quarter of FY 2015 and the first
quarter of FY 2016, the total cost of behavioral health
services for CMDP increased by 2.6% ($22.3 million to
$22.9 million). The cost increase reflects a 2.4%
increase in the number of unique CMDP numbers
served and a 0.2% increase in costs per capita since
the fourth quarter of FY 2015. (Patrick Moran)

March Spending
March 2016 General Fund spending of $569.7 million was
$114.4 million more than March 2015. Year to date,
spending is $7.48 billion, or $(28.6) million below last year.
(See Tables 7 & 8).


Year to date, the Department of Education has
spent $76.3 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
$(84.8) 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 7
General Fund Spending ($ in Millions)
Change From

YTD Change

Mar 16

Mar 15

Year-to-Date

from FY 15

AHCCCS

122.1

56.5

978.7

(27.5)

Corrections

90.4

23.0

781.1

68.0

Child Safety

31.2

(129.8)

302.2

61.3

Economic Security

(1.0)

156.2

422.9

(54.1)

Education

235.4

32.1

3,153.0

76.3

Health Serv ices

16.8

1.6

561.3

(2.1)

Public Safety

2.4

0.8

59.2

1.9

School Facilities Board

0.1

(1.0)

186.0

11.5

Univ ersities

36.8

(9.4)

548.1

(84.8)

Agency

Leaseback Debt Serv ice

0.0

0.0

84.1

(0.0)

Other

35.5

(15.6)

402.8

(79.1)

Total

569.7

114.4

7,479.4

(28.6)

11

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Table 8

General Fund Spending
($ in Thousands)
Agency

Mar 16

Change from
Mar 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

1,478.5
36.3
12.1
882.8
122,114.2
2,396.3
113.0

(2,155.9)
0.3
2.7
91.3
56,485.3
736.3
3.8

19,157.4
84,114.6
612.7
93.3
6,136.1
978,664.4
17,054.7
829.9

(28,308.2)
(7.1)
(25.6)
76.7
263.5
(27,473.7)
884.1
144.0

Department of Child Safety
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

31,224.0
2,208.3
257.6
150.9
90,391.6
946.0
(981.2)
163.8
235,408.3
407.7
7.9
35.9
87.3
240.2
157.7
407.4
53.5
1,356.0
16,767.3
168.7
112.4
226.6
9.3
440.2

(129,756.7)
(416.7)
(40.4)
100.8
23,012.4
(523.6)
156,151.6
163.8
32,116.3
(19.3)
(5.9)
5.1
32.1
15.2
62.6
(1,970.4)
4.0
435.5
1,630.1
(22.4)
27.4
151.8
8.0
105.7

302,228.4
20,099.7
38,935.6
439.0
781,104.7
6,000.5
19,124.2
422,853.5
906.8
3,152,954.3
6,128.9
7,000.0
133.7
416.4
712.6
2,230.7
1,623.2
3,947.3
1,794.4
738.7
7,682.0
561,289.2
2,434.1
700.3
1,381.5
31.3
3,759.1

61,349.5
(3,333.6)
(14,893.5)
(17.7)
67,950.4
(1,650.0)
3,549.1
(54,122.8)
906.8
76,323.4
(225.7)
19.1
15.3
36.4
(8.3)
100.6
(1,496.9)
1,794.4
41.9
(355.5)
(2,092.9)
(6.6)
59.9
580.2
(11.0)
(99.8)

10,045.3
1,378.9
2,894.4

(1,040.6)
(44.5)
(1,329.0)

66,597.7
10,576.7
19,855.1

(4,349.1)
(78.6)
(10,347.1)

12

JLBC – MONTHLY FISCAL HIGHLIGHTS – APRIL 2016

Table 8 (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

Mar 16

Change from
Mar 15

Year-to-Date

YTD Change
from FY 15

966.1

(73.1)

8,039.3

(1,000.6)

1,530.7
1,587.9
242.8
578.6
1,008.2
119.5
9.3
2,396.2
238.8
(1,237.2)
119.8
1,569.9
17.8
7.1

(497.2)
(248.3)
(13.7)
(29.5)
85.8
4.3
(29.0)
(163.3)
829.6
6.5
(8,734.0)
(1,026.6)
(133.1)
(4.2)
12.5

14,606.9
10,718.4
1,759.5
4,827.9
5,985.5
862.6
89.1
2.5
277.8
20,449.0
1,396.8
59,201.7
6,000.0
1,190.3
1,902.2
26,246.9
186,012.1
10,606.0
198.1
6,399.4
7.1

(626.0)
306.9
(5.6)
(1,833.9)
(522.2)
(13.0)
(58.2)
1.6
277.8
(1,185.6)
1,927.9
(1,869.6)
96.9
(12.2)
(12,300.5)
11,534.6
(981.8)
(5.2)
(1,994.0)
12.4

96.9
16,680.6
5,951.9
14,080.3
763.8
1,248.0
10.9
96.8
569,684.0

(585.2)
(4,878.6)
(1,363.6)
(2,586.1)
229.9
(42.1)
(123.3)
69.2
(250.9)
114,359.8

19,175.3
240,203.5
83,061.9
205,652.1
4,167.7
8,181.2
831.7
914.5
136.8
7,479,446.2

(3,809.5)
(44,404.7)
(13,272.7)
(23,275.2)
614.6
(269.6)
(1,000.0)
(165.9)
200.9
(91.1)
(28,644.1)

JLBC
Jul 14

Jul-15

3

JLBC
Jul 14

Jan 16

Jul 15

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

35,000

Jul 12

Jan 12

Jul 11

Jan 11

Jul 10

Jan 10

Jul 09

Jan 09

Jul 08

Jan 08

Jul 07

Jan 07

2.7% Y/Y Growth
(February 2016)

Jul 06

$19

Jan 06

$20

Jul 05

$23.64 / Hour
(February 2016)

Jan 05

$23

Jul 04

$25

Jul 03

Average Hourly Earnings – Private Sector

Jan 04

$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

Jan 03

Jan 11
July 11

1

Jul 02

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

April 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)
2,712,600
(March 2016)

2,100

3.2% Y/Y Growth
(March 2016)

2

Initial Claims for Unemployment Insurance

$24

45,000

40,000

30,000

15,551 Claims
(February 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

$187.1 million
(March 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

July 08

Jan 07

Jan 08

Jul 15

Jan 16

Jul 14

Jan 15

Jul 13

Jan 14

Jan 13

Jul 12

Jan 12

Jan 11

July 11

Jan 10

Jan 09

Jan 08

July 10

6

Excludes temporary 1 ¢ sales tax

Economic Activity Index

Residential Building Permits
100,000

240

90,000

230

224.6 Index Value
(February 2016)

220

80,000

Coincident Index Value

Building Permits

July 09

JLBC

July 07

July 06

(5.2)% Y/Y Growth
(March 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

3.8 % Y/Y Growth
(March 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

$32.6 million
(March 2016)

$50

July 06

$ in Millions

$200

70,000
60,000

Single Family Unit - 23,390 Permits
Multi-Family Unit - 9,632 Permits

50,000

(Feb. 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.

Jan 16

Jul 15

Jan 15

Jul 14

Jul 13

Jan 14

Jan 13

Jul 12

Jul 11

Jan 12

Jan 11

Jul 10

Jul 09

Jan 10

Jan 09

Jul 08

Jul 07

Jan 08

Jul 06

Jan 07

Jan 06

Jul 05

Jul 04

Jan 05

Jul 03

Jan 04

Jan 03

Jul 02

Jul 01

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

12-Month Moving Sum

Jan 10

Jan 09

Jul 08

Jul 07

Jan 08

Jul 06

Jan 07

Jan 06

Jul 05

Jul 04

Jan 05

Jul 03

Jan 04

Jul 02

Jan 03

Jan 02

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JLBC

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140

0

8