JLBC - Monthly Fiscal Highlights

May 2016

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

www.azleg.gov/jlbc.htm

“Base year-todate General
Fund revenues
are 3.7%
above the
prior year, and
are $60.6
million above
the enacted
forecast.”

April 2016 General Fund collections of $1.14
billion were 7.9% above the prior year. While the
state posted a strong revenue growth rate
during April, the forecast gain was a more
moderate amount, with collections ending up
$33.8 million above forecast. Reflecting the
state’s ongoing Great Recession recovery, this
month’s collections were the highest since
April 2008.
The April revenue forecast had anticipated
substantial growth due to a technical timing
factor. Most Individual Income Tax refunds are
processed on Wednesday, and there was one
fewer Wednesday in April 2016 than in April
2015. By distributing fewer refunds, state
revenues increased on a year-over-year basis.
April revenues can also be volatile depending
on the level of estimated and final Individual
Income Tax payments, which can be fueled by
unexpected levels of capital gains. April 2016,
however, saw relatively muted payment growth
of 2.1%. Overall, Individual Income Tax
collections were $13.7 million above forecast.
In terms of the state’s other major revenue
categories, Sales and Corporate Income Tax
posted losses that more than offset the gains in
the Individual Income Tax. In total, the “Big 3”
revenue categories were $(9.8) million below
forecast.
While the “Big 3” had little impact on the
forecast, Insurance Premium Taxes (IPT) and
Lottery proceeds generated the largest gains in
April. Insurance Premium revenues were $15.7
million above forecast in April. Year-to-date, IPT
collections are 14.4% above the prior year.

In addition, the Lottery distribution to the
General Fund was $22.3 million above the
enacted forecast. This distribution was based
on ticket sales during January – March, which
were boosted by the record $1.5 billion
Powerball jackpot that occurred during
January.
Excluding Urban Revenue Sharing and onetime transfers, base year-to-date General Fund
revenues are 3.7% above the prior year, and
are $60.6 million above the enacted forecast.
In comparison to revenue collections of $1.14
billion, April 2016 spending was $548.9 million,
which is a decrease of $(103.8) million from the
prior year. The FY 2016 spending added in the
recently enacted budget will appear in the
May and June expenditure data.
Fiscal year-to-date, General Fund revenues of
$7.62 billion have been offset by $8.05 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-May 2016 is $2.4 billion. In addition, the
state’s Budget Stabilization Fund has a balance
of $460.7 million.
Individual Income Tax Withholding
The state’s low level of Individual Income Tax
withholding growth has been a perplexing
aspect of this fiscal year’s General Fund
revenue collections. With state employment
levels recently growing by 3%, the year-to-date
withholding increase of 2.4% is surprisingly low.

Table of Contents

This report has been
prepared for the Arizona
Legislature by the Joint
Legislative Budget
Committee Staff on
May 20, 2016.

Summary

Summary of Recent Agency Reports

 Individual Income Tax Withholding ................. 1

 Aud. General/DCS – Differential Response .... 8

April Revenues ........................................................ 2

 ACA – Healthy Forests Incentives Report ........ 8

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

 ADE – ELAS Quarterly Report ............................. 8

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

2

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

Summary (Continued)
At least part of this mystery has been recently clarified.
As one of the ongoing challenges of implementing the
state’s new accounting system, the Department of
Revenue has just discovered that approximately $35
million of cumulative Individual Income Tax withholding
collections have been excluded from revenue
reporting so far this fiscal year. DOR intends to
recognize the entire $35 million in its May revenue
reporting, which will be published in the June Monthly
Fiscal Highlights.

If the withholding collections had been properly
recorded, the year-to-date growth would have been
3.5% rather than 2.4%. Even 3.5% growth remains low
by historical standards and is worthy of further study.

April Revenues
Table 1

General Fund Revenues ($ in Millions)

April
Year-to-Date

FY 2016
Collections
$ 1,136.5
$ 7,621.5

Sales Tax collections of $379.9 million were 1.8% above
April of last year but $(13.0) million below forecast for the
month. April collections reflect sales activity that
occurred in March. Year to date, sales tax collections are
up by 2.6% compared to last year and $(45.1) 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.

Difference From
Budget Forecast
$
33.8
$
60.6

Difference
From FY 2015
$
83.3
$
401.6

months for reasons that are not fully understood.
National retail sales were also weak during the first
quarter of this year and since this has largely been
attributed to the volatility in the stock market during this
period, the same may hold true for Arizona retail sales as
well.
Table 2
Sales Tax Growth Rates
Compared to Prior Year
April
YTD
Retail
0.5%
6.6%
Contracting
4.6%
(13.8)%
Use
0.9%
(0.2)%
Restaurant & Bar 7.4%
5.8%
Utilities
0.1%
2.1%

Contracting sales tax collections in April increased by
4.6% over the same month in the prior year. This was the
first year-over-year increase of the contracting tax since
January 2015. In prior months, contracting growth was
being reduced by the 2013 “TPT Simplification” law that
changed the tax base for building materials from the
contracting category to the retail category, beginning in
January 2015. Now, that the law has been in effect for
more than 12 months, contracting tax growth rates will
more accurately reflect economic activity.

Individual Income Tax net revenues of $629.7 million in
April were $86.4 million more than the prior year and $13.7
million above forecast for the month. Year-to-date,
revenue has grown 5.7% over the prior year.

Retail tax collections increased by a modest 0.5% in April
compared to the same month last year. Retail tax
collections have been trending down for the last few

As indicated in Table 3, withholding decreased by
(0.4)% below last year and was $(10.8) million below the
forecast. The monthly decrease may partly be

3

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

April Revenues (Continued)
explained by a reduction in processing days relative to
April 2015. Year-to-date withholding collections are 2.4%
above FY 2015. As noted in the summary, some of this
growth will be rectified in May.

Highway User Revenue Fund (HURF) collections of $121.9
million in April were up 1.4% compared to April of last
year and were $2.2 million above forecast. Year-to-date
collections are 5.5% above last year.

April estimated and final payments of $618.9 million were
2.1% above last year and $(8.4) million below the
forecast. Year-to-date, payments are 10.9% above
those collected during the same period of FY 2015.

Due to the implementation of a new accounting
system, DOR has made technical adjustments to prior
month collection figures. For April, DOR has decreased
the amount of prior General Fund revenue collections
by $(0.2) million, and the adjustment has been included
in the reported year-to-date results.

April Individual Income Tax refunds totaled $(307.1)
million – this compares to $(382.0) million in April 2015
and a forecasted amount of $(339.9) million. The
decrease in refunds may have largely been the result of
a decrease in the number of refund batches processed
relative to April 2015.
Table 3

Individual Income Tax Growth Rates
Compared to Prior Year
April
YTD
Withholding
(0.4)%
2.4%
Estimated/Final Payments
2.1%
10.9%
Refunds
(19.6)%
1.7%
Corporate Income Tax net collections were $74.4 million
in April, which was $(12.8) million less than in the prior
year and $(10.5) million below the forecast. Year to
date, collections are $(52.2) 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 April ticket sales
were $73.6 million, which is $4.8 million, or 7.1%, above
sales in April 2015. Year-to-date ticket sales are $662.6
million, which is 19.2% above last year’s sales. General
Fund Lottery distributions are made on a quarterly basis,
meaning April General Fund collections reflect sales
during the quarter from January to March. Year-to-date,
lottery revenues are $24.2 million above the enacted
budget forecast. Sales during the 1st calendar quarter
were spurred by a $1.5 billion record-breaking jackpot in
January.
Insurance Premium Tax collections of $42.9 million in April
were $(26.6) million below the prior year but $15.7 million
above the forecast. The large decrease below April
2015 is another issue likely related to the implementation
of the state’s new accounting system. IPT payments are
now being processed more quickly under the new
system. As a result, some of the normal April activity was
shifted into March. Year-to-date, collections are 14.4%
above last year.

4
Table 4

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

FY 2016 YTD (Ten Months)

Change From
Actual

April 2015

April 2016

Amount

Change from
Budget Forecast

Percent

Amount

Actual

Percent

April 2015

April 2016

Amount

Budget Forecast
Percent

Amount

Percent

Taxes
Sales and Use
Income - Individual
- Corporate

$379,860,032

$6,698,465

629,738,416

86,419,057

15.9

13,662,528

74,378,274

(12,785,725)

(14.7)

(10,465,401)

Property

5,117,977

Luxury - Tobacco

2,168,477

- Liquor
Insurance Premium
Other Taxes
Sub-Total Taxes

3,295,621
42,865,335

3,603,573
(486,804)
289,594
(26,645,353)

1.8 %

238.0
(18.3)
9.6

($12,986,472)

(3.3) %
2.2

$3,589,651,681

$89,387,361

2.6 %

3,309,970,302

179,898,830

5.7

(52,243,579)

($45,067,620)

(1.2) %

61,056,131

1.9

(10.7)

1,691,314

0.4

(12.3)

437,031,633

2,516,447

96.7

29,943,635

6,014,225

25.1

1,764,831

6.3

262,503

13.8

20,152,781

530,955

2.7

466,459

2.4

259,243

8.5

28,053,035

662,528

2.4

114,221

0.4

(38.3)

15,667,347

57.6

362,453,711

45,602,920

14.4

21,593,812

6.3

278.8

1,818,508

224.1

6,777,350

266,260

4.1

74,759

1.1

$7,784,034,128

$270,119,500

64,972,750

20,063,550

2,630,137

1,935,823

$1,140,054,269

$59,028,631

37,428,300

23,061,700

160.5

2,493,452

546,908

28.1

(46,511)

(1.8)

24,851,415

(2,945)

(0.0)

(235,933)

(0.9)

(9,845)

(32.8)

(1,852)

(8.4)

5.5 %

$10,734,703

1.0 %

3.6 %

$41,693,907

0.5 %

Other Revenue
Lottery
License, Fees and Permits
Interest

22,322,779

147.8

1,993

(4,745)

(70.4)

(5,082)

(71.8)

20,206

Sales and Services

1,206,487

(924,933)

(43.4)

(588,113)

(32.8)

24,038,166

Other Miscellaneous

1,387,713

319,868

30.0

375,292

37.1

23,038,411

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

--

1,238,787

5.4

(1,974,493)

(7.9)

0

$46,894,886

$23,985,953

104.7 %

$23,102,153

97.1 %

$162,525,455

$12,301,267

8.2 %

$18,919,766

13.2 %

$1,186,949,155

$83,014,583

7.5 %

$33,836,856

2.9 %

$7,946,559,584

$282,420,767

3.7 %

$60,613,673

0.8 %

25,604,506

0

(1.1)
34.9

987,154

31.3

0

59.2

0

1,043,790

--

24,156,326

4,376,940

29.1

0

(255,262)
5,957,311

44.7

(13,451,542)

-(34.4)

0
(4,263,070)

-(14.3)

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

(50,469,528)
0
(50,469,528)

275,114

--

(6)

0

--

0

0.0
--

(504,695,277)
179,597,255

116,473,752

2,751,147

--

(6)

0.0 %

(325,098,022)

119,224,900

-- %

184.5

(19)
0
(19)

0.0
0.0

275,114

-- %

0.0 %

$1,136,479,627

$83,289,697

7.9 %

$33,836,850

3.1 %

$7,621,461,562

$401,645,666

5.6 %

$60,613,654

0.8 %

$121,890,626

$1,725,576

1.4 %

$2,196,180

1.8 %

$1,130,836,885

$58,898,271

5.5 %

$18,492,954

1.7 %

Non-General Funds
Highway User Revenue Fund

5

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 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 0.5% in the
first quarter of 2016. This estimate represents a further
slowdown from the weak 1.4% growth in the fourth
quarter of 2015. The deceleration was primarily due to
slower growth in consumption, decreases in business
investment and federal government spending, and
increases in imports. Declining performance in these
categories was partly offset by increases in state and
local government spending and household investment.
Based on the pattern of quarterly growth seem in recent
years, economists expect that the low first quarter
reading reflects a measurement problem and that
growth will rise in the second quarter.
The Conference Board’s U.S. Consumer Confidence
Index decreased (1.9) points in March to a level that
was (0.1)% below the March 2015 reading. The monthly
decrease reflected greater pessimism in consumers’
economic outlook 6 months in the future. However, this
was partly offset by improvement in consumers’
assessments of their current circumstances, thought to
be the result of greater stability in financial markets.
The Conference Board’s U.S. Leading Economic Index
increased by 0.2% in March and stands 2.2% above its
March 2015 reading. The monthly increase follows 3
months of decreases. Of the index’s 10 components, 6
made positive contributions in March while 2 made
negative contributions and 2 were neutral. The greatest
positive contributions came from stock prices and
movement in interest rates. Those impacts were partly
offset by decreasing building permits and increasing
unemployment insurance claims.
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 March,
relative to February. The increase was driven by a 1.1%
monthly increase in energy prices. The overall index
stands 0.8% above the March 2015 level, which is well
below the Federal Reserve Bank’s 2% annual inflation
target. The low measure is largely due to a (12.7)% yearover-year decrease in energy prices. Annual growth in
the core index (all items except food and energy) has
grown by a steadier 1.6% through March.
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 4.6% compared
to March 2015. Over the same time period, the U.S.
coincident index increased by 3.1%. 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 23,806,
or 31.7% more than a year ago. The comparable
single-family permit growth rate for the entire U.S. is
11.3%. 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 9,070 multifamily building permits is 1.0% more than 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 17.6% above 2015.
Employment
According to the latest employment report released by
the Department of Administration, the state added
7,500 net new nonfarm jobs in April compared to the
prior month. This was more than the 10-year average
net job gain for April of 1,900 jobs. Most of the monthover-month job gains occurred in the Professional and
Business Services industry (+6,800).
Compared to the same month in the prior year,
Arizona added 80,900 net new jobs in April, which is a
year-over-year increase of 3.1%. In 5 of the last 6
months, nonfarm employment has grown by 3.0% or
more. The job gains have been entirely generated by
the private sector whereas the government sector has
continued shedding jobs. Year to date, the private
sector has added an average of 82,700 net new jobs
whereas the government sector has lost 2,300 jobs over
the same period. The largest year-over-year job gains
in April came from the following industries: Professional
and Business Services (+19,900), Education and Health
Services (+16,500), and Trade, Transportation and
Utilities (+13,400).
The state’s regular unemployment rate increased from
5.4% in March to 5.5% in April. The U.S. unemployment
rate remained unchanged at 5.0%.

6

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

Monthly Indicators (Continued)
In March, the Average Weekly Hours worked by
individuals in Arizona’s private sector was 34.3 hours.
This workload is 0.3% above the prior month level, but
(1.7)% below the March 2015 level.
The Average Hourly Earnings received by these private
sector workers was $23.59, which is (0.5)% below the
average in the prior month. March earnings were still
2.6% above the average in March 2015 and represent
the 12th consecutive month of positive year-over-year
increases in average wages.
The U.S. Bureau of Labor Statistics releases estimates
quarterly for a broader measure of labor underutilization
called the total unemployment rate. Besides the
“regularly” unemployed, the measure also includes
persons who are available to work but stopped looking
for a job (“discouraged workers”), and persons who had
to settle for part-time employment (“underemployed
workers”). The Arizona rate averaged 11.7% from the first
quarter of 2015 through the first quarter of 2016. This
rate is (1.1)% below the reading issued for the prior
period. The state’s 11.7% rate was the sixth highest of
any state, which is an improvement from its second
place position at the time of the prior reading. The
national average for the measure was 10.1% during the
quarter.
Tourism
Revenue per available room reached $117.73 in March,
which was 5.0% above the amount in March 2015.
Year-to-date, revenue per available room is 1.1% above
the 2015 year-to-date amount through March.
Ridership through Phoenix Sky Harbor Airport during
March increased 1.5% above the level in March 2015
and represented the busiest month on record. March
coincides with the peak of the state’s tourism season,
which was supported this year by continued growth in
annual attendance of baseball spring training games.
State Agency Data
At the beginning of May 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 530,800 members.
Total monthly enrollment decreased by (8,700)
members, or (0.5)%, during April. The overall decrease
in April was spread among most enrollment populations.
The Traditional population of low income parents and
children decreased (1,900), or (0.2)%, in April to a level
of 1,039,800 members. This drop was accompanied by
an enrollment decrease of (3,800), or (2.1)%, in the
Proposition 204 parent population.

In January 2014, the state started accepting new
enrollment to the Proposition 204 childless adults
program. In April 2016, the childless adult population
decreased by (1,700), or (0.6)%. At 307,500, this
population is 9.4% higher than a year ago.
The state also opted to expand adult Medicaid
coverage to 133% of FPL. Their enrollment decreased
by (50) in April and now totals 86,100 individuals.
Enrollment is 56.2% higher than a year ago. The
federal government is currently paying 100% of this
cost.
There were 19,964 TANF recipients in the state in May,
representing a (2.6)% decrease in monthly caseloads
from April. The year-over-year number of TANF
recipients has declined by (17.2)%. 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 May, there were 948,031 food stamp
recipients in the state, representing a (1.1)% decrease
from April caseloads. Compared to the same month
last year, food stamp participation has declined by
(4.6)%.
ADC reported an inmate population of 42,877 as of
April 30, 2016. This was an 0.2% increase since March,
and a 1.1% increase since last year.
Based on information the Department of Child Safety
provided for February 2016, reports of child
maltreatment totaled 50,692 over the last 12 months,
an increase of 2.7% over the prior year. There were
19,044 children in out-of-home care as of February
2016, or 9.2% more than in February 2015. Compared
to the prior month, the number of out-of-home
children increased by 1.0%.

7

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 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

April
1st Q 2016
March
April
April
April
April
March
March

5.5%
11.7%
17,721
18,248
2,718,000
157,400
133,900
34.3
$23.59

0.1%
(1.1)%
14.0%
(27.8)%
0.3%
(1.1)%
(0.1)%
0.3%
(0.5)%

(0.6)%
(2.6)%
(0.7)%
(43.5)%
3.1%
0.5%
6.0%
(1.7)%
2.6%

February
February
February

$900.6 million
$321.7 million
$340.9 million

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

3.2%
(5.7)%
6.5%

March
March

23,806
9,070

1.8%
(5.8)%

31.7%
1.0%

March

6,776

6.1%

(2.1)%

March

$234,900

2.2%

8.2%

February
March
March

157.22
4,188
27,680

0.3%
0.7%
1.0%

6.0%
(26.0)%
4.5%

March
December
February
March

4.3 million
601,364
271,500
$117.73

26.4%
(5.5)%
41.0%
18.6%

1.5%
0.0%
1.8%
5.0%

2nd Q 2016
March
March
2015
July 2015

80.0
226.19
5.0%
$266.8 billion
6,828,065

(2.0)%
0.3%
(0.9)%
N/A
N/A

1.1%
4.6%
(0.1)%
4.6%
1.5%

May
May

AA / Aa2
Stable

N/A
N/A

N/A
N/A

May 1st

1,788,924
1,039,799
307,539
182,287
86,129
621
57,984
114,565

(0.5)%
(0.2)%
(0.6)%
(2.1)%
(0.1)%
(6.6)%
0.4%
(1.1)%

9.3%
6.6%
9.4%
8.1%
56.2%
(49.7)%
1.7%
16.3%

Feb. 2016
February
March
April

50,692
19,044
1,282
42,877

(0.4)%
1.0%
33
0.2%

2.7%
9.2%
(70)
1.1%

April
April

19,964
948,031

(2.6)%
(1.1)%

(17.2)%
(4.6)%

February
February

18,609
27,517

15
(2)

517
888

$16.5 trillion

1.9%

0.5%

94.2
123.4
237.9
109.9

(2.0)%
0.2%
0.1%
0.1%

(0.1)%
2.2%
0.9%
0.8%

1st Q, 2016 (1st
Estimate)
April
March
March
March

8

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

Summary of Recent Agency Reports
Auditor General/Department of Child Safety – Report
on Differential Response – Pursuant to the FY 2016
Human Services Budget Reconciliation Bill (Laws 2015,
Chapter 18), the Auditor General has reported on the
Department of Child Safety’s (DCS) use of differential
response.
Based on the type and severity of reported child
maltreatment, states that utilize a differential response
approach follow up on child maltreatment reports in
one of two ways: (a) a traditional investigation for highrisk cases involving criminal conduct or (b) an
alternative response for moderate/low-risk cases, such
as neglect. An alternative response focuses on an
assessment of a family’s needs and then connects
them to appropriate services. The alternative response
may be conducted by a private vendor. Based on the
prevalence of risk and safety factors, a case can
switch from an alternative response to a traditional
response.
Findings
Although Arizona had a differential response program
called Family Builders from 1998 to 2004, DCS does not
currently employ a differential response approach. All
reports of child maltreatment undergo a traditional
DCS investigation. A number of states are considering
a differential response approach, and 21 states
already have a differential response program in place.
Nevada contracts out the initial safety assessment of
families assigned to the alternative response track.
The Auditor General found that differential response
programs may lead to better outcomes for families but
are likely more expensive in the short term than
traditional response. Families participating in the
differential response track were found to be more
engaged and satisfied with the child welfare system.
In addition, families may be more likely to accept
services if offered through the alternative track of the
differential response approach. Based on the Auditor
General’s research, other jurisdictions do not believe
that differential response programs compromise child
safety. Because differential response provides more
services than traditional response, differential response
is likely more expensive in the short term, although
there may be potential cost savings over the long
term.
Recommendations
The report recommends that DCS should (1) continue
working with the Legislature on legislation that allows
for differential response; (2) finalize and implement
criteria and policies and procedures for making
response assignment decisions and response track
switching; (3) develop well-defined practices to guide
workers and implement training for appropriate staff;
(4) determine services to be provided; (5) decide

whether to implement differential response in phases;
(6) allow stakeholder comment during implementation;
and (7) develop a plan to evaluate differential
response. (Ben Beutler)
Arizona Commerce Authority – Annual Report on the
Healthy Forest Enterprise Incentives Program – Pursuant
to A.R.S. § 41-1516I, the Arizona Commerce Authority is
required to report on the Healthy Forest Enterprise
Incentives Program by May 1 annually regarding the: 1)
quantity and measured weight of qualifying forest
products 2) number of new full-time employees hired in
qualified employment positions; and 3) number of fulltime employees employed in qualified employment
positions. In calendar year 2015 the total weight of
qualified harvest, processed, or transported forest
products was 722,596 tons; none of the 8 companies,
however, participated in the income tax credit portion
of the program.
The Healthy Forest Enterprise Incentives Program allows
businesses primarily engaged in the harvesting, initial
processing, or transporting of forest products in Arizona
to qualify for the following: a use and transaction
privilege tax exemption on qualified purchases, a 50%
reduction in the use fuel tax, a reduction in the
assessment ratio of personal and real property from
18.5% to 5%, an income tax credit of up to $3,000 per
employee on new jobs created, and an income tax
credit of up to $9,000 per employee for the cost of
training. (Eric Billings)
Department of Education – Report on Education
Learning and Accountability System – Pursuant to a
General Appropriation Act footnote, the Arizona
Department of Education (ADE) must contract with an
independent third-party vendor to provide additional
oversight on the development of ADE’s Education
Learning and Accountability System (ELAS). The vendor
is required to submit quarterly reports that evaluate and
assess the project’s feasibility, estimated expenditures,
technology approach and scope throughout the life of
the project. The vendor’s most recent quarterly review
was issued on May 2, 2016.
As described in prior reviews, delays in vendor
certification and the development process led ADE to
pursue a “dual system,” in which the new Arizona
Education Data Standards (AzEDS) platform runs parallel
to the existing SAIS framework, which continues to make
school payments in FY 2016.
The current review notes that as of March, ADE has
transitioned 400 of the more than 700 school districts
and charter schools to AzEDS (accounting for
approximately 50% of students), with 65-75 more
migrating to the system each week. At least one
vendor, representing up to 25% of students statewide,
had transitioned zero students to AzEDS.

9

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

Summary of Recent Agency Reports (Continued)
The report observes that some districts have expressed
concerns about transitioning from SAIS due to the
concurrent change to current year funding and
differences in expected ADM counts under ELAS. The
reviewers state that “there is no option . . . for
continuing with the old SAIS legacy applications, which
themselves pose a more serious support and security
risk to the state and districts the longer they are
supported.”
The report notes that ADE recently completed its
review of the business rules in ELAS and confirmed that
they correctly reflect statute. The review attributes the
remaining differences in ADM counts between SAIS
and ELAS to more accurate treatment of data under
ELAS (e.g. tracking student absences in minutes, rather
than simply as “part” or “full day”).
The review states that efforts to switch to current year
funding are “on schedule” and that “there is little
concern for the AELAS technical components” in this

regard. However, the report observes that “there is
some concern with the business processes and legacy
budget code” and recommends that ADE “request that
the finance department conduct dry-run tests of their
procedures and legacy applications in a current-year
scenario, and report the results to executive leadership.”
The report notes that ADE has transitioned 13 of 47
statewide Opt-in Student Information System (SIS)
districts to AzEDS, noting there has been less interest in
the option this year, leading to fewer planned
implementations than desired. The review also identifies
the failure of the statewide SIS vendor to provide
supplemental services (such as training) to districts within
the contracted timeframe. The reviewers recommend
that ADE “withhold payment to the vendor until the
service is rendered and there is customer signoff,” and
suggests that ADE “consider the pros/cons of a second
statewide SIS vendor, to promote competition and
options for districts.” (Matt Beienburg)

April Spending
April 2016 General Fund spending of $548.9 million
was $(103.8) million below April 2015. Year to date,
spending is $8.05 billion, or $(115.5) million below last
year. (See Tables 6 & 7).


Year to date, the Department of Education has
spent $108.2 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 $(93.3) 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
April 16

YTD Change

April 15

Year-to-Date

from FY 15

Agency
AHCCCS

11.7

(7.0)

990.4

(34.5)

Corrections

89.3

(11.2)

870.4

56.7

Child Safety

23.9

23.3

336.9

95.4

Economic Security

4.4

(99.3)

434.1

(146.5)

Education

281.1

31.8

3,434.1

108.2

Health Serv ices

15.4

(3.3)

576.7

(5.3)

Public Safety

27.2

(0.5)

86.4

1.4

School Facilities Board

4.2

(10.1)

190.3

1.4

Univ ersities

38.0

(8.6)

586.1

(93.3)

Leaseback Debt Serv ice

0.0

0.0

84.1

(0.0)

Other

53.7

(18.9)

456.2

(99.0)

Total

548.9

(103.8)

8,045.7

(115.5)

10

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 2016

Table 7

General Fund Spending
($ in Thousands)
Agency
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
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

April 16

Change from
April 15

Year-to-Date

YTD Change
from FY 15

1,519.5
114.9
7.4
698.8
11,749.2
1,558.5
75.1

(17,581.4)
2.7
1.1
(16.9)
(6,983.3)
(775.2)
(6.2)

20,457.6
84,114.6
727.6
100.6
6,834.9
990,413.6
18,613.2
905.0

(46,108.9)
(7.1)
(22.9)
77.8
246.7
(34,456.9)
108.9
137.8

23,929.7
2,208.3
12,488.2
68.3
89,327.2
2,155.3
4,431.8
101.6
281,111.7
3,117.4
30.6
37.7
59.3
226.3
228.7
3,127.8
74.7
634.3
15,372.3
320.9
68.6
155.6
9.5
512.9

23,312.8
(416.7)
(5,741.7)
18.0
(11,208.4)
195.4
(99,255.0)
101.6
31,832.7
2,125.6
21.1
14.1
(35.4)
(53.8)
41.5
2,240.5
(29.9)
73.2
(3,250.5)
2.8
13.5
93.0
5.3
(60.7)

336,914.7
22,308.0
51,423.8
507.3
870,431.8
6,000.5
21,279.5
434,130.4
1,008.4
3,434,066.1
9,246.2
7,000.0
164.3
454.2
771.9
2,456.9
1,851.8
7,075.1
1,794.4
813.4
8,316.3
576,661.5
2,755.0
768.9
1,537.1
40.8
4,272.0

95,419.0
(4,167.0)
(20,635.1)
0.4
56,741.9
(1,650.0)
3,744.5
(146,532.7)
1,008.4
108,156.0
1,899.9
40.2
29.4
1.1
(62.1)
142.1
743.6
1,794.4
11.9
(282.3)
(5,343.4)
(3.8)
73.4
673.2
(5.7)
(160.4)

10,664.8
1,183.7
628.6

(46.8)
9.0
(2,388.2)

77,262.5
11,760.4
20,483.7

(4,395.9)
(69.6)
(12,735.2)

11

JLBC – MONTHLY FISCAL HIGHLIGHTS – MAY 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

April 16

Change from
April 15

Year-to-Date

YTD Change
from FY 15

1,141.9

368.2

9,181.2

(632.4)

2,410.2
1,092.0
162.4
443.9
623.8
90.1
12.7
140.0
27,241.3
404.4
155.6
1,582.0
4,247.1
677.7
26.8
704.3
-

411.5
87.3
(6.0)
9.8
(346.3)
7.0
2.4
140.0
(249.5)
(504.4)
(60.9)
154.5
(12.8)
2,521.6
(10,142.0)
(62.4)
5.6
(6.0)
(9.6)

17,017.1
11,810.3
1,921.9
5,271.8
6,609.3
952.7
101.8
2.5
417.8
20,449.0
1,396.8
86,443.0
6,000.0
1,594.7
2,057.8
27,828.9
190,259.2
11,283.6
224.9
7,103.7
7.1

(214.5)
394.3
(11.5)
(1,824.1)
(868.5)
(6.0)
(55.8)
1.6
417.8
(1,435.1)
1,423.5
(1,930.5)
251.5
(25.1)
(9,778.9)
1,392.6
(1,044.2)
0.4
(2,000.0)
2.9

1,378.0
16,592.8
5,951.9
14,080.3
382.3
956.1
226.3
167.6
0.0
548,890.5

348.6
(4,966.4)
(1,363.6)
(2,586.1)
(13.6)
38.7
106.3
86.5
(4.9)
(103,830.2)

20,553.4
256,796.3
89,013.8
219,732.4
4,550.0
9,137.3
1,058.0
1,082.1
136.8
8,045,719.1

(3,460.9)
(49,371.1)
(14,636.3)
(25,861.3)
601.0
(230.9)
(1,000.0)
(59.6)
287.4
(96.0)
(115,508.5)

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

2.6% Y/Y Growth
(March 2016)

Jul 06

$19

Jan 06

$20

Jul 05

$23.59 / Hour
(March 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

May 2016
Appendix A

Jul 01

Jan 01

Jan-16

Jan 08
July 08

$21

Jan-15

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

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)
2,718,000
(April 2016)

2,100

3.1% Y/Y Growth
(April 2016)

2

Initial Claims for Unemployment Insurance

$24

45,000

40,000

30,000

17,721 Claims
(March 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

$205.9 million
(April 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

July 09

Jan 08

July 10

6

Excludes temporary 1 ¢ sales tax

Economic Activity Index

Residential Building Permits
100,000

240

90,000

230

226.2 Index Value
(March 2016)

220

80,000

Coincident Index Value

Building Permits

July 08

JLBC

July 07

4.6% Y/Y Growth
(April 2016)
July 07

Year Over Year Growth (%)

Jul 15
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

0.5% Y/Y Growth
(April 2016)

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

July 06

$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

July 07

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

Year Over Year Growth (%)

July 06

Jan 07

$100

Jan 07

$125

$33.7 million
(April 2016)

$50

July 06

$ in Millions

$200

70,000
60,000

Single Family Unit - 23,806 Permits
Multi-Family Unit - 9,070 Permits

50,000

(Mar. 2016)
40,000
30,000

210
200
190
180
170

160

20,000
150

10,000

7

JLBC

Jul 15

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 14

Jan 15

Jul 13

Jan 14

Jan 13

Jul 12

Jul 11

Jan 12

Jan 11

Jul 10

Jul 09

Jan 10

Jan 09

Jul 08

Jan 08

Jul 07

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

Jul 11

Jan 12

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

Jul 01

Jan 01

JLBC

Jan 02

Jan 01

140

0

8