Arizona ends budget year with $379M surplus - East Valley Tribune: Home

Arizona ends budget year with $379M surplus

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Posted: Monday, July 23, 2012 1:04 pm | Updated: 11:42 am, Tue Jul 24, 2012.

Led in part by an improving economy, Arizona is ending its budget year with a surplus three times larger than anticipated.

Preliminary figures released Monday by the Joint Legislative Budget Committee show the state collected slightly more than $9 billion in the fiscal year that ended June 30. That is $379 million higher than anticipated; budget staffers had projected the excess cash at just $122 million.

But the financial picture is also brighter on the other end of the equation.

Total spending for the year is close to $8.66 billion. That is projected to be $112 million lower than what lawmakers had anticipated on spending.

One reason is that there are fewer people than anticipated in the Arizona Health Care Cost Containment System, the state's Medicaid program. The number of childless adults still enrolled in particular is smaller after the state froze enrollment at the end of 2010 in a cost-cutting move.

Legislative budget staffers also said that the number of students enrolled in public schools was less than anticipated. And there was an actual decline in the number of inmates in state prisons.

Monday's news of the brighter state budget picture comes as a separate report from the state Department of Revenue shows that Arizonans appear to be confident enough in the economy to post a small gain last month in retail sales over the same time a year earlier.

Figures from the state Department of Revenue put the sale of taxable retail items at $4.05 billion. On paper, that's $100 million less than 2011.

But Elaine Smith, who heads the agency's Office of Research and Analysis, said there was a one-time adjustment last June of sales into the retail category, specifically of furniture. The result, she said, inflated the June 2011 retail sales figures by about $280 million.

Factoring that out, it shows the state with a 4.5 percent year-over-year growth in sales.

"Overall, these collections figures show an economy that growing at a modest pace,'' said Marshall Vest, economist at the Eller College of Management at the University of Arizona.

But Vest noted the year-over-year pace of growth is still slower than the same time last year. Even factoring out the one-time blip, sales grew at more than 5 percent between June 2010 and 2011.

Economist Dennis Hoffman from the W.P. Carey School of Business at Arizona State University said the state is still showing "some moderate growth.''

"It's certainly not blockbuster growth,'' he said.

"It's not growth that would signal happy days are here again,'' Hoffman continued. "But it's a positive.''

What's significant, he said, is that there is much more hesitation by consumers at the national level to go out and spend money than there is here in Arizona.

Then there are those car and truck sales, which are up 20 percent from the same level a year earlier. But Hoffman said while that's good, it isn't necessarily a sign of recovery.

He pointed out that it was not unusual for motor vehicle sales in Arizona to top $700 million a month between 2004 and 2007. In fact, in one month in 2005 it sprinted far past $900 million.

By contrast, even with that 20 percent annual increase, sales last month fell short of $600 million.

Hoffman said part of what's happening there is a variant of what happened in home sales: People stopped moving to Arizona from elsewhere.

"Folks would come here and they'd buy a house and they'd buy consumer vehicles and they'd tend to buy a car as well,'' he said. That was a pattern on which the state had come to depend.

"As every year went by, we just did 'wash, rinse, repeat,' '' he quipped. "It turned out to be not sustainable.''

Looking at other categories, Vest said sales of clothing and accessories were up 5.1 percent.

"Increases for the remaining large categories were disappointing,'' he said.

The figures for what the state collected all year in taxes, however, are better than anticipated.

Richard Stavneak, director of the Joint Legislative Budget Committee, said sales taxes were projected to be 4.8 percent above the prior year. The actual figure of $3.65 billion was 6 percent higher.

Individual income tax payments were nearly $3.1 billion, or 7.8 percent above the last fiscal year. The budget had assumed a 6.8 percent growth.

And corporate income tax collections were up nearly 15 percent, almost 50 percent higher than anticipated.

Stavneak agreed with Hoffman that the situation in Arizona appears to be somewhat better than the rest of the nation. But he said that should not be taken as a sign of continued improvement.

``There is some concern out there with the national economy, what's going to happen with the federal government, what's going to happen with the resolution of the federal budget deficit, what happens with Europe,'' he said.

``There are some good signs for Arizona-specific numbers,'' Stavneak said. ``But, obviously, we're part of the bigger economy and that is just as important in terms of direction for the overall economy.''

Stavneak also cautioned against seeing the better-than-anticipated budget figures as a reason to spend more money in the future. And that's not just because the temporary one-cent sales tax approved by voters, which generated more than $900 million this past fiscal year, is set to self-destruct this coming May.

For example, he said that George Mason University recently studied the impact of potential federal spending reductions. He said these alone could reduce state tax collections by $70 million annually.

Stavneak also said it is ``unclear'' whether the reduced level of enrollment in AHCCCS will continue, especially with the impact of the federal health care law yet to be determined.

And Stavneak pointed out that one reason the state has money left over is that lawmakers have refused to put money into various funding formulas for education for the last few years. He said those ``suspensions'' equate to $700 million in spending.

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