arizona economy & budget - azdor...office of governor janice k. brewer projected new jobs in...

Office of Governor Janice K. Brewer

Arizona Economy & Budget

Arizona Tax Conference

August 31, 2012


Overview

• Economy

• Revenues

• Outlook

• Federal Health Care Reform

• Other Issues

2


Economy

3


Economy

4


Economy – Retail as a Percent of PI

5

Reduction worth $15 billion in sales

Approximately $900 million in taxes


Housing Outlook

6

Forecast source: Global Insight

Average growth 6.4% per

year


Economy

7


8


-65%

-60%

-55%

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160

Per

cen

t C

han

ge fr

om

Pea

k Em

plo

ymen

t

Number of Months After Peak Employment

AZ Depression vs. RecessionNumber of Months needed to surpass a peak in employment

AZ 1929 AZ 2007


Economy – The Good News

Arizona now ranks 4th in job growth

(Behind ND, CA, and OK)

Phoenix ranks 5th among major metropolitan areas (of 26 ranked – St. Louis)

10


Types of Jobs

11

In Thousands


Projected New Jobs in Arizona 2010-2018

0

20,000

40,000

60,000

80,000

100,000

120,000

Pro

fes

sio

na

l

Se

rvic

es

Tra

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, Tra

ns

.,

Utilitie

s

Co

ns

truc

tion

He

alth

Le

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re

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ve

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Oth

er S

erv

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s

Fin

an

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l Ac

tivitie

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Ma

nu

fac

turin

g

Ed

uc

atio

n

Info

rma

tion

Na

tura

l Re

so

urc

es

Jobs Created Average Wages

Source: Research Administration 2008-2018 Occupational Forecast, August 19, 2010


Projected New Jobs by Education Requirement

Source: Research Administration 2008-2018 Occupational Forecast, August 19, 2010


Unemployment by Education Level

14

Source: U.S. Bureau of Labor Statistics


Multiplier Analysis: Jobs Created for Every Direct Job Added

Elliott D. Pollack & Company, The Job Recovery Package for the State of

Arizona, pg. 12

Industry Muliplier

Accomodations 0.63

Air Transportation 2.07

Chemical Manufacturing 3.73

Comercial Construction 0.83

Computer and other electronics Manufacturing 2.18

Electrical equipment and appliances 1.47

Fabricated Metal 1.1

Hospital 0.91

Mining 2.19

Nursing and residential care 0.36

Professional services 0.9

Telecommunication 2.06

Wholesale trade 1.21


Economic Outlook

• Continue Long Recovery

• Global Insight places recession risk at 25%

− Europe

− Federal Spending

16


Federal Spending - Sequester

• 7.8% percentage decrease applied to all covered non-defense discretionary and mandatory programs (FY 13 AZ Impact $132 million)

• 10% sequester percentage decrease applied across the board for defense programs (AZ Impact $1.3 billion)

• Arizona is projected to lose 35,248 jobs to DOD cuts and 13,941 to Non-DOD cuts, according to a Aerospace Industries Association report

17

FY 13 Potential Impact of Non-Defense Sequester on Arizona (In Thousands)

18

Source: Federal Fund Information For States Special Analysis 12-02, July 2012

EDUCATION, $69,245

HEALTH AND HUMAN SERVICES, $26,396

AGRICULTURE, $10,302

LABOR, $8,298

HUD, $7,071

ENVIRONMENTAL PROTECTION AGENCY,

$2,953

TRANSPORTATION, $2,552 INTERIOR, $2,488

OTHER GOVERNMENT, $2,676


Impact of Expiration of Tax Cuts

• Expiration of Title I of the Tax Relief Act, Unemployment Insurance Reauthorization, 2010 Job Creation Act, and Title III (gift and estate tax) will lead to an increased tax burden of $3.2 trillion between 2013-2022.

19


Arizona Federal Funding Cliff

20

-30%

-20%

-10%

0%

10%

20%

30%

40%

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

FY

92

FY

93

FY

94

FY

95

FY

96

FY

97

FY

98

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

(Est.)

FY

13

(Est.)

Pe

rce

nt C

han

ge

To

tal R

eve

nu

e (

in B

illio

ns)

State Fiscal Year

Federal Funding Trend Including Estimates for FY '12 and FY '13

Actual

Agency

Estimates


FY 2012 State Revenues

Corporate

Income

7%

Individual

Income

31%

Sales and

Use

42%

Other

Taxes

9%

Fund

Shifts

1% Prop.

100

10%

21

Source

Corporate Income

Individual Income

Sales and Use

Other Taxes

Fund Shifts

Prop. 100

TOTAL

(Millions)

$ 588

2,773

3,733

787

106

913

$8,900


Revenues – Growth Rate by Quarter

22

FY 11 FY 12 FY 13



23



24


Individual Income

• Over two years, II is up 28 percent with fourth quarter collections up 46 percent

• Why?

25


Individual Income – Up 28% ($686 million)

• Personal Income is up about 8 percent

• Effective tax rate up about 6 percent

• S&P 500 up 12.7 percent

26


New Tax Changes

FY 2013 FY 2014 FY 2015 FY 2019

2011 Competitiveness Package $16,700.0 $52,100.0 $182,800.0 $538,000.0

Capital Gains Reductions $0.0 $14,800.0 $38,000.0 $95,000.0

Other Changes $4,000.0 $12,100.0 $8,400.0 $21,500.0

Total $20,700.0 $79,000.0 $229,200.0 $654,500.0


Budget Outlook

28


Federal Health Care Reform

29


Childless Adult Population

30

80,000

130,000

180,000

230,000

280,000

Mar May July Sept Nov Jan MarchMay July


Federal Health Care Reform

31


Medicaid Decision Factors

• Enhanced Match (83%) vs. Regular Match (66%)

• Long-term commitment of Federal Government

• State fiscal stability

• Health care outcomes

32


Medicaid Costs

FY 2014 FY 2015

Mandatory Costs $90.4 million $261.2 million

Prop. 204 Restore W/ Enhanced Match

$58.2 million $250.2 million

Prop. 204 Restore W/ Regular Match

$118.7 million $569.4 million

33


TANF Block Grant

34


TANF Block Grant

• Cash assistance benefit reduced from $347 to $278

• Cash assistance benefit dropped from 60 months to 24 months

• Foster care subsidy reduced 20 percent

• Independent living support was eliminated

• Reductions in domestic violence assistance and shelter beds

35


Other Budget Issues

• Inflation (including wages)

• School capital finance

• Retirement

• IT upgrades

• Caseloads (DES)

• Other Capital

• Universities

• Education (initiative)

• Federal Action

36


Long-Term Outlook

37

-6

-5

-4

-3

-2

-1

0

1

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

State and Local Operating Balance Measure as a Percentage of GDP

arizona economy & budget - azdor...office of governor janice k. brewer projected new jobs in...

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