maricopa county budget analysis

8/9/2019 Maricopa County Budget Analysis

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Elizabeth Venable

Maricopa County Budget Analysis

Dec. 5, 2008

Introduction: Maricopa Countys Budget

Maricopa County is located in roughly the center of the State of Arizona and ishome to the state capital, Phoenix. Maricopa County is one of the fastest-growing andlargest counties in the entire United States. As of 2008, it is the 4th largest county in thecountry, and in terms of land area it is the 14 th largest. The population of the county hasgrown tremendously in the past two decades. For example, the county grew from2,122,101 residents in 1990 to 3,880,181 in 2007, an 83 percent increase in less thantwenty years.

Some basic figures illustrate the size of Maricopa Countys budget for 2008-09:

Beginning Undesignated Fund Balance(After 2007-08) $1,029,852,312

Total size of 2008-09 Budget(Revenues and Expenditures are Same)

$2,258,887,593

Ending Undesignated Fund Balance $649,590,515

Non-Recurring Capital Expenses $316,939,764

Major Funds in Maricopa County include the General Fund, the Detention

Operations Fund, the County Improvement Debt Fund, the General Fund CountyImprovements Fund, and the Solid Waste Management Fund.

Major functions of Maricopa County include:

Justice and Law Enforcement (Clerk of the Superior Court, County Attorney,Superior Court, Juvenile Court, Justice Court, Sheriffs Department, IndigentRepresentation and Public Fiduciary);

Medical Services (Public Health, Human Services and Forensic Science Center);Community Resources (Superintendent of Schools, Library District and StadiumDistrict);

Public Works (Flood Control District, Transportation Department and SolidWaste Management);

and County Administration (Board of Supervisors, County Administrator, Assessors

Office, Clerk of the Board, Elections, Finance, Human Resources, InformationTechnology, Treasurer and Facilities Management).

The approved budget for 2008-09 is based on a funding and expenditure amounttotaling $2,258,887,593. However, the costs of these functions are not evenly spread. Thefollowing chart lists expenditures by percentage of the 2008-09 operating budget, which

Venable Budget Final 1


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leaves out capital investments. Public safety accounts for well over half of the moneyspent, and health, welfare, and sanitation accounts for about a quarter. Aside from thecost of highways and streets, which runs to about a tenth, funding to other functions ofgovernment is nominal. Although the proportion of funds going to public safety costs isusually fairly high in Maricopa County, the ratio of public safety costs to the total is

higher in 2008-09 than in recent years.

2008-09 Approved Budget Forms of

Expenditures

23.70%

63.93%

0.74%2.00%

9.30%

0.33%

Education

Culture andRecreationGeneral Government

Highways andStreetsHealth, Welfare andSanitationPublic Safety

Major sources of funding for Maricopa County for 2008-09 include property

taxes, state shared sales taxes, charges for services, permits and fees, fund balances, andgrants. Taxes for this budget total slightly under 50% of revenues, which is less than inprevious years. Fund balances also cover a much higher proportion of expenses.Maricopa County, like Southern California, has been hit particularly hard by theforeclosure crisis, resulting in (anticipated) much lower than usual property tax revenues,and much higher than usual general fund expenses.


2008-09 Approved Budget Sources of Revenu

0% 14%

3%

16%

21%6%

21%

7%

5%

7%

Patient Revenue

Permits, Fees, Finesand Charges

Misc. and Interest

Fund Balances

Property Taxes,Penalties and InterestSales Taxes

State Shared SalesTaxesState Shared VehicleLicense TaxesHighway UserRevenues

Other Intergovernmentaland Grants


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As a note, Maricopa County officials have made deliberate decisions to avoid theuse of bond measures, and to maintain a relatively low level of debt. It has tried to lowerits mandated contributions to the State, which now are 18.2% of the General Fund Budgetdown from 25.1 in 2003%. Maricopa County also boasts in its budget that it has the

lowest property tax rate of the states urban counties, in a state (Arizona) that has some ofthe lowest property taxes in the nation. Maricopa Countys 2008 overall property tax rateis 1.2970 per assessed value.

A breakdown of tax revenue sources (1997-2007) shows that about one-third oftax revenue comes from general property taxes, another third comes from the state salestax, and the remaining third comes from a variety of sources: street lighting assessmentsand vehicle license taxes are consistent among these.

Tax Revenue by Source, 1997-2007

0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Year

Percent

Street Lighting

Assessments

Jail Tax

Rental car surcharge

Baseball Stadium Tax

Highway User Fuel Tax

Vehicle License Tax

State Sales Tax

General Property Taxes

An interesting source of revenues is the jail tax, which appears to have

supplanted the stadium tax after 1998. The Detention Operations Fund was voted intoexistence in November 1998, and is currently funded by a 1/5 of one-cent sales tax. TheDetention Operations Fund covers jail operations expenditures, and transfers to theDetention Capital Projects Fund for construction of the adult and juvenile detentionfacilities.



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The total number of employees in Maricopa County in FY 2006-07 was 13,274.This total made it the fifth largest employer in the county, although it accounted for only .7% of all employment.

Maricopa Countys Cash Solvency: Liquidity Ratios

A number of ratios and measures can give readers a sense of the state of the budget inMaricopa County:

2006-07 Ratios

Working Capital Current Assets - Current Liabilities $2,447,776

Current Ratio Current Assets / Current Liabilities 13.2242

Total Debt Ratio (Times) Total Liabilities / Total Assets 0.13657

Quick Ratio(Cash + marketable securities + receivables) / CurrentLiabilities

Note: See appendix 1 for original values.

While not every ratio is diagnostic, each gives us an idea of the picture that is the budget.The working capital ratio for Maricopa County is 2,447,776,595, which seems quitelarge. In addition, the current ratio (13.22) indicates that Maricopa County seems wellable to pay for its present liabilities. The quick ratio (6) helps to confirm the idea thatMaricopa County is has enough money to maintain itself in the present. The total debtratio of .1365, or 13.65% seems fairly low.

Maricopa County Budgetary Trends and Long-Term Obligations

Maricopa count appears to consistently be spending just slightly below its

revenues, allowing it to save and have a buffer. This is demonstrated in the visual.However, the percentages and ratios below suggest that in terms of rate of growth,expenditures have been growing just slightly faster than revenues and may eventuallycatch up with revenues.

Total Revenues vs. Expenditures

$0.00

$500,000,000.00

$1,000,000,000.00

$1,500,000,000.00

$2,000,000,000.00

$2,500,000,000.00

2001-02

200

2-03

200

3-04

2004-05

2005-06

2006-07

Total expendituresTotal revenues



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Percentage Changes for Revenues and Expenses, 2001-2007

Revenues

Percentage Change, 2001-2007 41.12%Average Annual Percentage Change 2001-2007 6.83%

Expenditures

Percentage Change, 2001-2007 48.68%

Average Annual Percentage Change 2001-2007 6.83%Note: See Appendix 2 for original values.

The unreserved fund balance has grown steadily from 1997-2007, although theend of the curve (2004-2007) seems to have flattened a bit and may be decreasing,indicating that the balance may not increase in the future.

Unreserved Fund Balance

y = 5E+07x + 3E+07

R2 = 0.9068

$0.00$100,000,000.00$200,000,000.00$300,000,000.00$400,000,000.00$500,000,000.00$600,000,000.00

1997-

98

1998-

99

1999-

00

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

Unreserved Fund Balance Linear ( Unreserved Fund Balance)

In addition, Maricopa Countys debt spending has been declining considerablyfrom 2001-2007.

Debt Service Funds

$0.00$20,000,000.00$40,000,000.00$60,000,000.00

$80,000,000.00$100,000,000.00$120,000,000.00$140,000,000.00

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Debt service funds



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Maricopa Countys net assets grew considerably throughout the 2001-2007period. Interestingly, however, total business-type activities net assets either stagnated ordecreased over the period.

Net Assets:

Government Activities vs. Business-type Activities

y = 4E+08x + 1E+09

R2 = 0.982

y = -3E+07x + 2E+08

R2 = 0.7425

-$500,000,000.00

$0.00$500,000,000.00

$1,000,000,000.00

$1,500,000,000.00

$2,000,000,000.00

$2,500,000,000.00

$3,000,000,000.00

$3,500,000,000.00

$4,000,000,000.00

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

Total governmentalactivities net assets

Total business-typeactivities net assets

Linear (Totalgovernmental activitiesnet assets )

Linear (Total business-type activities netassets )

Finally, Maricopa Countys total tax revenues grew consistently over the period1997-2007.

Total Tax Revenues y = 7E+07x + 6E+08

R2

= 0.9792

$0.00$200,000,000.00$400,000,000.00$600,000,000.00$800,000,000.00

$1,000,000,000.00$1,200,000,000.00$1,400,000,000.00$1,600,000,000.00

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

Total Revenues

Linear (TotalRevenues)

Focus: Maricopa Countys Public Safety Expenses

As previously stated, Maricopa Countys public safety expenses take up 63.93%of the total 08-09 budget. That percentage seems fairly high in comparison to other areas.In addition, expenses for public safety have grown far faster between 2001-2007 than



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they have for the two next large components of spending: highways and streets; andhealth, welfare and sanitation.

Funding for Maricopa County Services

$0.00

$200,000,000.00

$400,000,000.00

$600,000,000.00

$800,000,000.00

$1,000,000,000.00

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

Public safety

Highways and streets

Health, welfare andsanitation

One department that has seen increases in its staffing and capacity is the MaricopaCounty Sheriffs Department (MCSO).

Number of Employees,

Department of Public Safety Versus Total for

Maricopa County

0

5,000

10,000

15,000

20,000

25,000

30,000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Year

No.ofEmployee

Total DPS Total Maricopa Co.

A great deal of scrutiny has been placed on the Maricopa County SheriffsDepartment because of its controversial positions on criminal detention and immigrationenforcement. Probably the most notorious creation of Maricopa County Sheriff JoeArpaio is the Tent City jail where inmates live in outdoor tents, wear demeaning



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clothing, work on chain gangs, etc. This jail has been criticized by internationalorganizations such as Amnesty International. Sheriff Joe, or Americas ToughestSheriff, as national news media know him, has been able to parlay such stunts into long-term political success. He won re-election for the 5 th time in 2008, although his approvalratings have declined somewhat recently. The County also has the largest 287g

agreement in the nation, which allows its officers to be cross-deputized by Immigrationand Customs Enforcement to enforce immigration law. MCSO currently has 160 cross-deputized 287g officers. The City of Phoenix and other cities in the area have denouncedthe Sheriffs immigration sweeps and suggest they may involve racial profiling.However, despite (or perhaps because of) the controversy surrounding Sheriff Joe, hisdepartments funding is quite high. Indeed, its growth in terms of personnel has outpacedgrowth of other prominent criminal justice agencies in Maricopa County.

Number of Employees for Three Largest

Components of the Department of Public

Safety, 2001-07

0

1,000

2,000

3,000

4,000

5,000

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

Adult Probation

Court System

Sheriff

In addition, the MCSO jail capacity has been increased dramatically.



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Inmate Beds Available (Including Portable),

2001-07

0

2,000

4,000

6,000

8,000

10,000

12,000

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

Year

No.ofBeds Inmate beds

available

(including

portable)



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Analysis of Long-Term Solvency

It seems safe to bet that Maricopa County is going to be stable for a while.Whether or not one wants to attribute that stability to its kind of bare bones low-

government, low-spending attitude, low-tax model, or to other strategic managementmodels, it appears to be a fairly well functioning county, in financial terms.

Maricopa County doesnt seem to be having debt problems or cost problems, andits general fund has been increasing. The most troublesome aspect from the position ofMaricopa County is likely the expected downturn in taxes in 2008-09, and the resultingincreased use of money from the general fund in this years budget. However, it doesseem fairly vulnerable because of its low property tax rate, and the problems with thehousing slump.

Maricopa County has dramatically increased its public safety capacity,

personnel, and funding. One department that has received large increases in funding isthe Maricopa County Sheriffs Office. Although all departments in Maricopa Countywere reduced, the Sheriffs Office had to reduce their budget much less than otherdepartments did. There may come to a point (especially if the economic downturncontinues) when Maricopa County does not have the resources to keep such a high levelof law enforcement, especially as most other agencies appear to be operating on very leanbudgets.

Conclusion

Maricopa County is one of the largest in the United States, and has one of the

lowest property tax rates for a major urban area in the nation. It appears to be relativelystable although this may be partly due to a low level of some services. The most wellfunded area of the government is public safety, and the most well funded office withinthe category is the Maricopa County Sheriffs Office, which has seen steady increases inits capacity and staffing.

Sources:

Department of Finance. Comprehensive Annual Financial Reports. Maricopa County.2008. Accessed 5 Dec. 2008. .

Office of Management and Budget. Budgeting Documents. Maricopa County. 2008.Accessed 5 Dec. 2008. .

http://www.maricopa.gov/finance/CAFR.aspxhttp://www.maricopa.gov/budget/BudgetDocument.aspxhttp://www.maricopa.gov/finance/CAFR.aspxhttp://www.maricopa.gov/budget/BudgetDocument.aspx


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Appendix 1

2006-07 Actual

Current Assets 2,648,015,246

Current Liabilities 200,238,651

Total Assets 4,181,619,402

Total Liabilities 571,099,256

Capital Assets 1,422,257,683

Noncurrent Liabilities 370,860,605

Components of Current Assets

Cash in bank or on hand 4,320,032

Cash and investments held by County Treasurer 1,159,099,008

Receivables 26,472,051

Due from other governmental units 201,999,484

Inventories 11,359,197

Prepaids 1,855,519

Deferred Costs 5,537,308

Miscellaneous 4,165,144

Intergovernmental loans 21,018,395

Advances to other funds 48,666

Cash and Investments Held by Trustee-Restricted 111,346,473

Components of Current Liabilities

Accounts payable 77,602,169

Accrued Liabilities 11,952,477

Employee Compensation Payable 80,440,093

Interest payable 1,308,067

Deferred Revenue 27,814,030

Due to other governmental units 171,993

Deposits held for other parties 949,822

Noncurrent liabilities

Due within one year 59,330,829

Due in more than one year 311,529,776



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Appendix 2

Revenues andExpenditures 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Total expenditures $1,327,151,756.00 $1,380,395,860.00 $1,385,643,943.00 $1,523,963,815.00 $1,646,380,870.00 $1,872,848,632.00

Total revenues $1,355,237,417.00 $1,395,118,276.00 $1,476,753,864.00 $1,652,639,763.00 $1,852,887,554.00 $2,015,002,416.00
