1. DPS Budget Presentation John Arnold-Director Governor’s Office of Strategic Planning and Budgeting December 15, 2010

2. 2 General FundOngoing Revenue and Expenditures before Solutions 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 FY 2002FY 2003FY 2004FY 2005FY 2006FY 2007FY 2008FY 2009FY 2010 Est. FY 2011 Est. FY 2012 Est. FY 2013 Est. FY 2014 Est. $ in millions Expenditures with ARRA & RolloverGF ExpendituresGF Revenue Assumptions: Revenue: Ongoing revenue does not include one time items such as fund transfer, asset sales, etc. Growth rates assumptions: FY10: -9.2%, FY11:7%, FY12 and 7%. Expenditure: Ongoing expenditure does not include rollover or ARRA. FY10 and FY11 estimated Expenditure from most current S&U, FY12 and beyond assuming 7% growth.

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4.  FY 2011 $600-720 million  FY 2012 $1.3-1.5 billion 4

5. 5 AHCCCS added approximately 167,000 members in FY 2010. OSPB projects they will add 54,000 in FY 2011

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8. 8 Budget Unit Education (K-12) Medicaid Universities Prisons Debt Service Other TOTAL (Millions) $ 3,491.2 2,821.7 890.2 1,005.7 188.8 923.6 $ 9,321.3

9. Office of Governor Janice K. Brewer 9 Medicaid numbers assume regular FMAP

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12. FY 2008FY 2011 Comparison of Appropriated Funding

14. In response to the state’s fiscal crisis, Governor Brewer and the Legislature have cut $2.2 billion in government spending, including the following:  Reduced personnel expenditures by 22 percent  Reduced K-12 per pupil support by 18 percent  Reduced University per pupil funding by 25 percent  Reduced per capita correctional spending by 5.5 percent  Reduced child care enrollees by 40 percent (20,000 children) 14

15. Budget Reductions (continued)  Reduced the number of families on cash assistance by 47 percent (16,644 families)  Reduced state benefits for the SMI population  Provided no inflation for health care providers for the last three years  Eliminated most non federally mandated Medicaid services 15

16. Office of Governor Janice K. Brewer 16

17. Office of Governor Janice K. Brewer 17

18. Office of Governor Janice K. Brewer 18

19. In addition to spending reductions, Arizona has also:  Borrowed $2.1 billion  Deferred $1.5 billion in current year payments  Raised taxes by 14.5 percent ($900 million) 19

20. In FY 2014 Prop 100 Sales Tax Expires Federal Health Care Reform fully implemented Early Projection - $2 billion deficit Office of Governor Janice K. Brewer 20