Arizona Kicks Off Fiscal Year with $400 Million Surprise Surplus

The state of Arizona closed the 2024 fiscal year with an impressive financial performance, generating nearly $600 million more in revenue than initially forecasted by budget analysts in January. Lawmakers, who approved the state budget in mid-June, had expected $400 million less.

June, the final month of the fiscal year, was particularly strong, contributing nearly half of the surplus. The Joint Legislative Budget Committee (JLBC) reported an unexpected $248 million increase in revenue collections for the month in their latest fiscal report.

The successful fiscal year brought total revenues to $563 million above the January predictions, marking a significant improvement over initial mid-fiscal year forecasts. This higher-than-expected revenue directly impacts the fiscal year 2024 budget, resulting in a $412 million surplus compared to the budget hammered out in mid-June after extensive negotiations.

The exact implications for the state budget’s bottom line remain uncertain, as final spending figures for June are yet to be compiled and are anticipated next month. However, JLBC analysts suggest that any year-end surplus is advantageous, particularly given that the enacted fiscal year 2025 budget’s three-year plan predicts a modest $8 million surplus by 2027.

Medicaid refunds emerged as the largest contributor to the unexpected revenue, totaling $160 million. This was attributed to reduced spending on developmental disabilities and higher-than-expected managed care program profits.

Individual income taxes significantly outperformed projections, contributing an extra $156 million due to fewer issued tax refunds. Corporate income taxes followed suit with a $92 million gain, driven by a smaller-than-expected year-over-year decrease.

Additional revenue came from insurance taxes, which exceeded expectations by $51 million, and sales taxes, which brought in $49 million more than anticipated. Proceeds from unclaimed property hit a record $211 million, resulting in a $41 million boost in miscellaneous revenues.