The county expenditure limits are constitutional limits on how much local revenues counties can spend in a given fiscal year. This is generally the amount of local revenues expended in FY 1980, adjusted for population and inflation. These limits were amended into the state constitution in 1980, along with a number of other modifications to state and local government finance, including county levy limits.
Most of the provisions governing expenditure limits are found in Article IX, § 20 of the Arizona Constitution. This section outlines the process for calculating expenditure limits, defines local revenues, and establishes the ways counties can modify or temporarily exceed expenditure limits.
Local revenues generally include all revenues received by a county except for enumerated exemptions, which include:
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Debt proceeds
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Debt service requirements
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Dividends, interest, and gains on the sale or redemption of investment securities
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Trustee or custodian
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Grants and aid from the federal government
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Grants, aid, contributions, or gifts from a private agency, organization, or individual, except amounts received in lieu of taxes
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Amounts received from the State of Arizona Quasi-external interfund transactions
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Amounts accumulated for the purchase for land, buildings, or improvements
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Highway user revenues in excess of those received in fiscal year 1979-80
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Contracts with other political subdivisions
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Refunds, reimbursements, and other recoveries
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Amounts received for distribution to school districts
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Prior years carry forward
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Qualifying capital improvement expenditures repaid in accordance with Arizona Revised Statutes §41-1279.07
How are expenditure limits calculated?
The constitution and A.R.S. § 41-563 require the Economic Estimates Commission (EEC) to provide a preliminary expenditure limit for the upcoming fiscal year to counties by February 1st, and a final expenditure limit by April 1st. This is done by adjusting the base limit for each county by changes in inflation and population since 1978. The most recent expenditure limit calculations can be found by clicking here.
Originally, the base limit for each county was the actual amount of local revenues expended in FY 1979-80. However, since the creation of the expenditure limit, voters in several counties have modified the county’s base limit. Additionally, the legislature has authorized modifications to the base limit as a result of transfers of government functions. For more information on past legislative changes to county base limits, click here.
For most counties the population factor is set by the EEC utilizing the annual population estimates generated by the Arizona Office of Economic Opportunity. However, A.R.S. § 41-563.05 requires the EEC to utilize an alternative population estimate, which considers international border crossings, for counties (with a population under 200,000) that border a foreign country. To calculate the population factor, the county’s population as of July 1 of the prior year is compared to the population of the county as of July 1, 1978.
Currently, the EEC utilizes the GDP price deflator for the calendar year preceding the applicable fiscal year to calculate the inflation factor. The constitution provides the legislature the authority to establish different population or inflation metrics through the approval of a concurrent resolution with a two-thirds majority.
One-page primer on the expenditure limit, including information on: calculation, modification, penalties and history.
More detailed overview on the expenditure limit, including statutory and constitutional references.
Background, materials, and key takeaways from previous county propositions to permanently adjust the county’s expenditure limit.
Links to relevant constitutional and statutory sections related to the expenditure limit. Includes references and summaries of the legislative changes for each section. Includes history of various legislative changes to county expenditure limits through permanent or session law.
Includes summaries and references for Arizona Attorney General Opinions related to county expenditure limit issues.
Links to resources describing statutory requirements, template resolution and publicity pamphlet language and timelines for permanent base adjustments.
Links to resources from the Auditor General & CSA on completing & filing the AELR. Also includes statutory timeline.
How can expenditure limits be modified or legally exceeded?
The constitution provides counties with ways to modify or exceed their expenditure limits on a one-time or permanent basis, largely through voter approved propositions. Unlike municipalities, counties do not have the ability to establish an alternative expenditure limit.
Permanent Base Adjustment
The constitution provides counties with ways to modify or exceed their expenditure limits on a one-time or permanent basis, largely through voter approved propositions. Unlike municipalities, counties do not have the ability to establish an alternative expenditure limit.
Through 2025, seven counties have successfully pursued and had voters approve these changes. Additional detail on county permanent base adjustments, including proposition takeaways and materials, can be found in the History of County Expenditure Limit Adjustments section of the resource guide. olution with a two-thirds majority.
Single – Year Exceedance
Counties can also make single-year adjustments through voter approval or by the BOS for disaster-related expenditures. Article IX, § 20 (2)(c) allows counties to go to the ballot in May or November to authorize a specific, one-time exceedance of the expenditure limit in the subsequent fiscal year. Requirements for that election are outlined in A.R.S. § 41-563.02.
Article IX, § 20 (2)(a) and (b) also provide counties with the ability to exceed expenditures in the event of a natural or man-made disaster. With a 2/3rds majority, the BOS may authorize expenditures directly necessitated to respond to a disaster declared by the governor. If a disaster is not declared by the governor, 70% of the board may authorize excess expenditures but the subsequent year’s expenditure limit will be reduced by the amount of excess. Alternatively, the board can refer the excess expenditures to the voters for approval, with no penalty in the next fiscal year.
What are the penalties for exceeding the expenditure limit?
Article IX, § 20 (8) provides the legislature with the authority to establish sanctions and penalties for exceeding the expenditure limit. A.R.S. § 41-1279.07 (I) establishes the penalties for counties that exceed their expenditure limit. Statute requires the Auditor General to hold a hearing to determine if a county has exceeded their expenditure limit. If it is determined that it was exceeded, the county is required to reduce the county’s primary property tax levy limit by the amount of the exceedance.
In the past, the legislature has periodically modified the penalty for certain counties that have exceeded the expenditure limit. You can find the recent legislative modifications of expenditure limit penalties for counties here.
How are expenditure limits reported?
Annually, counties are required to file their expenditure limit with the Auditor General 9 months after the close of the fiscal year, by March 31st. A.R.S. § 41-1279.07 outlines the Auditor General’s responsibilities and includes the requirements of the Uniform Expenditure Reporting System (UERS).
The most recent Annual Expenditure Limitation Report (AELR) forms, which include templates and instructions, can be found here.
Additionally, the Auditor General publishes FAQs that cover a variety of topics related to expenditure limits and the AELR. A.R.S. § 41-1279.07 (E) requires the county to designate a CFO who is authorized to sign the AELR by July 31 of each fiscal year.