Protect Vital County Support
- May 1
- 5 min read
Understanding the County Impact of Lump-Sum Agency Reductions
How Discretionary Budget Authority Could Affect Legislatively Created County Support
HB 4138 & SB 1831 implement a 5% lump-sum reductions across state agencies, giving agency directors discretion over where within their budgets those reductions are applied. For most agency appropriations, that discretion is straightforward — directors manage their own operational budgets.
However, embedded within the budgets of several state agencies — like the Arizona Department of Administration (ADOA) and the Arizona Criminal Justice Commission (ACJC) — are appropriations that the Legislature created to pass through to county governments in response to specific state policy decisions.
An unintended policy consequence is that the budget gives agency directors — rather than the Legislature — authority to determine whether those county appropriations are reduced, and by how much.
The total amount at issue is over $13 million in funding for the impacts of state policy mandates on county government. This policy brief explains what those programs are, why the Legislature created them, and what a reduction would mean for the local taxpayer.
Key Facts:
These are not agency operating funds. The appropriations at issue pass through ADOA and ACJC to county governments. They are not available to fund agency operations.
The Legislature created each of these line items in response to specific state policy decisions impacted counties. More background information below.
Other restricted and formula-driven funds are not subject to lump-sum reductions in this budget. County pass-through appropriations should be similarly protected.
Total exposure is over $13 million across all programs. The proportional fiscal impact varies significantly but is higher particularly for small, rural counties. Examples of these appropriations are:
Counties are also already absorbing a $36 million increase in ALTCS contributions in FY 2027 — a separate, formulaic, mandatory obligation.
Solution: Clarify in the budget that agencies shall not take lump sum reductions out of special line items passed through to counties.
Examples of County Pass Through Funds
Use the buttons below to quickly navigate to each item.
Small County Support | $7.6 Million Ongoing
In Lieu Lottery Funding
Recipients: 13 rural counties (under 900,000 population), $550,000 per county
Purpose: To help support essential county services, restoring a portion of the county share of lottery funding that was swept during the great recession.
Since 1986, all 15 counties received a share of lottery revenues to help compensate counties for performing state functions. However, during the great recession, the statutory distribution of lottery revenues to counties was eliminated.
In FY 2014, an “in-lieu” appropriation restored some, but not all funding on a temporary basis. In FY 2018, 13 counties received an “in-lieu” appropriation at $550,000 per county, however Mohave, Yavapai, and Pinal were scored as one-time, necessitating action in FY 2019 to make it permanent for the 13 counties.
As a result of the elimination, from FY 2009 through FY 2020, over $35 million was swept from the counties to the state general fund.
Graham County Essential Support
Recipient: Graham County, $500,000
Purpose: Maintenance of essential county services to help offset the county’s disproportionate ALTCS burden.
Graham’s share of GF that goes to ALTCS is the highest amongst the small counties. Their ALTCS contribution is equivalent to the state having to pay $2 billion for long-term care, 5X higher than the state’s contribution.
In FY 2026, the county’s ALTCS contribution increased by 45% in a single year – that would be like the state seeing a $580M increase.
Elected Officials Retirement Plan (EORP) Offset | $3 Million Ongoing
Recipients: 12 rural counties (under 250,000 population), $250,000 per county
Purpose: To offset a portion of the impact caused by state lawmakers systematically underfunding the Elected Officials Retirement Plan (EORP) after its closure in 2013.
State policy caused EORP to become insolvent. In 2013, state lawmakers chose to cap the EORP contribution rate when the plan closed and said the state GF would cover the additional payments. That did not occur, causing the plan to become insolvent by 2018 when the court ordered the state to remove the cap.
Contribution rate for counties increased from 23.5% to 61.5% in a single year – rural counties were hit the hardest due to constitutional structure of county government. On a per person basis, the impact to La Paz or Greenlee Counties was more than 10x the statewide average.
County contributions to EORP remain elevated – the contribution rate is now 70.4% - the state needs to keep its promise to help rural counties from being disproportionately burdened by the state’s policy choice.
Counties brought forward a cheaper debt repayment partnership plan that would have eliminated the need for this appropriation, but the state chose not to pursue it. The state needs to fulfil its obligation by maintaining this appropriation until the legacy debt in EORP – created largely by state actions -- is extinguished.
Juvenile Dependency Proceedings Grant | $2 Million Ongoing
Recipients: All counties, distributed proportionally by share of filings; individual county maximum of $250,000. Administered through the Arizona Criminal Justice Commission.
Purpose: Recognizing the minimal state investment for mandated public defense services, the Legislature provided this support for juvenile dependency proceedings involving indigent families.
The state overhauled the child safety system in 2014, and dependency cases spiked as a result. That year, the Legislature invested millions into the agency for over 240 new FTE to process through the backlog of juvenile dependency cases, and as a result the number of dependency filings increased statewide by over 20% from 2013-2024.
Counties are required to provide and pay for attorney services for all parties in indigent dependency filings. As the state processed through these cases, counties saw caseload growth as a direct result. From 2013 to 2020, while Mohave County’s population grew by an estimated 7.85%, the number of dependency petitions grew by 61.5%.
Counties continue to spend more than the state on the criminal justice system, despite having lower overall expenditures. In FY 2024, counties spent $100 million more on the criminal justice system than the state, an average of 40% of their general fund compared to just 13% at the state level.
CORP Retirement Contribution Rate Increase | $377,000 Ongoing
Recipients: 14 counties with detention officers in the defined contribution retirement plan.
Purpose: To fulfill last session's legislative commitment that the state general fund would bear the ongoing cost of the state’s policy choice to increase employer contribution rates for detention and corrections officer DC retirement accounts.
The FY 2026 state budget increased the county and state employer contribution to detention and corrections officer DC retirement accounts from 5.0% to 5.5%, effective FY 2027. The budget also appropriated $1 million ongoing to cover the cost of that policy choice across all impacted employers, with legislative intent language establishing the state's obligation to hold local governments harmless.
County supervisors have repeatedly urged a data-driven, informed, and transparent process for making retirement plan changes. These are constitutionally protected promises to public safety employees. The state’s choice to increase retirement costs in the budget last year must be fully funded by the state to ensure that these policy choices don’t have a detrimental effect on the local taxpayer or crowd out other workforce investments that could be made locally.
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