EXPENDITURE LIMITATION PRESENTATION3.PDF

Expenditure Limit Presentation
September 28, 2026

What are expenditure limits?
In 1980, Arizona voters amended the State Constitution through Proposition
108 to establish expenditure limits for state and local governments. The
limits restrict spending of local revenues and were intended to curb
government growth and an increasing tax burden.
The expenditure limits are adjusted each year for population and inflation
growth.
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What applies to the County’s limit?
Expenditures funded by “local revenues” are subject to the limit. Local
revenues generally include all revenues received by the County, unless
specifically excluded by the Arizona Constitution.
Examples of excluded revenues:
Grants, aid, contributions, and gifts • Bond proceeds • Certain State
revenues • Certain intergovernmental payments • Refunds and
reimbursements
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County limit challenges?
The County is currently operating at its expenditure limit. The formula for
the limit, established more than 45 years ago, did not contemplate some of
today’s realities. There are three challenges to discuss:
• Disproportionate growth in County services
• Opioid settlement funds
• Capital project expenditures
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Total County Budget Growth Compared to Expenditure Limit Growth
Cumulative growth since FY2016
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027
Maricopa County Budget Expenditure Limit Phoenix Nonresidential Construction Cost Inflation
Excludes: Districts, CARES/ARPA Pandemic funding, and one-time paydowns of unfunded pension liabilities.

Disproportionate growth in services
The expenditure limitation assumes County spending needs will generally
grow with population and inflation. However, certain service demands and
responsibilities have grown disproportionately, including for:
• Public health and emergency response
• Election administration and security
• Substance abuse, behavioral and mental health
• Technology and cybersecurity
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Opioid Settlement Funds
Maricopa County was a party to a national settlement involving corporations
that distributed opioid drugs. Maricopa County’s share of the opioid
settlement is expected to exceed $200 million and will be distributed over
20 years. The settlement agreement restricts the use of the proceeds to
opioid addiction abatement and mitigation.
The County believes the settlement funds are not “local revenues” and not
subject to the expenditure limit. However, the Auditor General believes the
funds count against the limit. This puts the County in an untenable position.
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Opioid Settlement Funds (cont.)
A temporary solution is in place. The County worked with state legislators
and the County Supervisors Association to secure one-time penalty relief for
exceeding the expenditure limit due to spending opioid settlement funds in
fiscal year 2027.
Additional relief is needed for fiscal year 2028 and for the next 15+ years
afterward.
This class-action lawsuit and settlement is unlikely to be the last. A
permanent resolution is needed rather than a piecemeal approach.
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Capital project expenditures
The County must continually invest in aging facilities while also
constructing new infrastructure to serve a growing population.
Non-linear growth: Major projects require significant expenditures at
particular points in time, creating substantial year-to-year fluctuations in
spending.
Funding Considerations: Project expenditures funded with local revenues are
subject to the expenditure limitation, while those funded by debt are not.
Options: Some jurisdictions have permanently excluded capital project
spending from their expenditure limit through voter approval.
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Questions?
Thank you
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