Arizona Economic Overview
Arizona’s economy, second only to New Mexico’s, is the fastest growing in America and is the 61st largest economy in the world. Arizona’s dry and sunny climate brings large numbers of tourists and retirees fleeing their colder native states, while supporting the local economy by encouraging the growth of construction, restaurants, real estate, and local retailing.
Although Arizona’s economy was formed around the five "Cs"—cattle, cotton, copper, citrus, and climate—the state now relies on manufacturing as its most important economic sector, producing electrical, communications, and aeronautical items worth some $21 billion. Arizona is home to both Fortune 500 and start-up technology companies. Known for its large cattle ranches, Arizona provides livestock, dairy products, and a wide variety of crops for local use and export.
Prospectors passing through the state on their way to California during the Gold Rush of 1848–1859 found not only gold and silver but also copper in Arizona. Mining is still an important part of the state’s economy. When the railroads came to Arizona in the late 1800s, ranching and sheep raising—industries that previously were found only among the Navajos—thrived.
Cattle ranching, which brings in $2.8 billion annually, and dairy products still play an important part in Arizona’s economy. During World War II the state’s economy largely switched to defense industries. By the 1960s, manufacturing of electronics surpassed both mining and agriculture in contribution to the economy. Construction of Arizona’s 584 dams boosted the state’s energy supply and tourism.
Cattle, calves, and dairy goods are Arizona’s most valuable agricultural products. Arizona's family ranchers produce $437 million worth of cattle each year, which generates a total $2.8 billion in economic impact for the state and more than 94,000 jobs. Cattle production accounts for 5 percent of Arizona's gross state product. In many rural areas of the state, cattle production is 75 percent of the GSP.
Lettuce is the largest crop and comprises about 20 percent of total crop production for the state. Next is cotton production, where Arizona ranks 10th nationally. Hay, greenhouse, and nursery products comprise 10 percent of crop production. Other important crops are cauliflower, broccoli, sorghum, barley, corn, and citrus. The Central Arizona Project, a 336-mile canal system, diverts water from the Colorado River into central and southern Arizona. At the cost of $4 billion, it is the largest aqueduct system ever constructed in the United States and provides water to nearly one million acres of agricultural land.
BANKING AND FINANCIAL SERVICES
The financial sector in Arizona provides 181,000 jobs. Close to 60 national banks are represented in Arizona, with branches throughout the state. Large banks and financial institutions serving Arizona include Bank of America, Citibank, JPMorgan Chase, Wells Fargo, Armed Forces Bank, First National Bank of Arizona, Stockmen’s Bank, Union Bank of Arizona, and Bank of the West. Annual banking deposits total $78 billion. Consumer lending is valued at $4.7 billion and issuance of credit cards at $952 million.
The information and communications technology sector provides 9.4 percent of the jobs in the private sector and brings in taxable sales of $3.6 billion annually. The Internet service provider sector is valued at $1.5 billion and the broadcasting provider sector at $716 million. Local and wide area networks, email, and e-commerce are in use across the state. The Arizona Telecommunications System is the primary source for wide area networking (WAN).
A sophisticated telecommunications infrastructure delivering broadband is readily available in large urban centers, but not yet in rural areas. Arizona is also well known internationally for its world-class observatories, high-powered telescopes, and prominence in the field of space exploration, led by the University of Arizona. A study by researchers at the the university's Eller College of Management found that astronomy, planetary, and space sciences research generate $252 million annually and create 3,300 jobs.
Arizona’s mountains in the northern and central regions are home to 3.2 million acres of commercial forests (composed mostly of pondersosa pine and other types of fir trees), which provide essential lumber for the building materials and construction industry. The rate of construction in Arizona is unusually high due to the state’s rapid growth in recent years and the consistent flow of seasonal residents.
Close to 220,000 workers are employed in 15,463 construction companies, with annual construction receipts totaling $55 billion. Approximately 10,500 of those companies represent specialty trade contractors, with the remainder being made up of building contractors and heavy and civil engineers. In 2008, over 26,000 building permits were issued.
Public schools are divided into 220 local districts containing a total of 2,042 schools, all of which are overseen by the Arizona State Board of Education. Arizona spends $7,111 annually per pupil, which is almost $3,000 less than the national average of $9,963 and ranks at or near the bottom compared with the rest of the country. Salaries for teachers average more than $6,500 below the national average.
With an annual enrollment of one million students, revenues total $9.6 billion. Enrollment in the 76 higher learning institutions totals 624,147, breaking down as follows: public schools, 331,441; independent (nonprofit), 8,592; undergraduate, 476,547; graduate, 87,386; and first professional, 3,259. Total state and local appropriations amount to $1,704,391. There are three publicly funded universities in Arizona: The University of Arizona, Arizona State University, and Northern Arizona University. Private higher education is dominated mostly by "for-profit" and multi-site universites.
Arizona has substantial coal deposits, mainly located in the Black Mesa Basin. Coal mining employs more than 700 and contributes in excess of $2 billion to the state economy. Coal is the state’s primary fuel source and is used to produce 46 percent of its electricity.
Nevertheless, Arizona utilities lead the nation in the research and development of solar technologies for producing electricity. Arizona has some of the world’s largest solar electricity-generating plants. Its vast desert plains provide a high potential for solar power. A study released by the Arizona Department of Commerce projects that by the year 2020, a total of 1,000 megawatts of solar electricity could be in use, reducing emissions for the state by 400,000 tons per year and also creating at least 3,000 new jobs.
In addition, the Colorado River provides a tremendous source of hydropower. Arizona’s per capita consumption of electricity is relatively low compared to other states. Total net taxable sales in the energy sector amount to $9.2 billion. The highest energy-consuming sector is transportation.
The film industry in Arizona continues to grow and contribute both jobs and revenue to the economy, paying out $34 million in talent and crew salaries annually. In addition to film, an extensive range of cultural organizations—including several ballet companies, theaters, opera companies, and symphony orchestras—contributes to local economies. A total of 1,523 arts, entertainment, and recreation establishments bring in approximately $3.5 billion annually. There are private and government funds available to support the arts, but due to the 2008–09 recession, the government’s Art Commision overall budget was reduced by 42 percent.
Arizona’s strong insurance industry is one of the largest contributors to the state’s economy, generating more than $438 million in revenue each year. Homeowners pay premiums of more than $1.2 billion annually, and there are a total of 1,860 authorized insurers. The Arizona Department of Insurance monitors insurance companies, issues licenses to insurance providers, and educates consumers in making decisions about insurance.
Manufacturing is Arizona's leading economic activity, producing everything from electronics to published materials to processed foods. A total of 4,900 manufacturing firms employ about 180,000 workers with an annual payroll of $7.1 billion. Some 54,000 of these workers are engaged in manufacturing high-tech products. The computers and electronics sector contributes $14 billion to the state economy; transportation equipment, $8.6 billion; fabricated metal products, $3.2 billion; and food products, $2.9 billion.
The state’s aerospace industry manufactures helicopters, turbine engines, space vehicles, and guided missiles, and the metal industry fabricates door and window frames. Other widely manufactured products include pharmaceuticals and medicines; navigational, measuring, electromedical, and control instruments; audio and video equipment; optics; and photocopying and photographic equipment. The manufacturing industry brings in total annual revenues of $42 billion and contributes $20 billion to the gross state product. Arizona manufacturers exported $17.1 billion of goods in 2008.
MINING AND EXTRACTION
Arizona is a state rich in mineral resources. It is the national leader in copper production, providing two-thirds of America’s copper output from large open pits and mines. It is also an abundant source of gold, lead, zinc, uranium, silver, molybdenum, sand, gravel, and cement. The Arizona mining industry is made up of 186 companies with total annual revenue of $2.2 billion. It employs approximately 8,600 with an annual payroll of $355 million. The coal and metal ores sub-sector generates $2.1 billion, support activities for the industry are worth $70 million, and oil and gas extraction bring in some $10 million. The industry contributes $4.5 billion to Arizona's gross state product.
The Alliance of Arizona Nonprofits was created in 2004 in an attempt to support partnerships among some 40,000 nonprofit organizations in the state. By 2006, the alliance had some $17 billion in revenue and more than $27 billion in assets. Partnering with the National Council of Nonprofits, the alliance tries to fill the gaps when government services are terminated, providing a social safety net for Arizonans. Another nonprofit, the Arizona Community Foundation, is a statewide organization with approximately $450 million in trust and endowment assets. In 2008, the foundation awarded $33.7 million in grants and scholarships to more than 3,500 nonprofit organizations, schools, and government agencies.
Sales tax is an important source of revenue to Arizona’s state and local governments. Retail sales in Arizona are taxed at 5.6%, but different counties add on their own percentages to fund local projects. (Food purchased at grocery stores is not subject to sales tax.) Wholesale and retail trade provides 428,400 jobs and adds $55 billion to the annual economy. Many retail jobs are related to the state’s tourism industry, which is estimated to add $12 billion to the state’s economy annually. Walmart is the largest private employer in Arizona, with 17,343 workers on its payroll in the state. The retail pharmacy industry is a quickly growing sector of Arizona’s retail sales.
Because high-tech products are mostly exported, this sector is vital to the state’s economy—in 2005 it directly contributed $10.3 billion. Approximately 900 high-tech industries employ 280,000 workers and pay out $20.3 billion in salaries. Once an industry leader, Arizona experienced a decline in high-tech from 1990 through 2001. Still, high-tech products now account for 44 percent of all manufacturing jobs. The state's key technology industries are aerospace, defense products, semiconductors, and computing. The gross contributions of these businesses to the economy are 19 percent of employment and 25 percent of earnings.
Arizona’s high-tech sector also includes software publishers, data processing, telecommunications, hosting, computer systems design, architectural engineering, and scientific research and development. Arizona encourages its developing biotechnology field in an effort to bolster knowledge-based companies that offer high-paying jobs. The Council on Innovation and Technology was created in 2003 to develop strategies to grow the field in the state.
Transportation in Arizona is served by a combination of interstate and local highways, rail, and air routes. Public transportation is available via bus systems, and light rail connects Phoenix with nearby cities. Arizona's international airport, Sky Harbor, is a joint military and civilian airport located in Phoenix that serves about 20 million travelers annually and handles 240,000 tons of freight.
Regularly scheduled commercial flights are available from the Scottsdale Municipal Airport, and two Amtrak rail lines pass through the state. The transportation sector— including towing, railroads, and aircraft business—accumulates net taxable sales of $48 million. Nevertheless, the Arizona Department of Transportation was facing a $100 million budget shortfall at the end of 2009 that resulted in reductions in services and highway construction, as well as highway maintenance.
TRAVEL AND TOURISM
Arizona's warm climate, forests, and sunny skies attract millions of tourists each year. Attractions include the Grand Canyon, the Petrified Forest, the Painted Desert, Hoover Dam, Lake Mead, Fort Apache, and the rebuilt London Bridge at Lake Havasu City. The Hoover Dam, built in the 1920s, is still considered one of the world’s wonders of civil engineering and has been made a National Historic Landmark.
The mountains attract visitors interested in hiking, fishing, or skiing in the winter. Golfing, ancient Native American ruins, Indian reservations, and Spanish colonial ruins also attract a large tourist trade. The hotel and motel industry accumulates some $2.4 billion in net taxable sales. In 2008, total spending on travel in Arizona was $18.5 billion, responsibile for 166,900 direct jobs paying out $5 billion in wages.
Five major military bases in Arizona impact the economy: Yuma Proving Grounds, Yuma Marine Corps Air Station, Luke Air Force Base, Ft. Huachuca, and Davis-Monthan Air Force Base. There are also four National Guard facilities in central and southern Arizona. These bases provide tens of thousands of jobs that generate more than $9 billion in state revenues. In addition, the Arizona State Lottery has generated more than $2 billion for the state since 1981, and annual taxes on state-sponsored bingo operations reach $5.5 million per year.
-World Trade Press