The three-year housing boom in Arizona that ended in 2006 skewed the state's population figures, leading to projections that planners, economists and government officials agree are inflated.
Accurately tracking and projecting population numbers is crucial to financial development plans across Arizona. Taxes, freeways, commercial and residential projects all are based on how many people are expected to move here.
"Population growth is the beginning of the food chain of Arizona's economy," said Ioanna Morfessis, founding chief executive of the Greater Phoenix Economic Council. "But if the numbers are wrong, and I think the state's population numbers are inflated, it's going to be a house of cards for the economy."
State and census estimates showed a record 196,000 people moved to the Phoenix area during the height of the housing boom. The startling figure led to projections for the metro area's population to more than double to 12 million as soon as 2030.
Those figures were based largely on housing permits and occupancy numbers.
But the number of building permits exceeded the number of houses actually sold. For example, a record 62,000 new homes went up in metro Phoenix during 2005 but only about 40,000 of those were bought by people who moved into them.
The housing market began to slow in mid-2006 and by early 2007, the economy had begun to contract. Municipalities began cutting services, schools started closing, home builders walked away from subdivisions, retailers closed stores, businesses laid off workers, and foreclosures started to soar.
That's when it became clear that Arizona would not grow at the expected pace, and attention turned to adjusting population projections.
Six months ago, projection estimates showed 105,000 people moving to metro Phoenix in 2008. That figure recently was adjusted to 85,000 - 19 percent lower.
The drop translates to about $24 million less in tax revenue for the state. Each Arizona resident contributes $1,200 in state income tax and net sales-tax revenue, according to an estimate from Marshall Vest, a University of Arizona economist.
Problems from inaccurate population projections also ripple through Arizona's towns and cities, which receive their share of state taxes and other funds based on their populations.
"Arizona is very dependent on its population numbers because we have a revenue-sharing system," said Kent Ennis, deputy director of the Arizona Department of Commerce. "A municipality's growth determines how much they get of sales and income taxes and highway funds. Billions of dollars are riding on how much an area grows and how good population estimates are for that area."
Now, some of the area's top economists and the Arizona Department of Commerce are working on a better way to calculate projections without relying so much on housing.
Gov. Janet Napolitano in 2006 called for a state task force to investigate Arizona's population numbers.
The Arizona Data Estimates and Projection Task Force includes various state agencies, municipalities and economists. Last fall, the group came back with its recommendations to create a new model for population forecasts.
The model called for moving the state's population and job data collection and forecasting from the Department of Economic Security to the Commerce Department. The department is now working to get data on driver's licenses, school enrollments, hospital stays, more detailed job records and tax-return data.
The department also is working with local governments to track how many homes were actually built out of all the housing permits issued. And to figure out many homes and apartments are vacant, it's working with utilities to gather information on new hookups and power usage.
The state will need a demographer to launch the new projection model. But because of Arizona's more than $1 billion budget shortfall, the Commerce Department can't yet hire one.
Central Arizona Governments, which plans for Pinal County, can't wait. It has already hired economists to create the recommended new model. New population forecasts for Maricopa, Pinal and Pima counties are due out this fall.
"Everyone wants a population number they can count on, even if it's not the number we want to hear," Morfessis said.
