REPORT

OF THE

COMPTROLLER OF THE TREASURY

OF THE

STATE OF MARYLAND

September 30, 1968

TO THE GENERAL ASSEMBLY OF MARYLAND AND
TO HIS EXCELLENCY SPIRO T. AGNEW
Governor of Maryland

In compliance with the provisions of Section 9 of Article 19 of the Annotated Code of Maryland,
I submit herewith a report of the financial activities of the State of Maryland for the fiscal year ended
June 30, 1968.

Although the format of the report has been completely redesigned and revised, the information
presented in the various Exhibits, Statements, and supporting Schedules follows the pattern of similar
reports submitted in past years. I believe it will supply accurately and concisely the information re-
quired by public officials, financial institutions, libraries, accountants and others interested in such
matters.

The State began its 1968 fiscal year with a total Surplus Account of $34,022,480. General Fund
Expenditures for the 1968 fiscal year exceeded total Revenues by $36,856,556., which resulted in a net
operating deficit of $2,834,076. A summary of the transactions of the State's Surplus Account for the
fiscal year ended June 30, 1968, is as follows:

General Fund Surplus — Balance, July 1, 1967		$34,022,480
Surplus Increases — Revenues, etc.	$567,378.247
Less: Surplus Decreases — Net
Appropriations, etc.	604,234.803
Excess of Decreases over Increases		36,856,556
General Fund Net Operating Deficit — Balance, June 30,	1968	$(2,834,076)

A detailed analysis of the Surplus Account is presented in this report as Statement A—16. The
deficit existing at the close of the fiscal year was, undoubtedly, due to a revision in the income tax laws
by the 1967 Session of the General Assembly, which changed the State income tax from a flat 3% rate,
to a graduated rate of 2% to 5%, and also imposed these new rates on capital gains. Inasmuch as the
State of Maryland had no prior experience with either graduated rates of income taxation or with an
income tax on capital gains, it proved to be an almost impossible task to predict accurately, more than
a year prior to the actual collection of this new tax, a reliable estimate of how much revenue the State
could anticipate receiving from it. As a result of this unpredictability the State of Maryland actually
received $24,757,520 less from income taxes than had been estimated. However, since revenues from other
sources, as reflected in Exhibit F of this report, exceeded, in a number of instances, the amounts originally
estimated, the net deficiency in total estimated revenues amounted to $17,772,642. Thus to evaluate
the net general fund operating deficit the following analysis is presented.

General Fund Surplus —
Balance, July 1, 1967		$34,022,479
Less: — 1968 Fiscal Year Appropriations in Excess of Estimated Revenues:
Authorized Appropriations — 1968	$623,392.941
Estimated Revenues	581,781.581	(41,611,360)
Net Deficiency in Revenue Attainment		(17,772,642)
Write-off of Advance		(1,348)
Gross Operating Deficit for 1968 Fiscal Year		$(25,362,871)