In the years ended June 30.1981.1980 and 1979, governmental financial activities were recorded in the General, Special
Revenue, Debt Service and Capital Projects Funds ("GAAP Funds") in conformity with generally accepted accounting principles. In
prior years, governmental financial activities were recorded in the Budgetary General, Special, Federal, Annuity Bond and Loan
Funds ("Budgetary Funds") in conformity with accounting practices followed for budgeting purposes. The Combined Summary of
Revenues, Expenditures, Other Sources and Uses of Financial Resources and Charges in Fund Balances was prepared from the
financial statements of the GAAP Funds for the years ended June 30,1981.1980 and 1979; and from the financial statements
of the Budgetary Funds for the years ended June 30,1977 and 1978.

The financial activities recorded in the Budgetary Funds for the years ended June 30, 1977 and 1978 are generally com-
parable to the financial activities recorded in the GAAP Funds after adjustments to the Budgetary Funds to remove transactions
related to activities recorded in proprietary GAAP funds.

Certain adjustments were made to fund balances as of July 1.1978 to present the financial statements for the year ended
June 30,1979 in conformity with generally accepted accounting principles. These adjustments principally consist of adjustments
to revenues and expenditures of prior years reported in Budgetary Funds. It is not practicable to adjust the financial statements of
prior years to reflect these adjustments. However, the Office of the Comptroller believes the effect of such adjustments would not
be material to the Combined Summary of Revenues. Expenditures, Other Sources and Uses of Financial Resources and Changes in
Fund Balances for the years ended June 30, 1977 and 1978.

The following legislative changes and other matters affect the year to year comparability of the Combined Summary of
Revenues. Expenditures, Other Sources and Uses of Financial Resources and Changes in Fund Balances:

Revenues:

Motor vehicle taxes and fees declined in 1981 and 1980 when compared to 1979 principally because of a reduction in motor
vehicle fuel consumption and a reduction in the number of vehicle registrations.

For the 1979 year, the property tax was reduced from 23C to 20C per $100 of assessed value, resulting in a reduction of
$10,900,000 over the revenues that would have been reported as other taxes had the rate remained at 23C.

The sales and use tax was increased on June 1, 1977 from 4% to 5%. This had the effect of increasing revenues from those
taxes in 1978 by $122.979.000 overthe revenues that would have been realized at the former rate. The motor vehicle titling tax
was also increased from 4% to 5% on June 1, 1977, resulting in $24,936,000 more in revenues in 1978 than would have been
realized if the rate had remained at 4%.

Expenditures and Operating Transfers:

In 1981 and 1980 general government expenditures include approximately $6 million and $31 million, respectively, of
payments to political subdivisions for unclaimed local income tax withholdings applicable to tax years prior to 1977 (See Note 13
to the combined financial statements included in the Annual Report), and approximately $28 million in special grants to political
subdivisions for 1980.

For the years ended June 30, 1981, 1980 and 1979 material employee benefit costs applicable to proprietary funds were
transferred to proprietary funds. Accordingly, operating transfers out include employee benefit costs in the approximate amounts
of $55 million, $50 million and $46 million, respectively, transferred to proprietary funds.

For the year ended June 30. 1981 changes were made pursuant to 1979 legislation which affected the calculations for
employee benefits. As a result of such changes for the year ended June 30, 1981 governmental fund type retirement expendi-
tures (i.e., amounts funded) increased by approximately $45 million.

For the year ended June 30. 1981 intergovernmental expenditures have been separately classified in the financial state-
ments. The expenditures for the years ended 1980 and 1979 have been restated to reflect this change. It is not practicable to
reclassify expenditures of years prior to 1979 to reflect this change.

Operating transfers in principally reflect the amounts received by the General Fund from the Maryland State Lottery Agency.
Annual increases in the amounts reflect the increasing volume of Lottery ticket sales.