The State enters into long-term contracts for construction of major capital projects and records
commitments as encumbrances. The State pays the cost of capital projects principally from resources obtained
from general obligation bond proceeds, operating transfers from the general fund and federal grants. These
resources are received, in many cases, after the long-term contracts are executed and recorded as
encumbrances. Accordingly, the undesignated fund balance of the capital projects fund reflects a deficit. This
deficit will be funded by future bond proceeds and capital appropriations from the general fund (see Note 8).

PROPRIETARY FUND TYPE

Enterprise Funds:

The enterprise funds include:

1. Economic Development:

Direct loan and loan insurance programs of the Maryland Department of Economic and Community
Development.

2. Maryland Food Center Authority, which owns and operates warehouse facilities for use by wholesale
food distributors.

3. Maryland Transportation Authority, which constructs, maintains and operates transportation toll
facilities.

4. Maryland State Lottery, which operates the State Lottery.

5. Maryland Environmental Service, which constructs, maintains and operates water supply and liquid
and solid waste disposal facilities.

6. State Use Industries, which utilizes inmate labor from State correctional institutions to manufacture
goods, wares and merchandise to be sold to State agencies, political subdivisions and charitable, civic,
educational, fraternal or religious associations or institutions.

7. Maryland Higher Education Loan Corporation, which assists resident students in meeting costs of
attending approved institutions by guaranteeing loans made by commercial lenders.

FIDUCIARY FUND TYPES

Transactions related to assets held by the State in a trustee or agency capacity are accounted for in
fiduciary fund types. Fiduciary fund types are comprised of:

1. Expendable Trust Funds:

a. Deferred Compensation Plan:

This fund accounts for the amounts withheld from employees and invested in the plan as the
employee has directed. Assets of this fund aggregating $157,896,000 are available to the general
creditors of the State.

b. Employment Security Administration:

This fund accounts for the unemployment taxes collected from employers, federal revenue received
and remittance of benefits to the unemployed.

2. The nonexpendable trust fund reflects the transactions, assets, liabilities and fund equity of the State
Accident Fund. The fund was established to provide workers' compensation insurance for participating
employers in the State, including the State of Maryland.

3. The pension trust fund reflects the transactions, assets, liabilities and fund equities of the State
administered retirement and pension systems.

4. Agency funds account for the receipt and disbursement of various taxes and federal grant proceeds
collected by the State for distribution to the Federal government, political subdivisions and patient and
prisoner accounts.

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