Maryland Higher Education Loan Corporation
Maryland Deposit Insurance Fund Corporation
Maryland Stadium Authority
Unemployment Insurance Program
Maryland State Accident Fund
Maryland Retirement and Pension Systems
University of Maryland System
St. Mary's College of Maryland
Morgan State University

The Maryland School for the Blind, Blind Industries and Services of Maryland, Maryland Health and Higher
Education Facilities Authority, Maryland Automobile Insurance Fund, Maryland National Capital Park and
Planning Commission, State Employees Credit Union, and the Maryland Credit Union Insurance Corporation
have not met the criteria for inclusion in the reporting entity, and accordingly, are excluded from this report.

ECONOMIC CONDITION AND OUTLOOK

Economic conditions are favorable and continued expansion is expected during 1988 and 1989, thus
indicating favorable revenue prospects for the 1989 fiscal year. The unemployment rate for fiscal year 1988
declined when compared to fiscal year 1987 and is below the national average. Rising employment and income
within the State should ensure that general fund revenues will grow at a rate consistent with budgeted general
fund expenditures during the 1989 fiscal year.

To assist economic development and growth for the future, the State has initiated an Economic Development
Opportunities Fund in 1989 to help assure commercial and industrial expansion.

MAJOR INITIATIVES

During the year, the State was able to finance many needed services and initiatives as a result of extra
revenue made available primarily from income taxes resulting from the reform of the federal income tax
structure, a one time tax amnesty program, and increases in the motor vehicle fuel tax rate and registration fees.

In an effort to provide tax relief to low and middle income taxpayers, some deductions and credits were
enacted to the State's income tax structure which emulate the federal structure in order to reduce some of the
future tax revenues that will result from higher adjusted gross income on tax returns. The increased revenues
related to motor vehicles along with a proposed increase of registration fees in 1992 will generate sufficient
revenue to allow the Department of Transportation to expand its capital spending for roads, ports, and airports
by $1 billion and to share $313 million of transportation revenues with the local governments over the next five
years with minimum reliance on new bond issues.

From September 1,1987 to November 2,1987, the State conducted a successful tax amnesty program. That
program resulted in additional collections for the year in excess of $34.6 million, the majority of which were from
individual and corporate income taxes. It also added hundreds of new taxpayers to the tax rolls, which broadens
the tax base for future years and makes Maryland's tax system fairer for everyone.

The State was able to begin a major new initiative for the Action Plan for Educational Excellence which
provides for the State to increase its percentage of total expenditures for elementary and secondary education.
An expanded effort was made in the providing of health and human services and in the joint state, local, and
private participation in the fight to help welfare recipients gain independence through permanent employment.
Significant resources were also provided for improvements to public parks and recreational areas including
replenishment of the ocean beaches. Resources were also accumulated to carry out Maryland's commitment to
depositors whose funds were in savings and loan institutions that failed so that a final distribution can be pledged
without the issuance of bonds.

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