Retirement Costs:

Substantially all State employees participate in one of several State retirement systems (see Note 16). The
State also provides retirement benefits to teachers and certain other employees of its political subdivisions.
Retirement expenditures for governmental fund types represent amounts contributed by the State for the fiscal
year. Retirement costs have been provided on the accrual basis predicated on actuarial valuations. The excess
amounts of actuarially determined retirement costs over the amounts recorded as expenditures are carried in the
general long-term debt account group and accrued as a liability for the proprietary fund type and higher education
fund.

Accrued Workers' Compensation Costs:

A liability for accrued workers' compensation costs exists at June 30, 1991. These amounts represent the
liability for anticipated claims and claims expense for State employees. The State records expenditures in the
general fund and other funds as the claims are paid. The accrued workers' compensation costs are carried in the
general long-term debt account group and accrued as a liability for the proprietary fund type and higher education
fund.

Employee Benefit Costs:

Substantially all expenditures for pension, health and Federal Social Security benefits of governmental fund
types, including approximately $524,191,000 of expenditures applicable to teachers and other employees of
political subdivisions, are reported as program expenditures in the respective funds when paid. Material benefit
costs applicable to the proprietary fund type and higher education fund are reflected as expenses or expenditures
in the appropriate funds.

The State also provides postemployment health care benefits to retired employees and their dependents
(generally employees who retired before July 1,1984, employees who retired on or after July 1,1984 with at least
5 years of creditable service and employees who receive disability retirement allowances or special death benefits).
The State subsidizes approximately 50% to 90% of covered medical and hospitalization costs, depending on the
type of insurance plan. The State assesses a surcharge for postemployment health care benefits which is based on
health care insurance charges for current employees. During fiscal year 1991 these benefits amounted to
$32,896,000.

Principally all full-time employees accrue annual leave based on the number of years employed up to a
maximum of 25 days per calendar year. Earned annual leave may be accumulated up to a maximum of 45 days as of
the end of each calendar year. Accumulated earned but unused annual leave for general government employees is
accounted for in the general long-term debt account group. Liabilities for accumulated earned but unused annual
leave applicable to proprietary fund type and the higher education fund are reported in the respective funds.

Total Memorandum Only:

The "Total Memorandum Only" column represents an aggregation of the individual combined financial
statements and does not represent consolidated financial information.

B. Governmental Fund Types, Expendable Trust and Agency Funds:
Basis of Accounting:

The accounts of the general, special revenue, debt service, capital projects, expendable trust and agency funds
are maintained and reported using the modified accrual basis of accounting. Under the modified accrual basis of
accounting, revenues are susceptible to accrual and recognized in the financial statements when they are
measurable and available to finance operations during the year or liquidate liabilities existing at the end of the
year. Material revenues susceptible to accrual include: federal grants, income taxes, sales and use tax and motor
vehicle fuel and excise taxes. Expenditures are recognized when obligations are incurred as a result of receipt of
goods and services. Modifications to the accrual basis of accounting include:

• Interest on long-term obligations reflected in the general long-term debt account group is recognized in the
debt service funds when it becomes payable.

• Inventories of materials and supplies are recorded as expenditures when purchased. Such inventories are
not material.

37