Income Taxes:

The State accrues the net income tax receivable or refund due based on estimated income tax revenues and
refunds due relating to the fiscal year that will not be collected or paid until after the fiscal year. The accrual is
computed based on projected calendar year net tax collections, as estimated based upon tax laws in effect, future
projections and historical experience. The portion of the receivable that will not be collected within sufficient time
to liquidate payables as of year end is deferred.

Sales and Use Taxes:

The State accrues as a receivable June sales and use taxes that are unremitted at year end. These taxes are
considered measurable and available as they represent June collections that are remitted to the State in July.

Property Taxes:

The State levies an annual tax for the fiscal year beginning July 1 and ending June 30 on all real and personal
property subject to taxation, due and payable each July 1 (lien date), based on assessed values as of the previous
January 1, established by the State Department of Assessments and Taxation at various rates of estimated
market value. Each of the counties, Baltimore City and incorporated municipalities establish rates and levy its
own tax on such assessed values. The State tax rate since 1982 has been maintained at 210 per $100 of assessed
value. Unpaid property taxes are considered in arrears on October 1 and penalty and interest of 1% is assessed for
each month or fraction of a month that the taxes remain unpaid. Current collections are 98.2% of the total tax levy
for the fiscal year.

Intergovernmental Expenditures:

General, special revenue and capital projects fund revenues paid to political subdivisions and bond proceeds
granted to political subdivisions and other public organizations are recorded as intergovernmental expenditures.
Direct grants and other payments to, or on behalf of, political subdivisions are recorded as current expenditures.

Capital Outlays:

Principally all capital expenditures for the acquisition or construction of State general fixed assets are
reported as capital outlays in the capital projects fund.

Reserved General Fund and Special Revenue Fund Balances:

Loans receivable maturing after June 30, 1993, in the amounts of $2,780,000 and $78,823,000, are not
available for current operations and accordingly, have been reflected as reservations of general fund balance and
special revenue fund balance, respectively. A portion of the special revenue reserved fund balance, in the amount
of $75,000,000 as of June 30, 1993, has been reserved for an intrafund loan from the Maryland Transportation
Authority to the Maryland Department of Transportation.

Portions of the general fund balance and the special revenue fund balance, in the amounts of $63,233,000 and
$37,439,000, respectively, as of June 30, 1993, representing special budgetary and nonbudgeted agency
resources, were reserved for agency activities and programs.

A portion of the general fund balance, in the amount of $57,470,000 as of June 30,1993, has been reserved for
the State Reserve Fund. The State Reserve Fund is comprised of a Dedicated Purpose Account, an Economic
Development Opportunities Program Fund, a Catastrophic Event Fund and a Revenue Stabilization Account with
balances of $1,383,000, $2,475,000, $2,717,000 and $50,895,000, respectively, as of June 30,1993. The Dedicated
Purpose Account is designed to retain appropriations for major multi-year expenditures and to meet contingency
requirements. The major use of the account has been the accumulation of reserves to meet the State's
commitment to make payments to insured account holders of certain State chartered savings and loans in
receivership. The Economic Development Opportunities Program Fund is to be used for extraordinary economic
development opportunities and only as a supplement to existing programs. The Catastrophic Event Fund is to be
used to respond without undue delay to a natural disaster or other catastrophic event that cannot be managed
without appropriations. The Revenue Stabilization Account is designed to retain State revenues for future needs
and reduce the need for future tax increases.

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