IMPORTANT FINANCIAL
INNOVATIONS
During 1979 the State initiated a
number of important programs
which will improve the future
financial condition of the State and
provide dividends to the taxpayers.
These programs include pension
reform, debt management, and tax
relief measures,
Pension Reform
The General Assembly established
two Pension Systems that are
required to be fully advance funded,
beginning in 1981, and established a
program beginning in 1980 for the
advance funding of the existing
Retirement Systems. Membership in
the new systems is mandatory for all
new employees who enter the
systems after December 31, 1979,
and optional for existing employees.
The new systems contain substantial
changes in benefits. In addition,
actuarial methods and assumptions
will change for both new and
existing systems. While the full
advance funding provisions will
increase pension funding require-
ments in the near future, the full
impact of the pension reform will be
realized in substantial long-term
cost savings.

Debt Management
In 1978, Maryland began a formal
annual review of the size and
condition of the State general
obligation debt for the purpose of
determining fiscally prudent debt
limits. As a result, important steps
were taken during 1979 to reduce
the level and trend of Maryland's
indebtedness. Significantly greater
general fund appropriations were
made available to assist in financing
the capital budgets for 1979 and 1980
on a current rather than long-term
basis. Also, new bond authoriza-
tions to support the 1980 capital
budget were limited to approxi-
mately $155 million. Consequently,
Maryland was able to contain bond
issues to $115,350,000 during fiscal
year 1979, well beiow the amount of
$218,145,000 issued during fiscal
year 1978.

Tax Relief
Maryland's very strong economy
along with prudent financial
management produced improved

revenues and cost savings for the
State in 1979 beyond even the most
optimistic forecasts. These con-
siderations along with improved
revenue prospects for 1980
prompted the enactment of signifi-
cant tax relief legislation that is
applicable to fiscal year 1980. The
projected dividends (savings) for the
taxpayers of the principal items
included in the tax relief legislation
are: tripling the State income tax
standard deduction — $50 million;
eliminating the sales tax on heating
oil and other energy used to heat
residences — $49 million; elimi-
nating the sales tax on manu-
facturing and farm machinery and
equipment — $11 million; and
further extending the circuit breaker
property tax program — $8 million.
Other indirect tax relief totaling
approximately $70 million was
granted by increased aid to local
governments in the form of
transportation grants, indemni-
fication for revenues lost due to the
liberalized standard deduction, and
unclaimed withholding of individual
income taxes.
The actions taken during this past
year to implement improved
financial reportingand disclosure,
pension reform, debt management,
and revenue and expenditure
management, are demonstrations of
steps that the State of Maryland has
taken on its own initiative to
continue its long tradition of
responsible fiscal management.
While the outlook for the national
economy is uncertain, Maryland's
diversified economy should fare
better than the national economy
taken as a whole. These two factors
will enable the State to continue to
provide the essential services of
government to its citizens without
impairing its overall strong financial
condition.
I will be pleased to furnish
additional information on the State's
finances upon request.

Cordially yours,

Louis L. Coldstein
Comptroller of the
Treasury of Maryland

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