E20B
State Treasurer
Operating Budget Data
($ in Thousands)
FY 02-04 FY 04-05
FY 02 FY 03 FY 04 Change FY 05 Change
Operations $24,853 $27,658 $28,621 $3,769 $31,188 $2,566
Contractual Services 2,661 2,849 2,747 86 2,569 -178
Contingent & Back of Bill Reductions 0 0 0 0 -20 -20
Adjusted Grand Total $27,514 $30,507 $31,368 $3,854 $33,737 $2,369
General Funds $4,166 $3,840 $3,635 -$532 3,697 62
Contingent & Back of Bill Reductions 0 0 0 0 -20 -20
Adjusted General Funds $4,166 $3,840 $3,635 -$532 $3,678 $43
Special Funds 483 760 619 136 622 3
Reimbursable Funds 22,865 25,907 27,115 4,250 29,438 2,323
Adjusted Grand Total $27,514 $30,507 $31,368 $3,854 $33,737 $2,369
Annual % Change 10.9% 2.8% 7.6%
! Since fiscal 2002 the State Treasurer’s Office has taken approximately $1.4 million in aggregate
cost containment reductions. These reductions include savings related to the statewide hiring
freeze and general 1.5% reduction in general funds initiated in fiscal 2002 and carried forward
into fiscal 2003. Additional fiscal 2003 cost containment actions included savings resulting from
the delayed implementation of a new banking service and the use of special fund proceeds derived
from bond sale premiums to cover bond sale expenses in lieu of using general funds. Fiscal 2004
cost containment includes the continued use of special funds to cover bond sale expenses as well
as reductions approved by the Board of Public Works (BPW) in July 2003.
! The fiscal 2005 allowance provides a $2.4 million increase over the adjusted fiscal working
appropriation. Almost all of the increase is attributable to the State’s insurance coverage
program. Reimbursable fund expenditures are expected to increase 8.6% from $27.1 million in
fiscal 2004 to $29.4 million in the fiscal 2005 allowance.
! The allowance for general funds increased by $43,000 over the adjusted fiscal 2004 working
appropriation. General fund personnel costs increase by $178,000 in the budget which entails a
reduction in general fund support for nonpersonnel administrative activities of $135,000.
Note: Numbers may not sum to total due to rounding.
For further information contact: Matthew D. Klein Phone: (410) 946-5530
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Personnel Data
FY 02-04 FY 04-05
FY 02 FY 03 FY 04 Change FY 05 Change
Regular Positions 52.0 53.0 52.0 0.0 52.0 0.0
Contractual FTEs 1.0 0.0 0.0 -1.0 0.0 0.0
Total Personnel 53.0 53.0 52.0 -1.0 52.0 0.0
Vacancy Data: Regular Positions
Turnover Expectancy 1.77 3.40%
Positions Vacant as of 12/31/03 3.00 5.77%
! There are no new positions and no positions lost as a result of cost containment for the fiscal 2005
budget.
! There are three vacant positions as of December 31, 2003. Of these, one position has been vacant
longer than 12 months.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Analysis in Brief
Major Trends
Reconciliation of the State’s Main Accounts: The average number of days it took to reconcile
accounts exceeded 30 days in fiscal 2002 and 2003. The continued implementation and anticipated
roll-out of a new reconciliation system is expected to improve upon this measure.
Investment Portfolio Continues to Outperform 90-Day U.S. Treasury T-bill Rate: Although interest
rates have declined and are expected to remain low in the short-term, the Treasurer’s Office
investment portfolio continues to outperform the average 90-day U.S. Treasury T-bill rate.
State Insurance Claims Processing: The number of new claims filed increased substantially in
fiscal 2003 and is expected to continue to increase through fiscal 2005. While the number of claims
closed also increased, the closure rate has not kept pace with the number of new filings.
Consequently, the number of pending cases is on the rise.
Issues
Audit Report Identifies 16 Major Issues: The Office of Legislative Audits (OLA) released the audit
report for the Treasurer’s Office in December 2003 for the period beginning October 1, 2000, and
ending October 31, 2002. The report listed 16 findings related to eight areas of operations. Two of
the findings relate specifically to the Treasurer’s Office budget operations. The Department of
Legislative Services makes several recommendations concerning these audit findings.
State Insurance Trust Fund Balance Depleted: The State provides insurance protection through the
purchase of specific excess commercial insurance policies and through self-insurance from the State
Insurance Trust Fund (SITF). Increased costs associated with excess policy coverage and increased
claim losses have outpaced agency premiums. As a result, the SITF balance is significantly short of
the recommended actuary balance. To begin to correct this situation, the fiscal 2005 budget increases
agency premiums charged to State agencies by almost $10 million. The Treasurer should comment
on the short- and long-term plans for improving the SITF structural balance.
Expiration of General Banking Contracts Could Result in Deficiency: Several general banking
contracts are set to expire during fiscal 2005. The amount of funds provided to pay for these
contracts in the fiscal 2005 allowance may be insufficient to cover the cost of these contracts once
they are re-bid. The Treasurer should discuss plans for re-bidding these contracts and whether
the amount provided in the fiscal 2005 allowance will be sufficient to cover costs.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Recommended Actions
Funds
1. Reduce funds for motor vehicle gas and oil and vehicle $3,000
maintenance and repair expenses.
2. Reduce funds for library and data processing supplies. 3,000
3. Delete funds for office assistance. 8,000
Total Reductions $14,000
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B
State Treasurer
Operating Budget Analysis
Program Description
The State Treasurer is responsible for the management and protection of State funds and property.
To carry out these responsibilities, the State Treasurer selects and manages the depository facilities
for State funds, issues or authorizes agents to issue payments of State funds, invests excess funds,
safeguards all State securities and investments, and provides insurance protection against damage to
State property and liability of State employees. The State Treasurer also administers the sale of
Maryland general obligation bonds and serves as a member of the Board of Public Works (BPW).
The Treasurer’s Office consists of four programs: treasury management, insurance management,
insurance coverage, and bond sale expenses.
Performance Analysis: Managing for Results
The Treasurer’s Office is tasked with providing cash management including the reconciliation of
the State’s main accounts (depository and disbursement) and working funds.
• Objective: Reconcile the State’s Main Depository, Main Disbursement, and Income Tax Refund
Accounts within 30 days of receipt of the bank statement.
As shown in Exhibit 1, the Treasurer’s Office did a very poor job of reconciling accounts in a
timely fashion in fiscal 2002 and 2003. This poor performance can be traced to the office’s failed
attempt to improve its account reconciliation procedures in the late 1990s. Using its delegated
procurement authority (which allows it to approve and award banking services contracts without
control agency involvement) the office entered into two information technology contracts for the
development of an automated bank reconciliation system in April 1997. The two contracts, with
amendments, were valued at over $481,000 and provided for software, programming, training, and
related professional consulting services. The system never performed as expected, and after investing
nearly $1.6 million (not including the cost of IT personnel in the office) in the project, the Treasurer s
=
Office cancelled the project and reverted to a manual reconciliation process. In fiscal 2002 and 2003,
the office was unable to meet this goal as it attempted to run both the manual reconciliation and the
automated reconciliation system simultaneously.
Despite the setback, in 2002 the Treasurer’s Office identified the implementation of a new
automated system as a top priority. After an extended procurement process, a contract was awarded
to TrinTech, Inc. to deliver an automated reconciliation package as one component of system reform.
The office reports that progress is being made in the roll-out of the new automation system and
expects to complete parallel testing of the new system in early 2004 with full implementation
expected by April 2004. Improvements in the account reconciliation system are reflected in the
Treasurer’s Office fiscal 2004 and 2005 estimates as the office moves closer to a daily reconciliation
process.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Exhibit 1
Average Number of Days to Reconcile Accounts
Fiscal 2002 – 2005
FY 2002 FY 2003 FY 2004 FY 2005
Actual Actual Est. Est.
Measure: Average days to reconcile accounts >60 >30 <30 <7
Source: State Treasurer’s Office
A December 2003 audit of the Treasurer’s Office, conducted by the Department of Legislative
Services, Office of Legislative Audits (OLA), presented very damaging findings directly related to
the office’s financial reconciliation responsibilities. Specifically, the audit found that the Treasurer’s
Office did not adequately reconcile the cash balance in the State’s main bank accounts with the
corresponding balance recorded in the State’s accounting records. As a result, OLA was unable to
adequately determine the State’s cash balance. In conjunction with the implementation of the new
automated account system, the Treasurer’s Office is actively working on reconciling the books to
determine the extent and cause of any discrepancies between the books and the bank. OLA will
present a separate report covering its audit findings, and the Treasurer should comment on the
changes the office is implementing to improve the account automation process.
• Objective: Earn a rate of return on the investment portfolio that exceeds the average 90-day U.S.
Treasury Bill rate by 50 basis points on an annual basis.
The Treasurer’s Office is also responsible for maximizing investment earnings for the State’s
surplus funds. Exhibit 2, which shows the rate of return on the investment portfolio as compared to
the average 90-Day U.S. Treasury rate, indicates that the Treasurer’s investment portfolio out
performed the average T-bill rate by 80 basis points in fiscal 2002 and 62 basis points in fiscal 2003.
The office expects this trend to continue in fiscal 2004 and 2005 despite declining interest rates. In
its December 2003 report to the Legislative Policy Committee, the Treasurer conveyed that interest
rates have been declining since the beginning of calendar 2001 and expect to remain at historically
low levels through calendar 2003 and into calendar 2004.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Exhibit 2
Rate of Return on Investment Portfolio Compared to 90-Day T-Bill Rate
Fiscal 2002 – 2005
FY 2002 FY 2003 FY 2004 FY 2005
Measures Actual Actual Est. Est.
Average return on investment portfolio 2.98% 1.94% 1.65% 2.10%
Average 90-day T-bill rate 2.18% 1.32% 1.15% 1.60%
Basis point spread over 90-day T-bill rate 80 62 50 50
Source: State Treasurer’s Office
• Objective: Promptly and accurately investigate, analyze, and adjust all claims presented under
the State Insurance Trust Fund and the Maryland Tort Claim Act. Claims should be adjudicated
on a 1:1 ratio.
The Treasurer’s Office is also responsible for the efficient and cost-effective administration of the
State Insurance Program that includes self-insurance and procurement of commercial insurance. As
shown in Exhibit 3, the reported performance measure shows a dramatic increase in the number of
new claims filed.
Exhibit 3
Insurance Division Third Party Claims Processing
Fiscal 2001 – 2005
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
Measures Actual Actual Actual Est. Est.
New claims processed 2,938 2,994 3,877 4,150 4,325
Claims closed 3,087 2,924 3,493 4,150 4,325
Pending open cases 970 1,040 1,478 1,478 1,478
Source: State Treasurer’s Office
While the number of claims closed also increased significantly in fiscal 2003, this measure did
not keep pace with the number of new claims filed. Consequently, the number of pending cases open
at the close of fiscal 2003 increased markedly over fiscal 2001 and 2002 levels. The office reports
that the damage caused by Hurricane Isabel, liability resulting from a resurfacing project on Route 50,
and a significant increase in the number of routine claims submitted have contributed to the increase
in the number of new claims and pending open cases.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Fiscal 2004 Actions
Impact of Cost Containment
The cost containment actions taken to the Treasurer’s Office by BPW in July 2003 totaled
$73,224, or 1.97% of the office’s general fund legislative appropriation. This reduction is
approximately 0.8% lower than the State average reduction of 2.8% of the general fund legislative
appropriation (excluding mandatory aid to education). Exhibit 4 provides the details of the specific
reductions. It is also noteworthy that the office’s fiscal 2004 legislative appropriation already
reflected the continued use of special funds to cover bond sale expenses in lieu of general funds
which was initiated as part of cost containment in fiscal 2003.
Exhibit 4
Treasurer’s Office Fiscal 2004 Cost Containment Items
Approved by the Board of Public Works
July 2003
Action Base Funding Reduction
Reductions to information technology expenditures, including $172,625 $29,031
computer maintenance, supplies, software, and computers
Miscellaneous reductions including printing, office supplies, and 77,500 29,193
office assistance
Reduction expenditures for management studies and consultant 35,000 15,000
services
Total Reductions $73,224
Source: Department of Budget and Management
Governor s Proposed Budget
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As shown in Exhibit 5, the fiscal 2005 allowance for the Treasurer’s Office is $33.7 million
which represents almost a $2.4 million, or 7.6% increase over the adjusted fiscal 2004 working
appropriation. The increase is almost entirely in reimbursable funds with most of the increase in the
cost of commercial insurance. Commercial insurance premiums are increasing for the following
reasons. First, detailed property and equipment inventories received from State agencies reflect
updated property values. The second reason is that several of the office’s insurance policies that had
three-year guaranteed rates are expiring, and the Treasurer’s Office anticipates higher premiums once
new contracts have been procured. Finally, the commercial insurance market continues to reflect
increased premium costs in the aftermath of the September 11, 2001, terrorist attacks.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Exhibit 5
Governor's Proposed Budget
State Treasurer
($ in Thousands)
FY 03 FY 04 FY 05 FY 04-05 FY 04-05
Actual Approp. Allowance Change % Change
General Funds $3,840 $3,635 $3,697 $62 1.7%
Contingent & Back of Bill Reductions 0 0 -20 -20
Adjusted General Funds $3,840 $3,635 $3,678 $43 1.2%
Special Funds $760 $619 $622 $3 0.5%
Reimbursable Funds $25,907 $27,115 $29,438 $2,323 8.6%
Adjusted Grand Total $30,507 $31,368 $33,737 $2,369 7.6%
Where It Goes:
Personnel Expenses
Increments and other compensation...................................................................... $52
Employee and retiree health insurance.................................................................. 44
Retirement contribution cost increase ................................................................... 2
Reclassification of vacant positions ...................................................................... 34
Workers’ compensation premium assessment....................................................... 6
Cost containment and turnover adjustments.......................................................... 63
Other fringe benefit adjustments........................................................................... -9
Other Changes
Insurance coverage – mainly commercial policies ................................................ 2,278
Computer software training and tuition reimbursement ........................................ -5
Increased communications costs due including the Department of Budget and
Management (DBM) paid telecommunications..................................................... 58
Lease purchase..................................................................................................... 13
Out-of-state travel for conferences ....................................................................... -5
Office assistance .................................................................................................. 8
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Where It Goes:
Information technology – claims tracking system .................................................... -130
Reduced cost of general banking contracts .............................................................. -66
Office supplies ........................................................................................................ 19
Elimination of one-time fiscal 2004 expenditure for microcomputers ...................... -14
Increased reimbursement to Treasury Management for fiscal services ..................... 24
Other....................................................................................................................... -3
Total $2,369
Note: Numbers may not sum to total due to rounding.
General funds increase in the budget by $43,000 after adjusting for the contingent reduction in the
deferred compensation State contribution. General funded personnel costs increase by $178,000 in
the budget. This is primarily attributable to increased employee and retiree health insurance costs,
employee increments, a reduction in the office’s budgeted turnover rate, and the reclassification of
vacant positions. The increase in general funded personnel costs is offset by a $135,000 reduction in
general fund support for non-personnel administrative activities.
Impact of Cost Containment
The fiscal 2005 allowance reflects the elimination of $19,508 for matching employee deferred
compensation contributions up to $600, contingent upon enactment of a provision in budget
reconciliation legislation. It is also noteworthy that the office’s fiscal 2005 allowance reflects the
continued use of special funds to cover bond sale expenses in lieu of general funds which was
initiated as part of cost containment in fiscal 2003 and continued in fiscal 2004. Additionally, the
fiscal 2005 allowance continues the reductions imposed under the fiscal 2004 cost containment
actions approved by BPW in July 2003 as shown in Exhibit 4.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Issues
1. Audit Report Identifies 16 Major Issues
OLA released the audit report for the Treasurer’s Office in December 2003 for the period
beginning October 1, 2000, and ending October 31, 2002. The report listed 16 findings related to
eight areas of operations. OLA will present a separate analysis of its findings and recommendations
to the budget committees during the 2004 session. However, the Office of Policy Analysis observes
that two of the findings relate specifically to the Treasurer’s Office budget operations.
• Finding 12: Certain fees for support services to State agencies were assessed by the State
Treasurer’s Office without authorization.
The audit revealed that the Treasurer’s Office was, without legal authorization, assessing fees on
interest earned for funds which were invested by the office on behalf of State agencies. The office
was retaining these fees and receiving a special fund appropriation in the budget to cover
expenditures related to the office’s investment activities. Furthermore, the audit revealed that the
office was retaining any unexpended balance at the close of a fiscal year rather than reverting these
funds consistent with the General Accounting Division’s (GAD) fiscal year closeout policies which
require all special fund balances be transferred to the General Fund unless specific authority exists to
retain the funds. According to the audit, the balance of funds retained by the Treasurer’s Office was
$312,067 as of June 30, 2002. The Department of Legislative Services (DLS) recommends that
the Treasurer’s Office revert unexpended and unencumbered special funds derived from
investment fees assessed on interest earned for funds which were invested by the office on
behalf of State agencies consistent with GOA closeout procedures absent specific authority to
retain such fees.
The audit also found that the Treasurer’s Office was collecting fees for administrative costs from
State agencies participating in the capital lease financing program without specific legal authority.
Rather than receiving an appropriation for these revenues, the office was recording the fees as
nonbudgeted funds and utilizing the funds to cover expenditures related to the administration of the
capital lease financing program. The audit indicated that the balance of this nonbudgeted fund totaled
$238,244 as of April 30, 2003. DLS recommends that the Treasurer’s Office receive an annual
reimbursable fund appropriation in its budget to reflect the collection and subsequent
expenditure of these special fund revenues in its annual budget.
• Finding 16: Unredeemed minibond funds were not properly transferred to the Unpresented Bond
and Coupon Fund, or the Comptroller’s Abandoned Property Fund, as required.
The audit concluded that the Treasurer’s Office did not properly transfer funds related to
unredeemed minibonds to the Unpresented Bond and Coupon Fund and failed to determine the
amount of unredeemed bonds subject to transfer to the Abandoned Property Fund. Title 17 of the
Commercial Law Article provides that property is presumed abandoned if it remains unclaimed for
more than three years and should be transferred to the Abandoned Property Fund maintained by the
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Comptroller. Title 17, Section 317 of the Commercial Law Article further requires that after making
specified distributions all remaining net funds in the Abandoned Property Fund shall be distributed to
the State general fund at the end of each fiscal year. In retaining funds related to unredeemed
minibonds in the Unpresented Bond and Coupon Fund in excess of three years, the Treasurer’s Office
was in essence depriving the State general fund of revenues. The audit concluded that as of
February 28, 2003, the Unpresented Bond and Coupon Fund balance totaled $3.8 million. However,
an exact accounting of how much of these funds has been retained for more than three years and thus
required to be deposited into the Abandoned Property Fund was not provided in the audit. DLS
recommends that the Treasurer identify the amount of funds currently in the Unpresented
Bond and Coupon Fund and the amount that has been retained in excess of three years. DLS
further recommends that the Treasurer comment on how the legislative proposal provided in
HB 689/SB 433 will address the auditing finding and recommendation.
State Treasurer’s Office Legislative Package Addresses Audit Findings
The Treasurer’s Office’s legislative package for the 2004 session includes several proposals
specifically targeted to correct deficiencies identified in the audit.
• HB 686/SB 432: The proposed legislation is intended to clarify procedures regarding
undeliverable checks. Current law requires that undeliverable amounts remain in the
Undeliverable Checks Fund for seven years. This procedure is inconsistent with the Abandoned
Property Act and federal requirements for checks funded in whole or in part with federal funds.
The legislation would eliminate the seven-year limitation on issuing replacement checks and
clarifies that undeliverable check funds are not subject to the Maryland Uniform Disposition of
Abandoned Property Act.
• HB 688/SB 434: The proposed legislation is intended to clarify procedures concerning
unpresented checks. Specifically, the proposed legislation would eliminate a seven-year
limitation on reissuing checks that have been presented for payments and allow the Treasurer to
void unpresented checks and return the funds to their sources or transfer the funds to another
account. Unpresented check funds would no longer be subject to the Maryland Uniform
Disposition of Abandoned Property Act.
• HB 689/SB 433: The proposed legislation would require the Treasurer to deposit unredeemed
principal and interest on State general obligation bonds in an Unpresented Bond and Coupon
Fund and dispose of the unredeemed funds in accordance with abandoned property procedures.
Current law is silent on how the Treasurer should dispose of bond and interest payments that have
not been redeemed.
• HB 690/SB 290: The proposed legislation would allow earnings on deposits to offset bank
service charges and require that all investment earnings be paid into the general fund. Under
current law, agency bank accounts are not specifically authorized and interest earnings on these
accounts are not consistently paid into the general fund.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
• HB 691/SB 291: The proposed legislation would update statutory requirements for State units to
deposit revenues only into banks designated by the Treasurer’s Office in accordance with the
regulations and policies of the Treasurer and Comptroller. Current law requires State units to
make deposits on a monthly basis. This legislation would require daily deposits.
DLS recommends that the Treasurer brief the committees concerning how the office’s
legislative agenda will address the many deficiencies identified in the OLA audit.
2. State Insurance Trust Fund Balance Depleted
The State provides insurance protection through the purchase of specific excess commercial
insurance policies and through self-insurance from the State Insurance Trust Fund (SITF). The SITF
self-insurance program is designed to cover State agencies and employees for claims related to
property, motor vehicle, torts, and officer and employee liability. Although the Treasurer’s Office’s
Insurance Division procures commercial insurance policies for certain risks, most of the coverage is
provided through the SITF. As shown in Exhibit 6, the SITF is recording a significantly declining
fund balance. Although agency premiums increased in fiscal 2003 and 2004, these premiums have
not kept pace with excess policy coverage costs and annual losses. Consequently, the SITF balance is
projected to be just $1.5 million at the close of fiscal 2004.
Exhibit 6
Actual and Estimated SITF Fund Accounting
($ in Thousands)
Original Revised
FY 2002 FY 2003 FY 2004 FY 2004 FY 2005
Actual Actual Estimate Estimate Estimate
Beginning Balance $28,997 $19,885 $11,358 $11,358 $1,485
Transfers & Recoveries 552 434 600 600 600
Agency Premiums 8,013 8,679 10,800 10,800 20,000
Excess Policy Coverage (1,140) (5,050) (4,608) (4,608) (4,893)
Losses (9,953) (11,086) (10,450) (10,450) (10,450)
Est. Losses Hurricane Isabel 0 0 0 (4,500) 0
Operating Costs (1,585) (1,504) (1,714) (1,714) (1,669)
Transfer to General Fund (5,000) 0 0 0 0
Ending Cash Balance $19,884 $11,358 $5,986 $1,486 $5,074
Recommended Actuary Balance 23,827 26,219 26,219 26,219 26,219
Actuarial Shortfall ($3,943) ($14,861) ($20,233) ($24,733) ($21,145)
Source: State Treasurer’s Office
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Factors contributing to the declining fund balance:
• Costs to procure excess commercial insurance blanket coverage increased dramatically in
the wake of the September 11, 2001, terrorist attacks – As shown in Exhibit 6, the State paid
just over $1.1 million for excess commercial insurance in fiscal 2002 compared to slightly more
than $5.0 million for the same coverage in fiscal 2003. These costs are not expected to revert
back to fiscal 2002 levels.
• Officers and employee liability losses increase well in excess of agency premiums – Officer
and employee liability losses totaled just under $500,000 in fiscal 2000 and 2001; well under the
amount of agency premiums collected which averaged approximately $1.3 million. Losses
increase to $3.6 million by fiscal 2003 while premiums only increased to just over $1.4 million.
• Tort claims and losses exceeded premiums – In fiscal 2001 through 2003, tort claim losses
exceed agency premiums. Adding to the cost was an increase in the tort claims cap from
$100,000 to $200,000 beginning October 1, 1999.
• Transfer of $5 million for SITF in fiscal 2002 – The Budget Reconciliation and Financing Act
of 2002 transferred $5 million from the available fund balance to the general fund. This was
reduced from the proposed $11 million transfer.
All of these factors have contributed to a declining SITF balance. Moreover, the fund balance is
woefully short of the recommended actuarial balance. In order to begin addressing this situation,
DBM has substantially increased the amount of premiums charged to State agencies in fiscal 2005 to
$20 million compared to $10.8 million for fiscal 2004. Despite this increase in premiums, the SITF is
expected to close fiscal 2005 with a balance of just $5.1 million which is still well below the
recommended level. Clearly the plan to increase the amount of premiums paid by State agencies will
have to be extended beyond fiscal 2005 if the SITF fund balance is to be brought more in line with
the recommended balance. In addition, the Treasurer’s Office should continue to initiate aggressive
risk management and loss control measures to reduce paid losses.
The Treasurer should provide the committees with a blueprint for how the office intends to
bring a structural balance to the SITF, including the short- and long-term plans for increased
agency premiums and short- and long-term plans for improving the office’s risk management
and loss control policies.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
3. Expiration of General Banking Contracts Could Result in Deficiency
The State Treasurer procures and monitors all contracts for general banking services. These
include the main depository account, vendor and payroll disbursement accounts, fiscal agent,
custody/safekeeping, and agency working fund accounts. Several of the State’s general banking
contracts are set to expire in June and December 2004, and the amount of funds budgeted for these
contract expenses in the fiscal 2005 allowance does not reflect the likelihood that these contract
expenses will increase once the contracts are re-bid. This situation sets up a possible deficiency for
fiscal 2005.
The Treasurer should provide the committees with an update concerning the re-bidding of
the office’s general banking contracts. Specifically, whether the re-bid contracts are likely to
result in increased costs over the budgeted fiscal 2005 allowance for such contracts.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Recommended Actions
Amount
Reduction
1. Reduce funds for motor vehicle gas and oil and $ 3,000 GF
vehicle maintenance and repair expenses. The
remaining allowance is equal to the fiscal 2004
working appropriation and represents a 100% or
$4,500 increase over the fiscal 2003 actual
expenditure.
2. Reduce funds for library and data processing 3,000 GF
supplies. The remaining allowance of $28,700 is a
47%, or $9,200 increase over the fiscal 2003 actual
expenditure.
3. Delete funds for office assistance. Funding for office 8,000 GF
assistance was deleted for fiscal 2004 through cost
containment. This recommendation would continue
the cost containment measure through fiscal 2005.
Total General Fund Reductions $ 14,000
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Appendix 1
Current and Prior Year Budgets
Current and Prior Year Budgets
State Treasurer
($ in Thousands)
General Special Federal Reimb.
Fund Fund Fund Fund Total
Fiscal 2003
Legislative
Appropriation $4,036 $360 $0 $19,415 $23,810
Transfer from
Insurance Trust
Fund 0 0 0 6,492 6,492
Budget
Amendments 22 536 0 0 558
Cost Containment -218 0 0 0 -218
Reversions and
Cancellations 0 -136 0 0 -136
Actual
Expenditures $3,840 $760 $0 $25,907 $30,507
Fiscal 2004
Legislative
Appropriation $3,708 $619 $0 $27,115 $31,442
Cost Containment -73 0 0 0 -73
Budget
Amendments 0 0 0 0 0
Working
Appropriation $3,635 $619 $0 $27,115 $31,368
Note: Numbers may not sum to total due to rounding.
Analysis of the FY 2005 Maryland Executive Budget, 2004
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E20B - State Treasurer
Fiscal 2003
The Treasurer’s Office finished fiscal 2003 $6.7 million above the original legislative
appropriation. The difference is attributable to increased reimbursable fund expenditures resulting
from larger than anticipated insurance claim losses and increased commercial coverage costs.
Additional reimbursable funds were transferred from the Insurance Trust Fund balance to cover the
increased expenditure. Fiscal 2003 cost containment actions reduced the office’s general fund
appropriation by $218,000. Most of the cost containment reductions are attributable to a delay in
implementing a new banking service which enabled the office to negotiate a lower implementation
fee that provided $75,000 of the cost containment amount. An additional $125,000 represented the
use of special funds in lieu of general funds for bond sale expenses. An additional $22,000 in general
funds was provided from the Board of Public Works Contingent Fund to pay the expenses incurred
for a framed portrait of former State Treasurer Richard N. Dixon. Special funds increased in the
budget by $536,000 almost exclusively to cover bond sale expenses. These additional funds were
made available from the bond sale proceeds in lieu of using general funds which were eliminated
from the budget through cost containment.
Fiscal 2004
To date, the fiscal 2004 legislative appropriation has been reduced by approximately $73,000 in
general funds resulting from cost containment actions (see the earlier discussion of changes to the
fiscal 2004 appropriation for additional detail).
Analysis of the FY 2005 Maryland Executive Budget, 2004
18
Object/Fund Difference Report
State Treasurer
FY04
FY03 Working FY05 FY04 - FY05 Percent
Object/Fund Actual Appropriation Allowance Amount Change Change
Positions
01 Regular 53.00 52.00 52.00 0 0%
Total Positions 53.00 52.00 52.00 0 0%
Objects
E20B - State Treasurer
01 Salaries and Wages $ 3,213,117 $ 3,374,966 $ 3,596,276 $ 221,310 6.6%
02 Technical & Spec Fees 19,233 26,000 21,000 -5,000 -19.2%
03 Communication 83,961 47,026 117,823 70,797 150.5%
04 Travel 25,131 35,792 31,200 -4,592 -12.8%
07 Motor Vehicles 23,411 10,244 13,180 2,936 28.7%
19
08 Contractual Services 2,848,780 2,747,025 2,569,116 -177,909 -6.5%
09 Supplies & Materials 213,463 224,866 241,983 17,117 7.6%
10 Equip - Replacement 117,789 120,849 109,797 -11,052 -9.1%
11 Equip - Additional 20,258 2,998 0 -2,998 -100.0%
13 Fixed Charges 23,942,060 24,778,726 27,056,557 2,277,831 9.2%
Total Objects $ 30,507,203 $ 31,368,492 $ 33,756,932 $ 2,388,440 7.6%
Funds
01 General Fund $ 3,840,277 $ 3,634,730 $ 3,697,148 $ 62,418 1.7%
03 Special Fund 759,696 618,780 621,653 2,873 0.5%
09 Reimbursable Fund 25,907,230 27,114,982 29,438,131 2,323,149 8.6%
Total Funds $ 30,507,203 $ 31,368,492 $ 33,756,932 $ 2,388,440 7.6%
Appendix 2
Note: The fiscal 2004 appropriation does not include deficiencies, and the fiscal 2005 allowance does not reflect contingent reductions.
Fiscal Summary
State Treasurer
FY04 FY04
FY03 Legislative Working FY03 - FY04 FY05 FY04 - FY05
Unit/Program Actual Appropriation Appropriation % Change Allowance % Change
01 Treasury Management $ 4,533,855 $ 4,688,299 $ 4,615,075 1.8% $ 4,724,842 2.4%
01 Insurance Management 1,504,215 1,714,307 1,714,307 14.0% 1,725,790 0.7%
02 Insurance Coverage 23,917,634 25,749,110 24,749,110 3.5% 27,026,300 9.2%
01 Bond Sale Expenses 551,499 290,000 290,000 -47.4% 280,000 -3.4%
Total Expenditures $ 30,507,203 $ 32,441,716 $ 31,368,492 2.8% $ 33,756,932 7.6%
E20B - State Treasurer
General Fund $ 3,840,277 $ 3,707,953 $ 3,634,730 -5.4% $ 3,697,148 1.7%
Special Fund 759,696 618,779 618,780 -18.5% 621,653 0.5%
Federal Fund 0 -$ 0 0 0.0% 0 0.0%
20
Total Appropriations $ 4,599,973 $ 4,326,734 $ 4,253,510 -7.5% $ 4,318,801 1.5%
Reimbursable Fund $ 25,907,230 $ 28,114,982 $ 27,114,982 4.7% $ 29,438,131 8.6%
Total Funds $ 30,507,203 $ 32,441,716 $ 31,368,492 2.8% $ 33,756,932 7.6%
Note: The fiscal 2004 appropriation does not include deficiencies, and the fiscal 2005 allowance does not reflect contingent reductions.
Appendix 3