Fitch Rates $200MM Maryland General Obligation Bonds `AAA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 3, 2001

Fitch rates Maryland's (the state) $200 million general obligation bonds, state and local facilities loan of 2001, second series, for bids on July 11, `AAA'.

Additionally, the `AAA' rating on $3.5 billion outstanding general

Maryland's credit strengths include a wealthy, diversified economy, maintenance of sound financial operations and adherence to a policy which ensures that its debt is kept within affordability limits. Net tax-supported debt after this sale will be about $4.9 billion, or $919 per capita, 1.5% of estimated full value and 2.7% of personal income.

The state's economy relies heavily on services, trade and government while manufacturing is of less significance. Strength in the services sector underlies annual employment growth of about 2.5% since 1997, as trade and government have expanded more slowly; in 2000, the federal government provided fewer jobs than in 1995. Employment growth continues this year, although at a more tempered pace. Maryland is the eight wealthiest state, as measured by per capita personal.

Financial operations, reflecting both the economy and conservative budgeting practices, have been very successful, with revenues exceeding estimates consistently. Much of the higher revenue has been due to the income taxes but the sales tax has also performed well. At June 30, 2000, total reserves were nearly $700 million, of which $582 million represented the stabilization fund.

The stabilization fund was built up in conjunction with an income tax reduction being phased in over a five-year period. Better than expected financial results have minimized the need to use the enlarged reserves to subsidize the tax cut and the 2001-02 budget would invest the excess in capital projects. The stabilization reserve would then hold an amount equal to 5.7% of general fund revenues, a prudent level.

Fiscal year 2000 closed with a general fund balance of $936 million, and $582 million in reserve. The budget for 2000-01 was designed to use the surplus for capital purposes and transfers to the reserve, but revenues have again been ahead of projections. The general fund is expected to have a balance of $385 million at June 30, 2001, with $888 million in the stabilization reserve. Revenue estimates were upwardly revised in December and subsequent collection experience is exceeding the estimates. The budget for 2001-02 is based on reasonable assumptions and would use excess balances largely for capital purposes while retaining $568 million in the stabilization reserve.