the money which others may have accumulated, it is the more difficult and less agreeable, because one is forced to work at seemingly cross purposes with the heads of departments and therefore run into many cross currents. There is nothing difficult, provided one has the authority, in keeping appropriations within the revenues. The prerequisite is an earnest desire to that end. When that quality is present, the results follow as a natural sequence.

Some weeks in advance of your assembling, you received two simple and clear statements, showing the results from operation, of the State's finances for the past two years. This conveyed to you the first essential for intelligently dealing with the State's finances and collaterally prepared you to act on many other measures with which you will have to deal that are closely allied thereto. This advance information in such clear detail was an innovation to the usual procedure and will prove to be, it is hoped, a time saver, in that you are more fully acquainted with the State's finances the moment you take up your duties, than that which is ordinarily obtained by legislative bodies after weeks of investigation and reports of committees. This action was in line with recommendations made to the last Legislature, but it failed to receive the consideration that its merits deserved.

You were given in the statements referred to as having been sent you, the basis for a budget system. Instead of the outcome being based upon estimates of the future, they show the results of the past, classified and in budget form. A budget must be made up by some one clothed with authority, and its presentation must carry some force other than that of just the mere privilege of presenting one's views to a legislative body to be annulled by the mere vote of the majority of a quorum. In order to avoid injurious or unwholesome legislation pertaining to the finances, or to any institution of the State, the budget should be made up and published months before the assembling of the Legislature. In this way the members-elect would have an opportunity to study and discuss it with their constituency in all of its phases, before they come for actual legislative work. Don't you think this would be a decided advance over our present method? You doubtless have perceived that in order to carry out this idea, an amendment to the Constitution would be required. It is the only way, however, to establish the budget system in the State's affairs, but it would be worth the while.

In addition to incorporating in this message the financial statement for the year ending September 30, 1918, in parallel column, there has been made an estimate of the revenues and expenses for the current year, ending September 30, 1919. These estimates are based upon our present laws and on the present plane of expenses. They are conservative and will prove approximately correct.

There will also be conveyed to you as a part of this report a proposed revenue code gotten up by the Governor, Attorney General and the Auditor, as provided for by the Constitution. The changes from the present revenue laws are few and while they are not offered for the purpose of gaining revenues, but pertain mostly to the collection of the revenues and in harmonizing the different parts of the law. Yet should they be adopted, the effect will be to increase the revenues to some extent. It is not advisable that the revenue laws of the State should be torn asunder and rebuilt with each recurring legislative session. It requires some time for the officers who are to collect the tax and the people who pay them to ascertain what are their respective duties. The laws as they are embrace every class of business that can be discovered and the present burdens of the tax payer are sufficient to maintain him in an humble spirit.

The State had a surplus from last year's operation of $647,563.03, which of course reduced the outstanding warrants to that extent. This result was quite a reversal of the habit into which the State had fallen, that of spending more than its revenues. This practice had continued through many years, until a deficit had been created in amount equal to more than one-third of the State's annual revenues. This change which has been wrought, that of substituting for an average annual deficit of more than four hundred thousand dollars, an annual surplus of $647,563.03, is equivalent in results, to a change of more than one million dollars per annum, in the State's finances. This credit balance from the operation of the State's affairs for a single year is the largest ever obtained in the history of the State. The deficit which had caused so much annoyance is no longer a vexing problem. It is now within easy bounds for financing, and rapidly growing less, but you should not permit this statement to lure you into the idea that you can recklessly make appropriations, depending upon the future to take care of the results. The public demands that economy should prevail until the State's floating debt is paid. Even after this has been entirely accomplished, its practice will continue to be looked upon as a virtue. On the present basis of operation, that is, the scale of expenses for 1918, or on the scale of expenses of the past three months of the present fiscal year, with the current year's revenues which have been already fixed by law, the deficit can be easily liquidated by February 20, 1920. For verification of this, see detailed statement of Revenues and Expenses embodied in this message.

Present conditions, however, demand that you should provide an increase in the allowance for some of the State institutions and departments. There are many conditional appropriations on the books the release of which would have brought to me much pleasure if the finances of the State had justified such action, but considering the conditions, releases were made only when actual necessities demanded such action.

There are two items of credit shown in the estimate of income for 1919, that properly belonged to the fiscal year ending September 30, 1918. They will aggregate more than $100,000, but were not received until after the close of the fiscal year. They will, however, to that extent, increase the current year's receipts. These items alluded to, are the oil tax, which is collected by the Alabama Polytechnic Institute, the report of which was delayed by the influenza scourge. The other, being the franchise tax on foreign corporations, which was in litigation, and the opinion of the highest court was not rendered upholding the State's contention, until after the close of the fiscal year. These, if received in their proper time, naturally would have improved the showing for last year. The balance, with the addition of these two items, would have given a surplus for the year 1918 of more than $750,000. However, there has been brought over a balance due to the sheriffs on feed bills for the years 1915 and 1916, amounting to $66,103.50, which will consume a good part of these two items, and for which you are asked to pass a special appropriation. This balance due the sheriffs would have been paid during the past year except for a ruling of the Attorney General, that accounts. accruing in one year, could not be paid out of the appropriations made for subsequent years. This is the only item or account accruing during the past four years for which you will be called upon to make an appropriation. Other than this, you are handed a clean slate. This is quite different from former experiences, but conditions existing at such times possibly caused that course to be unavoidable.

The amount of the outstanding warrants on September 30, 1914, were shown to be $950,202.01. There was, however, an accumulation of unsettled bills and accounts, aggregating a very large amount, which the Legislature had to provide for and which were paid in 1915. In addition to this, there were many large sums released to institutions, and besides, more than $150,000 that had to be refunded on account of decisions relating to the corporate franchise laws of 1907, the courts having decided them to be unconstitutional. If warrants had been issued for all accounts at the time they accrued prior to September 30, 1914, for amounts that were properly chargeable to previous administrations, the outstanding warrants on September 30, 1914, would have been $1,995,254.97.

Aside from the large outstanding floating obligations of the State as shown above, and for which there was no provision for payment, except by a system of kiting, the annual expenses were pitched on a plane of more than $400,000 above the revenues. The depression over the State was at its lowest depths. Business of every conceivable branch was stagnant and values were contracted. It indeed presented a gloomy outlook, especially as to the likelihood of ever reversing the habit into which the State had

fallen and had pursued for so many years, that of spending more each year than its annual income. The Legislature continued its session until the end of the fiscal year without giving relief, and this left no opportunity to start the real work of rehabilitation until the following year was far advanced. Warrants issued for current expenses in 1915 and 1916 were paid promptly through financial arrangements made in those years. In fact, the floating debt of the State had been so thoroughly financed in 1915, that a doubt seemed to have been created in the minds of many as to whether a real indebtedness existed. This was unfavorable towards securing the co-operation needed to accomplish the ends sought. There were entirely too many who seemed not to realize the desperateness of the situation. At this juncture it was determined that a little psychology would go further than cash and extreme measures were adopted. The payment of warrants were held up, as an educational measure. This action was productive of much friction, but was efficacious. Firmness and determination with many confidential talks, brought about a better understanding. When this had been accomplished, conditions were matured for better results.

Reference has heretofore been made to the small increase in tax values during the period from 1914 to 1918 as compared to those of the previous four and eight year periods. This result, as you must know, was on account of the long period of depression, during which time the assessment of real property was made. The values as fixed in 1916 on realty, practically continue under the law, until 1920. The increase in assessed values for the next four years should, therefore, be the greatest for any similar period in the history of the State, because the two years 1916 and 1920 will represent the two extremes of the economic conditions of the present decade. If the average of the increases in assssed values for the period of the eight years from 1914 to 1922 keeps pace with the increases during the period from 1906 to 1914, then the prediction made above will be fully realized, as is shown in the following table:

Increase for four tax years from Oct. 1, 1906 to 1910, $134,718,584.

Increase for four tax years from Oct. 1, 1910 to 1914, $106,784,884.

Increase for four tax years from Oct. 1, 1914 to 1918, $89,672,067.

In order that the last eight year period of 1914 to 1922 shall maintain the same increase as the period of 1906 to 1914, the last four years of the former mentioned period, that is, 1918 to 1922, must maintain an increase of $151,831,411 during the four years. This would be greater than the increase was for the four years of 1914 to 1918 by $62,159,344. It is an entirely reasonable suppo

sition that this estimate will be sustained. If it should, the assessed values for taxation will be in 1922, 850 millions. We are now having unprecedented prosperity against the depths of depression in 1916, when the last general assessment of values were made.

Of the increase in the assessed values during the four years from 1914 to 1918, $29,868,565, or one-third of the total for the four years, was had in 1918, which indicates a liberal response in tax values to prevailing conditions. You will note also that onethird of the increase in values during the last four year period was made in 1918, but as the taxes are collected on this from October 1, 1918, to September 30, 1919, this administration will not receive credit from the benefits of the only year that reflects present day prosperity, in the statement made up at the end of the last fiscal year. The main task, however, was to change an annual deficit into an annual surplus and this has been done in the most satisfactory manner. Not only has this been accomplished, but the State's debt has been materially reduced and the annual excess of income is now approaching a million dollars.

Regardless of whether or not the increase in values as presented should be sustained, there will be a gradual increase of revenue from assessments for each of the four years, as shown by the records for many past decades. If, however, the estimates of increases in values as above made, should be sustained, then the revenues from advalorem taxes will be $986,904.17 greater in 1922 than they were for the year ending September 30, 1918. Of this sum $455,494.23 would go to the elementary school fund, and $531,409.94 would be available for general purposes. This improvement, of course, is taking place annually and the revenues will grow each year until 1922, when the full estimate will have been realized. For instance, the revenues from advalorem values will be approximately $195,000 greater this year than they were in 1918. In addition to this, there is a natural increase from year to year in license and other taxes, as the State develops and business grows, and this can be relied upon under normal conditions. These are stated that you may have the benefit of the observation of one who has had four years' experience during a trying period and under the most unfavorable conditions.

During the four years in which the status of the present financial report was being wrought, there was quite an increase in the aggregate amounts paid to a number of institutions, as compared with that paid during the previous four years. Some of these institutions were established by the Legislature of 1915 and represent new appropriations, while others represent the natural growth of four years. The principal institutions and departments that received these increases were as follows: