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I make these suggestions with entire confidence in your earnest desire to take such measures as may be necessary to maintain inviolate the faith of the State, and to relieve the financial department of all embarrassment in meeting public obligations, both of an ordinary and extraordinary character.

Joux A. Dix.

State of New York, Comptroller's Office,

Albany, January 26, 1874. To his Excellency John A. Dix, Governor:

I called the attention of the Legislature, in my annual report, submitted at the beginning of the present session, to the general fund and bounty debts of the State, and the condition of the sinking funds intended for their payment at maturity, for the creation of which provision is made in the Constitution of the State.

I deem it a matter of so grave importance to the proper administration of the financial department of the Government, and the present and future credit of the State, as to justify me in alluding to the subject more in detail in this special communication to you.

The general fund debt now outstanding amounted on the first day of January, 1874, to $3,988,526 40, payable as follows:

On demand
July 1, 1875.
July 1, 1878
At pleasure

$30,443 76
900,000 00

800,000 00
2,258, 082 64
$3,988,526 40

The bounty debt at the same date amounted to $20,815,000, payable April 7, 1877.

The general fund and bounty debt amounted in the aggregate to $24,803,526 40.

Provision was made for the creation of a sinking fund for the payment of the general fund debt in the second section of the seventh article of the State Constitution, which provides that “the principal and interest of the said sinking fund shall be sacredly applied to the payment of said debt."

The whole amount required to take up and cancel said general fund debt has been contributed and paid into the treasury under said section and article of the Constitution, but the moneys so contributed for the establishment of this sinking fund have been diverted from their legitimate purpose, and expended in payment of appropriations made by the Legislature, nominally in anticipation of taxes from year to year, and the same cannot be invested until such taxes are paid into the treasury.

The bounty debt was created to meet certain expenses of this State, incurred in the suppression of the late rebellion, in pursuance of chapter 325 of the laws of 1865, under the authority contained in the eleventh section of the seventh article of the Constitution of the State, which is in the following words:

“In addition to the above limited power to contract debts, the State may contract debts to repel invasion, suppress insurrection, or defend the State in war, but the money arising from the contracting of such debts shall be applied to the purposes for which it is raised or to repay such debts, and to no other purpose whatever.” There has been assessed and should have been paid into the

treasury at the present time to the credit of this bounty debt sinking fund the sum of......

$9,790,072 24 There is, in point of fact, invested at this time to its credit,

and now in the custody of the Comptroller, the sum of .. 2,772,444 09

Of which amount $2,220,200 were invested during the year

1873– Leaving a balance to be invested when the same is received

into the treasury from taxes assessed and not yet paid, as of January 1, 1874, of......

$7,017,628 15 Add to this the amount due the general fund debt sinking

fund already paid into the treasury and expended in anticipation of the taxes as above stated. .....

3,988,526 40 Making the total amount due to these sinking funds and not yet invested of ......

$11,006,154 55 Although this large amount stands as a deficiency in these sinking funds, it is largely made up of unpaid taxes, as will appear below.

The appropriations made by the Legislature had so far exceeded the revenues of the State from year to year, and so far trespassed upon the moneys which should have been invested in these sinking funds, that a tax of three and one-half mills on the dollar of the assessed valuation of the property of the State, amounting to over seven millions of dollars, was authorized by the Legislature of 1872 to meet the deficiency then found to exist in the treasury.

Four millions seven hundred thousand dollars thereof were for the general fund deficiency, and two millions six hundred thousand dollars for deficiency in the canal fund. The latter sum has been paid over by the Comptroller to the canal department in full.

Four millions six hundred thousand dollars of said three

and one-half mill tax yet remain uncollected, principally from the counties of New York, Kings, Westchester, Schuyler, Wayne, and Ontario, and when paid will be

placed to the credit of said sinking funds, to wit....... $4,600,000 00 There is yet unpaid of the general tax for the same year.... 1,500,000 00 There has been anticipated and used in payment of appro

priations for the new Capitol, asylums, etc., of the tax authorized in 1873....

1,500,000 00 Cash in bank (December 31, 1873).

1,900,000 00 Deficiency yet existing in the treasury which must be made good by taxation...

1,500,000 00 Making a total of

$11,000,000 00

This large sum of eleven millions of dollars should have been raised, paid into the treasury, and invested in the bonds of the United States or the State of New York, for the sinking funds, as required by the Constitution, and the laws under which such debts were authorized to be created, but a large portion of it has been diverted and used to pay extraordinary appropriations made by the Legislature, and a still larger por. tion is provided for in the deficiency tax and other taxes which will not be collected and reach the treasury within a year from the present time.

In addition to the amount already authorized, as above stated, there will be contributed to the bounty debt sinking fund, from the two mill tax, levied annually for four years, 1873 to 1876, both inclusive, a sum which will be ample to provide for the redemption of the debt at maturity, if no farther inroads are made upon these funds ; but it should be borne in mind that the proceeds of the tax levy of 1876 will not reach the treasury, under existing laws, until after April 7, 1877, when the bounty debt matures. Provision should, therefore, be made in advance to meet this contingency.

In view of the present condition of the treasury, as set forth in this statement, and of the large appropriations heretofore made and paid, in anticipation of the receipt of taxes levied to meet them, which has brought great embarrassment to this Department, it is submitted whether it is not the imperative duty of the Legislature to provide means to pay appropriations as they may be authorized, without farther encroachment upon the sinking funds constitutionally dedicated to the redemption of the State debt. Such a diversion is in direct violation of the Constitution; and if the policy of investing these sinking funds

1 in unpaid taxes is continued from year to year, the financial department will be constantly embarrassed, and when the debt matures, in 1877, the money will not be in the treasury, for the reason that, as at present, a very large amount will be used to pay appropriations in anticipation of taxes which cannot be made available until about a year after the debt falls due.

In view of these facts I shall regard it as my duty to obey the mandate of the Constitution, and invest the proceeds of taxes and other sums due the sinking funds, as rapidly as they reach the treasury, in the securities authorized by law.

Although the facts presented in this communication are substantially given in my recent annual report, I think it advisable to repeat them in this condensed form, to the end that they may be submitted to the Legislature, should it seem to you to be proper, accompanied by such suggestions as you may think expedient to make in relation thereto.

Respectfully, Nelson K. HOPKINS, Comptroller.

Report of the Comptroller, in answer to a Resolution of the Senate, passed February 10, 1874.

State of New York, Comptroller's Omice,

Albany, February 11, 1874. To the Senate :

I have the honor to acknowledge the receipt of a resolution of the Senate, passed on the 10th instant, in the following words:

Resolved, That the Comptroller be and he is hereby requested to report what loans, if any, have been made under the provisions of section 10 of article 7 of the Constitution of the State, which have not been paid, and which constitute a debt at this time under said section, and to what amount; and if such loan has been made, by what authority.”

In response thereto, I respectfully submit the following report:

Chapter 760 of the laws of 1873 contains the following paragraph : “The sum of $1,000,000 is hereby appropriated toward the erection of the new Capitol, which shall be paid by the Treasurer, upon the warrant of the Comptroller, to the order of the new Capitol Commissioners, as they shall require the same. Whenever there is a deficiency in the treasury of moneys applicable to the payment of this appropriation, the Comptroller is hereby authorized and required to borrow, from time to time, such sums as the said Commissioners may require, and the money so borrowed shall be refunded from the money received from taxes levied to meet this appropriation.”

Chapter 765 of the laws of 1873 imposed a tax for the fiscal year beginning on the 1st day of October, 1873, of one-half of one mill on the dollar of the taxable property of the State, for the purposes of the new Capitol, amounting to $1,064,813. The tax imposed under this chapter is expected to reach the treasury during the current calendar year after the 15th of April next.

There was no money in the treasury applicable to the payment of said appropriation to the Capitol, and under the authority of section 10, article 7, of the Constitution of the State, and of the above quoted clause from chapter 760 of the laws of 1873, the amount of said appropriation, to wit, $1,000,000, was borrowed from the capital of the sinking funds and advanced to the Commissioners of the new Capitol under said appropriation, and in anticipation of the one-half of one mill tax authorized by said chapter 765 of the laws of 1873. No part of this amount has yet been paid or refunded to the treasury, and none of it can be realized under existing laws until after the 15th of April next.

All payments heretofore made from the treasury on appropriations made by the Legislature in excess of the revenues by taxation, or otherwise, have been borrowed from the sinking funds.

The deficiency now existing in the several sinking funds, and heretofore reported to the Legislature, is the direct result of such payments in advance of the requisite provision to meet such appropriations by tax.

Respectfully submitted.

Nelson K. HOPKINS, Comptroller.

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