MESSAGE
OF
GOVERNOR HUGH M. DORSEY
TO THE
GENERAL ASSEMBLY
OF
GEORGIA
JULY 6, 1920
1920 BYRD PRINTING CO.
ATLANTA, GA.

~fESSAGE
OF
GOVERNOR HUGH M. DORSEY
TO THE
GENERAL ASSEMBLY
OF
GEORGIA
JULY 6, 1920
1920 BYRD PRINTING CO.
ATLANTA, GA.

STATE OF GEORGIA,
Executive Department,
Atlanta, June 7, 1920.
TO THE GENERAL ASSEMBLY OF GEROGIA:
FINANCES.
For more than sixty days prior to your convening, the treasury of the State has been unable to honor requisitions of those authorized to draw appropriations, made by your honorable body at the 1919 session, for the conduct of the State's business and the support of its institutions. Our educational institutions: The University; the several agricultural schools, and its other branches; our educational and eleemosynary institutions; the Academy for the Blind; the School for the Deaf; our educational and corrective institutions-the Training School for Girls; the Training School for Boys; our Soldiers' Home; our State Board of Health, to which appropriations for the Tuberculosis Hospital is made; our Sanitarium for the Insane; our Prison Commission; our Department of Agriculture, and other departments at the Capitol-those and others have been forced to go without funds, which are necessary if these institutions and departments are to continue functioning.
Those familiar with the finances of the State have anticipated that this condition which now confronts us was ultimately inevitable-the only element of uncertainty being the date of culmination. Except for your
3

prompt compliance with my request, at your 1919 session, to defer the distribution of the State Road Funds to the counties until September 10th of that year, it is probable that the embarrassment which is now existent would then have arisen. (Georgia Laws, page 1440, Resolution No. 16.)

The situation as it has been developing, and as it was at the beginning of this year, can readily be seen from this statement:

"Undrawn balance" or Appropriations for prev:ous year unpaid on Jan. 1 of each year.
,Jan. 1, 191B ___ -$2,092,794.79 Jan. l, 1914 ____ 1,607,431.30
Jan. l, 1915 ____ 1,901,702'.07 ,Tan. l, 1916 ____ 2,259,261.73 .Jan. 1, 1917 _____ 2,627,631.43
,Jan. 1, 1918 ____ 2,812,640.43 ,Jan. 1, 1919 ____ 2,f)2'ti,671.06
,Jan. 1, 1920 ____ 2,997,368.91

Balance in Treasury to help pay "llndrawn balance."
$1,113,517.31 739,625.75 787,455.88 842,799.09
1,386,136.42 1,459,531.18
813,139.66 909,825.64

Deficit, or amount not on hand necessary to complete payment of "Undrawn balance.''
$ 979,277.48
667,805.64
1,114,246.19
1,414,562.42
1,241,496.01
1,383,309.25
2,113,631.40
2,087,743.27

The State, it is seen, therefore, began the year 1920 in need of $2,087,743.27 with which to balance its account.

In addition to the ordinary expenses of our civil establishment and the usual maintenance expenses of our institutions, there were two obligations-one created by contract under the School Warrant Law of 1915; the other, the payment of pensions due our Confederate Veterans, which the State had to meet during the first of the year. These two items are the largest in the State's budget, and for some years-although the treasury funds have been supplemented by temporary loans-which the

4

Governor is authorized to make-their prompt payment has not been met without some apprehension of a possible failure.
A detailed statement of the plan of payments for this year may be profitably set forth:
Although under the law pensions to Confederate Veterans are not necessarily payable until May 1st each year, still it has been found advisable to pay as soon after the beginning of the year as possible the pensioners in one-half of the counties-those given priority one year being postponed the next-'-and this has been the unbroken custom since the law allowing annual payments to pensioners was enacted.
On February 10, 1920, therefore, a warrant for $632,820,00 was paid by the Treasurer for one-half of the pensions for 1920. This payment was made without securing a loan.
On March 1, 1920, a warrant for $1,979,617.75 was paid to redeem discounted school warrants issued to finance the public schools during 1919, and in anticipation of the taxes for that year. It was necessary to use the Governor's borrowing power up to $150,000.00 in order to meet this obligation. This loan was paid March 23, 1920.
On April 21, 1920-some few days earlier than commanded by law-a warrant for $627,775.00 was drawn on the Treasurer for the second installment of pensions for 1920. But to make this payment it was necessary to again use the borrowing power of the Governor-and perhaps for the first time in the history of the State for the full amount authorized, viz: $500,000.00-certainly for the first time since the limit has been increased to the present sum.
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The loan of $500,000.00, while obtained of the Highway Funds, exhausts the borrowing power of the Governor; as this fund, though heretofore available temporarily for general purposes until its distribution to the counties (which ordinarily is done annually about the first of June), under the terms of the Reorganization statute passed at your last session, is now '' controlled and disbursed under the provisions" of that Act only, and hence must necessarily be kept separate and apart from other funds and held until the occasion arises for its use in carrying out the road building program.
Although the revenues of the State have undoubtedly substantially increased from year to year, and though probably the increases for 1919 and 1920 will fully equal those of other years-still the greatly increased appropriations to almost every department and institutionand especially the large increases to pensioners and the public schools; the withdrawal of funds heretofore temporarily employed to tide the State over "the lean" months, coupled with the depreciated purchasing power of the dollar and the unusual "high cost of living"which has necessitated larger drafts, or more frequent calls, than heretofore have been made during the first half of our fiscal year-have at last necessitated the suspension of payments on appropriations, because the State neither has the money that can be used, nor the power to borrow more.
Only a small per cent, or about 13.17 per cent, of 1920 's anticipated revenues have been paid thus far. The greatest portion of the 86.27 per cent remaining will not be collected until toward the close of the year; but, in the mean time, half of the fiscal year has already passed, and within that period the necessities of the departments and
6

institutions, as might reasonably be expected, have demanded such a proportion of appropriations as exceed the revenues realized.
The appropriations already made for 1921 exceed those for the current year by about $700,000.00 and the indications now are that probably earlier next year than this the treasury will again be empty and those who have been so greatly inconvenienced this spring must again suffer.
Teachers; the employees of the Sanitarium for the Insane, and others employed at the various institutions of the State-most of whom realize little enough fo:r their labors-should neither be denied prompt payment of their meager stipends, nor made apprehensive and uncertain as to their livelihood.
And above all, the State should consider its helpless wards-the mentally sick-the infirm confined in our State institutions-and should not deny them the use of money which otherwise would lie idle in our State depositories.
Therefore, I unhesitatingly suggest legislation permitting the use, temporarily, of such portions of the highway funds as may be needed; provided, of course, that such use shall not interfere, hinder, or delay in any respect the State's road building program.
This, so far as I am able to see, is the only way by which immediate relief can be assured. Under no circumstances should these funds be diverted from the purpose for which they were originally intended, and. their use should be permitted only for such period as is absolutely necessary and to such an amount as can be
7

certainly repaid out of the bulk of the State's revenuee which will be collected in the fall.
There is little reason in holding this highway money idle in banks when the State's institutions need it and its agents and employees are forced to go without pay, unless they borrow money of these same banks and at a very high rate as compared with what the banks pay the State for its use, or unless the officials of the departments or institutions they serve voluntarily and personally do so for them.
There are two ways, and only two, whereby, in my opinion, the State can insure against a si~ilar situation in 1921. One is to permit the use of highway funds; the other is to increase the borrowing power of the Governor.
Prior to 1912, the Governor was authorized to borrow $200,000.00. A Constitutional Amendment passed that year increased the borrowing power to $500,000.00.
Appropriations for 1912, when the borrowing power was $200,000.00, were $5,625,825.00. The borrowing power, therefore, was approximately 3.55 per cent of the appropriations.
The 1913 appropriations were $5,9Q4,567.00, and the borrowing power of the Governor for that year was $500,000.00, or 8.46 per cent of the appropriations.
The borrowing power of the Governor now is only 5.41 per cent of the 1920 appropriations.
It might be advisable to amend the Constitution authorizing the Governor to borrow not more than 10 per cent of the appropriations made by the General Assembly for the fiscal year in which the loan is negotiated; or, if
8

not that, then to increase the borrowing power to threequarters of a million, or a million dollars.
The adoption of the foregoing suggestions, in all probability, would serve temporarily-and certainly if the increase in revenues for 1920 as suggested by the Comptroller General should be realized, and provided no other appropriations are made.
TAXATION.
But the State is greatly in need of revenue beyond any increase that can be expected by the most sanguine adherents of the present plan of taxation.
The Comptroller General, in his report for the year ending December 31, 1919, on page 12, lists appropriations for 1920 at a total of $9,074,616.50. The correct total is probably more, or $9,082,586.72.
This official also, in the same report, on page 13, expresses the hope that the net revenues for 1920 will be increased to $1,092,750.00, basing his expectations on the hoped for increase of assessed valuations of the State for this year as given by the Tax Commissioner, though the Comptroller accredits that official with expressing the hope that the values will increase ten million more than the Tax Commissioner in his report, at page 9, estimates will be the case.
But, conceding the figures given by the Comptroller General to be correct, and also the opinion which he ex. presses that all the 1920 appropriations as made can be paid by revenues to be realized this year, including the approximately $500,000.00 increase needed to pay pensions to our Confederate Veterans, authorized under an
9

Act passed at your last session, and the more than one million dollars asked by the department and institutions, as set out in the Budget and Investigating Committee's report just filed-still} even if these items are included and covered in the statement of the Comptroller General as referred to, Georgia, when you consider its needs, is not receiving adequate revenues, and will not until its tax methods are, in my opinion, "recreated."
I cannot see that tbere is any just ground for complaint as to appropriations, because I feel that they are all-~possibly without a single exception, certainly as to those which are in amount consequential-abundantly deserved and advantageously used. But there must be a change. We cannot continue to increase our appropriations thirty-seven per cent when our revenues only increase twenty-two per cent, as has occurred during the five-year period from 1915 to 1919, inclusive.
The Tax Commission in its report submitted to you at your first session, gives a thorough and exhaustive study of the intricate and complex question of taxation.
Nine out of the ten members of this Commissionone of whom is the Tax Commissione1 of the State-concurred in the majority report. This report shows that other States have failed also to raise adequate revenues under the ad valorem system of taxation, and because of the impossibility of devising under that system any kind of tax machinery that would succeed in realizing revenues from intangible property.
I have seen no valid objection to the majority plan. The suggestion that its adoption would result in a division of our people into classes, I regard as not based upon facts or reason. Such has not been the case in those pro-
10

gressive States where it has heen of force and where, if such a result were possible, sufficient time has intervened since its adoption to have produced this. unfortunate result. On the other hand, the uniform ad valorem clause results in an uneven distribution of the burdens of taxation and here and elsewhere has already, if you please, divided people into classes-those who pay and those who evade; those who pay some and those who pay less; those who pay on a fair valuation and those who pay on an inadequate valuation; a class that cannot evade because its property is in the open, and a class that evades and circumvents, and will inevitably, under the law as it now is, continue this practice.
The new law will classify property for the purpose of taxation, and scientifically, according to its nature, its characteristics and its earning capacity.
The present law divides our people into classes fully as much as any new system could possibly do-one of which-the owners of real estate-pay taxes on 86 per cent of the actual value of their property; while another -some of the public service corporations-pay as low as 22 per cent of the actual value of their holdings-while from the standpoint of relative burden imposed, real estate furnishes 83 per cent of the revenue of the State as against 6 per cent which is furnished by those who pay on money and credits.
At page 495 of the Georgia Senate Journal of 1919, a table will be found showing that the percentage of intangible property to the total assessed value of property in Georgia has been steadily decreasing, having dropped from 14W% in 1875 to 61-14% in 1918-and also that the percentage of personal property to the total assessed
11

value of property has decreased from 42 2-3% in 1875 to 32 2-3% in 1918.
To more clearly indicate the above, the table is herewith set out.
..'. "p,

1878- -$ 261,755,644 1880__ 261,424,651

1885- - 381,695,616

1890-- 416,828,945

1895-1900__ 1905 __

410,692,093 432,323,691 5i7,840,282

1910 __ 766,787,139

1915- - 951,763,472

1918-- 1,079,261,333

$37,130,943 29,323,736 33,795,735 38,933,258 31,064,175 24,730,695 41,17Z;177 48,248,841 33,659,082 65,613,896

$14 1-5% 11 5-6% 10 1-2% 9 3-8% 7 3-8% 8 % 7 1-8% 6 1-7% 5 3-8% 6 1-14%

$111,656,490 99,2"76,876
119,200,739 152,311,869 133,555,811 150,006,530 203,979,464 253,186,230 276,796,383 349,589,021

42 2-3% 39 1-4% 37 % 36 5-8% 32 1-2% 34 1-2% 35 1-2% 33 % 23 1-7% 32 2-5%

The report of the Tax Commission says:
'' The remarkable situation shown by the above table is not unique for Georgia, but has been found to exist in many other States where the ad valorem general property tax was still used in personal property.''
In the State of New York, as shown by the report of the State Bbard of Tax Commissioners of that State for 1914, page 49, it appears that the percentage of personal property to total assessment in that State has decreased from 18.9% in 1840 to 10.04% in 1905.

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The Minnesota Tax Commission report for 1910 says:
"Under the existing system, personal property tends to form a constantly decreasing proportion of the total property assessed for taxation. It is generally admitted that under modern conditions, the amount of personal property in existence always equals, and frequently exceeds, the amount of real property. In a State like Massachusetts or New York, some would have it that the amount of personal property is two or three times as much as the amount of real property; whatever the exact proportion may be, it is certain that it cannot be less than, and probably greatly exceeds, the amount of real property. During the Nineteenth Century, it is certain that the increase of personal property was particularly rapid; yet the statistics covering this period show that this class of property has usually offered a decreasing proportion of the total assessments.''
This condition, which seems to exist in all States where the ad valorem plan obtains inevitably results in placing an increased burden on real estate. That is the situation in Georgia.
It should be borne in mind that the suggestion with reference to the division of our people into classes, as urged by the opponents of this measure, presupposes that the General Assembly of Georgia, to whom would be intrusted the matter of classification, would prostitute their high office to an unfair and indefensible imposition of taxes upon one class at the expense of another. I shall never believe that the General Assembly of Georgia will
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be composed of a membership which will so far forget its duties to the whole people and lend its vote to any such program.
It should always be kept in mind in the consideration of this proposed change in our tax system that under no circumstances could any burden be imposed upon any property in excess of the five mill limitation prescribed by our Constitution, and which all property now theoretically is supposed to pay.
If the people of Georgia are willing that your successors in the positions of trust which you now occupy should use their judgment-after a full investigation as to the advisability of classification-you should be willing to submit to them for ratification the Constitutional amendment giving them this power; because, after the adoption of this proposed amendment, the same rule of uniform and ad valorem taxation as it now exists, if deemed wise, could be applied.
If the tax machinery adopted in Virginia-as the opponents of this new law have suggested-and not the inherent merits of the new system, are to be credited with the splendid success brought about in that State (in which it took six years to persuade the people that it was wise) is it not a remarkable coincidence that such success was only accomplished contemporaneously with the adoption of this new principle of taxation? Is it not a noteworthy coincidence that, without an exception, success in raising adequate revenues has accompanied a change from the old ad valorem to the classification system, and that this additional revenue has, in every instance, come chiefly from the classes of property which usually escaped taxation under the ad valorem plan?
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Under the law of averages as shown by the experience of other States, the chances are against Georgia ever being able, under any kind of machinery, to accomplish under the Constitutional provision of 1877, what is being accomplished in the nineteen States referred to on page 30 of the report of the Tax Commission, and in the States of Montana, New Jersey and Vermont, which were not included in this enumeration.
I cannot believe, in view of the universal failure of the uniform ad valorem principle of taxation, that Georgia can ever do under this principle that which other countries and States of the Union have failed to do, the reason for which failure can be summed up in the statement that it is inherently and fundamentally unfair.
Hon. H. J. Fullbright, in his annual report to the Comptroller General, on page 6, with reference to this report, says:
'' The recommendations contained in the majority report are in keeping with the thought of many of the ablest authorities on the subject of taxation, and in line with the laws of all the more progressive States of the Union. I heartily join in that report, believing that the adoption of the recommendations therein made would greatly improve our tax laws."
It is agreed, not only by the majority of the Tax Commission, but by the Hon. Seaborn Wright, who alone dissented from the report of the majority, and who filed a minority report which was submitted to your body; and by the Comptroller General of the State of Georgia, Hon. Wm. A. Wright, that changes should be made m our tax laws.
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While the Comptroller General, in his report for 1919, at page 21, disagrees with the majority report submitted by the Tax Commission, still he says that he has given much thought and study to the legislation proposed by the bill introduced at the last session, and that he is more strongly convinced than ever that were the machinery recommended by the Commission for the new system applied to the existing system of taxation, it would accomplish better results without the destruction of the system, which, in his opinion, has been successfully in operation since the adoption of the Constitution of 1877.
Therefore, I am suggesting that in view of the fact that all who have studied the subject agree that something should be done, that you adopt the plan recommended in the report of the majority of the Tax Commission; or that suggested in the minority report; or the plan advocated by the Hon. Wm. A. Wright, Comptroller General of the State, who has had long experience in the practical administration of the taxing laws of this State.
If it is the policy of the State to continue the old ad valorem system of taxation, amendatory laws to perfect the machinery along the lines indicated in the report oi the Minority Committee of the Tax Commission, or as suggested by the Comptroller General, should be immediately adopted.
I strongly advise that something be done-raise the constitutional limit; re-value the property now on the tax books; perfect-if it can be done-the machinery under the Constitution as it now is, or amend-and this I think to be wise-the Constitution, as suggested in the report of the majority of the Tax Commission. You
16

should do something without delay. You are in possession of as much information as any General Assembly can possibly have, and in view of the great needs of the State, and also in view of the fact that all who have given the tax methods of the State any thought, are of the opinion that something should be done, there can be little excuse for your failure to act.
BUDGET COMMISSION.
I unqualifiedly recommend the creation of a Constitutional Budget Commission, and invite your serious consideration to the bill suggested by the Budget and Investigating Commission in its 1919 report,' 'Exhibit I.'' This bill provides that after this Commission has devoted the time necessary to an intelligent understanding of the needs of the State's agencies, departments and institutions and has recommended an apportionment of the State's revenues for these purposes, while items so recommended may be decreased or omitted under the usual rules of the General Assembly, the amount of no item may be increased except upon a two-thirds vote of the membership of each House of the General Assembly present and voting, provided that such two-thirds shall constitute a majority of such memberships.
This provision is very similar to one in the Constitution of the Confederate States of America.
It is a necessary provision to give the work of this Commission before your body that standing to which it is entitled. This provision is also in the interest of protecting your membership against the solicitations and importunities of those who seek appropriations, and
17

tends to enable such matters to be settled upon merit alone.
This provision is not a limitation on the authority of the General Assembly in the matter of appropriating the State's funds. It is simply a sensible, reasonable and businesslike regulation of the procedure by which appropriations are to be made. It must be recalled that the General Assembly has no unlimited power in this respect, as the Governor, by the exercise of the veto power, can over-rule the wishes, with reference to matters of legislation, of any number of Representatives in the Lower House less than 128 and any number of Senators less than 34, so that under the provision of the Constitutional amendment providing for the creation of the Budget Commission your body will be placed under no further limitations than now.
Members of your body would have the balance of power on the Commission, while the minimum membership authorized to increase any item recommended, 97 in the House and 27 in the Senate, as now constituted, would suffice.
This provision would give to Georgia one of the essential requisites of a business budget system. It has been written into the laws of other States, and, after trial, has been found satisfactory. It is hoped you can approve this plan for submission to the judgment and wisdom of the people of this State, whose representatives you are, and who can well be trusted to say whether or not this is a wise and expedient regulation to safeguard State expenditures and insure their wise use.
I desire also to endorse that provision of this suggested Constitutional amendment which requires that no
18

other appropriation bill shall be considered until the General Appropriation Bill has been finally acted upon. During my tenure of office, the General Appropriation Bills have always been deferred and finally put through in the last minutes of the session, and hence have come to the Executive Department for consideration and action only after the adjournment of your body, and when to withhold approval of any item of consequence therein, would necessarily entail upon the tax payers of the State the expense of an extraordinary session. To delay the passage of the General Appropriation Bill until special appropriation bills have all been passed upon, must inevitably result always in the passage of special bills without any regard whatsoever to the State's ability to pay. It is unbusinesslike and unsystematic.
The benefits that will accrue from the adoption of the plan embodied in the Budget Bill submitted, will be so apparent-if it is once put in vogue-as to cause us to wonder that the old plan was ever permitted to exist.
Further, let me commend that provision in the last paragraph of the suggested Budget Bill which says that no special appropriation bill shall be enacted, should the amount therein carried cause the total appropriations fo:.. any year or years in which the same is to be paid to exceed the total revenue as estimated in the report of the Budget and Investigating Committee, unless such special appropriation bill shall provide the revenue necessary to pay the appropriation therein. The adoption of this will inevitably result in focusing the mind of the General Assembly on the amount of the State's revenue and the source from which it is derived, instead of permitting it in making appropriations-as has heretofore been the
19

case-to think only of the great needs of the State and its institutio~.
If this Budget Bill should be adopted, Georgia would never again be confronted with the situation which met you at the threshold of your deliberations at this session.
HIGHWAYS.
You are to be congratulated on the Highway Legislation passed at your last session, and it is earnestly hoped that with such minor amendments as may be suggested by your wisdom and as the operation of the State system which you have inaugurated may have developed are necessary, the program as outlined in the report of the Majority Committee, as submitted to you at your last session can be put through.
CONCLUSION.
Your body, at its 1919 session, undoubtedly passed as much progressive legislation as any General Assembly in the history of the State at its first session. Your creation of the State Board of Public Welfare; your establishment of the State Banking Department; the State Printing Department; your revision of the educational laws, and your highway legislation, constitute in themselves a splendid catalogue of accomplishments. If at this session you can succeed in the enactment of proper tax legislation; take the initial step for the establishment of aConstitutional Budget and InvestigatingCommission; take additional steps as indicated for the establishment of a State System of Highways, you cannot be denied the honor of having enacted more legislation in the in-
20

terest of the people of our State than any General Assembly heretofore has ever done. It is a great opportunity and one which it is sincerely hoped you will embrace.
Respectfully submitted,
Governor.