are less, and partly because of the subsequent develop-
ment of special taxes for state revenues which has ap-
parently caused a relaxation of the supervision of
local assessments, now used mainly for local purposes.
But in Indiana the assessed valuation of real estate
was increased by 44 per cent, in one year after the new
system went into effect. 1 In Michigan the assessed
valuation of property increased over 60 per cent,
from 1899 to 1903. 2 And in Wisconsin where the
most thorough system of supervision has been estab-
lished, local assessments more than doubled in three
years. 3 And it may be further noted that in each of
1 $553,937,744 in 1890; $898,600,323 in 1891. Rawles, op. cit.
276.
2 $968,189,097 in 1899; $1,537,355,738 in 1903.
3 $648,035,848 in 1899; $1,369,811,147 in 1902. Report Wis-
consin Tax Com., 1903, p. 10.
253
LOCAL GOVERNMENT
these three states the aggregate assessed valuation of
property is from thirty to fifty per cent, larger than
in the neighboring State of Illinois, whose population
and wealth is more than double that of the other states,
but where there is no efficient system of supervision.
Years before these recent measures for the super-
vision of local assessors there began the policy in many
states of a more complete centralization in the assess-
ment of special classes of property, especially railroads
and more recently other transportation companies and
also telegraph and telephone companies. In fact only
in Rhode Island, New Mexico and Texas are railroads
still assessed only by local authorities. In some cases
this centralization of assessment has been part of the
movement to secure such taxes for the state treasury ;
but in a number of states notably in Indiana and
Illinois since 1872 the state assessment of such prop-
erty has been used for purposes of local taxation.
Usually this centralized state assessment has been es-
tablished only for the property of corporations extend-
ing over a large number of local taxing districts ; but in
New York, under a law of 1899, the state tax commis-
sioners assess for local taxation the value of special
franchises in the public streets, which are for the most
part held by local companies; in 1901 the Indiana
tax commission was given charge of the assessment of
street and electric railways; and the Illinois state
board of equalization values the capital stock of
local franchise corporations. The New York franchise
tax law has been of great value in drawing attention to
a large amount of wealth that had previously escaped
taxation ; but it may be questioned whether the separa-
254
LOCAL FINANCE
tion of the franchise from other property elements or
the complete centralization in the assessment of dis-
tinctly local property is necessary or altogether advis-
able. In other states the value of such special fran-
chises is now often included (without additional legis-
lation) in the general assessment of the owners in the
ordinary course of valuing property for taxation.
AUDITING AND ACCOUNTING
State supervision over local accounts is as yet less
developed than state supervision over local assess-
ments. This is perhaps not surprising in view of the
fact that in most states the accounts of state finances
are very far from satisfactory. It is true there have
been state auditors and comptrollers since the estab-
lishment of state governments and in some cases simi-
lar officers in colonial times. But the functions of such
officers have often been limited ; while primitive meth-
ods of bookkeeping established in the days of insig-
nificant financial transactions have remained in use
after expenditures have come to be counted in millions
of dollars, and in the face of the development of sys-
tematic accounting in private and corporate business.
Indeed the imperfect and inadequate accounting
methods of the larger cities have often been somewhat
better than those of the states within which the cities
are located.
But within recent years there have been significant
measures taken both to establish satisfactory account-
ing systems for the state finances, and also to establish
state supervision over the accounts of local officers. It
255
LOCAL GOVERNMENT
is only the latter part of this development that can be
here considered.
Minnesota seems to have been the first state to have
undertaken any effective control over local accounts.
In J878 the office of state examiner was established,
with power to inspect the accounts of county officers.
A year later Massachusetts also inaugurated a system
of supervision over county expenditures. Appropria-
tions and tax levies for each county except Suffolk
have long been voted by the legislature, although this
is largely a matter of form and the estimates and pro-
posals of the county commissioners are regularly
adopted. In 1879, however, the commissioners of sav-
ings banks were authorized and required to inspect the
books and accounts of most of the county officers, with
power to require uniformity in methods of keeping
accounts and financial reports in accordance with pre-
scribed forms. In 1887 the state supervision was made
more effective by placing it in the hands of a newly
established office of controller of county accounts,
whose duties included the accounts of some officers pre-
viously exempted.
Valuable results have come from this supervision of
county accounts. Irresponsible methods disclosed in
the 70 's have been corrected ; and important reforms
have been introduced. Governor Bates has testified to
the good that has been devised from the uniform sys-
tem of accounting established in the counties; 1 and
endorsed a similar supervision over municipal ac-
counts.
1 R. H. Whitten, "Administration in Massachusetts/' 149-151
(Columbia University Studies in Political Science, vol. 8).
Annual Message of Governor Bates, January 8, 1903.
256
LOCAL FINANCE
One of the youngest states in the far West was the
next to follow up these partial measures, by establish-
ing a comprehensive system of state supervision over
local accounts. The constitution of Wyoming, adopted
in 1890, provided for the office of state examiner to ex-
amine the accounts of certain state officers, clerks of
courts, county treasurers and such other duties as the
legislature might prescribe. This was followed by the
enactment of statutes, which before long placed under
the supervision of this officer the accounts of every
public officer in the state handling public funds; au-
thorized him to establish a uniform system of book-
keeping by the state and local officials, and to examine
their accounts ; and made provisions for further action
in cases of defalcation discovered through his exam-
inations. The same officer has also supervision over
banks and other private financial institutions.
"The examination of public accounts is technical and
embraces the checking of every item whether great or small,
the subsequent footing of the cash accounts, and finally their
summation. Every account paid is closely examined, the
nature of the expense ascertained, the legality of the bill
inquired into, and the amount is finally checked to the stub
of the warrant issued, and also entered in the proper column
of the expense register. Whether or not the officer con-
ducted the affairs of his office in conformity with the statute
is also made a subject of inquiry.
"The examination made, a written report setting forth
the results accompanied with criticisms, requirements and
recommendations is prepared and filed with the governor
and a copy thereof filed with the officer or officers whose
accounts were the subject of investigation. Should it ap-
pear that there had been violations of law in the conduct
of any office, the examiner must report thereon, and he
257
LOCAL GOVERNMENT
has authority to enforce his rulings. In case of defalcation
or embezzlement, his findings are absolute, until reversed
by the district or other court having jurisdiction.
"In case of the default of any treasurer and the inability
of such officer to replace funds illegally used within the time
designated by the examiner, the examiner shall at once
assume charge and in all respects he becomes the legally con-
stituted treasurer of the state, county, municipality, or
school-district, as the case may be.
"Another important feature is the meeting of the exam-
iner with the constituted boards authorized to make the an-
nual tax levy. At such time the expense budget for the
ensuing year is carefully canvassed and reductions made
wherever possible. This paves the way for a reduced levy
of taxes, and frequently the total levy may be reduced from
one-fourth to one mill or more as compared with the pre-
vious year." !
Striking evidence may be adduced of the benefits re-
sulting from this system of supervision in Wyoming.
In 1892 the expenditures of the twelve counties in the
state were $412,000, while only two counties were on
an approximate cash basis, the others generally allow-
ing their expenses to exceed their revenues and issuing
illegal warrants to pay bills. In 1899, with thirteen
counties, the total expenditures had been reduced to
$295,000; and every county was on a cash basis with
a surplus at the end of the year. 8 Several governors
of the state have specially commended the work of the
state examiner in their messages to the state legisla-
ture. 3
*H. B. Henderson, in Nat. Mun. League, Conference for Good
City Govt., 1900, pp. 251-252.
*H. B. Henderson, op. cit.
3 Governor Wm. A. Bichards in 1899, and D. F. Richards in
1903.
258
LOCAL FINANCE
Other states near Wyoming soon followed its ex-
ample to some extent. Montana and North Dakota
have each created the office of state examiner, with
power to examine books and prescribe accounting
methods in county offices, as well as state institu-
tions. South Dakota, Nebraska and Kansas have pro-
vided a less effective supervision, in the two first
named through the state auditor; in the last named
through a state accountant. 1 More recently (in 1903)
Nevada has established a more intensive system of con-
trol. A state board of revenue must approve the loans
of local governments, prescribe the forms for financial
reports to the state comptroller, and employ an exam-
iner to inspect the accounts and records. 2 And in the
same year the extreme Southern state of Florida
created the office of state auditor, whose chief duty is
to prescribe the form of county accounts and see by
inspection that they are properly kept. 3
In the state of New York something has been ac-
complished in the same direction. Beginning in 1892
the state comptroller has been given power to audit
certain accounts of county treasurers, including the
court and trust funds and the accounts for the inheri-
tance tax ; while the state excise commissioner has simi-
lar authority over the accounts for the liquor tax. The
introduction of the comptroller's audit disclosed inex-
tricable confusion in the various accounts of county
treasurers, and that within a few years before there
had been defalcations or shortages in thirty-three of
1 Nebraska, Laws of 1893, Ch. 15 ; Kansas Laws of 1895, Ch.
247.
* Laws of 1903, Chs. 78, 123.
3 Laws of 1903, Chs. 14, 71.
259
LOCAL GOVERNMENT
the sixty counties in the state. A uniform system of
bookkeeping has now been introduced for these spe-
cial funds which with the regular audit discovers and
often prevents deficits and defalcations. 1 *
In 1903 a statute was enacted requiring all cities in
the state with less than 250,000 population to make uni-
form financial reports to the secretary of state. But
as no provision was made for the uniformity of
accounts or for an examination or audit of the books
of the city officers, nothing has as yet been accom-
plished under this provision.
Until a few years ago this movement towards state
supervision of local accounts was confined to the less
important states and to such partial measures in the
larger states as have been noted. But in 1902, the
State of Ohio enacted the most important law on the
subject yet adopted. This provided for a uniform sys-
tem of accounting, auditing and reporting for every
public office in that state, under the supervision of a
newly established bureau of inspection in the office of
the auditor of state. The act requires separate
accounts for every appropriation or fund, and for
every department, institution, public improvement,
or public service industry ; provides for full financial
reports to the auditor of state ; and authorizes annual
examinations of the finances of all public offices, with
power to the examiners to subpoena witnesses and
examine them under oath.
To carry out the provisions of the act three deputies
1 Fairlie, ' ' Centralization of Administration in New York
State,' ' pp. 185-186 (Columbia Univ. Studies in Political
Science, vol. 9).
260
LOCAL FINANCE
and a clerk were appointed by the auditor of state, all
of whom were former county auditors and experienced
in local methods. These, with the assistance of expert
accountants who had given special attention to muni-
cipal accounting, and after a thorough investigation
of existing practices, prepared complete systems of
accounting which have been installed throughout the
state in the offices of county auditors and treasurers,
city auditors and treasurers, village clerks and treas-
urers, school-district clerks and treasurers, and town-
ship clerks and treasurers. The first examinations of
the accounts have been made by the examiners
of the bureau; and from their report comparative
statistics of local finances covering the whole State of
Ohio have been published.
This brief description of these various measures
must bring into clearer light their significance and the
tendency which they illustrate. No one considered by
itself may seem of very large importance. But when
the detached and apparently disconnected pieces have
been brought together, it must be evident that in the
aggregate they indicate a distinct movement towards
state supervision of local finance. We may, therefore,
inquire into the rationale of such a movement, and con-
sider to what extent it should be encouraged.
In some respects the movement may seem in conflict
with general principles which are still declared to be
fundamental in our American system of government.
It must be admitted at least that it is not consistent
with the most extreme demands for local autonomy;
and that state control is not so clearly justified in this
261
LOCAL GOVERNMENT
field by a general state interest, as is the case in state
supervision of health administration, schools, or the
local management of state finances.
If, however, we apply the principles of such politi-
cal thinkers as John Stuart Mill and Henry Sidgwick,
it will be seen that this movement is in entire accord
with a rational political philosophy. These writers
recognize fully the advantages of locally elected
authorities for matters of local interest, as well as for
the sake of the political education of the people. But
they also point out the advantages of central supervi-
sion, not only where the interests of the larger govern-
mental units are directly concerned, but also because
of the more complete information and the larger degree
of technical efficiency which the higher government
can command. 1
Both of these latter factors support state supervision
in the two branches of local finance that have been
noted. The assessment of property with any approach
to equality of treatment calls for a high degree of ex-
pert skill, and the comparison of conditions over a
wide area. A uniform system of accounting is essen-
tial for accurate information on public expenditures,
and for the comparison of outlay with returns in the
many branches of local administration. And state con-
trol over the accounts of local public authorities is cer-
tainly as important as the control that has been estab-
lished in most states over the accounts of private cor-
porations, such as railroads, banks and insurance com-
panies.
1 Mill, 1 1 ^Representative Government," Ch. 15. Sidgwick,
"Elements of Politics," Ch. 25.
262
LOCAL FINANCE
Attention may also be called to another branch of
local finance where a system of state administrative
supervision is urgently needed, over the loans and
debts of local authorities. The need for some control
here is already recognized in the constitutional and
statutory debt limits established. But these arbitrary
limits do not and cannot adjust themselves to the vary-
ing needs and conditions of different local communi-
ties. There is a great difference between a debt in-
curred for water works, which will be met by the rev-
enue from the undertaking, and a debt for parks which
must be paid from general taxation, and a debt for
street paving that may be worn out in ten years. To
decide whether additional debt may be safely incurred
can be determined wisely only after a careful examina-
tion of a complex financial situation, involving a study,
not merely of the aggregate amount of existing debt,
but also of the provisions for meeting this debt and of
the resources of the local government concerned. Such
an examination requires expert technical knowledge,
which is entirely absent from the present crude legis-
lative limitations, and can only be supplied by a per-
manent administrative authority.
263
CHAPTER XVI
MISCELLANEOUS
Another field of public activity, formerly left to
local authorities, in which state supervision has very
recently been developed, is the construction and main-
tenance of roads. In the early part of the nineteenth
century the national government built the well-known
Cumberland road ; and there were also a few state and
territorial roads built in the period of internal im-
provements during the second quarter of the century.
But this tentative movement was soon abandoned, and
the building and care of roads was left to counties,
towns and road districts. For the most part, too,
road work was done by a labor tax; little money was
raised, and very little expert engineering construc-
tion was attempted. The rapid development of rail-
road building doubtless retarded the improvement of
highways to some extent, by offering a more efficient
means of transportation for long distances, and by
absorbing the energies of the community devoted to
the problem of communication. At any rate the
country roads of America remained* for the most part
crude and in bad weather almost impassable.
New Jersey inaugurated the new movement for
state aid and state supervision in 1891. Massachusetts
followed in 1894, Connecticut and California in 1895,
264
MISCELLANEOUS
and New York three years later. Since then other
states have taken up the work; and some steps have
now been taken in all of the New England states, in
most of the Central group and in few of the West-
ern states.
Under the present law in New Jersey the state pays
one-third of the expense of building improved roads,
ten per cent, is paid by the townships or abutting
property owners, and the balance by the county in
which the road is located. The work is done under
the supervision of a commissioner of public roads ap-
pointed by the governor ; and the practice has been to
reappoint the same official. Up to July, 1904, 1,100
miles of state roads had been built, at a total cost of
$4,930,000, of which $1,515,000 came from the state.
At first the improved roads were detached strips
scattered throughout the states, but intervening links
are being improved, and already there are several con-
tinuous highways across the state.
In Massachusetts the state roads are built under
the direction of a state highway commission, consisting
of three members appointed by the governor and
council. The state pays the entire cost of each road in
the first instance, but assesses one-fourth on the coun-
ties. Up to 1903, nearly $5,000,000 had been appro-
priated by the state; and the annual appropriation is
now $450,000 a year. Five hundred miles of state
roads have been built; and in addition the cities and
towns have constructed six hundred miles of improved
roads, under specifications similar to those in use by
the state commission.
Connecticut since 1895 has appropriated more than
265
LOCAL GOVERNMENT
$1,500,000 for state roads; and the counties have ap-
propriated about $2,000,000 for their share of the
work. The state pays two-thirds of the cost, and in
the smaller towns three-fourths. The work is done
under the direction of a state highway commissioner,
and nearly five hundred miles of improved roads
have been built.
Under the New York laws of 1898 the state pays
one-half of the cost of building improved roads, the
counties 35 per cent., and the towns or abutting prop-
erty owners 15 per cent. The work is done under the
supervision of the state engineer and surveyor, one of
the elective state officers. Up to 1904, 700 miles of
new roads had been built, and nearly $12,000,000 had
been appropriated by the state, counties and cities.
An amendment to the state constitution, adopted in
1905, authorizes the legislature to issue bonds to the
amount of $5,000,000 a year for ten years, for the
improvement of the public roads.
Pennsylvania in 1903 provided for an extensive
scheme of state roads, to be built under the direction
of a state highway commissioner. $6,500,000 was ap-
propriated for a period of six years. Two-thirds of
the cost is to be borne by the state, one-sixth by the
counties and one-sixth by the townships. A significant
feature of the Pennsylvania law is the use of state
funds for road maintenance, up to one-half of the
total expenditure for this purpose.
Vermont now levies a state road tax, and apportions
the proceeds and other state revenue to the towns, to
be expended on road building. The work must be
done in accordance with specifications furnished by
266
MISCELLANEOUS
the state commissioner, and under his direction. The
Rhode Island legislature, in 1903, appropriated
$100,000 for the construction and maintenance of
highways, under the direction of the state board of
public works. A small grant to the towns is also made
by the state of Maine.
California has for a number of years made small
appropriations for building state roads in sparsely
settled mountain regions. Maryland in 1903 appro-
priated $200,000 for road improvement, one-half of
the cost to be borne by the state. And Delaware in
the same year established a highway commission and
voted $30,000 as the state's share of the expense of
building better roads.
Other states have taken only the preliminary steps.
Illinois, Michigan, Iowa, New Hampshire and North
Carolina have established boards or officials to in-
vestigate existing conditions, to advise the local
authorities and to recommend plans for further action
by the state. It seems evident that the movement thus
begun will continue to gain in strength, until most, if
not all, of the states will engage actively in this work/
A long line of judicial decisions has clearly estab-
lished the rule of law in this country that locally ap-
pointed police officers are not, strictly speaking, local
officers, but are agents of the state governments for
the maintenance of the public peace and order. 2 In
1 Cf. Report of the Office of Public Road Inquiries, U. S.
Dept. of Agriculture, 1904.
*Cf. People v. Draper, 15 N. Y., 532; People v. Mahaney, 13
Mich., 481; People v. Hurlbut, 24 Mich., 80; Burch v. Hard-
267
LOCAL GOVERNMENT
spite of this legal theory, there has been developed no
effective state administrative control in this important
branch of local government. Some occasional and
haphazard steps have been taken in many states, but
no systematic and permanent machinery has been
established.
It has been already noted 1 that in a few states the
governor has power to remove delinquent sheriffs and
prosecuting attorneys, as well as other county officers.
This provides a limited degree of central control, ap-
plicable in cases of serious misconduct on the part of
the local officers. But it is very far from furnishing
any effective supervision over the performance of their
functions. Indeed there is seldom even any provision
for the collection of information about the work of the
local officers by means of reports.
Some supervision could easily be established by
making the sheriffs more clearly responsible for police
conditions in the local districts within their counties