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The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, January 08, 1931, Image 12

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Full Text of Governor George F. Shafer’s Address to Legislature ■
To the Members of the Twenty-second Legislative
We meet again at the threshold of a new year and at "the
beginning of another milestone in the governmental history
of the state to inaugurate a new legislative session and to
witness the birth of a new executive administration. We
begin these deliberations under the sanctity of a solemn oath,
* the obligations of which bind us, with the help of God, to
execute to the best of our ability the public trust which the
people have reposed in us. This public trust is a most sacred
one, the serious responsibility of which, I am sure, must
greatly impress the mind and conscience of each of us who
has assumed it, and the acceptance of it dedicates our labors
unreservedly to the service of the state.
May I begin this message by observing that since the legis
lature last convened, the business of the state, including
that of all its departments and institutions, has progressed
in a manner most satisfactory.
The several executive officers, both elected and appointed,
*“.aye co-operated in a most commendable way with each other
and with the Chief Executive in the administration of the
affairs of the state. My appreciation of this spirit of co
operation, I wish to publicly acknowledge and to congratu
late the state upon the good results which have come there
from and upon the tranquility which abides where unneces
sary friction is absent from executive councils. The financial
condition of the state is also in good order. Public expendi
tures have been confined to the available funds, future
obligations have been rigidly avoided, and we enter the new
term without the burden of accumulated debts. We have
striven unceasingly to administer the government not only
in accordance with sound business principles but in harmony
with sound political principles as well, with results that, I
believe, have been beneficial to the state.
Under our form of government the functions and respon
sibilities of making and executing the laws are wisely vested
in separate constitutional bodies, each chosen for a specific
purpose by the people. It is the province of the legislature
to adopt the laws and of the executives to administer them,
but experience has shown that the best results in govern
ment are _ obtained where there is a close and harmonious
relationship and a cordial spirit of co-operation existing be
tween the legislative and administrative bodies during the
progress of law-making. The most appropriate laws result
where the legislature acts in light of the facts made known
to it officially by the several public officers charged with
the administration of the functions of government and after
due deliberation is given to the counsel offered by those
whose task it is to deal from day to day with the problems
involved. In conformity with the law the heads of the sev
eral executive departments have prepared and filed official
reports covering the progress of the administration of their
respective departments. These reports, some of which are
necessarily voluminous, are intended to inform the public in
general and the legislature in particular, not only of the
routine facts pertaining to those departments, but also de
scribe the practical problems that have arisen which call
for legislative action and to give you the benefit of judg
ment founded upon experience as to the character of legis
lative assistance required. The aggregate of these depart
mental reports tell the story of the operation of the execu
tive branch of the state government during the past biennium,
and the subject matter of these reports is of such impor
tance that I would urge you to provide for their study and
analysis by a select committee appointed by each body of
the legislature. Such a special committee should serve as a
contact body between the departments and the legislature and
promote that spirit of co-operation and co-ordination of ef
fort which the situation requires.
Necessarily, I can not in this message do otherwise' than
touch in the briefest possible manner some of the more im
portant subjects requiring legislative attention, giving you
only the most essential information available and outlining
the legislative program and policy which to m% appears most
appropriate for the needs and welfare of the state.
Probably the most important single duty devolving upon
the legislative assembly is that of providing the necessary
appropriations for the maintenance and conduct of the state
government and its various departments and institutions.
In performing this task you will have before you for your
guidance the report and recommendations of the State
Budget Board which has made a very careful and painstak
ing study of all the departmental and institutional requests.
If these recommendations are substantially followed it will
enable the legislature to reduce the total appropriations from
the general fund of the state for the next biennium about
$835,000 below those granted by the last assembly, and thus
make possible a small reduction in general property taxes
for state purposes. In order to make this reduction it will
not be necessary to curtail the usual operations or impair
the normal efficiency of any state departments or state in
stitutions, but it will be necessary to refrain from allowing
any requests for the construction of new buildings for the
charitable, penal and educational institutions. It is the
judgment of the Budget Board, in which I fully concur, that,
while new buildings are needed at several institutions in order
to take care of normal expansion requirements, none are ab
solutely necessary during the next two years, except pos
sibly power plant additions and improvements at the School
for the Feeble Minded at Grafton. I believe that every
effort should be made by the management of these state
institutions to get along some way during the next biennium
without railing upon the taxpayers of the state to bear the
extra burden which the cost of new buildings would neces
sarily impose. •
In this connection I am sure that it is unnecessary for me
to remind you that < strict economy should be the ruling
principle in the making of all appropriations by this assembly,
and that the conditions and times demand that not a dollar
be appropriated from the general funds of the state for any
purpose, however laudable, beyond the sum actually neces
sary for the proper conduct of the government. Such a con
servative policy in the matter of appropriations will be in
harmony with both the needs and the desires of all our people
at this time. This rigid rule need not, of course, be always
followed in the case of appropriations made from those cer
tain special funds not derived from real and personal property
taxes, for, as I view it, it is the property owner, the farmer
and business man, who needs protection in these times from
the burden of taxation.
In urging upon you the necessity of economy in the making
of appropriations, I am not unaware of the fact that less than
12% of the total annual tax levy is required to operate the state
government, and that 88% goes for the support of the local
units of government. However, I believe that the example of
the state in reducing its governmental costs will have a very
wholesome influence upon all the political subdivisions and
municipalities and it may induce many of them to adopt re
duced budgets for the next two years.
Pnblic Debt
A considerable part of the cost of government is reflected
in the public debt of the state and its political subdivisions.
For several years the state has had no bonded indebtedness
except for industrial purposes. For the latter purposes, it
now has outstanding bonds in the total sum of $38,357,200,
of which amount $4,000,000 is for State Mill and Elevator
construction and operating capital, $1,000,000 for Bank of
North Dakota operating capital, and $33,357,200 for state
farm loan purposes. During the present biennium, $500,000
of construction bonds for the State Mill and $1,000,000 of
Bank of North Dakota capital bonds have been retired by
taxation. Until 1929, the annual interest on both Mill and
Elevator bonds and Bank of North Dakota bonds was paid
from state tax levies, but during the past two years the
interest on the Bank bonds in the sum of $75,000 and
$50,000, respectively, has been paid from earnings of the
Bank; while the interest on the Mill and Elevator construc
tion bonds for the current year, in the sum of $172,000, was
paid from earnings of that institution made during the
year of 1929. Accordingly, while tax levies for industrial
bond purposes have been reduced considerably during the
past two years, it will still be necessary to continue such
tax levies for many years before the state will be entirely
free of this tax burden.
The total municipal bonded indebtedness of the state is
approximately $19,000,000. The annual interest on such
bonded indebtedness, together with sinking fund levies, adds*
much to the annual tax burden of our people. I believe it
would be in the interest of economy if the legislature would
rigidly limit, not only the amount but the purposes for which
municipalities and political subdivisions may create public
debts, and also to safeguard all sinking funds raised by
taxation and oblige the application of all sinking funds to
the retirement of outstanding bonds. In this connection, I
would advise the enactment of a law which will require that
all municipal bonds shall mature serially, so that the prin
cipal of such bonds may be gradually retired as sinking
funds accumulate. The municipalities suffer an unnecessary
loss by accumulating large sinking funds which earn much
less than the interest on the outstanding bonds. If such
sinking funds were periodically applied to the payment of
the bonds, such losses would be saved to the taxpayers and
the danger of the sinking funds being lost through misuse or
ether causes would be entirely eliminated.
May | also suggest that you repeal all aws on the statute
books authorising the state to issue bonds for any purpose
except for farm loan purposes. lam sure that a strict policy
of limitation on the creation of bonded indebtedness by
either the state government or by local political subdivisions
will improve the credit standing of both the state and the
municipalities, as well as result in lower taxes. Our object
ahbuid bo. to keep our credit good and our taxes down. This
■ /‘ '** ... • * * ’ 1
tv *; ■
Governmental Survey Commission
I have long felt that the aggregate amount of taxes im
posed upon real and personal property by the local subdivi
sions could be substantially reduced if the entire govern
mental system f- m the townt Mn to the state was thoroughly
anf i carefully studied, overhauled and modern business
methods adopted. I am confident that many consolidations
could be effected and many expensive methods and func
tions eliminated or curtailed, which would result, not only
:r a real saving to the taxpayers, but introduce more effi
ciency in the operation of our complicated governmental
machinery. Believing that much good could be accomplished
in the direction of both economy and efficiency if some
agency were created for the purpose of ‘making a study and
survey of our whole structure of government, state and local,
I shall repeat the recommendation made by me two years
ago, wherein I advised the creation of a governmental survey
commission, which commission should be charged with the
duty of making the study herein suggested and report its
findings and conclusions*to the next session of tjie legisla
ture. I earnestly appeal to you to provide ways and means
of attacking this problem of high cost of government in an
intelligent way and I urge that there never was a time in
the history of the state when our taxpayers were in greater
• need of relief from property tax burdens than the present.
Taxation and Assessments
In 1928, Section 179 of the State Constitution was amended
to vest in the State Board of Equalization the power to
assess all public utility property in North Dakota. No
statute has yet been enacted by the legislature to prescribe
the procedure to be followed by the State Board of Equali
zation in carrying out this vastly important constitutional
duty. For three years the Board has assessed heat, light,
power and gas properties without statutory guidance. These
assessments in 1930 totalled the sum of $11,863,559. It is -
imperative that this condition be remedied and I urge this
legislative assembly to pass an appropriate law to govern
the procedure of the Board in such matters.
Taxation of Express Compinlts
I wish also to recommend a change in the manner of taxing
the property of express companies doing business in this
state. For many years this business has been conducted
largely by the American Railway Express Company and its
property was assessed by the Board of Equalization on the
same basis as railroads, that is, on its tangible property and
franchise value. In 1929, this property was assessed at the
sum of $892,761. Recently, all express business in the state
has been taken oyer by the railroads, which conduct the
business through an operating company known as the Rail
way Express Agency, Incorporated. This company merely
acts as an agent for the railroads; it receives no compensa
tion for its services; it has no net income and pays'no divi
dends. The value of its real and personal property within
North Dakota is less than $53,000. In view of the fact that
this company is merely an operating agent for the railroads,
it is doubtful whether it can be assessed on its intangible or
franchise value. 1 would, therefore, advise that a gross earn
ings tax be substituted for the present method of taxing this
class of business-
May I aiso call your attention to the condition of our laws
governing taxation of commercial auto transportation busi
ness in North Dakota. This is a new industry which has
grown rapidly during the past few years, not only in this
state, but throughout the country. There are now 182 per
sons, firms and corporations doing a commercial auto trans
portation business within the state, carrying passengers
and freight under licenses issued by the State Board of Rail
road Commissioners. On October 1, 1930, these licensees were
operating 280 cars, cabs and trucks. During the year 1930,
these licensees have paid fees to the Board of Railroad Com
missioners for regulatory purposes in the sum of $3,232.50,
and fees to the State Motor Vehicle Department for high
way purposes in the sum of $9,299.10. It is estimated by
the Board of Railroad Commissioners that these motor car-
Tiers transported 148,844 passengers and 24,741 tons of
freight during the year 1929, and that they ran a total of
1,958,612 miles. No record for 1930 operations is now
Inasmuch as registered motor vehicles, including the motor
buses and trucks above referred to, are exempt from prop
erty assessment, this transportation industry pays no taxes
for general governmental purposes, state or local, except in
come taxes which are negligible. Their tax contributions are,
therefore, limited to highway taxes only, paid in the form of
motor vehicle registration fees and the gasoline tax. It is
my judgment that every commercial enterprise operating
within the state,' whether large or small, should contribute
to the support of the general government on a basis of
equality with all other lines of business, whether it be
agricultural, commercial, or industrial. I would, accordingly,
suggest that you give careful consideration to the question
of establishing at this time a fair and equitable system of
taxation for this rapidly expanding auto transportation busi
ness, not for the purpose of adding burdens to this new
commercial activity, but in the interest of absolute justice
in taxation. For your thought in this connection, ,may I not
suggest the idea of adopting a gross earnings tax in lieu of
the present income tax, the proceeds to go into the general
treasury, together with an equitable schedule of motor vehicle
registration fees for highway purposes.
State Highway Department
The State Highway Department has made good progress
in the building of our Federal Highway System. During
1929 and 1930, it added 805 miles of new graded roads and
1,044 miles of new graveled roads to the State System, be
sides doing 482 miles of re-grading, re-graveling, re-oiling
and oil mix surfacing on the old system. This brings our
total number of miles graded according to Federal specifica
tions up to 4,710, of which number 3,208 have been graveled.
The department is carrying into the new year 752 miles of
combined grading, graveling and reconstruction work which
is unfinished, consisting of 388 miles of projects upon which
work has been done and 364 miles of projects which were •»
placed under contract during the fall for construction in
1931. Our Federal Highway System consists of 7,457 miles
designated according to law into two systems known as the
primary system and the secondary system. The primary
system is about 87% completed; the secondary system is about
29% completed, and the total system about 53% completed.
Preference in the order of construction has been given to
primary highways as directed by the state law, which accounts
for the fact that up to the present time most of the con
struction work has been done on the primary system.
State Highway Finances
In financing the construction of this great highway system,
the state has, up to the present time, operated on a strictly
cash basis. No debts in the form of bonds or otherwise have
been ereated against the state for highway construction or
maintenance purposes. The highway department has operated
under a departmental budget and has confined its expendi
tures each year to the estimated income for that year. In
making its annual budget the highway commission has acted
carefully and conservatively and has been successful in lim
iting the department’s obligations to the actual income and
assets of the department. During the latter part of 1930,
the department borrhwed $200,000 from the Bank of North
Dakota to enable it to promptly pay all estimates due on
construction work, but this loan was made against cash ad
vances previously made by the state to the Federal Govern
ment in a sum in excess of the loan, which advances will be
returned to the state as a matter of course during the next
few weeks. Accordingly, the department begins the new
year in an entirely solvent condition and prepared to dis
charge all financial obligations now due against it.
While the Highway Department has so far avoided finan
cial difficulty, it is now confronted with a most serious
financial problem, which I wish to lay before you in a frank,
and I trust, clear manner.
As you may know, our Federal Highway System is being
constructed under a sort of a partnership arrangement with
the United States Government unde? the terms of which the
Federal Government provides 50% of the cost of construction
and the state 60%; the state’s portion thereof being shared by
the counties in which the work is done on the basis of one-half
by the state and one-half by the counties. The annual Federal
allowance for North Dakota for the past three years and until
July 1, 1930, wps $1,200,000. Under the provisions of a Federal
Aid Authorization Act passed Jmt Congress last spring, our
annual allotment was increasedTrom $1,200,000 to $2,000,000
beginning July 1, 1930. So far, however, our state has not
availed itself of any part of the additional SBOO,OOO authorized,
because of lack of State funds with which to match such Fed
eral allotment. In preparing our construction and mainten
ance budget for both 1929 and 1930, the department has had
available sufficient funds, v#iich, when matched by the coun
ties, enabled the state to use most of the Federal Aid allowed
on the basis of $1,200,000 annually, but owing to conditions
which have recently arisen, this program of Federal Highway
construction can no longer be carried on with state funds
unless additional highway revenues are provided by this
session of the legislature.
For the purpose of giving you definite information as to
the amount, source and disposition of State Highway reve
nues, I am setting forth herewith a summary of the High
way Department’s construction and maintenance budget for
the year of 1930 and also a similar summary of the budget
rscently adopted for the year 1931:
1930 Budget for Highway Construction and
Estimated Income, State Funds *
Auto license fees. State’s share.... $ 850^000
Gas taxes, State’s share 1,550,000
Miscellaneous receipts , \...... . 75,000
T*tal . .*52,475,000
> ■: ‘
Estimated Expenditures, State Funds
General road maintenance $1,160,263
Snow removal, equipment and labor 174,737
Preliminary and construction engineering 253,000
Balance available for new construction and
reconstruction in 1980 887,000
Total . .$2,475,000
In making the estimate of income for 1930, the department
anticipated an increase of about $150,000 in gasoline taxes
and motor vehicle fees above that collected in the previous
year. This estimate proved, to be too libera!, however, and
instead of an increase of highway revenues, the collections
for 1930 actually dropped more than $150,000 below those.of
1929. The net gasoline tax collections were $140,000 less,
and the motor vehicle fees (State’s share) were $12,600 less
than collections for 1929. In making its budget for 1931, the
department has used as a basis “the actual revenues received,
by the state in 1930 without any anticipated increase in our
gasoline tax payments or motor vehicle registrations. Under
present conditions and under the same laws we have no rea
son to expect any greater highway income in 1931 than we
received in 1930. Accordingly, the 1931 budget is as follows:
1931 Budget for Highway Construction and
. • Estimated Income, State Funds
Auto license fees, State’s share $ 795,000
Gasoline taxes, State’s share 1,270,000
Miscellaneous receipts 100,000
Total /. .$2,165,000
Estimated Expenditures, State Funds
General road maintenance $1,218,897.80
Snow removal, equipment and labor 214,000.00
Preliminary and construction engineering... 192,000*00
Amount required to complete unfinished
projects under contract 460,000.00
Amount available for reconstruction 80,102.20
Amount available for new .Federal Aid
contracts None •*
Total .$2,165,000.00
By comparing these two budgets, it will be observed, first,
that the estimated highway income for 1931 is $310,000 less
than that set up in the budget for the previous year; and,
second, that there is nearly SIOO,OOO more required for gen
eral highway maintenance and snow removal purposes in
1931 than in 1980, due to the fact that nearly 500 miles more
of improved roads have been added to the system requiring
The net result of the foregoing analysis is simply this:
while there will be ample state funds available in 1931, and,
perhaps, in 1932 under present revenue laws to adequately
maintain our present 4,710 miles of Federal highway system
and to complete the 762 miles of unfinished projects now un
der construction, there will be no state funds available for
any Federal Aid contracts for letting in 1931. This means
that in order to carry on the work of completing our Federal
highway system, we must either provide more highway
. revenues, or require the counties to furnish all the money
necessary to match Federal Aid allowances, or borrow from
the Federal Government under the Emergency Act recently
passed by Congress. ,
While state funds for new construction work have dimin
ished, the demand for hew highway construction is greater
than ever. On January 1, 1930, the department had on file
official requests from the several couhties for more than
2,500 miles of new grading and graveling; and even after
we have since completed 890 miles this last year, the depart
ment now has on file requests for more than 2,100 miles of
new highway construction for 1931. The demand of the
people for the early completion of the Federal highway sys
tem is overwhelming from all parts of the state, and the
highway commission has been subjected to a constant bar
rage of petitions, resolutions and delegations from at least -
40 counties in the state, all urging and pleading for a speed
ing up of highway construction work.
What is the remedy for this situation? Shall the state
discontinue highway construction, or shall it proceed to com
plete the,Federal system? lam sure that the people of
North Dakota desire that highway construction shall pro
ceed without interruption until the system is fully com
pleted. If this is to be done, how shall new construction
work be financed? If no additional state revenues are
available, no doubt many counties will furnish the entire
amount necessary to meet Federal Aid. Several western
counties have already issued bonds in order to speed up con
struction within these counties. Other counties have made
advances to the state detriment in the form of temporary
♦ loans during the past year in order to secure work on im
portant highway projects. Should the counties furnish all
the funds necessary to match Federal Aid, it would, no doubt,
resuß in a considerable share of the cost being placed on
real and personal property, which it not, in my opinion, the
most desirable method of financing highway work. In my
judgment, the proper way to solve the problem is to provide
for an increase in highway revenues on motor traffic en
tirely, and to that end I would advise the following legis
First: Raise the State gasoline tax by 1 cent per gallon,
the collection to go to the state highway construction fund
after deducting the usual refunds for gasoline used in tractors
and stationary engines./
Second: Provide a moderate increase in motor vehicle
registration fees.
Third: Correct, if possible, the defects in the present sys
tem of allowing refunds, in order to reduce the frauds that
it seems certain are being practiced against the state, and
thus save to the state a larger share of gasoline tax collec
In considering the foregoing suggestions, please bear in
mind that a gasoline tax is the only means by which we can
place a part of the cost of road construction and mainten- -
ance on foreign cars which now use our roads by the thou
sands each year, and it is the only tax which is levied and
paid in direct proportion to the use which the motor vehicle
operator makes of the highways. I would also have you
know that our present schedule of motor vehicle fees is the
lowest in the United States.
It would seem that a combination of the foregoing
tions, if enacted into law, would give the Highway Depart
ment at least an additional million dollars each year which
is necessary in order to match the Federal Aid in the sum
of $2,000,000 now annually available to North Dakota, and
it would enable the state to entirely complete our Federal sys
tem within four or five years as well as do some necessary
improved highway surfacing, including oil mix surfacing and
a limited amount of paving. In this connection, may I re
mind you that if the state does not use, within three years, the
Federal Aid allotted, it is forfeited, and the amount transferred
to the other states that are prepared to use it.
Federal Emergency Fund
Pending an increase in State Highway funds, we will be
able to with construction work by taking advantage
of the provisions of the new Federal appropriation adopted *
by Congress on December 20th. Under the terms of this
Act temporary advances will be made to any state that is
without funds sufficient to match Federal Aid, such advances
to be deducted later from subsequent Federal Aid allowances.
Under this law, North Dakota has been allotted the sum of
$1,298,000 which it may draw on under the conditions stated.
This emergency Federal assistance is only temporary and *
will not relieve the state of the necessity of providing other
funds to carry on construction after September 1, 1931. The
untimely destruction of the highway records by the recent
fire will make it very difficult for the department to use as
much of this Federal advance aa it otherwise might.
In making your study of our highway problem there will'
be available to you all the information and data in the pos
session of the Highway Department, and you are invited to
carefully scrutinize the present and past operations of the
department and to command the assistance and counsel of
the members of the highway department staff.
Farm Storage
The last session of the legislature adopted a farm storage
law under the provisions of which farm warehouse certifi
cates may be issued covering the storage of grain on the
farms under the inspection and seal of the state. Immediately
after the Act went into effect on July 1, 1929, a state farm
storage department was established at Fargo and it has
been in operation some eighteen months. During the crop
season of 1929 farm storage certificates were issued by this
department covering the storage of 1,646,018 bushels of grain
to 1,596 person*, ft is estimated, that Over a million dollars
was loaned to farmers on such farm storage certificates,
mostly by the Federal Intermediate Credit Bank through the
Farmers' Union Terminal Association and' other agricultural
corporations affiliated with or doing business through the
Federal Intermediate Credit Bank, and the remainder by local
banks and investment companies. So far in the crop season
of 1930, there have been issued farm warehouse certificates
for 607,159 bushels of grain to 635 persons. The demand for
thii class of storage was considerable last year, but not so
strong this year, due largely to the fact that the loan valne
of wheat has been so low that it is not worth while for farm
ers to borrow against it. It has been clearly demonstrated,
farm storage is workable, economical and safe,
and that in normal years it would be very helpful to those
farmers who desire to keep their grain in storage on their
farms ani at the same time borrow for current expenses up
to 70% of its market value. I believe that farm storage is
sound in principle and that its general use would aid in estab
lishing a more orderly marketing system in this state. The
inspection foe of one-half of one cent nor bushel has proven to
be adequate to pay the expenses of field inspection. With a
large volume of grain placed
such fees would entirely rnamtam «« depi«*■“[£ it nt0 j
To facilitate the operation of the law, l oeneve
to repeal the provisions requiring fire and Txs*>
insurance on farm-stored gram, some less msuwnce ana
some more insurance than perm j t loan companies
to make their own insurance requirements without statutory
regulations. stored Graill From Assessment
I would also recommend that all stored grain, whether stored
in elevators or on farms, be exempt from assessment and tax
atl°n’ Butter Substitutes and Dairying
At the present time dairying is the mainstay of agricultiire in
North Dakota. The dairy cow and a fair priceforbutterfat
is a financial life-line to our farmers, without which their
situation would undoubtedly be much worse. It is a matter of
vast importance to our agricultural welfare that e yery pro
tection possible be given to the dairy industry. Prices of dairy
products have slumped considerably during the past two years,
due in part to the increased use of butter substitutes, such as
oleomargarine and other similar products, throughout the
country. Every effort should be made to aid the National
Dairy Council, the State Dairy Department, the Agricultural
College, the several farm organizations and other agencies m
their campaign to increase the consumption of .butter and de
crease the use of butter substitutes as a means of protection to
this branch of the agricultural industry.
As a part of such program of protection, as well as a matter
of fairness in taxation, I recommend the adoption of a sales
tax on all oleomargarine and other butter substitutes sold in
North Dakota. Our dairy industry now carries a large share
of the cost of the state government, while the butter substitute
industry, being located wholly outside the state, contributes
nothing. This inequitable condition should be remedied at
Some of our state penal and charitable institutions have
heretofore used oleomargarine as a matter of economy and
maintenance. From the standpoint of economy, the practice
is undoubtedly justifiable, but as a matter of state policy it
is now a doubtful practice. Under the direction of the Board
of Administration, all state institutions have long since, dis
continued the use of butter substitutes, except the Penitentiary.
This institution cannot do so without incurring a considerable
increase in the cost of maintenance until butter-making equip
ment is provided to enable it to convert its cream production
into butter for institutional use. In order to do this, it will be
necessary for the legislature to provide an additional appro
priation in the Penitentiary budget in the amount of about
$1,200 for that purpose.
Bureau of Criminal Identification
The last session of the legislature authorized the establish
ment of a state bureau of criminal identification at the Peniten
tiary. This bureau has rendered excellent service in identify
ing criminals and thus aiding in their speedy apprehension.
The Superintendent in charge, who is a fingerprint expert, has
aided in the solution of several murders, robberies and other
crimes during the past year, and has established a very exten
sive and complete record of identification data relating to
criminals. It is apparent, however, that this bureau can not
function as it should unless and until it is given some general
police powers and has the service of two or three officers who
are experienced and efficient in the art of identifying and ap
prehending criminals. We must not forget that with the aid
of automobiles and improved highways, our state has become
the playground of the transient criminals of America who wan
der mto and through the state at will, committing rob
beries, burglaries and sometimes murders, as may suit their
fancy. This transient'triminal problem is one of the most ser
ious problems in our country today, the successful solution of
which challanges the ingenuity of our public officials. lam
satisfied that it can not be successfully solved except through
the co-operative and co-ordinate efforts of the police authori
ties of the several states. Such co-operative and co-ordinate
efforts can only be secured through central state agencies and
such agencies must have police powers. lam aware that an
addition to the staff of this bureau would increase the cost of
. maintenance of that department and I hesitate to burden the
general treasury even for this important purpose; accordingly,
to provide the necessary additional funds for this bureau, if
given enlarged powers, I would suggest that funds be trans
ferred from the fees collected by the Licensing Department of
the Attorney General’s office, which are now remitted to the
municipalities. These remittances amount to so little for each
of the 100 municipalities receiving them that they are of no
practical value as local police funds and in most cases are not
m fact used by the municipal authorities for that purpose. The
Attorney General joins me in this recommendation.
State Hail Insurance
I again call your attention to the operation of the State Hail
Insurance Law. At the last session of the legislature I rec
ommended a change in the crop listing features of the present
law so as to eliminate the compulsory requirements in coun
ties where a large majority of land owners regularly withdraw
their lands from state hail insurance, and substituting therefor
an optional system of listing in such counties. Bills designed
to enact this recommendation failed of passage. May I now
mvite your attention to the recommendations of the Insurance
Commissioner contained in his Annual Report of the Hail In
surance Department for the year of 1929, wherein an optional
system of crop listing is recommended for the whole state in
lieu of the present compulsory method, which recommenda
tion is made subject to certain conditions and limitations there
in set forth. It is the desire of the Insurance Commissioner to
adopt a system of operation which will substantially reduce the
loss now resulting from the nonpayment of hail indemnity
taxes on insured lands subject to mortgages or other prior
liens, home or the new features recommended by the Insur
ance Commissioner are not, in my opinion, practical, but many
of his suggestions are, I think, feasible, and if adopted would
both strengthen as well as facilitate the operation of the law. I
thoroughly sympathize with the desire of the Insurance Com
missioner to devise a method which will protect the fund from
the loss of hail indemnty premiums and from the burden of
carrying hail insurance upon certain lands free of cost to the
insured, which the present system permits. I believe that a
m , s 1 “ ra T nce Jaw can be evolved from the suggestions
contained in the Insurance Commissioner’s report.
Immediate Payment of Hail Insurance Claims
e There is another defect in the method of administering the
„ ura ®ce Law, that should, if possible, be remedied.
nde *be present system, hail insurance claims although filed
dar !r g the summer months, are not paid until the
following December. This delay causes the farmers who suf
metin^ 36 * m Ef h Inc ° n J« ni ence. and expense. I believe that a
method can be worked out whereby these claims can be naid
£3* “VS M allowad / The Hail Insurance Depart-
Ected h f?nm kUn*?® B®”* 8 ®”* ? me a BPrplus of ovet $4,000,000 col-
£ om hlc £ immedlate Payments of
„„ m y? Bß .! s c T ould wadily be made, if the law was changed to
K 1 rec °mmend such amendments to the Hail In
surance Law as will remedy this condition.
... „ Banking Laws
l r appointed a voluntary banking code corn
laws S th? ± a f rsred w ? th the duty of making a study of the
* e 8t^ te governing state banks, savings banks, trust
Co . m P anie8 > and building and loan associations,
„ tbe °l su S£ e stmg improvements in these laws.
W%?,°.r ,SS1 ° n J as d °ne considerable work bn this task and
a r *; port I shall transmit to you for your in
formation and consideration.
following E, ar i icularly t 0 urge your favorable action on the
following matters recommended by such commission:
. Building and Loan Associations
e , code commission has recommended the enactment of an
entireiy new code of laws governing the incorporation and on"
* building and loan associations. I respectfully com
mend this proposed new code to you. The existing laws relat
mg to this form of loan business, which has many features of
ba " k business » *re entirely inadequate and need sub
stantial revision as a protection to the investors.
General Revision of Banking Laws
i he code commission also advises a rather complete revision
eneral ® tatut ® B relating to the operation of state bank?
and the supervision thereof by the state. The proposed chanmfs
suggested are too numerous for detailed reference here A bill
85E5555». ,, “ • übmitted *• you for .
Banks and Agricultural Credit Corporations
, preßent .J an^ ln g facilities in the state are entirely inade
quate to provide the proper credit accommodations for those
farmers and ranchers who need credit for livestock 08 S
feeding purposes. Many local bariks do not K m?
capitarwith which to make suehUvitiSk Wm SKSftS*
legal limitations on banks ™eke it difficult a«!i 8 i?E d exw * ln £
impossible, for them to
countior livestock lons with othcr ffis or St
tions. Under these circumstances. I believe it ii orpor . a "
•Mo to (rut to .Uts buk. ths MthoriS to |ny“ t
W u h,C S. d L rect . bor s owin * involve ß* Every bank in *££3. i?.w k
should be placed in a condition to fairly car?
needs of its customers who are engaged u s ual
tion, and this method, would, I belSEbe hilJfWta

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