I take pleasure in emphasizing the fact that the excess of money used has gone for charities and education, since the presentation of it forcibly directs your attention to those two subjects, which are now become, financially considered, the most important you will have to deal with.

Annual average total expenditures during the past three years_.
Annual average total expenditures during the five preceding years.

Increased average under present administration

Annual average expenditures for charities during the past three years.
Annual average expenditures for charities during the five preceding years..
Increased average under present administration.

$4,244,038 00

3,633,902 00

$610,136 00

$623,362 00

433,817 00

$189,545 00

Annual average expenditures for educational purposes during the past three

years.

$1,783,948 00

Annual average expenditures for educational purposes during the five preceding

years.

1,380,628 00

Increased average under present administration.--

$403,320 00

Financial legislation to be sound must of necessity be progressive. It always has been and always will be necessary to alter and amend statutes relating to revenue and expenditure, to wisely meet the changed conditions developed each succeeding year. The best informed legislator usually stops short of prophecy in devising a law, especially when attempting to forecast the final results of a complete or a partial system of revenue. Nothing of greater importance will demand your attention and deliberate consideration than the questions relating to the public exchequer. Some of the existing laws require to be altered to properly fit changed circumstances. Others should, perhaps, be repealed, and new ones enacted. In the various reports submitted for your information, you will find clearly set forth all the facts necessary to guide you to conclusions, and I respectfully refer you to them for elaborate details.

The recommendation that the Act of February 2, 1872, be so amended that the State Board of Examiners may be enabled to properly invest money which must otherwise lie idle in the treasury, meets with my approval.

The Act to promote drainage, approved April 23, 1880, became a law in response to an almost universal demand from the people of the mountains engaged in placer mining; and also from the farmers in the valleys affected by the flow of detritus, who realized something must be done to protect their homes from ruin, was declared invalid by the Supreme Court in the following year. The report of the Controller reviews the matter fully, and supplies all the data necessary to determine what legislation is needed to protect the financial interests of the State, and at the same time preserve her good faith.

Of the outstanding bonds of the State, only six hundred and thirteen thousand dollars are in private hands. Deducting ninety-five thousand five hundred dollars of Soldiers' Relief Bonds, payable on the first of July next and already provided for by taxation, and, deducting also the nine thousand five hundred dollars called in, there remains virtually only five hundred and eight thousand dollars of

our public debt held by individuals. There is now in the treasury two hundred and ninety-seven thousand dollars applicable to investment in it, and within a few months there will be about four hundred thousand dollars. Since, therefore, it would be necessary to raise by taxation only about one hundred thousand dollars in order to totally extinguish all of the State debt that she does not herself own and control, and because it would provide for the investment of a large sum now lying idle, and would thus create additional revenue for school purposes, I recommend the levying of such tax, and the early payment of such outsideindebtedness.

The proposition to substitute for the bonds now held in trust for the University and School Funds, new bonds bearing interest at the rate of four per cent per annum, is a sound financial one. It would save to the State more than fifty thousand dollars of interest annually, and to that extent would substitute direct for indirect taxation for the purposes of education; and the privilege would remain. of abrogating such tax entirely if increased values of taxable property should warrant such economy. It would keep inviolate the good faith of the State in applying properly the proceeds of the bounty of the General Government; would give legislators somewhat wider latitude for discretion in taxation, and taxpayers clearer knowledge of exactly what they are taxed for.

The cost of collecting the State revenue is altogether too great. The prevailing system-or rather the want of one-in the various counties, is unjust to the State. Under the provisions of Section 25 of Article IV of the Constitution, a general law should be enacted, applicable alike to all the counties. The suggestion that percentage be paid to them, upon a fixed scale, on the gross amount of State revenue collected, is a good one. In practice it would prove an economical one.

The subject of delinquent taxes-individual as well as corporateis become a very interesting one, and presents a grave question for consideration. I trust that you will give it that full attention which it demands, and that your deliberations will result in an earnest effort to protect those who do pay taxes against the rank injustice of those who do not. The report of the Controller clearly sets forth the existing state of affairs, and is especially elaborate in regard to railroad corporations that have refused, upon alleged legal grounds, to pay the taxes levied upon them. It is worthy of careful perusal. Pending a decision in the Supreme Court of the United States involving practically the question as to whether corporations are obliged to pay any taxes, if they elect not to, which decision will probably be made before your deliberations are closed, it does not appear to be proper that I should here set forth my views upon the question.

I respectfully desire to recommend that you administer a rebuke to the majority of your predecessors, and set a good example to all who will succeed you, by directing the levy of such a rate of tax as will certainly produce revenue sufficient to fully meet all the appropriations you may in your wisdom decide to make.

It has been the common custom for our Legislatures to base appropriations upon business principles and the tax levy upon political interests. The inevitable resulting difference it has been always necessary to reconcile by means of deficiency bills. A false surface

showing of economy is thus made, the real burden is shifted temporarily, and the labor of legislation is greatly increased without the diminution, but on the contrary, with the enhancement of taxation. The fact appears to my mind to constitute a substantial wrong to the taxpayers.

I entered upon the duties of my office with deficiency bills amounting to something more than two hundred and eighteen thousand dollars. A part of this sum was for increase in salaries of Judiciary, expense of Railroad Commission and Board of Equalization, that were created by the new Constitution, and commenced life the middle of the fiscal year. The Legislature of 1880 appropriated four hundred and fourteen thousand dollars more than it levied a tax to raise. Hence resulted the tax levy for 1881 of 65.5 cents as against that for 1880 of only fifty-nine cents. The last Legislature paid all of these accumulated debts, there was a falling off in the assessed value of property of fifty-one millions of dollars, and yet as the result of prudent economy in outlay, the tax levy for 1882 was. reduced to 59.6 cents; and to-day our public buildings are all in a most excellent state of preservation; and one of our prisons almost placed upon a self-sustaining basis. I believe it quite possible in future to reduce our tax for State purposes to fifty cents on the one hundred dollars.

It is exceedingly gratifying to be able to state that during the past two years we have not expended the full amount appropriated by the Legislature. It is also worthy of note that the Board of Prison Directors have returned to the State treasury twenty-five thousand dollars, from the amount appropriated for permanent improvements in that institution; and the Board of Trustees of the State Asylum for the Insane at Stockton have returned one thousand dollars, from the appropriation for the erection of a new building, and the Board of Directors of State Normal School at San Jose, have returned a like amount from the appropriation for which they have constructed a magnificent edifice. Thus it is seen that in the three State institutions. named, the Trustees appointed to manage them have so carefully guarded their trust that they have been enabled to return twenty-seven thousand dollars to the State treasury. I have been unable to find a similar record in the fiscal history of our State. It has been my aim to avoid leaving to my successor in office any deficiency bills to meet, and I have succeeded so well that I advert to the record with pleasure and pride.

SURVEYOR-GENERAL.

The report of this officer is well deserving your attention. The land system of our State, if, indeed, system it may be called, seems to have been adopted for the purpose of creating confusion and producing trouble. Whatever may have been the motives of the passage of laws so contradictory in their nature, so full of ambiguities, perplexing and expensive, it is difficult to state. They certainly demand a strict revision, and the recommendations of the Surveyor-General, with his reasons therefor, I strongly urge upon your consideration. Especially would I suggest an examination and review of the laws for the foreclosure of delinquent interests upon State lands sold upon credit. The law as it now stands is open to fraud and injustice, made even more so by the difficulties which

interpose to prevent a proper understanding of the cases when presented for final adjustment to the Surveyor-General and Board of Examiners.

In his report of 1880, the Surveyor-General, referring to his duties as Register of the State Land Office, expresses the opinion that "the expensive legal proceedings now attending the foreclosure of suits, initiated because of non-payment of the annual interest due on the sale of State lands, demands some attention." He refers to the fact that during the last twelve years the Register had sent out but three lists of delinquents because it generally resulted in more loss than income to the School Fund. He recommended a change of the law so as to require the issuing of the list once in four years instead of yearly as at present.

There are other reasons why this system should be changed. When, under these proceedings, a decree of annulment is obtained and filed in the State Land Office, the land becomes subject to reentry, and the Surveyor-General must receive, file, and approve applications to locate and purchase it. After approval a second purchaser may make payment, and go on to improve the land, build, and make a home. When it has become valuable the holder of the first certificate may show some error or omission in the proceedings by which it was annulled, have that annulment set aside, and the holder of the second certificate may find it worthless. That they are often so set aside is certainly true, and it is known that second purchasers have in some cases suffered severely.

The Act of 1881, giving the purchaser a right of redemption for twelve months, after the date of filing decrees of annulment in the State Land Office, will no doubt operate as a check to relocation to a certain extent, but the twelve months expired, and the time for redemption past, the old condition would again exist.

A disagreement between the State and the United States Land Office, resulted in the Secretary of the Interior declining to permit the further listing of lands. This necessitated the preparation of a statement of the lands hitherto listed, armed with which the Surveyor-General visited Washington and made a careful comparison with the records on file there. An amicable adjustment was made and a proper understanding between the departments is now settled and agreed on.

NATIONAL GUARD.

The report of the Adjutant-General shows in detail the condition of our State militia. This office has been conducted in a capable and efficient manner. Its expenses have been kept within the limits of its appropriation, and the books, papers, and correspondence thereof will bear the closest inspection.

The recommendations made therein, if adopted, would enhance the value and importance of the National Guard and place it on a footing alike creditable and serviceable to the State.

UNIVERSITY OF CALIFORNIA.

In my former message I expressed at length my views as to this institution of learning. The report of the Board of Regents, through their Secretary, gives a full account of its management. Your attention is invited to several recommendations made therein, the adoption of which are deemed absolutely essential.

Fifty-seven thousand eight hundred dollars is the appropriation asked for the ensuing two years; thirty thousand of which is needed to preserve State property from deterioration and destruction, and to continue its agricultural experiments. These experiments have been of very great value to the State, adding largely to its agricultural wealth, and those now in progress will be of still greater value. The remainder asked for relates to the efficiency of the several departments that have a direct bearing upon many industries of the State. The laws authorizing the purchase of bonds and transfer of funds from the General Fund, for the use of the University, are conflicting in their character and productive of serious trouble between the officers empowered to enforce them; and it becomes difficult in the adjudication of business to give a satisfactory interpretation of the statutes thereon. Separate views are entertained by each officer as to their intent and meaning, and, as a result, no one is satisfied with the conclusions arrived at.

This condition of affairs demands your investigation.

ATTORNEY-GENERAL.

The usual report of this officer has been generally devoted to a detailed statement of the number of criminal cases disposed of and the expenses attending them. The new Constitution, in its interpretation, has demanded so many changes in the administration of law that opinions involved in its construction have been asked for from numerous officials, which has added more than the usual labors devolving on the office. A suit of vital importance to the interests of the State, involving the power of the Board of Equalization to assess railroad corporations, has been, by the energy and persistency of the Attorney-General, carried from Court to Court, with successful issue to the people, until it has at last reached the highest judicial tribunal of the nation, the Supreme Court of the United States, where it has been recently argued, and is now submitted for final decision. The report contains an able review of the case, and your attention is respectfully thereto directed. The suggestions for legislative action made in this report seem to be wise and judicious, and their approval by you would aid the administration of justice.

STATE BOARD OF EQUALIZATION.

The report of the State Board of Equalization may well demand your attention. That body was provided for under the Constitution for the purpose, in part, of effecting an equalization of the assessment of the property in the State. From the report of the Board it would appear that it has not been able, through defects in the law, and decisions of the Supreme Court, in raising the assessment of the State to the true standard of value in money. Thus, while exclusive of railroads, the assessment of 1880 exceeded that of 1879 in the sum of one hundred and three millions sixty-eight thousand six hundred and forty-two dollars, the assessment of 1881 and 1882 did not increase in the proportion which was expected from the known progress of the State in material wealth and industrial pursuits. The assessment of 1881 was below that of 1880, thirty-six million two hundred and seventy-eight thousand five hundred and forty-one dollars. The