regular session it failed to vote the supplies necessary for the carrying on of the government as provided by law, the right to vote these supplies should be vested in the legislative council. The governor should have the modified veto power. The legislative council, to consist of Americans and Filipinos, should be created by appointment of the President. The popular assembly should not exceed 30 in number, to be elected from districts to be determined after a census of the islands.

We are aware that the power finally to withhold supplies is a most important legislative function, and that to modify it in the way suggested is not usual. But we think the modification very essential. A popular assembly elected from people never in the habit of of exercising any political power at all, in a country which has been exposed to the passions of war for so many years, is certain to have in it many members lacking altogether in that sense of responsibility for the operation of the government which must be present in each legislative branch in order to make certain that the government may live, and we ought not deliberately to form a government containing in it one branch which might, because of its passion and inexperience, be led into choking the government itself.

It will be observed that in respect to all other legislation except the voting of supplies this popular assembly would exercise the same power as any popular assembly in a similar government, and its vote would be indispensable to the passage of all laws but the budget. We believe that this system would satisfy the Filipino people, because it would give them an opportunity to take part in the government through an electorate, and it would form a place in which public discussion could be effectively had. Of course an absolute veto power, as in the case of the Territories, should be reserved to the President or Congress. What the Filipino people desire is a definite knowledge of the intention of Congress with respect to this country, and the passage of a law such as the one here indicated would place before them within a definite period the opportunity for that which they wish-a popular assembly. With definite knowledge of the time of its creation, they will be satisfied during the two years of the interval in which the government, but partly now established, may be rounded out and completed.

We respectfully urge that Congress be requested to confirm the legislation of the commission already enacted and vest by Congressional act in the civil governor and commission and their successors by appointment of the President the powers and authority heretofore exercised by them under the instructions of the President and subsequent modifications thereof, with the limitations therein contained, and that provision be made in such legislation for the popular assembly already described, to begin its life January, 1904.

We further recommend that by the act establishing the government

above recommended provision be made for the selection after January, 1904, by a joint vote of the popular assembly and the executive council of two delegates to represent the interests of these islands and the Filipino people before Congress and the Executive at Washington. Their expenses and salaries should be paid from the insular treasury. This is something which the Filipino people have very much at heart. We believe that such representation would be useful both to these islands and to the United States.

THE CIVIL SERVICE.

The civil-service law has been in operation since our last report, and we see no reason to change our conclusion as to the absolute necessity for its existence and strict enforcement. Without this law American government in these islands is, in our opinion, foredoomed to humiliating failure. Even if all its provisions are enforced, it is likely to be very difficult to secure and keep in the service honest, competent Americans who will enter into the spirit of the missionary task involved in the successful government of these islands.

Complaints have arisen on the part of Filipinos that they have not been given the same opportunity that Americans have had to secure places with equal salaries, and the complaint is true to this extent: The executive officers of the central government are almost all of them English-speaking officers, and a clerk to do efficient work should read, write, and speak English. Up to this time very few adult Filipinos have so thoroughly learned English as to be fluent enough to pass examinations for such positions; but the heads of bureaus, under instructions from the commission, are gradually working Filipinos into place, and the Filipinos are gradually picking up English. The Filipinos are, as a rule, beautiful penmen, but they lack accuracy and close attention. It is the opinion of competent judges, however, that each year will see a larger proportion of Filipinos in the higher positions and that this complaint against the operation of the law will be seen to have its basis in temporary conditions only.

There are no Filipino stenographers, and we find great difficulty in securing a sufficient number of stenographers among the Americans. We have been obliged to send to the United States a number of times for clerks of this class, and still all the departments of this rapidly expanding government are complaining of the dearth of those most important aids to the rapid transaction of business.

The civil-service board, whose report is hereto appended as Appendix E, is now at our suggestion taking steps to classify the school-teachers already appointed with a view to amending the law so as to bring that large class within the restrictions of the civil-service law and to require that future appointments shall only be made after examinations. The

report of the board shows the extent of its activities and the very many useful purposes it serves in the preparation of legislation upon the question of employees and salaries as well as in its usual fields of examinations, classification, certifications, and rules.

FIDELITY BONDS.

The commission has found difficulty in the matter of securing proper and sufficient bonds for those of its civil servants who are intrusted with the collection, custody, and disbursement of money. Under the military régime it was deemed sufficient security that an officer was subject to military discipline for any malversation of funds, and no bond was required. This made it necessary that every position of money responsibility should be filled by an army officer. After the 1st of July, 1901, when the volunteer officers were mustered out, some other provision had to be made. It was impossible, of course, for Americans to secure personal indemnity in the islands. In the fall of 1900 letters were written to all the fidelity companies in the United States inviting them to send agents to the Philippine Islands for the purpose of bonding government employees. Answers were received from nearly all of them declining to extend their business to these islands. Finally, through the assistance of your Department, one company, the Union Surety and Guaranty Company, was induced to send an agent to Manila, who reached here in May of this year, and an arrangement was made between the company and the government by which at quite high rates-1 per cent for all bonds of $6,000 or over, 1 per cent for all bonds of $3,000 to $6,000, and 2 per cent for all bonds under $3,000-all the employees of the government required by law to give bonds, secured them. In order to reduce the cost of the insurance to the employees, the government pays three-fourths of the expense. It is hoped that the result of the year's business will show that the checks are sufficient not to make the risk so great as the company anticipated and that competition will be introduced, so that a lower rate may be obtained. Indeed, the American Surety Company has now sent an agent to the islands. It was absolutely necessary, however, that some arrangement of this kind should be made on July 1 last, even at the high rates mentioned.

FRIARS' LANDS.

The commission renews its recommendations of last year that it be given authority to issue bonds with which to buy up the agricultural holdings and other property of the religious orders. Now that peace is being restored and civil courts are exercising ordinary jurisdiction, the necessity for removing this firebrand from the important provinces of Cavite, Laguna, Rizal, Bulacan, and Bataan can not be overstated. Under the military régime it was entirely possible by military order

for military reasons to forbid the owners of these lands from attempting either to collect their rents or to oust their tenants; but now no such arbitrary remedy is available, and the only course which is feasible is the one suggested. The commission believes itself in a position to say that there is a willingness on the part of those who have control of this matter for the religious orders to negotiate and part with all the land to the Government at reasonable prices. As it has already stated in its former report, the commission believes that the transfer of the property and its sale in small holdings to the present tenants, on long payments, might be effected without loss, and that this solution would be very satisfactory to all the people. The commission should be authorized, in case its view of the matter is approved, to issue bonds in an amount sufficient to buy the lands, and should be required to hold the proceeds of the sales of such lands as a sinking fund to meet the obligations of the bonds. We earnestly recommend this course. The matter is a pressing one, for the action of the courts in enforcing legal decrees in favor of the real owners of the land against the tenants will be a constant source of irritation, riot, and lawlessness in the provinces where the land is, and this will lead to distrust and uneasiness everywhere.

The acreage, as stated in our last report, of the land owned by friars in the provinces where the population is dense and the question is a heated one, is: Cavite, 121,747 acres; Laguna, 62,172 acres; Manila Province (now Rizal), 50,145 acres; Bulacan, 39,441 acres; Cebu, 16,413 acres; Morong (now Rizal), 4,940 acres; Bataan, 1,000 acresupward of 300,000 acres. In addition to this there are something more than 100,000 acres, one-half in Isabela and one-half in Mindoro, in regions sparsely settled, the ownership of which by the friars does not involve so much popular resentment because of their remoteness.

SAN JOSE COLLEGE CASE.

Since our last report the commission announced its conclusion in the San Jose College controversy. It decided that there was between the Catholic Church on the one hand and the petitioners representing the Filipino public on the other a controversy concerning the legal control of the trust involving sufficiently serious questions of law to submit the case to a competent tribunal. The commission was careful not to express any view on the merits. To put the case in way of settlement, the commission passed a law appointing a board to represent the interests of the Filipino people, in the name of the United States, and to bring suit in the supreme court of the islands against the archbishop of Manila and the friar in immediate control of the estate of the college. The act fixed the procedure and postponed the time within which the judgment in the supreme court of the islands should be final to the end of the term of the present Congress, in order that

provision might be made, if deemed wise, for an appeal to the Supreme Court of the United States. It seems to us that such an appeal ought to be provided for. The importance of the cause may be understood from the opinion of the commission in disposing of it, reported in the second quarter's volume of the commission laws. The suit has been brought and is now pending before the supreme court, and will be heard within the next three months.

As stated in our former report, there are other controversies likely to be brought into the courts of the islands between the Catholic Church and the insular government in respect to the title to and the administration of trust or other property. The intimate association between the Spanish Government and the Catholic Church and the difficulty of separating what is civil and what is church property is so great and presents questions of such delicacy from a political standpoint that we recommend that in all such cases an appeal be granted from the supreme court of the islands to the Supreme Court of the United States.

TAXATION.

In the plan of the commission the central government must depend mainly on import and export duties for its support. The internal taxes of whatever character are principally to be devoted to the support of the provincial and municipal governments. In pursuance of this purpose, whenever a provincial government is organized, one-half of the internal-revenue receipts, i. e., the industrial, urbana, and stamp taxes, since January, 1901, is turned over to the provincial treasury, and the remaining one-half is turned over to the municipalities of the province. A cedula or poll tax of $1 Mexican is levied upon each male person between the ages of 18 and 55, and one-half the proceeds is paid into the treasury of the town in which he lives and one-half into the provincial treasury. In addition, the municipal council has power to license saloons and other businesses requiring police supervision and mentioned in the municipal code. During the spring of 1902 will be collected for the first time an ad valorem land tax for the benefit of the provincial and municipal governments. The provincial board is required to levy one-eighth of 1 per cent on the assessable land of the province for roads and bridges and may levy two-eighths more for general purposes. The municipal council is required to levy one-fourth of 1 per cent for schools and may levy one-fourth of 1 per cent more for general purposes. We have not sufficient data at hand to say how much revenue these sources are likely to afford, but so far as we have been able to judge we think the provinces and towns will be self-supporting. If a deficiency should arise, it can be met by an increase of the land tax, which as at present provided is very small.