payers might file a petition with the county auditor who could convene the county council, and that body could review the levies, but in only two counties of the state was this provision of the law taken advantage of by taxpayers.

The first year under the new law there was an increase of between seven and eight millions of dollars, and most of that went to schools, but the next year there was an increase of $36,000,000 over the preceding year as the result of no check. The tax commission then went to the next legislature and reported what the effects of home rule" were. Although the governor had different ideas in the first place, when he saw the effect he was man enough and big enough to rise and take control of the matter and to see that there was some check placed again.

As to the check we have now in Indiana; we have absolutely no control over levies, unless ten or more taxpayers file a pet.tion with the county auditor, and the provision is that we have a hearing in the locality, and there is the same provision in reference to bond issues. In 1921-the first year that it went in effect-we had forty-six petitions for the review of tax levies. Out of those forty-six, we reduced forty-two. I don't know how many we will have this year, but I think that we will have a great many more, They have until the fourth Monday in September to file their p titions. The law requires the officers to publish a budget and the taxpayers are invited to appear the first week in September, when the taxing officers fix the levies. They have the right to object to any items in the budget, and if the local taxing officials don't cut down the budget to where the taxpayer thinks it ought to be, he has a right to appeal to the state board of review, and the decision of the state board is final.

I believe from a legal standpoint, although the state supreme court held that the state board's right to review bond issues was legal and was constitutional, that there was possibly some question as to whether our right to interfere with local tax levies did not interfere with the right of local self-government, but as we now have it, the law provides that the local taxpayers themselves initiate the machinery that gives us jurisdiction over these levies. We have no right to increase the levies; our only right is to approve or reduce them.

Judge Hough cited one or two instances of saving that were made on account of the power of the board over bond issues. He might have mentioned more. In one southern county they wanted to build a court house in 1919-the first year we had that provision for approving bond issues-and a petition was filed early in the year 1920. They had asked for $250,000 for the new court house. The hearing was held at Petersburg, and after a hearing we felt that $250,000 was more than that county-seat ought to have for a

court house, and we disapproved the bond issue. In our finding we said the amount was excessive, and a petition for rehearing was granted. They asked us then to modify the amount, and we granted $150,000 for the new court house. Before they let the contract, the legislature had taken the power away from the board, and the commissioners down there thought that there was no longer any check on them, and they let the contract, but instead of letting the contract for the building of a new court house within the amount of $150,000, they let a contract for the building of a onestory building, with a temporary roof, for $150,000, but before they could adopt a resolution for the next bond issue, the legislature had again given the state board power, on complaint of ten taxpayers, to interfere, and the matter came before us again, and when it came up again the one-story building was there. We could not then say that they could not have any more than $150,000, because they had begun the building and had spent $150,000 for the building with a temporary roof on it. When we investigated, we found that contracts had been let for the completion of the whole building, amounting to $417,000. We sent for the architect and the contractor, and told them that possibly the doors of the penitentiary ought to be open to somebody; we told those men that the thing had to be modified. They could not reduce the size of the building, because there was one story there, but they had to remove some of the frills and some of the marble schemes, and some of the useless things they had in there, and they finally completed the court house, without reducing the size of it, for $260,000 instead of $417,000. Of course, the contractor may not have liked that kind of supervision or that kind of control in some central board.

Mr. Hough had under his control in Marion County the building of a school house. They had advertised for bids, and had received a bid amounting to $182,800. That was the lowest bid. Mr. Hough sent for the architect and the trustee and said that the board would never grant that. We had an engineer on our staff who had gone over the plans and specifications and he had informed us what he thought the amount ought to be, and we told the architect that we would not approve an amount of that kind. The architect was the same one who had the control of that court house down in Pike County, and I suppose he knew that we meant what we said, and he got busy, and without changing the plans, without doing anything, except to get honest, that contract for the school house was let for $115,000 and we approved bonds for that amount. Invariably now, when applications are made to our board for bond issues. when we finally have had a hearing and feel that a bond issue ought to be granted, we tell the authorities to re-advertise and receive bids, and that if they receive the right kind of bids, we will

approve the bonds. That one check; that one control, has saved millions of dollars in the state of Indiana. I think I have talked over my time, but that is the way we handle these matters in our state.

My own political party is going back to some of the errors it made before, and is advocating in its platform a referendum and a limit on the tax rate-the very thing that experts have told us not to place in there; you know what a referendum means.

We had an election on a constitutional amendment for an income tax and for the classification of property, and only fifteen per cent of the voters in the whole state of Indiana participated in that important election; and then you tell me you are going to settle these things at a referendum! You know what will happen. The contractors and the fellows that want to put something over will get enough of their hirelings to help carry an election, and only ten per cent of the people may take part in the election, and then what will happen? They will have had the cost of the election; the cost of campaigning and everything, and the people will pay the bill.

CHAIRMAN HAGERMAN: I am sure the conference would like to hear from Mr. Fernald.

CHARLES J. TOBIN: May I be permitted to make a statement for the record at this point? The conference yesterday was kind enough to say that I might submit and make a part of the record further reference to the issue of bank taxation. I have gone over that in my mind and I fear that that may be a wrong procedure to follow, and while I appreciate very much the kindness and consideration shown me yesterday, when I wished to discuss this particular issue, I prefer to conform to the usual rules and keep to the program, and shall be satisfied to take the usual rephrasing of the remarks I made yesterday, as other speakers are required to do. The only exception I should like to make to that would be to be sure that there will be included the conclusions of the Davenport committee referred to by myself and Professor Haig and Senator Law yesterday. I should like to be certain that those two paragraphs as to the conclusions of the New York committee are included, and with that I shall be content. I appreciate the spirit which was shown yesterday, and yet I want to conform to the usual procedure.

C. P. LINK: This report was partially read yesterday or sketched by the gentleman. Most of us have copies of it, therefore I move you that this privilege be granted, that those parts of the report desired be printed.

C. J. TOBIN: I just wanted to make sure that the things Senator Law and Professor Haig referred to are included.

MR. H. B. FERNALD: What I am going to say is based largely on my experience with the state budget in New Jersey. We have, for five or six years, been working on budgets in that state. We have had the increased demand for expenditures. We have had the in crease in expenditures. In the five years that I have been in this work, acting as adviser to the governor, attending the four legislative committees, I only remember one case where anyone appeared at a hearing before the governor or at a hearing before the appropriation committee to object to an increased appropriation, and that one man was the owner of a building which was to be affected, if a larger appropriation was granted for better chambers for the court; he was the only man who appeared to object to the increased appropriation, and then only because it affected his personal interest. Every other person who has appeared before either the governor or the legislature, with reference to appropriations — or woman either-has come there with a request for increased appropriations or with a request that appropriations be not reduced. Can we wonder at the constant increase in governmental expenditure under those conditions?

We had the other day some rather warm discussion of this question of extravagance. I don't think we can speak correctly on the question of whether our governments are extravagant, unless we recognize clearly what we mean by extravagance. I may spend on my personal affairs $10,000 a year, and I may see that everything I spend it for I bargain carefully about; that I feel I get value received for each dollar I spend; but yet perhaps if I just cut out a lot I might spend, perhaps without such careful attention to details, only $5,000 a year. Which is the more extravagant, some ill-considered expenditures which only run to a total of $5.000.00 or careful expenditures which run to a total of $10,000? The big question with me personally is, have I the money to spend? If my income is such that I can spend $10,000 on my own affairs, and not reduce my wealth, and go ahead and pile up something as well, for the future, year after year, I don't think that I am doing wrong. If I am only making $6,000, it is plain foolish extravagance for me to go ahead and spend ten. I think that is the condition with our states and our towns.

We go back a few years and the tax burden was not a serious item. We had enough resources, so that if we needed more money we could reach out and place an additional tax on some class. If we put on a tax and it worked hard on one class, we could readily shift it to another. We could put in tax laws that had many imperfections, but they did not weigh heavily on anyone because the rates were low. Those same laws which were not burdensome at low rates, when the rates were made high, produced glaring inequalities; gross unfairness. That is the situation we are in. When

I looked over this program and saw we had ten sessions devoted to raising revenue and one session devoted to the limitation of expenditures, I thought that pretty nearly reflected the popular view, but I was very glad to find right at the first that we started in with the recognition of the necessity of reduction of expenditures if we are going to solve the tax problem. We do need this recognition, and I think that in this body unusual recognition is given to the need for reduction; but so many people, in considering the matter, say, "Yes, we ought to; we ought to; but we cannot; we must progress, we must continue to spend this money."

Now, I want to divide this matter of the limitation of expenditures into two general divisions; one a direct legal limitation, the other an indirect and, what I might call, natural limitation. We follow to a large degree this natural tendency of our people. If anything isn't right, pass a law; if expenditure is running too fast, pass a law and limit it. It is well to pass laws when they are necessary, but do not, in trying to do that, ignore the many natural limitations we have. Those are the things we have been relying on largely in the state of New Jersey. We do have certain limitations, which arise through the separate funds we have, and I am a great believer in that principle. We have a road fund; we have our school fund; we have one or two special funds, such as fish and game. Fish and game licenses go to the fish and game fund, to meet those expenditures.

We all know it is an easy thing to go to the people and say we must spend more money for our schools; we must increase our tax rate; but if we stop to think, we know that if we increase our tax rate for schools, that money goes into the general pot and is a reserve which can be drawn on for general expenditures. When drawn there are more needs for schools or more needs for roads, and again the new tax is for roads or schools.

I am satisfied that we must keep our expenditures as closely identified as possible with the subjects of taxation on which they are to be made. I am also satisfied that we must keep our sources of taxation just as close as we can to our control of expenditures. ì think we have made a mistake in the continual shifting from town to county, from county to state, and from state to the federal government, all with the idea that the town gets something that it does not pay for; that the county gets something it does not pay for, but that somebody else pays for. Somebody does pay for it. I think separate funds, with a clear understanding of what they are, and what they are intended for, will accomplish a great deal in limitations.

Another thing is publicity. We need more frankness with our taxpayers as to where the money comes from and how it goes. We often find citizens interested, in the state, trying to get infor