cutive for the maximum amount to be appropriated for the conduct of the state government, with a legislative check upon the executive to see that appropriations are kept within a reasonable maximum, and that the appropriations once made are properly expended. For the task of the legislature, a detailed auditing machinery within the legislative department is not needed, but accounts of all expenditures should be kept in such a manner that the general assembly when it convenes may receive a relatively brief and clear report of what has actually been done. The legislative committees may then investigate any points which, upon the basis of such a report, seem to require attention.

The budget difficulties in Illinois are now largely due to details in the constitution of 1870. The vesting in the governor of a purely negative share in the financial policy of the state through the veto, has not worked satisfactorily, and a long step has been taken toward vesting in the governor a positive responsibility in connection with the cost of the state government. Whether a greater share of responsibility shall be vested in the governor with respect to financial policy depends primarily upon the form of executive organization to be adopted. At present the governor controls the estimate of expenses and the actual expenditure of funds for the greater part of the state administration; and the general assembly through its appropriation committees are able for that part of the administration to obtain detailed statements much more readily than for the portion of the administration not under the governor's control. The question as to whether there shall be a greater or a less degree of executive control by the governor is one for the constitutional convention. Aside from this the main problem is that of removing some limitations which are now in the constitution with respect to financial policy.

IX. CONSTITUTIONAL RESTRICTIONS ON

PUBLIC DEBT

State Debt in Illinois. The first constitution of Illinois, like other constitutions of the time, contained no restrictions on the borrowing power of the General Assembly. During the early years of state government financial transactions were on a small scale; and while at times there were small deficits, and a loan of $100,000 was made to cover losses connected with the first state bank, no serious difficulties developed. But after 1835, the state entered into extensive banking, canal and internal improvement schemes, for which large loans were made; and following the financial crisis there came a break down in state credit in 1842. The total state debt at that time has been estimated at a minimum of $15,000,000 and a maximum of $20,000,000, or from 20 to nearly 30 per cent of the assessed valuation of taxable property ($72,000,000). Some efforts were made to meet this situation by the General Assembly; but the problem remained to be faced by the constitutional convention of 1847.

In the constitution of 1848, provision was made for an annual two mill tax for the state debt; and a series of restrictions were imposed on incurring further debt. To meet casual deficits or failures in revenue, $50,000 might be borrowed; but

"No other debt, except for the purpose of repelling invasion, suppressing insurrection, or defending the state in war (for payment of which the faith of the state shall be pledged) shall be contracted, unless the law authorizing the same shall, at a general election, have received a majority of all the votes cast for members of the General Assembly at such election."

The General Assembly was also required to provide for publishing the law, and to make provision for the payment of interest by a tax or from other sources of revenue; and the tax law must be submitted to the people with the law authorizing the debt.

The loan of state credit in aid of private enterprises was also prohibited.

Under these provisions, the state debt was largely paid off within twenty years, and substantially no additional state debt was incurred. By 1870, the state debt was only $4,890,937, or barely one per cent of the assessed valuation of property. The debt was further reduced to $1,446,666 in 1880-most of this consisting of amounts due to educational trust funds.

In the constitution of 1870, the provisions in the constitution of 1848 as to state debt were repeated (as section 18 of Article IV), with

an increase in the debt allowed to meet casual deficits from $50,000 to $250,000. Attention should also be called to the fact that Article IV, Section 18 lays down a rule that appropriations shall not exceed the amount of revenue authorized to be raised. Comment upon the operation of this provision will be found on page 276 of this pamphlet.

A constitutional amendment to separate section 3, adopted in 1908, authorized the issue of state bonds, not to exceed $20,000,000 for the construction of a deep waterway from Lockport to Utica.

In 1918, a state bond issue of $60,000,000 was authorized by popular vote, for the construction of a system of state roads, interest and principal to be paid from license fees on motor vehicles.

In 1916, the gross state debt of Illinois was $7,220,869, a large part of which was outstanding warrants, representing a temporary deficit, and covered by taxes for that year. The net debt was $2,066,920. In 1918, the gross state debt was $3,996,852, of which $1,939,932 was for outstanding warrants and other current obligations. The net debt was $2,056,920, to educational trust funds. The bonds recently authorized have not yet been issued.

Municipal Debts in Illinois. While the state debt had become unimportant by 1870, municipal debts had increased rapidly, especially during the preceding decade, by grants of aid for the construction of railroads. In 1870, the aggregate of municipal debts in Illinois amounted to $37,300,933, which was somewhat more than 72 per cent of the assessed valuation of property in the state, though less than 2 per cent of the estimated true value of property. In several counties the local debts amounted to more than 10 per cent of the assessed valuation of property; and in two counties (Cook and Macoupin) to more than 20 per cent.

After extended discussion in the convention, the constitution of 1870 placed a series of restrictions on municipal debt, in Section 12 of Article IX and another section separately submitted and adopted. These provide as follows:

"Section 12. No county, city, township, school district, or other municipal corporation, shall be allowed to become indebted in any manner or for any purpose, to an amount, including existing indebtedness in the aggregate exceeding five per centum on the value of the taxable property therein, to be ascertained by the last assessment for state and county taxes, previous to the incurring of such indebtedness. Any county, city, school district, or other municipal corporation, incurring any indebtedness as aforesaid, shall before, or at any time of doing so, provide for the collection of a direct annual tax sufficient to pay the interest on such debt as it falls due, and also to pay and discharge the the principal thereof within twenty years from the time of contracting the same. This section shall not be construed to prevent any county, city. township, school district, or other municipal corporation, from issuing their bonds in compliance with any vote of the people which may have been had prior to the adoption of this constitution in pursuance of any law providing therefor."

The separate section prohibited municipalities from subscribing to stock or loaning their credit to any railroad or private corporation, unless authorized under existing laws by a vote of the people of such municipalities prior to the adoption of this article.

A constitutional amendment, adopted in 1890, adding a new section (13) to Article IX, authorized the City of Chicago to issue not to exceed $5,000,000 in bonds on account of the World's Columbian Exposition, provided the amendment received a majority of the votes cast in Chicago.

The constitutional amendment authorizing special legislation for Chicago (section 34 of Article IV), adopted in 1904, authorized a total debt for the city (including the debt of all municipal corporations within the city and the city's share of the county and sanitary district debt) of not to exceed five per cent of the full value of taxable property; and also required a referendum on all new bonded indebtedness except for refunding purposes.

The restrictions on municipal debt, in the constitution of 1870, checked the increase of municipal debt for a time. In 1880 the aggregate municipal debt was about $45,000,000, an increase of something more than 20 per cent, and a reduction in the percentage of debt to both assessed valuation and the estimated true value of property. By 1890, the aggregate municipal debt had decreased to $40,000,000.

But since 1890, municipal debts have increased steadily, to $78,500,000 in 1902 and $137,000,000 in 1912. This increase was at about the same rate as the increase in the estimated true value of property. The increase since 1912 has probably been at a relatively larger rate; but no provision is made in Illinois for official data relating to municipal debts, and complete data are not available since the last census report.

This recent increase of municipal debts has been aided by legislation modifying the effect of the constitutional provisions. The basis of assessed valuation, which was fixed at one-fifth of true value in 1898, was raised to one-third of true value in 1909, and has again been raised to one-half of true value in 1919. The object of these changes has been to enlarge the borrowing powers of municipalities; and while altering the effect of the constitutional provisions, cannot be said to conflict with their terms.

Further enlargement of municipal debt has also been permitted by legislation authorizing the creation of overlapping municipal corporations covering the same territory, each authorized to incur debt by borrowing. The existence of such overlapping districts is recognized in the constitutional provisions, and the limits established apparently were intended to apply to each municipal corporation; but the formation of new types of such districts, such as park and sanitary districts, has substantially enlarged the total amount of debt which may be incurred for the same territory.

Judicial Decisions. Some judicial decisions interpreting the

constitutional provisions relating to municipal debts, and establishing rules for their applicaton, may be noted.

The limitation on municipal debt in Section 12 of Article IX, has been held to apply to each municipal corporation taken singly, and is not affected by the pre-existing debt of other municipal corporations covering the same or a part of the same territory. 1

But the establishment by a school district of a high school under the control of a separate board of education does not authorize the school district to incur indebtedness in excess of the constitutional limit of five per cent.2

The limitation on municipal debt applies to a contract for a term of years relating to ordinary current expenses payable out of the current revenue. 3

A city may acquire a system of waterworks by pledging the income until it shall pay for the system, and no indebtedness is created. But an obligation to pay with the income of property already owned by the city is not different from an obligation to pay with any other funds, so far as the question whether the transaction amounts to a debt is concerned.*

Street railway certificates issued by a city and secured by mortgage on the street railway property, together with the right to operate such railways for a period of 20 years after foreclosure, are held to create an indebtedness against the city; and the issue of such certificates is illegal if, added to the existing indebtedness, the total will exceed the constitutional limit.5

Tax anticipation warrants are not contracts, and a city is not indebted on account of having issued them. Such warrants, payable out of a tax already levied, do not add to the indebtedness of a city which has reached the constitutional limit, and they create no obligation on the part of the city.

Drainage assessments are not debts within the meaning of the constitutional limitation. They are in the nature of an exchange for benefits received by the enhanced value of the property derived from the improvement, to pay for which the assessment is made. The limitation of the constitution is against becoming indebted for corporate purposes and has no reference whatever to assessments for local improvements.7

The decision in the Lobdell case, relating to street railway certificates, is of special importance, in limiting the borrowing powers of cities for debts secured by public utility property. Such debts, outside of the ordinary limits, are now definitely authorized by the constitutions of Michigan and Ohio; and somewhat differ

1 Wilson v. Board of Trustees 113 Ill. 443 (1890).

2 Russell v. High School Board, 212 I. 327 (1904).

Prince v. City of Quincy. 128 Ill. 443 (1889).

4 City of Joliet v. Alexander. 194 TI 457 (1902): East Moline v. Pope, 224 III. 386 (1906); Schnell v. Rock Island. 232 Ill. 89, 99 (1908).

Lobdell v. Chicago. 227 Ill. 218 (1907).

Booth v. Opel 244 Ill. 317, 327 (1910).

People v. Honeywell, 258 I. 319 (1913).