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CARSON CITY, January 20, 1913.

To the Honorable the Senate and Assembly:

Complying with the provisions of the Constitution, I have the honor to submit to your honorable bodies the condition of the State and certain recommendations which seem to me to be expedient for legislative action.

The State of Nevada owes no debt except to itself. It has no outstanding bonds or other evidences of indebtedness aside from between funds in its own treasury. On the other hand, we hold the bonded obligations of the Federal Government and two other States, on which our School Fund is receiving interest, in the sum of $1,500,000, and there is owing the State, as balances due on contract lands, drawing 6 per cent interest, the sum of $1,201,857.50; a total of interest-bearing securities aggregating $2,711,857.50. The assessed valuation of our taxable property, in 1912, was $101,087,079.98, an increase of nearly $6,000,000 over the previous year and equivalent to a 336 per cent increase since 1902.

The State's indebtedness to its own School Fund (under its constitutional borrowing limit of $300,000), less moneys in the treasury applicable to its redemption, is $181,617.05. Thus, from the standpoint of resources, the solvency of Nevada is of high rank among the States. The present situation, relating to a deficiency of income in the General Fund, has no signification with respect to any diminution of the State's resources or lessening of its solvency.

The beginning of 1913 finds our people prosperous and the outlook more promising than at any time since the financial crisis of 1907. There is a healthful tone throughout the State. While there is less oversanguine exploitation of mines, there is far more actual mining than ever before in our history. Our banks are read

. justed on a foundation so secure that a recurrence of the disasters of five years ago is rendered highly improbable. Our agricultural development is beginning an era of great promise. Private enterprise, under the Carey Act, is engaged in determining the feasibility of reclamation projects in many of our valleys, with the outlook that extensive areas of our desert lands will be reclaimed within the near future. We are today manufacturing sugar from Nevada-grown sugar beets, and a new industry is thus inaugurated which contains abundant promise. In the last year some part of the westward drift of homeseekers has been deflected to Nevada, and more new settlers have come to the State than in any previous year in our history. In the two years past we have enacted a workmen's compensation law, to recompense employees injured in hazardous occupations; and have passed and enforced legislation to protect miners from injury and death in underground mines by requiring modern safety and fire-fighting appliances to be introduced, kept and used by mining companies. The eight-hour work-day is generally enforced. The State has shown its ability, under the State Police law, to cope with strike situations and thus render service to both sides by impartial action in preserving the peace and preventing violence, until calm judgment, leading to mutual concessions and agreement, prevails; thus preventing the bitterness, suffering, and loss inevitably coincident with protracted industrial warfare. Nevada, today, ranks first among the States in the efficiency and equity of such exercise of its police powers.

We are beginning to take more interest and concern in our system of municipal, county and state government; to inquire into the efficiency of the same, with respect to cost, and to consider wherein that which is obsolete or useless may be modified or eliminated and that which is beneficial can be perfected.

When considering high rates of taxation, we have hitherto been more apt to complain at beneficial innovations, ignoring time-honored waste and extravagance. It is proverbial that the public rarely probes into what is of long standing, which has come to be considered validated by time and custom, but attacks innovations, regardless of their benefit, as the conceived root of the excessive cost of government.

Our fundamental need, today, is to correct our system of taxation. It is known to be inequitable, working grave injustice and hardships, while the high rates of taxation operate as a brake and drag on our industrial progress. Next to the reform of our taxation system, so that every class of property will be compelled to bear its just share of the burden of government, comes the problem of perfecting our system of state, county and municipal government, so that waste will be eliminated and efficiency increased. That is the only definition of true retrenchment. Any other standpoint of reducing expenses is superficial.

Again, there is the disposition to direct the spot-light of retrenchment on the state government exclusively, giving the county and municipal governments the benefit of any doubt as to possibly being as fruitful fields of inquiry for waste and extravagance. In this connection it is to be remembered that from the standpoint of the taxpayer's pocket, the waste of a dollar in the state government is divided among the total taxpayers of the State, while the waste of a dollar in a county must be borne by the taxpayers of the county alone, and if in a municipality, by those of the municipality alone. Thus a waste of 20 cents in Elko or Washoe Counties, for example, affects the taxpayers of these counties as heavily as the waste of a dollar by the State; and a waste of a few cents in many of our municipal governments is more of a burden on the taxpayer than a dollar's waste by the State. The taxpayer pays a state tax, a county tax, a district-school tax, and if he is a resident of a town, a municipal tax. His total taxes may mount very high, in instances to over $3 on each $100 property valuation. But of this amount, 60 cents only comes to the State, and a considerable part of this goes back to the counties in support of the public school system, half the salaries of Assessors, etc., besides taking care of the orphans, insane, and convicts of the counties.

The cost of the strictly executive branches of the state government-excluding the legislative, judicial and educational departments, charitable and penal institutionsbut including all elective and appointed state officers, boards and commissions and the State Police, in round numbers is about $250,000. This represents 25 cents, approximately, of the state tax rate, or $2.50 on each thousand dollars of taxable property. The Washoe County property owner who now pays $17 taxes on each thousand dollars of taxable property, if all these executive departments were eliminated, would still have to pay $14.50. If in White Pine County, where he now pays $21, he would still have to pay $18.50 taxes per thousand, if the executive departments, boards and commissions all were eliminated. In Lyon County the relief would be in the ratio of $20 to $17.50, etc. In the foregoing, no comparison is made with the taxpayers residing in municipalities, where the tax rate is frequently double the state and county rate. In Reno, for example, the relief from such abolition of the total expense attached to the executive departments, boards and commissions, would be in the

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