Primary Resource

Address to the General Assembly by Governor James L. Kemper (December 5, 1877)

In the following address to the General Assembly, dated December 5, 1877, Governor James L. Kemper asserts Virginia's obligation to pay its debt.

Transcription from Original

Gentlemen of the Senate and House of Delegates:

On the eve of laying down the powers of this department, I greet a legislature which comes into being, to-day, at the bidding of the sovereign people. Performing for the last time the duty, enjoined by the constitution, of communicating to the general assembly the condition of the commonwealth, I embody the results of four years of observation and experience in the administration of the government.

It is cause for profound congratulation that the worst evils, possible to befall the state, from any human source, have been successfully tided over. We cannot resist the evidence that the future of Virginia is full of hope; for we are taught, by the trials already endured and overcome, that not only are we able to deal successfully with the financial difficulties which confront us, but this generation will be false to itself if it does not more than replace the prosperity and the political power of our fathers.

Nevertheless, in order to understand and to redress existing evils, it is required that firm hands shall explore their origin and measure their limits.

After Virginia, more than any other state, had borne the burthens and ravages of the most tremendous war of modern times; after having passed through the yet longer and harder trials of armed repression and reconstruction, so-called; this commonwealth finally received other and only less grievous injuries in the house of its friends.

It is true that when the reign of the sword was withdrawn, the state was left crippled and impoverished, but it was not without resources adequate to every end of just and economical government. On the sixth day of July, 1869, the political restoration of Virginia was finally and thoroughly consummated by the conservative wisdom and virtue of the people in expurgating and accepting a constitution which, however otherwise obnoxious, yet restored to themselves the control of their own government. Nothing remained to be done but, by the stern husbandry of our straitened resources and by a firm adherence to the justice, moderation and frugality enjoined by the example of our ancestors, to ensure the gradual recovery of the material prosperity we had lost. But instead of the honored traditional ways being regarded, new and disastrous policies were sought to be fastened upon the commonwealth.

In the works of internal improvement, constituting almost the whole consideration of the public debt, Virginia had preserved very large and valuable interests. Had these great properties of the state been husbanded with ordinary prudence, they would have sufficed ultimately to extinguish a very large part of the existing debt. But the policy prevailed of divorcing the government from the control of public works. These all-important interests were sold or encumbered or otherwise disposed of, and, for the most part, with ruinous sacrifice and loss. Not only were the best assets and securities of the public credit thus squandered and sunk, but another disastrous result is that the main arteries of internal commerce have been surrendered to a control which is alien if not unfriendly to the development of our own marts of trade.

Another if not equal injury resulted from a new adjustment of the public debt which deprived the state of all control over a large proportion of its annual revenues for more than the period of the present generation. After the war and prior to the passage of the funding bill, the legislature had in successive acts recognized the obligation of the debt and plighted the public faith for its redemption. But nothing had been done which countenanced the policy of bargaining off the future revenues of the state and subjecting the maintenance of the governments in any degree to the mercy of bonded creditors. No call from the people at home, no pressure from creditors abroad, necessitated or justified or suggested such a settlement. Up to that time, nothing but sympathy and good will had marked the relations of the bondholders to this commonwealth: the enactment of the funding bill was a surprise no less to them than to our own people; and we now know that a settlement incomparably better for all parties concerned in the debt of Virginia could then have been easily and honorably procured. Although the proportion of the revenues, thus sequestered and put beyond the proper control of the state by the original contract of the funding bill, was very much less than that contemplated and proposed by its projectors; although the operation of the bill was to some extent arrested by subsequent legislation, and the amount of revenues which it diverted from the treasury thus materially diminished; and although the subsequent rate of taxation has been greater by twenty per centum than that which the authors of the bill declared to be sufficient for carrying on the government and for paying at the same time full interest on the whole of the ante-bellum debt, then amounting to more than forty-five millions of dollars; notwithstanding these measures of partial relief from the intolerable hardships thus sought to be inflicted upon the government, nothing less than extraordinary caution, economy and vigilance have sufficed to meet current expenses, to enforce the laws and to hold society together.

In addition to this heritage of troubles transmitted to us by our predecessors, other causes have supervened to embarrass the government. Just four years ago, a monetary collapse settled down upon the business of the general country and its disastrous pressure was felt throughout the civilized world. In our own midst it impaired public and private confidence and credit; it shrank all taxable values; it locked up the local circulating medium which even theretofore had been inadequate and scanty; it increased the hardships of taxation and hindered the collection of taxes; it inevitably postponed the financial restoration of the state, and for a time it redoubled the difficulty of carrying on the government.

In fairly estimating these accumulated difficulties from within and without, we have a right to rejoice that Virginia has struggled successfully through them all. I speak advisedly and deliberately in affirming that the worst is over. For more than a year, the great monetary panic has been steadily and visibly receding. The taxable values and annual revenues give every promise of continued and progressive improvement; while in all practicable directions, and as far as the existing laws permit, the public expenditures have been correspondingly reduced. During the last four years, not only have the public schools and charities been maintained, law and order upheld, and the authority of the government preserved in its vigor, but the sum of $5,275,953.42 has been paid on account of interest on the various obligations of the state. The year, which is about to close, has brought with it favorable seasons, bountiful harvests and abounding health; while the masses of the people, by hard toil and by improved habits of industry, frugality and thrift, have made steady and marked progress in working out the material restoration of the state. The perfect peace and tranquility, everywhere and always prevailing, have been solely due to the law-abiding virtue of the people; for in no instance has the employment of military force or any vigorous exercise of executive authority been needed for the preservation of order. While alarming conflicts between capital and labor have shaken the foundations of society elsewhere, and even invaded some of the states contiguous to our own, no ripple of lawless excitement has disturbed any of the currents of business or enterprise in Virginia.

For deliverance in the past, for the opportunities of the present, and for the promises of the future, let our praise be lifted to The Giver of every good.

Receipts and Expenditures.

The average annual receipts from taxation, for the last eight fiscal years, have been $2,401,726.19. The receipts from the same source, for the fiscal year 1876–7were $2,505,387.17. Though above the average, this amount is less than the receipts for the next preceding year by $173,952.47. The reduction is due to the difficulties which were encountered in changing from one system of liquor taxation to another,—the taxes imposed upon consumption by the new law having been wholly suspended for a considerable period by the injunction of a federal court, while the same law very greatly reduced the taxation of wholesale dealers. The loss to the revenue from these sources, during the last fiscal year, was not less than $200,000.

The disbursements of the revenues from taxation, during the last fiscal year, were as follows:

For ordinary and permanent expenses of the government $967,393.42
For extraordinary or temporary expenses, required by special acts of assembly, for purposes other than the current support of the government 92,252.52
For public free schools* 326,266,46
For interest on debt 1,062,110.17
Balance applied to temporary loans of the year 1875–76 57,364.60
$2,505,387.17

The ordinary expenses of the government for the last fiscal year were less than for any year since the constitution took effect, and less by $88,583.08 than the average annual expenses of the last eight years on the same account. It will be found that the criminal expenses, which are wholly beyond the control of the executive department, have continued to increase in an extraordinary manner; and, due allowance being made for that fact, it will be seen that the reduction of the other ordinary expenses of the government has been considerably greater than the foregoing statement indicates.

The Present Condition of the Debt of Virginia

Of all the vagaries and extravagancies of the period we live in, none exceed the misapprehensions which have obscured the financial condition of Virginia. It is to be deplored that interests so complicated, sensitive and sacred as those of state faith and credit should ever be bedraggled in the ephemeral excitements of personal and partisan politics. The principal sum of the debt, the arrears of interest thereon; and the annual deficiency in the treasury, have all been subjects of the wildest exaggeration; while the market value of the public bonds has been depreciated and the popular mind has been discouraged by miscalculations, as to the ability of the state to carry its debt, which are in the last degree erroneous, fanciful and extravagant.

I propose to recapitulate the financial condition of the state and to present its entire indebtedness with the utmost possible exactitude. The particulars are drawn from the only authentic sources and they are verified by the only tests which can exclude the possibility of error.

The principal sum of the entire debt proper of the commonwealth, as of the beginning of the present fiscal year, is $29,350,816.76
The arrears of interest, which have accrued since the funding bill took effect, and which constitute so much non-interest-bearing debt, amount to 4,188,141.88
Consequently, the whole of the public debt, including principal and all arrears of interest, is 33,538,958.09
The entire debt assumed by the funding bill was 30,478,646.49
The difference is the increase of the debt, during the six years which have elapsed since the funding bill went into operation, viz $3,060,216.60

These figures show that the average annual increase of the debt during the last six years, resulting solely from the accumulation of interest arrears, has been $510,036.10 and no more.

Fortunately, the state yet retains several interests in internal properties, other than the water line, which are salable and have a determinate market value. If it be the pleasure of the general assembly to provide for the sale of these interests at their present value, and if the proceeds of such sales be invested in the new funded bonds of the second class, they will suffice to retire $1,900,00 of the existing debt and thus the entire outstanding indebtedness of the state will be reduced to $31,638,958.09.

But in calculating the deficiency in the treasury for the future, let it be assumed that this measure of relief may not commend itself to legislative approval.

It is as clear as mathematical demonstration that, if the legislature shall leave the general features of the present revenue system untouched—merely correcting patent defects in matters of detail—the current resources of the treasury will hereafter suffice to pay full interest on the entire outstanding debt. Even if our taxable values should not continue in the future to increase, as they are now increasing, by the slow but certain processes of reproduction and accretion; even if no retrenchment of the general expenses be made, and if the present revenue system be simply perfected and then allowed to go on without interruption, full interest will be paid to the creditors of every class. The recent constitutional amendment, which prescribes biennial sessions of the legislature, will necessitate an average saving, in legislative expenses alone, of one hundred thousand dollars annually. This single item of retrenchment reduces the average annual deficiency in respect of the debt from $510,036.10 down to $410,036.10. The balance of revenue, needed to cover this reduced deficiency, is already guaranteed by the new revenue measure devised by the last general assembly. The method now in force, for taxing the consumption of alcoholic and malt liquors, is an experiment which its authors have not claimed to be free from defects; and although more time is required for giving it full and effectual operation in many portions of the state, yet the returns already made demonstrate beyond question that, upon the obvious defects of the measure being corrected, the increased revenue to be derived from it cannot fall below a half million of dollars annually. This is no conjectural estimate: it is the result which is irresistibly proved by the actual working of the new system under many disadvantages.

In my inaugural message to the general assembly, I expressed the opinion, which subsequent experience has strengthened and confirmed, that, by properly rearranging and retrenching the expenses of the government, all the obligations of the state could be fully met and the existing rate of taxation at the same time reduced. Reserving that subject for another part of this paper, I take occasion to congratulate you upon the unanswerable fact that, if no adverse action shall either increase the volume of expenses or diminish the supply of revenues, the interest on every class of debt will be paid and the financial restoration of Virginia is already assured and virtually consummated.

In the foregoing statement I make no account of balances, due from one pocket of the treasury to another, because they constitute no part of the public debt. I now proceed to state and explain them.

Funds which are sometimes erroneously classed as part of the debt

I do not propose to repeat the expositions of the sinking and literary funds, contained in my former messages, to which reference is respectfully invited. It is enough for the present to show that these funds constitute no part of the state debt.

The principal sum of the sinking fund, now amounting to $5,125,271.90, is an aggregation of bonds, formerly held by public creditors, which have been paid off, taken in and deposited as property of the state, and as so much extinguished debt, in its own coffers. Instead of being a part of the existing debt, the sinking fund represents nothing but so much debt as has ceased to exist. It can only be increased by further reductions of the outstanding debt; so that, the larger the sinking fund, the less the state actually owes. It is no requirement of the constitution, but the voluntary act of legislature, which has given to this fund its present onerous amount, composition and character, and which has originated the policy of semi-annually diverting from the treasury great sums, equal to interest on the sinking fund, to be expended in purchasing and retiring or sinking other bonds of the state. Experience proves that this mode of maintaining so large a sinking fund is an excessive burden upon the treasury, especially during a period of depression like the present; and it is a question for serious consideration whether it is not wise to cancel and destroy the bonds which compose the fund, as the law-making power has unquestionable authority to do. No provision of the constitution and no obligation of plighted faith stands in the way of such a disposition of the sinking fund bonds. By the constitution of 1851, a specified portion of the annual revenues was set apart, to be invested in a prescribed mode; for maintaining a permanent sinking fund. By the present constitution no such requirements are imposed upon the government, but both the character and the amount of the means to be contributed, and the methods to be employed for the maintenance of the sinking fund, are left to unlimited legislative discretion. It is submitted that if the present sinking fund bonds be destroyed, and if provision be made for setting apart annually hereafter such specific sum as the treasury can reasonably afford, to be invested in obligations of the state or the United States, all the requirements of the constitution upon this subject will be completely satisfied. The present fund is too large to be carried, according to the design of its founders, without injustice to other interests and injury to the creditors themselves. Remaining in its present dormant condition, it serves only to beget error and confusion in respect to the real liabilities of the state.

The literary fund, so far from constituting any part of the debt, is a capital sum composed of assets belonging absolutely to the state, the annual income of which, now amounting to $83,907.64 is dedicated to the interests of education. The principal of the fund can never become demandable or payable, for by the terms of its foundation it is required to remain intact forever. It is in the nature of a perpetual annuity founded by the state for its own benefit. The annual interest on the literary fund goes to the support of the public schools by virtue of the same mandate of the constitution which devotes one-fifth of its property tax to the same object; and the payments from both sources are annual charges upon the treasury, of the same character, and ought equally to be classed as current expenditures on account of education. But however the literary fund be treated, it cannot be regarded as any part of the outstanding debt, for if by a change of organic law the fund itself were extinguished or covered into the treasury, the rights of no bondholder would thereby be impaired or affected.

It is not to be supposed that either creditors or others will hereafter seek to renew the idea, long since exploded, that Virginia will ever become liable for the debt of West Virginia, or for any part of it. Assuming that at the close of the war the two Virginias were jointly and severally bound for the whole of the original debt, nevertheless, by the express terms of the funding-bill contract, as acceded to by the creditors. Virginia can never become liable for any part of "West Virginia's third" except by virtue of a settlement hereafter to be concluded between the two states. Clearly and unquestionably, such a settlement is impossible to be had without the co-operation and assent of Virginia. If we ever become liable for any part of the debt thus remitted to West Virginia, then it will be no otherwise than by her own voluntary act that Virginia will incur that liability. Until the coming of the millennial era, it may scarcely be supposed that one state will volunteer to assume the burthens of another state. Out of one full third of this state, torn from its body, was created West Virginia. Of the debt, previously contracted by the undivided state, one-third at the date of its dismemberment fairly devolved on West Virginia. Equitably and justly, one-third of the debt was set apart and assigned to West Virginia, and the creditors ratified the assignment. No principle of right or duty, no obligation of honor, requires Virginia to pay "West Virginia's third" or any part of it: and, therefore, such payment will never be undertaken by Virginia nor expected by any of the parties concerned.

The proposed efforts to nullify the funding bill

In several messages I have endeavored to enforce the opinion that, however unwise and unfortunate the passage of the funding bill, yet the contract embodied in it and executed in pursuance of it is inviolable and irrepealable; that it is the bounden duty of all to stand to the decision for the highest state court affirming its validity, and that any further agitation for the purpose of invalidating it is a wrong to the good name of Virginia and an injury to every interest of the people.

Holding these views, it is appropriate and just, and it is due to the truth of history, that I should vindicate the motives of those who act upon opposing opinions. There is not and there never has been any organized party of repudiation in Virginia. Excepting an almost inappreciably small class of thinkers presently to be mentioned, the great body of those who resist the execution of the funding bill have no idea of resisting the payment of the debt. That bill has been the fruitful source of discord, and but for its existence no sentiment unfriendly to the creditors and no popular agitation on the subject of the debt could have arisen. Those, who seek to invalidate the bill, believe that it is in the nature of an act of state suicide; that it impairs the dignity and the sovereignty of the commonwealth by taking from it the control of its revenues and stripping it of its just powers of self-preservation; that its device of tax-receivable coupons, alienating in advance and mortgaging to creditors for a period of thirty-four years a large proportion of the taxes, deprives the government of essential government functions and powers; that its enactment was not merely a suprize but an imposition upon the people; that exaggerated estimates of our taxable values, afterwards seconded by undue influences, procured and precipitated its passage; and that, for these and minor reasons, the bill ought to be judicially or otherwise annulled and avoided. The opposers of the bill are galled and irritated by the withes [shackles made of twigs] and manacles with which it fetters the traditional liberty of local self-government. Its effect is to wound the sentiment of state pride and to engender resentments and animosities which, though often supposed to be directed against the holders of the debt, are really aimed at the funding bill itself. Many who were first to revolt against the compulsion of the bill would be first in honorable and voluntary efforts to pay off the debt, if the compulsion were removed. But let it be understood, on the part of those who seek to overthrow the funding bill, that if they fall short in any reasonable effort to meet the just demands of creditors; if they fail to provide all the means properly available for that purpose; if they refuse to remedy the acknowledged defects of the present revenue system; then their inaction will be taken for repudiation and all the worse because it will be negative, indirect and insidious.

It is time that the funding bill were disembarrassed of all the fallacious objections with which its validity is assailed, and it is time that all controversy over the debt, so baneful to the peace and the progress of the state, should now be finally settled and put behind us. Why is the contract of the funding bill irrepealable?

In construing the provision of the constitution of the United States, which forbids a state to pass any law impairing the obligation of contracts, in a multitude of cases and by the highest courts, state and federal, it has been held and decided:―that the prohibition applies as well to the contracts of a state as to the contracts of corporate or natural persons; that a state may by contract exempt property from taxation forever; that a state may by contract make the certificates or evidences of its own debt receivable in payment of its taxes; that such contracts made by one legislature bind all succeeding legislatures; and that such contracts are not only as inviolable as those between citizens competent to contract, but they are incapable of being abrogated, either in whole or in part, by the utmost power of the state. It is true that while the jurists who antagonize the funding bill admit that the decisions of the courts are as I have stated, yet they believe and insist that those decisions are wrong and that the supreme law, which forbids a state to impair the obligation of contracts, was never intended to apply to the undertakings of a state. But those decisions are plainly and confessedly irreversible. I am dealing with stubborn facts as they are; and I shall pause for no speculative inquiry as to what might have been or ought to be. It is enough to know that the decisions cited inevitably and finally control the question at hand.

Moreover, it is well settled that the courts are bound to accept the legislative authentication of an act as conclusive proof of its passage, and they cannot go behind it even to consider any allegation of fraud or corruption in the procurement of a passage. It is easy to see that if the courts could inquire into the means or motives which procured the passage of a law, and could annul it as the result of such inquiry, then the judiciary would absorb the government, and the constitutional independence of the departments would be broken down and destroyed. It must also be borne in mind, in this connection, that if from any change of circumstances or from any conceivable cause it were possible, as it is not, for the court of appeals of Virginia to reverse its decision affirming the validity of the funding bill; even if the other departments of the government should join in carrying such reversal into effect, and even if the ultimate power of the people in sovereign convention should unite in annulling or repealing the bill, still, all these would be obviously unavailing acts done by or on behalf of the state; for the main question would then be cognizable and would have to be decided by the supreme court of the United States which, through a long line of decisions, has maintained the identical grounds held by our court of appeals in the premises. In order to nullify the funding bill, it is not enough to set aside the authority of the court of appeals of Virginia; it is also necessary to get rid of the supreme court of the United States. I forbear to comment upon the morality of resistance to judicial authority; but so far as its policy is concerned, no lesson from the past is needed to inform us that the power of Virginia is not equal to the power of the United States.

Nor can it be imagined that any device or subterfuge, however ingenious, designed to obstruct a particular provision of the funding bill, could be regarded with less disfavor by the judicial mind than an open and direct violation of the contract it contains. Any measure, of whatever kind, intended to impair the receivability of the coupons, would be regarded as impairing the obligation of the contract, and would be met with the condemnation of the courts all the more decisively on account of its indirection.

But it is alleged by able jurists that any of the government, which destroys or imperils its own existence, is nugatory; that the funding bill alienates revenues which are or may become indispensable to the support of the government, and that therefore, from the very necessity of the case, the bill is unconstitutional and void. Is this proposition true?

Assuming that the state cannot strip itself of such powers and resources as are indispensable to its existence, it must be remembered, as having been well settled, that the political department can alienate by contract some portion of its means; and it is the province of that department to decide what portion of its revenues is necessary to the support of the government and what portion can be alienated without imperiling its existence. It must also be borne in mind that a department of the government, like the state, can never die, and, however the members composing it may change, yet in legal contemplation, the department itself is the same yesterday, to-day, and forever. In 1871, the political department, being clothed with full authority to contract in the premises, decided that the state would have means enough left for its support after alienating a certain proportion of its revenues to its creditors, and accordingly it did by an executed contract alienate those revenues, or most of them, for a period of thirty-four years. Could that identical department, the next day or year, or six years thereafter, change its mind and annul the contract, which it was competent to make, on the ground that it had committed an error and had conveyed away more of the revenues than it could afford to spare? The statement of the question answers it. The parties to every contract stand in co-equal relation, and they are clothed with correlative rights. The only department of the government, which can bind the state by contract with its creditors, has neither more nor less power to annul or change the contract afterwards than the creditors themselves have. To say that either party to a concluded contract may withdraw from it or annul it, because it has made a bad bargain, is the announcement of a theory which would overthrow every principle of legal right and human obligation. To say that a state may thus retract its plighted faith and revoke its contracts, is to destroy the sanctity of all contracts, to put an end to all confidence between man and man, to overturn the foundations of public and private credit, and to render the government powerless to raise loans and maintain its existence in any time of emergency. The establishment of a doctrine so monstrous would be the virtual dissolution of civilized society.

But it is alleged that the funding bill contract is in fact impending and virtually stopping the wheels of the government; that it impairs its inalienable right of self-preservation and imperils its existence; that to let it remain in force is to produce a case of political felo-de-se; that the state is constitutionally bound to preserve its being, and the only means of preserving it is the abrogation of that measure; and, that therefore the supreme duty and supreme law of self-preservation both empower and oblige the state to abrogate it. Are these propositions true?

It must be remembered that Virginia is not a separate nation, but one of many united states, irresistibly bound by the obligations which perpetuate the common country and bind the states together in a general union. The state must act within the powers which it has reserved and not delegated to the common government. It cannot go counter to those delegated powers, for they are inviolable and supreme. It is a part of the supreme law thus erected over all the states that no state shall impair the obligation of a contract. When it is proposed that the state shall invoke the supreme law of self-preservation and exert the supreme right of nations, in order to rid itself of a contract, I ask how can Virginia, under such color of authority, do an act which the organic law of the union expressly binds Virginia not to do? In order to invoke such supposed authority, Virginia must go outside of the union, and cease to be a member of it. The proposed remedy is extra-constitutional and revolutionary, and in order to justify it the supreme judicial tribunal of the union would have to be called on to do what is plainly impossible, that is, to reverse its consistent and traditional rulings upon the question involved. Even where an independent nation invokes the ultimate law of self-preservation in such case, the highest authorities inform us that the necessity for resorting to it must be clear and overwhelming; it must be such as to satisfy the sentiment of honor which pervades the moral and financial world; "it must be the first and supreme necessity, a necessity which is not chosen but chooses, a necessity paramount to deliberation, that admits no discussion and demands no evidence," which alone could excuse an alternative so replete with anarchy and desperation.

Happily, it is demonstrable that no such necessity can arise in Virginia. If the debt proper of each state be aggregated with its municipal and local indebtedness, a comparison on that basis will show that, relatively to population and resources, the people of Virginia owe less than those of many of the states. It will be found that the rate of taxation in this state is less than in almost all others. It will be found that the state taxes are little as compared with the direct and indirect taxes which Virginia pays to the national government. Even if the new method of taxing liquors should yield no increase in revenue, still, the deficiency in the treasury would be covered by a sum equal to a tax of ten counts on the hundred dollars or of thirty cents of each inhabitant of the commonwealth. The allegation that the state cannot maintain its existence and carry its debt is not only wholly unsupported but conclusively contradicted by the facts.

The remaining objectors to the funding bill are those, before referred to, who assert that Virginia owes no debt. They argue that the state has been conquered by arms, and that the conqueror, having dismembered it and destroyed more than half of its taxable values, has become solely liable for its ante-bellum debt.

We are taught, by the standard authorities on national law, that where two powers are at war, and one of them in battling for the defence of its invaded territory destroys the property of its own citizens, the damages thus inflicted are "misfortunes which chance deals out to the proprietors on whom they happen to fall," and that no demand lies against the state for losses which it thus occasions to its own citizens in the exertion of its rights. It is evident, and for stronger reasons, that no reclamation lies against the invading or conquering enemy for the damages or losses he inflicts. The law of states and nations declares:―"All are exposed to such damages, and wo to him on whom they fall. The members of a society may well encounter such risk of property, since they encounter a similar risk of life itself." Indemnification for such losses is utterly impracticable, because "there would be no end of the particulars, and it is to be presumed that no such thing was to be intended by those who united to form a society." If compensation for such losses is allowed at all, it proceeds from the equity and voluntary bounty of the sovereign and not otherwise. It is true that if the autonomy of the conquered state be destroyed, if it be deprived of the powers of taxation and self-government and its being merged in that of the conqueror, then the latter must assume its foreign debt; but even in that case, the conquered people would be taxed by the conqueror and so made to pay their own debt. Assuming that Virginia was conquered by arms, its autonomy was not destroyed; the conqueror re-invested it with its original powers of raising revenues by taxation and restored to it the very improvements and properties which represented the consideration of its debt. It must also be borne in mind that the state, in resuming these powers of self-government, renewed its liability for the debt in the very constitution which was then accepted and ratified by almost the whole body of its people. Moreover, the law-making power, afterwards in pursuance of a new contract, delivered to the creditors new bonds for such part of the original debt as corresponded with the reduced proportions of the state. Even if a right of action had at any time existed against the United States in respect to the debt, the state would now be stopped by its own record from asserting such right.

I have heretofore deemed it due to the truth of history to place on record a recital of Virginia's claims upon the equity of the United States,―adding then what I now repeat:―that the best way to get help from others is first to help ourselves; and, that the cheapest and easiest as well as the only means of getting rid of the debt is to pay it off.

The re-adjustment of the debt.

Soon after the beginning of my official term, when the monetary pressure upon the country was distressing, and when the difficulty of meeting the deficiency in the treasury was greatest, the general assembly, on my recommendation, authorized a conference with the public creditors, in order to a readjustment [sic] of the debt. In recommending the conference, and in conferring with that body, I proposed that all the contracting parties to the debt should agree to re-adjust it by postponing so much of the accruing interest as exceeded the then disposable means of the state;―thus providing for the payment of such reduced interest for the time being as would correspond with our reduced revenues, and for such greater interest afterwards as would steadily increase with our increasing population and resources; "so that the whole debt and interest, as originally assumed and agreed, should be paid in full, ultimately, and just as soon as the best ability of the state would permit." By this arrangement it was designed to secure every possible relief to our own people, to place all classes of the creditors on the same footing by paying the same interest to all, to establish relations of confidence and good will between them and the state, to restore the public credit, and to put an end forever to the financial controversy which has already subjected Virginia to losses far greater in amount than the debt itself. No countenance was given to the idea that a reduction of the debt, or the excision of any part of it, was possible to be enforced by the action of the state, without the free consent and concurrence of the creditors. The conference was held on the 10th day of November 1874, and its members represented a great and commanding proportion of the public debt. After deliberation that body agreed by unanimous vote to the exact substance of the plan I had proposed, that is to say, it consented to postpone one-third of the interest on the debt for ten years. The action of the conference was transmitted to the general assembly with the earnest recommendation that it should be carried into effect by appropriate legislation. But that recommendation unfortunately failed, and the debt agitation has since gone on with increasing injury to the state.

It can be hardly be doubted that the state could obtain from the creditors now the same concessions which were tendered in 1874, if the same necessity existed to justify them. But that necessity has passed away. The condition of the state has improved, is improving and will continue to improve; and I have forborne to recommend an increase of taxation simply because the present revenue laws, with due correction of defective details, will suffice henceforth to meet all the obligations of the state.

Moreover, a re-adjustment which is feasible and honorable, and which is far better than any heretofore proposed, can now be had. So soon as the state shall proceed to pay, as it can, full current interest on the debt; so soon as its ability and its will to continue such full payment shall be made evident to the financial world, I have assurance that then a loan may be negotiated at four per cent. and in a sum sufficient for retiring the whole of the debt. By taking this direct road to re-adjustment, the burthen of the debt will be diminished one third in a way consistent with the traditional reputation of Virginia.

But any re-adjustment, between the debtor and creditor, conforms to the standard of financial honor, which is assented to or acquiesced in voluntarily by both the contracting parties. It would be as unwise as unjust for either party to seek concessions in any other than a spirit of conciliation or without an equal regard for the rights of both. Any attempt at re-adjustment, by the employment of coercion or menace, would defeat itself: but if either party to a contract could succeed by such agencies in wresting from the other the surrender or abatement of any pre-existing right or security, he would be taking the goods of another, against his will, by putting him in fear.

I will not countenance the supposition that any one could favor a readjustment intended to operate exclusively upon the second class or non-tax-receivable debt, so as to reduce either the principal or interest thereof. Such a readjustment would direct itself to less than one-third of the debt and to the weakest class of the creditors, consisting largely of widows and orphans in our own midst. Such a readjustment would illustrate the spirit which shrinks from an encounter with the strong and tramples on the weak. Instead of so indefensible a policy, every consideration of justice and self-respect demands that we place this weaker class of creditors upon the footing of those who are most favored.

The broadest and highest considerations only must rule this whole question.

The credit of the state and the credit of the citizen are parts of one whole, and neither can long exist without the other. The government is but the reflex of the people. The character of the state is but an aggregation of their individual characters. The success of all good and great enterprizes for the development and enrichment of the community depends in a greater or less degree upon credit and, ultimately, upon public credit. No state has ever broken its faith except at the cost of banishing capital, prostrating enterprize, impoverishing its people, and drying up the sources of its revenue. The preservation of a healthy sentiment of state pride and honor is the bulwark of free institutions. It is the cheapest defence of order, the surest means of staying vice and crime, and of giving purity and prosperity to the people and the government. The loss of that sentiment brings with it the saddest of all calamities for a state—the decay of its men. But now that our future financial character is to be formed and established before the eyes of the world, it is upon a higher level than that of any merely domestic interest that Virginia must stand. It is true that the principal of the debt was borrowed and received in gold or its equivalent, and that it was expended in improvements which to-day confer benefits commensurate with their cost. It is true that if the means thus borrowed had been unwisely spent or wickedly squandered, no complaint would lie at the door of the creditor, nor would the obligation of the state be less, on that account. But no matter what the origin, or consideration or history of the debt, no matter who its present holders, it is enough for us to know that Virginia as now constituted gave her bonds and plighted her honor for its payment. No matter how onerous the obligation, yet justice, duty, right and faith demand its fulfillment. We will pay the debt because it is right, as well because the repudiation of the least part of it would blight the historic virtue of the people and the inherited glory of the commonwealth.

I close my official labors, in this connection, with the noble words which John C. Calhoun uttered for South Carolina; and I adapt and apply them, expecting the approving response which they cannot fail to command:―"I pledge myself that my state will pay every dollar she owes, should it take the last cent, without inquiring whether it was spent wisely or not. Should I in this by possibility be mistaken; should she tarnish her unsullied honor and bring discredit on our common country by refusing to redeem her plighted faith, which I hold to be impossible; deep as is my devotion to her, and mother as she is to me, I would disown her."

Various statutory and constitutional reforms by which the taxes may be reduced.

Against constant opposition, and in spite of many discouragements, I have, from the day of my induction into office until now, persistently urged that by the enforcement of proper reforms the debt could be carried and the taxes at the same time reduced. In my inaugural and in all my annual messages, as well as in repeated special communications to the general assembly, I have strenuously insisted upon the adoption of a specified system of economy and reform—"a system, which will go through every branch of the public service—a system, not formal or pretentious, but thorough, practical, rigorous and inexorable, which will bring the cost of the government down and conform it to the dwarfed area and resources of the state." It is impossible any longer to misunderstand or to doubt the fact that the people of Virginia intend to enforce such a system. The conflict may be prolonged, but its issue is not doubtful. Nevertheless let us fairly consider the obstacles to be overcome.

No matter what measure is proposed for the reduction of public expenses, it is sure to be assailed and resisted by the potent opposition interested against it. In every such case a conflict, which is apt to be acrimonious, arises between those who pay for the support of the government, on the one hand, and those who live upon the government, on the other. The official corps is intelligent, compact, and alert; its more active members are unitized and animated by a common interest; it exerts potent political influence either through the columns of a portion of the press or in caucuses or more directly elsewhere; and it moves with the power and celerity of an army in resisting every effort to abolish the places or to curtail the emoluments upon which any of their number subsist. On the other hand, the opposing tax-payers are dispersed and from necessity they strive without close concert. The relation between these contending forces is illustrated by "the great advantage over which an organized body, such as a government or an army, has over an unorganized mass—an advantage increasing with the always increasing difficulty of concert and co-operation; and this, again, increasing with the number and dispersion of those on whose concert and co-operation success depends." It is natural that the official corps, looking to public employment for life-long support, should become honestly convinced that their places are important and essential to the welfare of the state, should at length regard office as at once a profession and a property, and should resent every effort to curtail official service as a personal wrong to themselves. But whatever the cause, it is certain that in time their increasing offices strike their roots ever so deeply into the body politic, from which they draw their nourishment, that an attempt to eradicate any of them recalls the fatal shrieks anciently said to issue from mandrakes when being uprooted from the earth.

It may as well be taken for granted that no measure of retrenchment will ever be urged forward without being combatted at every step by this associated influence. Its favorite means of thwarting such a measure is ridicule—the most formidable of all parliamentary weapons. It seeks to decry the intelligence of those who propound the measure by satirizing the littleness of the items which enter into the sum of any systemic retrenchment. But it must be borne in mind that the great amounts which constitute the annual income and outgo of the government are made up of little sums, so that almost any single recipient or disbursement is in one sense insignificant and trifling. It is the particles of money which make up the volume of taxes and expenditures as water-drops compose the ocean; and there can be no retrenchment which does not look after the almost innumerable small payments which added together constitute the sum-total of expense. The greatest political philosopher, yet produced by the English-speaking race, taught and emphasized the truth that no statesmanship is sound which does not take care of the small economies of government. Moreover the taxing power is limited to well-defined objects. The government has neither the legal nor moral right to draw from the tax-payer any sum whatever beyond its just needs. The ablest southern statesman of the last generation said:―"I hold that those who make are entitled to what they make against all the world except the government, and against it except to the extent of its legitimate and constitutional wants; and that for the government to take one cent more is robbery."

But the facts are startling which show that the increased and unnecessary expenses of this government are such as cannot be disguised by any sophistry or derision. They are augean [abominably filthy] accumulations which may not be allowed to continue with any just regard for the purity or the efficiency of the government. Let the ordinary expenses for the last eight years be compared with the corresponding expenses before the war. Leaving out of the calculation all disbursements on account of free schools and the public debt and all extraordinary or temporary expenses, the remaining ordinary expenses for the current support of the government, during the last eight years, have averaged $1,055,976.50 annually. During the ten years, ending with the year 1860 inclusively, the same ordinary expenses were $588,236.37 annually. The area of the state was then more than a third larger, and its taxable values were almost twice as great as they are now. And yet the smaller and poorer state now expends every year, upon the current support of its government, $467,740.13 more than was spent for precisely the same purpose, before the war, when Virginia flourished in the plenitude of wealth, prosperity and power. If the cost of the government be made to bear the same relation to area, population and resources that it did before the war, then the present annual revenues will suffice to pay full interest on the debt, support the government and the schools and leave an annual surplus in the treasury of some hundreds of thousands of dollars besides. Let it be remembered, in this connection, that municipal and county expenses, the latter now including the salaries of county judges, have also a general thing been grievously and enormously increased since the war. When these facts are all considered, and when it is proposed to lop off the whole of this increase of taxes and burthens, I ask by what authority is the movement charged to a false, a narrow or a niggard economy?

I proceed to point out briefly some of the particular expenses which can and ought to be cut down.

The accounting business of the government has run into needless enlargement and complication, and the capitol is overcrowded with unnecessary officials and employees. If that business were conducted according to the improved methods now very generally adopted, if it were made subject to direct supervision and guarded against interruption and intrusion, if it were so rearranged and distributed as to necessitate continuous labor on the part of all employees throughout office hours, and if the number of hours were the same or anything like the same prescribed for public and private business elsewhere, then it cannot be doubted that half the official force at the capitol would easily accomplish twice the amount of office work now done. Even the government of the United States, with all its alleged extravagance and all its vast means, is said to exact of its employees longer and more continuous daily labor than is required in like cases by this impoverished state. It is certain that trained and skilled clerks and other employees seek, in commercial and other departments of business, far more laborious employment which occupies them, daily, almost or quite double the number of hours now actually given to office work at the capitol. The clerical business of the government ought to be done in the manner and at the cost fixed for corresponding work by the fair competitions of private business. Some, who are most experienced and capable of advising in such matters, affirm that if any commercial house were to conduct an accounting business equal to that of the state, at the same expense incurred by the state, the result would be swift and inevitable bankruptcy. An investigation will also disclose the fact that the perfect and symmetrical system of checks and balances, which the founders of the government devised to guard the treasury, has been marred by the interposition of official machinery which is not only needless and expensive but productive of confusion. But for this departure from the original system, it is my opinion that such a defalcation as that which occurred in 1873, and which appears to have gone on through many months until its discovery in January 1874, would never have been possible.

The task of rectifying and retrenching the official service of the government is one of great responsibility and difficulty and it involves long and arduous labor. With great deference I suggest that the legislative sessions are so crowded with multifarious and urgent matters, that legislators cannot spare the time required for such an undertaking. A special commission ought to be carefully created with authority to employ the best experts and practically to reorganize the departments at the capitol.

Among other heavy burthens on the treasury, which can at once be reduced, are those imposed by the penitentiary and the lunatic asylums.

The crowded condition of the penitentiary and its consequent expensiveness are due to no increase of crime among the people, but to the fault of the law which ranks as felonies such offences as ought to be punished as misdemeanors, summarily and inexpensively. I commend to your attention the bill, matured at the last session of the general assembly, which embodies a partial revision of the criminal code.

The lunatic asylums are encumbered with many cases of senile lunacy. These unfortunate beings are inoffensive and tractable imbeciles, who are known to be incurable. It is said that many of them have competences or belong to families well able to take care of them, and all of them can be suitably and humanely provided for either at their homes or in the public almshouses. At present they so block up the asylums as to exclude cases of recent and curable insanity. The result is that persons of the latter class are kept in the jails with hurtful surroundings and at great expense to the state, and they there become incurable for want of skilled attention. The lunatic asylums are institutions for the scientific treatment and cure of insanity, and they were never designed to be hospitals for incurables.

In this connection, I again call attention to the oppressive and unjust charges imposed upon the state in the transportation of convicts to the penitentiary and lunatics to the asylums. As many as three guards have been employed for the imaginary service of assisting an officer in bringing a manacled and helpless prisoner to the penitentiary. In many cases of the sort, the ostensible guards are parties travelling really for mileage and pleasure at the expense of the state. Where fugitives from justice, often of desperate character, have been brought back from other and even distant states, under executive requisition, it has been my rule not to allow any guard; and yet in those cases a single officer his prisoner safely and without difficulty to the place of his destination. No guard ought ever to be allowed for conveying a convict to the penitentiary; but one of the trained officers of that institution should solely perform that duty and should be allowed, not mileage, but necessary expenses merely. The plainest dictates of humanity require that the pitiable lunatic should be conveyed to the proper asylum only by one of the experienced assistants or nurses of that institution.

The criminal expenses, being the allowances certified by the courts in criminal cases, amounted during the last fiscal year to $177,940.65. During the ten years preceding the war, when the state was more populous and the courts more numerous, these expenses averaged $65,429.31 annually. Such an increase of criminal charges is as unnecessary as it is inexcusable. It is notable that, with no perceptible increase of crime, such charges have greatly increased since the transfer of criminal business from the circuit to the county courts. It is said, with reason, that these allowances against the state are not generally subjected to such inquisition and correction as claims against the county treasuries—the latter being awarded under the eye of the local tax payer by whom they are directly felt. It may be proper for the state to pay the expenses in felony cases, but there is no good reason why all other criminal charges should not be borne by the counties and corporations; and, if this change be made, it is safe to assume that the criminal charges will be so reduced, by local influences and interests, that no county would then pay as much directly through its own treasury as it now pays indirectly through the state treasury, on this account.

There are economic and other still more important considerations which call for a revision of the judicial system. Almost the whole of the complicated litigation resulting from the war has been ended. The business of litigation has been largely and lastingly reduced. It is now generally conceded, and it is undoubtedly true that, if the present circuits be rearranged so as to equalize the labor of the judges, the circuit and hustings courts can henceforth dispatch all causes, both civil and criminal, without delay or inconvenience. Every reason for maintaining the present county court system has ceased to exist, and its continuance as a charge upon the people will be as incongruous as useless. Moreover, in its very structure, the system is liable to the gravest objections. It violates the essential principles, which govern the administration of justice, that the same person should at once be a judge, a practising attorney and a dispenser of county patronage. Those principles forbid that the ermine of the judge and the gown of the lawyer should be worn alternately by the same person, whatever his abilities or his worth. The judge decides in his own court the cause of a party who is his client in another court. The practising attorney champions one side of a question, in one court, which he has to determine as a judge, in another court. Such mixed relations of personal interest and public duty are utterly incompatible with the sanctity, the reverence, the disinterestedness and the absence of all bias, which are the indispensable muniments of the judicial office. In my judgment, it is as practicable as it is desirable to return to the ancient and honored county court system of justices, originally appointed and commissioned by the executive, themselves filling vacancies in their own body, and serving without pay. The gratuitous, disinterested and independent nature of the service caused it to be honored and aspired to, and elevated the men who performed it. Their example exerted the finest conservative influence among the people under whose eye the service was performed. The system was a great factor in molding that distinctive character for Virginia which notably has attracted the respect of mankind. A similar institution in England has been styled, by the foremost statesman of that country, the sheet-anchor of its liberties. The illustrious body of statesmen who assembled here to form a constitution, forty-eight years ago, concurred in the opinion, then expressed, that this system was the conception of a wisdom which had "snatched a grace beyond the reach of art." It is idle to say that the men are wanting to replace the justices who once adorned the county courts. The restoration of the system will of itself reproduce the men.

There are other reforms, besides the retrenchments I have recommended, which should be made to contribute to a reduction of taxes. The present revenue system has defects which make its operation unequal; and it is necessary to equalize its burthens in order to lessen the rate of taxation with fairness to all classes. The existing mode of assessing personal property is an opprobrium to the government. It is the opinion of the auditor of public accounts that the state receives not more than one-third of the revenue to which it is entitled from this source. The assessor is not properly responsible to state authority, and the system invites him to become the ally of the property-holder against the government. At present the tax-payer is virtually a law unto himself; and if he so elect, his assessments may be controlled more by his own volition than by the force of the law of the value of his possessions. The whole system calls for stringent revision. In permanently reforming it, care should be taken to lodge the power of appointing commissioners of the revenue either with the auditor or the courts. The plan of a board in each corporation and county, for equalizing the assessments of personal property, is said to have worked well in some other states.

I again recommend the appointment of a state board for equalizing the assessment of lands.

The new plan of taxing the consumption of alcoholic and malt liquors needs many minor improvements which will readily suggest themselves: such as amendments rectifying the disproportion of the tax on wholesale dealers and authorizing the auditor to employ the direct agencies necessary to a uniform enforcement of the law. While I preferred and recommended what is known as the gallon tax on sales of spirits, as calculated to raise more revenue and to produce less resistance, yet the present system has been put in actual operation at considerable expense; it has as yet received none but an imperfect and insufficient trial; and now when, in spite of all difficulties and disadvantages, it gives promise of great usefulness as a revenue measure; it would be in the last degree improvident and unwise to repeal it without fairly and thoroughly testing its merits.

The oyster-beds are the absolute property and the ungranted domain of the commonwealth, and though annually affording immense profits to non-residents and others who maraud upon them at will, they are practically untaxed and yield no revenue. The gross annual yield of this state property, thus virtually given away, is not less than twenty millions of dollars. It is difficult to see how the state can constitutionally or justly tax the estates which its citizens have purchased or inherited, and, at the same time, throw open this rich domain of its own for the unlicensed, gratuitous and unlimited possession and use of non-residents and all others. If the oyster-beds are not to be preserved and taxed as other property, then they should be disposed of at once either by lease or sale.

The school fund.

From the year 1870 to 1874, that part of the school fund, which was payable out of delinquent taxes, fell imperceptibly into arrears. No arrears of that description have subsequently arisen. Their accumulation during the period named was occasioned as follows: The delinquent revenues—such as were due by defaulting officers, then numerous,—had to be collected by suit, were subject to all the delays incident to litigation in the courts, were in some cases wholly lost by reason of the insolvency of the defendants, were in others abated or compromised by special acts of assembly, and they were generally received after many delays, often extending through years, and then in irregular instalments and in small sums. The cost and expense of collecting each of these claims could only be ascertained after the last instalment upon it had been received, and therefore the division of such scattering receipts, between the general treasury and the school fund, was postponed until a final settlement could be reached which was necessary to show the net sum to be so divided. It was thus that, while these numerous small balances were awaiting the final returns necessary to an accurate settlement and division, they grew to the aggregate sum of $382,732.26,―the highest amount ever reached by such arrears in the past—and thus they accumulated imperceptibly to the officer who had them in charge. Even the superintendent of public instruction was wholly ignorant of their existence until January 1876. Legislative committees, examining the business of the auditor's office, had regularly reported their approval of the manner in which it was conducted. No provision of law required the auditor to pay over to the school fund its proportion of each separate fragment of delinquent revenue at the time of its receipt. The auditing department acted with perfect integrity and good faith throughout the progress of these transactions, and no censure can justly attach to any of its officers in the premises. The charge that these funds were diverted to creditors, or were ever diverted at all, is wholly without foundation.

All other school funds have been accounted for and paid over by the auditor, as they were demandable, except a balance which unavoidably fell in arrears, during the last fiscal year, but which is now no longer due. Some months ago, when the receipts from an important source of revenue were cut off by the injunction of a federal court, as before explained, an extraordinary deficiency in the treasury resulted, and for a brief period it was impossible to raise money enough to meet the demands of the government and at the same time pay the school quota in full. The balance thus due and unpaid to the school fund, at the end of the last fiscal year, on account of revenues collected during that year, was $60,000. That balance has since been not only met, but overpaid by $15,000, so that nothing now remains due the school fund, except the residue of such arrears as grew out of the delinquent taxes, from 1870 to 1874, as stated above.

As the balance of $60,000 was due the school fund on the revenues collected in 1876–7, why was it not paid over until after the expiration of that fiscal year? I answer, because an absolute necessity and the clearest requirements of law made it the duty of the auditor to withhold it for the time being. The supreme object and requirement of the constitution is that the government shall be maintained for holding society together and preserving the existence of the state. Another and important but subsidiary requirement is that the public schools shall be maintained. If the existence of the government cease for want of the means of supporting it, then the school system as well as all other public interests must go down in the general catastrophe; for the maintenance of the schools depends upon the prior maintenance of the government. Moreover, the school fund is not collected and paid into the treasury separately, as I have recommended; but all the revenues are received into that common reservoir, and the law provides that all disbursements therefore shall be made on the warrants of the auditor and not otherwise. Out of this general fund, the statutes require specific sums to be paid for the support of the schools, and in terms equally mandatory they require other specific sums to be paid for the support of the courts, the departments and the public institutions. In this instance it happened, for a brief period, that there was not money enough in the treasury for paying in full the several sums thus appropriated by different provisions of law—all equally mandatory in their terms. To make all the payments required by law was plainly impossible; and thereupon the auditor drew his warrants upon the treasury for so much money as was barely and absolutely indispensable for keeping up the existence of the government, and all that was left he turned over to the school fund. What else was he to do? If at that time he had paid over to the school fund its quota in full, no sufficient means would have been left for continuing the existence of the government. Was he to treat the school interest as paramount to all others, to surrender to it the balance in the treasury, and thereby cause the lunatics to be deprived of food, and inmates of the penitentiary and jails to be turned loose among the people, and the entire machinery of the government to be stopped? In an issue of life and death between the state and the school system, it is to be said that the state must perish and the schools survive? Does the bond of the constitution so nominate and exalt any one of the departments, over all others, that it may, whenever the letter of the bond is forfeit, cut its pound of flesh from the body of the state, nearest its heart, even at the sacrifice of the life of the state?

The charge, that this action of the auditor was in any sense a diversion of the school fund, is unwarranted and gratuitous. To divert a public fund is to turn it aside from uses which are legitimate to other uses which are illegitimate. If, under the circumstances, the auditor had responded to the demands of the school fund sooner than he did, he would have perpetuated a criminal diversion of funds primarily liable as well as necessary for maintaining the existence of the government.

The school system is the creation of organic law. The constitutional obligation to maintain it is not questioned. In all my official relations to that system, I have endeavored to support it fairly, efficiently and in the spirit of its founders. But if it is to override all other interests, however momentous or sacred; if the claims of the school department upon the funds in the general treasury constitute a lien paramount to every other; if the existence of the government, in an emergency, is to be dependent upon the leniency of that department; then, the sooner it is shorn of its dangerous supremacy the better.

The inspection of tobacco.

The legislation of the last general assembly on this subject embodied the substance of important provisions which I had recommended, and although it contained patent defects which caused doubts as to when its operation would begin and as to how it effected [sic] pre-existing law, yet being submitted for my approval on the eve of the final adjournment when no time was left for legislative revision and correction, it was deemed wisest to approve it with a view to the amendment of its details at the present session.

In view of the uncertainty of the law, it has been considered best not to dispose of the public warehouse for the future by lease, but to leave that subject open for legislative action.

The long-continued controversy in regard to the inspection of tobacco should be speedily and finally solved. Almost any well-defined system of inspections would be an improvement upon the incongruous and easily-evaded provisions of the law which I have been called on to enforce heretofore. On taking charge of this office, I found that the allowance of rebates to middlemen at the warehouses, and other practices plainly prohibited by law, were prevalent. By these practices, planters and sellers of tobacco paid more for its inspection than was actually charged and received on that account at the warehouses; and in this way expenses, aggregating a large amount, were needlessly imposed upon the producer and seller. It was not for me to say whether the requirements of the law were right or wrong, but to execute them. Without hesitation I discarded former incumbents and appointed new inspectors pledged to comply with the law strictly and to reform prevalent abuses. The few, who were disappointed in the dispensation of executive patronage, raised an outcry which was mistaken through the country for opposition on the part of commercial circles in the cities to the just reforms thus inaugurated. Although those circles really did nothing in the premises, yet this clamor of the dissatisfied few produced misunderstandings and jealousies between production and trade which had the effect of diverting large quantities of tobacco from marts to which it legitimately belonged. As an insect is said to make more noise than a hundred great beeves quietly grazing, so, in this instance, the din raised by the exceptional agitator was louder and more noticeable than the actual movements and demands of trade, and it led to the injury of all the real and meritorious interests concerned.

There is no cause and there ought to be no pretext for conflict, between production and trade, in connection with the great staple of tobacco. In this as in all other relations, the real interests of the town and the country are one; they are indissolubly interwoven together, and the progress of each depends upon the prosperity of the other. Our noble and beautiful metropolis is largely dependent for its commercial growth upon the sales and the manufacture of tobacco. In order to accomplish its great destiny, it is necessary to build up the interests on which its growth depends; and legislation on this subject should be such as to promote equally and impartially both the country and the town, both production and trade, by fostering confidence, co-operation and good-will between them.

The canal and its connections westwardly by rail.

The policy of building a railway through the great mountain pass between Buchanan and Clifton Forge, is no longer the subject of controversy. About three-fourths of the work of constructing it is already done. A few months hence, when completed, it will be found to have been built at a third of the cost and in a third of the time required for the construction of the canal between the same termini. Should the water line be extended to Clifton Forge, the railway alongside of it will so facilitate its extension, in the matter of transporting material and supplies and otherwise, that it will be found to have been the possible investment in the interest of the canal. But it will produce speedier and better results by establishing a connection between the great coal and iron belts, by bringing the best ores and the cheapest fuel into juxtaposition, by utilizing the incalculable natural wealth of an important division of the state, and by increasing the business of the canal, and thus reinvigorating that immense but languishing interest. Nevertheless, prompt legislation is necessary to ensure these results.

The canal has been seriously injured by the late calamitous flood. While the injuries are not irreparable, the canal company is without the means and ability requisite for restoring the property. I recommend that all the able-bodied and disposable convicts of the penitentiary be employed at state expense in repairing and improving the canal and completing the railway to Clifton Forge. The state virtually owns the water line. The capital stock of the canal company is $12,400,000, of which the state owns $10,400,000, and of this last sum $7,400,000 is preferred stock. The state can better afford to feed and clothe the convicts, while giving increased value to this largest of its properties, than to support them in idleness and in unprofitable employment at the penitentiary.

It is presumed no objection will be made to amending the charter of the railway company, so as to extend the time within which the road is required to be completed,―the propriety and expediency of such a measure being self-evident.

Miscellaneous.

I recommend all such constitutional legislation for the relief of the unfortunate sufferers by the late flood as may comport with the future demands of the treasury.

The able report of the state commissioner of fisheries is commended especially to your attention.

Where appointments to places of honor or emolument are conferred at this office, it would seem proper that the appointees should be selected by the particular executive during whose term and under whose supervision they are expected to serve. Acting upon this rule, I have declined to encroach upon the province of my successor by choosing appointees to serve during his term, except where the law or the public interest plainly dictated a different course. Accordingly, I have forborne to appoint commissioners to represent the state at the approaching international exposition, provided for by joint resolution of the last general assembly, because their service cannot commence for some time after the expiration of my official term.

I have declined to fill any of the vacant commissioners of general and field officers of militia. What is known as the reserve militia is an imaginary organization, not enrolled, and without existence even upon paper. The appointment of titled commanders for that mythical army, though authorized, is not enjoined by law, is called for by no just reason and by no public interest, and it offends the sensibilities of that great and honorable body of the people who have served as real soldiers, many of whom have won less pretentious but far better titles by heroic deeds in actual war.

The necessity for returning to the ancient and honored mode of voting at elections by the living voice; for readjusting the means of supporting the public schools so as, without impairing them, to quiet the increasing conflict between property and public education; for prohibiting special legislation in every case where a general law is possible to be framed; for cutting down the overgrown proportions and expenses of both state and local government;—these and many other considerations demand that the constitution shall be reformed throughout, either by a convention or by a commission or by the legislature. The present constitution was the offspring of influences alien and unfriendly to Virginia, and it is wholly unsuited to any community whose population is less dense than that of the New England states.

The late vacancy in the office of attorney general.

On the 16th day of August last, Raleigh T. Daniel, esquire, attorney general, departed this life; and at an early day thereafter I appointed James G. Field, esquire, as his successor.

The untimely death of the late incumbent was as great a calamity as the commonwealth could then have sustained in the loss of a citizen. For genius, for learning, for classic eloquence, for incorruptible purity, for shining efficiency and fidelity in official service, and for proud devotion to Virginia, few equals and no superior survived him. Let his memory be enshrined as a cherished possession of the commonwealth.

Conclusion.

Not a few of my predecessors, in closing their final messages, availed themselves of what is known as "the privilege of a parting word." It was the sanction of a custom which thus permitted them, upon leaving the chief executive office, to vindicate or explain whatever in their official action had specially provoked criticism of their motives. I shall honor the custom by deliberately breaking it. If my official service has been worthy of Virginia, then it shall speak for itself. If in aught I have been unfaithful or unequal to the high trust which a generous people committed to my charge, then no words of ingenious defence or apology can change faults into virtues. All I know and all I dare affirm is, that, having stood steadfastly against every opposer for what I have adjudged to be truth and the right, I shall now deliver into the hands of my successor the crown of Virginia's honor, without a stain or spot or blemish sullying its purity or its traditional glory.

JAMES L. KEMPER