I understand that my remarks are to be directed largely by the questions, rather than any set speech on my part. I will gladly answer any other inquiries. THE CHAIRMAN-Well, we will try to think out some questions for you, Doctor. MR. DICK-What is the custom, Doctor, in the majority of the states, or the practice, rather, in relation to the fiscal year? DR. CLEVELAND-I cannot say as to what the custom is in a majority of the states in this country, but the digest, which is going through the printer now, prepared by the Legislative Drafting Bureau, gives you that exact information, and I would refer you to them. MR. LINCOLN-I understood Mr. Harris, who spoke here yesterday, to say that a budget system had been adopted by some state during the past ten days; do you know anything about that? MR. CLEVELAND-I do not know of a true budget system in the American states. There are various acts, both legislative and constitutional, which have been called budget systems, and they are about as far removed from it as anything could be. The word "budget" has a number of very different meanings, and in this country it very seldom means a budget as the term is used where this form of control is effectively employed to enforce responsibility. In this country the term budget is sometimes used to mean the preliminary estimates that are prepared by departments, and usually the departmental officers are made the ministerial agents of the legislature to submit whatever the heads of those departments may wish, and they call the estimates so submitted the departmental budgets. They do not bear any of the earmarks of budgets, as budgets are understood in budgetmaking countries. MR. LINCOLN-I stumbled on one in the library the other day about a foot thick-of the state of Illinois. DR. CLEVELAND-Yes? MR. LINCOLN-That had more of the earmarks of what we have been told is a proper budget than anything I have seen. DR. CLEVELAND-I was very much interested in Mr. Fitzgerald's characterization of Mr. Taft's effort in Washington along that line, Mr. Fitzgerald claiming that they had something of a budget system down there. Now, as I understand a budget, if it means anything as an instrument of control over the finances in representative governments, it must have two essentials: (1) it must be in itself a complete financial plan and presented in such form that people can think about it in making decisions about the next year's business arrangements; (2) it must be submitted by someone who is responsible for the financial policy of the government or institution. Now, what they have in Washington, and what they have in most of these states does not meet either of these requirements; it is neither a financial plan nor is it a statement submitted by anybody responsible for the financial policy of the institution. THE CHAIRMAN-Let me interrupt with something more hopeful right here. It is a fact, is it not, that there have been a number of studies lately of this subject in the different states? I refer particularly to Minnesota. DR. CLEVELAND-Yes, and Illinois made one recently. DR. CLEVELAND-Yes. THE CHAIRMAN-And the commissions which have been engaged in these studies reached in their recommendations, all of them, substantially the same lines of sound financial methods, so far as their constitutions would permit them? DR. CLEVELAND-With this exception. They have about the same concept of what the budget as an instrument should contain, i. e., that it should be an instrument which presents both sides of the financial picture and shows what the probable deficit or surplus will be (assuming that there were no change in your revenue rate) and what additional revenues or borrowings are necessary in order to meet the estimated requirements. In the description of the budget as an informational document there is substantial agreement. The difference lies in recommendations with respect to procedure. Some have left out of account the second principle suggested, namely, that it should be prepared and submitted by some person or group of persons that is responsible to the state at large for execution of the plan-some one who is responsible for proposing a financial policy that is adapted to actual working conditions. It is on the second requirement where there are differences. In Wisconsin, for example (a part of what is sometimes called the Wisconsin idea, I think), they have a mixed commission, one partly made up of legislative members and partly of executive members, the same as we have had in New York. Well, the fallacy of that thing was shown right here in New York, where the members of the commission failed to reach a decision. This proved to be absolutely unworkable because the members of the two branches of the government, the legislative and the executive, could not get into an agreement and therefore did not report at all. THE CHAIRMAN-That is why I left out Wisconsin. THE CHAIRMAN-I mean the idea of mixing up the proposer of a plan for revenues and expenditures and the critic was the error of their method, wasn't it, the same as the error of our method? DR. CLEVELAND-Yes, I think so. THE CHAIRMAN-In the other states they have reached quite different conclusions. DR. CLEVELAND-Well, I think the prevailing opinion within the last two or three years is coming very strongly to be that the budget in its inception must necessarily be an executive document, and that it should be authoritatively prepared and submitted as a program of the executive to be criticised, rejected or adopted by the appropriating body. THE CHAIRMAN-The Wisconsin idea, as I recall it, was an old one; their system has been in effect some little time. DR. CLEVELAND-Yes, but in a little different form. Where there are two houses to work with of course a rather complex problem is presented on the legislative side. And that is another thing we have now here in this state. It has worked itself out, however, in budget-making countries, either by requiring joint consideration or by making the upper house more or less of a passive body. Sir Thomas Erskine May, the great English constitutional authority on parliamentary practice, characterized the relations of the executive and the law-making branch in this way: The Crown or executive demands money, the Commons grant it, and the Lords assent to the grant. And in the last few years the British have come to a point where they do not even consider that the Lords' assent is necessary. The usual thing is to put the granting power, we may say, or determining power, in one house, and then make the executive deal with the appropriating house of the two chambers, simply giving to the other one a passive consent. You perhaps recall that this presented itself many years ago in Prussia. In 1850, I think it was, the King granted a constitution to his subjects, but he did not set forth in this constitution which house should pass on appropriations. A few years later the lower house turned down Bismarck's budget, and he put it up to the upper house, got their consent, and then went on and spent the money on that authorization for three years. After they had finished a successful war with Austria, and settled some of the exigencies of the realm, then William I. came in and asked the lower house to establish a practice by specific provision. But we have had a similar situation developed in our practice, where the executive has been made the budget-making authority of the government as in the colonies, in Porto Rico and the Philippines. There, since it is necessary under their enabling acts or fundamental law, to get the consent of the legislature it was also found by experience to be necessary for Congress to pass a statute authorizing the executive to go ahead and spend at the previously established rate in case of failure to obtain a grant or in case of deadlock. Unless the constitution gives to the executive the power to dissolve the legislature there is no other way out of it. THE CHAIRMAN-No other way except to trust to common sense. DR. CLEVELAND-There is no such thing as common sense when there is a deadlock between two branches of the government-it is a matter of selfish partisan interest that rules. THE CHAIRMAN-Well, I don't know. DR. CLEVELAND-Deadlocks are not broken by common sense; it is brute force that breaks a deadlock. THE CHAIRMAN-We get around a great many here. DR. CLEVELAND-What would have happened in the government of the United States if, as in 1912, Congress had refused to make temporary provision authorizing the executive to spend money from July on until the 24th of August, when they passed the annual appropriation bills after Mr. Taft had vetoed some of them. THE CHAIRMAN-That is just an illustration of the common sense. They did. DR. CLEVELAND-It happened in that case that they did; but what would have happened if they had not, as the lower house did with Bismarck? The executive would have been obliged to have exercised his discretion, and that would have been in a manner to keep the government going. THE CHAIRMAN-In this country these tests of extreme logic do not occur quite as often as they do in more logical and less commonsensible countries. DR. CLEVELAND-But we have never had a situation presented here which required the exercise of such common sense, because the executive never had any of these responsibilities laid upon him. MR. BANNISTER-What has been the effect in your judgment of the powers of the fiscal supervisor in relation to charities? DR. CLEVELAND-Well, it seems to me that is simply a part of a system of irresponsible government as we have developed it in this state, and as it has been developed in this country very largely. That is, the theory in this country has been, as has been brought out by a number of speakers, that the aim of the constitutions and of all our past political thinking has been to render both legislative and executive officers harmless, rather than to give them responsibility and then hold them to it through some means of getting issues raised promptly before the people. With our constitutional theory of checks and balances we have attempted to get some efficiency into our institutions by making the departments independent, either by electing self-perpetuating bodies, or bodies whose appointments and terms overlap and continue from one administration to another, or by some other method of isolating the executive and depriving him of control over the department. With departmental or administrative decentralization and executive impotence, it has been thought desirable to inject some kind of supervision somewhere over the finances, and therefore in this state we have attempted to carve out offices of independent financial control again, built on a theory of checks and balances. Instead of giving to one executive officer responsibility for fiscal policy we have set aside a number of officers in the constitution and said that a fiscal supervisor will pass on all expenditures of one kind, and another officer on those of a second kind; that their action shall be reviewed by a third and honored by a |