omy in administering institutional affairs. It has always been looked upon with favor by our institutions, as this gives them two chances at the state treasury. The supplemental budget has with us had some justification; as in the past, requests for funds were filed a year previous to the operation of the budget, which, under normal conditions, makes a scientific distribution of state funds and the administration of institutions somewhat difficult. It has tended to make the Appropriation Committee careless and provided a ready means of pushing its responsibility on to its successors. When New Jersey adopted its Executive Budget, we determined to get away from a supplemental or emergency budget, but not until last winter were we able to accomplish this purpose. In 1917, to meet the unforeseen requirements arising from our entrance into the war, we granted a lump-sum emergency appropriation, and placed its distribution in the hands of the State House Commission, which is composed of the governor and the heads of the several departments; this provided relief for many trying conditions which could not have been foreseen in either our annual or our supplemental budget.

Last winter, we changed our fiscal year from November 1 to July 1, thereby bringing the operation of our budget four months nearer the time for filing requests for funds, and within three months after its final adoption. By thus bringing the operation of the budget within a reasonable time after its passage, and with the means of relieving the distress of unforeseen conditions through our emergency fund we were able to do away with the supplemental appropriation bill for the first time in several generations.

I appreciate that the power given the State House Commission to transfer appropriations and the expenditures of our emergency fund does violence to the theories of that school of budget making which adheres strictly to the detailed or segregated budget. I will, for the moment, accept this plan of making appropriations, but in so doing, must ask its defenders to accept with it the necessity for more care and intelligent thought in the making than is given the average budget, whether executive or legislative. I recognize the force of the argument in support of the segregated budget and freely admit that the carefully detailed appropriations bring the expenditures of such a budget under more definite control. I am inclined to the belief that the lack of flexibility of such a budget

surrenders economy and efficiency in its operation. At the same time, we must admit the force of the argument on the other side, viz., that those who know most about an institution can best administer its affairs, and that a detailed budget destroys the incentive and even the opportunity for the exercise of initiative and executive ability. In other words, it makes the executive head or board of managers of an institution simply the errand boys of the budget and its makers; in short, I will accept the detailed budget only after the most positive assurances that it has been intelligently made.

To sum up my conclusions, I am a firm believer in the Executive Budget. It has proved to be a vital part of our plan for a business administration of state affairs. It appeals to me as a step in the right direction, but I wish to emphasize again my unbounded faith in a permanent specialized budget commission as the necessary adjunct to, or rather as an indispensable part of any budget plan. I believe this will prove true in New Jersey, as well as in other states, as I am convinced that no budget will be the instrument for a scientific distribution of state funds until it has the support and guidance of such a commission.

DISCUSSION OF THE NEW ERA IN BUDGETS

VICTOR MORAWETZ, New York city, presiding: The popular meaning of the word "budget" is decidedly vague. Almost any more or less detailed, more or less accurate estimate of expenditures during some more or less definite period of time is commonly called a budget. For example, a few days ago a friend stated to me that she kept a budget of her personal expenses for each quarter, and she said that it always came out right because every evening she added to her budget any expenses which she had forgotten. I asked her how she managed to make this budget balance with her income. "Oh," she said, "whenever I exhaust my bank account I just stop paying cash and have things charged, and then add the things charged to my next budget."

Of course students of government do not use the word "budget" in this loose though perhaps convenient sense. To them a governmental budget means a complete, detailed and accurate estimate of all the contemplated expenditures of the government during the next fiscal period, together with a complete and definite plan for meeting those expenditures.

Moreover, students of government recognize that a sound procedure for the preparation, the initiation and the adoption of a budget is a matter of as great importance as the budget itself. The chief executives of government, the president, the governors, and the heads of the various municipalities throughout the country have charge, or should have charge of the conduct of the affairs of their respective governments and of the expenditure of the government funds, for which they should be made politically accountable. Without a sound and well regulated budget procedure it is impossible to hold these executives to this responsibility. A sound budget procedure, therefore, involves first, the preparation of the budget or financial program by the chief executive in collaboration with his several heads of departments, and its submission by the executive in its completed form to the legislative branch of the government; second, the executive shall have ample opportunity to appear publicly before the legislature, sitting as a committee of the whole, to explain the budget, to meet criticisms, and to take an active part in perfecting it; third, the legislature shall have power to reduce or cut out items, but no power to increase items or to add items which the chief executive does not want, and for which, therefore, he cannot be held responsible.

This in brief is the system which has been adopted in every civilized country, I believe, excepting our own. It is only an adaptation of the methods universally applied to the conduct of large business enterprise. Any business man would scout the suggestion that the financial plan of his company should be formulated either by one committee or by half a dozen committees of his board of directors, in the absence of the president who has charge of its business, and that it should then be adopted by the board of directors without consulting the president. Yet that is sub

stantially the procedure of our national government and of the goverrments of most of our states and municipalities.

The procedure in vogue in the United States was developed early in the history of the country as a result of political conditions. In consequence of this, a large part of the people, including many of our legislators, seem to think that it is a natural procedure. They fail to appreciate how utterly unbusinesslike it is, how demoralizing to the legislators, and how subversive of all good government.

One of the most important functions of institutions like the Academy of Political Science, the Bureau of Municipal Research, and the Institute of Government Research, is to make the voters understand the extreme importance of adopting a more sound and businesslike method of preparing and accepting financial plans for the budgets of their respective governments.

MR. ROBERT DOWLING, of the New York Real Estate Board: The method for so many years of keeping a large amount of expenditures out of each annual budget was by issuing long-term bonds. The Real Estate Board is not in favor of issuing bonds for temporary improvements, even for school houses. It is in favor of the "Pay-as-you-go" policy for the City of New York.

For the past twenty years since consolidation, we have had an increasing tax rate, a rate that began in 1902 or 1903, when we increased our assessed values. Under the former method about two-thirds of the real value was assessed, while at present property is assessed presumably at one hundred per cent of the market value. I should say that the City of New York is now over-assessed. Competent judges have thought that we are assessed as high as twenty per cent over the real value.

We have suggested various means of saving money, but we all know with what results. The city's expenses have increased year after year. We have a 2.36 tax rate in New York city. A limitation in the constitution of the state of New York limits cities to an annual expenditure for local purposes of two per cent of the assessed value of the property within the city limits. The addition above two per cent now is for meeting the debt service and the state taxes. I am informed that the 2.36 rate today means 1.66 for local purposes and 70 for state taxes and debt service. We are within thirty points of the limitation fixed by the constitution and we are perfectly willing to reach the limit of two per cent. Then we are stopped by the constitutional provision, not in the charter. Very few people in New York seem to know that the constitution fixes that limitation. Last winter when I was appearing before some of the senate committees I was told by one of the leading senators of the state that the limitation was in the charter, but it is in the constitution of the state of New York.

While this war continues, while the cost of labor and materials is at least one hundred per cent over what it was in 1914, this expenditure should stop. We should utilize the plants that we have, whether for schools or any other purpose. We can use them. We are not getting the use out

is collecting from real estate over $100,000,000 annually beyond what it collected in 1903. It is collecting in personal taxes $4,000,000 to $5,000,000 less than it collected in 1903. We propose that the City of New York be limited in its expenditures by the legislature, which has that duty put upon it by the constitution. That also has been forgotten. The legislature is specially directed by the constitution to limit the expenditures of cities, and it has done nothing, so far as I know, to accomplish that. It has done nothing but increase the expenses.

At the last session the Committee on Taxation and Legislation, of which I am chairman, presented a bill to fix the tax rate in New York city at 1.75% and fix a 2.0005 tax on personal property in this city. There is something awry when $4,000,000 of personal taxes was collected in the City of New York in 1916, and the same district now pays $900,000,000 in income taxes to the United States government.

We do not endorse any system of issuing bonds for these improvements. We are in favor of charging it to us in the annual budget. We prefer to pay the additional taxation rather than to have this debt heaped upon the City of New York. We can watch the budget each year much more easily if it includes $15,000,000 or $20,000,000 than if bond issues to those amounts are made. We are opposed to the plan that Controller Craig has advocated here. We are perfectly willing to accept the burden fixed by the constitution.

FRANK J. GOODNOW, President of Johns Hopkins University: I have noticed that in the remarks which have been made with regard to a budget it has been spoken of as a program of work for the next ensuing fiscal period. The Maryland budget amendment does not regard the budget in that light, and it is going to be difficult for any state budget or for any budget that may be adopted for the United States to be so considered. If an executive budget law takes away from the legislature the right to increase any of the estimates which have been made by the governor, at the same time the governor must be required, as he is required by the budget amendment of Maryland, to present not so much a program of work to be done, as a plan for financing an organization already in existence. If you have no system of cabinet government as it exists in England, where the budget system originated, a governor can, by refusing to estimate for any enterprise to which he is opposed, disrupt the entire state administration. Suppose that under the law a public service commission has been provided with certain functions to discharge, and with salaries fifixed. Can the governor, by refusing to put in any estimate for the public service commission, wipe it out of existence? That is the result of considering the budget as a program of work. It can be a program of work to be done for the next fiscal period, that is, a program of work to be done under the discretion of the governor, only where the legislature has some power to put the governor out of office. It does not have such power under our system where the governor refuses to provide for an administration as fixed by law. We have attempted to provide that the governor must put in estimates for the organization as it is under the law. As Governor Harrington has