In order that the burthens of taxation may be distributed fairly and equally throughout the state, it is plainly essential that the assessments shall be revised and rectified by a state board of equalization. It is suggested that such board might command more confidence and give greater satisfaction if chosen by joint vote of the general assembly. A rich vein of increased revenue is to be found by reforming the present most ineffectual system for assessing and returning personal property. That system holds out continual premiums to frauds on the revenue. Under it the tax-payers are often virtually the assessors of their own personal estates, and in relation to their property tax are "a law unto themselves." The result is, the honest and poorer man often pays heavier taxes than his richer but less scrupulous neighbor. The evil, like all unchecked evils, is increasing, and enormous annual losses are chargeable to its growth. The public morals as well as the public finances call for its eradication. In some of the states a system for equalizing personal-property values, in accordance with general regulations prescribed by law, is said to have proved an effectual remedy. I commend the subject to your careful consideration. THE PUBLIC DEBT AND THE FUNDING BILL. The principal of the debt proper on the first of $29,957,010.75 The like principal on the first of October, 1875, was 29,514,426.38 Showing a decrease within the last fiscal year, re sulting from the operations of the sinking fund, of $442,584.37 The bonds constituting the debt are classified as follows: Bonds with tax-receivable coupons attached, amount- Other bonds, not so convertible, $18,881,500.00 1,355,515.80 Together making the principal of the debt, as above stated, The arrears of unpaid interest of all classes amounts to Showing the total debt proper, including principal and interest, to be $20,237,015.80 9,277,410.58 $29,514,426.38 2,781,030.53 $32,295,456.91 of which the sum of $2,781,030.53 bears no interest. The whole debt proper as assumed by the funding act was $30,478,741.49. It has since increased by the sum $1,816,715.42 by reason of the accumulation of interest arrears, and during the last four years the average increase from this cause has been $454,178.85 for each year. I make no account of the third, of the original ante-bellum debt, which was by the terms of the funding bill contract set apart and assigned for future settlement with West Virginia. The sum so assigned stands as "West Virginia's third." It is not a part of the existing debt of Virginia. Under the terms of the funding act, as acceded to by creditors, and consequently forming a contract between the state and the parties so acceding, no liability can attach to Virginia for the payment of the third thus assigned, except by virtue of a settlement yet to be consummated. It is West Virginia's debt. How can any settlement be reasonably conceived to be possible which could impose on Virginia the payment of West Virginia's debt? I shall waste no words in discussing a contingency which would involve an incredible wrong to Virginia, and which, to say the most for it, is now the remotest of all imaginable possibilities. I go further, and pronounce it an obvious impossibility. But as to the debt proper of Virginia, which our predecessors newly and expressly assumed by the terms of the funding act, our obligations are clear and plain. Even if it were conceded that the federal government, by destroying the entity of the original state, became liable for the debt, nevertheless, by the terms of the funding act, and by the subsequent sealing and delivery to creditors of the bonds it provided for, Virginia has assumed new, independent and inviolable obligations for their payment. These bonds constitute our debt, and in respect to their payment it is due to the honor. and credit of the state, it is demanded by every material interest of our people, that the voice of the government and of each of its departments shall give forth no uncertain sound. The shortest way of acquainting the newly-elected representatives of the people with my own views and recommendations on this subject of paramount importance, is briefly to reproduce my undeviating official action thereon in the past. In my inaugural message, I said: "Obligations to public creditors, binding the honor and good faith of the commonwealth, should be fulfilled to the utmost of her ability in any event and under all circumstances. No other calamity could inflict greater detriment, either moral or pecuniary, upon the whole body of the people, than a deliberate breach of public honor:" and in that connection, I argued that by a system of thorough retrenchment and economy, and by taxing our untaxed resources, together with needed changes of the constitution, the state would be enabled to meet all the obligations to creditors, then and now existing, and at the same time to reduce the general taxation. In a special message on the subject of the finances and debt, transmitted on the 27th of March, 1874, I said: Any separate action of ours must of necessity have regard to the terms of the fanding act. However unwise or precipitate its enactment, it were idle now to question its validity. It was the act of competent authority; under it the bonds of the state have been executed and delivered, and we cannot go behind them. To the extent to which its provisions have been accepted, it is undoubtedly a binding contract between debtor and creditor, and it is incapable of being modified without the concurrence of both contracting parties." No grosser fallacy can be conceived than the one which claims that a commonwealth can flourish while its credit is in a state of prostration and dishonor. Capital will surely shun the state until its credit is established on a sound basis." The best evidences exist that a great influx of immigration and capital may be expected as soon as the integrity and stability of our government shall be demonstrated beyond question. Action tending to impair the public credit or to depreciate any class of our obligations, the application of surplus means to any purpose other than the payment of the interest due creditors, and especially the use of such surplus in the purchase of our own depreciated paper, would inflict lasting and grievous wrong and loss upon our own people. If even partial repudiation were practicable, it would subject the state to pecuniary losses very far exceeding the amount of the public debt." Our real relief lies in the restoration of confidence and a good understanding between the state and her creditors; in such settlement of the public indebtedness as will restore respect for our good faith, as will command the assent of creditors, and secure to them the regular and punctual payment of the utmost interest we are now able to pay, only postponing such part of our undertakings as our poverty renders impossible of performance for the present. It is certainly in our power, if we now enact a just and efficient system of taxation and prudently husband our resources, to pay henceforward four per centum per annum on the entire debt intended to be assumed by the funding act. It is believed that an understanding can be had with creditors, by which we might guarantee with certainty the regular and punctual payment, in semi-annual instalments, and at convenient places, of two-thirds of the aceruing interest for the present, giving proper certificates for the deferred interest, and providing for the payment of full interest, together with all arrearages on interest account, as soon as our steadily increasing resources shall permit." It is believed that a fair and deliberate conference between the state and her creditors will result substantially in the settlement NOW PROPOSED-a settlement providing for the payment of such reduced interest, for the time being, as may correspond with our reduced means, and for such greater interest hereafter as will steadily increase with our increasing population and resources-so that the whole debt as heretofore assumed, together with the full interest as now agreed, will be discharged ultimately and just as quickly as the best ability of the state will permit." With such wise forbearance on the part of creditors as their own best interests dictate, time will restore to the state all her strength and render the burthen of the debt easy to be borne. If the wealth and population of the single city of Richmond shall continue to increase in the ratio of the past, the mere increase of revenue to be derived, at existing rates of taxation, from our metropolis alone, will in a few decades suffice to discharge the unpaid interest and cover the present deficiency in the treasury." "I invoke .. such legislation as will keep untarnished the public honor." The legislature having sanctioned this proposition for a conference with the bondholders, that body, representing a large propor tion of the home and foreign debt, was convened on the 10th of November, 1874. My foregoing plan for an agreement to suspend or postpone such portion of the interest as the state was unable for the time being to provide for, until "our steadily increasing resources" should discharge the full interest, together with all arrearages on interest account," was submitted to the conference, and its exact substance was unanimously agreed to by that body. In my last annual message I recommended that the action of the conference should be carried out by appropriate legislation; but that recommendation unfortunately failed. In seeking by means of the conference to postpone a portion of the interest, and so to make the general burthens of the government as light as possible for the time being, a leading object was to afford needed relief to the most depressed and unproductive subjects of taxation and to assist in restoring them to a healthy condition. Among other unfortunate classes of our people, a large one is composed of those farmers who came out of the war loaded with debt, and whose returns from the soil have been greatly reduced in consequence of the disorganized condition of farm labor. If, as has been proposed, the general rate of taxation were raised as high as could be borne without injury by the most prosperous classes, that rate being applied with the uniformity which the constitution requires, would ruinously burthen such suffering and embarrassed classes as the one mentioned. A wise political economy would teach us to adjust the burthens of the government so as to promote the improvement of the latter classes and to facilitate the recovery of their former productive capacities. The opposite policy would treat them as impediments upon the public progress and would crush them beneath it, in order that their places might be supplied with other and more fortunate occupants. Such a policy would diminish the production and the taxable values of the commonwealth; it would in the end curtail the revenues and the payments upon interest, and it would beget wide-spread hostility to the debt, while its literal execution would revive the cruelties of Caligula. It became my duty to lay before the conference a fair and full exposition of the public finances, and to explain to the bondholders our continued default in the payment of interest. As a part of that duty, I undertook to demonstrate that the funding act was a disastrous mistake, based upon exaggerated estimates which claimed for the state twice its actual wealth, and which promised the immediate payment of such semi-annual interest as exceeded our ability to pay. But, at the same time, I expressly recognized the validity and obligation of the funding act, declaring that, to the extent to which creditors had acceded to its terms, "a new, valid contract had undoubtedly been consummated between the state and the creditors so acceding." It was necessary and proper to scrutinize the funding act and to develop and expose its unwisdom, in order to ascertain clearly the difficulties it imposed and to provide the best possible means of meeting them. But such exposure was still more important and indispensable in order to vindicate the character and honor of the commonwealth. The circumstances connected with the passage of the act had caused the financial world to believe. that Virginia had abundant ready resources for promptly and easily fulfilling all her obligations, and that her continued default resulted from a want of honor. The exposure heretofore made has satisfied all impartial and right-thinking minds that the default has resulted, not from a want of honor, but wholly from a want of ability. Nothing has so damaged the public credit, nothing has so retarded our recuperation or so discouraged the influx of capital and immigration, as the pretension that our official records falsely presented the resources of the state. Such a pretension, by inducing the belief that our ability to pay was far greater than our actual payments, sunk the market value of the bonds, aspersed the honor of our people, and placed the state in the attitude of defrauding the public creditors. But since the former delusive estimates have been refuted and corrected, confidence in the good faith of Virginia and in the ultimate payment of the debt has been to a great extent restored, and the market value of the bonds has steadily and decidedly advanced. Another and serious injury has been inflicted upon the public credit by the fallacy of those who, in assailing the funding act, deny the validity of the contract it contains and seek to arrest its operation by new and hostile measures. The contract thus created has been deliberately passed upon, and it has been pronounced to be final, inviolable and irrepealable, by the court of last resort. Moreover, it is a self-executing contract. More than two-thirds of the debt consists of bonds with tax-receivable coupons, and of registered stock which is convertible at the will of the holder into such bonds. By the terms of the contract the state has bound and obliged her officers to receive these coupons as money in payment of any and all dues to the treasury. By passing the coupons to the tax collector as part of the public revenues, creditors are annually collecting full interest on the tax-paying coupon bonds. They may continue to exact such full interest in the future, whether any or all the legislation of the government shall will it or forbid it. The debt due them is represented by a paper which is in the nature of an execution, endorsed "no security to be taken"-an execution which the creditor is armed with complete power to enforce. No refusal to appropriate money to the payment of interest can prevent the coupon creditor from collecting his coupons. What possible good then can be accomplished, what intelligent object can be promoted, by resisting the execution of a contract which executes itself, by assailing the indestructible validity of a covenant which is so plainly unassailable? Equally fallacious is the idea, if it exists, that a reduction of the debt, or the excision of any part of it, is possible to be enforced by the action of the state, without the free consent and concurrence of the creditors. The proposition I urged upon your predecessors expressly repelled every such idea, for its terms distinctly declared for the recovery of financial confidence and credit, by means of such friendly adjustment with the creditors as would postpone so much of the interest as the accruing revenues fell short of paying; but only providing for such partial postponement until the growth of the state and its increasing taxable values should enable us to pay in full; "so that the whole debt, as heretofore assumed, together with the full interest as now agreed, will be discharged ultimately and just as quickly as the best ability of the state will |