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Governor Julius L. Meier's Administration

Governor's Message, 1933

Source: STATE OF OREGON MESSAGE Of JULIUS L. MEIER, GOVERNOR To the THIRTY-SEVENTH LEGISLATIVE ASSEMBLY Special Session November 20, 1933

Members of the State Senate and House of Representatives:

You have been convened in extraordinary session to consider recently arisen problems of such grave importance and so vital to the welfare of the state that consideration thereof cannot be deferred until the next regular session.

The duration of special sessions is limited by the constitution to twenty days, which in itself is a plain mandate that consideration shall be given therein only to legislation of emergency character.

If the major issues which confront us at this time are to receive an adequate and satisfactory solution within the limited time allowed, the calendar must be kept clear of irrelevant and unimportant legislation.

I appeal to you, therefore, to test every proposed measure as to whether it be of vital importance to the state at this time.

Remember that it is only twelve months until you will have an opportunity to consider general legislation at a regular session.

First of the problems to be laid before you is that of devising ways and means for the state to cooperate with the Federal Government in providing relief for the thousands of our citizens who are in distress because of unemployment.

The President and the Federal Relief Administration have called upon the state to bear its share of the burden, and it is in accordance with this demand that I have convened you in this special session.

The recent announcement that public works money will be made available, along with relief money, for inaugurating what is apparently planned to be a very extensive work relief program will not relieve the state of its obligation to provide relief funds. On the contrary, the increased responsibility of the state to participate in the relief program is clearly indicated.

May I state here that as far back as the summer of 1931 I appointed unemployment relief committees in every county and cooperated with them in their activities through the Highway Department and other state agencies.

Recognizing the growing seriousness of the unemployment situation and the urgent need for coordinated relief activities, in June, 1932, I named a state-wide unemployment relief committee.

Until the last session of the legislature this committee served without statutory authority and with no appropriation.

Confronted with the need for a legally constituted relief organization to cooperated with the Federal Government, the last legislature, on my recommendation, passed a measure providing for a state-wide relief committee and setting up in each county a local relief committee to consist of the county court or three members named by the court and four members appointed by the Governor. In the appointment of these committees, the greatest care was exercised to select outstanding men and women thoroughly conversant with conditions in their respective localities.

In cooperation with the state and county relief committees there was made available by the Reconstruction Finance Corporation, under the act of 1932, $2,798,000, of which $125,600 was spent in 1932 and the balance during the present calendar year.

With the exhaustion of the 1932 fund there was appropriated by the last session of the Congress a national relief fund of $500,000,000, which was placed under the supervision of the Federal Emergency Relief Administration. The terms of this act provide that federal funds shall be made available to the states on the basis of $1.00 for every $2.00 provided by the state and local agencies. There has been allocated to this state by the Emergency Relief Administration $1,448,315.

A total of $4,300,000 has been expended for relief in Oregon during this year, of which only $628,700 was from state and local funds.

The Federal Relief Administrator has discretion, in certain cases, to make grants of funds to the states, upon showing of need and exhaustion of resource. In line with this policy, and definitely conditioned upon my calling the legislature in special session, the Federal Administrator has made available $950,000 for relief in Oregon during the months of November and December, making it perfectly clear, however, that payment under this grant is dependent on cooperative action taken by this special session. In other words, the total of $950,000 will not be paid over unless we keep our end of the bargain.

While the records of the State Relief Committee indicate that there has been a substantial reduction of the numbers on the relief rolls from a peak of 51,266 families in May, the approach of winter is rapidly aggravating the serious aspect of the situation.

Preliminary to calling a special session of the legislature on the request of the Federal Relief Administrator, I appointed a committee of thirty-two citizens to make a survey of relief needs and to recommend ways and means to meet these needs. This body estimated that requirements from October 1, 1933, to December 31, 1934, will approximate $8,000,000.

While we hope that civil works program will tend to reduce relief expenditures by removing from the relief rolls a substantial number of able-bodied men, the state is still confronted with the responsibility of caring for the thousands who are not employable at the type of work proposed, and of supplementing federal grants for this civil works program. Furthermore, it is planned that the civil works program will be terminated in February while past experience has shown that our relief load reaches its peak in the early spring months.

The recommendations of the committee for raising revenue for relief needs are in your hands. Chief among the proposals is the allocation to relief purposes of revenue raised in connection with the control and sale of alcoholic liquor, in which recommendation I concur.

Before discussing this plan in detail, hwoever, let us consider here legislation for the control and regulation of alcoholic liquors—another of the emergency problems before you for consideration.

When it became apparent that repeal of the eighteenth amendment would occur prior to January 1, 1934, I appointed a committee of eleven representative citizens in various parts of the state to make a survey of the entire subject of liquor control and to recommend a plan which will safeguard the state against the evils of the old saloon regime.

After nearly three months of thoughtful consideration and research, that committee submitted its report on October 14, 1933. Several weeks ago I placed copies of the report in your hands. I now submit my earnest recommendation that the principles therein embodied form the basis of the new state liquor act.

I wish to comment in passing that the committee which I appointed served without compensation and without funds for investigation. It is significant that their conclusions, although arrived at and submitted independently, bear a remarkable similarity to those contained in the Rockefeller report which was prepared by experts with a quarter of a million dollars for investigation purposes. Doubtless most of you are familiar with the Rockefeller report. If not, I commend it to your careful study, along with the report of the state committee.

The proposed plan is predicated upon the assumption that the people of this state are in no mood to return to the evils which led to the adoption of prohibition.

The report cites the following features of the liquor traffic as particularly obnoxious and recommends their avoidance:

1st. Private profit to the retailer leading to competitive business methods and stimulated sale through the medium of the saloon.

2nd. The vicious system of private licensing which provides rich opportunity for political patronage and graft.

3rd. Pushing the sales of “hard” liquor as against those of beer and wine because of greater profits accruing from the former.

4th. Financing of saloonkeepers by brewers and distillers and the creation thereby of a powerful political vassalage.

5th. Sale of legalized liquor to the ultimate consumer at a price so great as to enable the bootlegger to continue his nefarious contraband trade.

To prevent the return of such abuses the committee urges, as its first recommendation, that all traffic in liquor containing more than fourteen per cent by volume of alcohol to be handled through a system of state dispensaries conducted under the supervision of an appointive, non-salaried commission of three members. This is the type of control which has worked successfully in the Canadian provinces.

First and foremost it seeks to eliminate, not only the elements of private profit and competition but also the urge to artificially stimulate sales over and above normal demand. Thus it strikes directly at the very heart of the most vicious evil incident to the liquor traffic of former days.

By allocating plenary powers to such a commission, the state is relieved from any active participation in the liquor business, but, at the same time, there is reserved to the people a measure of control, untainted by political influence, such as would be wholly impossible under any system of private license yet devised.

Licensing private individuals to engage in the wholesale or retail liquor business has conclusively proved itself a failure, and to return to any such system would invite inevitable disaster.

I quote from the Rockefeller report:

“With the passing of the Eighteenth Amendment, the American states are free to make a fresh start. Only the public welfare needs to be considered. There are no property interests that have to be defended, no investments demanding protection, no organized retail trade associations to fight. For a state, confronted with this opportunity, deliberately to tie its hands by establishing an intrenched business that will seek in its own protection to thwart every limitation and block every change would seem to be the height of folly.”

In the matter of sale of liquor in restaurants, the committee draws a hard and fast line between the use of naturally fermented wines and beers as beverages and that of fortified or distilled liquors containing more than fourteen per cent by volume of alcohol as intoxicants. The serving of the former with bona fide meals in licensed restaurants is advocated, while the serving of “hard” liquor by the glass, which will inevitably amount to nothing less than the return of the old time saloon, is disapproved.

Intimately associated with the task of providing a satisfactory method of liquor control there exists the necessity of considering that traffic as a potential source of revenue for the state.

Raising revenue for governmental administration is a perennial necessity varying constantly in degree and kind with the ebb and flow of humans needs. Liquor control is a problem not only of today but of the future. We must not let the consideration that today’s revenue raising problem is a particularly pressing one obscure the fact that the primary purpose of the liquor act is to secure a satisfactory system of regulation and control.

By entirely eliminating the element of private gain through the creation of the state monopoly herein advocated, even with a small margin of profit, a substantial return may reasonably be expected to accrue from such annual turnover. While it is impossible at the present time to determine accurately the total revenue, it has been estimated at $1,500,000 a year to $2,500,000 a year.

It is my recommendation that all revenues from the sale of liquor over and above the expense of administration, together with such other revenues as you may provide for unemployment relief, be paid into the unemployment relief fund created by the last legislature until June 30, 1935, or until the relief emergency has passed.

After the relief emergency has passed, revenues derived from the dispensing of alcoholic beverages should be distributed in accordance with the committee’s recommendation, twenty-five per cent to he state and seventy-five per cent to the counties permitting the sale of beverages containing alcohol in excess of five per cent by volume, prorated according to population. License fees should be returned to the treasuries of the incorporated cities or the counties from which such license fees are derived.

In view of the additional employment which may reasonably be expected from the contemplated federal public works program, it is hoped that the allocation of current revenues from liquor control and such other sources as you may develop will provide sufficient cooperative funds to insure the continuance of federal aid for direct relief.

In the even, however, that these sources are not sufficiently productive to meet our needs, or that future federal legislation should require additional matching funds to permit us to avail ourselves of federal aid, I recommend that authority to capitalize the unemployment relief fund by the issuance of revenue anticipation certificates be placed in the hands of the State Board of Control.

Should any county be in need of funds beyond those currently available to it in the unemployment relief fund, I recommend that the county assign its share of such revenue so long as certificates issued on its account are outstanding. IN this way the cost of relief in excess of current receipts would be placed on those counties requiring additional aid and would leave available to those counties not requiring such aid any revenues accruing after the expiration of the emergency period.

In other words, those counties whose relief needs are large will be empowered to draw against their share of future revenues while those counties not requiring additional aid will retain their future revenues to devote to other purposes. This method will impose a careful check on local demands and will eliminate the complaint that those counties which carry their own burdens are forced to pay the bill for others less fortunately situated.

My contact with the Federal Relief Administration convinces me that it is essential to the continued cooperation of the Federal Government that there be maintained an adequate system of control and administration centered in the state, satisfactory to the Federal Government and recognized by it. To the other duties already placed upon the State Relief Committee there has just been added supervision of the civil works program sponsored by the President. It is, therefore, important that the authority and responsibility of the State Relief Committee be retained unimpaired.

The distressed condition of the public elementary schools of the state is a matter of deep concern, calling for your serious consideration. In spite of drastic cute that have been made in school budget, four hundred forty-one districts, in which 32,000 Oregon children attend school, are over a year behind in the payment of warrants for current expenses.

Because of mounting delinquency in the payment of taxes, the total of outstanding school warrants increased over thirty-seven per cent during the last fiscal school year and had reached $6,00,000 when the annual school reports were made on June 20, 1933.

In an effort to preserve their credit, the school boards of two hundred forty-eight districts have contracted for less than eight months of school for the current year. In many other districts teachers’ salaries and other operating expenses are being paid with warrants that can be cashed only at a heavy discount, if at all. With credit gone, these schools will be closed to thousands of Oregon boys and girls.

The time has come when the state must begin to assume the responsibility laid upon it by its constitution, which contains these words: “The legislative assembly shall provide by law for the establishment of a uniform and general system of common schools.” In compliance with this mandate the legislative assembly has enacted many laws dealing with education, but the financial burden involved in putting legislative requirements into effect has always been left to some unit other than the state.

The income from the irreducible school fund, amounting to $1.11 per school child for 1933, is the only contribution to the public school distributed on a statewide basis. From the county school fund and the two-mill elementary school tax, the counties provide thirty-six per cent of the cost of running the schools. These are both direct property taxes. From local levies, the districts provide sixty-two per cent of their school costs. These are also property taxes. A property tax is the only source to which counties and districts may turn to revenues to operate the schools.

A state school fund produced from sources other than a property tax and distributed to districts in proportion to needs would serve not only to directly relieve the property taxpayer of a part of his burden but would also aid in adjusting the inequalities that exist between poor and rich districts and would tend to equalize the educational opportunities for the children of the state.

State after state has recognized that education is not a school district responsibility only but a state responsibility as well and has made provision for state funds to carry a part of the cost of schools.

For example, beginning with January 1, 1933, the state of Indiana assumed $600 of the cost of each classroom unit. Missouri has just taken its initial step in providing state support for schools by raising $3,000,000 for that purpose. At its 1933 legislative assembly North Carolina made provision for conducting a minimum school term of eight months throughout the state from state funds. Within the past year the Washington state legislature made provision for an annual fund of $10,000,000 from state sources for school costs. Though the Washington measures have been in litigation, the responsibility of the state for the operation of its schools was definitely recognized by the legislature. A number of other states have taken steps similar to those I have just cited.

The multiplicity of school districts in the state, still numbering over 2,100, each largely independent in budgetary matters, makes it mandatory that with a state fund should go such supervisory control, through the state department of education or through a county board provided for that purpose, as to assure its effective use. The fact that one of the three counties operating as county school districts reduced the amount of outstanding warrants during the past year, while the other two were among the five counties showing the smallest increase, is ample evidence that county control can be effective.

Among other possible available sources of revenue to aid our distressed schools, I would recommend for you favorable consideration a gross earnings tax on public utilities.

In this connection, I want to call your attention to the fact that the public utility corporations in Oregon have for many years past enjoyed not only a continuous, fair return on their investment, as provided by law, but under the guise of dividends on watered stock and excess holding company fees have also collected and appropriated to themselves enormous sums over and above such fair return.

In view of these excessive profits which the utilities have appropriated to themselves, it seems only fear that at this time of distress they should contribute toward the maintenance of our public schools, which, since their inception, have been maintained by our property taxpayers, who are now collapsing under this heavy burden.

Mounting tax delinquencies have created a financial crisis, not only for our school districts but likewise for counties, municipalities and other governmental agencies.

In this connection, I would suggest that you give consideration to the creation of a separate state authority, vested with power to aid in the refinancing of state, municipal and local bonds, warrants, and other similar evidences of indebtedness. This authority should be vested with the power to borrow from the Federal Government, in event that a federal agency in created to advance funds for the aid of refinancing states and their local subdivisions, the money to be borrowed to be equal to one-half of the delinquent taxes due counties, and the money so borrowed to be distributed back to the counties pro rata according to the delinquency existing, and in turn distrubted to local tax levying bodies pro rata in accordance with their tax delinquencies, which loans would be secured by first liens on the delinquent taxes, and would be paid off as delinquent taxes were collected by existing constitutional authority.

I would suggest that, in the event you favor such a proposal, you memorialize Congress to enact legislation supporting the plan. If such federal funds could be made available, the local warrant situation in the state would be relieved and a substantial cash fund provided for current operation and relief.

Since the enactment by your honorable body of the present measure for bus and truck regulation, protest has been made that inequalities exist in the operation of this law. If such inequalities exist they should be adjusted, but the principle that busses and trucks should pay a fair return for the use of our highways should be maintained.

Later in the session when certain data that I have requested are available I shall submit to your honorable body a special message in connection with the development of the Bonneville navigation and power project.

In addition to the major problems outlined herein certain enabling legislation is needed to place the state of Oregon in a position to derive full benefit form opportunities offered by recent federal legislation.

Again I urge that legislation be limited to measures which are absolutely essential at this time in order that attention may not be diverted from major issues.

The task before you demands extraordinary singleness of purpose, fairmindedness and devotion to duty. I am confident that you will perform it wisely and justly, free from partisan bias and needless controversy.

In discharging the grave responsibilities placed upon you by the people of Oregon, please be assured that you can depend upon my fullest cooperation and support.

Julius L. Meier

Governor

December 5, 1933.

To the Honorable Members of the Senate and House of Representatives:

Gentlemen:

In my message on the opening day of this special session I called attention to the financial distress of our public elementary schools, pointing out that on account of rising tax delinquencies outstanding school warrants had reached a total of $6,000,000 on June 20, 1932, representing an increase of more than 37 per cent.

I pointed out that in spite of drastic cuts in school budgets 441 districts, representing 32,000 Oregon children, are over a year behind in the payment of warrants for current expenses.

I further pointed out that in an endeavor to preserve their credit the school boards of 248 districts have contracted for less than eight month of school for the current year.

I still further pointed out that in many other districts teachers’ salaries and operating expenses are being paid with warrants cashable only at a heavy discount, if at all, and that with their credit exhausted these schools will be closed and thousands of Oregon boys and girls.

In view of this deplorable condition and in view of the further fact that education is a state as well as a school district responsibility, I recommended the creation of a state school fund produced form sources other than a property ax, as an emergency measure to aid our public elementary schools during the present financial crisis with which they find themselves confronted.

Although it is not the function of the Executive Department to draft legislation for presentation to the legislature, I caused to be prepared and presented to the proper committee an emergency measure on this subject, just as I have caused to be prepared and presented to appropriate committees legislation carrying out all of the major recommendation of my message. Further than this the Executive Department cannot go, for in your body alone resides the function to enact legislation.

The particular measure referred to, which was drafted and presented only after it became apparent that no other revenue was to be made available, imposes a 1 per cent privilege tax upon persons engaged in the business of selling tangible personal property and utility and other services.

The measure exempts from its provisions sales of motor vehicle fuels, sales made by farmers, producers, manufacturers, wholesalers and jobbers to dealers for resale, insurance premiums and rentals of real property. It is estimated that the measure would produce approximately $3,000,000 annually.

The chief opposition so far encountered by this measure comes form the Master of the State Grange and the head of the State Federation of Labor, both of whom are obstructionists in the sense that while they are always prolific with objections to any and all solutions presented, neither has any remedy to present for this or any of the other serious problems confronting the state.

In my opinion neither of these officials reflects the sentiment of the rank and file of their organizations with respect to this legislation as an emergency aid for our public elementary schools. In my judgment laboring men and farmers are as vitally concerned in seeing our schools kept open as any other citizen of the state.

In fact, since the proposal of the measure, grange organizations have expressed themselves in favor of the bill as an emergency aid for our school, and so have several labor leaders.

Next to the home, our schools exert the greatest influence on the character of our citizenship.

Consequently the most important business of the state is the training and education of our children, and education should be available to every child.

I am, therefore, renewing my recommendation of appropriate emergency legislation to meet the crisis with which our schools are faced, and in doing so I am pleading the cause of approximately 200,000 school children and approximately 7,500 teachers, who are looking to you for aid in this crisis.

Very truly yours,

JULIUS L. MEIER,

Governor

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722

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