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Governor Walter M. Pierce's Administration

Governor's Message, 1923

Source: Message of Walter M. Pierce, Governor To the 32nd Legislative Assembly Regular Session, Convened January 8, 1923

I wish to express to the people of Oregon my sincere gratitude for the significant vote of confidence in the recent election. I fully realize the almost staggering responsibility of my position. I will do my best to justify the confidence reposed in me. As I look over the election returns I realize that I received, on the 7th of November last, as many Republican votes as I did Democratic votes. I, therefore, declare myself the people’s Governor, and I ask the continued support and friendship of the people of Oregon, without reference to past affiliations, political or social.

I have no intention of building a political machine. I shall call around me, to fill positions, those in whom I have confidence and I shall remove them from office without fear or one single thought of the future if I find they do no live up to my expectations. I shall give every ounce of devotion I have to the interests of this state, fearlessly working, as I see the galaxy of states that the world has ever known. I will return the commission, in four years, as clean and untarnished as I receive it today.

Conforming to custom and constitutional provision, I will proceed to briefly outline what I believe to be the duty of this Legislative Assembly.

Coming as I do from the farm into the turmoil of the state government, I believe the paramount question before this legislative body is reduction and redistribution of the burden of state taxes. We must not wreck the state government or too seriously handicap any of its necessary activities. I suggest that in your appropriations you constantly ask yourself the question, “Can we afford it?” I promise you and the people, that as a member of the Board of Control, I will as far as my power lies save every dollar that can be legitimately saved in the management of state institutions, and I ask you to keep in mind the same principle of economy in your duty as state legislators.

Property in Oregon assessed at little more than a billion dollars can not continue to bear a collection of nine and one-half million dollars, as it did in 1922, for state activities. As long as these trying times continue it is essential that we eliminate all unnecessary expenditures.

Legislatures of which I have been a member have for many years in good faith endeavored to consolidate the state departments only to meet with opposition from those specially interested. The time has come when the interests of the few must give way to the welfare of the many and I earnestly recommend that a law of wide scope be enacted consolidating many commissions and departments and abolishing other altogether. By enactment of such a law hordes of state agents and inspectors and special deputies who are traveling the state over, year in and year out, will be disposed of and a conservative, efficient method of handling the business of the state be substituted for the present costly and haphazard system. The best possible government is a simple government economically administered.

Three of our state commissions, which now require large sums from the state treasury for their maintenance, should be self-supporting.

With but slight readjustment of its rates, the State Industrial Accident Commission can derive all of its funds from the industries to which it renders so valuable a service in giving exemption from litigation, and prompt and adequate benefits for injuries and death to workmen and their dependents. Likewise, the Public Service Commission should be supported from fees paid by the public utilities that come within its jurisdiction. Stability of revenues is afforded to these utilities by the Public Service Commission, as has been demonstrated during the trying times following the war and it is but just that a far return in the way of compensation for the actual cost of supervising their affairs should be paid by the utilities to the state treasury, thus relieving the general taxpayers of what is otherwise a large burden. Indeed, the time will come, as I said in my campaign, when all public service corporations will be taxed on their gross earnings, rather than on their general property, as is done in California and other progressive states. But I am advised the legality of such a tax is now in litigation pending before the United States Supreme Court and I refrain from recommending that such change in method of taxing these corporations be made until this litigation is finally adjudicated. Should the change be made at this time and the litigation result adversely to the gross earnings method of taxing, the state would be left for two years without any means of securing revenue from this source.

The department of fisheries is costing the state large sums of money. I believe such an industry should be at least self-sustaining. In some states it is a source of public revenue.

No doubt the tourists associations have been in great benefit to the state, but in this hour of stress and need I believe appropriations for such purposes should be omitted.

There should be no appropriations this session for state buildings.

I recommend that you carefully scrutinize all appropriations for fairs. The state fair is an institution of great value and it must be maintained. It should, however, be as nearly self-sustaining as possible. Our farming communities derive needed benefits from county fairs, but perhaps existing provisions for their maintenance will be found sufficient without additional appropriations.

The experimental stations have been of much benefit. The smutless wheat developed at the Moro station will save farmers thousands of dollars. The blightless pear from the Talent station will revolutionize the pear industry. The work of the stations is too far reaching to mention in detail, but I wish to assure all it is valuable. We must not, however, increase the number of stations.

The extension work of the Oregon Agricultural College, and the University of Oregon, should be maintained; but I have no doubt a saving can be made.

In the present stressful times we can suspend the continuing exhibition of Oregon products in Portland and thereby save $20,000 during the current biennium.

I oppose any increase of salaries.

I believe there is money in the treasury sufficient to meet the requirements of this year and therefore recommend that you repeal the soldiers’, sailors’ and marines educational law.

No further appropriation should be made for the World War Veterans’ State Aid Commission and the commission should be abolished when money now on hand is expended.

Numerous state departments are maintaining branch offices. In every case possible the expense of branch offices should be eliminated.

This session should provide means of lifting at least one-half of the present state tax from farms and homes and to that end I recommend a graduated income tax. For purposes of simplicity in collection and enforcement I would reenact the same federal law as the law of this state, with exemptions the same as in the federal law and making the rates such percentage of the federal rates as will raise four to five million dollars per annum. Enforcement of the act I would place in the hands of the state tax commissioner who can, I believe, through cooperation with the federal tax officials keep the costs of administration to a minimum. I can not emphasize too strongly that an income tax be treated as a means of redistributing and equalizing the present burden of taxation and not as an excuse for increasing that burden by new and additional expenditures of state money.

As a further means of relieving real property of its present unbearable load of taxation, and without intending to invite new expenditures, I call attention to the fact that one-third of the standing timber in Oregon is in Forest Reserves and is thus nontaxable. As this timber passes into private ownership and is marketed it should bear a severance tax that has some relation to its true value.

Other states have long imposed severance taxes on natural resource wealth as it is converted into private wealth. In fact, a severance tax on timber, even where in private ownership, is recognized to be the fairest tax both to the owned of the timber and to the state as a source of revenue. Unless the state acts, our people will some day awaken to the fact that timber, our greatest natural resource, has been largely depleted, leaving bonded indebtedness in millions still unpaid without the timber against which the bonds were issued having contributed its fair share toward the retirement of the bonds. This applies not alone to state bonds but to the bonds of all those municipalities in the timbered areas, such as counties, school and port districts, where large bonded indebtedness has been created without adequate provision for the retirement of the bonds as the timber is removed.

I am advised that recent investigation has disclosed a bad state of affairs with reference to sinking fund provisions in the various taxing units of the state. In some instances, bonds have been issued without regard to making the maturities time with the useful life of the improvement. This is resulting, in some counties where the chief resources are timber, in the timber being cut at a rate that will result in default on the bonds when they mature unless provision is made either to refund the bonds on a shorter term basis or two adequately tax the timber as it is being removed and put the proceeds in a sinking fund.

In fact, on this whole question I am of the opinion that the state could to advantage exercise some form of supervisory power over the financial affairs of the various taxing units. Municipalities and other taxing units should not be permitted to impair the credit and good financial name of the state by running riot with excessive bond issues, making no provision for the payment of the same when due. The principle should control, that no bonds should be issued for a longer time than the useful life of the improvement for which the bond is created. And sinking funds should be maintained inviolate in order to make certain that no default will ever occur in the bonds of any Oregon municipality.

I ask the legislature to revise the assessment laws of the state and give the tax commissioner the right to supervise county assessments. At the present time there is widespread discrepancy in the assessment of property in different counties. In one county sheep are assessed at $2.00, the same kind of sheep in another county at $5.00, and in another county at $8.00, and it is notorious that large stocks of merchandise in various parts of the stat have escaped their just share of taxation through lack of control of the state tax commissioner over lax and inefficient local assessors. The state tax commissioner should have full authority to compel the same proportionate assessment on the same kind of property in every county in the state.

By an equitable valuation of all property millions of dollars can be added to the present assessment roll without raising the just assessment on farms, horses and livestock. In keeping with my policy that new sources of revenue shall not serve as an excuse for additional expenditure in any department of state government, I recommend that if you approve my plan for increasing the values on the tax roll that at the same time you provide that those institutions and departments which derive their income from millage taxes shall take from this source no larger sum during the next two years than they received in 1922. Any excess thus collected should go toward reduction of the general property tax.

I am advised that extensive insurance is written in this state by companies that have not complied with the laws of Oregon with the result that premiums on such business are escaping taxation in this state. I recommend a law that will either halt this practice or that will reach and tax operations by non-resident companies.

I am deeply concerned over the state of our highway program. Six years ago Oregon had no state bonds except a small issue of $340,000 of rural credit bonds. Today, with the exception of South Dakota, Oregon is the heaviest bonded state in the union, when wealth and population are considered, and the bonded indebtedness of South Dakota will be exceed by Oregon when the rest of the state bonds already authorized are issued as will be necessary to complete the existing road construction and carry out the provisions of the Soldiers Bonus Act.

A Wall Street journal, Commerce and Finance, in its issue of October 18, last, stated, “The total amount of the bonds issued in the United States for highway construction is $367,000,000.” When we contemplate that this is the total issue in all the states and then think that Oregon, the thirty-sixth state in wealth and population, has issued one-tenth of all the highway bonds in the United States, well may property owners be concerned with the future.

I am forced to the opinion that instead of having an unpaid highway giving part time to this gigantic business, unless a consolidation of state departments and commissions places the highway program under other supervision, it would be marked economy for the state to have a commission of three members who will devote their entire time to the highway work under the direction of the Governor and receive reasonable compensation for their services. Under that plan the Governor would not only be responsible to the people for the acts of the highway commission and the entire department, but the way would be paved to save considerable sums of money.

In six years the State Highway Commission has spent the almost unbelievable sum of nearly $40,000,000 derived from the sale of state bonds, several million dollars from the National Government, and several million dollars from the counties. Under the present constitution we are allowed to issue only $40,379,996 in bonds. I am informed that it will require practically the entire issue to complete existing contracts. There has not been kept in reserve the full two and one-half million dollars authorized for the Roosevelt Highway. There will be nearly two million dollars of interest to meet each year. Bonds are coming due. Recently completed highways are now demanding repair and replacement. Macadam construction is waiting. Many links in the main highways are yet to be completed. The Roosevelt Highway voted by the people in good faith must have consideration. The Government is now offering to appropriate large sums of money for road work in Oregon, providing the state shall match them.

It all brings to our attention the absolute necessity of husbanding our resources to provide an adequate revenue for the charges already fixed against the highway fund. I therefore recommend that the old quarter mill road tax be retained for the road funds, that the tax on gasoline be increased and that any adjustments that may be made in the present automobile law do not reduce revenue. If any changes are made in the license law, I recommend that the fees on high-priced cars be increased.

The market road law has proven its merit. Cities and farmers have been mutually benefited. I have often made the statements that “If this law is kept on the statute books for ten years Oregon will be unequaled in the nation for good market roads.” At the end of that period there will be no bonds to liquidate because the roads will have been paid for as they have been built. I recommend that the present law be altered to provide the County Court with full and complete authority over all money derived under the market road fund, the roads to be built according to plans and specifications furnished by the State Highway Department.

A few days ago I was on my farm. I watched a beautiful pen of white-faced steers, grain fed, ready for market, and as I watched them I thought, you are worth about $50.00 each on the present market. If I were to count the taxes from which you have eaten the grass, and the taxes on the land from which you have eaten the hay, and the taxes paid upon yourselves and your mother, then there is standing against each of you approximately $15.00 taxes. Each steer has actually cost this farm $75.00. When your hide is cut up and made into harness and shoes, and you are cut up into steaks and roasts, then you will cost those who consume you about $500.00 each. The railroad that takes you to market fixes the freight rate and makes a profit, the packer that prepares you for the market fixes the price and makes a profit, the retailer fixes the price and makes a profit, the hotel keeper, the harness marker all fix the price so that they will make a profit. The farmer is the only one in the long, long line from the produced to the actual consumer who asks the world to fix a price on his product and he is the only one who fails to make a legitimate profit. Only ten percent is allowed in this instance to the one who produces, ninety percent taken by those who can and do dictate the price. Slowly in places, rapidly in other places, the producers are being financially ruined by the present marketing system. I do not even want to think of state owned packing plants and warehouses for distribution of farm products but I do want to warn the business world that the producers must have better treatment and a fair chance for existence.

Eight years ago from this platform Governor Withycombe delivered his inaugural address and in that address said, “The farms of Oregon are mortgaged for approximately $22,000,000.” Today Oregon farms are mortgaged for approximately $100,000,000. Why have the farm mortgages more than quadrupled in eight years? I can hear many people say “bad management.” Rather it has been due to the failure, yes, the downright inability of producers during late years to balance their annual budgets. Unless that situation is remedied, the country is threatened with a breakdown in the morale of its farming element—the backbone of the nation. It will require time and active endeavor to improve existing marketing methods, but we can accomplish an early reduction in the producer’s share of the state tax, which, in the country, is nearly one-half the whole tax, and we can spread a portion of the present tax burden on incomes and forms of business that, though infinitely better able to do so, are not now bearing their fair share of the cost of state government.

Among the growers of grain and hay there is must dissatisfaction with the enforcement of the Grain Inspection Law. When I introduced this measure in the Senate some years ago, I little dreamed that it would grow into the large department that it has. I remember saying to the Senate that it would become self-sustaining, and I will to the call the attention of the Legislature to the fact that it is now self-sustaining. It never should have been put under the Public Service Commission, with which it does not harmonize.

I know that the time is not propitious for any new state activities. I also clearly remember that the Market Commission Bill was defeated two years ago,. Notwithstanding all these facts, I believe that this Legislature should, by law, create a State Market Agent, and place the Grain Inspection Department now with the Public Service Commission under the State Market Agent, such State Market Agent to work directly under the control and guidance of the Governor.

The law creating the State Market Agent should provide that every purchase of grain made by exporters should at he close of each day’s business be reported to the State Market Agent. Failure to do so should be punished by fine. The State Market Agent could then publish, over his official signature, the exact price in Portland every day.

The State Market Agent should have authority to inspect any of all books of any business house for the purpose of ascertaining the amount of grain purchased as well as the price thereof. The State Market Agent should be authorized to afford all possible assistance to cooperative marketing. He should have the right and authority to issue bulletins from time to time, not only giving the actual price paid, but giving instruction to the producers as to how to better prepare their products for market, pointing out as far as possible where better markets may be obtained. The fund derived from grain and hay inspection will be ample to maintain the department.

I do not want to be considered as one preaching the cause of the county against the city; I think I can envision as well as anyone the possibilities of great industrial development in the seaport cities of Oregon. Portland can become a city of a million people within the life time of many now living. Our water power may be developed so that this state may become one of the great industrial centers of the world. Our unsurpassed forests may be cut off and the timber manufactured into lumber, we may grow prosperous and wealthy, but we may, unless we remedy conditions, at the time be buying our food and clothing in Asia, South America, and from the islands of the sea, and we may see the beautiful dairy herds of Oregon, the pride of many a home, driven from the state by its greatest competitor, the cocoanut cow. That kind of development took place in England when the industrial revolution set in something like a century ago. When the great war came, England was importing 75 per cent of her foodstuffs from over seas. The German submarine would have starved England to death had it not been for the valiant sons of America who caught the wavering banner of civilization and bore it to victory on Argonne’s shell-swept slopes.

We should not develop such a civilization here, allow our fields to be abandoned and permit future generations to be at the mercy of a foreign submarine. The problem is not, as is sometimes state, to get the city man to the country but to keep the young men and the young women now growing up in the country from going to the city. Every legitimate endeavor should be exerted to make country life attractive enough to stop the present alarming exodus from the farm.

Some years ago the people of Oregon passed a constitutional amendment giving the state of Oregon the right to guarantee interest on bonds issued by irrigation and drainage districts fro a period not exceeding five years and placing this great power in the hands of the State Superintendent of Banks, the State Engineer and Attorney-General. Under this constitutional provision bonds have been guaranteed by the state in many districts over a period of from one to five years. The commission holds that when the state has guaranteed the interest the state is obliged to issue its bonds to pay the interest on the bonds of the irrigation and drainage districts. The total amount of the interest the state has thus guaranteed is $1,400,000. The interest upon these bonds issued by the state is then to be paid by the district but it is a fact well known that some districts are likely to fail to pay from taxes collected within the district the interest coming due upon bonds issued by the state. The only way to meet the prospective loss to the state will be by taxation. There will be no question confronting the incoming administration more serious than whether the state had better continue to guarantee the interest on bonds of irrigation districts after the time has expired for which interest has already been guaranteed, hoping for the recovery of agricultural conditions, or shall the state refuse to guarantee further, accept the loss, and allow the matter to go by default?

A deal is about to be closed in which an irrigation district proposes to sell its 6 percent bonds for eighty-three cents on the dollar, the state to guarantee interest for five years. Should the state guarantee that interest? It is a question that can only be answered after a most careful and searching investigation.

I ask the president of the senate and the speaker of the house to appoint their ablest men, the best financiers in the senate and house on their irrigation committees and I ask the committees to meet in joint session, examine all of the records, summon witnesses, search out the facts and make a report to me as governor and to the people of the state of Oregon so that I may have something to guide me when the state is called upon to act after you have returned to your respective homes. The hour is too critical and the situation too dangerous to issue more bonds to pay interest on irrigation and drainage bonds that the various districts issue, without advice and counsel. The board that passes on these bonds should be reconstructed. The governor and the state treasurer should be members of the board. I ask you to submit a constitutional amendment to the people to be voted on at the next regular election so amending the present constitution that the governor and the state treasurer will be members of the commission that guarantees interest on irrigation bonds.

I believe in the Workmen’s Compensation Law. It has been of great benefit to the state, and I am opposed to any material change that would affect the honest operation of the law as it stands. Any law that returns 92 per cent or more of the money collected for the purpose for which it was collected is a successful and beneficial law.

The narcotic evil is a growing menace. This legislative assembly should pass a drastic law to enable officials to cope with those who are vending drugs.

I have been saddened many times by finding that prominent men of this state behind closed doors are breaking the prohibition law. I ask for a higher sense of moral duty and for an awakening of the public conscience. We must one and all determine to drive liquor from our midst by making it so hard for the bootlegger to thrive that he will be glad to leave our state and take with him his nefarious business. Liquor venders cannot do business alone. I ask you for assistance in a continued effort to enforce the law. I do not want a state constabulary but I do want sufficient police agents to eliminate as far as possible violation of the prohibition act. I also ask that one-half of all the fines collected through enforcement of the state prohibition and narcotics laws be turned into a special fund, such fund to be used in enforcing the laws.

We should enact a law prohibiting the selling or leasing of land in Oregon to the Mongolian and Malay. European and Asiatic civilization can not amalgamate, and we can not and must not submit to the peaceful penetration of the Japanese or other Mongolian races.

The alfalfa weevil, a dangerous parasite, has entered Oregon’s boundaries. I recommend an appropriation of $5,000 annually for two years to provide a quarantine, the appropriation to be used by the State Board of Horticulture.

I am a firm believer in the free public schools but the present burden of taxation in this state compels me to ask every school board and all the Boards of Regents to practice the strictest economy.

No mortgage company could long remain solvent that loaned 75 per cent of value upon real property as the soldiers’ bonus act requires. Fluctuations in values will in many cases more than absorb the 25 per cent margin. Morevoer some men have taken advantage of the needs of ex-soldiers. Hence, I can see nothing but a certain amount of loss to Oregon from the soldiers’ bonus law. I call upon everyone who has charge of the enforcement of this law to see that the loss is reduced to the lowest possible minimum.

At the present time there are no funds available for the reconstruction of state buildings destroyed by fire. I recommend that a sinking fund be provided for that purpose.

The law compels relatives of patients in the state hospitals for the insane, and in the state tuberculosis sanitarium, to pay for their care and keep if they are financially able. I shall see to it that this law is enforced.

One of Oregon’s finest and most prosperous cities, Astoria, narrowly escaped total destruction recently in the state’s most ravaging fire. The heart of the state bleeds for the crippled city. If the legislature decides to give financial aid to Astoria, I believe it should be done by direct appropriation and not by diverting money from other needed funds.

There have been many serious errors in the work of past legislatures by reason of the ancient method employed in engrossing and enrolling bills. The cost last session of this work was $8,346.50. Section 2680 of the code should be amended so that a printed bill only would be used on final passage. This change would avoid mistakes which lead to litigation and save at least $5,000.00 this session in legislative expense.

The present motor license law was hastily drawn at a special session. It includes some glaring defects and provisions dividing authority with the result that administration is in many cases impossible. It should be carefully revised at this session.

There is a widespread demand for the reduction of the hunter’s license. It should be given careful consideration.

I ask the Ways and Means Committee in drawing appropriation bills to fully itemize each bill so that I can, if I deem it necessary, veto items that appear to me unnecessary.

I do not intend to encroach upon the prerogatives of the legislature. Firmly do I believe the two departments of government should function independently. I have pointed to some conditions that I believe should be treated by law. It is your province to prepare and pass measures embodying matters on which the people have so clearly spoken. I am ready at any time to help you either individually or collectively and I offer you the fullest measure of cooperation.

The people are expecting must of this legislature and many of those expectations will become disappointments unless the executive and legislative branches carry out their respective duties in harmony. I am sure that you know full well how intensely the people are thinking. I know you are ready and willing to bury personal and party ambitions and all differences for the common good.

WALTER M. PIERCE

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722
Phone: (503) 986-1523 • Fax: (503) 986-1616 • oregon.sos@state.or.us

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