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Governor Walter M. Pierce's Administration

Governor's Message, 1925

Source: Message Of Walter M. Pierce, Governor To the Thirty-Third Legislative Assembly 1925

Members of the Legislature:

The half-way point in the term for which I was elected Governor of Oregon having been reached, it is fitting and proper that at this time an accounting upon the functions and affairs of state within that period be made to this, the Thirty-third Legislative Assembly, and to the people of Oregon.

Taxes

Taxation has received my most earnest attention during the past two years, in the belief that reduction in the cost of government was uppermost in the public desire. Unquestionably, the paramount issue in the election campaign of 1922 was the reduction and redistribution of taxes. I kept this issue squarely before the people in every address that I made during that campaign. During my incumbency of the office of Governor I have done all within my power to carry out the pledges made at that time, and feel that I can now point to a substantial measure of achievement, in that I have kept every pledge that I made.

In 1922 the state tax levy, including fixed millages, was $9,376,289.11. This year the state tax levy is $7,492,761.47, or real reduction in state taxes of substantially $2,000,000, notwithstanding the fact that when I became Governor there existed in the State Treasury a deficit of approximately $400,000, growing out of the fact that the legislature had in the past appropriated larger sums than the Tax Commission was allowed to levy under the 6 percent tax limitation law. There is, at the present time, a surplus of more than $200,000 in the State Treasury.

Had the voters of Oregon seen fit to allow the State Income Tax Law to remain upon the statute books, no state tax would have been levied this year, except the millages fixed by law, which are outside the 6 percent tax limitation, and which will aggregate in 1925 approximately 5.5 mills, or $5,569,712. While we have had a measure of both reduction and redistribution of state taxes, it is true that we who earnestly desire further to redistribute the burden of state taxation have suffered a serious set-back through the repeal of the State Income Tax Law, which was accomplished by the prodigal use of lavish campaign fund spent very largely in the repeated publication of false and misleading propaganda.

Repeatedly it has been stated that in my campaign of 1922 I promised to cut taxes in half. This falsehood, malicious and utterly without the shadow of foundation in truth, has been broadcasted about the state for the past two years. I made no such statement to anyone at any time. What I did say repeatedly and now say again, is that one-half of the state taxes, now borne by property, could and should be placed upon the shoulders for better able to bear it.

The operation of the State Income Tax clearly establishes the fact that my statement was correct. Income Tax returns now on file in the State Income Tax Department reveal that during the year 1923 a net income of $160,000,000 was made by individuals and corporations in Oregon. After all exemptions for families and dependents were deducted, there remained more than $70,000,000 taxable income upon which income taxes were assessed for the year 1923. The records in the State House further disclose that 25,000 income taxpayers in Oregon enjoyed in 1923 a net income of $67,000,000. Returns show that they paid in property tax $327,035. The property tax was less than one-half of 1 percent of their net income, and 3,190 taxpayers, with incomes a little lass than $11,000,000 net, paid $6,380,000 in property tax, or almost 60 percent of their income.

If the entire tax load of the state, including all of its political subdivisions, were to be placed upon net incomes, after allowing exemptions for dependents, a little more than one-half of the taxable income of all citizens in Oregon would be required. As it now is, the $40,000,000 exacted annually in taxes from those who hold property, can mean only the confiscation of many homes.

Practically one-half of the real property in Oregon today will not rent for more than enough to pay the taxes levied against it. At least two-thirds of the rent value will be required to pay the taxes on the remaining half. The most favorably situated farms in the state would probably rent for a sufficient sum so that about 40 percent of the rent would pay the taxes. Slowly but surely, the unequal distribution of the burden of government is confiscating the property of many people in this state. Readjustment must be made.

I continue a firm believer in the justness of an income tax. I can conceive of no fairer, squarer method of taxation than that of taking a small percentage from each of those who enjoy a net profit by reason of the operation of law and the protection of government. The State Tax Commission for 1923 estimated that the collection of the income tax for that year would yield $1,250,000. We actually collected $1,794,363.93. I t will be possible to collect $500,000 more, which is still due from delinquent income taxes for 1923. Should collections be made from corporations, in accordance with the decision of justice McCourt of the Oregon Supreme Court, we estimate that $1,000,000 additional could be collected.

You should pass an act making possible the collection of all delinquencies for the year 1923. The law was upon the statute books during that year, and the amount die under the law should be pain into the State Treasury by those who were fortunate enough to have a net income during that time, when so any were paying their taxes out of capital accumulated in former years.

I still believe that the best income tax law that could be passed in Oregon would be one similar to that in South Carolina, under which the income taxpayer contributes to he state one-third of the amount he pays to the national government.

The injustice of Oregon assessment laws may be brought forcibly home by a few illustrations:

The 1913 assessment of the county of Multnomah was $308,682,515, exclusive of utilities. In the eleven years since, blocks upon blocks of new buildings have been constructed in the great metropolis within that county. Thousands of beautiful homes have been erected, hundreds of new industries have been established, bank deposits have doubled, and the population has increased by more than 100,000. The building permits issued have amounted to $140,000,000, yet the assessor of Multnomah county returns a property assessment for 1924 of only $293,942,180, exclusive of utilities, which is $14,740,335 less than that of eleven years ago. Multnomah county voted to repeal the Income Tax Law by a majority of 22,127.

I have in mind a corporation for which the owners were offered $3,250,000. the property of this corporation is assessed at $700,000. Another property, worth perhaps $4,000,000, and earning a net income of approximately $800,000, is assessed for $500,000. I have in mind also, a property worth $40,000, which is assessed of $2,500, and coming down to the residences the assessor of Multnomah county stated this year that he thought they were assessed in that county at about 25 percent of their value.

In one county, sheep are assessed at $6, while in the adjoining county they are assessed for only $3. Cattle are assessed in one county at $35, and across the line in the next county at $20. There is no way under the present law by which an equalization can be made. I plead with you to pass the necessary legislation to rectify these wrongs.

I call your attention to the report of the Tax Investigating Committee, of which Mr. I. N. Day was chairman. An excellent bill was presented by that committee and considered by the Joint Committee on Assessment and Taxation at the session of 1923. I ask that this bill again be introduced, and I hope that it will receive your special consideration at this session.

I have urged economy in every department of state government. Some publications of this state have repeatedly charged that expenses have increased in many departments, and that additional automobiles have been purchased for the use of state officials. The number of automobiles and trucks has increased in no department under the control of the Governor except three light autos used exclusively in the Prohibition Department.

The annual increase of insane in Oregon is nearly 100, and approximately the same for feeble-minded. In fact, the number of inmates in all state institutions has grown with the increase in state population, until today 500 more individuals receive direct state aid and care in state institutions that at the time I was elected to the office of Governor. Notwithstanding this increase in population, every department of state government under the Board of Control has returned to the State Treasury a surplus from the appropriation made two years ago. The total amount returned is approximately $256,000.

State Fund Deposits

In accordance with the report of the retiring State Treasurer, Mr. Jefferson Myers, it is recommended that the depositing of state funds by open for competition among the banks of the state. It would increase the state income from this source approximately $150,000 annually.

It is further recommended that the State Treasurer be authorized by law to purchase at par all certificated issued by the State Emergency Board.

Also, that all bonds issued by the State of Oregon, or by any of its subdivisions, be serial bonds, which would prevent the necessity of investing sinking funds.

Irreducible School Fund

Investigation carried on during the last half of 1924 reveals the fact that the Irreducible School of Fund is in a most deplorable condition, due to years of well-nigh criminal neglect and negligence on the past of those entrusted with the safeguarding of this most sacred fund. Losses amounting to probably $200,000 apparently have resulted from loans made on properties which were insufficient to secure the money loaned. Interest and costs of foreclosure will increase this amount at least 50 percent, so that we face a loss of possibly $300,000, for which there is absolutely no excuse. Losses due to impairment of securities that were originally inadequate will probably run to $300,000, with an additional interest and cost charge of $150,000, making a total loss sustained of more than $500,000.

It is vital that this find be restored to its original amount, at least, and that these losses be made good. The Attorney General has ruled that the interest must be distributed and so can not be used for this purpose. I would recommend that the money derived from the inheritances in the state be place in the Irreducible School Fund. This in 1924 amounted to $347,572.75.

I desire to urge most emphatically that immediate steps be taken to safeguard this fund and to prevent in future the woeful waste of the past. It is little short of criminal to use this fund for the payment of political debts, and those who administer this money in the years to come should be compelled to use at least ordinary business methods and due care in its conservation.

It has developed in the investigation already referred to that the law prohibiting the sale of mortgaged property should be revised, as under the present law houses, barn and fences have been sold for mortgaged property, and we are without criminal recourse. It also appears that personal taxes can be assessed against real property and constitute a prior lien as far as the state’s mortgages are concerned. This also should be remedied by suitable legislation.

Severance Tax on Natural Resources

Two years ago you failed to pass a law taxing natural resources upon removal from nature’s storehouse. May I again call your attention to the fact that nearly one-half of the standing timber of Oregon is in forest reserves and is at present nontaxable. I believe that as our state is deprived of any natural resource a reasonable tax should be levied thereon. It is estimated that the standing timber in Oregon is now assessed at about $100,000,000, and pays an annual tax of approximately $2,500,000.

I recommend for your consideration a severance tax upon all natural resources, the tax collected from timber to be divided into four equal parts, one-fourth to be paid to the State Treasury for the reduction of state taxes; one-fourth to be paid to the county in which the timber is cut, for the relief of county taxes; one-fourth to be added to the Irreducible School Fund, and one-fourth to be placed in a Reforestation Fund, to be administered by a Reforestation Committee, which should be created by an act of your body.

It will make shameful history if we allow the magnificent forests of Oregon, the finest standing timber in the world, to be transformed into blackened stumps, and the valuable timber products transferred to eastern states and foreign ports while Oregon exacts not even revenue enough to start a new forest. It should be a law that when a tree is felled two healthy tree must grow in its place. No private owner has the moral right to cut an unripe tree, even on his own land.

The privately owned standing timber in Oregon is worth more than one billion dollars. In the aggregate it bears a lighter assessment than any other property in the state. Taken in its entirety it is assessed at about 10 percent of its real value. Why, then, should it not be taxed as it is cut?

Tax Supervising Commission

I ask you to reenact the law providing for a Tax Supervising Commission for each county. Under the law you passed tow years ago, I appointed Tax Supervising Commissioners, who, I believe, would have saved the people more than $2,000,0000 annually in taxation. Unfortunately, the Supreme Court found it necessary to declare the law unconstitutional. I ask you to reenact the law in such a way as to make it constitutional.

Public Service Corporations

In 1922 public service property was assessed at $189,358,984.60. In 1024 the same class of property was assessed at $244,053,824.67. This was an increase of $54,693,840.07 in the assessment in two years, or 28.8 percent. Simple justice demands that all public service corporations should be assessed at not less than the amount upon which they claim the right to fix rates so that they can earn dividends. I deny the contention of utilities corporations that fixed dividends must be earned on paper investment. I realize the necessity for utilities corporations, but I deny the sacredness of the money so invested and the claim that when it is invested it must earn fixed dividends. It should be subject to the fluctuations of competitive economic development, life ordinary property. If the principle is allowed to stand that investments made in public service corporations shall always earn fixed dividends, often at 6 percent and above, it is but a matter of a few years until the entire wealth of the nation will be absorbed in these corporations, because the natural increase of wealth is not sufficient to pay them the 6 or 8 percent that the courts have fixed as a reasonable income for money so invested.

Indirect Taxes

There are several states in the Union that levy no direct tax upon property for support of their state government. Different methods have been adopted by different states to provide money for the maintenance of state government. California collects all moneys for state expenses from a gross earnings tax upon public service corporations, and other fees. However, the public service corporations are exempt from local taxation. Minnesota also levies taxes on gross earnings of public utilities. Pennsylvania collects largely from fees and a severance tax on anthracite coal when mined. Iowa collected, last year, $700,000 as a tax on cigarettes. Other states are collecting a heavy tax on moving pictures. Oklahoma is largely supported from a tax on oil and gas—natural products. In some states professional or occupational taxes are collected. It is my belief that property in the state of Oregon should be freed entirely from state taxes and millage levies of all kinds. I earnestly urge you to increase the indirect taxes, as other states are doing, so the tax on property in Oregon may be reduced and ultimately abolished entirely, so far as state taxes are concerned.

Highways

I again invite your attention to the fact that the Highway Department is one of the most extensive and far-reaching that we have in the state. The commissioners who supervise this must give a large amount of time to the work of the commission, for which they receive no compensation.

There are outstanding at this time $38,060,750 in highway bonds. There will come due this year $797,000 in highway bonds, and $1,297,000 in 1926. I believe these bonds should be paid and cancelled as they fall due. I am opposed to the reissuance of these bonds, because I believe it unnecessary. However, we must continue highway construction. It will cost $15,000,000 to complete the highway system. During 1924 nearly $2,000,000 was spent on maintenance. The interest on the bonds, and bonds coming due this year will be $2,597,516.17. For the year of 1926 the amount for interest and bonds will be $3,023,073.75. It will be seen that these items of interest, bonds maturing and maintenance, will absorb approximately $10,000,000 in the next two years.

The present gasoline tax and automobile license fees will yield in the same time about $11,600,000, thus leaving a narrow margin for new construction, matching of government money and emergencies.

There is an additional revenue for highway construction derived from the one-quarter mill tax on property. I believe that the law requiring this one-quarter mill tax on property should be repealed. Other additional revenue should be provided for the highway fund. The gasoline tax is fair, yields a large revenue, and the cost of collection is small. It is paid by those who use the roads, and a considerable percentage of this revenue comes from the tourists in the summer time. Washington and California each collects a 2-cent gasoline tax. I am informed that in both states an effort will be made to increase this tax. We can not have ours very much higher than the adjoining states. However, I deem this a matter for careful consideration by this legislature.

Over forty miles of the Roosevelt highway is in Forest Reserve in Lincoln county. The government should be memorialized to construct this road at once, at its own expense, without asking cooperating on the part of county or state.

I am not in sympathy with the general movement to lower the amount of revenue derived from licenses on cars. A solemn compact was entered into by the promoters of the present road bonding plan with the people of Oregon, by which the bonds were to be paid as they came due out of the license revenues. It can not be done if the amount received from licenses is materially reduced, although I believe it only fair that the license fees on the old and used cars should be reduced.

The license fee, in fact, is one of the smallest items in the cost of running a car, and then the automobile license exempts the car from property tax. The average car, if assessed like other property, would be assessed at $500, and at the average rate of 40 mills the tax on the car would be $20. One-half the cars in the state do not pay that much in license fees.

Shortly after the adjournment of the last legislature I appointed a committee to study and report upon the readjustment of the auto license fees. The committee deserves the thanks of the people of Oregon for its intelligent and painstaking labors. A bill has been prepared by this committee which I most heartily commend to you for passage.

Our highways are the pride of our state. The matchless beauty through which they penetrate should not be desecrated by billboard advertising. The time has come in Oregon when popular sentiment will sustain a law prohibiting it. The remedy, if not other appear, may be found in the power to tax.

I ask you to leave the Market Road Law in substance upon the statue books. I introduced this bill into the Senate many years ago. Under its operation more than $10,000,000 has been collected and spent on the roads of Oregon. I now favor, however, a modification of the law so as to give the Highway Commission a greater authority over the expenditure of the money.

Automobile tourists left in Oregon in 1924 fully $10,000,000. Revenue from this source can be materially increased by the early completion of the highway system, including that wonderfully scenic route known as the Roosevelt highway. The Federal Government should be memorialized at the earliest possible date to construct the Skyline Trail from Crater Lake to Mount Hood. World-wide travelers assert that there will be nothing in the world comparable with such a road. It would seem that those in authority at the nation’s capital should see the justice in giving Oregon this small appropriation, when they consider the injustice of the act which took from our tax rolls that vast area for forest reserves. May we urge those representing us in Congress to united effort in securing this appropriation, which would vastly increase the number of automobile tourists immediately upon completion of the road.

Corporation Department

The Corporation Department has been conducted in a most efficient manner. The Blue Sky Law should be amended and made more effective. The law passed in 1923, providing for the issuance of non-par stock, should be repealed, or so amended that advantage will not be taken of innocent purchasers.

Insurance Department

The Insurance Department has been a real source of revenue during the past biennium. You increased the fees in 1923 at my request. There was collected in fees from insurance companies in 1922 the sum of $321,000. In 1924 this department deposited in the State Treasury $540,757.61.

There have been many incendiary fires in the state in the last two years. It is estimated that one-half of all the property destruction by fire in the state of Oregon is due to incendiarism. Proper legislation should be passed to remedy this situation.

State Traffic Department

The State Traffic Department should be under one head. At present part of the force is under the Highway Commission and part under the Secretary of State. It seems to me clearly the function of the Highway Commission to regulate the traffic on the highways that it is called upon to maintain. I ask you to amend the law, putting the entire traffic service under the Highway Commission.

Department Consolidation

Two years ago I asked you to consolidate the various departments of state government into fewer divisions in order to avoid duplication of duties, activities and expense. Consolidation occupied a large part of the time at the last legislative session, but the necessary legislation was not enacted. I again urge you to consider this very important matter. The government of the state of Washington is far more efficient than ours by reason of the enactment of what is known as the “Administrative Code.” Not only would consolidation afford greater economy, but greater effectiveness and efficiency.

Industrial Accident Commission

Two years ago, in my inaugural message, I asked you to enact legislation making three commissions self-sustaining: the Industrial Accident Commission, the Public Service Commission, and the Fish Commission. You passed a law, which I was glad to sign, suspending the contribution from the State Treasury for the use of the Industrial Accident Commission for a period of two years. I now ask that you pass another act at this session relieving the state of contribution to this commission for at least two years more.

I recommend that you submit an amendment, to be voted on at the election of November, 1926, making the present Industrial Accident Commission compulsory in all hazardous occupations, and with no other changes. I am aware of the fact that an amendment was proposed and defeated at the last election, having in view this same object, but it was handicapped by many additional provisions. Give the people a chance to vote upon this clear issue with no conditions attached. I feel certain the people will adopt such an amendment, which is necessary to save the work of the commission from failure by withdrawals. The large number of rejections would have worked a serious handicap had it not been for increased business. Private companies have insured at less than the cost of insurance, as found by our own experience during a period of more than eleven years. The only way these private companies can accomplish this miracle is by their failure to settle with the injured ones on the same terms that the state would settle. Advantage has been taken of those unfortunates by the greed of a selfish few. The act is in danger. It should be made compulsory in its application to hazardous occupations.

By special enactment at this time I believe that all peace officers of the state should come automatically under the benefits of the Industrial Accident Commission. Men who take the risk of injury and death in enforcing the law out to feel that their families are protected in case of serious injury.

Department of Fisheries

There was appropriated $36,000 to the Department of Fisheries at the last session. IT will not be necessary to make any appropriation for this department this year. More than $800,000 has been appropriated for the promotion of the fish industry in Oregon in the last few years.

Two years ago the legislature passed a law requiring a poundage tax of one-half cent on all commercial fish taken, which yields about $230,000 annually. This tax can be increased to one cent, thus creating a surplus to be paid into the State Treasury to reimburse the state for the amount appropriated during the last few years for the benefit of the fish industry. I wish to add that the producers of grain have paid freely a tax for the inspection of their own grain in sufficient amount to return to the State Treasury the sums advanced by the state.

Moneys Collected by Commissions

There is being collected by various commissions, operating under law in the state of Oregon, large sums in annual fees, and which during the past biennium reached the astounding total of $1,703,209. It is may recommendation that this legislative body pass an act requiring all commissions which collect such fees to deposit the same in full in the General Fund of the State Treasury. All commissions should be notified immediately that they are to present their budgets to the Ways and Means Committee and have the necessary appropriations made by that committee. It is neither sound business nor safe practice to allow commissions to collect fees and spend them as they see fit, without budget or audit, without check or proper accounting. The temptation to spend the money is so great that thousands of dollars are likely to be wasted each year rather than accrue to the State Treasury for the public benefit. The answer that the commissions should have the right to spend the fees they collect as they see fit does not suffice, and is itself an affront to the principles of good government. Money collected under state law belongs to the State Treasury, and money expended in any state activity should be expended only when appropriations have been made by representatives of the people. It is a fundamental principle of our government that no expenditure shall be made until the money has been appropriated by the people’s representatives. In the collection of fees by any commission there is an exercise of governmental powers.

World War Veterans’ State Aid Commission

I recommend that a constitutional amendment be submitted to the next general election that will reduce the tax on property from one mill to one-half mill, for the use of the World War Veterans’ State Aid Commission. A one-half mill levy for about eight years will create a sufficient fund to enable the commission to carry out all the provisions of the law creating it.

The commission has paid in cash bonuses $4,847,733.07 to veterans of the World war, and has loaned $14,565,700 upon property in the state. As the commission is obliged to lend 75 per cent of the appraised value, should it be requested, it will be seen that there may result a severe loss by reason of over-loans and the shifting of property values.

There is still a deficit of about $3,000,000 caused by the large amount of cash bonuses paid. During 1925 and 1926 the tax levy will yield a little more than $2,000,000. The remaining deficit of $1,000,000 should be collected from the taxpayers at the rate of $500,000 each year, and thus will be absorbed in two years. At the present rate of losses there will be a shrinkage of $2,000,000 or more in the loans resulting from the 75 per cent valuation law and by reason of the interest rate of four per cent to the veterans as against the interest charge of approximately four and a half per cent to the state on all bonds issued to date, thus making it necessary to continue the contribution of one-half mill tax on property for about eight years.

Public Service Commission

The Public Service Commission should be reconstructed. It would be far better to abolish the commission than to let it continue in its present form. I trust that no appropriation will be made for such continuance.

Penitentiary

Two years ago I asked the Ways and Means Committee to appropriate, for the use of the penitentiary, the identical sum of money, $420,000, given that institution under the former administration, but with the stipulation that the Governor have the right to use $100,000 of the appropriation to establish industries for the inmates of the penitentiary. I stated my belief that the maintenance cost could be kept within the sum of $320,000 for the biennium. I am happy to tell you that we have maintained the penitentiary on this amount, having reduced the monthly per capita cost from $39 to $28, and with a small balance left from the appropriation of $320,000.

With the $100,000 entrusted to me, there was constructed, with the aid of prisoners, a fire-proof, concrete warehouse, 70x200 feet, at a cost of $26,000. The construction of such a building ordinarily would have cost $65,000. With prison helpers there was also constructed a modern hydro-electric power plant, developing 231 horsepower, within the penitentiary grounds, by using the power from a small stream that for years has run through the penitentiary enclosure. This is a permanent addition to the state’s property, and will save Oregon $6,000 annually. The electric power plant itself is worth to the state the entire $100,000 which was entrusted to my care.

Machinery has been purchased for the reducing the flax straw to fiber. We have constructed concrete retting tanks, machinery for making flaxseed oil, for escutching the retted straw and for making fiber there-from. The cost of this machinery has aggregated $30,000. It is all operated by the prison electric power plant.

At the present time there is on hand about $100,000 worth of flax straw, flaxseed, flax meal, fiber and tow for upholstering. I feel secure in saving that I return at least $200,000 to the state in property. On September 17,1923, we suffered a disastrous fire, which swept out all the penitentiary shops and caused a loss of at least $150,000. The revolving fund lost $39,000 by reason of this fire, which amount should be replaced in that fund at this time. I secured from the Attorney General an opinion which allowed me to carry $40,000 insurance on the flax, and this amount was collected from insurance companies. The Emergency Board appropriated $65,000 for the rebuilding of penitentiary shops. We are able to return $5,000 of this amount to the treasury, as unused, as we have rebuilt at less cost than the estimate made by the engineers.

Boys’ Training School

Three year ago the legislature diverted $260,000 of the one-fourth mill road tax for the purpose of constructing a new Boys’ Training School. Two years ago the legislature passed a law giving the Board of Control the right to buy a new site for the training school, Acting under this authority, the Board of Control purchased 276 acres of land near Woodburn, on the Pacific Highway, a very fine site for a training school. A balance of $220,000 remains in the treasury for the construction of the necessary buildings. This is found to be inadequate. It is therefore recommended that $100,000 be appropriated by this legislature, to be added to the fund in hand, for the construction of the new buildings for the Boys’ Training School near Woodburn. We can then complete modern buildings for the care of these boys. There are now 200 boys at the training school.

Reformatory

I ask you to create by law a reformatory, to be established on the present site of the Boys’ Training School, for the purpose of caring for the younger men at the penitentiary, who should not be compelled to associate with hardened criminals. Also for the older boys now at the training school. This institution should be under the control of the Warden of the penitentiary, who should have authority, under the direction of the Governor, to transfer any inmate from one of these institutions to the other.

The number confined at the penitentiary has rapidly increased, perhaps in some measure because of my refusal to grant executive clemency in many cases where it heretofore has been freely given. There are now 467 inmates, of which number 91 are under the ago of 20 years. Those who are constantly in contact with these young men are better able to select from the number those who will reform and become useful citizens, than is any judge or board. Should anyone sentenced to the reformatory become incorrigible the warden should have the right, upon presentation of the facts, and approval of the Governor, to remove the boy to the penitentiary. The Superintendent of the Boys’ Training School likewise should have the right to transfer boys from the training school to the reformatory, under the supervision of the Board of Control.

State Market Agent

The office of State Market Agent was created last session at my request. This office has been filled in a most efficient manner. This department has done much to encourage cooperative marketing in the state and to bring about standing parking and grading of all farm products.

Grain inspection has been ably directed. Complete cooperation has been established between the national grain inspection force and the state department, and without noteworthy exception the grades made by the state employees are the accepted grades upon cereal shipped from Oregon and sold in foreign markets. This is of great value both to the produced and to the exporter.

It is accepted as fact by all that farm products must be cooperatively marketed. It requires effort and patience to teach the producer the necessity for cooperation. The department has proved its value and during the coming two years we hope to have the producers so organized that many of the products of the farm can be marketed to yield a profit to the produced.

I am glad to report that this department is not only self-sustaining but has created a surplus out of which the original $20,000 appropriated for its maintenance, before I became Governor, may be returned to the State Treasury. I remember distinctly when I introduced the Grain Inspection Bill in the Senate six years ago having said that the Grain Inspection Department would be self-sustaining and a burden upon the general taxpayer. I am happy to report that such is the case.

Wild Life

The wild game of Oregon is the common property of all the people, and its protection and propagation are therefore matters of the utmost importance, which are entitled to receive the earnest and sober thought of able, sincere men. This great heritage, with its vast food values and great incentive to healthful outdoor recreation, can only suffer if permitted to become the spoils of politics and the football of political controversy. I recommend that the entire control of this very important function of state be vested in an appropriate department of the Oregon Agricultural College, under the control of the Board of Regents thereof.

Lime

An effort should be made to secure cheaper lime for the use of the agricultural interests of Oregon. Freight rates on lime shipped from the state plant located in southern Oregon are so high that it makes the lime very expensive, and arrangements should be made for the development of cheap lime from the large deposit in Polk County.

Oleomargarine Bill

I was deeply disappointed in the defeat of the Oleomargarine bill. I refuse to believe that, if the facts were known to them, the majority of the people of the state would deliberately injure our great dairy interests for the benefit of the producers of the South Sea Islands. The great majority against eh bill was gained largely by the circulation of false and misleading propaganda picturing butter at one dollar a pound.

In time the question again must be submitted to the people as to whether or not foreign vegetable oil substitutes shall be allowed to masquerade in the flavor and color of butter and thereby take the home market from one of the greatest and most important industries in our state.

With feed higher than for years, and butter fat low, the dairymen face a hard situation. I sincerely hope the legislature will grant them relief, either by a tax on all vegetable oil substitutes for butter, or by prohibiting the mixture of dairy products with vegetable oils as a substitute for butter.

Irrigation and Drainage Bonds

I ask you to propose a constitutional amendment to be voted on by the people at the General Election 1926, repealed the state guaranty of interest on irrigation and drainage boards. I am not ready to say that the state should cease to help drainage and irrigation in Oregon, but I do believe that the assistance should be direct. Under the present plan it has simply afford a rich field for exploitation by promoters and schemers, often to the very great detriment and distress of the settler. The present commission has done its best to develop, to conserve, and to save under the law as it now exists.

The interest on the Jordan Valley Irrigation bonds was certified and guaranteed because it was found that the cost per acre for irrigation would be less than $40, and for the reason, too, that the commission decided that the state was morally if not legally, bound to do so because of the attempt to irrigate these lands under the Carey Act. These bonds were certified and guaranteed for the amount of $400,000. It is my belief that this project will succeed.

During 1924 it was necessary to call a meeting of the Emergency Board to appropriate $18,516 to pay interest on irrigation bonds that had been issued by the state in behalf of irrigation districts. There are now outstanding $2,027,110 in bonds issued to pay interest on bonds of these several irrigation districts. Many of the districts will not be able to pay the interest on these bonds, and as they are a general obligation of the state it will be necessary for this legislature to provide the money by appropriation to pay this interest, since we must not allow the credit of the state to become impaired.

The methods employed by the promoters of many of the irrigation districts of Oregon should have had the attention of the criminal courts before the statute of limitations had expired. Earl settlers—pioneers—the very best people of the state—were, by one means or another, brought into these irrigation districts and have lost, or are on the point of losing, their homes because bonds voted under the operation of law become an underlying lien. Such bonds take precedence over loans made even from the Irreducible School Fund.

Hydro-Electric Power

Oregon has the finest natural water power in the Union, and I favor its use for the benefit of the people. It is undeveloped at present except by a few private corporations, which enjoy a monopoly of the Creator’s wonderful gifts to the people. Properly designed hydro-electric plants constructed along modern lines on Oregon’s splendid power streams should not cost, in many locations, more than $100 per horsepower. Under the present system millions of dollars are invested in Oregon in old-fashioned hydro-electric plants of high-cost construction, for which the public is paying.

The Public Service Commission of this state makes the rates for electric current—based on cost of construction and distribution—sufficiently high to pay interest on over-valued investment, thus making the cost of power excessively high. Cheaper power would bring to our state hundred of industries that would cause an unprecedented development in the Pacific Northwest. The state is set for the hydro-electric drama in Oregon. This stat is seriously handicapped now by the cheap development of hydro-electric power in the state of Washington, where power is sold by municipal plants for much less than it is sold in Oregon.

I am informed that power can be developed on the McKenzie, the Deschutes, the Columbia, and at the Umatilla Rapids, and delivered to Portland and the Willamette Valley towns for approximately $11 per horsepower annually.

I ask you to enact a law creating a hydro-electric Commission to investigate and report to the Governor the cost of the construction of modern, up-to-date, hydro-electric power plants on undeveloped natural water power of the state of Oregon, investing this commission with power to form a district, establish boundaries thereof for the delivery of electric energy and water at such points as the commission shall designate with in the district, and giving the Governor power, should the commission so recommend, to call a special election to vote a bond issue of sufficient amount to build and construct such municipally-owned hydro-electric power plants. Even should any district decide adversely as to the construction of such power plants, the data gathered by such a commission would be of great value to prospective investors.

The investment of $10,000,000 in the Clear Lake Project, at the head of the McKenzie river, I am informed by engineers, would deliver the finest mountain water to most of the larger towns in the Willamette valley, and probably would yield current that could be sold for not more than $15 per horsepower annually, wholesale, which would pay for maintenance and interest and provide for the payment of bonds. This would revolutionize Oregon. The people should have the right to construct such plants, where found feasible, at the earliest possible moment. I also urge that everything possible be done to encourage the construction of a plant at Umatilla Rapids for electric and power purposes.

Labor

It has come to my attention that here are individuals and firms within the state who employ labor without making proper provision for prompt payment of wages earned. They sometimes get heavily in debt to honest working people, and, taking advantage of this fact, force the employees to accept stock of a valueless interest in the business in settlement. I therefore recommend that provisions be made for the more adequate protection of wages by giving to the Labor Commissioner the authority to assist in making collections through the district attorneys, where necessary, and who shall act without fees.

I find from the report of the Labor Commissioner that there was paid in fees to employment agencies in the state of Oregon, during the year 1924, the enormous total of $358,756.44. This is the amount exacted from the laboring people for securing employment. I consider this amount extortionate. I firmly believe that this country owes a job to every man who wants to work. I do not think that he should have to pay for the privilege of securing one.

I believe that free labor agencies, in cooperation with the United States Employment Service, should be established in all centers, under the control of the Bureau of Labor. This will incur some expense, although not large, and I favor a sufficient appropriation from the State Treasury to provide this needed relief to the unemployed.

Child Labor Amendment

I recommend the adoption of the Child Labor Amendment ot the Federal Constitution. It is certainly right and proper to give to Congress the power to pass a law protecting childhood in America from the greed of those who coin dollars from the labor of helpless children.

Salaries

A heavy responsibility falls upon the District Attorneys of our state. The salaries paid them frequently are inadequate return for the energy and ability that is demanded of the men who are charged with the enforcement of the laws of the state. I recommend that these salaries be increased.

I ask you, also, to increase the salaries of the Justices of our Supreme Court.

No other salary increases are recommended.

Law Enforcement

In the matter of law enforcement there has been most certainly a decided improvement in this state. However, much still remains to be done. All laws should be enforced upon rich and poor alike, in magnificent home as well as in humble cottage. I am a firm believer in the Prohibition law. In the enforcement of this law we have had 1,218 cases and the narcotic cases numbered 15. There has been assessed $271,903.63 in fines for violation of the Prohibition law, and $1,150 in fines for violation of the Narcotic law. Sentences imposed would require 45,361 days’ confinement in jails and penitentiary for the Prohibition law, and 570 days for violation of the Narcotic law. There have been destroyed 28,144 gallons of intoxicating liquor and mash. Stills seized and destroyed number 134. There have been seized and confiscated 43 automobiles. Under operation of the law we are forcing the bootlegger to pay for his own conviction. If the law is enforced with sufficient funds and vigor, the bootlegger will be driven entirely out of business.

The department has been active in nearly every county in the state. Only $25,000 was allowed to the prohibition fund annually. The State Prohibition Department has created more consternation among those who flagrantly disobey the prohibition laws, and among officials lax in their enforcement methods, than has been created anywhere, at any time, with the same amount of funds for personnel and operations. I urge you to increase the power of this department, and give it 50 per cent of the fines collected from violators of the prohibition laws.

The State Prohibition force is the terror of the lawbreakers. It has been conducted in a clean, straight-forward, business-like manner, and I invite your body to investigate the moneys expended in the enforcement of the prohibition and narcotic laws. I wish to bring to your attention the report of the Prohibition Commissioner

In a series of addresses delivered over the state I have done my best to arouse a higher spirit of Americanism, a deeper sense of moral duty, in the citizens of Oregon. I have instated, and still maintain, that honesty is the principal qualification for all officials. I have used every possible opportunity afford by school or church to create a sentiment for the enforcement of every law, and for love and respect for our sacred institutions of government.

America is doomed if classes ever appear as they have in the older civilizations. Men of property and standing in our country should be in the forefront of the fight for the enforcement of every law. Should the time ever come when the wild mob surges down the street, as it so often has done since civilization had its beginning more than six thousand years ago, vast wealth will then be of no avail. The plea for mercy will go unheeded unless the average citizen believes that all have received justice under the operation of the government, which he is called upon to protect with his life; for this is a government emanating from all the people, based on the consent of the governed.

A sentiment must be built up throughout the land that America plays fair with everyone, and respects no one over another because of property or birth. I call upon every man and woman, within the church and without, in the mansion and in the cottage, in the city and on the farm, in the office and in the field of labor, to share in the duty and responsibility for law enforcement.

We, who are the beneficiaries of the greatest inheritance the world has every known in the form of governmental institutions, unequalled in their justice since time began, today find them trembling in the balance, because there is growing up a spirit of indifference to law and established authority.

May there be a revival of the spirit of reverence for authority and law that will sweep this land from end to end, so that Oregon may be the most progressive state in all the Union, a state where law is held sacred, enforced without favor, or repealed when found wrong. All the police power in the nation could not bring this to pass in Oregon alone unless supported by popular approval. Our government will stand only so long as justice is administered through the laws and courts. I call upon the bench and bar of this state to reform the practice in the courts so that the punishment of the guilty will be prompt and commensurate with the crime.

When the anarchist appears in the so-called lower stratum of society, we may depend upon it that he also has made his appearance into the so-called upper stratum. This country has more to fear from the law violator in the marble office than from the ragged leader of the mob in the street. It is often the idle rich, sometimes the professional idler, who is chiefly responsible for the “I don’t care” attitude of today.

Friends, as we love America, we must care! Our own homes, our own government, depend upon the thought and care that we exercise for the preservation and their continuance. It is still true that “Eternal vigilance is the price of liberty.”

I am exceedingly anxious to work in harmony with this legislature. I do not want to infringe in any way upon any of the prerogatives of the legislative branch of our state government. I guarantee to you that every department of state is open to your inspection. We will be glad to appear before any of your committees at any time for a full and complete accounting of any transaction or circumstance in the conduct of state affairs upon which you may desire information.

It is your function to prepare and to pass bills. I wish to help you in every possible way. I tender you my full cooperation at all times.

Our state is rapidly growing in wealth and population. We must not handicap or retard its progress. Neither must we allow the confiscation of valuable property in this state for the benefit of the selfish few who would avoid their reasonable part of the burdens of society. It is the duty of law to equalize the burdens as far as possible, compelling the selfish to assume the obligations which they should bear as a matter of right.

Oregon is one of the most favored spots on all this earth. We have the climate, the soil, the water, the natural gifts of nature. We have inherited the experience of the ages. We can create here the most perfect civilization the world has ever known, where the rewards of human toil are more equitably distributed, and the burdens of society are more equally borne than elsewhere.

Our forests must be preserved that they may bring labor and wealth to future generations. The might of our streams should heat and light the homes and turn the wheels of industry. In Oregon should be established the final temple of civilization. May our deliberations and work here contribute some small measure of progress toward that great end.

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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