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REPORT.

AUDITOR GENERAL'S OFFICE,
Lansing, Mich., Dec. 24th, 1866.

To the Honorable Legislature of the State of Michigan:

In submitting to you, at the expiration of my official term, this, my Annual Report, allow me first to congratulate you upon the soundness and prosperity of the financial affairs of our Commonwealth.

Although a five years' war has required heavy drafts upon the Treasury, and large State bounties, amounting in all to nearly two millions of dollars, have been paid to our soldiers, our State has met all her obligations promptly. Her indebtedness has increased only about one million and a half since 1861, and there is at the close of this fiscal year a cash balance in the State Treasury of more than half a million.

The balance in the State Treasury at the com-
mencement of this fiscal year, was..
The receipts during the fiscal year from all

Sources, are...

Total available funds for the year,.
Warrants have been drawn by me upon the State
Treasurer, amounting to.

Leaving balance Dec. 1st, 1866,.............

A warrant of $2 52 is still outstanding, which increases the actual cash balance on hand at the close of the fiscal year, to $579,007 32.

This amount of surplus will not be diminished during the ensuing fiscal year; on the contrary, there is good reason to anticipate that it will be largely increased during the months

....

$468,399 29

... 1,901,990 69

..$2,379,389 98

1,791,385 18

$579,004 80

of March and April, 1867, perhaps to eight or nine hundred thousand dollars.

The surplus funds of the State are now on deposit with the National Insurance Bank of Detroit, Jackson City Bank, and the Second National Bank of Lansing, at a rate of interest of 3 per cent. per annum.

Section 2, Act 200, Session Laws of 1863, does not fix any minimum rate at which the surplus funds shall be deposited, but leaves it optional with the State Treasurer to deposit the funds“ at such rate of interest as he, in his discretion, shall deem best for the interest of the State.”

It is nearly four years since said act was passed. At that time circumstances were different. Money was plenty and could be obtained at a very low rate of interest, and the surplus funds deposited at that time were comparatively light.

Money being worth much more at present than four years ago, I think the State could derive about five per cent. interest on her surplus funds, and I would suggest to amend Section 2, Act 200, so as to fix the rate of five per cent. as a minimum.

And with the expectation that the surplus funds will accumu. | late during the next year to at least $800,000 or more, I

would further suggest the propriety of leaving the investment of these moneys with the Chief Executive of the State, and the two financial officers. This, I think would be a decided improvement of our present system of depositing the surplus funds of the State. Long ago some of our sister States adopted similar methods.

STATE INDEBTEDNESS.

By reference to Schedule H, of this Report, which exhibits & specification of the items of indebtedness of the State, you will see that a part of the two million loan will fall due on the 1st of January, 1868. This part amounts to one-quarter of & million.

It does not seem to be necessary for the Legislature to provide for the payment of that amount in any other way, than simply to authorize the proper officers to apply the receipts of the Trust Funds during the ensuing fiscal year, as far as necessary, towards paying that item of our indebtedness, as these receipts will, in all probability, be large enough to liquidate the same. To meet, however, any emergency, it will be well enough to authorize an appropriation from the general fund, of $100,000, or so much thereof as may be needed, to redeem that part of the Two Million Loan falling due Jan. 1st, 1868, provided the receipts of the Trust and Sinking Funds should not be sufficient to liquidate the same.

The total funded and fundable debt amounts to $3,979,921 25, an increase of less than one hundred thousand dollars since the close of the year 1865, while, during the same perio), the cash balance in the Treasury has increased more than that amount, notwithstanding the heavy expenses for bounties, and other war purposes. It seems more than probable that in future the receipts on account of the Educational Funds, and the tax derived from the Sinking Funds, (3-16 of a mill on the taxable property,) will be sufficient to pay the various items of our indebtedness, as soon as they fall due. The method of applying the receipts of these funds towards liquidating the outstanding indebtedness of the State, is decidedly the best financial policy which could have been adopted, and I confidently hope that, whatever may be said to the contrary, the same will be continued as long as there is any outstanding indebtedness.

STATE TAX.

The State Tax for the year 1866, which I have levied in ac. cordance with the various Acts of the Legislature, and apportioned among the several Counties of the State, consists of the following items: 2 7-10 Mill Tax, Act 363, Laws of 1865,....

$464,650 67 1-8

122,
1861,

38,495 73 1-16

5,
1861,

19,247 87 Military Tax, 16,

1862,

19,628 70 Appropriation for Insane Asylum, Act 192, Laws 1865, . 40,000 00 Total,......

$581,922 97

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With refefence to the above items, I have to remark that in levying the 2 7-10 mill tax, the equalization as made by the Board in 1861 was taken as a basis, in strict compliance with Act 363, Laws of 1865, while the aggregate amount thus levied was apportioned among the several counties on the basis of the equalization of 1866. In levying and apportioning the tax for the Sinking Funds, that is the 1-8 mill and the 1-16 mill tax, I have based my calculations on the equalization of 1866, and thereby increased those two items of our State tax about 70 per cent. against last year. On the last page of this Report, a tabular statement will be found of the various items of State tax, as apportioned among the several counties.

In 1865, the tax levied for the support of the State Government, the benevolent and other State institutions, and for the payment of the interest on the State indebtedness, not otherwise provided for, was 3 2-10 mills on the taxable property; in 1866 it was reduced to 2 7-10 mills, and for next year a rate of 1 1-2 mills on the taxable property as equalized by the State Board of Equalization in 1866, will, in my opinion, be abundantly sufficient for the above named purposes, provided no extravagant appropriations be made and the expenses of the State Prison reduced. About this Institution and its financial affairs, I contemplate speaking on another page of this Report.

TAX COLLECTIONS AND SALES.

With reference to Schedule B, which specifies the receipts on account of the General Fund, it will be observed that the amount received from the several counties, for taxes collected, &c., is unusually large, ($458,351 35,) while, as appears by Schedule C, the amount paid to the counties on account of taxes collected is comparatively small, ($95,804 94.) This favorable result has been accomplished by the continued and systematical efforts of this department, to induce and compel the Treasurers of the several counties to do justice to the State, and pay their actual dues. Heretofore some counties

were indebted to the State to a large amount; during the last months of this fiscal year however, the accounts between State and counties have been balanced as nearly as possible.

The proceeds of the annual tax sales, and sales of State tax lands are lighter this year than the last, amounting to only $130,136 87, against $161,105 17, in 1865. From some of the County Treasurers, the proceeds of the tax sales have not yet been paid into the State Treasury. The Treasurer of Leelanaw county has refused to pay the proceeds of the sales for the last two years, claiming that the State is indebted to his county. This, however, is not correct, and I have repeatedly taken pains to convince him of the incorrectness of his views, but in vain. And, as the amount of taxes collected for the county of Leelanaw, is very small, much too small for an offset against the proceeds of sales, I have deemed it necessary to request the Attorney General to commence legal proceedings against the Treasurer of said county and his bondsmen. The amount due on account of tax sales from said Treasurer is $576 89, and the amount of the official bond I hold, $2,000.

The Treasurer of St. Clair county, also has failed to pay the proceeds of the last tax sales into the State Treasury, but in his case circumstances are entirely different.

A few weeks ago, Henry Johr, Esq., the Treasurer of St Clair county, appeared in my office, delivered his sales books and certificates of sale, and represented, that on the 20th day of November, while on his way to Lansing, he was robbed in the city of Detroit, of $7,500 in currency. He further represented, that owing to this unfortunate accident, he was at present unable to pay over to the State Treasurer the proceeds of tax sales, which by reference to the sales books and certificates of sales, amount to $8,240 88. The county of St. Clair at that time was indebted to the State on his general account, in a sum of about $5,000, which was promptly paid by the Treasurer, who at the same time expressed a willingness to do justice to the State, and meet his obligations at as early a day

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