would be entailed upon the inmates, many of whom are nearly helpless, would be something too terrible to contemplate. I most earnestly recommend an appropriation large enough to meet this emergency.

STATE BANKS.

The report of the bank commissioner shows the institutions under the control of this department as being in excellent condition. Perhaps nothing more clearly indicates the prosperous condition of our people than a comparison of the statements made by our banks under the official call in 1900 and again in 1902. Comparison made between the calls of September 1, 1900, and November 25, 1902, shows the total number of banks under state supervision at this time is 477, a gain of eighty-nine banks in two years. The total capital is now $7,751,000, an increase of $1,138,000 during the same period. The total surplus is now $1,769,701.86, a gain of $419,491.34. The total deposits are now $40,135,176.58, a gain of $8,508,841.14. The total loans are now $32,885,046.98, an increase of $11,072,211.42. The total value of all real estate, other than bank buildings, is $253,641.78, a decrease of $279,716.14 in two years. The banking law does not contemplate banks holding real estate other than a suitable building for the transaction of the bank's business, and a large proportion of the real estate now held was acquired through the adjustment of matured loans, and the banks are rapidly, as their best interests will permit, disposing of this class of security, as the decrease of nearly $300,000 will show. The cash and sight exchange (legal reserve) at this time is $15,352,451.44, or 38.25 per cent. of the entire deposits, showing the banks of the state are upon a safe and conservative basis.

HANDLING OF PUBLIC FUNDS.

I believe that the law should be so amended that county treasurers, when they remit any funds to the state treasurer, should be required to notify the state auditor of the amount remitted, and the auditor, upon receiving such notice, should be required to charge the treasurer with such amount.

And I would further recommend that our laws be so amended that the accounts of the state fiscal agency and the state depositories be kept with the auditor of state and state treasurer in a more businesslike manner. Under the present law, neither the state fiscal agency nor the state depositories are required to report to the auditor of state. When the state treasurer remits to the fiscal agency or makes a deposit with the state depository, he should be required to sign, with the auditor of state, a statement showing that said remittance or deposit has been made, and the auditor of the state should be required to charge the state fiscal agency or state depository with said remittance or deposit, and credit the state treasurer; and when the state treasurer issues a check or draft on the fiscal agency or state depository, before delivering said check or draft to the party

to whom it is issued, the treasurer should be required to present it to the auditor of state, and the auditor be required to countersign said check or draft, keeping a record of the same, charging the treasurer with the amount of said check or draft and crediting the fiscal agency or state depository with the amount. Under the existing law, when the board of examiners, consisting of the governor, secretary of state, and auditor of state, makes its monthly examination of the state treasury, it is compelled to ask the banks what the state has on deposit with them, and is compelled to take the treasurer's statement as to what amount of money is in the state fiscal agency, New York, in place of getting this information from the records in the auditor's office.

I find, from the record kept of the examinations made by the aforesaid board of the state treasury for the year 1902, that the average amount of funds in the fiscal agency during said year was $51,390. I also find that the state has a contract with the state fiscal agency whereby the agency pays the state two per cent. on the average daily balances of state funds in said agency, which for 1902 would amount to $1027.80. I also find from the records of said board that the average amount deposited in Topeka banks, the same being state depositories, for the year 1902, was $481,272.69. If the New York bank which is the fiscal agency can pay two per cent. on the average daily balances, it occurs to me that the banks of Kansas will be willing to pay the same. Two per cent. on the average deposits in the Topeka banks for 1902 would amount to $9625.45.

I also find from the records of said board that the average amount of money in the state treasury and in the Topeka banks as state depositories for the year 1902 amounted to $768,811. This amount, at two per cent. on average daily balances would net the state $15,376.22 per annum. It seems to me that business prudence and the public welfare demand that some change, such as suggested herein, be made in the handling of our state funds. I would also recommend, if these suggestions are enacted into law, that the bond of the state treasurer be reduced one-half its present sum, the bond to be made by some surety company and paid for out of the profits accruing to the state upon the daily balances as suggested in this recommendation.

REQUIRING ACCOUNTING OF MONEYS.

I would recommend that the Legislature enact such laws as will forever abolish trading and trafficking in the marketable commodities from the various state institutions. At every institution, edu cational or otherwise, where any money is received from any source, or where any commodity is sold, it should be sold for cash, and the cash paid at the end of each month to the state treasurer. I think it is due the members of the Legislature and the taxpayers of the state of Kansas that they know what it costs to run the institutions

of the state. The Legislature could then more intelligently make the necessary appropriations.

I would also suggest that all public moneys received from any of the sources mentioned at any of the state institutions, after being paid to the state treasurer, be reapportioned or at once placed to the account of said institution, and that it be paid out by the state treas urer on warrants issued by the auditor of state, on vouchers made out and properly approved, the same as required in paying out regular appropriations.

ASSESSMENT AND TAXATION.

The subject of taxation is one of the most important that will engage your attention. For many years it has been generally conceded that our present tax law is insufficient for present conditions, crude and inequitable in its operation. Framed thirty-four years ago, when Kansas was a frontier state and all its property visible and easy of assessment, it is now imperfect, and wholly inadequate to meet the changed conditions of society.

The expenses of government tend to increase much faster than population, so that the per capita of taxation in this, as in all other states, constantly increases, but the burdens remain where they were placed when the state was new, on real estate and visible personal and railroad property.

The increase in the use of the corporate form of business, the vast growth of enterprises of a quasi-public character, holding from the public franchises of great value, have led to a vast increase in intangible personal property which almost wholly escapes taxation. The protection of these and other new forms of wealth, as well as the increasing extension of government into new fields of regulation and control, have vastly increased the cost of government, the burden of which these new forms of wealth successfully evade under the present law. In 1873, when the assessment of railroad and personal property was first separated, real estate paid 74.47 per cent. of the total tax, personal property 17.79 per cent., and railroads 7.85 per cent. In 1900 railroad taxation had increased to 17.53 per cent. of the total, real estate bore 66.01 per cent., a slight decrease, and personal property, in spite of its vast increment, had fallen to 16.46 per cent. of the total. In that year, with $60,000,000 in our banks, the assessors found but $3,000,000 for taxation, and the total assessment of personal property was but $57,000,000, or $3,000,000 less than our holdings of money alone. As in 1873, the farmer, the small-home owner, the possessor of real estate and the owner of visible personal property, such as the stockman and merchant, pay five-sixths of the tax, and the railroads pay the rest.

Besides this, there are glaring inequalities between the assessment in adjoining counties, and consequent inequalities in the burden of both state and county government.

---2 Sen.

These inequalities and injustices have attracted the attention of our lawmaking power for many years, and many attempts have been made to adjust the law to the new conditions, but the brief time allowed by the session has prevented a comprehensive and satisfactory plan; and so thoroughly has this been proven that the session of 1901 adopted the plan which has been followed with success in most of the Northern and Western states in recent years of a State Tax Commission.

The commission consisted of representatives of both houses and certain state officers, and was empowered to sit in vacation and prepare a new tax law. The attention of the commission was called to the evils above recited, and it was particularly directed to provide for the fuller assessment of personal property.

The commission so constituted has expended much time and thought upon a bill and report, which will be submitted to you. It has collected a large amount of information, investigated the laws of other states and their operation, and its conclusions and the information it has obtained will be of value to you in considering this subject. Without commenting upon the bill prepared, or assuming to pass any opinion upon its merits, I invite your earnest attention to its various features, with the sincere hope that you will not permit the work of the commission to be lost by a failure to act in this matter, and that you will be able, starting with their work, to formulate a law that will bring upon the tax-rolls the vast amount of personal property that now escapes, thereby lightening the burden borne by the farmer, the home-owner, the merchant, and all who own real estate and visible personal property.

LOUISIANA PURCHASE CENTENNIAL EXPOSITION.

For the purpose of exhibiting the resources and showing to the world the industrial, commercial and social progress of our state, the Louisiana Purchase Centennial Exposition Commission of Kansas was created by an act of the last Legislature, and directed to assume and exercise all powers necessary to secure a complete and creditable display of the interests of the state at the international exposition to be held at St. Louis in 1903, and to select a site and erect thereon buildings for such display.

This commission, pressing the fact that Kansas was the first state to make an appropriation, succeeded in securing one of the best sites awarded to any state. The collection of exhibits has begun and plans and specifications for a building are being considered.

Such appropriations should be made as will enable Kansas to assume her place of proper eminence at this exposition and to pre. sent a display which will be an inducement to investment in and immigration to this portion of the territory covered by the Louisiana purchase. The postponement of the exposition until 1904 will necessitate such amendments to the law as are necessary to meet the changed conditions.

BUREAU OF LABOR AND INDUSTRY.

The report of the commissioner of labor is a collection of data with special reference to the industrial interests of the state. Certain legislation is recommended concerning labor that I believe worthy of your consideration, especially that referring to the prohibition of child labor under the age of fourteen years in factories and workshops, except under certain conditions prescribed by law; also, a just and equitable arbitration and conciliation law, in order to better protect the industrial interests of the state against the disastrous effects of long-drawn-out strikes, and at the same time guarantee justice and fairness to employer and employee.

NATIONAL GUARD.

I recommend a just and liberal support of the organized militia of the state. It is composed of nearly 1400 young men, who give their services to the state without compensation, except during the brief period while in attendance at the annual encampment. The general government is liberal in supplying all needed equipment, the expense devolving upon the state being for the maintenance of the organized companies and batteries. The annual appropriation made by the government to Kansas for equipments amount to $21,241.82, but it is contingent on the organization and support of a sufficient militia. The government has awakened to the necessity of a revision of the obsolete national militia laws, and a bill now pending in Congress makes still more liberal provisions for the support of the National Guard. If the bill now before Congress becomes a law, it will be necessary to amend the state militia act to harmonize it with certain provisions of the national law.

I believe in an organized and efficient militia, and I trust the state of Kansas will cooperate with the national government in all efforts toward improvement, and will liberally aid all movements tending to the development of the National Guard.

STATE HISTORICAL SOCIETY.

The State Historical Society is now provided with satisfactory accommodations for the care and proper exhibit of the collections showing the trials and accomplishments of our people in creating this splendid commonwealth. No state has had a more inspiring history; and now that the work of the society is in order, it is a source of gratification that liberal support by the Legislature has always been accorded, instead of leaving this patriotic service to individual effort. All Kansans should be proud of the society and its work, and I heartily commend it to the Legislature for continued consideration and liberality. A proper cataloguing of the collections has been reasonably well kept up, and I would suggest that, upon its completion, a catalogue of the Kansas portion, at least, be published, that it may be more available to the general public.