State Tax.-There was levied in 1864 a direct tax of 51 mills for the following purposes:

of a mill for schools; 1 mills for general purposes; 1 77-80 mill for bounties; 48-80 of a mill for canals, and 3-16 óf a mill for the Albany and Susquehanna railroad.

The aggregate proceeds of the State tax levied in 1863, and payable during the last fiscal year, were $6,143,704.03, exclusive of the mill tax for school purposes.

CANALS AND CANAL FUNDS.

Statement for the fiscal year ending with the 30th of September, 1864, namely:

The surplus revenues have been applied, under direction of the
Constitution, as follows:

Transferred to the Sinking Fund, under art. 7,
sec. 1, of the Constitution...

.........

$1,700,000 00

Statement of the Canal Debt, paying interest on the 30th

September, 1864.

Principal.
$7,906,224 76

Under art. 7, sec. 3, of the Constitution........ 11,736,000 00

Under art. 7, sec 1, of the Constitution.....

Under art. 7, sec. 10, of the Constitution..
Under art. 7, sec. 12, of the Constitution..

An. in. of $434,253 48

696,800 00

The gross earnings of the canals from the close of the fiscal year 1860, to September 30, 1864, four years, were $17,722,384.84. After paying the expenses of superintendence, collection and ordinary repairs for the same period, $3,279,976.44, there was a net balance of surplus revenues amounting to $14,442,408.40. From this

sum there has been appropriated to the Canal Debt Sinking Funds $10,824,570,14; to the funds for the extra repairs and improvements of the canals, for land damages and other claims against the State, growing out of the enlargement and completion of the public works $1,666,724.86; to the General Fund, on account of interest on the General Fund Debt, and for the support of the Government, $1,951,113.40, making altogether $14,442,408.40.

The amounts carried to the credit of the Sinking Fund have been applied, so far as necessary, to the payment of the interest and principal of the canal stock debt. On the 30th September, 1864, the balance in all the Sinking Funds, in the aggregate, was $6,022,609.90, constitutionally pledged to the payment of the interest and principal of the canal debt. It is a matter of pride and gratification that since the close of the fiscal year in 1860, this debt has been reduced $4,779,511.23.

The Auditor of the Canal Department reports that there are. now outstanding and unsatisfied claims against the State, including interest to the date when payment can be made from funds now to be provided by taxation, amounting to $586,329.59. These claims are founded upon awards by the Canal Appraisers for lands taken for public uses, and upon awards by the Canal Board, under special acts of the Legislature. I recommend that provision be made for the payment of these claims at the earliest period practicable.

The Auditor estimates that there will be a deficiency in the canal tolls the current fiscal year, owing to the very large sums needed for the repairs and maintenance of the canals, to an extent that will render additional aids to the Sinking Fund, under article VII, section 3 of the Constitution, necessary to enable the State to preserve the public faith towards its creditors. The claims. upon the fund will be for interest upon the $12,000,000 debt for the next fiscal year, and whatever the deficiency may be, it must be supplied by deficiency loans upon the credit of the fund, or by equitable taxation.

We should not, in my judgment, borrow money to pay the interest on the public debt. The disposition and ability of the people to bear the burdens of the hour, and discharge occurring liabilities and demands upon them, is a gratifying evidence both of their patriotism and prosperity. The practice of paying debts, instead of borrowing to pay, should be observed by governments as well as by individuals, and especially should the rule of prompt

payment of interest on debt from ordinary resources or taxation never be departed from except in unexpected emergencies. Notwithstanding the heavy burdens of taxation, the people in all the industrial pursuits exhibit a comparative increasing prosperity. It may not be improper to refer, at a time when so much solicitude is felt as to the strength and resources of the loyal states, and the prosperity of the people, to the share which New York State has in making up the aggregate of these resources.

The contest forced on the people for national existence is severe, yet the magnitude of the means it has developed, and the strength it has shown the loyal states to possess, exceed all our calculations. We may, with just satisfaction, point to the leading facts of our prosperity, when the purpose to be served is to strengthen and encourage the patriotic impulses of the people, and to sustain them in the discharge of duties which often involve great hardships and trials. The sacrifices they are called on to make will not be considered in vain, when the national strength develops itself in such unexpected proportions, and seems to defy the demands of this gigantic war.

The geographical position of our State is such that it has at all times drawn to its ports, and carried over its interior lines of transportation, the greater share of the foreign commerce and of the interior exchanges of the United States. This concentration of trade has increased since the war began in consequence of the closing of the Southern ports, and the stoppage of trade on the Mississippi, and not only has this tendency been more decided, but, in addition, the volume of all classes of trade, foreign and domestic, has been greatly enlarged, contrary to the predictions of the enemies of the Union, and to the surprise of most of its friends. The chief seaport of the country has increased its business both in foreign and domestic commerce more rapidly than at any previous time, and the great lines of transportation have nearly doubled the quantities of produce carried through this State to the seaboard since 1859, and the greater proportion of the increase has been subsequent to 1860, or during the years of actual war.

The public works of the State, now more decidedly than ever before, indicate the wisdom of their founders, and the great railroad lines find their capacities taxed to the utmost with only occasional interference with the canals.

The report of the Auditor shows a falling off in the revenue of the canals for the fiscal year, but this may be the result of the

anxiety of the people to reach the markets with their produce in the quickest possible time while prices are ruling high. Oftentimes their interests will be promoted by paying the higher rates of railroad transit, with the view of seeking a market which to-day is buoyant and to-morrow may be depressed. Hence large quantities of produce have been diverted from the canals to these speedy lines of communication, thus swelling their business, as their annual reports exhibit. It is not doubted, however, that the transit of internal commerce will find its accustomed channel when the circumstances which have operated temporarily to control it, are at an end.

The tonnage of produce going eastward on the Erie canal, derived from the Western States and the Canadas, rose from 1,034,763 tons in 1859 to 2,594,837 tons in 1862. During the years from 1859 to 1864 inclusive, the two great railroad lines carried eastward the following aggregates of both through and way freight :

With such conditions attending the very crisis of the great national trial, as regards the activity of trade, and the quantities of staple articles produced in the interior and sent through and out of the State for exchange at its commercial centre, it is reasonable to assume the stability of the large interests confided to our charge within the State, and to place the most implicit reliance on the power of the country to sustain the exhaustion of war.

Turning from this internal movement to the foreign trade conducted at the port of New York, we find it increasing during this critical period quite as rapidly. The exports more than doubled from 1859 to 1863, and the imports which were previously greatly concentrated at that port were fully maintained.

These facts are important and significant, as I before remarked, from their relations to the dangers in which the country is involved. They afford the amplest assurance, also, of the great and permamanent value of the public works, which are the property of the State, and that they may be relied on as a permanent and productive basis of revenue. The Western producing States are especially benefited and aided by the public works, and experience

has fully shown that the great natural channel of the St. Lawrence river, though open to almost unrestricted use for the United States produce shipments outward, withdraws but a small percentage of this Western trade.

The increased business of the State in manufacturing and other industrial pursuits has kept pace with the advance before described, but it cannot be made the subject of equally definite statement. The evidences of this manufacturing activity are everywhere abundant. It has caused an increased consumption of many products of the State, and by so much has had a tendency to create the appearance of decline in such products, when in fact a substantial increase occurred.

Such are the contrasts which encourage the people under the trials which they have by their patriotic energy controlled to their advantage when it was asserted that the result would be the ruin of their industry and their commerce.

AGRICULTURE.

Everything which pertains to the cause of agriculture is of the utmost concern to all. The productions of the earth from tillage are the chief resource of our prosperity in times of peace, and upon their abundance the support and effectiveness of our armies are dependent in time of war. It is with great satisfaction, therefore, that I extract from the report of the Corresponding Secretary of the State Agricultural Society the information that the agricultural interest of the State is in a flourishing condition, and that the recruiting of the armies, which affects this interest more, perhaps, than any other, has not seriously diminished its produ tions, the introduction of labor-saving machinery having, in a great degree, compensated for the lack of men engaged in manual labor.

I am informed that an application will be made to you in behalf of the Agricultural College. This institution has been closed since 1861, for want of means to carry out the design of its foundation. A most generous offer of endowment has been recently made by a distinguished citizen of the State, on condition that the Legislature shall make a grant to it from the income of the public lands. I doubt not you will consider this offer and take such action thereon as the nature and importance of the subject may demand. It is certainly desirable that this institution may be speedily enabled to enter upon its appropriate and valuable sphere of usefulness.