The Bismarck Tribune Newspaper, January 9, 1929, Page 7

Members of the Legislature: ‘ ot ati to the mandates of the state constitution and a cording to a custom long established, the members of thi the Twenty-first Session of the Legislative Assembly, ha' reat in joint session to witness the public inauguration of the sete ofticials recentiv elected, and to receive a message irom both. the outgoing and incoming Governor. In so doing, we fare all, I am sure, conscious of the solemn character of thi occasion, fully appreciative of the Ping responsibility th Fésts upon each of us, and sensibl: the high degree of con- fidence reposed in us by our con: nts and our duty to dis- charge our official trust in the spirit of the constitutional oath today taken by each executive officer and legislative member in this presence. We meet at the threshold of an- other biennial period in the governmental history of the state, a period which offers to us as public servants, the opportunity Pi and Main of rendering valuable service to our state and country. The Session of the Legislature is confronted with the responsibility of dealing in an intelligent way, with many important matters pertaining to the adminstration of the « State government; a government which has steadily grown, enlarged and expanded over nearly forty years of statehood. The whole structure of this government includes several hundred local municipal and political subdivisions, and a central state body which is over and inclusive of all of its subordinate parts. It is the province.of your state executive officers to execute and administer laws relating to the con- duct of the central government; but the province and respons- ibility of the legislature is much broader; it must enact the laws under which, not only the central government, but also the hundreds of townships, school districts, counties, villa; and cities must be governed. Your legislative actions during this session will, therefore, intimately touch and affect, directly and indirectly, the property, civil rights, economic and social welfare, liberty and lives of more than 640,000 people, residents of North Dakota; and it will influence the future relationship of our state in the political and economic structure of the Northwest. The range of subjects that you will be called, upon to consider will be altogether too great for me to cover in detail within the time allotted for this address; hence, I’ shall limit this communication to a brief, *# and, I hope, clear statement of the more essential facts per- taining to the condition of our state affairs, some specific, as well as general recommendations for your consideration, and give expression to a few fundamental principles which I think should guide your legislative deliberations. APPROPRIATIONS - One of the most important tasks that will engage your serious attention is that of making the regular biennial ap- propriations for the maintenance and requirements of all state departments and institutions, and for other purposes. In discharging this duty, you will have before you for your assistance, the report of the budget board, which board has considered all budget requests submitted to it as required by law, and which, after a very general and necesserily hasty review of them, has given its preliminary conclusions there- on. As usual the total amount of these budget requests ex- ceed the probably available revenues of the state under exist- ing revenue laws, several millions of dollars. The br t, board has pared these requests down to a figure which will bring the total amount recommended within the present ’ available revenues for the biennium. An effort will, no doubt, be made;from many Riegel to induce the legislature to increase these appropiations above the grand total ap- proved by the budget board. If this is done, I urge you to not, under any circumstance, permit the allowance of ap- propriations in excess of the present income of the state. Should this be done, it would be incumbent upon you to either create new sources of revenue, or increase the present high rate of property taxation. In my opinion neither is justified under present conditions, Rather than increase the present rate of property taxation, you should, if possible, wherever it can be done without impeiring the efficiency and functions of the government, make reductions consistent with sound ee: of business and economy. I realize, of course, that e reductions in the regular appropriations for state pi es connot be made at this session, owing to the necessary maintenance requirements of existing institu- tions and dqpartments long established, without a radical re- organization of the entire state system of government. This cannot, in the nature of things, be accomplished abruptly; but ‘we, nevertheless, owe it to the taxpayers of the state to do that which is @ithin our power: namely, protect the taxpayers against afiy further increase in real estate and personal te property 5 £3, ‘ fe PUBLIC DEBT Cloself:related to the subject of appropriatiofis is that per- tainingfto: the public debt. In ten years our state debt has risen fgom' $412,000 in 1918 to $35,157,500 in 1928. The an- nual bond interest charge has come up during this period from. $20,000 to over $1,500,000. The entire present bonded debt of the, state was created entirely for the establishment and operation of the so-called industrial program upon which the state embarked in 1919. It includes $2,000,000 to provide capital for the Bank of North Dakota; $4,500,000 for the con- struction and operation of ghe State Mill and Elevator; and $28,657,500 to provide funds for the operation of the Farm Loan Department of the Bank of North Dakota. The last named class of bonds is secured by first mortgages on farm lands held.in trust by the State Treasurer. The annual in- terest on these bonds is largely paid from interest collections derived from such mortgages. However, it has occasionally happened that such mortgage interest ce have been insufficient to cover the total annual bond interest, and in Y such cases tax levies have been resorted to to provide the necessary funds to make up the dificiencies. For this purpose nearly a million dollars have been Jevied since 1920. Nearly all of the interest: falling due on the bank capital and Mill and Elevator bonds has been paid from taxation, together -% with sinking funds established to fetire the principal of such bonds upon maturity: These various bond obligations, most of which is interest. have heretofore been reflected in the annual state tax levies, and exceed the sum of $6,000,000. For the past several years the average annual amount in- cluded in the general state tax levy for these purposes has been about three-quarters of a million dollars, ‘is fact ac- counts for one difficulty which has in the past, and now iadgeiie the way of reducing state levies for some years in e re. p Added to the state bonded itidebtedness is also to be con- sidered the outstanding municipal bonded indebtedness. This amount has likewise increased from approximately $11,000,- 000 in 1913 to over $25,000,000 in 1925. The interest and principal charges thus incurred by local subdivisions has added much to the tax burden of our people during the last ten years. The state and municipal bonded indebtedness of North Dakota combined is in excess of $60,000,000. Unless this rising tide of public debt is stemmed, is is obvious that it will be exceedingly difficult to either reduce property taxes, or prevent substantial increases in the future. Further in- creases in the public debt, whether created fy Ps state or its political subdivisions, will not only add considerably to the annual tax charges, but generally impair the credit of the state. J, therefore, recommend that the legislature reject all proposals to add to the state debt for aor purpose ? except a limited amount to permit the contin operation of the Farm Loan Department of the Bank of North A and, that no further authority be ited to local sub- divisions and municipalities to bond for any purpose what- soever, As a further protection against possible increases in the public debt of the state, I would suggest the repeal all laws now on books designed to authorize issuance of state bonds for any purpose other than rural credit purposes and that further’ restrictions be adopted limiting the purposes and'smounts for which municipal bonds may be issued. * TAXATION AND COST. OF GOVERNMENT \ Fa _ everyone have been keenly appreciative of which both, agriculture and business has z carry in the form of constantly increasing ‘costs and higher property taxes, This burden larly apd upon the owners of farm burden which has net earnings of farm years of 1915 and 1921, lor state and ss ha i a ry oqiry i a ee | Dn ent sod parona propa, le upon r has inn ‘lace ip moet See fe Ee gece ce, 9 fo taxpa result of a rapid and extensive expansion in the functions of the government, both state and local, which has occurred during the past fifteen years. During the last ten years we have experienced a perfect mani. for governmental experi- ments and expansion in this country, and the certain cons sequences of it all has been, larger public expenditures, greater public debt, and ‘higher tax levies extending through- out the entire structure of government from the lowest to the highest unit. This condition has been exceptionally severe in this\state in view of the fact that the number of taxpayers has not increased in recent years; and the further fact that * our state, in common with all agricultural Leaps t suffered the strain of a nation-wide economic depression, the shock of which was great and far-reaching; but from the results of which, I am happy to say, we have made and are making sure and steady recovery. ® i From the burden of these heavy taxes the people of our state are entitled to be delivered if it is within the power and-genius of the government officials, state and local, to accomplish it. In view of these elementary facts, it is apparent that any program of tax reduction, in order to be substantial and effective, must not be confined to the structure of the state government only, which, as I have said before, consumes Tess than 15% of the annual property tax levies; but it must also apply with equal force, to the expenditures and func- tions of all political subdivisions of the state, which con- sume the remaining 85% of the annual tax payments. It involves a comprehensive program of reconstruction and readjustment in our whole system of government from top to ‘bottom, on a basis which will include the elimination of unnecessary governmental functions, the consolidation of departments and offices, the improvement of governmental machinery and methods, the curtailment of some, and the élimination of other governmental activities. No other or lesser program will accomplish any substantial reduction in the present cost of government in North Dakota; because it is not within the power of the government to reduce the cost of living, nor the price of commodities and labor which the government must purchase at public expense. Such a program should contemplate the strengthening, not the weakening of our governmental processes, the introduction of more efficiency in the entire system, and the elimination of waste and unnecessary expenditures throughout the whole structure. This problem is not an easy one to solve, nor an inviting one to approach, and its proper solution calls for the exercise of care and deliberation, and a high degree of intelligence and courage on the part of both the legislators and admin- istrators dealing with it. I believe that the task is by no means hopless and that we should at this session give serious consideration to it. I realize, however, that with the many and varied legislative matters requiring your at- tention, it will not be possible for you to undertake such a comprehensive program at this session. . I, therefore, re- commend that you provide for the appointment of either an interim legislative committee, or a competent commission with full power to study the whole subject and report its findings and recommendations to the next session of the legislature. Such interim committee or commission should be provided with a small appropriation, sufficient to defray its necessary expenses and reasonable compensation for its members. This matter is of tremendous importance to the future welfare of the state, and I trust that you will give it earnest and careful consideration. “BANKING LAWS T also wish to direct your attention to the condition of the laws of the state relating to the LE eect and operation of state banks, saving banks, trus’: and investment companies, Depositors and investors in banks have passed thru a very sad experience in North Dakota recently, an experience which has taught us that our laws relating to these associa- tions, which are of a quasi-public character, are not adequate, nor hilt f appropriate for the full protection of the depositing and investing public. Perhaps no banking system or set of laws could have withstood the shock of the post-war deflation, but certain it seems that these, laws require modification and alteration to meet the changed and chang- ing economic condition of the times, in order to prevent speculative use of depositors’ funds in banks and other in- vestments companies, and to encourage safer and sounder management of these institutions in the future. This too, is a problem which should not be dealt with hastly, but with care and deliberation. Accordingly, I recom- mend the appointment of a select interim legislative committee, or a commission to study this subject, and to make report to the next legislative session. While this may seem like delaying ac- tion on this important subject too long; yet, I believe we should proceed with extreme care and throughness in such matters, for if our work in this field is well and wisely done, it will, in all probability, stand without modification, for many years. SECURITY FOR PUBLIC DEPOSITS There iz, however, one. piece of the bank legislation that might well be considered at this session. As you know, under present laws both state and national banks are entitled to be designated as depositaries for all public funds, except state funds, and when so designated, are required to furnish either personal or surety company bonds as security for such public deposits. Under the unusual conditions which have prevailed in the banking field in recent years, personal bonds have proven entirely unsafe, and surety bonds either too expensive, or difficult to obtain, with the result that many local banks in good condition do not qualify as public depositaries. I think this unsatisfactory situation may be remedied by adopting a law which will authorize banks to purchase and pledge government bonds, state or national, as security for public deposits in lieu of personal or surety com- pany bonds. I believe it is good public policy for the political subdivisions to keep a large share of their public funds on deposit in local state and national banks, but only under conditions which will absolutely protect such public deposits against loss in case of bank insolvency. BUILDING AND LOAN ASSOCIATIONS I would also suggest that at this session you revise th> laws pertaining to the organization and operation of building and loan asso¢iations. Owing the recent difficulties in the banking business, many investors are putting large ~:1™s of money into the stock and securities of these orga’ zations. It is, therefore, desirable that the supervisory av’*>rity of the State Banking Department over these institu.‘ons be broadened and that certain restrictive provisions be adopted which will tend to prevent the organization and operation of this class of investment companies on a promotion or speculative basis. TEACHERS’ INSURANCE AND RETIREMENT FUND I wish to direct your attention to the necessity of revising the Teachers’ Insurance and Retirement Fund Law. This law was orgiginally enacted in 1913 and has been in operation ever since. A recent actuarial survey of the schedule of rates upon which this fund is founded, discloses that such rate schedule is altogether inadequate to maintain the solvency of the fund, and that remedial legislation is now imperative to protect its future existence and usefulness. STATE HIGHWAY DEPARTMENT The State Highway Department has recently become one of the most important departments in the whole state government. Its growth in the past five years has been phenomenal. It is now engaged in the gigantic task of con- per ngyy 9 and maintaining a 7,400 mile state highway system under the Federal Aid Plan, and in the course of this con- struction and maintenance work, it is now annually exnend- ing between $4,000,000 and $5,000,000 of public funds. These funds ue derived from the gasoline tax, motor vehicle license fees and federal aid appropriations. This department has so far constructed some 3,905 miles of this state high- way system, of which 2,164 miles have been gravelled. As thig highway mileage construction increases, the maintenance cost also increase, thus rapidly reducing the margin of funds available for new road const mn purposes. It. is now estimated that this rapidly growing maintenance cost will soon consume all of the highway revenue income under existing laws, leaving no funds with which to complete the const ‘ion of the remainder of the state road system. It would, therefore, seem certain. that additional highway revenues will soon be required to complete this big buildin; progam. Whether it will be necessary to provide for suc! onal income at this session of the legislature, I am net now. to advise. I submit that question to your it without recommendation. I am, however,. opposed to idea of issuing bonds for road or bridge construction purposes as a source of revenue, Bonds mean interest charges over a long iod of time, and J think we have quite a sufficiency of that sort.of liabilities now. fF believe in s pay- as-weego-policy in this matter. Shonld additional highway income be required it should be obtained by increasing the line tax and motor vehicle license fees. If it seems le to increase the gasoline tax rate and motor vehiclo . fees at thia session, I would suggest that two matters be in connection therewith. First, “consider the ads lity of providing additional revenue for the use of the counties for the development of the county or marketing road system; and, sented study the possibility of slimline: ocal or , : and the to see farm property mained Pine banter of road ond Bdge leven A comes tte oes tt col por coy ly epg olor tg pene’ gh ge "attention by the officials of ‘the highway commission. -- DEPARTMENT REPORTS of the state require avery department of the state government a make and file written reports elther annually or biennially, giving the condition and progress of the work of such departments, and in many cases, suggesting desirable as well as necessary changes in the laws relating to the administration of the public business. These reports are too numerous, and also, too voluminous to be studied by each member of the legislature: but, nevertheless, they contain much vital and Veal eget information touching the business of the state. Neither space nor time will allow me to refer in detail to the subject matter of these several. reports. nor pecsree, with the recommendations contained there- in, although I know that most of these recommendations are of sufficient importance to command your interest and at- tention. I, therefore, recommend that each body of the legislature create a special committee charged with the duty of examining those official reports and studying the recom- mendations therein contained. I urge this procedure as a means of facilitating contact between the legislature and the various state departments. and in the interest of better coordination between the legislative and executive branches of the government. " BUREAU OF CRIMINAL IDENTIFICATION AN! APPREHENSION The report of the Committee on Criminal Law approved by the State Bar Association at its annua] meeting last year, contains some recommendations dealing With \the subject o! criminal justice, which merit your thoughtful consideration. I refer particularly to the Committee’s recommendation favoring the establishment of a State Bureau of Criminal Identification and Apprehension. During the past several years North Dakota and neighboring states have been sub- jected to the depredations of the professional robber class of the country. In the year just closed, several successful bank robberies and burglaries were committed by these transient criminals, who wander at will all over the American Continent with automobiles, making profitable and safe use of our im- proved highway system. In nearly all cases, these raiders have escaped arrest. This is due largely to the ease with which they can travel thru the country from their rendezvous in the large cities with high-powered cars, and the utter inadequacy of our ancient local police system to deal with this baffling problem. I have become convinced that this con- dition can only be successfully met by the coordinated efforts of the several states, aided by the Federal Government. Such coordination, can only be had thru the medium of central state agencies empowered to co-operate with other like agencies in other states in hunting down and apprehending this ever increasing class of fugitives. While I hesitate to suggest adding to our already numerous state agencies, yet T believe that it is one of the primary duties of the state government to protect its citizens and their property from the ravages of professional criminals who constantly invade our state with but little fear of interference from the law. FOUR YEAR TERMS FOR STATE AND COUNTY OFFICERS In the interest of both economy and efficiency in govern- ment, I believe that the terms of all county and state officers, whose terms are now two years, should be made four years. I have long felt that such a change would be very desiyable in North Dakota. Under our present election laws, two elections are held every other year, thus compelling several hundred county officers and all state officers who are candidates for reelection, to campaign almost continuously for the better part of each even numbered years. This re- sults in a flagrant waste of time and money for both the candidates and the taxpayers; it interferes with the efficient conduct of public business and subjects the people to the shock and disturbance of frequent political controversies. The two year term system was established long before primary elections were provided for, at a time when nominations for all public offices were made by the con- vention method. Under the convention system only one campaign and one election every two years was necessary. The constitution provides that any official who proves to be inefficient or corrupt can be recalled at any time by the voters. Most j teeet officials are efficient and worthy and are rewarded frequently by re-election as a matter of course. Four year terms for state and county officers would not only result in a great saving of expense to candidates and taxpayers, but would introduce more stability into our whole system of government, state and local. It is true that biennial elections would still be necessary to choose members of Congress, and perhaps, members of the legislature; but that is no reason why the state and county governments should be regularly disrupted by the effects of a campaign lasting several months each even-numbered year. TERMS OF SUPREME COURT JUDGES In this connection, I would also invite your consideration of the advisibility of increasing the terms of the members of the Supreme Court. Under the present laws every six years a majority of the Court is required to be elected. This circum- stance seriously hampers the judicial work of the Court and threatens the stability of that extremely important branch of the state government. ROOSEVELT NATIONAL PARK PROJECT For sometime a movement has been on foot to procure the establishment of a national park in the Bad Lands of the Little Missouri. Bills have been introduced and are pending in Congress set aside this natural beauty spot in com- memoration o8 Theodore Roosevelt, who in the early eighties, lived, hunted, and ranched in this region. Last July a sub- committee of the Public Lands Committee of the United States Senate, accompanied by the Director of National Parks and other government officials, inspected this proiect and held a hearing at Medora in connection therewith. This sub-committee and the park officials will, in due time. make a report to Congress on the feasibility and desirability of establishing a national park at this location. I understand that never in the history of national park development in the United States has the federal government established a national park at any site however suitable, ex- cept upon the condition that the title to the land constituting the same is furnished to the government free of cost. In all previous cases this condition has been required and com- plied with by the states or citizens interested. I believe it is essential, therefore, that the State of North Dakota should now take the initiative in this matter, and make vrovision pt this session of the legislature for procuring and trans- ferring to the federal government the lands necessary for this park project. This can easily be done: First, by directing the conveyance to the United States for parks purposes of all public lands; now owned by the state, of which there are several thousands acres, located within the proposed nark 2rea; and, second, by creating a park fund for the purchase of such privately owned lands as may be necessary for such park project, to be made available only in the event and at such ‘time as Congress shall provide when creating the park. I am confident that if North Dakota will thus show its dis- position to co-operate with the federal government in. the fame spirit and manner as other states have done and are doing. we may look forward to the early establishment of this important development with well founded confidence. BANK OF NORTH DAKOTA One of the big administrative problems now confronting the state government, to which I desire now to direct your attention, is that of the operation of the so-called industrial or purely busines® institutions of the state. Foremost in importance of these, is the Bank of North Dakota. During the past seven years, being the duration of the pre- sent management, the Bank of North Dakota has been operated primarily as a farm loan bank and as a d-positary of state and municipal funds. Its banking business has been largely of a public nature, financed almost entirely with public monies on deposit therewith, except the operation of the Farm Loan Department, which, as you know, is financed entirely from proceeds of bonds issued and sold against the credit of the state. Since itr organization in 1919 to the pres- ent time, the Bank of North Dakota has made real estate loans to actual resident farmers of North Dakota in the aggregate yum of $30,750,000, all of which sum except $2,760,- 000 has been made under the direction of the present management, The bank reached the high mark of its farm loan business in 1924 when over $6,000,000 of state funds were loaned. Since that year, the demand for this loan service has gradually diminished, reaching the low point in 1928, when only $1,728,000 of such loans were made. Th» nresent legislative authorization to make this class of state loans is $32,500,000, leaving a margin of less than $2,000.09" to go on during the next biennium unless such authorization ix in- creased by this legislature. While it is not desirable to draw too heavily upon the state’s credit for this purpose, yet I feel that under the conditions, we may properly and safely add $5,000,000 more to the present aut zation, and I would ane th it it took th @ present man ent over the opera- tion of the benk in December 1921, it was in deplorable con- dition, Heavy Serratiog: losses had been sustained, and many millions of public funds were tied up in frozen loans and re- orlinadequafely secuted. “Since January 1, 192, the goncral or secured, Since January 1, » the general condition of the bank has steadily improved. Between that date and October.3, 1928, the date of the last official audit, its reports show that the bank bas gained over $557,000 over operating expenses, besides establishing a reserve of more than for accrued interest due the State Treasurer on the bank's capital bonds. This bg ii ) a froien Focond sad Eaclyygt dag credit y pipe integrity, a ficiency General’ ier R Paee tons antieica aoe Liege eo) t vithfal a we Ma ve at the Bark ‘et man; fa service as Manager Nerth Dakota, stands as a monument to his loyalty and character. There is, h » still th of the bank, 4,800,000 due Toon cloved banks, a considerable portion ef * to $1,808,938.40, the records will show a so-called operating which is cértain in the end to be # dead loss; hence, standing the marked improvement which the in recent years, it will require several years careful and efficient management before fo charge off these 4 oe Se over liabilities. It has been management the institution can be porting basis, providing it is kept entire! of commercial banking and most of its nothing but farm loans and government The new administration is pledged to continue the policy of conservative and limited operation of the the interest of absolute saftey for the millions of publie monies on deposit therewith. To further insure the safe and conservative operation. of i this institution, I would recommend some changes in the law governing the handling and dispoajtion of the Real Bond Payment Fund which is now nearly $2,000,000, and which will grow steadily larger from year to year. Under the existing law this fund is made up of both interest principal payments on farm mortgages. There is no segre- gation of these funds. conséquently principal payments as well as interest collections may be used to pay current in- ling due on outstanding real estate bonds, thus impairing the sinking fund created for the retirement of these bonds when they mature. I believe it is essential to the preservation of the credit of the state, as well as good business, to constitute the principal payments made on these mortgages a special sinking fund absolutely protected against use for any purpose except for the retirement of maturing bond issues, or investment in state bonds of similar character. STATE MILL AND ELEVATOR We also have before us the question of the operation of the State Mill and Elevator. This institution has had a stormy career. It has passed thru six continuous years of trial, and its successful operation, from a business stand- point. is still an unsolved problem. I shall not discuss in de- tail the various phases of this problem, nor the different stages thru which this institution has passed; but shall be content with referring to only a few outstanding facts as a basis for making some recommendations respecting its future operation. This Project involves an outlay of slightly over $4.550,000 for. construction and operating purposes, not including in- terest, all of which, except approximately $50,000, was financed by the sale of state bonds. The annual interest on these bonds is $258,250. From the date of the issuance of such bonds to January 1, this year, there had been paid as interest on these bonds, according to the records of the State Auditor, the sum of $1,499,394, all of which has been paid from general property taxes, except the sum of $109.240.58, which was covered into the State Treasury by the Mill and Elevator as a part of the $160,000 payment made at the opening of the Special Session of the Legislature a year ago. All of the principal of these bonds are still outstanding and unmatured, except one instalment of $250,000 which matur- ed on July 1, 1928, and was paid from general taxation. According to the reports of the Mill Auditor this business has during the past six years of operation to December 1, 1928, cost the state in operating losses, including as a part of its operating loss the accrued interest on the Mill and Elevator bonds and depreciation on the plant and equipment, the sum of $1,584,313.23. This calculation is based upon the book value of its assets and liabilties. According to the same reports, calculated upon the same basis, the loss to the state for the year of 1928 to December 1, was $158,621.30. This is a somewhat better showing than in 1927, when the loss was $170,640.16. It is a great improvement over 1926 when the reported loss was $429,147.51. These figures appear to“conflict with statements given out by the Mill management from time to time wherein cer- tafn operating profits have been and are claimed. The difference, however, is more superficial than real, and the two statements are easily reconcilable. For some reason the Mill management has not since 1925, charged that business upon its books with the annual interest on the Mill and Ele- vator bonds, which was $258,250, or with depreciation upon the plant and equipment. Of course, if we relieve the busi- ness of this charge, which over a period of six years amounts profit. My view is that such bond interest and depreciation should be included in the operating cost of this institution: First, because such interest is paid by the state solely for the account of this business; second, the Mill and Elevator Bond Law (Chap., 153, Sec 9, S. L. 1919) requires the Mill and Elevator to repay to the State Treasury such bond interest out of the profits, if any there be; and third, it is the only way by which the taxpayers can readily see the true financial status and progress of the business. By this method we can easily determine from time to time what the State Treasury is out on account of the business, and what further improv- ment in managment is necessary in order to completely re- lieve the taxpayers of all annual fixed charges incurred thru the establishment of this enterprise. ,_ Inasmuch as the annual fixed obligation for bond interest, in the sum of $248,875 (since the payment of $250,000 of the principal of such bonds) must be paid for some years, re- gardless of whether the industry is a going concern or not; and, since from the experience of the past two years it has been demonstrated that this fixed annual charge can be sub- stantially reduced, with good prospects of further reduction in sight under careful and efficient management, it is the | dap of wisdom to continue the operation of this business yy the state until such times as a more satisfactory arrange- ment can be provided. We are no longer concerned with the political or economic wisdom of inaugurating this experi- ment, but rather with the present, practical problem of mak- ing its operation a financial success, if possible; and if not, to keep the losses to the state resulting from its existence, down to an absolute minimum. This, in my judgment, is now the settled opinion of a great majority of the people of the state without regard to faction, and it is the principle upon which the new administration will formulate and execute its Mill and Elevator policy. Let me also observe in this connection that this institution should, in my opinion, be operated primarily on its merits as a business enterprise, and not as a laboratory nor an agency thought to be vested with some mysterious power to regulate the market prices of grain and flour. Our first duty, as well as immediate problem, in respect to its operation, is to put it upon a self-supporting basis; and, if possible, entirely free the taxperera of the state from the annual tax levies here- tofore found necessary for the payment of its bond obliga- tions. To accomplish this result, it follows that it must, at all times, be operated with strict regard to established busi- ness principles in the Mill and Elevator industries, and, as free from influences of current politics as it is humanly possible for any state-owned industry to be operated. With the view of placing this business on a sounder and more stable basis, I would recommend that its mangement be changed in form and character. Since March 1925, the authority and responsibility for the active mangement of the Mil] and Elevator has been vested entirely in the Governor of the state. The result of this policy has been unfortunate, to say the least, if not a complete failure. It is obviously improper and illogical to vest the entire responsibility for the active management of any institution, much less a large industrial plant located in a distant city, in the hands of the Governor. I was elected upon the definite and specific pledae: that the future operation of this enterprise should e removed from the control of the Governor and placed under a commission of three, a majority of whom should be of Nonpartisan affiliation; such commission to be created by this Legislature and vested with full and ample power to manage and operate this business, subject only to the right of ‘he Industrial Commidsion to periodically audit its affairs, I earnestly recommend the enactment of this proposal. If this recommendation is adopted, I, and my official associates will pledge to such commission our complete, cordial, and effective co-operation in the administration of the business. HOME BUILDING ASSOCIATION The liquidation of the defunct Building Association is just about completed. All state-owned houses but\one, have been sold, and all construction contracts in controversy except one, have been adjusted. The debt of the Association due to. the Bank of North Dakota, its only unpaid creditor, has been reduced to about the sum of $66,513.14 from the ceeds of the Home Building deficit tax levy which has in force since 1928, and from other sources. This deficit will be fully paid in 1980. The ultimate loss'on account of this project will exceed $400,000, ; DRAKE MILL = We still have the Drake Mill on our hands, After efforts to sell this- property, the best offer received b Industrial Commission was $2,600, sion did not feel Potcrtond in is no 4 STATE HAIL INSURANCE The State Hail Insurance Department the of the