USA > California > History of California, Volume VI > Part 70
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naturally grew out of the abundance of state war- rants. Speculative bankers, like Palmer, Cook, & Co., contrived by becoming the bondsmen of state officers to obtain the handling of the money which should have been in the state treasury. Crime became easy and natural on both sides. Palmer, Cook, & Co., who had nearly ruined the state's credit in 1854 by withholding the interest due on its bonds in order to depreciate them for speculative purposes, the money being in their possession, in 1856, through the com- plicity of officials, had both the state and the city of San Francisco in their power. The press and the people remonstrated; and such journals as could not be purchased courageously exposed the iniquity in their midst.
The legislature of 1856 made an effort by funding the indebtedness which should remain after the close of that year, to convert all outstanding warrants into bonds at seven per cent, and accordingly issued $1,000,500 worth of new bonds payable in 1875, with interest half-yearly, receivable in California or New York. To meet the interest, a tax of ten cents was levied on each $100 of taxable property in the state, the surplus, if any, to be used from time to time in re- deeming these bonds at the lowest rates at which they could be purchased of the holders. It was also made the duty of a board of examiners, consisting of the governor, secretary of state, and attorney-general to examine the books of the controller and treasurer, and count the money in the treasury as often as once a month. But the previous mode of legislating, like virtue, was bringing its own reward, making reforms difficult. Finances all over the state were in a deplor- able condition. Millions had been wrung out of the people to support extravagant county and municipal governments.15 The laws regarding collection of taxes
15 For the condition of affairs in S. F., see a communication from Sam Brannan in S. F. Bulletin of Oct. 29, 1856. Brannan tendered his taxes for 1855-6 in city scrip, which the officials were bound to receive. He endeav- ored to get them to bring the case before the courts, which they would not
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were imperfect, and delinquencies not uncommon. Suits at law were instituted to bring these defects to the notice of the law-makers, and to prevent payment of taxes in state and county scrip, the supreme court deciding adversely to Attorney-general William T. Wallace, that state controller's warrants could not, in the face of the funding acts of 1855 and 1856, be re- ceived for taxes. This was a check upon the practice of collector's going into the market to buy up state warrants at seventy or seventy-five cents on the dollar, and substituting them for the coin or gold bullion re- ceived from tax-payers, and was a step in the right direction.
The reform however began, as I have said, too late for the catastrophe to be averted. A deficit had been discovered in the accounts of State Treasurer S. A. McMeans.16 His successor, Henry Bates, improved
do, and after months of waiting, rather than appear delinquent he paid the money. His object in resisting, he states, was to keep money out of the hands of the officers. In 1856-7 he again withheld his taxes. 'It is well known,' he says, 'that the present sheriff (or party assuming to act as such) has failed to qualify as the law directs, and it is notorious that the tax col- lector is insolvent.' Again: 'I have not only not paid the present year's taxes, but I have also advised my friends to withhold theirs until after the approach- ing election, and I have no doubt future events will justify the wisdom of my course.' With regard to public affairs he says: 'The present indebteduess of the state of Cal., represented by bonds, audited accounts, etc., is about $5,000,000. Some of the bonds bear an interest as high as 12 per cent per annum. (These were the Ind. war bonds of 1861.) So I think I may safely estimate the yearly accruing interest upon this debt at $350,000, or an aver- age of 7 per cent. Now, add to this the amount necessary to carry on the govt, and we at once see the startling amount it is necessary to raise every year by taxation. Think for a moment how the above $5,000,000, and the $8,000,000 or $10,000,000 besides, what have been drawn from the people by taxation, have been squandered. Look at the present extravagant system of conducting the state govt, and decide if the expenses of the state may not be reduced by an honest effort. But turning from state affairs, consider for a moment how the people of this city have been oppressed and robbed. Think for a moment of the vast amounts that have been drawn from the people in taxes-the large sums received from the sales of real estate, and the present heavy indebtedness of the city. What have we got to show for all this ? The $5,000,000 or $8,000,000 received from taxes, and the $1,000,000 or $5,000,000 indebtedness, together with the large sums received from the sales of real estate, have all been squandered. Much less oppression and dis- honesty, in 1776, caused the American revolution in which our fathers took part, and I say it is not remarkable that their sons, in 1856, should follow their example and fall back upon their reserved rights for their own protec- tion.'
16 Dr S. A. McMeans, born in Dandridge, Tenn., 1808, was engaged in the war with Mexico, and came thence to Cal. in 1849. He died in Virginia City, Nev., in 1876. Sac. Leader, Aug. 5, 1876.
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upon such a mere peccadillo as a discrepancy in ac- counts, and launched wholesale into a violation of all law and all trust, by purchasing and assisting others to purchase state warrants, controller's warrants, and state scrip of every kind, with the coin and bullion of the state. His own profits from this mode of unlaw- ful speculation aggregated for 1856 about $15,000. The law requiring the public moneys to be kept in the fire-proof vault of the capital, and forbidding its de- posit with any individual or firm, was disregarded, and Palmer, Cook, & Co. again became the holders without security of $88,520, interest money due in New York on the state's bonds, but which they retained for their own use, the firm failing, and most of its members and
agents absconding. Great was the outcry against the defaulting bankers, where the state was thus dis- honored, and the guilty treasurer hastily gathered up what money remained in the treasury, which fell $15,000 short of the amount due, and placed it in the hands of Wells, Fargo, & Co., to be transmitted to New York. This company then entered into arrange- ments to assist Bates in his nefarious transactions, who permitted E. A. Rowe, president of the Pacific Ex- press, and others, to speculate with the state's money deposited with them, by reason of which $124,000 was lost to the treasury.
In order to cover up the deficiency in the state's funds on the meeting of the legislature of 1857, Bates bargained with the agent of Wells, Fargo, & Co. at Sacramento for a temporary loan of $20,000 to make a showing, should a committee of the assembly proceed to count the money in the treasury, as was threatened. The sum borrowed was placed in the state vaults, partly in United States money and partly in California ten-dollar pieces, worth twenty- five cents less each than United States ten-dollar coins; and when the money was returned to Wells, Fargo, & Co. it was in coin of the United States mint. In order to obtain this temporary loan the treasurer
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MEN WHO SHOULD HAVE BEEN HANGED.
drew his official draft in favor of the firm, in the sum of $20,000. In order to meet the interest falling due in January 1857, Bates took from the general fund to apply upon the interest fund the sum of $60,000.
These things did not happen because the people were dishonest, or had not furnished the means to maintain honorable financial standing, but because the men who forced themselves into places of public trust were corrupt professional politicians. On the heels of these losses, amounting to no one knew how much, but evidently to $272,521, came the decision by the supreme court that the state bonds to the amount of over $3,000,000 had been unconstitution- ally issued. The wonder is that no one had put forth this opinion before; the language of the constitution being plain on the subject of creating any debt or liabilities, which singly or in the aggregate should exceed, with any previous liabilities, the sum of $300,000, except in case of war, or for a special ob- ject, the means of paying the interest and principal being provided for; and not then until it should have been submitted to the people, and consented to by the vote of the majority, with other precautions and restrictions. It seemed to come upon the public as a surprise. "Disguise it as we may," cried the Sacra- mento Union, "the world of civilization will pronounce the verdict of judicial repudiation against the state of California. Let but a single failure to pay our inter- est promptly occur, after the decision of our court is read on the Atlantic side and in Europe, and the name of California will become the scorn of all states, as well as of all men who prize public faith and individual honor." After leaving the constitutional question untouched for five years, to bring it up now, and decide against the validity of a debt of more than $3,000,000, would look like a deliberately planned and executed act of dishonesty. In that light, the decis- ion was regarded as a public calamity.
But the masses were not dishonest, and when it
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was pointed out by the judge that the question could still be submitted to the people, of adopting the indebtedness of the state, with the addition of appro- priations for necessary future expenses, they con- sented; and a bill of submission being passed by the legislature of 1857, voted to pay $4,000,000 rather than endure the ignominy of repudiation. Civil bonds continued to be issued from time to time, as the expenses of the state demanded.
There were still two sources from which relief was expected. One was the Indian war debt appropria- tion by congress, of $924,259.65, which would, if paid into the treasury of California, have gone far toward lifting the present burden. But Jefferson Davis, sec- retary of war, refused to pay the accounts transmitted to him until he should be placed in possession of the vouchers upon which the warrants were issued. Many of these were lost; besides, the governor demurred to sending any portion of the archives of the state to Washington.17 Settlement was made on about half the amount, interest accumulated on the remainder, and after vainly endeavoring to secure a further ap- propriation, the holders of war bonds were forced to take what they could get out of the first.18
The other fund looked to for relief was that col- lected during the military government, after the treaty of Guadalupe Hidalgo-the civil fund. But after sev- eral memorials, resolutions, and efforts by California senators to have the claim acknowledged, it was for- ever put to rest by a decision of the supreme court of the United States, that the action of the federal offi- cers in collecting customs after the cession and before a government was established, was warrantable and
17 Sac. Uuion, Sept. 20, 1856; S. F. Alta, Aug. 7 and Sept. 21, 1856; S. F. Bulletin, Sept. 23, 1856; Cal. Jour. Sen., 1857, app. no. 8, 16, 18-19; Id., 1859, 312-13, 475-6; Cal. Reports, 6, 499; Tuthill, Hist. Cal., 528-9; Governor's Message, in Cal. Jour. Sen., 1856, 27-8.
18 Tuthill, Hist. Cal., 530. A few of these bonds were found and paid as late as 1873-4. U. S. House Com. Rept, 669, iv., 43d Cong., Ist Sess.
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STAMP ACT.
proper. After this there was nothing to do but to go on levying enormous taxes, and cutting down expendi- tures. To a California legislature it was much easier to continue the taxing than to discontinue extrava- gance.
In 1857 it was found necessary to levy a tax on the export of gold, on insurance, and on divers branches of commerce, in the shape of a stamp act, providing that after the first day of July no court should take cognizance of any complaint founded on any promissory note, foreign or inland bill of exchange, certificate of deposit, policy of insurance, bill of lading, bond, mort- gage, deed, lease, or receipt, unless it should be writ- ten on paper stamped for the sum, and in the manner required by the act.
In 1861 the indebtedness of cities and counties amounted to about $10,000,000. In 1863 the state debt was still about $5,000,000. The direct tax levied by the federal government during the war of the re- bellion, soldiers' relief, and soldiers bounty funds, as well as public institutions taxes, kept the people's ex- penses up, even after a system of retrenchment had been begun. In 1867. the state tax was 99 cents and the state debt a little more than two years previous; and it was not until 1875 that the debt was reduced to a little less than $3,000,000 and the state tax to 64 cents. The property valuation of the state at this period was $611,500,000; the amount charged tax collectors for state and county purposes was $20,141,568.39, of which nearly seven millions went to the state treasury. The population of 1870 was 560,247 persons, divided amongst whom the assess- ment amounted to $35 for every man, woman, and child in the state.19 No wonder the collectors de- ducted nearly fourteen per cent for delinquencies in
19 Controller's Rept, 1873-1875, 22-3. For county indebtedness of Los An- geles co., see Hayes' Scraps, Angeles, v. 496; of Yuba co., Yuba Co. Hist., 43-4; of Marin co., Marin Co. Hist., 129-30. El Dorado co., as early as 1852, owed $30,000, which it had no means of paying. Placer Times and Transcript, Jan. 15, 1852.
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making up their estimates. And yet California had a greater amount of wealth to the individual than any of the older states. Her troubles had never come from any real lack of means, but from the improper use of them. 20
20 As to the use made of such money as had been appropriated, I will make some mention here; and also of all public institutions charged with public moneys. The first public building ordered by the legislature to be erected, for which a fund was provided, was the state marine hospital at S. F. In April 1850, an act was passed authorizing the same ' upon grounds containing not less than 20 acres, and which at the time of such erection shall belong to the state, and shall be situated upon the bay of S. F., and not less than 2 nor more than 12 miles distant from that part of the town of S. F. known as Clark's Point.' The building was to cost, with improvements of grounds, not more than $50,000. The money to carry out this purpose was to be derived from fees to the health officer, elected by the legislature. These fees were for visiting and examining each vessel from a foreign port, $20; each vessel from any U. S. port, not on the Pacific coast, of above 100 tons, $16, not over 100 tons $12; under 100 tons $S; coastwise vessels to pay the sum of $6. Fines imposed for obstructing the visit of the health officer to go into the fund. The receipts for the first quarter were $34,683.16, 'which sum was required to pay the ordinary expenses of the establishment (which was then in a temporary building) during that period.' Cal. Jour. Sen., 1851, app. 541. For the 2d quarter the receipts were $30,830.93, which sum was also neces- sary to pay current expenses, except $167.43, found among the unclaimed effects of deceased persons. This sum was the first paid into the state treas- ury to form a state hospital fund. Meantime congress appropriated $50,000 for the erection of a marine hospital at S. F., which should have rendered the state hospital unnecessary. But not so thought the legislature of 1851, which passed an act to provide a revenue, compelling the master or owner of a ves- sel arriving from a foreign port to give a severed bond, in a penalty of $200, for each passenger, conditioned to indemnify and save harmless the state marine hospital at S. F., and every city, township, and county in the state, from any cost or charge for the relief, support, or medical treatment of the persons named in the bonds, which were required to be secured by 2 or more suretics, provided that the master or owner might commute for the required bonds by payment of $5 in money for each cabin passenger, and for each deck passenger $3. Any refusal or neglect caused a forfeiture of not less than $500, nor more than $2,000, which inured to the benefit of the hospital fund, and all vessels were required to carry a charity-box for the collection of money for the state marine hospital. The act also made this institution a city hos- pital, by authorizing the city to send there its sick, upon terms agreed upon between the city and the trustees of the marine hospital, but not to exceed $50,000 annually. Cal. Statutes, 1851, 384-6. A certain proportion of the revenue derived from gaming licenses and auction tax was also diverted to the hospital fund. It would seem from remarks in the Alta that the state marine hospital was regarded as 'infamous.' 'Maledictions,' says the editor, 'upon the heads of those who enacted the illegal, cruel, and villanous pro- vision, by which the poor mariner was plundered, not succored, and the com- mercial interests of the state jeopardized for the purpose of gratifying a few craven satellites.' Other hospitals, at Sac. and Stockton, authorized in 1851, received a part of these taxes. Sac. was granted $30,000 and Stockton $20,000. These other state hospitals received an appropriation annually out of the general fund. In 1852 an act was passed authorizing the trustees of the Stockton state hospital to erect a building for the insane of the state, and to provide for their support, the building not to cost over $10,000, this sum to be paid out of the state treasury, with $7,500 for the support of the insane.
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It could not be said that at this period California had any system of political economy. From 1849
These institutions annually required more money. The next device for their support was the 'passenger act,' similar to the act before described, but call- ing for not less than $5 nor more than $10 for each passenger landed in Cal., from foreign countries, or the other states of the union; and exacting heavy bonds for landing a lunatic, cripple, pauper, or infirm person, not a member of a family. By an act of 1853 a com. of immigrants for the port of S. F. was authorized, to be appointed by the gov., to hold office for two years, and to approve all bonds and administer all oaths in the discharge of the duties connected with the passenger act. His pay was ten per cent of the receipts, the remainder, after payment of costs, to go into the state treasury. Two fifths of this fund was then appropriated to the support of the insane asylumn established at Stockton in 1853, in place of the Stockton state hospital, and for which a draft on the treasury of $50,000 was authorized. The state marine hospital was discontinued in 1855, and the property belonging thereto was conveyed to the county of S. F. for the use of the indigent sick, and all moneys received in commutation of bonds under the passenger act was set apart to constitute the hospital fund of the state of Cal., to be apportioned among the counties of the state in proportion to their population. To dis- courage the immigration of persons who, under the laws of Cal. and the U. S., could not become citizens, a law was passed in 1855 requiring a tax of $50 to be paid for every such person brought to any port in Cal. Suit could be brought against the master, owner, or consignee, in the event of a refusal to pay the amount due to constitute a lien on the vessel. All moneys collected under this act were to be paid into the treasury for the hospital fund, except five per cent to go to the commissioner of immigration. In 1832, the sum of $25,000 was appropriated for the relief of the overland immigration, and $2,000 for the use of the indigent sick at San Diego. In 1855 $10,000 was appro- priated to be divided between the two orphan asylums of S. F. In 1856 $40,000 was appropriated for the completion of the state insane asylum at Stockton. The city of Sac. brought a claim of $144,295.50 against the state, which was said to have been expended by that city between Dec. 6, 1849, and May 3, 1851, on account of the sick and destitute, not residents of the city or county, and for the proper interment of those of this class who died within that period. During the heavy overland immigration, a large number of im- inigrants were relieved annually, as well as many sick miners.
To provide a fund for the state library, a tax of $5 was levied upon the commission of every state officer and every member of the legislature. A board consisting of the governor, treasurer, comptroller, president of the senate, and speaker of the assembly, had power to draw this money, and to purchase books, maps, and furniture for the library. A supplemental act made all fees, of whatever nature, collected in the office of the secretary of state, a portion of the library fund. By an act of 1856 so much of the above laws as conflicted with a provision of the militia law setting aside the $5 tax on military commissions, to constitute a military fund, was repealed. In this manner were special taxes made to meet most of the expenses.
Both before and after the admission of the state, convicts Were confined on 'prison brigs' at S. F. and Sac., and in such insecure jails as were to be found in some counties. But in 1851 the legislature passed an act making M. G. Vallejo and James M. Estill lessees of state prison convicts, and upon them devolved the obligation for ten years to guard and provide for this class of persons, three inspectors, with a salary of $1,500 each, being appointed to make rules, and report to the legislature. During the year 1851, according to the inspectors, the jail in S. F. was used for a portion of the state convicts, and one prison brig had been fitted up and moored near Angel Island, on which 35 prisoners were confined. . The law of 1851 implied the erection by the state of a penitentiary, but leased the state prisoners, without requiring
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to 1857, 268,713 persons had arrived at San Fran- cisco by sea, and 144,100 had departed in the same
any returns from their labor, while paying inspectors, in addition to the costs of arrest and prosecution. This, as the inspectors remarked, had the look of 'affording rare facilities for private advantage.' The number of convicts turned over to the lessees in Jan. 1851 was 60; and Cal. convicts were among the worst in the world, being the scum of the criminal professions from every part of the inhabited globe. Others were added to the 60 during the year. From the prison brig 17 escaped by overpowering their keepers, and three escaped in S. F. Out of the 20 thus let loose upon society, 7 were recaptured. Upon this report the legislature of 1852 passed an act constituting the in- spectors and the supt of public buildings, a board to examine bids for a con- tract and select a site for a state prison; purchase to be made of 20 acres for that purpose at not more than $10,000, to be paid out of the general fund. No limitation as to price was mentioned in the bill, but all the proceeds from the sale of swamp and overflowed lands, after draining and levying the same, was pledged to be held inviolate for the payment and redemption of bonds of the state, issued and made payable in 10 years, with 7 per cent interest, payable semiannually, for the purpose of discharging the debt to the contractor. The board were to settle upon a plan suitable for the pur- pose, and did so. Two bids were received, one from Isaac Saffrans, and one from F. Vassault, either of which would have footed up nearly $1,000,000. The plans and proposals were approved by Bigler. Land was purchased at San Quentin point, and excavations begun, when the legislature of 1853 made an investigation of the subject. The gov. had not pointed out the unconstitutionality of the act, nor expressed any doubts of its expediency. The investigation showed that several members of the senate had proposed limitations, the majority being in favor of $100,000, and that when it was voted upon these senators had believed that $100,000 was incorporated in the bill by amendment. Yet when the original bill was examined, no evi- dence could be found of mutilation or erasures. By what legerdemain the bill passed through both houses was not discovered. That the same craft was shown in the bids was proven. Several were presented and withdrawn, leaving only the two mentioned. These were copies of one another in every respect, except 'slight difference in the estimates,' showing that they emanated from the same source. The sureties offered in one case were J. M. Estill, Jos. Daniels, and R. H. Allen, and in the other John Middleton and T. Butler King. There seemed to have been many persons interested in the job, but the responsibility was not fixed upon any. The legislature of 1853 passed an act declaring void the contract with Vassault, and authorizing the expenditure of $135,000 in the construction of a state prison on the ground at San Quentin, to be paid, as before proposed, in state bonds inaturing in ten years, with interest at 7 per cent; and $18,315 was paid out of the gen- eral fund for the work and material already done and furnished. No second offer of the state's swamp-lands was made to unprincipled speculators; but a tax was levied of 4 cents on each $100 of taxable property, to constitute a fund to redeem the bonds until the debt should be paid. Thomas D. Johns was the contractor under the new arrangement. The prison was completed in Jan. 1854, and the convicts, 242 in number, were removed thither at a cost of $25,000. The appropriations of 1852 and 1853, 'for special objects, having no necessary connection with the administration of the state govt,' amounted to $436,350.78. The legislative, executive, and judiciary departments had cost in the period $1,107,927.80. In 1855 the legislature created a board of three state prison directors, who were intrusted with the management of prison affairs, nomination of subordinate officers, etc. The first board was appointed by the legislature, and expended in 7 months, including the erec- tion of a wall about the prison, the sum of $382,226.84, or a monthly average of over $54,030. The second board was elected by the people, and expended
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