USA > Rhode Island > Providence County > Providence > State of Rhode Island and Providence Plantations at the end of the century : a history, Volume 3 > Part 28
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The amount distributed among the towns for school purposes was increased to $25,000, and that sum was to be raised by the income from the public deposits, and such other sum as should be necessary was to be taken from the general funds of the treasury. Thus the total in- come from the funds was used to increase them, but the law was not strictly observed.2 During the following two decades heavy drafts were made on the state treasury. In 1839 it was voted to build a state prison and to raise the necessary funds by direct tax, but it was found more convenient to use the United States deposits for that purpose, and $29,526 was so used. The sum of $103,192.72 was taken to meet
1In 1839 the income from lotteries and auctioneers was appropriated to paying the state's indebtedness to the school fund, and after such indebted- ness was cancelled was to be devoted wholly to increasing the permanent school fund.
2The taxes on lotteries and auctioneers were used to eke out the income from the public deposits, and in 1840 the state owed the fund $19,706. The next change in the management of the school funds was made by Stephen Cahoone, elected treasurer in 1841. He diverted all the income of the invest- ed school funds, and the interest of the public deposits, to raising the annual fund of $25,000, but at the same time he observed the law in using the income from auctioneers and lotteries to cancel the state's indebtedness. Thus, while drawing from the funds with one hand, he added to them with the other. In the next year he took enough from all these sources of income, including the tax on lotteries and auctioneers, to make the required $25,000, and turned over to the permanent fund only about half the taxes on lotteries and cred- ited the state's debt to the fund with that sum.
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255
PUBLIC AND PRIVATE FINANCE.
the expenses of the Dorr war, and $10,000 more was borrowed to pay the cost of the constitutional convention of 1842. In 1844 the state owed the United States deposit fund $142,719.21. The state arsenal cost $13,000, and the settlement of the boundary line with Massachu- setts cost $14,800. The United States deposits were further drawn upon, and in 1850 the state owed $194,245.88 to this account. To anticipate a little : The state having come to view the United States deposits as a gift, rather than a loan, made further drafts upon them in order to pay its obligations, until in 1857 it had used $231,070.06 of the original sum of $386,611.33, and the auditor congratulated the state on the fact that it was at last free from debt. The balance of the United States deposits, $155,541.27, was in 1859 covered into the per- manent school fund. That fund then consisted of nearly $72,000, making in all $229,435.65, which was invested in bank stocks.
From 1854 the school fund had increased rapidly, as a law of 1851 had provided that all income on the invested fund, the tax on auction- eers and the interest received on deposits of the state revenue, should be added to it. Under this law sums as large as $16,000 were invested in a single year. Since 1860 all income from the fund itself has been turned into the general funds of the treasury and only the income from auctioneers is used to increase the principal. This income has averaged nearly $2,000 annually, and would have largely increased the fund had it not been for losses due to unwise investments, which are prescribed by the law. The fund now amounts to $249,183.
But if the state has not adhered to the liberal interpretation of the school fund laws, it has been liberal with the local public school sys- tem. The amount distributed among the towns has been increased from time to time, until at present $120,000 is appropriated annually to that purpose.
The expenditures of the state since 1850 can be briefly described. The most important cause of extraordinary charges was the war of the Rebellion. At the beginning of the war the state had a floating debt of $4,000. At the close of the war the net debt was $3,889,000. Some of the towns and cities had also incurred war debts-the debt of $300,000 of Providence being a typical case. The receipts and dis- bursements of the military department to January 1, 1866, seem to have amounted to $7,188,974.97, but many of them were counterbal- ancing entries, consisting of renewals of outstanding indebtedness. There was as usual a wide discrepancy between the state's early claims against the United States and the amounts of the claims allowed by the latter. Any statement of figures must therefore be liable to some error. From now available records the state seems to have expended a net of $5,915,805.99 for war purposes, exclusive of interest payments. Of this sum $4,160,641.90 was raised by the proceeds of bond sales and premiums. The state received from the United States the sum of
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256
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
$1,409,036.65, and of the total amount of its final claims all but $110 was allowed. No sinking funds were provided for the war bonds, but they were bought up by the state as rapidly as the funds received from the United States and the extra heavy taxes already noted became available. At the close of the war $111,000 had been bought. In 1875 $1,436,500 had been bought, and as there seemed little prospect of mak- ing further purchases at advantageous prices, a board of sinking fund commissioners was established and a fund annually set aside to pay the bonds at maturity. Although small sums were subsequently bought, the last issue of $699,000 matured and was paid August 1, 1894. The state was free from debt.
In the decade 1840-1850 the rapid increase in population, largely by immigration, compelled the state to give more attention to the de- pendent and defective classes. Previously the whole of the public burden for such classes had been thrown upon the towns and the out- relief system had been generally followed. When in a few instances workhouses had been established, as in Providence, tramps, imbeciles, insane, and petty criminals were promiscuously cared for in one insti- tution. In 1845 the state began to aid the towns in such matters by paying the board of the deaf, dumb and blind and soon afterwards the insane also. A school commissioner to care for the general school system of the state was appointed about the same time. The care of the insane was costly, and the state board of charities and corrections was organized in 1868-69, primarily to care for the insane poor by means of a state asylum. To its duties was also added the care of the dissolute and drunkards, and a workhouse was built; then a place for the poor who had no legal place of settlement or whose board might be paid by the towns where they belonged, was also built; the three insti- tutions are collectively known as the state farm. Until recent years the accounts of these institutions, as well as those of the state prison and county jails, built in 1874-75, were kept separately from those of the state treasurer. In the schedules herewith presented the income and expenditures of all of them are classed as items of state accounts and listed under their proper heads. The addition of a state normal school in 1854, and very much enlarged in the seventies, completes the list of costly new functions which the state has undertaken during the past half century.
With the past few years, however, a number of new departments have added to the state functions in the protection of persons and property. These are a health department, commissioners of railroads, of insurance, of banking, of factory inspection, of shell fisheries having charge of the state oyster beds, of inland fisheries for stocking the lakes and streams with spawn, of dams and reservoirs, of weights and meas- ures, of commercial fertilizers and feeding stuffs, and the state board
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257
PUBLIC AND PRIVATE FINANCE.
of agriculture, which is almost wholly occupied in inspecting and destroying diseased cattle. It will be observed that the greatest in- creases have been in the court and educational system and in the carc of the needy and defective classes. The following tables of income and expenditure of the state in the years indicated will enable the reader to compare the various items since 1850, which was the time when state expenditures in Rhode Island began to increase rapidly :
Total income, 1800. $6,000.
Population 69,100
1825.
25,150.
90,100
INCOME SCHEDULE.
SOURCES OF INCOME.
1850
1875
1900
Taxation, totals
$65,340
$678,120
$1,324,000
General property tax
17,080
492,420
644,120
Savings banks
36,300
112,920
351,970
Insurance companies
3,160
56,800
157,610
Building and loan associations
400
Auctioneers
1,230
1,810
1,900
Incorporation
5,750
14,140
Liquor licenses
109,670
Billiard and pool table and entertain- ments
1,260 1
3,070
6,590
Peddlers
6,070
3,700
2,480
Fertilizers
240
1,650
2,390
Fines, fees and penalties, totals
10,460
39,520
51,540
of courts
6,210
34,900
44,570
of jails and prisons
4,250
4,620
6,970
Payments for services and goods, totals
4,270
21,990
57,870
Prisons, labor and products board
920
7,050
4,020
Reformatories, labor and products
330
board.
130
Almshouses, labor and products
2,890
Asylum, board for insane
13,940
Schools, tuition and board
7,710
Turnpike tolls
1,000
Interest on deposits
2
17,040
2,690
Income from funds and real estate, totals.
3,820
27,700
30,920
Dividends on school funds
3,335
22,090
8,710
Rents on oyster lots
85
5,270
20,970
Rents, miscellaneous
400
340
1.240
Grants from U. S. for soldiers
510
2,320
4,000
Total
84,402
786,690
1,482,200
Population
147,500
258,200
428,500
'This item includes a small income from liquor licenses. In 1875 prohibi- tion was in force, but in 1874 the state income from liquor licenses was about $70,000.
17-3
2,350
14,940
25,700
Corporation
30,070
2,660
Civil commissions
board
3,150
12,180
Miscellaneous
258
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
Total expenditure, 1800
$ 5,800
1825
18,300
EXPENDITURE SCHEDULE.
OBJECTS OF EXPENDITURE.
1850
1875
1900
General government
$ 9,310
$36,920
$ 87,500
Executive department
1,000
1,530
5,690
Financial
500
4,160
11,600
Legislative
7,810
31,230
59,920
Elections
Protection of person and property
36,000
210,100
558,220
Military department
300
23,830
61,160
State constabulary
410,550
Court system
24,590
96,570
251,750
Jails and prisons
11,110
26,470
65,300
Workhouses
26,310
44,080
Reformatories
20,950
62,740
Miscellaneous commissions
15,420
2 73,190
Well being and convenience
12,210
Roads and beachways
10,020
Harbor commissioners.
2,190
Needy and dependent classes.
100
53,580
204,810
Soldiers and sailors
46,790
Indians
100
300
1,000
Almshouses
19,370
54,440
Asylums (insane)
29,910
99,250
Hospitals
4,000
2,500
Gifts to charitable associations
830
Education
34,900
120,710
345,690
Schools
34,900
114,840
3300,550
Libraries
1,880
13,790
Monuments and documents.
4,000
8,980
Celebrations
5,010
Statistical department
12,360
Gifts to agricultural societies
5,000
Interest_
760
160,530
82,300
Sinking funds
32,000
Unclassified
3,240
7,460
16,220
Miscellaneous
7,700
5,860
16,450
Total maintenance
92,010
595,170
1,355,400
Construction account
163,660
State house
155,240
Miscellaneous
8,420
'The following items make the sum total: Commissioner of insurance, $1,980; commissioners of inland fisheries, $1,260; commissioners of shell fisheries, $1,200; commissioner of railroads, $630; state board of health, $350. 2The sum total was made up as follows: Commissioner of insurance, $8,020; commissioner of railroads, $3,480; factory inspectors, $4,350; inspec- tion of commercial fertilizers and feeding stuffs, $3,890; state board of agri- culture, $23,450; commissioners of shell fisheries, $4,210; commissioners of inland fisheries, $4,760; commissioner of banks, $740; commissioners of dams and reservoirs, $1,170; sealing of weights and measures, $1,660; donations to societies for prevention of cruelty to children and to animals, $3,500; and helath department, $13,960.
3Including $3,660 invested for the permanent school fund.
4A state police force for executing the prohibitory law.
10,290
259
PUBLIC AND PRIVATE FINANCE.
The expenditures for the various departments, including those of local bodies, can be given only in a few instances. The court system of the state includes the cost of the whole department except local police courts and probate courts. The local cost of these will not much exceed $15,000. The total local and state cost for judicial purposes is about $265,000 annually. The poor expenditures of the towns are about $95,000; those of the state nearly $205,000 more-a total of $300,000; from which should be deducted about $15,000 paid by the towns to the state and others for board of insane, leaving a net expense to the state for its poor of $285,000 annually. The local and state expenditures for educational purposes in 1850, for maintenance were $96,900 ; for buildings, $19,000 ; in 1875 they were $503,000 for mainte- nance and $274,000 buildings. In 1900 they were $1,515,000 (includ- ing $57,500 for reform schools) for maintenance and $218,500 for buildings and works of reference.
The payment of the bonded debt of the state in 1893 and 1894 re- lieved the treasury of expenditures for sinking funds and interest of $126.350. Some time before this the anticipations of such an event had led to various plans for using the surplus funds of the state for more extensive public improvements. The prosperity of 1892 gave impetus to such ideas and the following special expenditures have been made during the ten years 1891-1900 : The state home and school, $80,000 ; the World's Fair, $55,000; the state institution for the deaf, $69,000 : the soldier's home, $97,000 ; revisions of the laws and constitu- tion, $30,000 ; state census 1895, $59,000 ; jails, $30,000 ; court houses, $110,000; bridges, $46,000; special highways, $112,000; beachways, $56,000 ; the agricultural school, $120,000 ; the normal school, $421,000; the new camp ground, $50,000; armories, $150,000; state prison, $65,000; the state asylum for insane, $67,000 ; and the state almshouse and workhouse, $53,000. In all about $1,700,000 have been devoted to these purposes without incurring any permanent debt. In the year 1895, however, the expenditures overran the total income by $90,000. In order to avoid this form of indebtedness in the future the treasurer was given authority to anticipate the taxes, which are levied under a general law and due and payable without special enactments. The taxes are payable by the towns and cities on June and December 15th. The state treasurer draws an order on the town treasurer for such sums as he desires to anticipate, not exceeding the amount properly due at the next time of payment. This order, when properly counter- signed, is discounted at the bank and is called a tax assignment order. In this way the treasurer has for a few months in each year anticipated the payment of taxes. In 1896 the amount thus anticipated was $642,000 of the total tax of $646,000. The amount anticipated has decreased each year until in 1900 it was but $300,000 of the total tax. The discount account during the four years has been $25,600. The
260
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
state, however, had scarcely paid its permanent debt in 1894 when the project of a new state house was sanctioned. Bonds were first issued in the same year and other issues have been made since that time. The present debt for state house purposes is $2,300,000, less sinking funds of $338,000. The cost to the state in the form of interest and sinking funds is $108,500 annually. On January 1, 1901, the amount expended for the state house was about $2,250,000, and a further issue of $700,000 has been authorized. The state also has a Spanish war debt of $180,000. This will be repaid by the United States.
The character of local expenditures may be gleaned from the fact that of the thirty-six towns in the state only five have city charters. The rights to levy taxes and to incur indebtedness for the various municipal departments, have been from time to time conferred upon the cities and towns, and somewhat liberal grants were made to the city of Providence beginning in 1866. The city began, soon after, the construction of a system of water works and sewers, and since that time has engaged in extensive and expensive undertakings. Toward the latter seventies the disposition to incur indebtedness was indulged so freely in Providence that in 1878 the so-called debt limitation act was passed. Under it no towns, without special statutory authority, can incur a debt in excess of three per cent. of the taxable property of the town. The increase of debt throughout the state, due to the grow- ing municipal functions imposed by increasing population, is illus- trated by the following table :
The total local indebtedness in 1870 was $3,035,000, that of Provi- dence alone being $2,266,000, against which were sinking funds of $1,070,000.
YEAR 1880.
YEAR 1900.
DEBT.
SINKING FUNDS.
DEBT.
SINKING FUNDS.
Providence
$10,475,000
$1,102,000
$16,906,000
$2,610,000
Pawtucket
1,100,000
165,000
4,623,000
372,000
Woonsocket
240,000
10,000
2,934,000
139,000
Newport
152,000
36,000
912,000
130,000
All other towns.
640,000
23,000
3,473,000
216,000
Totals
$12,607,000
$1,336,000
$27,948,000
$3,467,000
PART IV-CHARTERED BANKING-1791-1900.
[Chartered banks in Rhode Island have had a peculiarly close asso- ciation with the industry of the state. Their history cannot be under- stood apart from their appropriate setting in the local economic devel- opment. This chapter will therefore be divided into four sections beginning respectively with the years 1791, 1809, 1840 and 1865. The first period was characterized by banking free from state supervision
261
PUBLIC AND PRIVATE FINANCE.
and by industry confined to commerce and agriculture. The second was a period of banking restricted by state supervision and industry almost wholly devoted to manufacturing. The third period was marked by some degree of inflation incident to gold discoveries and tlie civil war and consequent further restrictions in banking and by indus- try reorganized by the use of steam power and carried on by incorpo- rated companies instead of co-partnerships. The fourth period has been marked by the importance of deposits and trust companies in banking and a reorganization of industries due to better methods of credit and improved mechanical devices.]
First Period .- 1791-1809.
Rhode Island was not among the first states to undertake the role of a banker, but it drank deeper and longer than they of the cup of inflation, repudiation and dishonor. At the close of the Revolution, it was said that "punctuality in business engagements was observed nowhere outside of Philadelphia",1 and Rhode Island customs and traditions had been such that the statement was particularly applicable to it. The economic condition of the people did not warrant the hope of success in a private banking enterprise. The state was impover- ished by the war, the soil had been exhausted by the demands made upon it and many of the inhabitants were emigrating to the more fertile lands of the west. Trade was dull, the limited territory which was tributary to the towns offered by no means a hopeful prospect to those who remained. The two factors of encouragement were world- wide commerce of the merchants (the fitting of the first ship for the East India trade occurred in 1787), and the beginnings of the cotton industry in 1790. At this time there were only four banks in the states-one each in Boston, New York, Philadelphia and Baltimore. Providence was far behind any one of these cities in wealth or popula- tion or prospects.
The first attempt to start a bank in the state was made in March, 1784. The project had been discussed in the public press and the advantages of such an institution had been ingeniously advertised by the promotors. The Bank of America in Philadelphia was cited as an illustration of the opportunities for investment which banking offered. The stock of that bank was in great demand and a semi-annual divi- dend of eight per cent. had been paid on it in January. The proposed bank was to be called the Bank of Rhode Island and Providence Plant- ations. Its capital was fixed at $150,000, and the par value of the shares was $300. Ex-Deputy Governor Jabez Bowen, John Jenckes and John Brown were to receive subscriptions, but despite the com- manding influence of such men, the plans failed. Only $30,000 was subscribed at a meeting held at the state house. The meeting ad- 1Gallatin's Works, iii, 370.
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
journed to assemble in a few days at "Mr. Rice's tavern". Of that assemblage there is no record, save that many of those who had not subscribed before, and among them Moses Brown, were invited to attend. Economic conditions were not ripe for the enterprise. There was very little capital available for it, and it probably did not com- port with the business acumen of the Brown brothers to attempt to build a bank on stock notes, as subsequently became common. The plan for a bank lay dormant for seven years.
In June, 1791, it was revived, this time apparently by the firm of Brown & Francis, of which John Brown was a partner. Brown was in Philadelphia at the time and he had been urged to get a branch of the United States bank, then forming, established in Providence, but he found such a scheme impracticable. He advised his brother that
GREENVILLE TAVERN, SMITHFIELD.
The Greenville Bank was formerly located in this building. Built by Resolved Waterman in 1730.
the establishment of a local bank would be the most effective method of inducing the United States bank officials to think the town entitled to a branch. He believed the time a fitting one for the enterprise, although the town was small and the field limited, "but", he wrote, "by our exertions, and favoring a good and substantial foundation for the commercial, manufacturing and mechanical rising generation, it may in time become no inconsiderable capital, but without a spring to promote our young men in business here they must and will continue to go to such places as will aid them with the means of business; and in short all our wealth, I mean the wealth as fast as acquired, in this state must be transferred to other states, who by their banks promote all the valuable arts of mankind".1 This paragraphi was typical of the lives
1Moses Brown Papers, August, Sept. and Oct., 1791.
263
PUBLIC AND PRIVATE FINANCE.
of Jolin and Moses Brown. Their zeal for all kinds of local improve- ments seemed almost untiring. For nearly four months they were maturing the details of their plan and comparing it with the charters and regulations of the then existing banks of this country and those of the Bank of England. They favored a small bank and limited capital of only $100,000, but finally decided to increase the latter in order to enlist subscribers from outside the state; while to encourage those of limited means a disproportionately large vote was proposed for the small stockholder and the voting power of any individual or corpora- tion was limited. It was also thought advisable to pattern as nearly as possible after the United States Bank. As a further inducement to subscribers, it was stated that "the institution is pleasing to the secretary of the treasury of the United States and that, therefore, every reasonable encouragement from him may be expected".1 The stock was limited to $250,000-625 shares of $400 each. Of this sum $50,000 was for a time reserved for the United States and $20,000 for the state. Neither, however, subscribed. Other investors were ready. Thirteen hundred and twenty-four shares, or nearly three times the stock allotted to private parties, were at once subscribed. Capitalists and corporations from the state and the neighboring states and from Boston and New York sent in their offers. Only $180,000 of stock was allowed, and the subscriptions of non-residents were reduced thie most. The charter of the Providence Bank was granted by the general assembly October 3, 1791.
As this charter was the model of bank charters for many years, it deserves careful consideration. The preamble contains the following : "Taught by the experience of Europe and America that well regulated banks are highly useful to society, by promoting punctuality in the performance of contracts, increasing the medium of trade, facilitating the payment of taxes, preventing the exportation of specie, furnishing for it a safe deposit, and by discount rendering easy and expeditious the anticipation of funds on lawful interest, advancing at the same time the interest of the proprietors", etc. The incorporators were empowered "to have, purchase, receive, possess, enjoy and retain, lands, rents, tenements, hereditaments, goods, chattels and effects of what kind or nature soever; and to sell and dispose of the same, to sue and be sued, plea and implead."
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