GRAND TOTAL ALL PURPOSES (Excluding fixed charges, postal service, and sinking fund) CONCLUSION 1915 .$670,863,653 Revenue available for current appropria tions $657,851,993 670,863,653 $ 13,011,666 23,775,155 $ 10,763,489 (f) Under present methods of governmental bookkeeping these expenditures cannot be separately stated; they are lumped, therefore, under "general administrative purposes." (g) Postal estimates, payable from postal revenues, $306,953,117 are not included in this schedule, though shown in the detailed schedule of expenditures. (h) Offset by D. C. revenue, about one-half, which is included in "special revenues," above. CONCLUSION All government expenditures must ultimately be met by revenue and by revenue only. The issuance of bonds or other evidences of debt is merely a temporary expeditne-in sound financing—and the payment of these debts must come from revenue; i.e., from surplus revenue devoted specifically to this purpose. All nations with responsible ministries provide revenue for their respective governments by means of budgets. The finance minister prepares estimates of the needed expenditure in summary and in detail. He submits these estimates to the legislative body, or bodies, together with estimates of revenue, also in summary and in detail. He balances these, one against the other, increasing taxes in number or in rate, if more revenue must be had, or cuts expenditure estimates if taxes cannot safely be increased, whether for political or economic reasons. The central feature of the budget is this balance of revenue against expenditure. It is the primary necessity in nearly all national finance. It is the rock upon which ministerial ships split and founder. It is the danger signal and the rallying point for the opposition to a party or a ministry. In the United States we have not had this fundamental requirement of national finance for many years, mainly because of the phenomenal growth of our wealth and our population and because our taxes have been principally indirect taxes-custom duties, established for purposes of "protection" to our industries and our labor. Revenue has been, therefore, not dependent upon expenditure, with corresponding direct taxation as in most other nations. Revenue has, on the contrary, been produced incidentally, as it were, and usually in excess of the amount needed for economical and efficient administration. Hence our extravagance as a nation; hence our public building bills; our rivers and harbors acts; our inefficient civil service; our "pork barrels" and our contempt of economies and economics. This indirect revenue is one of the reasons why this country has never had a budget and yet has gone on from year to year growing ever more wealthy, ever more extravagant, and ever more contemptuous of budgetary requirements and of the financial methods of foreign nations. Now, in 1914, we are beginning to be pulled up with a round turn. Now, with our tariff reforms and our income taxes we are departing sharply from the ways of the fathers. Moreover, in our private business competitions we hear and join in the slogan of efficiency, which tends to dominate the activities of business of the present day. It is creeping into governmental methods likewise; into our cities and our states; witness commission government in cities, and note university extension in state affairs; into our national departments, witness the demand for cost accounting and for uniform classifications of expenditures. What do these developments mean? What do they portend? Evidently an approach to a closer balance between revenue and expenditure; to an increased attention to this relationship and to a sharper critical demand for efficiency-which necessarily includes economy-in government expenditure. In other words, it portends the approach of the budget and budgetary methods in national finance in this country, as in other countries. Bondholders' Reorganization Plans for an BY J. B. GEIJSBEEK, C. P. A. An article by Mr. R. H. Hess appeared in THE JOURNAL OF ACCOUNTANCY, volume 10, page 26, and also in the September, 1910, issue of the United Banker and Investor, of Minneapolis, explaining in a most excellent and advisory manner the facts concerning western irrigation bonds. At that time the writer replied to this article with a note of warning in respect to the filings on water in these irrigation districts in excess of the possible supply (see JOURNAL OF AcCOUNTANCY, Volume II, page 223). Both these articles should be read in order to appreciate the following. Since the appearance of these articles the hard times in the world of finance and business in the past few years have given the colonization of lands (which, after all, is the real foundation of the value of an irrigation bond) such a backset that these securities have arrived in the back row, as far as preferability is concerned, because several irrigation districts have been unable to secure payment for the bond requirements as to the principal and interest. This turn of events was so unexpected that, while the subject of the former warning, namely, that of over-filing on water, still remains an unrealized danger, other conditions have arisen which conclusively prove these bonds extremely undesirable, not because of a lack of investors but because of the sad experience many of them have had. The following is here presented so that the facts may be known to those accountants who meet these securities in their work, but have had no opportunity to study the course of events in the actual field of operation. It should be reiterated that at the time of the appearance of the two articles mentioned, namely, four years ago, the following conclusions apparently were justified: "(1) That irrigation bonds are not, necessarily, or as a rule first liens on reclaimed lands and water works; (2) that they are not issued under substantial government supervision; (3) that bond issues may easily be made to exceed the value of the property by which they are secured; (4) that irrigation district issues have not, necessarily, the characteristics of municipal bonds; and (5) that irrigation issues should be carefully differentiated from standard types of bonds when considered as a medium of investment"; and, further, (6) that there is always great danger of filing on more water than is available for the district. The statutes of Colorado, and for that matter, of other states, read beautifully and present a scheme of financing irrigation systems which appears to be, from the reading of the statute, a feasible and exceedingly equitable arrangement, especially in the gradual and easy liquidation of the indebtedness. by the farmers. In practice, however, this does not seem to work out that way for numerous reasons. FIRST: Irrigation systems are usually built for the purpose of selling and colonizing the land; therefore, the total expense for the entire system is incurred practically before the settlers have arrived. It places, then, on a few settlers, who may come there first, the entire burden of the interest and maintenance of a system entirely too large for the wants of these few, with the result that their burden in maintenance and interest assessments is too heavy. SECOND: The bond issue is a lien similar to a mortgage on the land of the settler, who, as a consequence, has continually before him the bugbear that his farm is mortgaged, even if he has paid in full for his land. THIRD: The nightmare of a mortgage can never be expelled until every farmer in the district has paid his share, because, although he may have paid his share, say by the purchase and surrender of bonds of the district, yet that legal lien remains until every other farmer in the district has paid in full. It is almost impossible to conceive when this time will arrive. Therefore, as long as he lives, practically speaking, he (and no doubt the next generation) will be hounded by an annual assessment for interest on something he does not owe. FOURTH: While the assessments for maintenance, bond interest and bond redemptions are called taxes under the statute and levied and paid in a similar manner, they do not seem to have the accepted power of taxes, which attracts buyers of delinquent tax certificates at public sales. When land is sold for general taxes it carries with it after a number of years such a title to the land that the original fee holder may be dispossessed of his property. This possibility forces the individual to pay his taxes. That condition does not exist with taxes levied for irrigation districts, with the result that at the annual tax sales for delinquent taxes the counties rather than individuals purchase these tax sale certificates, and the counties have no machinery, power nor authority to assume control over these lands, as can be done by individuals in the case of general tax sale certificates or foreclosures. Therefore, the farmers who desire to defraud- and judging by the districts' lenient methods of levy and collections and by past experience, many do so desire-force the man who is honest to pay the taxes for the man who is dishonest, because there must be enough added to the annual levy to take care of the amount remaining unpaid in delinquencies so that the system will be maintained and provision made for interest and redemptions. Thus, the load is made heavier with the increase in the number of settlers; and, when the district apparently is made prosperous by increase in the population, the burden on the individual farmer increases and we have already seen that it was heavy enough at the outset. FIFTH: After a few years the district begins to fail in the payment of its bond interest. Then the bondholders form an organization for self-protection and learn that they have a bond which really cannot be foreclosed. They also learn that they have a bond in an institution in which there is no way by which the bondholders can assume control of the management, as the bondholders in a corporation can do by the appointment of a receiver or by taking possession of the property. SIXTH The moment the bondholders start proceedings to ascertain their rights the relation between the farmer (who manages the district) and the bondholders becomes as disagreeable as that sometimes existing between capital and labor, with almost the same notoriety attached thereto. The result, then, is that the farmers endeavor, honestly or dishonestly, to defeat the interest of the bondholders, if not openly, at least in effect. For instance, they will start to increase unduly their maintenance expenses. They will not set aside from the assessment of unpat |