Evolution of the budget in Massachusetts

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Preface

This historical sketch of the development of the budget in Massachusetts is an outgrowth of a brief outline prepared for Representative Joseph E. Warner during the fall of 191 7, when the author was the secretary of the Joint Special Committee on Finance and Budget Procedure of the Massachusetts General Court. It is not the purpose of this discussion to prove or disprove any of the current budget dogmas, but solely to record in orderly fashion the long series of events that have led up to the present budget system of Massachusetts. The reformer who looks for immediate and revolutionary changes in the financial methods will find little consolation in the history of Massachusetts. For this very reason, the student of government who believes there is some value in the gradual growth of the habits and forms of government, will see, it is hoped, a justification for this presentation of the evolution of the budget in Massachusetts.

The author has several debts to acknowledge. Representative Benjamin Loring Young^has been a most helpful and constructive critic. Mr. Carl A. Raymond, Deputy Supervisor of Administration, and Mr. Louis A. Phillips, Legislative Reference Librarian, have rendered valuable assistance. The acute criticisms of Professor vi PREFACE

Thomas Reed Powell and the suggestions and advice of Professor Howard Lee McBain, both of Columbia University, have guided the author in shaping the material of this study. Lest others may be charged with responsibility for statements of fact and of judgment contained in these pages, it is only fair to state that as the author has not in all cases been guided by his counselors, the responsibility is his and his alone.

L. H. G.

New York, March, 1920.

Prefatory Note

This volume is the second in a series of special studies in administration in course of preparation by the Bureau of Municipal Research and Training School for Public Service, as announced in the first volume by Dr. C. C. Maxey, "County Administration — A Study Based Upon a Survey of County Government in the State of Delaware.''

Although Mr. Gulick's treatment is for the most part historical, the writing of history has not been his purpose. On the contrary, it is his intention to present for the practical administrator dealing with state budgets an account of actual appropriation methods and the practice prevailing under an important piece of budget legislation.

Not the least of his purposes has been to counteract the superficial views which prevail in some quarters as to budget-making. There are some who write and speak as if "a budget system" could be established overnight by a mere act of the legislature imposing on some body or authority responsibility for preparing estimates of expenditures and revenues. In reality budget-making is a complicated process. In installing a budget system we are not confronted with the relatively easy task of adding a wing to an old structure, or of devising a new bureau or office of government. On the contrary we are viii PREFATORY NOTE

brought face to face with operations as complex as the multifarious activities of modem government and with processes which go to the very root of our constitutional law and political custom. If any one is under the delusion that the governor of the state or the President of the United States can on his own motion introduce a "budget system" by expanding his message into a monumental fiscal statement or by recommending the adoption of an act of appropriation prepared in executive chambers, it would be well for him to rid himself of that delusion immediately. If any one thinks that a mere statute requiring an executive consolidation of estimates is sufficient to install a "budget system," he also is in error. Above all, it is a travesty upon the term to give the name "budget law" to an act which merely equips legislative committees with staffs of searchers.

It might as well be said, once for all, that a budget system involves fundamental executive and legislative practices, carefully devised accounting methods, adequate expert service, efficient record keeping and work reporting — in short, all of the processes of good management. This is so in England, it is so in Germany, it is so in France, it is so in Japan, in Canada, and in every country where a budget system is in operation, even though there are, of course, certain differences in procedure. It involves an abandonment on the part of the pubHc of the traditional attitude that the treasury exists for the satisfaction of local needs. It involves the training of public servants equipped to operate a system based on sound business

PREFATORY NOTE ix

principles. Whoever expects, therefore, to rush a " budget biU'' through the coming legislature and to see an immediate revolution in finances, is destined to be disappointed. Advocates of a budget system have before them a season of scientific research into accounting and reporting methods, civil service practices, public works management, cost measurement and record keeping. Moreover, they have before them a long campaign of public education.

Mr. Gulick's study is merely an eloquent commentary illustrated by a wealth of detail on the principles laid down above. As such it will be welcomed I am convinced by those men of affairs who are actually wrestling with the problem of installing sound budget practices in detail.

Charles A. Beard,

Director, Bureau of Municipal Research, and Training School for Public Service .

Contents

OHAFTEB FAOa

I. Before the Constitution i

Charter Provisions ; The Executive-Legislative Struggle ; Development of Legislative Control ; Underlying Causes.

Chapter I

When the patriots of Massachusetts Bay resisted the imposition of a tax on tea by a government in which they had no voice, they were expressing a pohtical axiom well rooted in the hearts and pockets of our ancestors. Taxation and representation belonged together. It was one of the ideas that came over in the Arabella in the spring of 1630 when the government of Masasachusetts was brought from England to this continent.^

The idea that taxation and representation belonged together was the more firmly fixed because of the long conflict that had been waged between the royal governors and the elected representatives of the colonists.

Charter Provisions.

In 1 69 1 William and Mary granted Massachusetts a

new charter. The frame of government, in the words of

the charter, was as foUows :

"And Wee doe further for Vs Our Heires and Successors Will Establish and ordeyne that from henceforth for ever there

1 Manual of Constitutional Convention, 191 7, page 6.

B I shall be one Governor One Leivtent or Deputy Governor and One Secretary of Our said Province or Territory to be from time to time appointed and Commissionated by Vs Our Heires and Successors and Eight and Twenty Assistants or Councillors to be advising and assisting to the Governor. . . . And further Wee Will and by these presents for Vs Our Heires and Successors doe ordeyne and Grant that there shall and may be convened held and kept by the Governor for the time being. ... a great and General Court of Assembly Which said Great and General Court of Assembly shall consist of the Governor and Councill or Assistants for the time being and of such Freeholders of Our said Province or Territory as shall be from time to time elected or deputed by the Major parte of the Freeholders and other Inhabitants of the respective Townes or Places. . . ."

The legislative power conferred on the general court was to enact ^'wholesome and reasonable laws," to "name and settle Annually all Civill Officers," to define their duties and powers, and

"to Impose and levy proportionable and reasonable Assessments Rates and Taxes upon the Estates and Persons of all and every the Proprietors and Inhabitants of our said Territory to be disposed of by Warrant under the hand of the Governor . . . with the advice and Consent of the Councill for Our service in the necessary defense and support of our Government of our said Territory and the Protection and Preservation of the Inhabitants there according to such acts as are or shall be in force within our said Province and to dispose of matters and things whereby our Subjects inhabitants of our said Province may be Religiously peaceably and Civilly Governed Protected and defended soe as their good life and orderly Conversation may win the Indians natives of the Country to the knowledge and-obedience of the onely true God and Saviour of Mankind. . . . **

I

It was also provided that the governor should have the veto power, that all laws should be sent to England for a further approval, and that the councillors should be elected by the Great General Court.^

The Executive-Legislative Struggle,

This charter with its grant of the money power to the people's representatives formed the basis of the long struggle between the house and the governor, a struggle which is too well known to need any comment here.^ It is sufficient for oxu" purposes to point out the saHent results of the struggle. These were :

1. The wide separation of the executive and legislative departments.

2. The absolute control of the people's representatives over the levy of taxes and the appropriation of funds.

3. The gradual assumption of executive power by the legislature through the agency of its financial control.

4. The estabKshment of the principle that financial measures must originate with the "people's representatives" — the lower house.

5. The evolution of a "legislative budget" as a means of restricting the executive and keeping taxes down.

* Charter of 1691.

«H. R. Spencer, "Constitutional Conflict in Provincial Massachusetts." Charles H. J. Douglas, "Financial History of Massachusetts from 1620 to 1775." Charles Bullock, "Finances of the United States 1775 to 1789.'?

Incidents in the Struggle,

This conflict brought forth many exceedingly interesting incidents. So hostile were the representatives to various royal governors that they decreased their salaries, which were voted annually, and even went so far in the bitterest fights as to make no grants whatsoever.

Phips, the first royal governor, wrote to the home government "no salary was allowed or was intended,'' and asked the king to interfere.^ Dudley, the third governor, demanded the enactment of a permanent salary, only to be informed by the house, "As to settling a salary for the governor, it is altogether new to us ; nor can we think it agreeable to our present constitution ; but we shall be ready to do what may be proper for his support." ^ In 1720 Elisha Cooke, the leader of the "country party, '' ^ was elected speaker of the house. Governor Shute disallowed the selection, but the house paid no attention. The governor then dissolved the assembly.^ When the new house met in July, the representatives took vengeance by cutting in half the gratuity voted annually to the governor's father, and in the following year decreased the governor's salary.*

It is to be noted that the power over the governor's salary was used as a club and that up to 1735 the grant was customarily postponed to the last day of the session.'* Indeed, in 1721 the house refused to proceed to the passage

* Bancroft, Vol. II, page 68. ^ Spencer, page 66. 3 Letter of Shute to Board of Trade, June i, 1721, Vol. 13, X. 24.

* Bancroft, Vol. II, page 246.

of money bills till the governor notified them that he had approved the acts, resolves and elections of the session.^

The gradual encroachment by the legislature on the executive power was the cause of continued friction almost from 1 69 1 to 1775. More than one governor complained bitterly to the home government. Governor Shute made the charge to the king in 1723 that the house had given orders to garrisons, examined and disposed of military supplies, discharged individual officers for poHtical reasons, and determined the number and ranks of armed men he might maintain.^

Perhaps the keenest complaint of all, however, was that of Governor Belcher in a letter dated December 26, 1732, to Newcastle, in which he said :

"All the struggle in that matter is for power; if every account of the Province must be subjected to the House of Representatives the King's Governor will be of very little signification. They that have control of the money will certainly have the power, and I take the single question on this head to be whether the King shall appoint his own Governor or whether the House of Representatives shall be Governor of the Province." 3

Douglas, who condemns the tactics of the representatives in his financial history of Massachusetts, regards the financial struggle as part of the American Revolution.^

1 Spencer, page 66. 2 /^j^f.^ page 124,

^ December 26, 1732, Belcher Papers, page 493.

^ Douglas, Financial History of Massachusetts, pages 57, 137,

The Origination and Amendment of Money Bills.

There was also a long-continued conflict between the house of representatives and the coimcil over the amendment of money bills. In 1746, for example, the council altered the tax bill sent up to them by the house. It was returned, and the journal of the house reads : "Read and non-concurred. For as much as the House apprehend the honorable Board (according to the constant usage of the General Court and ancient privilege of the Representatives of the People) may only concur or nonconcur a Tax Bill, but may not make any amendment. '* L On June 21st, the council persisted in amending the bill, and on the 24th the house refused to accept any amendment made by the council. Finally, on the 26th the council gave in, at the same time notifying the house, — "Although the Board apprehend they have a just right to make an amendment on a Tax Bill, at least in a matter circumstantial, which was the point in dispute between the two Houses on the present Tax Bill ; yet rather than delay the important business of the Court at this critical juncture, the Board have concurred the Tax Bill as sent up by the Honorable House. ^^ Nevertheless, the council, that very afternoon, amended an appropriation (supply) bill and sent it down. Again the house non-concurred and sent a message to the board, saying: "It is very surprising to the House, that the Honorable Board should in their vote of this day begin a grant of a great expense to this Province ; for how reasonable soever the particulars voted may be, yet this House apprehend such grants should always originate with the People, who are at the cost of them."

This struggle between the two houses was settled by the constitution in 1780 with its provision that — "All rhoney bills shall originate in the House of Representatives ; but the Senate may propose or concur with amendments as on other bills/' — a phrase which found its way into the federal Constitution in 1787.^

Development of Legislative Control,

Paralleling this struggle for financial control by the representatives of the people, there was a gradual development of the machinery of financial control. In the earhest days there were no separate appropriation acts, strictly speaking, for the right to spend was included in the right to collect. The revenues were raised by grants of direct and indirect taxes "For the Defence of his Majesty's subjects and interests," and for other equally vague and general purposes. The revenue measures of a year were from three to six in number. They had no relation with each other, and no attempt was made to consider the financial problem as a whole and to plan accordingly.^

The revenue system of the province, coupled with the growing financial leadership of the house of representatives, brought about a significant change. The revenue needed was raised from two sources, direct taxes and

^Gilpin, Madison Papers, pages 1 530-1 531; Massachusetts Constitution, Part II, Chap. I, sec. Ill, Art. VII.

' See Province Laws and Resolves, Vol. I to V.

indirect taxes.^ The fact that the indirect taxes failed to meet the needs of the government made it necessary to fall back each year on polls and property taxes to be apportioned on the various towns. The representatives were sent by these towns and so had a lively appreciation of the unpopularity of direct taxes and as a result were always eager to prevent any expenditure that could possibly be avoided. To make the expenditures for a given year as low as possible, they finally brought all the matters together in a single bill, paring it down to the lowest possible figure and insisting that the council could not amend it in any particular, nor introduce any other measures. This evolution of a "legislative budget, '' in which expenditures and revenue were balanced over against each other with great care, was complete by 1733. In that year practically the entire running expenses of the government were fixed and financed by a single bill entitled "An Act for Supplying the Treasury with the Sum of Seventy-Six Thousand Five Hundred Pounds, Bills of Credit, for Discharging the Public Debt, &c., and for establishing the Wages of Sundry Persons, &c., in the Service of the Province." This combined appropriation and revenue bill provided :

1. Fixed salaries for the soldiers of the province.

2. That seventy-six thousand five hundred pounds should be issued in bills of credit, — "all sums shall be employed for the necessary defence and support of this

1 Douglas, Financial History of Massachusetts, 32, [33 ^59-95 ; Bullock Finances of the U. S. i775-89> ^ul. University of Wisconsin, pages 224-226.

government, viz., eight thousand one hundred and sixtytwo pounds twelve shillings, part thereof, shall be applied to pay the wages and other sums now due or that may be due by virtue of the estabHshment of Castle Williams as above, and to and for no other purpose whatsoever. ..." In similar fashion the other appropriations follow, each concluded by the clause ^'and to and for no other purpose whatsoever."

3. Pay for the councillors and for the representatives.

4. '^That if there be a surplusage in any sum appropriated, such surplusage shall ly(e) in the treasury for further order of this court."

5. That the bills of credit issued be redeemed by poll and property taxes as they fell due over a period of years.^

By 1733, then, the legislature had adopted a " segregated budget," in modern parlance, and had carefully guarded the surpluses by making them lapse into the treasury.

This unity of financial planning continued, except for an upset at the time of the colonial wars, till 1775, when the war financing, both state and national, upset all orderly procedure. The period falling between 1733 and 1775 displays at times a unity of financial planning exceedingly refreshing to the present-day student of pubHc finance.^

Underlying Causes.

It is an interesting phase of budgetary history that in provincial Massachusetts a unified financial program

1 Province'Laws, Vol, 11, page 690. ^!^i774 Province Laws, V, page 390.

lO BUDGET IN MASSACHUSETTS

was developed as early as 1733. A careful study of the forces that brought it about lead to the conclusion that it was a result of the conflicting political interest of the peoples' representatives and the royal governors. A unified financial plan was found to be the most efficient way of tying down the executive and limiting the direct taxes. Professor Bullock writes in his monograph on the Finances of the United States, 1775 to 1789 : "It is probably safe to attribute the growth of a unified budget in this colony (Massachusetts) to the calculating and parsimonious character of the policy of the representatives. This conclusion does not necessarily exclude all possibility of an influence having been exerted by the example of English methods. But it does seem certain that within the colony itself existed conditions which are a sufficient explanation of the course of budgetary development.'* ^

* Bui. U. of Wisconsin, Vol. i, page J28.

Chapter II First Steps Under The Constitution 1780 To 1849

The New Constitution.

The Massachusetts constitution of 1780 was the handiwork of John Adams as modified by the elected representatives of the freemen of the state. ^ It preserved most of the old institutions and made changes only where necessary to correct Provincial abuses, or to replace the British crown.

The sections of the constitution affecting finances and financial control were copied almost word for word from the charter of 1691 — with the omission of the religious and missionary phrases.^ The veto power was left with the governor,^ the executive duties of the old council were turned over to the new council,^ while the legislative duties of the old council went to the senate.^ The power to originate money bills was 'left with the house, though the senate, now elective, was given power to amend.^ The issuance of moneys from the treasury was made dependent, as under the charter, upon a warrant signed by the governor.^

* Convention Manual 191 7, page 22. ^ paj-^ n gg^. I^ Article IV.

3 Part II, Chap. I, sec. I, Article II. * Ihid., Chap. II, sees. I-III.

5 Ihid., Chap. I, sec. II. « Ihid., Chap. I, sec. Ill, Article VII.

Uhid., Chap. II, sec. I, Article XI.

Article XIII of the section dealing with the governor is interesting in view of the historical experiences of the province. It provides :

"As the public good requires that the governor should not be under the undue influence of any of the members of the general court by a dependence on them for support, that he should in all cases act with freedom for the benefit of the pubKc, that he should not have his attention necessarily diverted from that object to his private concerns, and that he should maintain the dignity of the commonwealth in the character of its chief magistrate, it is necessary that he should have an honorable stated salary, of a fixed and permanent value, amply sufficient for those purposes, and established by standing laws : and it shall be among the first acts of the general court after the commencement of this constitution, to establish such salary by law accordingly."

From a financial standpoint, the only important change brought about by the new constitution was the estabhshment of a popularly elected governor, and even this innovation had little effect for the time being because of the ingrained jealousy of executive power.

The Budget of I'jSo.

During the Revolution all orderly finance disappeared, and it is not surprising to find a disorganized system in 1780. In the first session of the general court after the adoption of the new constitution there were eight acts and 157 resolves of a budgetary nature. If any financial plan had been adopted for the session, certainly no evidence of it is to be found in the number or sequence of the acts and resolves carrying a charge upon the treasury

Summary Table from the Budget of lySo.

The sums necessary for the services of the current year (exclusive of raising the men and the supply of beef, respectively assessed upon the towns) are as follows :

For shirts, shoes and stockings for the Massachusetts line .... £20,200

To pay for clothing from Europe, already purchased, and charges . 6,000

To import clothing from ditto 20,000

To pay for officers clothing, now due to them 12,000

To discharge part of the principal of the public debt 50,000

To purchase small stores for the army 11,000

Money required by Congress for payment of the troops, etc. . . . 86,000

Ditto, to discharge Quarter-Master's certificates 64,000

To discharge interest on the depreciation notes, and such of them as

become due in a few days 9S,ooo

To pay interest on the securities of government 118,000

For the support of civil government 30,000

For the Commissary-General's office 30,000

For the supplies of forts and garrisons 40,000

To discharge the debts due from the late Board of War .... 12,500

To pay interest on hard money notes 6,000

To procure 13,000 bushels of salt 9j75o

Ditto — 74,500 gallons of rum 18,625

For redeeming one-seventh part of the new money 66,000

To procure 2000 barrels of pork 16,000

To pay for transportation of rum, salt and pork 16,000

Money for sundry charges of the war, not enumerated 212,000

(in specie . . £939>o7S

Amounting in the whole to nine hundred and thirty-nine thousand and seventy-five pounds, in specie. The means for payment of which, as we conceive, may best be obtained in the following manner

By loan on the supply biU £400,000

The silver money tax now collecting 72,000

The surplus of beef, appropriated to the supply of pork .... 16,000 By the shoes, stockings, etc., proportionably levied on the several

By the sale of confiscated estates 40,000

By excise on articles of consumption 50,875

By a tax on poUs and estates 320,000

By a lottery for the purchase of clothing 20,000 or providing funds for the treasury. But on February 27, 1 781, about the middle of the first session of the general court, a summary budget statement was prepared and ordered printed and publicly distributed.^ This statement, in addition to the summary estimates of expenditures and revenues, contains an explanation of the revenue measures, of some of the appropriations called for, and concludes with a discussion of the state debt and a ringing appeal to the patriotism of the people for support of a public loan. The financial balance sheet of this " budget'^ is reprinted on page 13.

Legislative Committees of lySo.

In addition to handling many matters directly, the general court appointed a number of committees and individuals to which were appropriated lump simis for the discharge of obligations of the government.

Among these committees were the committee for superintending purchases (R. Chap. 8, Oct.), the board of war (R. Chap. 10, Oct.), the committee to superintend the purchase of beef (R. Chap. 16, Oct.), the committee for methodizing and stating accounts (R. Chap. 20, Oct.), the committee for settling with the army (R. Chap. 21, Oct.), and the committee to conciu* and pay accounts (R. Chap. 11, Oct.). All of these, but one, were carried over from the pre-constitutional days and in some cases were instructed "to proceed in their business according to the several directions of former general

' Resolves of 1780, Chapter 162.

courts." ^ Others were not formally reappointed or reinstructed, but continued and acted as before.^

The most interesting of these committees from the budgetary standpoint is the committee to concur and pay accounts. It was an innovation created by resolve Chapter II, of November 4, 1780, as follows :

^^ Resolved J That Richard Cranch, Lemuel Kollock, Joseph Hosmer^ Jonathan Webster, and Noah Goodman, Esqu'rs, be, and they are hereby appointed a committee on the part of this House, whose business it shall be to receive, examine, and pass on all accounts (not otherwise ordered) which shall be exhibited to them for allowance, for any service done in persuance of any resolve or order of the General Court, provided such accounts be properly vouched and authenticated, and the dooings of said committee respecting such accounts, or any three of them (who are hereby appointed a quorum) shall be considered as valid as any vote or resolve of this house, during the recess as well as in the sitting of the General Court.

"And it is further Resolved, That Jabez Fisher and Ephraim Starkweather, Esq'rs. shall be a committee on the part of the Senate, and they are hereby authorized and empowered, both in the sitting and recess of the General Court, to concur and pay aU such accounts as shaU have been allowed by the committee of the House as aforesaid, always taking proper vouchers for the same.

*'And it is further Resolved, That there be paid out of the public treasury to said committee of the Senate, a sum not exceeding two thousand pounds in the new emission of money, to enable them to pay off accounts as aforesaid, said committee to be accountable for the expenditure of the money they shaU so receive.

* Resolves 1780, Chap. 20, October.

2 E.g. Chap. 29, Jan. sess. See Chaps. 72, 85, 206, etc., grants to individuals for public purposes.

"And it is further Resolved, That the Committee on the part of the House shall keep a particular record, expressing the names of the persons whose accounts they shall allow, the towns to which they belong, for services done, and the sums allowed to them respectively, which record shall be laid before this House once in every session, for their inspection.

"And it is also Resolved, That the committee on the part of the Senate shall from time to time lay their accounts, which they shall have paid, together with the vouchers, and an account of their expenditures, before this House, that said committee of the Senate may be discharged from such sums of money as may appear to have been by them expended, provided always that nothing in the foregoing method of examining, allowing and paying accounts shall be considered as a precedent for the future, but to have been adopted merely from the necessity of the present times."

A few days later certain former duties of the treasury were transferred to this committee on accounts by chapter 37 of the resolves. "Whereas," read the preamble of this resolve, "it has been found inconvenient that the bounties, . . . should continue to be paid by warant on the treasury : Therefore, to prevent unnecessary loss of time in getting said bounties, It is Resolved" that the committee on accounts be instructed to pay bounties.

On receiving its appropriation, the house committee set about certifying the various claims that came before it as payable under the orders and resolves of the general court, and the senate committee, on receiving this certificate, paid out the amount indicated from the appropriation granted. From time to time the committee laid its "Roll of Accounts" before the general court to have it "allowed." At such times the committee was "discharged" of the amounts allowed. For example, on November 24th, we find the following resolve :