James Rolph

27th Governor, Republican
1931–1934

Inaugural Address

Delivered: January 6, 1931

TO THE SENATES AND ASSEMBLY OF THE STATE OF CALIFORNIA:

Let me open my inaugural message to the legislature by greeting you for the first time in formal assemblage and thanking you collectively for the promises of help and co-operation which so many of you individually have tendered to me since my election to the office of governor of California.

If denied such help and co-operation I would be greatly handicapped, since the ablest and most experienced of governors could accomplish little without the good will of the legislature, and I lack the benefit, enjoyed by so many of my predecessors, of long training as legislator or administrative official in handling the peculiar and difficult problems of the state government. I come to my new tasks with much diffidence. What confidence I may feel today is due to your kindly attitude, the consciousness of my own zeal to serve well our state and its people who elected me by so overwhelming a majority, and a hope that my nineteen years in the office of mayor of San Francisco will prove to have taught me something at least, of the science of government.

In assuming the duties of this great office, to which I have been called by nearly a million men and women, I bespeak the good will and co-operation of all ofmy fellow citizens regardless of affiliations in order to secure during my term of office peace and plenty to the people of the State and the greatest opportunities for their children to grow in wisdom and in grace as they grow in years.

The conventional function of an inaugural address is to outline plans and policies of political and governmental nature which the newly inducted incumbent proposes to launch and promote during his administration, and I intend to follow that course in this address; but I delay doing so in order to speak briefly of the fundamental ideas which it is the function and purpose of all true governments and wise administrations to bring about.

The Constitution of the United States declares that it is designed to promote tranquility, promote the well-being of the people, establish justice and secure the blessings of liberty; and these are the beneficent ends which I have ever in mind.

At the moment I speak of only one of them.

Tranquility is a fundamental requirement to happiness and contentment, and it is therefore desirable that our people should be as free from strife and vexatious contention as is consistent with the frailty of humankind.

The first requisite is a large toleration of views which are not peculiarly our own. I do not mean a so-called toleration which will abolish all ideals and principles, but that abounding charity whereby we will be enabled to enter into the spirit underlying the views of others and to live in harmony with them, although there may be differences, say, marked differences, in many matters, including those of religious, political, social and economic natures.

There is a certain ferocity for righteousness which brings about turmoil and strife to no end and this is altogether to be deplored as inconsistent with the general well-being of the people.

I have already mentioned justice, liberty and the general welfare, and I need not stop to dwell thereon.

These then make up my fundamental creed.

I come now to speak of practical measures designed to be helpful to those who are capable of carrying through to destinies of success, and for the care of those who have been unequal to or have been overthrown in the struggle of life. In these two great objectives, I include all good ends and the means by which they are attained.

Humanitarian Treatment of the State’s Dependents

The greatest business of the state is the business of Government, and it is the least understood. Government should be conducted on lines of economy, but not on a basis of parsimony.

Real economy consists in honest and reasonable expenditure of the people’s money in return for general advancement of the public welfare. Any economy which denies to the State’s unfortunates the comforts due to human beings is false economy.

As Governor I stand for an economical administration of the State’s affairs. But I shall refuse to make a political record through starving the State Institutions. I shall refuse to recommend inadequate appropriations for the relief of State institutions merely to gain the plaudits of those who do not understand the crying needs of the State. This State may well be proud of the great institutions which have been built for the shelter of the unfortunate and the care of the needy. Many of these institutions are in need of immediate repair, as well as extensions. Their facilities must keep pace with the growth of our population.

The poor, the stricken and the unfortunate shall have a first claim on the consideration of my administration. Every poor creature, bereft of reason, should have a bed in which to sleep, comfortable habitations in which to live, decent and sanitary surroundings and wholesome food. This is the very least that humanity has a right to demand.

I shall consider my administration a failure if, through parsimony or neglect, the poor State’s unfortunates shall fail to receive the ordinary comforts of life. What means the wealth of the State if those who have faltered by the wayside of life do not receive the common charity due to all men?

Many of our state institutions are in need of enlargement to keep pace with the demands of public growth. There should be no waste of funds, no needless expenditure, but there should be an adequate building program to tenderly care for all the State’s unfortunates. Furthermore, some of our state buildings are approaching the point of decay. They should be promptly and immediately modernized in order to protect the lives of their unfortunate inmates. Fire in any of these institutions would be an appalling disaster. A record in tax economy would stand as a feeble answer to the appalling charge of neglecting the safety of the unfortunate wards within this and other buildings. Disaster such as has confronted the public institutions of other States would leave a blot upon our history that no record of false economy could make us forget.

Our state prisons present one of the great problems of modern society. Owing to the complexity of our laws, the enactment of innumerable statutes and other causes, our state prisons are becoming overcrowded. Penal institutions should not by overcrowding be made into houses of torture to break the spirits of men. While discipline and punishment are necessary to those who break the law, an opportunity should be afforded to all to reform and to rebuild their lives.

While I do not believe in nurturing or mollycoddling criminals, I believe that vast numbers of men who have been led astray can, by proper effort, be reformed.

Our state prison system does not permit of the segregation of criminals. The petty offender is too frequently made the constant companion of the cut-throat and the gunman. An enlightened system of penology points to the classification of criminals where those of milder degree are not thrown in constant contact with the vicious and degraded type. Our overcrowded prisons are a breeding place for future crimes. Broken, dispirited men, merely plot against their fellows. Soured and embittered, they plot against society. Our state prisons should be so enlarged that they will give opportunity for segregation and for constant and wholesome employment for the inmates.

The State, at least, owes the duty to society of trying to lessen the crimes of the future. Discipline, rigid and even severe, must be imposed on those who break the law, but these violators of the laws of their country are men, within the breasts of whom there must be some spark of human good. Be that instinct toward good, small or great, we should encourage its development in order to lessen the prospects of future crime. Relief from crowded and intolerable conditions, even at the expense of building added prisons, should be looked to to solve this problem.

The institutions for the blind and for the feeble-minded should have our especial care. I commend to the Legislature enactments which will give to the sightless unfortunates of the State the last possible need of encouragement and support. We, who have eyes to see, should, in return for our blessings, stint no effort to give to the blind every possible opportunity for education, wholesome surroundings and congenial occupations. I shall consider that my administration has some claim to remembrance if it shall make the cause of these poor but proud and dependent wards of the State, the special object of our care.

Little does it comfort us, though the public at large be prosperous and happy, if our less fortunate, broken, sightless or demented kindred are forgotten and neglected. The cry of human need is the first call that we must answer.

Financial Problems Presented

My advent to the office of governor comes at a time presenting peculiar and extraordinary difficulties to the state administration. Unfortunately, a worldwide depression has created an acute problem of unemployment in California, as elsewhere, and at the same time has caused a shrinkage in the gross revenues of the public utilities, the net revenues of other corporations, and the value of inheritances, which are the bases of so large a proportion of the State’s revenue. We are met also with the fact that the people rightly have materially reduced the taxes on the electric railroads and thus stricken one and one-quarter million dollars from the normal revenue, and that reductions in rates made by the railroad commission, by reducing the gross revenues of the utility companies affected, will cause a material reduction of the state’s percentage of those gross revenues. In other words, this administration at its beginning is faced with unusual and urgent demands, and a diminished revenue with which to meet them. Fortunately, on the other hand we face this situation with a surplus of approximately thirty million dollars in the state treasury.

For the solution of this imperative fiscal problem I invoked the aid of Mr. Rolland A. Vandegrift of Los Angeles, who has a thorough knowledge of the State’s financial affairs, and has been appointed by me to the office of director of finance. My instructions to him for the preparation of the budget were to provide liberally for all the proper needs of the various institutions and departments, giving consideration to their recurring biennial requirements for expansion to serve a rapidly increasing population; to see to it that there should be no let-down, but should be an orderly extension of the humane service which the state owes and is giving to the sick, the insane, the blind, the indigent, the orphan, the widow, the veterans, and to all its wards; to make generous allowance for an intelligently planned building and road program in order to provide employment urgently needed by so many worthy men and women in these days of stress; but, at the same time, to hold every branch of the government to the strictest standards of economy consistent with efficiency; and, finally, to cast the results of his work into an honest, candid and complete Budget, which will recite the whole story, without evasions, concealments, or any of the tricks by which prodigality is sometimes disguised in the modest livery of thrift.

That budget will be laid before you. It will tell its own tale. I think it meets the standards which I set for it. In my judgment it does not fail on the side of either liberality or frugality. Naturally and properly it will dip into the surplus to meet the extraordinary requirements of our unemployment problem and our special building program. The use of a surplus is to act as a surge chamber in times like these when there is an unusual gap between revenue and expenditure. A substantial but not excessive surplus should always be maintained, and the surplus, when depleted below the safety point, should be rebuilt. The inroad on the surplus necessitated in the approaching biennium is an emergency and will not recur in the absence of extraordinary conditions.

As the situation now presents itself, there will be no occasion to seek additional sources or increased rates of revenue in the biennium commencing July first of this year, or, so far as we can foresee, in the succeeding biennium. The normal increase in revenue should take care of the normal increase in expenditure and the end of the four-year period ahead should see the surplus replenished and adequate to serve as a cushion in future abnormal periods as it has done in the current abnormal period. I am well aware that state and local taxes, in California, as elsewhere, have become a serious burden on real estate, agriculture, industry, business, and the whole population. To keep taxation as low as possible without impairing the service which modern, humane and civilized government ought to render to the public will be my constant concern.

We must expect a state whose population and industries are growing as rapidly as those of California to require a normal increase in governmental expenditures from biennium to biennium.

The budget to be laid before you, however, calls for an increase in the biennium commencing July first next of less than four per cent over the expenditures for the current biennium, as compared with increases in the previous three bienniums ranging from twenty per cent plus to twenty-three per cent plus. True, the figures for former bienniums include the special appropriations, but our proposed budget contains items aggregating a considerable amount which have formerly been omitted from the budget and provided for by special appropriations. I urgently ask your co-operation in order to keep the special appropriations of this session to the lowest possible amount, and to bear in mind the difficult financial condition presented by the estimated falling-off of normal sources of revenue and the fact that those who actually pay the taxes can not afford in this period to assume heavier tax burdens.

The building and general construction program contemplated by this budget represents items which must be done and may economically be done at the present time. Many other worthy projects will be urged upon you, no doubt, but we who are responsible for the state government must not lose sight of the basic economic truth that the present stringency is due to the diminished purchasing power of the people and we cannot augment that purchasing power by exacting more taxes from them. In other words, we cannot spend ourselves rich. We must defer, until more propitious times, all extensions and increases in governmental expenditures that can be postponed with reasonable regard to the state’s welfare.

For your information I include in this message but shall not take time to read, a comparative statement of expenditures for the ten year period, July 1, 1923, to June 30, 1933. You will see it in the printed copies of this message.

There may be some slight change in the amounts and percentages for the biennium commencing July 1, 1931, due to modifications of the budget subsequent to the printing of this message.

Comparative Statement Of Expenditures
For The Ten Year Period,
JULY 1, 1923, TO JUNE 30, 1933

State of California
Fiscal Years of Biennium	Date limits of bienniums	Total expenditures for bienniums	Percentage of increase
GENERAL BUDGET
75th and 76th	1923-1925	$ 39,229,690.20
77th and 78th	1925-1927	46,082,607.08	17.467
79th and 80th	1927-1929	54,649,849.53	18.592
80th and 81th	1929-1931	63,842,095.00	16.82
82th and 83th	1931-1933	68,483,622.00	7.27
EDUCATIONAL BUDGET
75th and 76th	1923-1925	$ 54,332,242.80
77th and 78th	1925-1927	63,519,571.89	16.91
79th and 80th	1927-1929	72,461,292.37	14.077
80th and 81th	1929-1931	80,206,130.00	10.69
HIGHWAY BUDGET
75th and 76th	75th and 76th	$ 47,797,851.58
77th and 78th	1925-1927	64,823,402.42	35.620
79th and 80th	1927-1929	82,692,642.39	27.566
80th and 81th	1929-1931	111,111,608.00	34.37
82th and 83th	1931-1933	110,383,010.00	.656 reduction
TOTAL BUDGET
75th and 76th	1923-1925	$ 141,359,784.68
77th and 78th	1925-1927	174,425,044.39	23.391
79th and 80th	1927-1929	209,803,784.29	20.283
80th and 81th	1929-1931	255,159,833.00	21.62
82th and 83th	1931-1933	265,305,955.00	3.976

A Permanent Tax Commission Approved

In view of the interrelation of state and local taxation, the unremitting pressure to persuade the state to take over functions formerly financed by the localities, the recurring demands for “equalization” of state and local tax burdens in the absence of adequate information or fixed standards on which to base equalization, and the obvious need of a uniform system and standards of making assessments in the counties, the state should maintain some centralized supervision of local taxation above definite limits at least to the extent of accumulating information and investigating and advising the local taxpayers on the merits of proposed major expenditures or commitments.

I recommend the creation under an elective state board of a permanent, non-political, fact-finding bureau, staffed by men who have not only technical knowledge, but also practical experience in the field of taxation. That agency should devote its entire time to the task of establishing facts bearing on the tax problems of the state and its subdivisions, but its powers should be limited to fact-finding and reporting information for the benefit of officials and the public. No effort at lightening the burden or, if need be, reforming the system of taxation, can be intelligently carried out unless the facts are ascertained and available. The difficulty of ascertaining such facts by occasional and temporary commissions has been admitted by such commissions and is evidenced by the impossibility of determining with any degree of accuracy from data at hand the relative tax burdens as between the various classes of property, the various political subdivisions, or the state and the counties. The services of this staff of experts should be available to the counties, cities, and other taxing political subdivisions on payment to the state of the actual cost of the service rendered. This recommendation is substantially in accord with the report of the Joint Committee on Taxation.

One of the grave evils of our present system is the piling up of special assessments, especially on real property. In many instances the accumulation of such special assessments is tantamount to confiscation. Benefits from such special assessments are often remote or imaginary but the assessments are very real and must be paid in legal tender. We find cases of farmers and homeowners paying more in taxes and assessments than their land will bring. Proper restrictions on the levying of special assessments should be imposed by the legislature.

Increased Appropriation for the Governor’s Office

You will observe, on reading the budget, that despite these counsels of economy, the increase in the appropriation for the governor’s office considerably exceeds the average of increases for other departments. In order to set an example, my predecessors with the best of intentions, but, in my opinion, mistakenly have refused for some years to permit any enlargement of the office staff in order to handle the normal growth of the business of the office. For the same reason they have prevented any provision for an automobile for the governor although the state provides automobiles for many other officials. But the work had to be done. My predecessors have borrowed employees and automobiles from other offices so that the frugality exhibited in the budget was no saving to the Treasury. Pursuant to my determination that my budget, whatever its shortcomings, shall present a complete and true picture of the fiscal situation, I have had all the governor’s expenses charged to the governor’s appropriation without camouflage. The governor’s office staff is considerably smaller than the staff of the mayor of San Francisco. I am confident that the people of California are not aware that their governor has no official automobile and will not begrudge him the additional help and the means of transportation which the business of the office requires. As the Budget does not become effective until July first, and the increases in the staff and the purchase of the automobile should be made at once, an addition has been made in the governor’s contingent appropriation out of which the governor may make such payments as will fall within the remainder of the current fiscal year.

Officials Requested to Refrain From Lobbying for Appropriations

Since the budget, as presented, represents an earnest, and, in my judgment, a successful effort to be not only just but liberal to the institutions and departments, I will expect public officers and employees under the governor’s jurisdiction to refrain from seeking, directly or indirectly, additional appropriations. Lobbying for appropriations is not the proper business of officials of the State government. Officials who can afford to spend their time in the lobbies proclaim themselves superfluous.

Reapportionment

One of the most important and difficult duties of the legislature at this session will be the reapportionment of the state into congressional, senatorial, and assembly districts. According to the federal census of 1930, California is entitled to nine additional members of the House of Representatives, making twenty in all. Section 6 of Article IV of the state constitution, as amended in 1926, requires the legislature at the first regular session following each decennial federal census to adjust the legislative districts and reapportion the representation so as to preserve the assembly districts as nearly equal in population as may be; provided, however, that no county or city and county shall contain more than one senatorial district, and the counties of small population shall be grouped in districts of not to exceed three counties in any one senatorial district. In case the legislature fails in its duty to reapportion the state, the task is made to fall automatically on a reapportionment commission, consisting of certain designated public officers.

Our scheme of popular government contemplates that the congressional and assembly districts respectively shall each contain approximately the same population so that representation shall be fair and equal. Unfortunately, the political history of this country affords numerous instances of “gerrymandering” by which tricky reapportionments have been made to give undue advantages to particular parties, politicians, or localities. I trust that this legislature will approach the task without regard to sectional, individual, or party interests and will make a reapportionment of both congressional and legislative districts in conformity with both the letter and the spirit of the federal and the state constitutions and the traditional American idea of equal and local representation. Only such a reapportionment will satisfy the people of California.

State’s Water Problems

Only a brief reference to the water problems of California is possible in this message. I assure the legislature and the people, however, that I am not unmindful of those problems; the problems of flood control in the northern valleys and in the Santa Ana river system, of saline encroachment in the lower reaches of the Sacramento river, and of the drying-up of the lands in certain southern sections of the San Joaquin Valley. A coordinated solution of these problems has long and earnestly been sought. Surely, in California, where water is so precious, the state must devise a general unified plan for the conservation and use of its water against the increasing needs of its increasing population and the demands of the coming generations whose stewards we are. No complete or satisfactory solution has been found yet although the elaborate and expensive studies heretofore made will doubtless aid in the ultimate determination of a plan. The difficulties are mainly financial. Economically, the cures proposed thus far seem about as bad as the disease. We may not rob or wreck one section, industry, or group in order to sustain another. We must not spend more in salvaging lands than the lands will be worth when salvaged. We cannot impoverish the farmers of any section in order to bring under cultivation lands whose yield will merely augment the existing over-production of farm products. As the Joint Committee of the senate and assembly said in its final report, submitted January 18,1929 (p.15), “development should not proceed more rapidly than economic needs of the State require.” We must be sure we are right before we go ahead with any plan. Yet we should not permit any section, industry, or group to languish and suffer unduly for lack of energetic action on the state’s part. I stand ready as Governor to give the legislature and the distressed localities all the assistance in my power toward finding a practicable solution of these pressing problems. We must not approach these problems in a narrow or sectional spirit. While the benefits sought may primarily affect certain localities, the evils we seek to cure have been brought into being by causes that are not local. Every irrigationist along the upper stretches of the Sacramento, the Feather, and the American rivers has contributed to the slow salting of the distant delta by tidal trespass. We cannot heal these real woes by sympathy or fair words, however sincere. Distinctly, the duty of relieving the acute situation caused by the uneven distribution of our water resources and the growing demand on them is mainly the business of the state and not solely of the affected localities. The Hoover-Young commission has submitted a report. To give that report the serious consideration which it merits will be one of your duties and mine during the current session of the legislature.

Fortunately, definite progress has been accomplished toward the construction of the Colorado river dam and thereby toward relief of the great and populous coastal plain of Southern California from the menace of a water famine. All the forces of the state government will be constantly available to aid in smoothing out the obstructions that still lie in the way of the completion of the Boulder dam.

Nor must we forget that water is not the only natural resource of California calling for conservation. Our wealth of natural gas must not be wasted. The water will continue to flow so long as the snow and rains continue to fall, but natural gas once escaped cannot be recaptured and the supply is not inexhaustible and cannot be replenished. So, too, our forests, which, once destroyed, cannot be replaced for ages, present an acute problem. They must have adequate protection from destruction by fire through wise, preventive measures.

Oil and Gas Industry

I commend to your careful consideration various matters concerning the oil industry of California. It is one of the greatest industries of our state and deals with our principal natural resource.

Of a total production in 1929 of 1,007,323,000 barrels of oil in the United States, California alone produced 292,534,000 barrels, having a value at the well of $321,367,000.

For the year 1929 our export shipments of petroleum products have an estimated value of $141,102,094.

The natural gas supply of the state developed concurrently with the oil is of tremendous importance. Nine hundred and eighty-six million cubic feet per day, equivalent in fuel value to 43,611 tons of coal, are now being utilized in California, but unfortunately 409,000,000 cubic feet per day and are being blown into the air.

The last Legislature passed legislation designed to protect our oil and gas resources against waste. The Supreme Court of our state has upheld the constitutionality of these provisions. I consider that the present law should receive your serious consideration in the event that you should deem it wise to fortify its provisions and to enlarge the authority of the state in preventing the wasteful production of oil as well as of gas. California, Oklahoma and Texas have dealt intelligently with this subject, each state along different lines, and I believe that our legislature may profit from the efforts of our sister states as they from us.

Much has been accomplished through the voluntary effort and co-operation of California producers in confining the production to the demand and preventing waste. By voluntary curtailment California producers are producing less than 600,000 barrels per day as against a potential production of over 1,100,000 barrels per day. New fields and deeper sands are coming in, and the problem is one in which the industry should have the co-operation of the state authorities. The federal government has already announced its preparedness to co-operate, so far as the government-owned lands are concerned. But the question is primarily one for the state to deal with.

Curtailing crude oil and gas production and preventing waste in the extraction of those irreplaceable products is but one step in conservation. Orderly and economic marketing of the manufactured products is an essential part of their conservation. The demoralized marketing conditions which have occurred from time to time during the past years, the so-called price wars, are beneficial neither to the industry nor its employees nor to the consumer. Your attention is invited to a consideration of the provisions of our anti-trust laws and to the question whether or not legislation may not be advisable under which reasonable trade agreements and such as are in the public interest might be authorized by properly constituted authority. Law-enforced competition, particularly in the production and distribution of the products of our natural resources, is apt to be harmful rather than beneficial to the public interest.

Gasoline Tax Frauds

Finally, in this connection, I direct your attention to the situation with respect to the so-called gasoline tax of three cents per gallon. I find that the law has been evaded and violated to an undeterminable but appalling extent. The amount of the tax added to the cost of gasoline is borne by the consumer though payable by the distributor, and on admitted returns of sales more than $700,000 is overdue in gasoline taxes. Some of these sums aggregating hundreds of thousands of dollars have been due since June 30, 1930. When it is borne in mind that by not returning the tax to the state the distributor is enabled to undersell his competitor who does pay the tax by three cents per gallon, it is obvious that the retention of the tax by the seller renders it a vehicle for price-cutting of the most vicious form, to wit, at the expense of the state. I am also led to believe that other frauds exist, such as the sale of gasoline within the state which is reported, however, as having been delivered for shipment without the state and therefore as nontaxable. Severer penalties should be provided for the violation of the law and its evasion more strictly guarded against. The quarterly period for paying over the tax should be shortened. The tax is now collected without cost to the state. It would be better, in my opinion, if the collection of the tax were paid for under a system which would ensure a better enforcement of the law.

Reclamation and Flood Control

I have inherited from previous administrations a tremendous and pressing problem in the reclamation and flood control projects in which the state of California is interested. It would be impossible at this time to review in detail the many ramifying aspects which are presented and, therefore, I shall advert only to the principal policies which shall govern my administration regarding them. The importance of the subject is readily apparent when it is understood that the Sacramento and San Joaquin drainage district, a state agency comprises 1,115,000 acres in the Sacramento and San Joaquin valleys, and that the California debris commission has estimated that the project completed will cost $51,000,000.

The above estimate grew out of the commission’s report of 1925, sometimes referred to as the “Grant Report,” and sometimes as the “Revised Report,” which was adopted by Congress and approved by President Coolidge, February 28th, 1928. This report has also been adopted by the state of California, and is the basis for the participation of the state government, and the landowners affected, with the federal government. It recommended that the annual appropriations from the federal government be increased from $500,000 to $1,000,000 per year, the limit set by the existing law, which recommendation was adopted by Congress in the enactment of the Curry bill in 1929, under which the federal government appropriated $1,000,000 as its yearly contribution, whereupon the state of California matched this amount by appropriating $1,000,000 for each of the 81st and 82nd fiscal years, the latter ending June 30th, 1931.

The basic understanding behind these appropriations was that the costs of the great works of flood control and reclamation should be borne one-third by the government of the United States, one-third by the State of California, and one-third by the landowners living within the defined area. The program for the fiscal year ending June 30th, 1932, so far as the federal government is concerned, already has been approved by the chief of engineers and is based upon the federal appropriation of $1,000,000 for work during that fiscal year. The obligation of the state of California to make equal appropriations with the federal government has been many times definitely stated and publicly recognized, and in order that the state of California shall do its full part I have caused to be inserted in the budget of my administration for the 83rd and 84th fiscal years an appropriation of $2,000,000 and I have no hesitation in stating as a definite policy that the state of California during my tenure of office will continue to go forward in step and in alignment with the government of the United States toward the completion of the tremendous works of improvement contemplated by the report of the California debris commission.

There is another problem involved in these policies which appeals to me as being of even greater importance and concern. I refer to the pressing plight of the landowners and farmers whose holdings are situated not only within the boundaries of the Sacramento and San Jaquin drainage district but also within the confines of separate and distinct reclamation and irrigation districts superimposed as it were upon the land of the greater district.

The homes, the holdings, and the very existence of these landowners are imperiled by the appalling underlying reclamation and irrigation tax burdens upon their lands. It is now a matter of common occurrence that banks in many cases have refused originally to grant, or, in other cases, to renew, mortgages upon these country lands because of the staggering liens from reclamation and irrigation taxes which would be anterior to the ordinary land mortgage. In many cases the ruin of a life’s work and the destruction and loss of all he possesses stare the landowner in the face.

The state should find some means of assisting these farmers and citizens. In the Sacramento and San Joaquin drainage district alone in November, 1930, as evidenced by assessments No. 2, No. 6 and No. 7, there was still outstanding against affected lands the large sum of nearly $7,000,000 in underlying liens. The unfortunate part of the situation is that in addition to this huge sum the lands involved are in turn again situated in smaller districts, and the lands have again been saddled with large underlying liens imposed for the purpose of creating and completing the local problems of reclamation and irrigation.

As I said before, this phase of the reclamation tax problem appeals to me most strongly, and I shall do everything in my power during the coming years of my administration to lessen and alleviate it. I hope that with careful study and intensive analysis some means will be found whereby the state itself can be of aid in refunding and refinancing the reclamation and irrigation liens and encumbrances. I pledge myself and my administration to use every means at our disposal not only to fulfill the obligations of this state in the completion of its great reclamation and drainage projects, but to aid and assist by every means possible the landowners and agriculturists who are so vitally threatened.

Schools

Our public school system is properly one of the main concerns of the state government. With respect both to physical equipment and teaching staff the public schools of California will stand comparison with those of any other state. We do not begrudge to our schools any amount of money that they may need for sustaining and advancing their high standards. But our educational budget now absorbs more than one-third of the total expenditures of the state. I am convinced that much expense could be avoided and, at the same time, a notable improvement in the results obtained if in the education of our children more attention were paid to fundamentals and less to non-essentials. All comparatively useless subjects should be eliminated from the curricula of the elementary and high schools. The oversupply of qualified teachers in the United States suggests that perhaps our teachers’ colleges do not need to expand as rapidly as their faculties and local supporters may desire them to do. It is no kindness to train young women at great expense to them and the state for teaching positions which they are not likely to find.

The teachers are an earnest and hardworked body of public servants. I recommend particularly to your consideration the enactment of a new or amended and improved teachers’ retirement salary act providing increased retirement salaries, but any act adopted should be actuarially sound.

Competent teachers should be protected in their positions by a just and reasonable tenure law. Teachers, moreover, are entitled to longer notice of dismissal than is provided in the present law. In any changes made to the tenure law, the first consideration should be the protection and benefit of the pupils, and, second, the security of the teachers in their positions.

Study should be made of the overlapping of services by various groups of educational institutions. This overlapping has been brought about by the growth of the junior colleges, the addition of a fourth year to the courses in the teachers’ colleges, and the expansion of the State University.

The liberal financial support of the public schools, junior colleges, state teachers colleges and universities, will always have my favorable consideration.

Agriculture

Agriculture is a method of living rather than a business, so the very first consideration must be given to the people living on our California farms, and to keep them there, their method of living must be made a paying business.

When a delegation of dirt farmers called upon me last month, several of its members spoke of the difficulties of holding their sons on the soil.

For the protection of our farmers we have built up a system of quarantine, inspection laws, pest and disease control and standardization practices. But we have neglected to strike a proper balance between production and marketing. The farmer has been taught to produce all too well; his real problem is the marketing of his surpluses at a profit.

Fortunately, within the department of agriculture there exists the machinery to provide the grower and the farmer with adequate market information and to protect him against those forces which profit by disorderly selling. I shall insist upon the use of this machinery to the utmost, for any government which does not give its people protection is not fulfilling its first duty, and I know of no better protection for the farmer than adequate tariff protection and complete market service and reports.

The budget for the support of the department of agriculture has crept within a few years from barely over $1,000,000 until it now calls for over $4,000,000. What has been accomplished by this expenditure? Our farmers are earning less for their labor and investment than ever before in the history of agriculture. Perhaps the department needs all of the money that it has requested, but surely a larger proportion should be spent that more people may eat of the bounty of our rich soil and that our people who cultivate it should have some reward for their labor.

Certain economical and mechanical readjustments have made tremendous changes in agriculture, and equally radical changes in the dietetic habits and fashions have tended to cause a fluctuating demand for soil products.

Particularly in California we produce what might be called luxury crops seeking distant markets and the economic condition of the country has a tremendous effect upon the return on these commodities.

California, like all other states, has undoubtedly suffered from the most serious change witnessed by agriculture in the last ten years, when, so far as foodstuffs are concerned, we have ceased to be primarily an exporting nation. Instead we are now importing an enormous tonnage of soil products in excess of our total exports of raw and manufactured agricultural commodities.

So, our real interest lies in having the primary right of our farmers to enjoy our rich home market, infinitely richer than that of any other or all other countries combined. This market should be thoroughly protected for the benefit of our growers.

Quarantine laws should be enforced strictly, for such enforcement is the method of protecting more than a billion dollars invested in the orchards, vineyards, gardens and livestock of this state. Quarantine should be enforced adequately but justly. Since it is a two-edged sword, we should be extremely careful that our quarantine laws are just in principle and so intelligently enforced that they will not react against us.

Since 1920, in spite of the activities of innumerable agencies seeking to better the condition of the farmer, his financial status has steadily become worse throughout the state and nation.

Upon the success of our agriculture depends the welfare of our labor and the prosperity of nearly every California industry and nearly every person within our state. The farm problem must be solved and solved promptly. To that purpose I shall put my shoulder to the wheel.

Labor

My sympathy with the just aspirations of those who toil with their hands has been demonstrated in my private business and my public career. California has a liberal system of laws for the protection of labor and the amelioration of the condition of the workers. I recognize, however, that the emancipation of labor from the thralldom of the early industrial age is a progressive movement and has not been completed. Labor is entitled to its fair share of the benefits brought by machinery, improved methods of distribution, and increasing national wealth and I intend to assist each prudent, forward step in that direction. But this disposition does not imply any inclination toward that small and irresponsible group of agitators who are hostile to the institution of private property and, if permitted, would destroy in mad experiments all the progress that has been made by organized labor in its long and winning fight for working men and women.

Business

You will not find me unfriendly to legitimate business, large or small. The utility and other corporations of California, owned, as they are, by hundreds of thousands of our fellow citizens, have done much to make California a great manufacturing state and to develop that variety of industries which contribute to the wealth and prosperity of every section. Business, in corporate form, its the main contributor to the financial support of the state government. True, the corporation’s taxes are actually paid by the ratepayers of the utilities, the passengers on the railroads, the consumers of articles that have been shipped by rail or manufactured or sold by corporations, but that fact is additional evidence of the truth that the welfare of business is closely involved with the welfare of all the population. These corporations are the great employers of labor, the great builders, the great developers of our natural resources, under our efficient system of regulation. My administration is pledged to do all that the state may fairly and rightly do to aid legitimate business. On the other hand, I shall expect business to co-operate with my administration for the common good, even though such co-operation may entail at times some sacrifice.

Commerce

I thought of no better authority to confer with on the very important subject of “Commerce” than Captain Robert Dollar, dean of the shipping world and he has written me his views which I transmit to you in a copy of his letter to me.

It is truly said that commerce moves the world, and this statement of Captain Robert Dollar encourages us in our justified optimism.

Regulation of Public Utilities

Effective regulation of public utilities has been one of the best and most outstanding achievements of the progressive movement in California. Its benefits have fallen alike upon the public and the companies. Formerly, the great corporations were the masters of the state. Regulation has made the utility corporations public servants entitled to public respect and assistance. If we are to preserve the benefits of regulation we must see to it that regulation is administered by officials friendly to the idea and spirit of regulation. The utilities as well as all other parties are entitled to just treatment from regulating bodies.

Mining

May I confess that, while I have never engaged in mining, that earliest and most picturesque of California industries has always had a strong appeal to my imagination. One of my urgent ambitions as governor will be to accomplish something in the way of stimulating and reviving that languishing industry. I would like to see the entire mother lode and all the mining regions humming with activity. Legislation, of course, cannot put gold into the ground. But I shall be responsive to all sound suggestions for the benefit of the mining industry and the mountain counties.

The gold in California’s stream beds and mountains was responsible for her birth both economically and politically as a member of the family of states. California’s gold was an important factor in sustaining the federal finances and credit during the stress of the Civil War in the ‘60’s; and in spite of recession of annual yield in recent years, this commonwealth is still one of the leading states in production of the yellow metal. The decreased production of new gold is due to nation-wide and world-wide economic conditions over which the gold miner himself has no control; and because the price of his product is fixed by governmental action as the basis of our (and other nations’) monetary system, the gold miner is entitled to special consideration at the hands of our law-making bodies both of State and nation, to the end that whatever statutory or taxation burdens are now hampering the flow of new gold from out of the ground may be either eliminated entirely or at least ameliorated to the maximum degree. California should be in the forefront of the movement to help. We need more new gold. In the United States today we are consuming in the arts and industries more than twice as much gold as we are taking out of our mines each year. Unless something is done to help, it is conceivable that the foundation of our financial system will sooner or later be affected.

But gold is not California’s only bid for fame and attention. This state is prolific in available minerals of commercial value, and the diversity of her products is not approached by any other commonwealth. Mining in California marches alongside of and goes hand-in hand with agriculture, as one of the great basic industries upon which our people depend. Our wealth in structural and other industrial mineral raw materials is wide-spread throughout California and in great variety, and if properly fostered and adequately supported by governmental promotion, will continue to grow in importance and will continue to support an ever-increasing industrial population in this state.

STATE HIGHWAY SYSTEM

The economical distribution of our products from farm, factory and mine to market, is a problem of general interest. The main arteries and laterals of our great highway system tap the places where our products are produced.

The increase in tourist travel throughout California is an example of the great service our highway system, as developed to the present date, has rendered. The motoring public has assumed the obligation of constructing and maintaining the state system of highways, and also of assisting our county systems with one third of the total gas tax revenue and one-half of the motor vehicle fees. California’s highway system, as now established, consists of a total of 6590 miles of which there are 4287 miles of primary roads and 2303 miles of secondary roads.

For the maintenance and expansion of our highway system, the state highways receive from the motor vehicle revenues, fuel tax, and federal aid an allotment of approximately thirty-one and a half millions a year, and the counties also receive from the motor vehicle revenues and fuel tax about one-half that amount per year. The state highway fund is expended under the terms of the Breed act. I will not occupy you now with a statement of details showing the allocation and application of that fund.

Federal aid which has been available by act of congress since 1921 is for projects on the federal aid system, only, the federal aid system being state highways selected by the federal government in 1921 as the federal aid system. This amounts to approximately four and a quarter millions per year under the existing authorizations.

I believe that we should continue our program of building and improving the state highway system and that the development should be carried out on a balanced program, both in the sparsely settled mountain and desert areas as well as in the rich valley and urban regions. It is essential to the proper development of our state that a fair distribution of mileage commensurate with the funds available for this purpose be made. The development of our system either north or south is a benefit to the entire state. I am in accord with the principles laid down by the last legislature in considering the addition of new highways to the state highway system, as this recognizes the lack of balance between the mileage of secondary roads in the south and in the north.

I expect to ask our highway authorities to cooperate in the construction of roads inside incorporated cities that are logically direct connections and a part of our state system to the extent possible with the funds available under existing law, without jeopardizing the carrying on of the state highway program. Necessarily, at the start, this class of work will be limited to points where the conditions are most acute with respect to passing traffic in and out of towns and cities, and where communities are least able to bear the burden. Where the highway system does damage to the smaller towns in passing through them, justice demands our aid. Such aid is compulsory in towns under populations of 2500 and optional above that.

The highway work should be expanded as rapidly as funds can be provided, in order that during this temporary period of unemployment the greatest number of our citizens can be put to constructive work as soon as possible. Approximately eighty-five per cent of each dollar expended on highways goes directly or indirectly to labor. It is important that the legislature proceed to make the funds available at the earliest possible date for carrying out the program of highway construction.

Transbay Bridge

Ever since the earliest days, traffic between San Francisco and Oakland has been by ferries; at all times this has created a serious traffic problem. Industrial science and improved construction methods now afford us a solution of this traffic problem by building a bridge connecting the counties of San Francisco and Alameda.

The history of this bridge begins some ten years and more ago, when private capital sought franchises from the City and County of San Francisco, under the old Toll Bridge Act, for permission to build a bridge between San Francisco and Alameda counties.

There was a rush of applicants for this permission and after years of hearings before the supervisors, the city appropriated a sum of money and appointed an engineering board consisting of the City Engineer of San Francisco, John Galloway and Robert Ridgway, who in an exhaustive report found that it was feasible to build such a bridge.

They approved several tentative sites, numbering them in the order of their approval, but stated that they could not definitely approve any site owing to the lack of foundation data.

In 1928 it became apparent that the state should assume the obligation of building this tremendous undertaking, and to this end the legislature in the 1929 session passed the necessary legislation placing this projected bridge under state control.

The war department had continuously refused permission to build such a structure north of Hunter’s Point, but during the early part of last year, President Hoover and Governor Young appointed a joint bridge commission consisting of navy, army and civilian membership, and this commission in a signed report unanimously approved the feasibility of such a structure, conserving both the interest of navigation and national defense.

In 1930, the Hoover-Young bridge commission made its report to the President and the Governor. This report cleared the way for the actual construction of the bridge. Under the auspices of the state highway engineer and after exhaustive borings were made, plans and estimates for a double deck bridge were submitted to the commission, accommodating motor vehicle traffic, and interurban cars. The estimated cost was seventy-five million dollars, which money was to be found by the sale of revenue bonds. The report showed that these bonds could be retired and interest paid on them by anticipated traffic, as shown by traffic surveys.

All toll bridges in the state should, I believe, be freed from tolls as soon as economically possible and be made a part of the highway system. The highway commission is charged with the determination of the location and routing of roads, and in my judgment should stand squarely behind this movement to insure the completion of this bridge, serving one-quarter of the state’s population, resident to the San Francisco Bay area.

This bridge will be the most stupendous undertaking of its kind in the world. Under proper financing and safe and economical construction, and under the able direction of the state authorities, in cooperation with the world’s best engineers, it will prove a boon to the state of California, and fill a long felt want of the great metropolitan area of San Francisco Bay.

The necessary additional legislative measures are now under way. There is pending a case before the Supreme Court to determine the validity of the bonds and bill to be presented to Congress and to the state legislature in order to facilitate the early starting of the work, with the hope that it will commence before the close of this year.

It is extremely important, in my opinion, that these two great communities be afforded modern methods of communication with each other, and this at the earliest possible moment.

Banking

The banks of California, both National and State, are in an exceptionally sound and liquid condition. They have never before been in such a strong position to care for the legitimate requirements of improving business.

The exceptional diversity of California’s economic activities contributes much to the soundness of banking practice by eliminating the hazard of concentrations prevalent in less favored commonwealths. Moreover, the Bank Act of California has long been pointed to by the rest of the country as a model of banking legislation. Its provisions enforce the maximum of safety and liquidity in bank operation, and call for a high order of supervision by the State Superintendent of Banks.

The position of our banks may be briefly stated, in round figures, as follows: their resources mount to the astonishing total of $4,200,000,000, with deposits of $3,280,000,000 and capital surplus and undivided profits of $347,000,000. Cash resources, cash on hand and due from banks, are $710,000,000. United States Government bonds and other securities held, total roundly $1,000,000,000, while bank borrowings are at the lowest level since 1922.

It is gratifying to know that California is third among the states of the Union in its per capita bank resources, the figure being $735. Our per capita savings are $365, again the third highest among the states; our per capita commercial figure is $213, in which we rank as the sixth state. New York and Massachusetts, with their vast foreign trade, naturally lead California in all of these figures.

Faith in California is justified by these gratifying figures. I firmly believe that business is on the eve of an up-swing.

With our banks so amply able to support the industries of our State, with our great wealth of natural resources, and the highly progressive spirit of our people, I look forward to an era of achievement that will set a new standard for California and the Nation.

Building and Loan Associations

A problem of definite importance to my administration is the establishment of the state’s building and loan business, as a whole, on a plane assuring its highest service in that segment of our California financial structure for which building and loan is designed and of which it is capable. A recent startling abuse of public confidence and trust on the part of one individual who played to his own advantage upon a weakness both in the law and the administration of that law resulted in a severe blow to those personally victimized and likewise to creditable building and loan interests.

Unfortunately, no phase of human endeavor is proof against isolated instances of dishonesty. The perverse activity of one individual does not impeach a financial business which with its half billion dollar structure paid out in interest during 1930 more than twenty-five million dollars to its six hundred thousand investing customers. The building and loan associations of this state are today lending their resources to the financing or construction of one hundred and forty thousand California homes and other improved properties. Many of these associations have been and are performing their trust efficiently and faithfully.

The building and loan association occupies an important position in the present-day economic plan. It is imperative that the sound company of this type have the confidence of the community. Adequate state supervision is essential for the protection of the public and the welfare of the associations themselves. Therefore, the field of their operations should be definitely defined. Efficient governmental regulation should be provided.

These organizations came into being through a demand for this kind of financing, originated for the mutual benefit of their members. Their scope of activities in the financial field has broadened decidedly through progressive development and healthy competition for business. State regulation has not kept pace with these developments. The lax enforcement of the present building and loan act has proved an actual menace to the public and to the sound, properly managed associations.

The remedy for this unhealthy financial situation lies chiefly in proper governmental regulation. Adequate reserves must be required of all such associations, and the state supervision must insure that such reserves be maintained to the proper standard. State examinations must be sufficient and thorough, and should be made frequently enough to be effective.

Many building and loan companies in effect accept savings deposits. National and State legislative bodies have enacted rigid and comprehensive laws regulating the conduct of organizations authorized to accept deposits. The bank act of California provides certain standards for companies organized under the state law to do a savings bank business. Among the most important of these are the requirements affecting the character of the reserves such savings banks must maintain.

It would appear logical, therefore, that any other organization which in effect accepts savings deposits and which is subject to state supervision should have and maintain adequate reserves. The mere fact that the state has deemed it essential to regulate these various kinds of financial institutions leads the public to believe there is but one standard required by governmental agencies. The sound, well-managed and financially strong building and loan associations have been handicapped by inadequate and inefficient supervision. They will welcome such steps as will establish a uniform standard of efficient state supervision.

The present statutes governing building and loan associations were adopted years ago and the business has far outgrown them. In 1907 our state banks were confronted by a similar condition, due to the fact that state banking laws were inadequate and obsolescent. A new bank act was thereupon enacted which is outstanding for careful regulation and under which California state banks have prospered as never before.

Building and loan associations require a similar codification of the laws by which they are to be governed. It is my aim to urge laws which will not unfairly restrict building and loan associations from the progress which many of them have enjoyed through their high standard of self-supervision but which will place the business in its entirety on a thoroughly sound basis worthy of complete public confidence.

Faith in California

By reason of world-wide conditions, the year 1930 was a period of economic depression which naturally had its echoes in California. All of us have suffered from it. And, as in good times our optimism goes beyond all bounds, so in bad times our pessimism becomes excessive and reacts upon itself to make the times harder and the outlook gloomier than the facts warrant. As conditions were never so bright as we thought they were in 1928, so they were never so dark as we thought they were in that winter of our discontent, the last few months of 1930.

On each of us depends the rapidity and extent of our recovery. Our troubles are past if we will open our eyes and see that they are past.

Let us face 1931 with heads up and shoulders back, looking forward with serene confidence in the destiny of our State, and in the security of her industrial and financial institutions. Let us have faith in California! That faith will make us what we wish to be. That faith will turn despair into hope, distress into comfort, failure into success. Let us display, at the opening of this new year, the courage and confidence which inspired the pioneers who peopled our loved state, which have carried us through many periods of stress, which enabled San Francisco in 1906 to spring from the ashes and rebuild itself greater than before, which animated the men who guided the rise of Los Angeles from a small town to a great metropolis in a few decades; the courage and confidence, in short, which have characterized Californians from the earliest days and without which there is little in life worth having. We can shape our own future. Let us do so. And let us begin today by resolving to open a new administration with a revived and strengthened faith in California.

Let me illustrate by this striking parallelism the wealth of the American people and the resiliency with which they are capable of recovering from heavy losses.

Very recently I went to some pains to ascertain with much detail the cost of the war to the American people and the amount of losses incurred during the past fifteen months in the shrinkage of stock market values.

In round figures, the war, directly and indirectly, cost the United States fifty-one and a half billion dollars exclusive of loans to the allies. You will recall that, following the war, came a period of severe losses and depression from which the country made a rapid and brilliant recovery, culminating in a long period of prosperity, rising values, and universal optimism.

Then, in the latter part of 1929, came the natural reaction which resulted in a sudden decline of values and consequent development of a spirit of pessimism. It is computed from official sources that the shrinkage in market values of all listed securities amounted to approximately thirty-five billion dollars, and other shrinkages, caused by this loss, totaled an estimated sum of ten billion dollars additional, making total loss from the peak to the bottom of stock values during the period of the crash of forty-five billion dollars.

Is it not logical, indeed, is it not inevitable that the nation which could so rapidly recover from the huge war losses will recover with equal rapidity from the losses sustained during the past fifteen months?

All California needs right now to bring about that recovery is a spirit of confidence and quick response to courageous leadership; the state of mind which says, “I will”, instead of “I can not”. It is my wish to apply such leadership within my province.

I wish to imbue the people of California with my own faith in California. I wish to begin my administration on a note of hope and confidence. Be prepared by holding such hope and confidence to follow my leadership into the bright days which I see just ahead.

Necessity for a Homogenous Administration

With the fundamental ideas and the plans of legislation and administration which I have recounted, I am brought to one consideration of a very practical character upon which I shall speak for a moment.

When a Governor enters upon his task he finds many head places of departments through which he would wish to work out his plans and policies held by those who have not hitherto and perhaps are not now and may not in the future be in sympathy with him, and therefore while the nominal administration is that of the Governor it is in measurable part not his administration but the carry over of different and earlier plans and policies. It should be possible for the Governor at the very beginning to man all of the departments with those who entertain his views of administration and are prepared unreservedly to co-operate with him in their promotion.

I do not mean by this suggestion to invoke the outworn idea that to the victor belongs the spoils, and I do not refer to public officers not in dominant positions in the outstanding departments of the State administration. Those, however, who do hold dominant positions in outstanding departments should come in with and go out with the governor.

This idea is not new and its suggestion by me is not novel.

Immediately upon the accession to office of a new President, the resignations of all the diplomatic representatives of the government are in his hands so that he may not be compelled to carry on his foreign policies though diplomatic representatives originating in past administrations and perhaps holding views not entirely in harmony with the views of the new President.

The same idea underlies the abolition of the short term of Congress which immediately follows the election of a new Congress, the work of which is delayed for more than a year beyond the election.

I shall in obedience to the views just expressed recommend a change in statutory law to bring in the whole of an administration at the one time and not a portion only at the inauguration of the Governor and other parts from time to time, running on perhaps to the end of his term.

I have now in an imperfect way sought to express the sentiments and plans which I entertain in respect of important matters of government and the ideas underlying them; and again I ask the co-operation of al my fellow citizens in bringing to accomplishment the views which I have expressed and the plans and purposes which I have outlined.

I dedicate to the advancement of these ideas and to the accomplishment of these objectives all my faculties, all my energies, and all my experience; and God willing, I shall not fail.