The Indiana plan: A study of state administrative control over local finance

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THE INDIANA PLAN—A STUDY OF STATE ADMINISTRATIVE CONTROL / OVER LOCAL FINANCE

By Reuben A rthur Zubrow, M# A* &

lfWhoever hopes a f a u l t le s s ta x to se e , hopes what n e 'e r -was, or i s , o r e 'e r s h a ll bei* —M cCulloch's a d a p ta tio n of Pope#

Subm itted to th e F acu lty o f the Graduate School in p a r t i a l fu lf illm e n t o f th e requirem ents f o r th e degree of Doctor of Philosophy in th e Department of Economics Ind ian a U n iv ersity June, 1950

ProQuest Number: 10295220

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ACKNOWLEDGMENT

The w r i t e r tak es p le a su re in acknowledging h is o b lig a tio n s to th e many f r ie n d s , te a c h e rs and co lleag u es a t both Indiana U n iv e rsity and th e U n iv e rs ity of Colorado whose cooperation and p a tie n c e have made t h i s study p o ssib le*

I t i s alm ost im possible

to catalogue th e v a rie d n a tu re of t h e i r c o n trib u tio n s*

Moreover,

th e w r i t e r ta k e s t h is o p p o rtu n ity to thank th e Indiana S ta te Board o f Tax Commissioners, p a r t i c u l a r l y Chairman N* W* H o lla r and S e c re ta ry A. B* W ilson, f o r p e rm ittin g th e use o f th e o f f i ­ c i a l records f i l e d a t th e S ta te House in In d ia n a p o lis and f o r g ra n tin g th e w r i t e r many p erso n al in te rv ie w s during th e p erio d th e o r ig in a l d ata used f o r th e b a sis of t h i s study were c o l­ lected* In common w ith th e o th e rs who c o n s titu te d th e immediate ”post-w ar crop” of graduate stu d e n ts in Economics a t Indiana U n iv e rs ity , th e w r ite r b e n e fite d from th e in v alu ab le counsel and frie n d s h ip c o n tin u o u sly and g ra c io u sly provided by P ro fe ss o r C a rro ll L* Christenson*

To P ro fe ss o r Louis S h ere, D ire c to r of

Tax R esearch, a la rg e debt is due f o r h is f r ie n d ly i n t e r e s t and c o o p eratio n , p a tie n t s u p e rv isio n , and extrem ely v alu a b le guidance and c r itic is m a t each sta g e in th e p re p a ra tio n of t h i s th e s is *

TABLE OF CONTENTS

CHAPTER I II

PAGE In tro d u c tio n

X

The Philosophy o f th e Indiana Plan

11

The O rigin of th e Indiana P lan

23

The Development of th e Indiana P la n , 1919-1948

40

The O perations of th e County Boards o f Tax Adjustment

88

The O perations o f th e S ta te Tax Board

147

Conclusions

204

A

The Sample

219

B

D etailed Annual Data f o r S ta te and County Tax Boards, 1943-1948

231

TJ* S* Bureau o f th e Census Data

260

III IV V VI VII

APPENDIX

C

BIBLIOGRAPHY

267

LIST OF TABLES

PAGE

TABLE I II III

Number and Amount of Budgeted Tax L evies Reduced A nnually by S ta te Tax Board, Years 1921-1931

47

Reductions Made by S ta te Tax Board R elated to O rig in a lly Budgeted Tax L ev ies, Years 1921-1931

51

A d d itio n a l A p p ro p ria tio n s, In clu d in g Bond Is s u e s , Approved by S ta te Tax ^oard, Years 1932-1937

61

IV Aggregate Reductions in Budgeted Tax L evies Made by S ta te Tax Board f o r S e lec te d Years

63

V Annual P ro p e rty Tax L ev ies, A ssessm ents, and S ta te ­ wide Average Tax R ates, Years 1931-1937

65

VI Annual P ro p erty Tax L ev ies, A ssessm ents, and S ta te ­ wide Average Tax R ates, Years 1938-1945

68

VII V III

S tru c tu re o f Ind ian a Taxing J u r i s d i c ti o n s , C la s si­ fie d by Type and S iz e , Year 1940

70

S ta te Tax Board Hearings on Local Budgets, C la s s i­ f ie d by Type o f J u r is d ic tio n , Years 1939-1940

72

IX A d d itio n al A p p ro p riatio n s, In clu d in g Bond Is s u e s , Approved by S ta te Tax Board, Years 1938-1947

83

X Aggregate Reductions in Budgeted Tax L evies Made by S ta te Tax Board, Years 1939-1942

85

XI

XII X III XIV

Number o f Local Taxing J u r is d ic tio n s in Sample Compared w ith T o tal f o r In d ia n a , C la s s ifie d by Type and Siz e o f Government Unit

90

D is trib u tio n o f Local U nits of Government, C la s s i­ f ie d by Size o f J u r i s d i c ti o n , Years 1943-1948

92

Number of Local Budgets and S p e c ific FundsReviewed 94 by County and S ta te Tax Boards, Years 1943-1948 Number of Local BU(jgets S p e c ific Funds Reduced by County Tax Boards, Years 1943-1948

95

XV Tax Levy Reductions Made A nnually by County boards o f Tax A djustm ent, Years 1943-1948

97

XVI

Number of Budgetary *unds Reviewed and A djusted by County Tax Boards, C la s s ifie d by Type and Size of J u r is d ic tio n , Years 1943-1948

100

TABLE

XVII

XVIII

XIX

PAGE

Number o f B udgetary Funds A d ju sted by County Tax B oards, Expressed as P e rc e n tag e s o f Funds Reviewed, C la s s if ie d by Type and S iz e o f J u r i s d i c t i o n , Years 1943-1948

102

Amount o f Budgeted Tax L ev ies Reviewed and A djusted by County Tax B oards, C la s s if ie d by Type and S iz e o f J u r i s d i c t i o n , Years 1943-1948

106

County Tax Board R eductions E xpressed as P e rce n tag e s o f O rig in a lly Budgeted Tax L evies Reviewed, C la s s i­ f i e d by Type and S ize o f J u r i s d i c t i o n , Years 19431948

109

XX CountyTax Board R eductions E xpressed as P e rcen tag es o f O rig in a lly Budgeted Tax L evies A d ju ste d , C la s s i­ f ie d by Type and S ize o f J u r i s d i c t i o n , Years 19431948 XU

XXII XXIII

111

Number o f BudgetaryFunds Reviewed and A d ju sted by Cbounty Tax B oards, C la s s if ie d by ^ype o f Funds, Years 1943-1948

114

Number o f P u b lic W elfare Funds Reviewed and A djusted A nnually by County Tax B oards, Years 1943-1948

116

Amount o f Budgeted Tax L evies Reviewed and A djusted by County Tax B oards, C la s s if ie d by Type o f Fund, Years 1943-1948

118

XXIV Amount o f P u b lic W elfare ^'unds Reviewed and A djusted by County Tax B oards, Years 1943-1948

120

XXV Number o f BudgetaryFunds Reduced by County Tax Boards C la s s if ie d byBStated R easons, Years 1943-1948 139 XXVI

Amount o f Budgeted Tax L evies A djusted by County Tax B oards, C la s s if ie d by S ta te d R easons, Years 1943-1948 143

XXVIII Number and Amount o f B udgetary Funds Reduced A nnually by S ta te Tax Board, Years 1943-1948 148 XXVIII

Number o f B udgetary Funds Reviewed and A djusted by S ta te Tax Board, Years 1943-1948

151

XXIX Number o f Budgetary Funds A djusted by S ta te Tax Board E xpressed as P e rce n tag e s o f Funds Reviewed 152

TABLE

PAGE

XXX Amount o f Budgeted Tax L ev ies Reviewed and A djusted by S ta te Tax B oard, C la s s if ie d by Type and S ize o f J u r i s d i c t i o n , Years 1943-1948 XXXI

XXXII

XXXIII

154

S ta te Tax Board R eductions E xpressed a s P e rc e n ta g e s o f O r ig in a lly Budgeted Tax L evies Reviewed, C la s s i­ f i e d by Type and S ize o f J u r i s d i c t i o n , Years 19431948

157

S ta te Tax Board R eductions E xpressed a s P e rc e n ta g e s o f O rig in a lly Budgeted Tax L evies A d ju ste d , C la s s i­ f i e d by Type and S iz e o f J u r i s d i c t i o n , Years 19431948

159

Number o f Budgetary Funds Reduced by S ta te Tax Board C la s s if ie d by Type o f *und, Years 1943-1948

161

XXXIV Amount o f Budgeted Tax L evies Reduced by S ta te Tax Board, C la s s if ie d by Type o f Fund, Years 1943-1948 XXXV Number o f Budgetary ^unds Reduced by S ta te Tax Board C la s s if ie d by S ta te d Reason, Years 1943-1948

163 167

Amount of Budgeted Tax L evies Reduced by S ta te Tax Board, C la s s if ie d by S ta te d Reason, Years 1943-1948

173

Number o f Budgets and Funds Reduced and Reviewed by S ta te Tax Board upon Taxpayer A ppeals, Years 19431948

180

Amount o f Budgeted Tax L evies A nnually Reduced by S ta te Tax Board upon Taxpayer A ppeals, Years 19431948

181

XXXIX Number o f Budgets and Funds Reviewed and In c re a se d by S ta te Tax Board upon Local Government A ppeals, Years 1943-1948

183

XXXVI XXXVII

XXXVIII

XL Amount o f Budgeted Tax L evies A nnually In c re a se d by S ta te Tax Board upon Local Government A ppeals, Years 1943-1948 XXI

185

Combined Number and Net Amount o f Budgeted Tax L evies Reduced by County and S ta te Tax B oards, C la s s if ie d 188 byx'ype o f J u r i s d i c t i o n , Years 1943-1948

TABLE

PAGE

XLII

Combined Number and Net Amount o f Budgeted Tax L evies Reduced By County and S ta te Tax B oards, C la s s if ie d by S iz e o f J u r i s d i c t i o n , Years 1943-1948 191

XU I I

Combined Number and Net ^mount o f Budgeted Tax L evies Reduced by County and S ta te Tax B oards, C la s s if ie d by Type o f Fund, Years 1943-1948 194

x u v A d d itio n a l A p p ro p ria tio n s Approved Compared w ith th e Combined Net R eductions Made in Local Budgets by th e County and S ta te Tax B oards, C la s s if ie d by Type o f J u r i s d i c t i o n , Years 1943-1948

199

XLV A d d itio n a l A p p ro p ria tio n s Approved Compared w ith th e Combined Net R eductions Made i n Local Budgets by the County and S ta te Tax B oards, C la s s if ie d by S iz e o f J u r i s d i c t i o n , Years 1943-1948

201

CHAPTER I

INTRODUCTION

P u b lic fin a n c e was r e c e n tly c h a ra c te riz e d as "a f i e l d o f b a t t l e , both f o r opposing i n t e r e s t groups and opposing v ie w p o in ts ... one must begin by conceding t h a t most o f th e f i e l d i s c o n tro 1 v e r s ia l.* 1 T his a p p ra is a l i s n e it h e r s t a r t l i n g n o r new. For decades

/ f n

th e same c o n d itio n s have a p p lie d to th e g e n eral f i e l d o f economic th e o r y .

This la c k o f agreem ent among p ro fe s s io n a l s c h o la rs is gener­

a l l y a ttr ib u te d *

( l ) t o th e complex n a tu re o f th e s o c ia l phenomena

stu d ie d —a m u ltitu d e of everchanging v a ria b le s w hich a re n o t r e a d ily s u s c e p tib le to p re c is e measurement, c o n tro lle d e x p e rim e n ta tio n , or rig o ro u s a n a l y s i s ; and (8) to th e f a c t t h a t s o c ia l s c i e n t i s t s cannot p o s s ib ly e lim in a te p h ilo s o p h ic a l b ia s e s from t h e i r s t u d i e s . A s i g n i f ic a n t d if f e r e n c e , n e v e rth e le s s , may be observed between th e s i t u a t i o n s e x is tin g in p u b lic fin a n c e and g e n e ra l economic th e o ry . In th e case o f th e l a t t e r , th e p resence o f c o n f lic tin g th e o r ie s seem ingly has no a p p re c ia b le im pact upon th e decision-m aking o f th e m u ltitu d e o f a to m is tic economic organism s—consum ers, b u sin e ss firm s , reso u rce owners—whose day to day decision-m aking w ith in th e in ­ s t i t u t i o n a l framework determ ines th e n a tu re o f t h e i r o p e ra tio n s in 1.

H arold M. G roves, Trouble Spots in T axation, P rin c e to n U n iv e rs ity P r e s s , P rin c e to n , New J e rs e y , 1948, p . 4 .

2

th e p r iv a te s e c to r of th e economy*

1

In c o n tr a s t , in p u b lic fin a n c e and th o se o th e r a re a s o f economics where p o lic y d e te rm in a tio n concerning th e p u b lic s e c to r o f th e economy cannot r e l y s o le ly upon avowed s e l f - i n t e r e s t guided by an auto m atic m arket mechanism, some o th e r c r i t e r i a must provide th e r a tio n a le f o r th e d ecision-m aking o f th e p o lic y makers— l e g i s ­ l a t o r s , p u b lic a d m in is tr a to r s , c i v i l se rv a n ts*

Loose and fo rm less

g e n e r a l i t ie s upon which f,most rea so n a b le men m ight g e t to g e th e r * •• such as th e p re s e rv a tio n o f a dem ocratic way o f l i f e and a r i s i n g 2 n a tio n a l income" do n o t p ro v id e a s e t o f w orking ru le s * Never­ t h e l e s s , governments must f u n c tio n , s e rv ic e s be perform ed, expend­ i t u r e s a p p ro p ria te d and revenues r a is e d —a l l w ith o u t th e guidance o f an a u to m a tic , s d l f - c o r r e c t i n g mechanism*

The a p p a re n t need o f

a th e o ry o f ta x a tio n a n te d a te s th e "W ealth o f N a tio n s"; b u t t h a t a th e o ry o f e x p e n d itu re s i s e q u a lly e s s e n t i a l has n o t always been 1*

I t i s q u e stio n a b le i f th e re c e n t c o n tro v e rsy re g a rd in g th e shape o f th e t h e o r e t i c a l c o s t curves has in flu e n c e d th e in p u to u tp u t d e c isio n s o f a s in g le e n te r p r is e r * Perhaps i t i s n o t rem iss to n o te t h a t in a manner somewhat analagous to Mr* Dooley*s famous dictum t h a t th e "Supreme C ourt fo llo w s th e e le c tio n r e tu r n s " , th e developments in economic th e o ry have follow ed th e m ajor changes in economic o rg a n iz a tio n , tech n o lo g y and s o c ia l r e la tio n s * When th e n e o - c la s s ic a l p a r t i a l e q u ilib riu m a n a ly s is no lo n g er s u f f ic e s as a w holly te n a b le e x p la n a tio n o f a "tem porary f r i c t i o n a l m aladjustm ent" which co n tin u es f o r a decade as th e "G reat D epression" a "Keynesian R evolution" in economic th in k in g i s b o ra ,

2*

Groves, op* c i t * , p* 4*

3

re c o g n iz e d , e x p l i c i t l y n o r im p lic itly * 1

I n any c a s e , w hether a

te n a b le th e o ry , i f any, se rv e s as a b a s i s , th e p a r t i c u l a r f i s c a l p r e d ile c tio n s and i n t e r e s t s o f th e p a rty in power—th e d e c is io n makers o f th e p u b lic s e c to r —a re m a n ifeste d in a c o n c re te and p o s it i v e p u b lic fin a n c e program* S tr u c tu r a l changes in p o p u la tio n , te c h n o lo g y , u rb a n iz a tio n and l iv in g s ta n d a rd s , o c c u rrin g w ith in a r e l a t i v e l y unchanging p o l i t i c a l framework composed o f a v e r i t a b l e ju n g le o f f u n c tio n a lly and g e o g ra p h ic a lly o v e rla p p in g p o l i t i c a l j u r i s d i c t i o n s , have caused th e emphasis o f p u b lic fin a n c e a n a ly s is to s h i f t from one u n reso lv ed is s u e to a n o th e r—and on each su c c e ssiv e one th e wlin e s o f b a t t l e a re drawn anew*

P r i o r to th e tw e n tie th c e n tu ry th e f u n c tio n s , ex­

p e n d itu re s and revenues o f a l l le v e ls o f government were s u f f i ­ c ie n t l y sm a ll, r e l a t i v e t o n a tio n a l income, to w a rra n t only s l i g h t a t t e n t i o n to th e problem o f in te rg o v ern m en ta l f i s c a l r e la tio n s * Governments were g e n e ra lly f i s c a l l y independent o f each o th e r , sin c e th e p re v a ilin g b e l i e f was t h a t th e u n it o f government a d m in iste rin g a fu n c tio n sh o u ld , in th e i n t e r e s t o f e f f ic ie n c y and economy, be s o le ly re s p o n s ib le f o r su p p o rtin g t h a t fu n ctio n *

But th e G reat

1* Cf* Gerhard Colm, “Theory o f P u b lic E x p e n d itu re s", Annals o f th e American Academy o f P o l i t i c a l and S o c ia l S c ie n c e , Ja n u ary , 1936, pp* 1-11* A lso , P aul J* S tr a y e r , ^P u b lic E xpenditure P o lic y " , The American Economic Review, March, 1949, pp* 383-404. 2* Perhaps i t i s n o t an e x a g g e ra tio n t h a t th e p ro f e s s io n a l economic th in k in g o f our day (and o f y e ste rd a y and tomorrow) can m a n ifest i t s e l f only by w hatever in flu e n c e i t e x e rts on th e d e term in atio n o f p o lic y f o r th e p u b lic s e c to r o f th e economy, and to th e de­ gree i t in flu e n c e s th e i n s t i t u t i o n a l framework w ith in w hich th e p r iv a te s e c to r o p erates* “P o l i t i c a l Economy" may be th e more a p p ro p ria te term f o r m eaningful economic a n a ly s is *

4

D epression made i t p a te n tly c l e a r t h a t lo c a l governm ent, and in many in s ta n o e s s t a t e governm ent, had i n s u f f i c i e n t re so u rc e s to m eet th e burden o f fin a n c in g th e in c re a s e d number o f fu n c tio n s r e ­ q u ire d by th e p u b lic .

Local government dependence upon th e s tro n g ­

e r c r e d i t and s u p e rio r ta x in g powers o f th e s t a t e and f e d e r a l gov­ ernm ents became unavoidable and was accompanied by an unm istakeable growth in f e d e r a l and s t a t e su p e rv is io n o v er lo c a l fin a n c e .

She

t h e s is t h a t th e t a x - r a i s i n g c a p a c ity o f lo c a l government should be equated to th e le v e l o f e x p e n d itu re s was d is c a rd e d , and in te rg o v e rn ­ m ental f i s c a l r e l a ti o n s became a m ajor contem porary problem o f pub­ l i c a d m in is tra to rs and s tu d e n ts o f p u b lic f in a n c e . I f one a tte m p ts to p la c e ttf i r s t th in g s f i r s t 1*, i t appears t h a t th e u n d e rly in g is s u e s o f t h i s problem stem from th e age o ld r id d le t h a t has co n fro n ted man whenever he has liv e d in in te r d e ­ pendent s o c ia l groups—th e problem o f re c o n c ilin g freedom and o r­ d e r.

More s p e c i f i c a l l y , i t i s th e c r u c ia l problem o f c o n tin u o u sly

a s c e r ta in in g anew w hat r e l a t i v e degree o f p o l i t i c a l and f in a n c ia l independence f o r th e l o c a l i t y w i l l be com patible w ith s o c i e t y 's c u rr e n tly p r e v a ilin g d e s ir e f o r o v e ra ll c e n tr a liz e d p lan n in g and o rd e r.

That th e l o c a l i t i e s a re i n a p o s itio n o f com plete le g a l

i n f e r i o r i t y to th e s t a t e , w ith o u t any in h e re n t r ig h ts to autonomy or l1home rule**, has been p r a c t i c a l l y accep ted as in c o n tr o v e r tib le

5

d o c trin e by s t a t e and f e d e r a l c o u rts ♦’*' However, th e n a tu re and p r e c is e degree o f c o n tro l o r su p e rv is io n t h a t th e statke should e l e c t to e x e rc is e over lo c a l u n i ts o f government a ffo rd s a h ig h ly d e b a ta b le a s p e c t o f s t a t e - l o c a l r e l a t i o n s , and th e p o s s ib le a l t e r ­ n a tiv e te c h n iq u e s and p r a c tic e s a re o f an alm o st i n f i n i t e v a rie ty # ^ M oreover, a lth o u g h a u t h o r i t i e s seem ingly ag ree t h a t s t a t e adm inis­ t r a t i v e c o n tr o ls , e s p e c ia lly in th e f i e l d o f f in a n c e , a re p r e f e r ­ a b le to s t a t e l e g i s l a t i v e c o n tr o ls , th e r e i s th e problem o f d e v is­ in g means to keep th e form er from d e g e n e ra tin g in to a ty p e o f con­ t r o l t h a t , in e f f e c t , m erely s u b s ti t u t e s the o p in io n s o f a group o f s t a t e o f f i c e r s f o r t h a t o f lo c a l o ffice rs# ® The C ouncil o f S ta te Governments, in i t s r e p o r t on s t a t e - l o c a l r e l a t i o n s , ad v o cates th e 1# On t h i s is s u e th e U# S* Supreme C ourt h e ld i n th e case o f T renton v# New J e r s e y : " In th e absence o f S ta te c o n s t it u t io n a l p ro v i­ sio n s sa feg u a rd in g i t to them , m u n ic ip a litie s have no in h e re n t r i g h t t o self-g o v ern m en t which i s beyond th e l e g i s l a t i v e c o n tro l o f th e S ta te # A m u n ic ip a lity i s m erely a departm ent o f th e S t a te , and th e S ta te may w ith h o ld , g r a n t, o r w ithdraw , powers a&d p r iv ile g e s as i t se es f i t # However g re a t o r sm all i t s sphere of a c tio n , i t rem ains th e c re a tu re o f th e S t a t e , e x e rc is in g and h o ld in g powers and p r iv ile g e s s u b je c t to th e so v e reig n w i l l # 11 Trenton v . New J e r s e y , 262 U# S# 182 (1923)* 2# C f. S chuyler W allace, S ta te A d m in istra tiv e S u p e rv isio n o v er C itie s in th e U nited S t a t e s , Columbia U n iv e rs ity F r e s s , New York, 1928* 3# “There a r e , o f c o u rs e , th o se who urge t h a t th e c i t y i s i n need o f c o n sta n t t u te la g e — But th e homely f a c t i s t h a t w h ile in th e flu x e s o f our p o l i t i c s s t a t e governments a re sometimes s u p e rio r to c i t y governments in s ta n d a rd s o f c iv ic rig h te o u sn e ss and a b i l i t y , th e y a re a ls o sometimes g ro s s ly i n f e r i o r in th e s e sta n d ­ ards# In th e fa c e o f such flfcxes tu te la g e may be needed today and p r o te c tio n a g a in s t tu te la g e tomorrow# By and la r g e , th e c a p a c ity o f th e c i t y f o r self-g o v ern m en t i s d o u b tle ss measured d i r e c t l y by our c a p a c ity as a people f o r c re a tin g and o p e ra tin g dem ocratic i n s t i t u t i o n s # 11 Howard Lee McBain, American C ity P ro­ g re ss and th e Law, Columbia U n iv e rs ity P r e s s , New York, 1918, pp# 3-4#

6

uso o f " c o n tro l* " t h a t u t i l i z e p e rsu a sio n and minimum sta n d a rd s o f s e r v ic e w hich th e l o c a l i t i e s would be encouraged to exceed in acco rd ­ ance w ith t h e i r a b i l i t i e s and r e s o u r c e s I t seems t h a t t h i s "most e f f e c t i v e type of s u p e rv isio n " i s p re d ic a te d on th e assum ption t h a t c o n tro ls a re in tro d u c e d a s a p a r t o f a c a r e f u lly planned and i n te ­ g ra te d program w hich has tak en in to c o n s id e ra tio n th e v a rie d n e ed s, re s o u rc e s , p e rso n n e l and p e c u lia r p r e d ile c tio n s o f th e governm ental u n its involved*

However, c o n tro ls a re in tro d u c e d many tim es to

cope w ith a p a r t i c u l a r emergency s i t u a t i o n in w hich p o l i t i c a l exped­ ie n c e , r a th e r th a n th o u g h tfu l a n a ly s is , becomes th e m ajor c o n sid e ra ­ t i o n and d i c t a t e s th e choice o f su p e rv iso ry techniques*

I t i s w ith in th e c o n te x t o f t h i s framework o f s t a t e - l o c a l r e l a ti o n s t h a t th e p a r t i c u l a r phase o f s t a t e su p e rv isio n over lo c a l fin a n c e in In d ia n a which has been commonly known as th e "In d ian a P la n " i s t o be analyzed*

The l a t e Commissioner P h ilip Z o erch er,

reg ard ed by some as th e "forem ost ta x a d m in is tra to r in th e country" was th e one in d iv id u a l most in tim a te ly a s s o c ia te d w ith th e development o f th e "In d ian a P la n f o r th e C ontrol o f L ocal E xpenditures"* He serv ed as a Commissioner on th e In d ian a S ta te Board o f Tax 1* C ouncil o f S ta te Governments, R eport o f th e Committee on S ta te Local R e la tio n s , 1946, pp* 41-42* 2. J . W. O liv e r, "Taxes from Taxpayers* P o in t o f View", P ro c ee d in g s, N a tio n a l Tax A s s o c ia tio n , 1936, p* 180* 3* Commissioner Z o erch er, in h is form al sp eech es, w ritin g s and row p o rts t o th e In d ian a l e g i s l a t u r e in v a ria b ly r e f e r r e d to th e In d ia n a P lan as one which would c o n tro l lo c a l o r p u b lic expendi­ tu re s *

7

Com missioners’*' from 1917 u n t i l h is r e tire m e n t from p u b lic l i f e in 1941*

D uring t h i s p e rio d o f marked change in th e d ir e c tio n and

le v e l o f s t a t e and lo c a l fin a n c e , th e In d ian a P la n , which had i t s in c e p tio n in 1919, re c e iv e d a g re a t d e a l o f p u b l ic i ty in ta x c i r ­ c le s * S c h o la rs , ta x a d m in is tra to rs and p u b lic o f f i c i a l s o f o th e r s t a t e s , c o n fro n ted w ith f i s c a l problem s t h a t were e s s e n t i a l l y s im ila r to th o se o f In d ia n a , w atched th e experim ent w ith g re a t in te re s t.

Commissioner Z oercher p u b lic ly n o ted t h a t a d m in is tra ­

t i v e o f f i c e r s o f o th e r s t a t e s recommended th e p la n to t h e i r own le g is la tu re s ,

2

and s p e c i f i c f e a tu r e s were in c o rp o ra te d in th e

su p e rv iso ry te c h n iq u e s o f some s t a t e s *3 A sta n d a rd t e x t in pub­ l i c fin an o e which d id n o t make e i t h e r a d i r e c t o r o b liq u e r e f e r ­ ence to th e p la n was most u n u su a l.

The s t a t e t a x b o a rd , in i t s

1936 Annual R eport to th e In d ia n a l e g i s l a t u r e , commented t h a t "in c o n tr o llin g p u b lic e x p e n d itu re s, o u r s t a t e has le d th e way and ta x p a y e rs o f o th e r s t a t e s have recommended f o r t h e i r own s t a t e s , 1 . Throughout th e rem ainder o f t h i s study th e term s s t a t e t a x b o ard , s t a t e b o ard , o r m erely b o a rd , w i l l be used synonymously f o r th e le g a l t i t l e "In d ian a S ta te ^oard o f Tax Commissioners" whenever t h e re fe re n c e In s h o r t form i s c le a r from th e c o n te x t. 2. Z oercher a p p ro v in g ly quoted Governor S i l v e r ’ s 1905 message to th e New J e rs e y l e g i s l a t u r e in which he s t a te d : " I f th e L egis­ l a t u r e in i t s wisdom can f in d an y th in g more e ff ic a c io u s th a n th e In d ian a P la n , I would be glad to have them do s o , b u t exper­ ien c e has shown us t h a t n o th in g has been as p r a c t i c a l in i t s e f ­ f e c t s as t h a t p l a n . . . . I s tro n g ly urge upon you th e enactm ent o f a law s im ila r t o th e In d ia n a P la n ." P . Z o erch er, " S ta te Super­ v is io n o f P u b lic E x p e n d itu re s", P ro ceed in g s, N atio n al Tax Asso­ c i a t i o n , 1928, p . 117. 3 . The s t a t e s which g e n e ra lly a re th o u g h t o f as having used th e sub­ s ta n tiv e f e a tu r e s o f th e In d ian a P lan a re New Mexico (1921), Iowa (1924), Oregon (1921), and Oklahoma (1926).

8

th e a d o p tio n o f 'I n d i a n a 's m ethods'*"^

Moreover th e N a tio n a l Tax

A s s o c ia tio n p rovided an e x c e lle n t sounding board f o r p u b lic iz in g th e plan*

Commissioner Zoercher* as an a c tiv e member o f th e o rg a n i­

zatio n * and i t s p r e s id e n t in 1936* a v a ile d h im s e lf o f th e o p p o rtu n i­ t i e s afforded*

H is P r e s i d e n ti a l Address to th e a s s o c i a t i o n 's annual

co n ference in 1936 ended w ith a f i n a l adm onition to th e assem bled membership t h a t " th e s t a t e s w hich a re n o t ta k in g advantage o f th e In d ian a P la n a re m issin g an o p p o rtu n ity o f g iv in g r e a l s e rv ic e to th e p eople*" ^ As a m a tte r o f fa c t* th e e n t i r e speech was devoted t o expounding th e v ir tu e s o f th e In d ian a P la n , which g e n e ra lly was tr u e o f h is o th e r form al a d d re sse s t o t h i s group*

3

Even in open-

f l o o r d is c u s s io n on some u n re la te d s u b je c t i t became common to ex­ p e c t a p le a in b e h a lf o f th e In d ian a P la n whenever Commissioner Z oercher to o k th e f lo o r a t th e s e annual conferences*

I'hus* in

s e lf-d e fe n s e * he would p re fa c e h is rem arks w ith nI am n o t going to t e l l you about th e In d ia n a Plan* b u t th e In d ian a P lan i s s t i l l A t h e r e 1** o r some s im ila r remark* 1* The In d ian a S ta te Board o f Tax Commissioners* Annual Report* In d ia n a Yearbook* 1937, p . 252* H e re a fte r th e s t a t e b o a rd 's annual re p o r ts ap p earin g i n th e yearbooks w i l l be c ite d as "Annual R e p o rt”* u n le s s noted otherw ise* 2* P* Zoercher* " P r e s id e n tia l A d d ress", P roceedings * N a tio n a l Tax A sso c ia tio n * 1936* p* 203* 3* P . Zoercher* "C e n tra l S u p e rv isio n o f Local E x p en d itu re s", Proceedings* N a tio n a l Tax A s s o c ia tio n , 1924, pp* 163-172; " S ta te S u p e rv isio n o f P u b lic E x p e n d itu re s", P ro ceed in g s* Na­ t io n a l Tax A sso ciatio n * 1928* pp* 95-127* 4* P . Zoercher* o p e n -flo o r d iscu ssio n * Proceedings* N atio n al Tax A sso ciatio n * 1932* p* 162*

9

G e n e ra liz a tio n s abound re g a rd in g th e n e c e s s ity o f i n s t i t u t ­ in g s t a t e su p e rv iso ry c o n tro ls i n o rd e r to curb th e "fello w s who w ere th e m oney-spenders, th e g ra b b e rs, th e ta x -s p e n d e rs " , in a word th e lo c a l p u b lic o f f ic e rs *

I t was f u r t h e r contended t h a t "th e

amount saved th e ta x p a y e rs by t h i s method o f review ing bond is s u e s and ta x le v ie s amounted ^from 1919 to 19367 i50 #30,000,000 and th e i n d ir e c t sav in g can e a s i l y be c o n sid e re d an equal amount"*

Except

f o r such u n s u b s ta n tia te d e s tim a te s o f "ta x p a y e r s a v in g s " , no a t t e s $ t was made by th e s t a t e board to analyze th e im pact th e s e a g g reg ate "sav in g s" had upon le v e ls o f e x p e n d itu re s , f u n c tio n s , and sta n d ard s o f s e rv ic e o f th e many d i f f e r e n t ty p es and s iz e s o f lo c a l ta x in g j u r i s d i c t i o n s in Indiana* This t h e s i s i s p rim a rily d ir e c te d toward a n aly z in g such b a s ic a s p e c ts o f th e o p e ra tio n o f th e In d ia n a P la n , as th e l a t t e r , and d eterm in in g w hether th e p la n has a c tu a lly worked out as i t s proponents have c o n tin u a lly contended*^

I t s purpose is* ( l ) to

d is c lo s e th e philo so p h y o f p u b lic fin a n c e u n d e rly in g th e p la n ; (2) t o t r a c e i t s g en esis and h i s t o r i c a l developm ent; and (3) to 1* Z o erch er, op* c i t * , 1936, p* 202* 2* W ylie K ilp a tr ic k , S ta te A d m in istra tiv e Review o f Local Budget Making, P u b lic a tio n No* 3, M unicipal A d m in istra tio n S e rv ic e , New York, 1927* This d e f i n i ti v e and p io n e e r study by Dr. K ilp a tr ic k , made in 1927, i s one o f th e few c r i t i c a l an aly se s o f th e o p e ra tio n o f th e In d ian a Plan* Of c o u rse , many lo c a l o f f i c i a l s and s t a t e leagues o f m u n ic ip a litie s have condemned th e p la n , b u t g e n e ra lly on th e grounds th a t i t s o p e ra tio n i s an unw arranted in frin g e m e n t upon t h e i r r ig h ts to lo c a l autonomy and "home r u l e " . C f. th e anonymous a r t i c l e , "Has th e In d ian a P la n Been a S u c c ess", N a tio n a l M unicipal Review, Volume XXI, No* 2 , F eb ru ary , 1932, pp* 100-106*

10

r e p o r t th e r e s u l t s o f an e m p iric a l stu d y o f th e o p e ra tio n o f th e In d ia n a P la n f o r th e p e rio d f o r which d e ta ile d o r i g in a l d a ta w ere a v a ila b le , th e y e ars 1943-1948«

More s p e c i f i c a l l y , th e l a t t e r ob­

j e c t i v e i s an a ttem p t to a s c e r ta in and a n a ly z e : (a) th e a b so lu te and r e l a t i v e m agnitude o f th e e f f e c t s o f th e p lan upon lo c a l ta x le v ie s and e x p e n d itu re s; (b) th e d i s t r i b u t i o n p a tt e r n o f i t s in cid en c e upon th e v a rio u s ty p es and s iz e s o f lo c a l ta x in g u n i t s ; (c) th e d i s t r i b u t i o n p a tt e r n o f i t s in cid en ce upon th e ty p e s o f funds and fu n c tio n s a f f e c te d ; (d) th e c r i t e r i a , i f any, f o r e f f e c tu a tin g th e a d ju s t ­ ments o f lo c a l b u d g e ts; (e ) w hether o th e r forms o f a d m in is tra tiv e su p e rv isio n could have been more d e s ir a b le and e f f e c tiv e in a c h ie v in g th e s ta te d o b je c tiv e s .

CHAPTER I I

THE PHILOSOPHY OF THE INDIANA PLAN

The b a sic philosophy o f s t a t e - l o c a l r e la tio n s h eld by those who were m ainly re s p o n sib le f o r th e emergence o f In d ia n a 's unique*** p lan o f s t a t e a d m in istra tiv e su p e rv isio n over lo c a l fin an ce may be in f e r r e d from th e annual re p o rts o f th e s t a t e ta x board and th e pub lished w ritin g s of Commissioner Z oercher during th e decades o f th e "prosperous tw e n tie s" and th e "d epression t h i r t i e s "•

This was

th e e ra in which th e p lan became firm ly e s ta b lis h e d as the b a sic a d m in stra tiv e c o n tro l over th e f i s c a l o p e ra tio n s of In d ia n a 's two 2 thousand lo c a l ta x in g j u r i s d i c t i o n s , Z o e rc h e r's a p p ra is a l of lo c a l o f f ic e r s and h is th eo ry o f government ex penditures were suc­ c in c tly quoted in a paper he read to th e N ational Tax A sso c ia tio n Conference in 1924, when he s a id :

"Experience shows us t h a t spend­

ing agencies w i l l no t check them selves, and th a t mere laws attem p t­ ing t h i s a re circum vented.

So long as m unicipal and o th e r o f f i c i a l s

1 , C f, i n f r a , p , 23, ffc. 1, 2, In d ian a has s l i g h t l y more than 3000 lo c a l governmental u n its bub approxim ately only 2000 lo c a l ta x in g j u r i s d i c t i o n s . The d is c re p ­ ancy may be a tt r ib u t e d to th e presence of 1010 townships in th e In diana s tr u c tu r e o f lo c a l government. Although th e c i v i l town­ ship and i t s o v erly in g school d i s t r i c t le g a lly re p re se n t two d is ­ t i n c t u n i t s , th ey a re considered a sin g le ta x in g j u r i s d i c t i o n sin c e th e a d m in is tra tiv e and l e g i s l a t i v e a u th o r ity over both a re vested in one group o f township a u th o r itie s who p re p a re , e s ta b lis h and submit a sin g le f in a n c ia l budget f o r both u n i t s , C f, S ta te Board o f A ccounts, Budget C la s s if ic a tio n and Forms f o r C iv il and School Townships, In d ia n a p o lis , 1937*

12

w i l l spend we must pay*

This i s th e ro o t o f th e e v il*

Since th ey

w i l l n o t check them selves, we must do something to check them* The elem ental f a c t s , a c c o rd in g ly , a re sim ple and d ire c t*

1

I t i s an

a n a ly s is which i s m arkedly s im ila r to th e o ft-e x p re s se d view points found in th e p u b lic a tio n s o f taxpayers* a s s o c ia tio n s and o th e r o r­ ganized groups o f im portant p ro p e rtie d taxpayers*

This view point

was again expressed in 1928 in th e fo llo w in g manner:

“The question

o f ta x a tio n w i l l never be solved u n t i l th e tax p ay ers have some voice in c o n tr o llin g ex p en d itu res and some e f f e c tiv e methods in p u ttin g i t in force*

C andidates f o r o f f ic e a re g e n e ra lly v ery l i b e r a l in mak­

in g prom ises t h a t th ey w ill reduce ta x e s i f e le c te d to o ffic e *

Ho

sooner do th e y g e t in to o f f ic e than i t i s q u ite convenient to f o r o g e t th e prom ises made”* That t h i s view was a ls o shared by th e o th e r commissioners on th e s t a t e ta x board is a t t e s t e d by th e 1921 Annual Report (a t which tim e Commissioner Zoercher was n o t chairman o f th e board) in which i t was contended th a t ”lo c a l o f f ic e r s a re o fte n busy only in seeking p la c e s to spend money in s te a d o f bending t h e i r e n erg ies to give th e p u b lic f u l l re tu rn f o r every d o lla r sp en t and reducing th e amount to be c o lle c te d ” *

Thus, lo c a l o f­

f i c e r s a re lo o se ly c h a ra c te riz e d as ”ta x -s p e n d e rs” and ”ta x - e a te r s " 1* P . Z oercher, “C en tral S upervision of Local E x p en d itu res", P roceedings, R a tio n al Tax A sso c ia tio n , 1924, p . 164* 2* P* Z oercher, “S ta te S u p erv isio n of P u b lic E x p en d itu res", P roceedings, N atio n al Tax A sso c ia tio n , 1928, p* 112* 3* Annual R eport, 1921, p* 894*

13

who possess a "w e ll-d e fin e d d is p o s itio n to ex trav ag an ce"’** which must he curbed in th e i n t e r e s t s o f th e tax p ay ers by a system of c e n tr a lis e d s t a t e supervision* An exam ination of th e annual re p o rts o f th e s t a t e ta x board and th e p u b lish ed w ritin g s and speeches o f i t s members f a i l s to d is c lo s e t h a t a tte n tio n has been d ire c te d to th e more fundam ental problems of s t a t e - l o c a l r e la tio n s *

Methods o f secu rin g g r e a te r e f ­

fic ie n c y in p u b lic e x p en d itu res (low er u n it c o s ts ) which c r i t i c a l stu d e n ts o f p u b lic fin an c e have con sid ered f o r decades a re n e ith e r analyzed n or mentioned*

The e lim in atio n o f r u r a l and overlapping

lo c a l ju r is d ic t io n s which a re to o sm all f o r e ff e c tiv e a d m in istra ­ t i o n , th e t r a n s f e r o f c e r ta in lo c a l fu n c tio n s to th e s t a te o r spec­ i a l d i s t r i c t s which could d isre g a rd e x is tin g p o l i t i c a l boundaries when th ey can perform such fu n c tio n s more econom ically th an th e t r a d i t i o n a l u n i t , a re b u t a few o f th e a sp e c ts o f lo c a l f in a n c ia l a d m in is tra tio n which have n o t been considered by th e board*

In e f ­

f e c t , th e f a c t t h a t perm anently h ig h er governmental c o sts a re an in e v ita b le accompaniment o f an u rb a n iz e d -in d u s tria liz e d c i v i l i z a ­ tio n , saddled w ith a p o l i t i c a l framework t a i l o r e d f o r a bygone e r a , i s n e ith e r c o n sid ered n o r recognized*

In s te a d , th e in cre ased c o st

o f government i s a tt r ib u t e d to "the extravagance of p u b lic o f f i c i a l s o r because th e people them selves demand lu x u rie s*

I t has become th e

h a b it o f many p u b lic o f f i c i a l s to ta k e up every new fad o r fancy and seek new avenues f o r th e spending o f p u b lic money* 1* Annual R ep o rt, 1919, p* 125*

In o rd in ary l i f e

14

©very c it i z e n i s ta u g h t to liv e w ith in h is income• "*

This homely

th e o ry o f p u b lic ex p en d itu res i s re m in isce n t o f th e p u b lic pronounce­ ments which were o ffe re d th e n a tio n by th e Coolidge A d m in istratio n d u rin g th e n in e te e n t h i r t i e s . ^

The duty t o be t h r i f t y , spend fr u g a l­

l y , and l iv e w ith in o n e 's income should be as binding upon u n its o f lo c a l government as upon th e n a tio n and th e in d iv id u a l c i t i z e n . Poor R ic h a rd 's Almanac a p p a re n tly can be s u b s titu te d f o r a th e o ry o f p u b lic e x p e n d itu re s. Twelve y ears l a t e r , th e l a s t y e ar t h a t Commissioner Z oercher served as a member o f th e s t a t e ta x b o ard , th e re s t i l l was no in d i­ c a tio n o f any s i g n if ic a n t change in th e philosophy o f th e board. I t s annual re p o rt f o r 1940 s ta te d t h a t "we ^ /sta te ta x board^ as a s s e s s in g o f f ic e r s a re o fte n blamed fo r h ig h ta x e s , when i n f a c t i t i s only our duty to see t h a t a l l owners o f p ro p e rty c o n trib u te t h e i r p o rtio n according to th e v a lu a tio n o f t h e i r p o ss e s sio n s.

I t i s th e

spending o f f ic e r s t h a t a re chargeable w ith th e amount o f ta x e s t h a t 3 a re to be p a id . 1 . This ex ac t q u o ta tio n i s found, w ith o u t c ro s s -re fe re n c e , in th e follow ing so u rc e s; Z oercher, op. o i t . , 1928, p . 96; Annual R eport, 1928, p . 887; and Annual R eport, 1931, p . 657# 2 . The same th re e sources c ite d above in fo o tn o te 1 a ls o quoted th e follow ing remarks from P re s id e n t Coolidge*s In a u g ra l A ddress; "Economy i s id e a lism in i t s most p r a c tic a l fo rm ....T h e w is e s t add soundest method of so lv in g our t a x problems i s through econou^r." 3 . Annual R eport, 1940, pp. 124-125. I t should be noted th a t althoug h th e re p o rt q u a lif ie s t h i s statem en t by la b e lin g th e board as " a s se ss in g o f f i c e r s " , i t im p lies an adm ission t h a t perhaps th e ap­ p e ll a t e and mandatory review o f ta x le v ie s and bond issu e s had not m a te r ia lly a ffe c te d th e le v e l o f ta x c o lle c tio n s and e x p e n d itu re s. This i s th e only in sta n c e the w r ite r was ab le to fin d in which t h i s p o in t of view was expressed in annual re p o rts o r p u blished -speeches o f board members#

15

In b r i e f , th e philosophy o f th e board toward lo c a l govern­ ment during th e p e rio d o f Commissioner Z o e rc h e r's ten u re i s one based on a sim ple p e rc e p tio n o f loose spending, b y -p assin g o th e r and more fundam ental problems o f s t a t e - l o c a l re la tio n s #

I t tends

to r e f l e c t , a t b e s t , an u n s o p h is tic a te d and n a iv e , i f n o t b iased and o n e -sid ed , view point which more commonly was expressed by im­ p o rta n t p ro p e rtie d tax p a y ers and ta x p a y e rs ' a s s o c ia tio n s whose p r i ­ mary concern in lo c a l fin a n c e seem ingly had been to b rin g about re ­ d u ctio n s in ta x le v ie s and o v e ra ll c o sts o f government, w ith o u t ap­ p r a is in g th e e f f e c ts o f such red u c tio n s upon governmental fu n c tio n s and sta n d ard s o f se rv ic e req u ire d f o r community w elfare# The r e la tio n s h ip o f sundry s p e c ia l i n t e r e s t groups, p a rtic u ­ l a r l y ta x p a y e rs ' a s s o c ia tio n s , to th e s t a t e ta x board and t h e i r philosophy reg a rd in g s t a t e c o n tro l over lo c a l fin an c e w a rran ts some examination#*^*

I t i s f a i r l y common knowledge t h a t the tasq)ayersf

a s s o c ia tio n s which have emerged in th e m id-west and fa r-w e s t have been la r g e ly fin an ced by i n t e r s t a t e r a ilr o a d s , p u b lic u t i l i t i e s , 1# C f. R obert K. C a rr, S ta te C ontrol o f Local Finance in Oklahoma, U n iv e rs ity o f Oklahoma P re s s , Norman,Oklahoma, 1937. This i s an in te r e s ti n g study along th ese l i n e s . A re se a rc h study de­ voted to th e in flu e n c e which ta x p a y e rs ' a s s o c ia tio n s and o th e r lo b b y is ts e x e rt in th e f i e l d of lo c a l fin an c e in In d ian a should a ls o y ie ld f r u i t f u l r e s u lts #

16

and o th e r la r g e co rp o ra te taxpayers*^

T h eir i n t e r e s t in supporting

th e -work o f such o rg a n iz a tio n s stems p a r t l y from th e f a c t th a t t h e i r p ro p e rty ta x e s a re g e n e ra lly based upon v a lu a tio n s determ ined by s t a t e ta x boards o r commissions whose v a lu a tio n s a re much c lo s e r approxim ations o f " tru e cash v a lu e ” th an th o se a rriv e d a t by lo c a l Z a s s e s s o rs in e v a lu a tin g o th e r ta x a b le p ro p e rty ; and p a r t l y from an a c u te awareness t h a t th e in cid en c e o f b e n e f it d e riv e d by them from lo c a l governm ental fu n c tio n s and s e rv ic e s i s s i g n i f ic a n t l y sm aller 1* C* M* Brown, o f th e Utah Copper Company and Utah Taxpayers* As­ s o c ia tio n , in d isc u ssin g th e o rg a n iz a tio n o f ta x p a y e rs 1 a s s o c ia ­ tio n s s ta te d t h a t "th e fin a n c in g o f th e a s s o c ia tio n i s accom­ p lis h e d o r d in a r ily through c o n trib u tio n s from i n te r e s te d ta x paying groups, who pay in p ro p o rtio n to t h e i r ta x burden* Funds a re a ls o r a is e d by se c u rin g in d iv id u a l memberships to th e o rg an i­ z a tio n throughout th e s t a t e , charging only a nominal sum fo r membership*” C* M* Brown, "The Function o f Taxpayers* A ssocia­ t io n s in E xpenditure C o n tro l" , P ro ceed in g s, N ational Tax Asso­ c i a ti o n , 1931, p* 247* L ikew ise, M ilbank Johnson, Chairman of th e Board, C a lifo rn ia Taxpayers* A s so c ia tio n , has s ta te d t h a t " in our o rg a n iz a tio n , which has many la rg e companies and c o rp o ra tio n s as members, we can c a l l upon any te c h n ic ia n / s l o / in th e s e c o rp o ra tio n s and b rin g t h e i r s k i l l and experience / i n p u b lic a d m in istra tio n i j to b e a r upon th e s e governm ental problems****I th in k we ought to look upon th e taxpayer a s s o c ia tio n as an a ll y to th e s e p u b lic o f f i c i a l s t h a t a re t h r u s t in to o f f ic e w ith no experience w hat­ e v e r; th ey a re very glad to have some haven o f r e s o r t xpx where th ey f e e l th ey can g et an a b s o lu te ly im p a rtia l f a c tu a l re p o rt upon th e s e th in g s and advice in th e handling of la rg e a f f a i r s •• ••We f e e l t h a t i s a c o n trib u tio n what we a re making to our s t a t e , reco g n izin g th e in ex p erien ce and fre q u e n tly th e incompe­ ten c e o f th e e le c te d o f f ic ia l" * M* Johnson, in o p e n -flo o r d is ­ cussio n on "E xpenditure C o n tro l", P ro ceed in g s, N ational Tax A s so c ia tio n , 1931, pp* 278-279* 2* The In d ian a s t a t e ta x b o ard , in i t s 1920 r e p o r t, s ta te d th a t th e re were "two courses open to th e S ta te board when i t con­ s id e re d th e q u e stio n o f e q u a liz a tio n * Reduce th e v a lu a tio n p laced by i t on th e r a ilr o a d s , te le g ra p h and telephone compan­ i e s , banks, t r u s t companies and p u b lic u t i l i t i e s , amounting to #1,000,000,000, o r r a i s e the o th e r p ro p e rty in th e 92 c o u n ties to th e stan d ard s e t by i t* " Annual R eport, 1920, p* 1040*

17

th an th e in cid en c e o f th e lo c a l ta x th ey pay*"** The In d ian a T axpayers1 A sso c ia tio n was formed in September 1923, and i t s d eclared o b je c tiv e , as s e t f o r t h in i t s a r t i c l e s o f in c o rp o ra tio n , was to " a id , encourage and promote th e re d u c tio n of p u b lic expenses and ta x e s in th e s t a t e o f In d ia n a , and in th e count i e s , c i t i e s and o th e r p o l i t i c a l su b d iv isio n s th e re o f* "

2

According

to i t s e x ec u tiv e s e c r e ta r y , th e Indiana P lan "was lik e a b e a u tif u l, b u t id le p ie c e o f m achinery" u n t i l th e a s s o c ia tio n was form ed, which a c t marks th e " f i r s t d e f i n i te ste p in th e d ir e c tio n o f stopping w aste and extravagance and o b ta in in g some s o r t o f d e f in ite super­ v is io n over th e e x p en d itu re o f p u b lic funds."®

The c lo se working

r e la tio n s h ip which developed over th e years between the a s s o c ia tio n and th e s t a t e ta x board appears to have been m utually s a tis f a c to r y * The spokesmen f o r each , Mr* H arry M iesse and Commissioner Z oercher, r e s p e c tiv e ly , expressed e s s e n t ia ll y th e same philosophy o f s t a t e ­ ly For example, one does n o t expect a Texas crude o i l p ip e lin e com­ pany t h a t has to pay lo c a l p ro p e rty ita x e s on th e a sse sse d v a lu a ­ t io n o f t h a t p a r t o f fcs Texas-New Je rse y p ip e lin e which passes through an In d ian a community, to a c tiv e ly support a program f o r th e improvement o f lo c a l h e a lth , sc h o o ls, s t r e e t s , e tc * , e s p e c ia l­ ly when such a program means the c o rp o ra tio n w i l l have to pay a la r g e r amount o f lo c a l p ro p e rty taxes* However, i t i s a problem o f b u sin e ss e th ic s and p u b lic r e la tio n s w hether c iv ic duty re ­ q u ire s an ab sentee c o rp o ra tio n to give f in a n c ia l support to an o rg a n iz a tio n t h a t may be a c tiv e ly campaigning f o r red u c tio n s in ta x e s and ex p en d itu res which in e f f e c t would make i t in p o s s ib le to achieve such a c iv ic improvement program based on in cre ased lo c a l expenditures* 2* H* M iesse, "The Functions o f an A sso c ia tio n o f Taxpayers in Con­ n e c tio n w ith th e C ontrol o f P u b lic Expenses", P roceedings, N atio n al Tax A s so c ia tio n , 1931, p* 252* 3* Ib id * , pp* 251-252;*

18

lo c a l r e la tio n s and p u b lic expenditures*

1

Thare was mutual admira­

tio n f o r th e work being done by t h e i r re s p e c tiv e o rg a n iz a tio n s, and t h e i r g eneral a p p ra is a l o f lo c a l o f f i c i a l s and lo c a l government was n ot markedly d issim ila r*

Commissioner Zoercher p u b lic ly acknowledged

the work being done by th e Indiana Taxpayers1 A sso c ia tio n , e s p e c ia lly in i n i t i a t i n g tax p ay er appeals to th e s t a t e ta x board*

o

Mr* M iesse,

in tu r n , a ls o regarded t h i s a c t i v i t y as one of g re a t importance® and 1* Cf* ib id * , pp* 249-259* Also see the follow ing) H* M iesse, '‘Indiana Tax Problem s", Proceedings, N ational Tax A sso c ia tio n , 1936, pp* 174-179; th e pamphlet "Control Your P ro p erty Tax", Indiana Taxpayers* A sso c ia tio n , In d ia n a p o lis, 1947; and Zoercher* op* c i t * , 1924, pp* 163-165; op* c i t * , 1928, p* 96; op* c i t * , 1931, pp* 268-269; op* c i t * , 1936, p. 201* 2* One year a f t e r th e form ation o f th e Indiana Taxpayers* A ssociation Commissioner Zoercher p u b lic ly commented t h a t ? th is taxpayers* a s s o c ia tio n , o f which Mr* Miesse is s e c re ta ry , has done a g re a t d eal in th e l a s t yeeur to educate the c itiz e n s o f the s t a t e , and th e y have been p a r t i a l l y resp o n sib le fo r a g re a t many o f th e ta x le v ie s being appealed"* P* Z oercher, in o p en -flo o r d isc u ssio n on "C entral S u p erv isio n ", P roceedings, N atio n al Tax A sso c ia tio n , 1924, p. 190* Four years l a t e r , in a form al address to the N ational Tax Associa­ t i o n , Commissioner Zoercher again s ta te d t h a t " th is o rg an izatio n ^ In d ian a Taxpayers* A ssociation7***.has done much good the p a st few years in ta k in g th e lead in many counties in having budgets p ro p erly examined and reviewed where proper changes were not made by lo c a l o f f ic ia ls * This A sso ciatio n has taken the p o s itio n th a t honest o f f i c i a l s should n o t o b je c t to a review of bond issu e s and ta x le v ie s , fo r i f th e demands a re j u s t , th e re w ill be no d i f f i ­ c u lty in having th e same approved by th e S ta te Board"* Z oercher, op* c i t * , 1928, p* 113* 3* "Thus th e a ss o c ia tio n has been u se fu l in two ways—in persuading o f f i c i a l s to make red u ctio n s before budgets were published and in u rging appeals where the o f f i c i a l s declined to cooperate and went ahead w ith a determ in atio n to be the so le judges of what should be spent"* M iesse, op* c i t * , 1931, p* 254* "Through th e years th e Indiana Taxpayers A sso ciatio n has e s ta b lis h ­ ed a s t a f f * . . t o sponsor appeals where proposed budgets and ra te s were deemed too high*" The pamphlet "Control Your P roperty Tax", Indiana Taxpayers* A sso c ia tio n , In d ia n a p o lis, 1947, p* 2*

19

and expressed confidence in th e judgments of th e hoard in making determ inations on reviewed ta x le v ie s and bond issues** But i t is s ig n if ic a n t to note th a t one of the most c o s tly and im portant fu n ctio n s undertaken by th e Indiana Taxpayers' .Asso­ c ia tio n has been th e c o lle c tio n and com pilation of d e ta ile d fin a n ­ c ia l s t a t i s t i c s fo r p r a c tic a lly every tax in g ju r is d ic tio n in th e sta te *

Inasmuch as the le g is la tu r e does no t provide a p p ro p ria ticn s

f o r the maintenance o f a s t a t i s t i c a l resea rch s t a f f by the s ta te ta x board* i t s f i e l d examiners* when review ing lo c a l budgets* make use of the d e ta ile d comparative s t a t i s t i c s and analyses prepared by th e Indiana Taxpayers' Association*

Thus* i t appears th a t the a sso c ia -

tio n i s perform ing a p u b lic se rv ic e ,

fo r th e s ta te ta x b o a rd 's

1* “I f th e average p ublic o f f ic e r of the a rro g an t ty p e * ..w ill not l i s t i n to advice from our experts or from h is own c o n stitu e n ts th e law perm its h is neighbors to appeal h is budgets and ra te s and th e S ta te Board o f Tax Commissioners* sin ce i t s creation* has been composed of men who did not h e s ita te to go to th e ro o t o f a l l governmental problem s, no m atter whether the process was p a in fu l or not*" M iesse, op* c i t * * 1931, p . 255* 2* "We obtained fin a n c ia l statem ents from v i r tu a ll y every u n it of government in th e sta te * including tow nships, counties* c i v i l and school towns, and c itie s * We ta b u la te d th e expenditures of th ese u n its fo r a p erio d of years* pointed out a n tic ip a te d rev­ enues and suggested methods whereby economy could be p ra c tic e d • • • • I t has been no sm all ta s k to prepare fin a n c ia l statem ents on one thousand and s ix te e n townships in the S ta te of Indiana b ut th e work involved has been w orth a l l i t cost****It is now g en erally known and recognized t h a t any person seeking informa­ tio n r e la tiv e to any phase o f th e c o st of government can obtain what he seeks in our o ffice* Our f i l e s are f r e e and open to a l l who w ish to use them*" Miesse* op* c it * , 1931* pp* 254-255* I t should be noted t h a t t h is in v ita tio n has been accepted by the s ta te ta x board fo r i t s f i e l d examiners* 3* Bf* supra* p* 16* fo o tn o te 1, fo r an analagous example of a ta x ­ p a y ers' a sso c ia tio n perform ing g ra tu ito u s serv ices fo r the sta te *

20

f i e l d exam iners have h e ld h e a rin g s , examined b u d g ets, and made re ­ commendations on th e budgeted ta x le v ie s and e x p en d itu res o f as 1 many as t h i r t y d i f f e r e n t u n its o f lo c a l government in one day. As l a t e as 1941, a prom inent member o f th e b o ard , in commenting on In d ia n a 1s system of a d m in is tra tiv e review o f lo c a l b u d g ets, acknowledged th e continued a s s is ta n c e which th e s t a te ta x board receiv ed from th e Indiana T axpayers' A sso c ia tio n in perforating t h i s fu n c tio n .

He p u b lic ly s t a te d , "our Board has tak en th e a t t i t u d e

t h a t taxpayers a s s o c ia tio n s have been a b ig help to u s * . . . We tak e th e p o s itio n th a t we can b e n e f it a g re a t d e a l by t h e i r inform ation „2

and t h e i r advice a t the budget h e a rin g s *"

The s t a t e , in e f f e c t , depends upon a p riv a te o rg a n iz a tio n , re p re s e n tin g a s p e c ia l group i n t e r e s t , to fin an c e and pro v id e a s e r­ v ic e which i s e s s e n t ia l to th e a d m in is tra tio n of a su p e rv iso ry func­ tio n re q u ire d by s t a t u t e .

I t i s q u e stio n a b le i f t h i s can be consid­

ered to be in accord w ith a cc ep tab le p u b lic a d m in is tra tiv e p r a c tic e s , w hether a t th e lo c a l, s t a t e o r fe d e ra l le v e l o f government. 1 . From d a ta c o lle c te d by th e w r i t e r from th e f i l e s o f th e Ind ian a S ta te ^oard of Tax Commissioners, S ta te House, In d ia n a p o lis , 1949. 2. P . A. B e c g k iw ic t, member 1941-1949, Indiana S ta te Board of Tax Commissioners, Proceedings o f 4 1 st Annual Conference o f th e In d ian a Tax Board and County A ssesso rs o f In d ia n a , 1941, p . 3,6. 3* I t would be i n t e r e s t i n g to sp e c u la te how th e more co n serv ativ e p re ss and e d i t o r i a l i s t s would re a c t i f i t became known th a t in an analagous manner, la b o r unions were perform ing a "public serirfrce" by supplying a s t a t e d iv is io n o f la b o r w ith s t a t i s t i c a l d a ta and an aly ses which t h a t governm ental departm ent needed in orddr to c a rry out i t s a d m in is tra tiv e fu n ctio n s re q u ire d by law .

21

During th e p re s e n t decade, th e s t a t e ta x board has shown some d e v ia tio n from th e philosophy o f lo c a l fin an c e t h a t had mani­ f e s te d th e "Z oercher e ra " o f th e board*s h isto ry *

Both th e 1942

and 1945 annual re p o rts s t a te t h a t "during th e year i t has been th e d e s ir e of t h i s departm ent to encourage b e t t e r p u b lic r e l a t i o n s , and we b e lie v e much p ro g ress has been made toward t h i s end****With a more c o o p erativ e f e e lin g between th e o f f i c i a l s o f t h i s departm ent and lo c a l government o f f i c i a l s , n e a rly a l l ^budget^ problems were s e t t l e d f a i r l y and s a t i s f a c t o r i l y to th e taxpaying p u b lic " !

This

appears to be a m o d ific a tio n o f the t r a d i t i o n a l "Zoercher lin e " which had c h a ra c te riz e d lo c a l o f f ic e r s as "tax -sp e n d e rs" and " ta x e a te rs " *

However, th e annual re p o rts o f t h i s p e rio d do n o t r e f l e c t

any s i g n i f ic a n t d e p artu re from what p re v io u s ly had been considered th e prim ary o b je c tiv e o f th e In d ian a P lan —th e curbing o f ta x le v ie s 2 3 and th e saving o f " la rg e sums o f money" f o r th e taxpayers* 1 . Annual R ep o rts, 1942, p . 891, and 1945, p . 828* 2* Annual R eport, 1942, p* 891, 3* In 1949 a change in a d m in is tra tio n occurred a t th e S ta te House, and an e n ti r e l y new board o f t a x commissioners was appointed by th e newly e le c te d governor* The chairman of th e new board, Mr* N* W* H o lla r, inform ed the w r i t e r in an in te rv ie w in A ugust, 1949, t h a t he d e sire d to perm it th e lo c a l u n its o f government th e f u l l e s t autonomy and "home ru3e " , w ith in th e e x is tin g s t a t u ­ to r y requirem ents* However, he a lso "expected them to liv e w ith ­ in t h e i r budgets once th e y had been o f f i c i a l l y e s ta b lis h e d " , and n o t con tin u e to deluge th e board w ith th e unprecedented q u a n tity o f re q u e sts f o r a d d itio n a l a p p ro p ira tio n s , th e review and approval o f which had become one o f th e boardfe " g r e a te s t time-consuming d u tie s"* This p o in t o f view i s m arkedly d if f e r e n t from t h a t ex­ p resse d by previous boards* However, i t th e p re s e n t b o a rd 's ob­ j e c tiv e i f ach iev ed , i t w i l l be a most novel inn o v atio n in th e course o f s t a te - lo c a l f i s c a l r e la tio n s in Indiana* C f. i n f r a , C hapter III*

22

Moreover, i t should be noted t h a t the p re se n t system of s t a te ad­ m in is tra tiv e c o n tro l over lo c a l b u dgets, revenues and expenditures i s e s s e n tia lly th e same Indiana Plan which was devised to cope w ith th e p e c u lia r problems of th e pre-w ar y ears and which was founded on a philosophy th a t has been a tt r ib u t e d to th e e a r l i e r s ta te ta x boards, and in p a r tic u la r to Commissioner Zoercher*

CHAPTER I I I

THE ORIGIN OF THE INDIANA PLAN

The Indiana Plan re p re se n ts one o f th e major asp ects o f th e h i s t o r i c a l development o f s t a te - lo c a l f i s c a l r e la tio n s in Indiana— from a f i s c a l system c h a ra c te riz e d by p r a c tic a lly f u l l autonomy a t the lo c a l le v e l to one in which a d m in istra tiv e powers, in la rg e p a r t , have been c e n tra liz e d in th e S tate* 1

m, The o rig in o f th e plan

i s to be found in a s e rie s of opportune and p o l i t i c a l l y fe a s ib le a d m in istra tiv e techniques d ire c te d toward achieving what appears to have been Indiana*s primary f i s c a l o b je c tiv e f o r more than a century—th e e stab lish m en t o f an e q u ita b le and uniform p ro p erty ta x system*

Evidence i s lack in g which would in d ic a te th a t the Indiana

Plan re s u lte d from any consciously planned program s o le ly m otivated by a d e s ire to in flu e n c e , supervise o r curb lo c a l governmental func­ tio n s , se rv ic e s and expenditures* During th e f i r s t h a lf of th e l a s t cen tu ry , s ta te and lo c a l government in Indiana depended, as in the o th er s t a t e s , alm ost ex­ c lu s iv e ly upon p o ll and p ro p erty taxes fo r p u b lic revenues*

Al­

though th e period was c h ara c te riz e d by an "abominable a d m in istratio n 1* The general p a tte rn has been eq u ally tr u e , of course, of th e development o f s ta te - lo c a l r e la tio n s in p r a c tic a lly a l l the sta te s* S ig n ifio an^ d iffe re n c e s between s ta te s e x is t, however, in th e type and degree o f c o n tro l ex ercised over lo c a l finance* In d ian a ’s ex­ p erience i s unique only in th e manner and degree i t has chosen to u t i l i z d s ta te c o n tro l over lo c a l finance*

24

o f th e p ro p e rty ta x ”,

1

l i t t l e was done to improve the s itu a tio n *

County e q u a liz a tio n boards, w ith a p p e lla te review powers over lo c a l assessm ents, were c re ate d in 1841, b u t th e re was no s t a te board em­ powered to make o rig in a l assessm ents o r to review those made by the county boards on a p p eal.

Except fo r th e lim ite d a c t i v i t i e s of th e

S ta te A u d ito r, who was req u ired to a sse ss s ta te bank sto c k and hear c e r ta in taxpayer grievances fo r a tim e, th e re was no semblance o f s ta te c o n tro l over lo c a l finance in Indiana*

2

In 1851, the newly adopted s ta te c o n s titu tio n req u ired the General Assembly to provide ”by law a uniform and equal r a te of assessm ent and ta x a tio n ” and to p re sc rib e re g u la tio n s to secure a " ju s t v a lu a tio n f o r ta x a tio n of a l l p ro p e rty , both re a l and p e rsonal"*

I t should be noted t h a t the c o n s titu tio n does not re ­

q u ire " f u l l market valu e" nor " tru e cash v a lu e ” assessm ents.

It

appears t h a t th e c o rre c tio n of u n d er-v alu atio n o f ta x a b le proper­ t y was n o t deemed e s s e n tia l to the achievement of an e q u ita b le , uniform and j u s t system o f p ro p erty tax atio n *

L e g isla tiv e a t ­

tem pts to meet t h i s c o n s titu tio n a l requirem ent emerge as one o f the major problems of s ta te - lo c a l f i s c a l r e la tio n s in Indiana during th e next century*

The year follow ing the adoption of the 1851

1 . Governor W a lla c e ^ a p p ra isa l o f th e lo c a l ta x s itu a tio n when he recommended to the le g is la tu r e th e c re a tio n of the e q u a liz a tio n board in 1838. Quoted by F ran k lin P . H a ll, The Indiana Gross Income Tax, tm published d o cto ral d is s e r ta tio n , U n iv ersity of W isconsin, Madison, 1946, p . 8* 2* Annual R eport, 1917, p. 113* 3* Indiana C o n stitu tio n , S ection 1, A rtic le 10*

25

c o n s titu tio n , th e General Assembly provided f o r boards of eq u aliz a1 tio n in c o u n tie s, congressional d i s t r i c t s and the S tate* The l a t t e r ■was a u th o rized to eq u alize r e a l p ro p e rty , but perm itted to remain in se ssio n only 10 days.

I t s powers were so c lo s e ly circum scribed th a t

improvement in assessm ent was in d is o e m a b le .

The S ta te E q u alizatio n

Board was reorganized and given o rig in a l j u r is d ic tio n in th e a s s e s s ­ ment o f r a ilr o a d , te le g ra p h and domestic co rp o rate p ro p e rtie s in g 1872. However, i t s t i l l lacked c o n tro l over th e assessm ent of other p ro p e rty , and th e subsequent era was c h a ra c te riz e d by noto rio u s underv a lu a tio n and "the spread o f in c re a s in g ly in e q u ita b le assessm ents". The cause o f th e in e q u a lity was to be found in the a c tiv e eompetitLon between l o c a l i t i e s in try in g to keep t h e i r re sp e c tiv e ta x burdens r e la tiv e ly low.^

To remedy t h i s s itu a tio n the Tax Reform Law o f 1891

was enacted by the le g i s l a t u r e . v is io n s .

I t contained two su b sta n tiv e pro­

I t replaced th e la rg e ly in e ff e c tiv e S ta te E q u alizatio n Board

1 . Revised S ta tu te s of In d ian a, 1852, S e c tio n 7. 2. Laws o f 1872, Chapter 37. The r ig h t to a ssess the p ro p erty of domestic co rp p ratio n s by th e S ta te E q u alizatio n Board, however, 'Sms repealed a few years l a t e r " • Annual R eport, 1918, p* 140. 3 . H. L. L utz, The S ta te Tax Commission, Harvard U n iv ersity P re s s , Cambridge, 1917, p . 150. 4 . The conditions p re v a ilin g p r io r to 1891 were described as follow s by Judge T. E. Howard, author of th e Tax Reform Law of 1891s "Our f in a n c ia l system had alm ost reached the p o in t of breaking down under th e w eight o f i t s own cumbersomeness, d iso rg a n iz atio n and general in e ffic ie n c y . The counties were a t war w ith one an­ o th e r, each seeking by undervaluation of i t s p ro p erty to escape from i t s j u s t share of th e pub lic burden". Indiana County Asses­ s o r s 1 P roceedings, In d ia n a p o lis, 1910, p. 33. Also see Annual R eport, 1921, p . 894, f o r the work of th e S ta te E q u alizatio n Board* 5. Laws of 1891, Chapter 99.

26

w ith a newly created. S ta te Board of Tax Commissioners^ whose func­ tio n was to eq u alize the ta x le v ie s and assessm ents of th e counties* Secondly, i t implemented th e c o n s titu tio n a l assessm ent p ro v isio n of u n ifo rm ity end e q u a lity by re q u irin g t h a t a l l assessm ents were to be a t " tru e cash v alu e 11•

The a c t f u r th e r empowered the newly c re ate d

board to make h o riz o n ta l (b lan k et) in c re a se s in th e p ro p erty valua­ tio n s o f e n tir e c o u n ties in o rd er to reduce the in te r-c o u n ty competion*

However, i t appears th a t th e reform l e g is la tio n did not ac­

complish i t s o b je c tiv e s , and according to th e 1912 ta x board, p r i ­ m arily because "adequate a d m in istra tio n machinery had not been p ro « 2 vided • Although th e next th re e decades show l i t t l e d isc e m a b le improvement in v a lu a tio n s th e a g ita tio n fo r " f u ll market ant^qui ta b le " assessm ent c o n tin u a lly mounted from 1910 to 1919 when f i n a l ly th e le g is la tu r e enacted a new ta x law to rep lace the 1891 measure* The ta x board, in i t s 1912 b ie n n ia l re p o rt, contended th a t "co n d itions

th a t tim e^ were ra p id ly d r i f ti n g to th e same le v e l

they were p r io r to 1891***and th e only chance to enforce the law, „ 4 as w r itte n , was l o s t w ith th e f i r s t assessm ent • The board warned 1* The board co n sisted of fiv e members, 3 e x -o ffic io (Governor, Sec­ r e ta r y o f S ta te , S ta te A uditor) and 2 appointed members who could not be of th e same p o l i t i c a l party* In 19Q7 the governor was re­ placed by a t h ir d appointive member* P ro fe sso r Lut2, in h is e a rly but comprehensive study o f ta x commissions, c a lle d the Indiana board "the f i r s t of th e modem permanent s t a te ta x commissions"* L utz, op* c i t * , p* 3* 2* S ta te Board o f Tax Commissioners, B iennial R eport, 1912, p* 12* 3* In 1910, Governor M arshall to ld the bounty a sse sso rs a t t h e i r an­ n ual conference t h a t " i t is no t worthwhile fo r you, or f o r me, to deny th e f a c t th a t the law of Indiana ^ 8 9 1 lavy i s n o t obeyed**•• Real e s ta te i s not taxed a t i t s tru e cash value and personal prop­ e r ty i s not given in a t i t s tru e cash value"* Indiana County Asses­ s o rs ' Proceedings, In d ia n a p o lis, 1910, p* 26* 4* Loc* c i t *

27

t h a t c o n tro l over lo c a l ta x le v ie s and borrowing should be exercised b efo re f u l l value assessm ent was enforced, otherw ise the sudden in ­ crease in th e tax in g and borrowing c a p a c itie s of th e l o c a li t ie s "would r e s u l t in such extravagance and disarrangem ent of fin a n c ia l a f f a i r s t h a t the S ta te might not recover in a generation"#^

This

was the f i r s t o f f i c i a l in tim a tio n by th e board th a t s ta te supervision over the determ in atio n of lo c a l tax ra te s might be a necessary ac­ companiment o f s ta te reassessm ent powers t h a t were to be u t iliz e d in achieving an "eq u itab le and just** ta x system# Three years l a t e r Governor R alston, in h is message to the le g is la tu r e in 1915, conceded th a t n e ith e r uniform ity nor e q u a lity had been achieved in th e ta x system#

However, he did n o t concur

w ith th e s ta te ta x board’s a n a ly sis of the s itu a tio n th a t th e basic le g is la tio n was d e fe c tiv e , ra th e r than i t s adm inistration#

In ste ad

he contended " th a t the f a u l t is w ith the pu b lic o f f i c i a l s wworn to obey and enforce the law and not w ith th e p eople’ s supreme law"*

2

A ccordingly, h is only recommendation was th a t th e s t a te ta x board be empowered to remove th e county a sse ss o r, fo r scause, and appoint h is successor# law#

But th e 1915 le g is la tu r e did n o t tamper w ith th e

In ste a d , i t created a s p e c ia l ta x commission (R alston S pecial

Commission) whose duty i t was to consider what changes in the tax s ta tu te s were req u ired "to make a j u s t and e q u ita b le ta x system"# 1# Loc* c it# 2# House Jo u rn a l, 1915, p. 50 3# Ib id # , p# 35# 4# Indiana Acts o f 1915, p. 47t#

4

28

The sp e c ia l com m issions m ajo rity re p o rt th e next year re ­ vealed g la rin g in e q u a litie s in assessm ents t h a t were g re a te r than anyone had suspected#

Three co u n ties o f th e s t a te had average

assessm ents o f 25 p ercen t o r le s s of ”tru e value** w hile a t the o th er extreme 5 co unties had assessm ents o f 75 p ercen t o f ”tru e v a lu e” , w ith the o th e r 86 counties* average v a lu a tio n s ranging be­ tween th ese extrem es.

And th e in e q u a litie s rep o rted between in d iv i­

duals were even g reater#

wOne c la ss of taxpayers (w ith average

assessm ents of 146 p e rc en t of tr u e value) was payihg te n tim es as much ta x e s , in p ro p o rtio n , as the o th er c la ss (w ith average a sse se ments o f 14#7 p e rcen t of tru e v a lu e)••••A s a ru le th e high a sse ss­ ments a re on th e sm aller p r o p e rtie s , the c la s s if ic a tio n by values showing a steady decrease in r a tio of assessm ent as the p ro p e rtie s in cre ase in v a lu e # ...T h e ta x system o f Indiana i s th e re fo re a le g a liz e d —o r ra th e r to le r a te d —system of robbing th e small p roperty owner fo r the b e n e fit of a com paritively sm all body o f la rg e proper­ t y owners #w^ The R alston commission had considered the attain m en t of a more e q u ita b le and j u s t ta x system, based on uniform and ,ff u l l valu e11 assessm ent, to be the o b je c tiv e o f reform and i t recommended th a t th e s ta te ta x board be given adequate powers to accomplish th is 1. Report o f th e Indiana S p ecial Commission on Taxation, 1916, pp# V I-V II.

29

end*'*'

I t a ls o recognized the need o f curbing r is in g ta x le v ie s th a t

could r e s u l t from the in cre ased v a lu a tio n s and suggested the use of c la s s if i e d , but i n f le x ib le , s ta tu to r y ta x lim its*

N either mandatory

nor a p p e lla te review of ta x r a te s by th e s t a t e boarddwas mentioned* The follow ing y e a r, th e s t a te ta x board in i t s annual re p o rt a lso recommended t h a t s t a te su p erv isio n over lo c a l ta x ra te s be in stitu ted as a p a rt of th e more general assessm ent reform program*

S p e c ific a l­

ly i t proposed a uniform ta x lim ita tio n law coupled w ith a popular referendum fo r c e rta in ra te s in excess of the s ta tu to r y lim its* This would provide a degree of f l e x i b i l i t y and lo c a l autonomy which the R alston commission's recommendation had lacked.

However, i t

did n ot req u e st any a d m in istra tiv e powers over lo c a l ta x hates fo r the board.

2

I t req u ired two more years before the s t a t e l e g is la ­

tu re enacted In d ia n a 's f i r s t o v e ra ll ta x lim ita tio n law f o r lo c a l 3 ju r is d ic tio n s , and i t w i l l be noted t h a t th e law f i n a l ly passed I b i d . , pp. 7 -8 . The major recommendations were as follow s: (a) Make th e board as independent as p o ssib le by dropping i t s e x -o ffic io members, and c re a tin g a n o n -p artisan board; (b) Empower the board ”to order a h o riz o n ta l increase o r de­ crease o f th e assessm ent of any m u n icip ality of th e s t a t e ”, and to re a sse ss any p ro p e rty , i f necessary, a t lo c a l ex­ pense | (c) Empower the board to appoint and c o n tro l county a s s e s s o rs , e lim in a tin g th e e le c tiv e system of s e le c tio n ; and (d) A uthorize the board to review any in d iv id u a l lo c a l a sse ss­ ment* 2* ”The recommendation o f th is board is to lim it the ta x levy fo r a l l purposes to some s p e c ific maximum, ample p rovision always being made fo r schools and bond is s u e s . No excess of maximum levy f o r any p u b lic improvements s h a ll be made unless authorized by vote of the e le c to ra te * ” Annual R eport, 1917, p . 115* 3* According to th e 1920 r e p o rt, Indiana did not have any o v e ra ll s ta tu to r y ta x lim its p r io r to 1919. Annual R eport, 1920, p . 1006*

30

in 1919 d if f e r e d s i g n i f ic a n t l y from t h i s 1917 reoommendation* R a ls to n 's su c ce sso r in o f f i c e , Governor Goodrich, in h is message to th e l e g i s l a t u r e in 1919 a ls o emphasized once again t h a t I n d ia n a 's prim ary f i s c a l problem was to d isc o v e r means f o r reducing the in e q u a litie s o f p ro p e rty ta x a tio n r e s u ltin g from th e in e q u ita b le and undervalued assessm ents*

1

The General Assembly, a c tin g upon th e

g o v e rn o r's re q u e st th a t i t en ac t th e e s s e n t ia l recommendations made by th e s t a t e t a x board t h a t y e ar t o th e l e g i s l a t u r e , passed th e Tax Reform Law of 1919.

2

The o u tsta n d in g fe a tu r e s of the new law were

as fo llo w s j (a) The 1891 ru le o f " tru e cash v alue" assessm ent was extended to a l l u n its o f government and again was la id down as a n e c e s s ity f o r ach iev in g e q u ita b le ta x le v ie s ; (b) The s t a t e board was given th e "power to review and re a ss e s s any p ro p e rty in th e s t a t e " ; ® (c) S ta tu to r y ta x lim its o f a dual n a tu re were in tro d u ced p r o h ib it­ ing lo c a l ta x in g d i s t r i c t s from e s ta b lis h in g o v e ra ll ta x ra te s f o r t h e i r re s p e c tiv e u h its t h a t e it h e r ( l ) exceeded $1.50 p er $100 o f v a lu a tio n , o r ( 2) r e s u lte d in a ta x y ie ld la r g e r than t h a t o f th e previous y e a r; 1* "Our ta x laws have n o t been re v ise d f o r more than a q u a rte r o f a century* TJnder our p re se n t system o f ta x a tio n and ad m in istra­ t i o n , th e g ro s s e s t i n e q u a litie s e x i s t . In many cases t h e i r bur­ dens f a l l h e a v ie s t on th o se l e a s t ab le to bear them ". Message o f Governor to th e Houses o f th e General Assembly, January 9, 1919, In d ian a Yearbook, 1919, p . 6* 2* Acts o f 1919, Chapters 58 and 59, S ectio n 198* 5* This was th e s t a t e ta x b o a rd 's i n te r p r e ta tio n o f th e a c t . The In d ian a Supreme Court th e fo llow ing y e a r, however, h e ld o th e r­ w ise , contending th e b o a rd 's e q u a liz a tio n powers did n o t extend beyond the county and th e re fo re in e q u a litie s between u n its w ith ­ in a county could not be e q u alized by board a c tio n . Annual R eport, 1920, p . 1045*

31

(d) th e s ta te ta x board was given mandatory review powers and f in a l a u th o rity f o r the d eterm ination of* ( l ) a l l lo c a l ta x le v ie s which exceeded th e s ta tu to r y ta x lim its o f (c) above (which in e f f e c t meant p r a c tic a lly a l l lo c a l le v ie s ) and, ( 2) a l l lo c a l bond issu e s exceeding $5,000; (e) th e e x -o ffic io members of th e board were dropped, and i t was made a th re e man ap p o in tiv e board, w ith not more than two mem­ bers from the same p o l i t i c a l party* Thus, follow ing the p a tte rn s e t by th e e a r l i e r e q u a lis a tio n and ta x b o ard s, i t s composition was n o t "n o n -p a rtisa n ", b u t " b i- p a r tis a n " • Thus, Indiana in attem pting to remedy th e n o to rio u sly in ­ e q u ita b le and undervalued lo c a l assessm ents f i n a l ly re s o rte d to leg ­ i s l a t i v e ta x lim its which embodied a degree of f l e x i b i l i t y to the e x te n t th a t the s t a te ta x board could perm it lo c a l ra te s and le v ie s in excess of the s ta tu to r y maxima. 1

m This fe a tu re of th e law is

g e n e ra lly considered to be the o rig in a l Indiana P lan fo r th e s ta te su p ervision of lo c a l fin a n c e , and i t may be noted t h a t i t in co r­ porated mandatory and n o t a p p e lla te review of lo c a l budgets.

The

s t a te ta x board was s a t i s f i e d w ith the 1919 law fo r i t had o b tain ­ ed what i t had wanted in th e way of ta x reform le g i s l a t i o n .

The

board a c tu a lly had "prepared the b i l l " according to Commissioner Zoercher^ and the board*s 1922 annual re p o rt.^

Thus, i t appears

1* As summarized by K ilp a tric k , "the o rig in of the Indiana Plan was not contained in th e need to rep ress e x o rb ita n t ta x ra te s and b o n d in g ..• • /ij^ was the assessm ent s itu a tio n during the period o f 1913 to 1919". He a lso pointed out th a t in 1919, the year the plan was in troduced, "only nine s ta te s had a lower percentage of per c a p ita income absorbed by ta x a tio n " . K ilp a tric k , op. c i t . , p. 9. 2. "The Commission prepared th e b i l l which re s u lte d in the law o f 1919". P . Z oercher, "S ta te S upervision of P ublic E xpenditures", Proceedings, N ational Tax A sso c ia tio n , 1928, p . 96. 3. "The le g is la tu r e of 1919 passed a law th a t embodied most of the recommendations subm itted by the S ta te Board of Tax Commissioners." Annual R eport, 1922, p . 1081.

32

th a t during th e two years follow ing i t s 1917 re p o rt the hoard s ig ­ n if ic a n t l y changed i t s opinions regarding a d m in istra tiv e techniques f o r c o n tro llin g lo c a l ta x r a te s as a p a rt of a general reassessm ent program.

The 1917 recommendation fo r a f le x ib le ta x lim it would

have assured a la rg e degree o f lo c a l autonomy by use of popular r e f erendums*

The b i l l f i n a l l y recommended and enacted in to law, by

in c o rp o ra tin g th e mandatory review p ro v isio n , in e f f e c t tr a n s fe r re d the s itu s of f i n a l d eterm ination over lo c a l f i s c a l a f f a i r s from th e community to th e s t a t e .

The power o f th e board was enlarged a t the

expense o f th e lo c a l o f f i c e r , and lo c a l autonomy su ffe re d c o rre s­ pondingly* Moreover, i t appears th a t th e s t a te ta x board attem pted to check the development of any unfavorable p u b lic re a c tio n toward the board fo r having “fathered** the p ro v isio n which rep resen ted a major in cu rsio n on "home rule"*

In a review o f the o rig in o f th e 1919

le g i s l a t i o n , th e board*s annual re p o rt fo r 1922 s ta te d th a t the law "as f i n a l ly passed contained about n in e -te n th s old law and onete n th new, and th e re was nothing in the new law th a t had not been recommended by governors o r ta x commissions p r io r to 1918"• 1

It

would appear, however, th a t th e "one-tenth" o f new law p rim a rily concerned w ith curbing lo c a l revenues, expenditures and s e rv ic e s , has been q u a lita tiv e ly f a r more s ig n if ic a n t in the development of In d ian a ’s s ta te - lo c a l f i s c a l re la tio n s than th e "n in e -te n th s" of Annual R eport, 1922, p . 1081. Ten years l a t e r Commissioner Zoercher s t i l l contended th a t "the b i l l / o f 1919]7submitted to the le g is la tu r e was a re-enactm ent of the old law of 1891 adding such amendments as had been suggested by the sp e c ia l commission and th e previous s ta te a d m in istra tio n ." P . Zoercher, "Regarding the Indiana P lan ", R atio n al Municipal Review, May 1932, p . 309.

S3

o f o ld law*

The ex perience w ith th e old law , going back to 1891,

had shown t h a t th e ta x b o ard , lo c a l a s s e s s o r s , and c o u rts f a i l e d to a d m in iste r v ig o ro u sly and e f f e c t i v e l y th e ta x laws p rim a rily con­ cerned w ith reducing th e in e q u a li t ie s in th e ta x system which gen­ e r a l l y had o p e ra ted in th e i n t e r e s t s o f th e im p o rtan t p ro p e rtie d tax p ayers*

The board i t s e l f su b seq u en tly ad m itted th e c o rre c tn e ss

o f Governor R alston*s e a r l i e r a p p ra is a l t h a t th e d e fic ie n c y was 1 n o t to be found in th e 1891 law , but in i t s a d m in istra tio n * The b o a rd 's annual re p o rt f o r 1920 s t a te d :

"One o f th e main

reasons why th e o ld law (1891) f a i l e d was in t h i s , th a t th e S ta te board d id n o t e x e rc is e th e power given by s t a t u t e o f applying h o r i­ z o n ta l r a i s e s * • **The f a c t t h a t i t was n o t used v ig o ro u sly under th e o ld law accounts in a .la r g e measure f o r th e unequal assessm ents and g en eral f a i l u r e o f th e ta x a d m in is tra tio n o f th e S ta te under t h a t law ."

In c o n tr a s t to th e above, th e b o a rd 's a d m in is tra tio n o f th e

"o n e -te n th " o f new law , was m a te r ia lly d i f f e r e n t from t h a t o f any­ th in g w itn essed in th e p a s t .

The p u b lic iz e d ta x p a y er savings of

#12, 000,000 r e s u ltin g from th e f i r s t y e a f 's o p e ra tio n s alone a t t e s t s to th e b o a rd 's v ig o r in a d m in iste rin g t h i s "o n e-te n th " o f new law which embodied th e In d ian a Plan* M oreover, except f o r Governor M a rs h a ll's remarks on lo c a l fin an c e to th e S enate in 1913 in which he recommended " th a t no 1* C f. su p ra , p* 27* 2* Annual R ep o rt, 1920, pp. 1041-1042. The annual re p o rts o f th e board a f t e r 1922 in d ic a te t h a t th e e q u a liz a tio n reform s d id n o t m a te r ia liz e d u rin g th e n ex t two decades* C f. i n f r a , pp.?0-$lf

34

bonds s h a ll be issu ed u n t i l a p p lic a tio n made to th e S ta te Board o f Tax C om m issioners*..is granted"

th e re i s l i t t l e evidence to support

th e b o a rd 's o th e r 1922 c o n ten tio n t h a t the o rig in of th e p ro v isio n re q u irin g mandatory review over lo c a l ta x ra te s was to be found in recommendations made p r io r to 1918. both i t s 1920

2

and 1922

3

And i t should be noted th a t in

annual re p o rts th e board acknowledged i t s

changed p o s itio n on ta x l im i ts .

The 1920 re p o rt s ta te d th a t "the

board in i t s re p o rt two years did not adopt the ta x lim it plan fo r th e reason t h a t th e Ohio ta x lim it has worked a hardship in many 4 in s ta n c e s , because i t e sta b lis h e d a hard and f a s t r u le " . I f th e board did not want to r e s o r t to in f le x ib le ta x lim its in order to keep th e ta x le v ie s from r is in g d ir e c tly w ith th e in creases in v a lu a tio n s , th e re were a t hand techniques o th e r adopted, which in e f f e c t tra n s fe r re d th e s t a te ta x board.

than the p ro v isio n

a la rg e measure

o f c o n tro l

to

The o rig in a l suggestion contained in the

1917 re p o rt f o r achieving f l e x i b i l i t y by use of popular referendums had n o t been in v a lid a te d by th e Ohio ex p erien ce.

Such a method,

1 . Senate J o u rn a l, 1913, p . 18* * 2. Annual R eport, 1920, p . 1011. 3 . Annual R eport, 1922, p . 1088. 4 . Op. c i t . , 1920, p . 1011. 5 . Jensen p o in ts out th a t "when Kansas, in 1907, undertook to r a is e th e a ssessed v a lu a tio n to th e f u l l 100 percent market valu e, and d id , in f a c t , more than q uintuple the v a lu a tio n s, the le g is la tu r e w isely guarded a g a in s t making excessive ta x l e v i e s ....A sh o rt s ta tu te was enacted in substance making i t unlawful fo r any o f f i ­ cer or s e t of o f f ic e rs to f i x ra te s which wbuld produce a sum of money in excess of 2 p er cent more th an th e sum which would have been produced by th e s ta tu to r y r a te s o f 1907". Je n s,P . Jensen, P ro p erty Taxation in th e Unifted S ta te s , U n iv ersity of Chicago P re s s , Chicago, 1931, p . 473.

35

re q u irin g n e ith e r mandatory nor a p p e lla te review of ta x le v ie s by the b oard, of course, would have assured the l o c a l i t i e s th e re te n ­ tio n of a much g re a te r degree of autonomy over t h e i r f i s c a l a ff a irs * The evidence tends to in d ic a te th a t th e s t a t e ta x board, in fram ing th e 1919 b i l l , was p rim a rily concerned w ith curbing lo c a l ta x le v ie s and expenditures and had n o t considered th e problem of lo c a l autonomy to be of s u f f ic ie n t im portance to w arran t th e use of 1917 proposal which would achieve ta x lim it f l e x i b i l i t y through th e use of popular referendums* Thus, out of Indiana*s lo n g -stan d in g stru g g le to achieve a more e q u ita b le and j u s t ta x system , the s ta te ta x board emerged in p o ssession of an a d m in istra tiv e su p erv iso ry technique which had as i t s m ajor o b je c tiv e , n o t the red u ctio n o f in e q u a litie s o f th e prop­ e r ty ta x system , but ra th e r th e curbing of ”ta x -sp e n d e rstt* This became th e most p u b lic ize d fe a tu re o f th e Indiana Plan fo r th e next two decades—s t a te c o n tro l over aggregate le v e ls o f lo c a l revenues and expenditures*

And i t appears t h a t the a d m in istra tiv e vig o r o f

th e s t a t e ta x board improved w ith th e s h i f t in emphasis on objectives* A chro n o lo g ical p o rtra y a l o f the ev o lu tio n o f th e Indiana Plan re q u ire s th a t mention be made o f two o th e r p ieces of l e g is la tio n , enacted p r io r to 1919, which subsequently formed an in te g r a l p a rt o f Indiana*s system of s t a te su p erv isio n over lo c a l finance*

In

1909 th e le g is la tu r e passed th e P ublic Accounting Act which created a Department of In sp e c tio n and Supervision o f P ublic O ffices in

36

"I

Indiana a D ivision of Accounting and S t a t i s t i c s

( b e tte r toaovrn as

th e Indiana S ta te Board o f Accounts) as th e s ta te * s a d m in istra tiv e agency f o r th e su p erv isio n of th e accounting procedures and prac­ t i c e s of lo c a l government*

Completely independent o f the s ta te

ta x board, the S ta te Board o f Accounts -was among th e f i r s t of i t s kind in th e country# When th e law was enacted th e s t a te was p rim a rily concerned o w ith the safeguarding of p u b lic monies, and w ith th e checking o f county tr e a s u re rs who, as so le c o lle c to r s o f th e p ro p erty ta x , c o lle c te d th e s t a t e 's share of revenue from t h i s source*

The im­

m ediate duty o f th e board was th e i n s t a l l a t i o n of a uniform sys­ tem o f accounting and re p o rtin g , and a "complete budget system fo r a l l county, c i t y , town and township o f f ic e s " *

I t was charged

a lso w ith th e continuing fu n ctio n s o f conducting p e rio d ic a u d its 1 * The D ivision of Accounting and S t a t i s t i c s w ill be re fe rre d to as the S ta te Board o f Accounts throughout th e rem ainder o f t h is study, u n less noted otherwise* 2* "In 1905 and 1906 an epidemic o f defalcations in public o ffic e s ra is e d a cry among taxpayers and honest o f f i c i a l s fo r some means o f c o n tro l over th e funds o f pu b lic o ffic e rs * '^he a c tiv e sup­ p o rt of two Governors, J* Prank Hanly and Thomas R* M arshall, f i n a l ly bore fu u it* * * in February 1909"* S ta te Board of Accounts, Annual Report, 1937, p* 83# A lso, th e annual re p o rt fo r 1921 noted th a t "among th e more con­ spicuous and fla g r a n t abuses which the board has in v e s tig a te d and p r a c tic a lly elim in ated are th e s a le of *sh o rt weight* furnaces and b rid g e s, vending of teachers* c o n tra c ts , m alpractices in the c o n stru ctio n and re p a ir of bridges and fre e gravel ro ad s, and the p ra c tic e o f charging d if f e r e n t p ricd s fo r th e same a r t i c l e s when sold under s u b s ta n tia lly id e n tic a l conditions"* S ta te Board of Accounts, Annual R eport, 1921, pp* 349-350* 3* S ta te Board o f Accounts, Annual R eport, 1917, p* 476*

37

o f a l l lo c a l u n its and determ ining th e v a li d i ty o f a l l fin a n c ia l tra n sa c tio n s* ^ The emergence o f th e Indiana Plan gave th e budgetary pro v i­ sio n a new importance* f o r i t became the keystone o f th e e n tire s tr u c tu r e o f s t a te su p erv isio n over lo c a l fin a n c e .

I t appears th a t

p r io r to 1921 many lo c a l u n its had not accepted the budgetary p rin o c ip le , and according to th e s t a te ta x board th e re was ”n o t much need in having a budget law i f o f f ic e rs a re p erm itted to ignore i t tt* The s t a te now had to concern i t s e l f not only w ith the is o la te d lo c a l u n it which did not adhere to the budgetary procedure, but w ith th e more general problem of determ ining whether the p re scrib ed accounting and budgeting system d o v etailed w ith th e procedural requirem ents o f th e Indiana P lan f o r c o n tro llin g lo c a l ta x le v ie s and expenditures* 1 * According to Otto K. Jensen* S ta te Examiner* S ta te Board of Ac­ counts* the annual a u d its o f governmental accounts in Indiana a re "made w ithout n o tic e ...w e examine a l l u n its , a l l o ffic e s t h a t d isb u rse or receiv e p u b lic funds from governor to j u s tic e o f peace”* 0 . K. Jensen* o p en -flo o r discussion* Proceedings* Conference o f S ta te Supervision of Local Finance* W ashington, 1941, pp. 20-21. 2* Each of th e S ta te Board of Accounts* annual re p o rts fo r 1917, 1919, end 1920 s ta te th a t ”the adoption of the *budget system 1 throughout th e s ta te would mean a t o t a l saving o f la rg e sums o f money a n n u ally ". I t appears th a t a f t e r 1921* the board b elieved i t had obtained f a i r l y u n iv e rsa l compliance to t h i s elem entary p rin c ip le fo r in i t s 1921 and 1922 re p o rts the board notes th a t "the adoption o f the ‘budget system 1 throughout the s ta te means the t o t a l savings o f la rg e sums o f money annually”. S ta te Board o f A ccounts, Annual R eports§ 1917, p . 477; 1919* p . 577; 1920, p . 240; 1921, p . 351; and 1922, p . 148* (Underscoring not in o rig in a l)* 3* S ta te Tax Board, Annual R eport, 1922, pp. 1087-1089*

38

The p r in c ip le t h a t lo c a l o ff ic e rs should, be req u ired to l i r e w ith in e s ta b lis h e d budgets may be tra c e d , in In d ian a, to th e County Reform Law of 1899^ which provided th a t county o f f i c i a l s should spend no more money than was a p p ro p ria te d .

The s ta te ta x board e a rly r e a l ­

ized the im p lic a tio n s of t h is s ta tu te f o r e ffe c tiv e su p erv isio n over lo c a l fin a n c e .

Using a d e cisio n of th e Supreme Court of Idaho

2

as

a b a s is , the board contended th a t th e p rin c ip le of th e 1899 s ta tu te was equally a p p lic a b le to th e o ff ic e rs of a l l o th e r forms of lo c a l government.

Moreover, the board in te rp re te d the a c t to mean the

lim ita tio n o f a p p ro p ria tio n s "to the amount s e t out in th e budget and f o r th e purposes th e re in d esig n ated 1*.

Local o f f i c i a l s appar4 e n tly did not concur w ith th e b o a rd 's in te r p r e ta tio n and subsequent­

ly more s p e c ific le g is la tio n was enacted which made the budgetary p r in c ip le a b a sic fe a tu re o f th e Indiana system of s ta te supervision over lo c a l fin a n c e . u n iv e rs a l.

“in ce 1937 compliance has been p r a c tic a lly

The law i s v io la te d o ccasio n ally by o f f i c i a l s o f sm all

r u r a l ju r is d ic tio n s whose lack of adherance to th e p rin c ip le almost c e r ta in ly may be a ttr ib u te d to ignorance o f the law ra th e r than to 1 * Acts of 1899, Chapter 343. 2. Graves v . B erry, 207 P a c if ic , 718 (Idaho). 3 . Z oercher, op. c i t . , 1928, p . 98. 4 . "In p ra c tic e i t had been found t h a t although th e s ta tu te provided fo r the budgeting of a l l item s to be expended, various o f f i c i a l s paid l i t t l e heed to t h is s tip u la tio n and went rig h t ahead exceed­ ing t h e i r o r ig in a l published budgets". M iesse, op. c i t . , 1931, p . 253. 5. Acts o f 1927, ^hapter 95; Acts o f 1935, Chapter 150; Acts of 1937, Chapter 119.

39

w i l l f u l v io la tio n #

1* Annual Report^ 1940# p« 124,

CHAPTER XV

THE DEVELOPMENT OF THE INDIANA. PLAN, 1919-1948

"While Indiana has been c re d ite d w ith being one o f th e p io ­ n eer s ta te s in the use of a d m in istra tiv e c o n tro ls over lo c a l finance i t has n o t a b sta in e d from th e e x te n siv e , bu t le s s p u b lic iz e d , use of le g i s l a t i v e c o n tro ls —p a r tic u la r ly s ta tu to r y debt"*- and ta x lim ita ­ tio n s*

'^he h is to ry o f th e Indiana Plan has been in tim a te ly i n te r ­

woven w ith th e l a t t e r *

Tax lim its and budgetary review c o n s titu te

the "Siamese tw in s” of s ta te su p erv isio n o f lo c a l finance in Indiana The Indiana experience w ith t h i s type o f su p erv isio n during th e th re e decades under review may be c la s s if ie d in to fiv e d i s t in c t p erio d s based on th e ro le played by th e le g i s l a t i v e c o n tro ls in re ­ l a tio n to the many re v is io n s o f th e a d m in istra tiv e c o n tro ls , gener­ a l l y re fe rre d to as th e Indiana Plan* a c te riz e d as follow ss

These p erio d s may be char­

( l ) th e p eriod of the o rig in a l Indiana P lan ,

d escrib ed in Chapter III* (2) the p erio d o f Johnson "home r u l e ” and lo c a l autonomy; (3) th e p erio d of "ap p e lla te review "; (4) th e p er­ iod of "mixed review ” ; and (5) th e p erio d o f "mandatory review ”* This ch ap ter p re se n ts an a n a ly sis of the o p eratio n of th ese forms 1* I'he Indiana C o n stitu tio n o f 1851 provided fo r a s ta tu to r y debt lim ita tio n of 2 p e rc en t of th e assessed v a lu a tio n fb r every lo c a l tax in g ju r is d ic tio n * A c o n s titu tio n a l amendment of 1881 re ­ s t r i c t e d the lim ita tio n to m unicipal corporations*

41

o f th e Indiana F la n , in r e la tio n to th e changing ta x s tr u c tu r e and le v e ls o f e x p en d itu re s, revenues and assessm ents t h a t accompanied th e economic developments o f th e t h i r t y y ear p e rio d under considera­ tio n *

The F erio d o f th e O rig in al Indiana Flan During th e f i r s t f i s c a l year under th e Tax Reform Law o f 1919, which req u ire d ”f u l l v a lu e ” assessm ent, th e n e t v a lu a tio n of ta x a b le p ro p erty rose from $2,233 m illio n s to $5,749 m illio n s , an in c re a se of approxim ately 160 percent*

Consequently, th e board in i t s 1919

annual re p o rt (published in 1920} s ta te d t h a t ”pro p erty has been p la c e d a t much n e a re r i t s tr u e cash value than had ever been known in th e h is to r y of th e s t a t e ” *

Because o f th e low s ta tu to r y maxi­

mum ta x r a t e , th e board reviewed p r a c tic a lly a l l budgets*

Budgeted

ta x le v ie s o f $87 m illio n were reduced by alm ost $12 m illio n , thus enabling th e board to hold th e in cre ased ta x le v ie s to an amount which was approxim ately 10 p e rc e n t h ig h er than the ta x le v ie s o f th e previous year*

Although th e f i r s t yeafs o p eratio n s seemingly

had been s u c c e s s fu l, th e board e a rly in 1920 declared t h a t hence­ f o r th i t would review lo c a l budgets only upon p e titio n of tax p ay ers, and th a t hearings would be held lo c a lly in the c o u n tie s , in ste a d of In d ianapolis*

This procedural change was the f i r s t m o dification of

the o rig in a l Indiana Plan and probably was the o rig in of th e appel­ l a t e review o f ta x r a te s and le v ie s , notw ithstanding Commissioner 1 , Annual R eport, 1919, p . 123#

42

Z o e rc h e r's many re fe re n c e s to Governor M a rs h a ll's address to th e In d ian a S enate in 1913*

As n o ted , Governor M a rsh a ll's recommenda­

tio n s were lim ite d to bond is s u e s and provided f o r mandatory review by th e s t a t e ta x board, n o t a p p e lla te review.^" The reasons f o r th e change in p rocedure, according to th e 1919 re p o rt (p u b lish ed in l a t e 1920) were t h a t th e review o f budgets and bond is s u e s had "put an enormous burden of work upon t h i s B o a rd ..• In a d d itio n th e r e to , th e s e fe a tu re s o f th e law have been met w ith w idespread o p p o sitio n throughout Ind ian a la rg e ly occasioned by th e c e n tr a liz a tio n o f power in th e s t a t e body over th e lo c a l o f f i c i a l s . "

o

The l a t t e r , u n q u estio n ab ly , was th e more com pelling reason*

The P erio d o f Johnson "Home Rule" I t appears t h a t th e b o a rd 's deference to th e aroused p u b lic o p in io n a g a in s t th e o r ig in a l Indiana P lan did not m a te ria liz e soon enough.

Local o f f i c i a l s condemned i t as an " a u to c ra tic c e n tra liz e d

bureaucracy"

and p o in te d to v a rio u s bond issu e s r e s u ltin g from th e

b o a rd 's re f u s a l to

allow

sundry improvementc o sts in c u rre n t budgets.

Before th e b o a rd 's

newly

adopted 1920ru le which s u b s titu te d a p p e lla te

review f o r th e o r ig in a l mandatory review was ever ap p lied a Second S p e c ia l S ession o f th e General Assembly was convened in J u ly , 1920, 1.

Annual R eport,

1919,

p . 123*

2*

®f. su p ra , pp.

33-34.

3.

H. G. L o e ffle r, "M unicipal Tax L im its and Economy", N ational M unicipal Review, Volume X, Number 9, September 1921, p . 477.

43

as a r e s u l t o f th e w idespread i r r i t a t i o n t h a t developed p a r t i c u l a r l y in reg a rd to th e a lle g e d s u p e r f ic i a l exam ination by th e board o f lo c a l budgets under mandatory review .

The l e g i s l a t u r e enacted th e

"Johnson Home Rule Law” ^ which re p e a le d th e c o n tro v e rs ia l p ro v isio n s o f th e 1919 law—th e s ta tu to r y ta x lim its and th e board* s mandatory 2 review powers over bond is s u e s and ta x l e v i e s . The a u th o r ity over th e ta x le v ie s was t r a n s f e r r e d t o County Boards of Review,

rz

which

1.

Acts o f 1920, C hapter 49.

2.

I t appears t h a t as th e years p a sse d , Commissioner Zoercher developed myopia in view ing th e cause of th e change in th e law . Whereas th e 1919 annual re p o rt a tt r ib u t e d i t to "w idespread o p p o sitio n throughout In d ia n a ” , th e 1922 re p o rt contended t h a t ”th o se in te r e s te d in spending la rg e amounts o f p u b lic funds o b je c te d and r a is e d th e c ry in fa v o r o f home r u le ...T h e S ta te Tax Board e a r ly in 1920 c o rre c te d t h i s by adopting r u le s which provided a l l h e a rin g be h e ld l o c a l l y . ” Annual R eport, 1922, pp. 1083-84. A ccording to h is 1924 address to th e R atio n al Tax A sso c ia tio n , th e board was s tr ip p e d of i t s powers ”as a r e s u l t of f a ls e propaganda a g a in s t th e law , by c o n tr a c to r s , money-spenders and o th e r s " . Z o erch er, op. c i t . , 1924, p . 164. His paper to th e same group in 1928 in te r p r e t s th e event as fo llo w si "A s p e c ia l se ss io n o f th e l e g i s l a t u r e was convened as a r e s u l t o f th e Supreme Court d e c la rin g u n c o n s titu tio n a l th e method adopted in making e q u a liz a tio n o rd e rs ...W h ile th e l e g i s l a t u r e was busy p ro v id in g a remedy f o r th e fix in g of v a lu e s, money-spenders a g ita te d changing th e law a ff e c tin g bond issu e s and ta x l e v i e s , and th e S ta te Board*s power over th e se was taken away and power g ran ted to th e County Council? Z oercher, op. c i t . , 1928, pp. 97-98. The l a t t e r d i f f e r s co n sid era b ly from th e in te r p r e ta tio n given to th e event in th e boards*s 1919 annual r e p o r t.

3.

County Boards of Review, th e a d m in is tra tiv e agency f o r review ing lo c a l asse ssm e n ts, should n o t be confused w ith th e County C ouncil. The l a t t e r is th e l e g i s l a t i v e body of th e county and as such approves th e a p p ro p ria tio n s and fix e s the ta x r a te s and le v ie s f o r t h i s ta x in g j u r is d ic t io n on ly .

44

were empowered to review any lo c a l budget upon th e appeal of tw enty o r more a ff e c te d ta x p a y e rs .

Moreover, th e powers o f th e board a ls o

were r e s t r i c t e d e a r ly in t h a t y ear when th e In d ian a Supreme Court h eld t h a t th e b o a rd 's e q u a liz a tio n o rd ers could n o t apply to a u n i t sm a lle r th an th e c o u n ty .’*' During th e one f i s c a l y e ar o f o p e ra tio n under th e Johnson "home Rule" law th e appeal p ro v isio n on ta x r a te s was invoked in o n ly two counties,** alth o u g h lo c a l ta x le v ie s in c re a se d by some $36 m illio n , o r about 50 p e rc e n t.

In th e b o a rd 's annual r e p o r ts , and

Z o e rc h e r's speeches o f subsequent y e a rs , th e marked r i s e in ta x le v ie s during th e y ear th e Johnson law was o p e ra tiv e i s in v a ria b ly a tt r ib u t e d to t h i s "overdose o f Home R ule",

fhe f a c t t h a t th e p ric e le v e l in

1920 was a t th e h ig h e s t p o in t ever experienced in th e United S ta te s p r io r to t h i s p e rio d i s n o t m entioned as a p o ss ib le c o n trib u tin g cause o f th e marked r i s e in lo c a l ta x l e v i e s .

Moreover, although

th e 1919 annual r e p o rt - (p u b lish ed in 1920) noted t h a t th e c o n d itio n s o f th e p e rio d were " p e c u lia r" in th e sense t h a t i t was "a tim e im m ediately succeeding a war p e rio d when a l l p u b lic ex p en d itu res were n e c e s s a r ily reduced to a minimum, r e s u ltin g in th e n e c e s s ity f o r many p u b lic improvements and e x te n sio n s" , th e re p o rt does not a llu d e to t h i s s i t u a t i o n as a p o ss ib le c o n trib u tin g f a c to r to h ig h e r ta x le v ie s . 1.

AnnualR eport, 1920, p . 1045*

2.

AnnualR eport, 1921, p . 893.

3.

AnnualR ep o rt, 1919, p . 123.

45

I t appears t h a t th e board was more i n te r e s te d in r a tio n a liz in g i t s p a r t i c u l a r view point on th e s t a t e c o n tro l o f lo c a l fin an c e th an in an economic a n a ly s is o f th e s itu a tio n *

The P e rio d o f A p p e lla te Review, 1921-1931 The in o rd in a te r i s e in ta x le v ie s during th e one y e ar o f ex p erience w ith th e Johnson “Home Rule" law, induced both r e t i r i n g Governor Goodrich and incoming Governor McCray to recommend to th e 1921 l e g i s l a t u r e t h a t th e s t a t e ta x board once a g ain be given review powers over lo c a l budgets and bond issu e s* ^

A ccordingly, th e

l e g i s l a t u r e re p e a le d th e Johnson law and amended th e 1919 law, but mandatory review coupled w ith s ta tu to r y ta x lim its was n o t re s u rre c te d 2 a t t h i s tim e* In s te a d th e s t a t e ta x board was granted f i n a l a u th o r­ i t y over th e d e te rm in a tio n of lo c a l budgets upon a p p e lla te r e v ie w a l l lo c a l ta x le v ie s and a l l bond is s u e s in excess o f $5,000 were made a p p ea la b le to th e board on p e ti t io n o f 10 o r more taxpayers* The board was empowered to approve o r reduce, b u t n o t to th e le v ie s *

in c re a s e

This 1921 v e rsio n of s t a t e su p e rv isio n over lo c a l fin an ce

became firm ly e s ta b lis h e d as th e Ind ian a P lan f o r th e next decade. I t was s u b s ta n tia lly th e form o f lo c a l c o n tro l t h a t th e s t a te ta x board 1*

House J o u rn a l, 1921, p* 26, pp, 152-153*

2,

Local ta x in g j u r is d ic t io n s were n o t su b je cted to s ta tu to r y ta x lim ita tio n s over t h e i r re s p e c tiv e aggregate le v ie s o r o v e ra ll ta x r a te s f o r th e n ex t te n years* This p erio d of " a p p e lla te review" could be c h a ra c te riz e d e q u a lly as w e ll as one o f freedom from o v e ra ll s ta tu to r y ta x lim ita tio n s *

46

had t r i e d to i n s t i t u t e p r io r to th e m o d ificatio n of i t s powers in 1920 and an exam ination of th e annual re p o rts f o r th e decade rev eals t h a t th e board was s a t i s f i e d th a t t h is rep resen ted the most d e sira b le form of s ta te su p erv isio n to e x ercise over lo c a l fin a n c e . The powers of th e s t a te ta x board under th e plan were con­ tin u a lly te s te d in th e c o u rts , but the board in v a ria b ly was upheld. The f i r s t appeal in which the c o n s titu tio n a lity of th e board1s powers over ta x le v ie s of lo c a l ju r is d ic tio n s was f u l ly p resented and reviewed was a case in which th e board’s a c tio n in fix in g the South Bend C iv il C ity ta x r a te and levy fo r 1928 was challenged. The c o u rt, as in previous case s, held th a t "the power

ru led in favor of th e board and

of ta x a tio n i s in the S ta te , which occupies

th e p o s itio n of u n iv e rsa l tr u s te e fo r a l l i t s M unicipal subdivi­ sio n s.

C itie s get t h e i r a u th o rity to levy tax e s only from a grant

th e re o f by th e S ta te

le g is la tu r e •1

The s t a te ta x board’ s "success"

in reducing the o r ig in a lly

budgeted ta x le v ie s of lo c a l government in Indiana during the f i r s t eleven years under th e 1921 v ersio n of the Indiana Plan is shown in Table I below.

2

1. Zoercher v . A gler, 202 Indiana 214, S t. Joseph County Superior C ourt. 2. Table I I r e la te s th e adjustm ents to the amounts of o rig in a lly budgeted ta x le v ie s fo r the same years covered in Table I .

47

Table 1 NUMBER AND AMOMT OP BUDGETED TAX LEVIES REDUCED ANNUALLY BY THE STATE TAX BOARD YEARS 1931-1931

Year

Number of Budgets Reviewed on Appeal

Number o f Budgets Reduced

Reduction in Tax Levies

1921

42

39

$1,254,448

1922

74

46

1,034,572

1923

37

25

1,874,070

1924

42

41

1,467,345

1925

113

65

1926

95

51

1,639,187

1927

134

77

4,674,623

1928

142

80

1,290,031

1929

134

83

3,269,092

1930

116

73

1,304,826

1931

299

211

1,891j 347

1,228

791

$21,243,544

T otals Source*

•

1,554,004

S ta te Tax Board, Annual R eports, 1921-1931*

A marked r i s e in th e number of appeals occurs a f t e r 1924, th e y ear th e Indiana Taxpayers1 A sso ciatio n was formed.

Dur­

ing the f i r s t fo u r years th e number o f appeals never exceeded 74, and the y e a rly average fo r the p eriod approximated le s s than 3 p ercent of Indiana*s 2000 lo c a l ta x in g j u r is d ic t io n s . 1 suPr a > P*

fo o tn o te 2«

In every

46

subsequent y e a r, except 1926, i t exceeded 100 and in 1931 th e num­ b er o f appeals was alm ost 300, o r approxim ately 15 p ercen t o f th e t o t a l number of lo c a l ta x in g u n i t s .

The average number o f appeals

fo r t h i s l a t t e r p erio d i s more than th re e tim es g re a te r th an th a t of th e preceding y e a rs.*

xhe number of red u ctio n s made annually,

in tu r n , follow s q u ite c lo s e ly th e change in the number of appeals* Taken a lo n e , w ithout considering the d o lla r amount of th e ta x le v ie s involved, th e se aggregate d ata a re no t very meaningful# Thus, f o r th e p e rio d under c o n sid e ra tio n , 1923, th e year of the sm a llest number o f budget appeals and re d u c tio n s, shows d o llarw ise a t o t a l amount o f adjustm ent which i s p r a c tic a lly th e same as t h a t achieved in 1931, th e y ear in which the g re a te s t number o f appeals and adjustm ents o ccurred.

In o th e r words, although a la rg e r num­

b er o f adjustm ents took p lace in th e l a t t e r y e ar, they obviously were s ig n if ic a n tly sm aller p e r budget than those a ffe c te d in 1923. When the adjustm ents a re r e la te d to the amount o f ta x le v ie s o r i ­ g in a lly budgeted in th ese two re sp e c tiv e y e a rs, the t o t a l d o lla r red u ctio n in 1923 rep resen ted a cut o f 1.7 p e rc e n t, whereas in 1931 2 i t amounted to only 1.5 p e rc e n t.

1. Commissioner Z oercher, ij^ iis 1928 address to the N ational Tax A sso c ia tio n , commented th a t the 134 appeals in 1927 "was the la r g e s t number of appeals taken on ta x le v ie s since th e amend­ ment o f 1921, and many of th e se appeals were due to th e a c t i v i ­ ty of th e ta x p a y e rs1 a ss o c ia tio n and th e farm fe d e ra tio n ." Z oercher, op. c i t . , 1928, p . 105. Of course, both Zoercher and Miesse many tim es p u b lic ly a t t r i ­ buted the in cre ase in th e number o f appeals to the a c t iv i t y of th e Indiana Taxpayers* A sso c ia tio n . C f. su p ra, pp. 17-18, and in p a r tic u la r fo o tn o te s 2 and 3, p . 18. 2# C f. Table I I , p . 52.

49

More s ig n if ic a n tly , an exam ination o f th e b o a rd 's annual re ­ p o rts f a i l s to rev e al th e type and s iz e of ju r is d ic tio n s and the s p e c if ic types of funds which have been a ffe c te d by the adjustm ent procedure*

In o th e r words, th e re is no in d ic a tio n o f whose budgets

were reduced and th e n a tu re o f th e re d u c tio n .

For example, the a l ­

most $5 m illio n red u c tio n in ta x le v ie s f o r 1927, i f achieved mainly by a d ju s tin g th e la r g e r c i t i e s 1 budgetary working balances and es­ tim ates of m iscellaneous revenues from sources o th e r than p ro p erty ta x e s, a c tu a lly may have re s u lte d in a sm aller impact upon th e f i s ­ c a l o p eratio n s o f th e communities involved than the $1 m illio n re ­ duction o f th e follow ing year*

This i s e s p e c ia lly so i f in th e l a t ­

t e r case th e cu ts were p rim a rily made on the sm all u n its of govern­ ment and re s u lte d in red u ctio n s in t h e i r a p p ro p ria tio n s and expendi­ tu res*

The s ta te ta x b o a rd 's p u b lic statem ents and annual rep o rts

of th is p e rio d however do not provide any d ata fo r making such analy­ ses*

^ n stea d , the aggregate red u ctio n s a re la b e lle d "taxpayer savings"

supposedly r e s u ltin g from th e o p eratio n of the Indiana Plan*^ Even in terms of ag g re g ate s, as provided by the b o ard 's annual re p o rts and th e taxpayer a s s o c ia tio n l i t e r a t u r e , the rep o rted amount 1* The p a u city of published d ata regarding th e s ta te ta x b o a rd 's o p eratio n s a p p aren tly is n o t p e c u la ir o r confined to the l a s t t h i r t y y e a rs , the p erio d of the o p eratio n o f th e Indiana Plan* P ro fe sso r Lutz in h is e a rly study o f the Indiana S ta te Tax ComM ission, covering th e p eriod from th e b o a rd 's in ce p tio n to 1916, a ls o was f r u s tr a te d by the f a c t t h a t "the u t t e r l y inadequate fig u re s published by th e board make i t im possible to examine t h e i r claim s*" H* L. L utz, The S ta te Tax Commission, Harvard U n iv ersity P re s s , Cambridge, 1917, 153#

50

of red u c tio n re p re se n ts a m isleading and exaggerated p ic tu re o f "taxpayer savings*1# F i r s t , th e s t a t e ta x board does not a llu d e to th e p o s s i b i l i t y t h a t th e su ccessiv e y e a r ’s "sa v in g s” may co ntain an u n a sc e rta in a b le amount o f d u p lic atio n #

Levies and expenditures

o r ig in a lly budgeted fo r c a p ita l improvements (the b u ild in g of a h o s p ita l or school, the purchase o f f i r e - f i g h ti n g equipment, e tc ) may be reduced o r e lim in ated in a p a r tic u la r y e a r, but they a re not gone forever#

In many in sta n c e s they merely a re d efe rred and r e ­

appear in n ext y e a r’ s budget#

I f then th e same item were cu t ag ain ,

an " a d d itio n a l saving" would appear to have been obtained#

More­

o ver, as sometimes happened, i f th e p a r tic u la r a p p ro p ria tio n which had been denied in previous years f i n a l l y was approved by th e board, the f i c t i t i o u s "savings" o f the previous year would s t i l l be c a r­ rie d in th e board’s r e p o r t, even though the r e s u lt o f the b o ard ’s a c tio n had been m erely to d e fe r th e expenditures over time# A second m isleading p ra c tic e was t h i s :

reductions in bud­

geted ta x le v ie s and expenditures may r e s u l t in th e use of addi­ tio n a l a p p ro p ria tio n s o r bond issu e s fo r fin an cin g p a r tic u la r func­ tio n s which otherw ise would have been financed from c u rre n t revenue. This p ra c tic e a lso o p erates to d e fe r the ta x p a y e rs’ c o st to some subsequent period#

And i t should be noted th a t the aggregate re ­

ductions on bond issu e s r e s u ltin g from th e a p p e lla te review by th e s t a te ta x board, rep o rted to amount to more than $30,000,000 during 1921-1931 in c lu s iv e ,’*' a ls o co n tain s an u n a sce rtain ab le amount of 1# A nnual R e p o r t , 1 9 3 1 , p* 637#

51

d u p lic a tio n over th e y e a rs .

Consequently, the elem entary ru le of

not d o u b le-counting, i . e . , not include the same "saving*1 more than once, has n o t been follow ed by th e s t a t e ta x board. Using the board*s rep o rte d d a ta , th e magnitude o f the reduc­ tio n s in lo c a l le v ie s r e la tiv e to th e amounts o r ig in a lly budgeted f o r t h i s p erio d a re shewn in th e follow ing ta b le : Table I I REDUCTIONS MADE BY THE STATE TAX BOARD RELATED TO ORIGINALLY BUDGETED TAX LEVIES YEARS 1921-1931

Year

U nadjusted T otal o f th e Local Tax D uplicate ($000,000)

STB Reductions in Tax Levies (|000,000)

Net T otal of the Local Tax D uplicate ($000,000)

Reductions as p ercen t of O rig in al Tax Levies

1921

$101.8

$1.3

$100.5

1.3

1922

101.4

1 .0

100.4

1.0

1923

110.4

1.9

108.5

1.7

1924

112.9

1.5

111.4

1.3

1925

115.8

1 .6

114.2

1 .4

1926

116.3

1.6

114.7

1.4

1927

127.8

4.7

123.1

3.7

1928

127.8

1.3

126.5

1.0

1929

132.1

3.3

128.8

2.5

1930

119.5

1.3

118.2

1.1

1931

126.4

1.9

124.6

1.5

Source:

S t a t e Tax B o a r d , A n n u al R e p o r t s , 1 9 2 1 - 1 9 3 1 .

52

The ta b le shows th a t th e aggregate red u ctio n s amounted to le s s than 2 p ercen t o f th e budgeted ta x b i l l in every year except 1927 and 1929, when th ey were le s s than 4 and 3 p e rc e n t, re s p e c tiv e ­ ly .

rthen i t i s considered t h a t th e d a ta have n o t been ad ju ste d for

p o ssib le d u p lic a tio n s , and th a t evidence i s lac k in g to in d ic a te what p o rtio n o f th e red u ctio n s re p re se n te d c o rre c tio n s of e stim ate s of o p eratin g balances and non-property ta x revenues,*^ and what p o rtio n subsequently was rep laced by a d d itio n a l a p p ro p ria tio n s, i t appears th a t the o v eral magnitude o f th e impact of th e Indiana Plan upon lo c a l finance during t h is p e rio d was something le s s s ig n if ic a n t than th e h ig h ly p u b lic iz e d "taxpayer savings" a ttr ib u te d to th e o p e ra tio n of th e Indiana P lan by i t s major proponents. Going beyond th e ta b u la tio n of fig u r e s , Commissioner Zoercher and the s t a te ta x board on numerous occasions contended th a t th e " in d ir e c t sa v in g s", c o n se rv a tiv e ly estim ated to be an equal amount,

2

r e s u lte d from th e f a c t th a t the e x iste n ce o f th e Indiana Plan au to ­ m a tic a lly operated as a r e s t r a i n t and curbed the lo c a l o f f ic ia ls * 1 . Cf. i n f r a , Chapters V and VI. 2 . Commissioner Zoercher in h is p r e s id e n tia l address to the N ational Tax A sso c ia tio n in 1936 s ta te d t h a t "the amount saved the ta x ­ payers by t h i s method of review ing bond issu e s and ta x le v ie s amounts to $80,000,000 and the in d ir e c t savings can be e a s ily considered an equal amount". P. Zoercher, " P re s id e n tia l A ddress", P roceedings, N ational Tax A sso c ia tio n , 1936, p . 202. This amount i s a ls o re fe rre d to in th e s t a te ta x board*s annual re p o rts and appears to r e f l e c t unadjusted reductions of $33 m il­ lio n in ta x le v ie s and $46 m illio n in bond issu e s fo r the period 1919-1932, in c lu s iv e . Cf. Annual R eports, 1931, p . 634, and 1932, p . 886.

53

p r o p e n s itie s to spend p u b lic f u n d s T h a t th e p lan may have i n f lu ­ enced some o f f i c i a l s in t h i s manner probably i s c o r r e c t, b u t t h a t i t may have a f f e c te d an e q u a lly im p o rtan t group o f lo c a l o f f i c i a l s in p r e c is e ly th e o p p o site way—in c re a se d t h e i r p ro p e n s itie s to "pad11 budgets in a n tic ip a tio n of p o s s ib le s t a t e board review and re d u c tio n — was n ev er p u b lic ly recognized*

Of c o u rse , n e ith e r of th e e f f e c ts can

be proven t o have ta k e n p la c e ; i t would be d i f f i c u l t to a s c e r ta in in which d ir e c tio n th e in flu e n c e o f th e p la n was s tro n g e r, and im possible to a s s e s s th e q u a n tita tiv e im portance of s u b je c tiv e v alu es and in ­ d ir e c t b e n e f its o f t h i s ty p e . N o n eth eless, th e ta x board d uring t h i s p e rio d a p p a re n tly was s a t i s f i e d w ith th e type o f a d m in is tra tiv e su p e rv isio n over lo c a l fin an ce a ffo rd e d by th e 1921 v e rs io n o f th e In d ian a P la n .

This may

be in f e r r e d from an exam ination o f th e board*s annual re p o rts f o r th e p e rio d .

Recommendations f o r any change in th e p lan a re conspicuous

by t h e i r ab sen ce, alth o u g h lau d a to ry comments on i t s o p e ra tio n a re co n tain ed in th e re p o rt f o r every y e a r.

The 1931 r e p o r t, devoted

w holly to an account of th e plan*s accomplishments sin ce i t s in c e p tio n , ended on th e note t h a t th e p lan had sto o d th e t e s t .

"The endorsem ents

given th e In d ian a P lan by stu d e n ts of government everywhere i s if y in g to th e c itiz e n s h ip of t h i s s t a t e . g re a t change.

g r a t­

Time has brought about a

Many who in th e p a s t have c r i t i c i z e d th e law have come

to r e a liz e t h a t much good has been acco m p lish ed .• .A wide-awake 1.

C f. i n f r a , Chapter VI f o r i n te r e s tin g example where board adm itted t h a t th e o p p o site e f f e c t m ight occur, i . e . , an in c re a se in th e lo c a l o f f ic ia ls * p ro p e n s itie s to "pad" b u d g ets.

54

c itiz e n s h ip can p r a c t ic a l l y c o n tro l i t s lo c a l tax es by th e p ro v isio n s now embodied in th e Indiana Tax Law,1'

The Great D epression—The P erio d of Mixed Review, 1931-1937 The emergence of th e G reat D epression in the e a rly 1930*s, wrought r a d ic a l changes in th e Indiana P la n , as in th e e n tir e f i e l d of s t a te - lo c a l f i s c a l r e l a ti o n s .

Of the th re e le v e ls of governm ent-

f e d e r a l, s t a t e , lo c a l—th e l a t t e r was imm ediately a ffe c te d by the rep ercu ssio n s of th e d e p re ssio n .

The obvious and p re ssin g problem

f o r lo c a l government from th e s t a r t was to o b tain some r e l i e f , not c u re .

R apidly mounting p u b lic w elfare expenditures coupled w ith

reduced revenues r e s u ltin g from decreased v a lu a tio n s , ta x delinquen­ c ie s , and fo re c lo s u re s , confronted Indiana*s communities w ith a major f i s c a l emergency#

The s itu a tio n in Indiana was f u r th e r aggravated

by th e c o n s titu tio n a l p ro h ib itio n a g a in st s ta te debt and c o n s titu tio n a l lim ita tio n s on lo c a l borrow ing. The General Assembly in 1931 attem pted to cope w ith th e d e te r io r a tin g f i s c a l s itu a tio n by enactin g ta x lim ita tio n le g is la tio n which made i t i l l e g a l fo r lo c a l u n its to budget ta x le v ie s fo r the next two years in excess o f t h e i r 1930 le v ie s unless such excessive 1,

Annual R eport, 1931, p, 639,

2,

P ro fe sso r H all in h is a n a ly sis of th e s itu a tio n contended t h a t **perhaps i f lo c a l borrowing had not been so c lo se ly c o n tro lle d r e s o r t to gross income ta x a tio n would not have appeared so n ecessary” , F ran k lin P, H a ll, Indiana Gross Income Tax, un­ p u blished d o c to ra l d is s e r ta tio n , U n iv ersity of W isconsin, Madison, W isconsin, 1946, p , 18,

55

le v ie s were approved by th e s t a t e ta x b o ard .^

The board i t s e l f had

n o t favored s ta tu to r y ta x lim its as a s u b s titu te f o r a p p e lla te review and had n o t asked f o r th e c o n fe rre d mandatory review powers*

It

shared th e le g is la tu r e * s b e li e f t h a t a c tio n had to be taken to provide a measure o f r e l i e f f o r th e p ro p e rty ta x p a y e r, bu t i t a p p ra ise d th e s i tu a tio n as one which re q u ire d t h a t th e base o f th e ta x system be broadened by th e in tro d u c tio n of "replacem ent” ta x e s t h a t would re ­ lie v e th e p ro p e rty ta x from c a rry in g th e m ajor r e s p o n s ib ility f o r fin a n c in g lo c a l government.

The b o ard 1s 1930 annual re p o rt had recom­

mended th e in tro d u c tio n o f a s t a t e income ta x , which in i t s opinion could be enacted w ith o u t amending th e c o n stitu tio n , and e x cise s on p tobacco and s o f t d r in k s .* The fim Ur predicam ent o f th e lo c a l ta x in g u n its continued to worsen during th e n ext two y e a rs .

The s ta te l e g is la tu r e in attem p t­

ing to cope w ith th e s itu a t i o n by th e re in tro d u c tio n o f s ta tu to r y ta x r a te lim ita tio n laws a c tu a lly wrought havoc w ith th e t r a d i t i o n a l In d ian a P lan and th e s t a t e ta x board*s a u th o r ity over lo c a l b udgets. C onsequently, th e 1932 s p e c ia l se ssio n of th e General Assembly enacted a b ill

7

t h a t abandoned th e o v e ra ll ta x levy lim ita tio n of th e p re ­

ceding y e ar and re s to re d f o r a l l lo c a l u n its th e 1919 r ig id ta x r a te maximum o f #1.50 fo r every #100 of a sse sse d v a lu a tio n which could be exceeded only under "emergency c o n d itio n s " . 1.

Acts of 1931, Chapter 78.

2.

Annual R eport, 1930, p . 322.

3.

Acts o f 1932, Chapter 10.

L ater t h a t same y e a r,

56

however, a j u d ic i a l d e cisio n handed down by a county c i r c u i t co u rt h eld th a t ta x r a te s and le v ie s re q u ire d fo r se rv ic in g lo c a l indebted­ ness o u tstan d in g as of August, 1932, were excluded from th e lim ita tio n . . 1 provision#

The follow ing year in re g u la r se ssio n th e 1933 le g is la tu r e amended th e 1932 a c t to in co rp o ra te t h is exem ption, but a t the same time made th e s ta tu to r y lim ita tio n even more re p re ss iv e by reducing th e maximum r a te fo r u nincorporated m u n ic ip a litie s (tow nships) from $1*50 to $1*00, w hile re ta in in g th e ra te fo r in co rp o rated c i t i e s and towns a t the o rig in a l le v e l o f $1.50.

p

The s e v e rity of th ese lim ita tio n s

is in d ic a te d by th e f a c t t h a t $.15 of the re s p e c tiv e maxima rep resen ted th e s t a t e 's p ro p erty ta x r a t e , thus leaving fo r th e fin an cin g of the c o u n tie s, tow nships, c i v i l c i t i e s and school d i s t r i c t s an e ff e c tiv e le g a l r a te o f &1.35 fo r th e urban u n its and $#85 fo r the r u r a l u n its o f government. The 1932 a c t a ls o c re ate d a sta te -w id e system of County Boards o f Tax Adjustment^ which were made s o le ly resp o n sib le f o r adm inistering !•

F ran k lin P . H a ll, "Indiana Experience w ith General P ro p erty Tax Rate L im ita tio n " , The B u lle tin of th e N ational Tax A sso c ia tio n , Volume XXXI, Number 8, May 1946, p. 231.

2. Acts of 1933, Chapter 237. 3. The County Board of Tax Adjustment i s composed of a seven member ap p ointive board, fo u r of whom a re appointed by the judges of the c i r c u i t and/or su p e rio r co u rts of th e county, one by th e county c o u n cil, one by th e mayor of the la rg e s t c ity in the county, and one by the board of education in the la rg e s t school d i s t r i c t in th e county. P. S. S ik e s, Indiana S ta te and Local Government, Bloomington, In d ian a , 1946, p . 64. H e re a fte r t h i s board a lso w ill be re fe rre d to as the county tax board, county adjustm ent board, or merely county board when the meaning is c le a r from the c o n te n t.

57

th e new ta x lim it law .

The county boards were given mandatory review

powers over a l l lo c a l budgets and were a u th o riz e d to reduce s p e c if ic fund le v ie s when necessary to o b ta in compliance w ith the s ta tu to r y ta x l i m i t s .

C orporation and township o v e ra ll r a te s could exceed th e

s ta tu to r y maximum only when th e county board d e clare d an “emergency11 e x is te d in th e lo c a l u n i t .

The “emergency c la u s e ” provided th e loop­

hole by which lo c a l u n its and th e county boards were a b le to avoid th e re p re ss iv e e f f e c ts o f th e a c t . The reenactm ent of th e ta x lim it laws and th e c re a tio n of th e County Boards o f Tax Adjustm ent in d ic a te s t h a t th e Indiana l e g i s l a t u r e during t h i s p e rio d did not share th e s t a t e ta x board’ s o p tim is tic a p p ra is a l o f th e e ffic a c y o f " a p p e lla te review ” under th e In d ian a P la n as a device f o r achieving sta te -w id e c u rta ilm e n t of lo c a l ta x le v ie s and e x p e n d itu re s.

As a r e s u l t of th e emergency

f i s c a l l e g i s l a t i o n , th e ta x board’ s a p p e lla te review powers over lo c a l le v ie s and ex p en d itu res were made v i r t u a l l y su p erflu o u s—a f i f t h wheel on an a lre a d y overburdened and cumbersome s ta te admin­ i s t r a t i v e mechanism*

In 1932 th e b o a rd 's annual re p o rt f o r th e f i r s t

tim e in a decade made no mention o f the number of appeals under th e In d ian a P la n , n o tin g only t h a t they were "very much le s s than in form er y e a r s ...th e $102 ,1 89.”*

t o t a l amount o f th e red u ctio n amounted to only

This was le s s than 10 p e rc en t o f the amount o f red u ctio n

o b tain ed in any previous year and rep re se n te d approxim ately o n e -te n th 1.

A n n u al R e p o r t , 1 9 3 2 , p . 8 8 5 .

58

o f on© p e rc e n t o f the t o t a l lo c a l ta x d u p lic a te f o r 1932#^ On© should n o t assume t h a t by i t s emergency l e g is la tio n th e l e g is la tu r e had rep u d ia te d th e u n d erly in g philosophy of th e Indiana Plan*

R ather i t accepted Commissioner Zoercher*s

and th e s t a t e ta x

board*s e a r l i e r adm onitions t h a t th e b e s t remedy fo r curing lo c a l f i s c a l i l l s was to be found in a good dose of p ro p erty tax curtailm ent# The c re a tio n and d e sig n a tio n of th e County Boards of Tax Adjustment as th e s t a t e 's a d m in is tra tiv e arm fo r th e enforcem ent o f th e ta x lim it law, w ith power to a d ju s t lo c a l le v ie s , in e f f e c t meant th e emergence of a dual system o f s t a te su p e rv isio n over lo c a l finance#

I t did not

mean a b a sic s h i f t in th e a tt i tu d e toward ta x problems# I t appears t h a t th e l e g is la tu r e a c tu a lly had attem pted to im­ plem ent, r a th e r than c u r t a i l , th e Indiana P lan by the in tro d u c tio n o f abnorm ally low ta x lim its*

In e f f e c t , a p p e lla te review was scrapped

and th e mandatory review o f p r a c t ic a l l y a l l lo c a l budgets was sub­ s t i t u t e d in i t s place*

Moreover, a p p e lla te review in i t s " b e s t”

previous y e ar of e x p erien ce, w ith tax p ay er a s s o c ia tio n a s s is ta n c e , had not been ab le to reach more than 15 p e rc en t of th e s t a t e 's 2000 lo c a l ta x in g u n i t s .

The le g i s l a t u r e , i t seems, was seeking a

technique by which to extend the Zoercher philosophy to the rem aining 85 p ercen t o f th e ta x in g d i s t r i c t s .

But the wave of oppo sitio n based

on th e "home r u le ” is s u e , to th e 1919 experim ent w ith ta x lim its and mandatory review obviously had not been forgotten#

Lodging th e

mandatory review powers and th e a d m in istra tio n of th e ta x lim ita tio n 1.

Cf# i n f r a , Table IV.

59

laws in th e newly c re a te d and d e c e n tra liz e d county ta x boards in ste a d of th e s ta te ta x board provided a measure of insurance a g a in st the p o ssib le charge of s t a te u su rp a tio n of lo c a l autonomy* That th e s t a te board a t t h i s time did not approve nor advocate th e le g i s l a t i v e measures enacted may be in fe rre d from i t s 1932 re p o rt (published in l a t e 1933)*

In a d d itio n to noting t h a t the county ta x

boards, w ith t h e i r powers of mandatory review , made th e board1s a p p e lla te review la rg e ly su p e rflu o u s, th e re p o rt made nine s p e c ific recommendations f o r a lle v ia tin g th e f i s c a l emergency*

None of th ese

could be in te rp re te d as giving t a c i t approval to th e new ta x lim ita tio n law and th e machinery e s ta b lis h e d fo r i t s adm in istratio n * By 1935 th e county adjustm ent boards' n o to rio u sly loose in te r p r e ta tio n of the emergency clause of th e 1932 a c t had re s u lte d in p r a c tic a lly a l l lo c a l r a te s being above th e s ta tu to ry l im i t s *2 1.

The f i r s t th re e recommendations were designed to stren g th en the b o a rd 's powers fo r e q u aliz in g assessm ents; th e next fiv e c a lle d f o r broadening th e revenue system by tax in g in ta n g ib le s , reducing p ro p erty ta x exem ptions, and i n s t i t u t i n g a s ta te n et income tax and a 2% r e t a i l s a le s ta x ; and th e remaining one c a lle d fo r a red u ctio n and re o rg a n iz a tio n of tax in g u n its by e lim in a tio n of overlapping ju r is d ic t io n s , p a r tic u la r ly th e tow nship. This f i n a l recommendation i s the only in stan ce th a t the w r ite r was ab le to d isco v er of the ta x board d ire c tin g a tte n tio n to a b asic fa c to r underlying in c re a sin g government c o s ts .

2.

For example, in 1934, which was one of the b e st of th e f i r s t four enforcement y e a rs , only 17 townships out of In d ia n a 's t o t a l of 1010 and not a sin g le m unicipal co rp o ratio n out of 529, had r a te s w ith in th e le g a lly p re sc rib e d maxima, according to a study by C harles K ettleborough of th e S ta te L e g isla tiv e Bureau* Quoted by F ranklin P . H a ll, "Indiana Gross Income Tax”, unpublish­ ed d o c to ra l d is s e r ta tio n , U n iv ersity of W isconsin, Madison, W isconsin, 1S46, p . 231.

60

The General Assembly in an attem p t to c lo se t h i s loophole again m odified th e Indiana P lan by e n a c tin g l e g is la tio n re q u irin g s ta te ta x board approval o f a l l emergency and a d d itio n a l a p p ro p ria tio n s The b o a r d s re a c tio n to t h i s change in th e plan was noted in i t s 1935 re p o rt which s ta te d t h a t "the Tax Board did not ask f o r t h is a d d itio n a l power, but the l e g is la tu r e r e a liz e d th a t th e tendency of p u b lic o f f i c i a l s is not always along th e lin e s of economy and re ­ ducing e x p en d itu re s, and th e re fo re conferred t h is a d d itio n a l duty upon th e S ta te Tax Board." Table I I I shows t h a t th e c e n tra l review of a l l a d d itio n a l and emergency a p p ro p r ia tio n s ,of lo c a l governmental u n its did not m a te ria lly "reduce e x p e n d itu re s". The marked in c re a se in th e a b so lu te amount of a p p ro p ria tio n s req u ested and approved during t h is p e rio d , of co u rse, was not re ­ la te d to th e change in su p e rv isio n .

I t re s u lte d from an expansion

of governmental fu n ctio n s and t h e i r c o st was a sso c ia te d w ith the expanding fe d e ra l p u b lic works and w elfare programs, fe d e ra l and s t a te g ra n ts , and th e shared d is tr ib u tio n of s t a te c o lle c te d revenues 1.

Acts of 1S35, Chapter 150. This fe a tu re of th e Indiana Flan has continued unchanged and today c o n s titu te s one of the more onerous ta s k s re q u ire d of th e board according to i t s p resen t chairm an. See fo o tn o te 3, p . 21. The annual re p o rts fo r 1936, (p. 233); 1937, (p. 256); and 1946, (p . 918) in d ic a te th a t o th e r boards have re a c te d in a s im ila r manner to t h is ta s k .

2.

Annual R eport, 1935, p . 228.

61

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84

th e t o t a l amount reviewed*

I t i s apparent th a t th e board d id n o t

u t i l i z e i t s powers to change th e amount and d ire c tio n o f e x tra budgetary ex p en d itu res which th e lo c a l communities deemed neces­ sary* The im pact of th e red u c tio n s on th e le v e ls o f e x p e n d itu re s, as in th e preceding p e rio d , continued to be p r a c t ic a l l y i n f i n i t e s ­ imal*

In fo u r o f the te n y ears th ey amounted to s l i g h t l y more

than o n e -te n th of one p e rc en t of th e lo c a l governmental expendi­ t u r e s , and in th e two y ears in which the la r g e s t red u c tio n s were made th ey approxim ated o n e -h a lf o f one percent*

During t h i s same

p erio d the a d d itio n a l a p p ro p ria tio n s approved, a ls o expressed as a p e rc e n t of th e t o t a l e x p e n d itu re s, v a rie d from a low of s ix p e r­ cent to a high o f fo u rtee n percent*

The conclusion i s seemingly

in escap ab le t h a t the l e g i s l a t i v e attem pts to clo se the 'Emergency'1 loophole by g ra n tin g th e s t a te ta x board mandatory review powers over a l l e x tra -b u d g etary a p p ro p ria tio n s had p r a c tic a lly no in f lu ­ ence upon th e le v e ls and tre n d s of lo c a l governmental expenditures during the p erio d under consideration* The magnitude of the o v e ra ll adjustm ents a ffe c te d by the s t a t e ta x b o a rd 1s newly acquired mandatory review powers over th e re g u la r budgets of the lo c a l tax in g ju r is d ic tio n s fo r the fo u r pr e-war years fo r which published d ata a re a v a ila b le is shown in Table X below*

85

T a b le X

AGGREGATE REDUCTIONS IN BUDGETED TAX LEVIES MADE BY STATE TAX BOARD YEARS 1959-42 T otal Tax Levy C e r tif ie d by CBTA

STB Reductions in Tax Levies

Net Total of the Local Tax D uplicate

STB Reductions as percent of Tax Levies C e rtifie d by CBTA

Year

($ 0 0 0 )

($ 0 0 0 )

($ 000)

1939

$99,588

$2,295

$97,293

2.30

1940

98,957

1,629

96,328

1. 6 6

1941

100,375

1,646

98,729

1.64

1942

94,715

1,239

95,476

1.31

,159

$1,702

$96,457

Average Sources

1.73#

S ta te Tax Board, Annual R eports, 1940-1943.

That th e s u b s titu tio n of mandatory review fo r a p p e lla te re­ view in 1937 re s u lte d in an in crease in both the ab so lu te and r e la ­ tiv e amounts of reductions in lo c a l ta x le v ie s is evidenced by the d a ta .

The y e a rly average of aggregate adjustm ents amounted to

#1.7 m illio n , compared w ith th e $ .4 m illio n achieved in the e a rly n in e te e n - th ir tie s

Expressed as a percentage o f the budgeted tax

b i l l th e red u ctio n s shown fo r th e more recen t period were four tim es la rg e r than those of the e a r l i e r p e rio d .

More s ig n if ic a n tly ,

however, the y e a rly average of aggregate adjustm ents amounted to le s s than two percent of the t o t a l ta x le v ie s , and in 1939, which 1* Cf. supra, Table IV, p. 61*

86

rep resen ts th e year o f th e g re a te s t red u ctio n , i t was only 2#3 p ercent of the t o t a l tax le v ie s and continued to d eclin e every year th e re a fte r*

I t should be Recalled once again th a t these data

have not been adjusted fo r p o ssib le d u p lic a tio n , e tc * , which have the e ffe c t of exaggerating and m isrepresenting the n e t amount of "re a l savings" to the taxpayer* I t is p a te n tly evident th a t the influ en ce exerted by the revised and strengthened Indiana Plan on aggregate le v e ls of lo cal revenues and expenditures during th ese e a rly war years con­ tinued to be as lim ite d and inconsequential as i t had been during the periods when th e major re lia n c e in c o n tro llin g lo c a l finance in Indiana was placed upon s ta te ta x board a p p e lla te review o rig i­ n atin g from taxpayers* remonstrances* I t may be noted th a t th e Indiana Plan th e o r e tic a lly has p o s s ib ilitie s as a c o n tra -c y c lic a l device in a s ta te - lo c a l com­ pensatory f i s c a l program*

However, the o v e ra ll impact of the plan

during the th re e decades of i t s ex isten ce seemingly has been so n e g lig ib le th a t i t cannot be considered an e ffe c tiv e co n tro l in ­ strument fo r th is purpose even i f i t s e ffe c ts had been counter­ c y c lic a l ra th e r than c y c lic a l and n eutral* I t also should be evident th a t the a v aila b le data published by the s ta te ta x board, on which the above macroscopic analyses have been based, do not lend themselves to an em pirical an aly sis of the d is trib u tio n p a tte rn of the incidence of the county and 1 . Cf* supra, pp. 42-43*

87

and s ta te ta x board adjustm ents on th e myriad types and siz e s of fu n c tio n s, funds, and tax in g ju r is d ic tio n s comprising the Indiana system of lo c a l finance#

I t i s toward th is m icroscopic asp ect of

th e problem th a t the follow ing chapters p rim a rily are directed*

CHAPTER V

THE OPERATIONS OF THE COUNTY BOARDS OF TAX ADJUSTMENT

The 1937 v ersio n of th e Indiana Plan fo r the Control o f Local E xpenditures, as noted p re v io u sly , incorporated s ta tu to ry ta x lim ita tio n s which p r a c tic a lly assured the u n iv e rsa l mandatory review of a l l lo c a l budgets by the county and s ta te ta x boards# This system of dual c o n tro l was not su b jected to any f u r th e r major re v isio n by th e s ta te le g is la tu r e during th e next twelve years# Both major p o l i t i c a l p a r tie s u n c r itic a lly accepted the Indiana Plan as a tr a d i ti o n a l Hoosier i n s t it u t io n necessary fo r the s ta te su p ervision of lo c a l finance#

A fter 1942 the s t a te tax board

discontinued the p u b lic a tio n of the meagre aggregative data on ’’ta x p a y e rs1 savings" which had c h a ra c te rise d the annual rep o rts of the preceding decades#

Except fo r such generalized statem ents

as "we know t h a t some o f th e ta x adjustm ent boards h a v en 't done a very good job"*^ or they "are to be complimented fo r t h e i r work w ith th e S ta te Board o f Tax Commissioners in reviewing budgets", inform ation is com pletely lacking regarding the magnitude or e f­ fic a c y of th e county ta x boards* operatio n s during the decades of th e n in e te e n - th ir tie s and n in e te e n -fo rtie s #

This a re a of s ta te

1# p* A# Beczkiwicz, Proceedings, 41st Annual Conference of Indiana Tax Board and County A ssessors of Indiana, In d ia n a p o lis, 1941, p p . 3 7 -3 8 .

2# Annual R eport, 1945, p# 825#

89

supervision over lo c a l finance in Indiana c o n stitu te s a "darkest A frica" as f a r as published em pirical data are concerned.

In an

attem pt to f i l l in these im portant gaps th is and the follow ing chapter p resen t an a n aly sis of the reviewing agencies operations during the war and post-w ar y e a rs, 1943-1948 in c lu s iv e , the only period fo r which unpublished d e ta ile d data were a v aila b le when t h is study was i n i t i a t e d in e a rly 1949 The study i s based on a re p re se n ta tiv e sample of 310 lo cal governmental u n its which c o n stitu te d 250 o f Indiana*s 2,033 lo ca l taxing d i s t r i c t s .

The d is trib u tio n of the sample by type and

size of taxing J u ris d ic tio n as compared w ith the universe fo r 3 Indiana is shown in Table X I. 1. The data and analyses presented in t h is and the subsequent ch ap ters, unless noted otherw ise, are based on the o rig in a l data c o lle c te d by the w r ite r from the f i l e s of the S tate Board of Tax Commissioners, S ta te House, In d ian ap o lis, fo r the tax levying years 1943-1948, in c lu siv e , which correspond w ith the c o lle c tib le years 1944-1949, inclusive* Moreover, in the te x t and ta b le s , unless otherwise noted, the years w ill r e fe r to the ones in which th e tax le v ie s and ra te s were o rig in a lly estab lish ed and reviewed, ra th e r than the subsequent ones in which the tax lev ies were c o lle c te d . 2. The discrepancy between the number of governmental u n its and number of taxing J u ris d ic tio n s in the sample is account­ ed fo r by the in clu sio n of th e s ix ty townships which repre­ sent both c iv il and school townships. Cf. supra, p . 11* footnote 2. 3. See Appendix A fo r the b asis of se le c tio n of the sample and the t e s t s of re p re se n ta tiv e n e ss.

90

T a b le XI

NUMBER OF LOCAL TAXING JURISDICTIONS IN SAMPLE COMPARED WITH TOTAL FOR INDIANA CLASSIFIED BY TYPE AND SIZE OF GOVERNMENT UNIT YEARS 1943-1948 Number in Sample

Type and S ize8,

Total Number in S ta te

C ounties: C-I P opulation 100,000 and over C -II n 50,000 to 100,000 C -III " 26,000 to 60,000 C-IV ” under 26,000 T otal Counties

5 8 8 9 30

5 8 25 54 92

Townships: l ’- i P opulation 25,000 and over T -II " 10,000 to 25,000 T -III ” 5,000 to 10,000 T-IV " under 5,000 T otal Townships

5 9 16 30 60

19 30 48 913 1010

C iv il C itie s* M-I Population 50,000 and over M-II " 25,000 to 50,000 M -III " 2,500 to 25,000 M-IV " under 2,500 T otal C iv il C itie s

8 10 28 44 90

8 10 80 431 529

School C itie s : S -I O verlie M-I^ S -II n M-II S -III 11 M -III S-IV n M-IV Total School C itie s

9 10 28 23 70

9 10 80 74 173

250

1804

T otal Taxing Units Sources:

c

U. S. Bureau of Census,9©nsus of P opulation, 1940# S ta te Board of Accounts, S t a t i s t i c a l Report of the S ta te of In d ian a, 1947•

(a) Size c la s s if ic a tio n based on 1940 population data# Appendix A fo r s e le c tio n of sample#

See

(b) S—I included Floyd County Consolidated School D is tr ic t in 1948 only, as th is was the f i r s t year of i t s existence# (c) Above data exclude 229 sp e cia l taxing d i s t r i c t s . Cf# supra, Table V II* p . 70#

91

I t w i l l be noted th a t p r a c tic a lly a l l larg e u n its of govern­ ment a re included in th e sample.

The two u p p er-size s t r a ta w ith in

each c la s s if i c a t io n , except tow nships, c o n s titu te a 100 percent re p re se n ta tio n .^ - Thus, th e sample q u a n tita tiv e ly accounts f o r a much la rg e r share of th e s t a t e ’ s o v e ra ll lo c a l finance a c t i v i t i e s than could be in fe rre d from i t s comparative s iz e .

The 30 counties

used as th e prim ary b a sis fo r th e s e le c tio n of the o th er lo c a l u n its , although amounting to le s s than o n e -th ird of th e t o t a l co u n ties, aocounted f o r approxim ately tw o -th ird s of the s t a t e ’ s t o t a l populatio n , assessed v a lu a tio n s , and county expenditures and property tax revenues in 1946.

Likew ise, during the same year the 90 c iv i l c i t i e s in the

sample, c o n s titu tin g le s s than o n e -fif th of the t o t a l number of m u n ic ip a litie s , rep resen ted approxim ately f o u r - f if th s of the m unicipal expenditures and revenues.

School d i s t r i c t s overlying

th ese c i v i l corp o ratio n s showed a comparable d isp ro p o rtio n a te s ig n if ­ ican ce.

Even th e townships are weighted h eav ily in favor of the

la rg e r u n its although u n iv e rsa l re p re se n ta tio n was not used fo r any siz e stratu m .

The 60 sample tow nships, rep re se n tin g 6 percent of

th e t o t a l , accounted fo r about 25 percent of th e s ta te population a and t o t a l township expenditures and property ta x revenues.4' Table XII p rese n ts the sample used in th is study regrouped on the b asis of tax in g j u r is d ic tio n . 1.

The sample includes the 22 counties and 18 c it i e s of Indiana used by th e U.S. Bureau of Census in i t s government s e rie s on ’’County Finances” and ”C ity Finances”, re s p e c tiv e ly .

2.

Derived from S ta te Board of Accounts, S t a t i s t i c a l Report of the ................. S ta te of In d ian a, 1947.

92

T a b le X II

DISTRIBUTION OF LOCAL UNITS OF GOVERNMENT CLASSIFIED BY SIZE OF JURISDICTION YEARS 1943-1948 Number in Sample

Size of U nit

Percentage D i s tr i­ bution

Large urban u n its

27

10.8

Medium urban u n its

37

14.8

Small urban u n its

80

32.0

Small r u r a l u n its

106

42.4

250

100 0

T otals Sourcei

.^

Table XI, p . 90.

The above c la s s if ic a tio n rep re se n ts a simple summation of the siz e s t r a t a of the. fo u r major types of lo c a l government u n its shown in Table X I.

For th is purpose a t hand th e sm allest u n its in each

of th e d iff e r e n t forms of lo c a l governments, i . e . c la s s if ic a tio n s C-IV, T-IV, M-IV and S-IV, have been designated as r u r a l tax in g ju r is d ic tio n s since counties w ith populations of le s s than 25,000, and townships w ith le s s than 5,000, are predom inantly towns and c i t i e s of le s s than 2,500, f o r urban and ru ra l communities.

composed of

the U.S. Bureau of Census* break

I t w ill be noted th a t

d e sp ite the

q u a lita tiv e importance of th e la rg e r u n its —the u p p er-size s t r a ta of each category—adequate cognisance has been given to th e sm aller ju r is d ic tio n s .

The sm all urban and ru ra l u n its combined represented

alm ost 75 percent of th e sample, and more than 40 percent of the t o t a l .

the l a t t e r alone accounted f o r

93

A ll lo c a l u n its of government in Indiana continue to use a form of fund accounting in which s p e c ific ta x r a te s , le v ies and expenditures a re determined fo r each in d iv id u a l budgetary fund. The tr a n s f e r of monies between funds is p ro h ib ited except when ex­ p l i c i t l y authorized by the s ta te ta x board fo r the financing of a d d itio n al or emergency a p p r o p r i a t i o n s I n e f f e c t , a separate and independent budget i s prepared, reviewed and f in a lly estab­ lish ed fo r each sp e c ific fund.

An an aly sis of th e number of ta x ­

ing ju r is d ic tio n s whose budgets were adjusted by th e reviewing agencies, w ithout con sid eratio n of the funds a ffe c te d , reveals only a p a r t i a l , i f not m isleading, p ic tu re of th e impact of the Indiana Plan upon lo c a l fin an c e. The aggregate number of funds reviewed by both th e county and s ta te ta x boards during the s ix year period under considera­ tio n is shown inTable X III.

I t w ill be noted th a t the study con­

tain ed more than 6,000 s p e c ific funds or roughly 1,000 fo r each of the s ix y e a rs, an average o f 4.3 funds per lo ca l budget.

As

may be expected, the average number of funds v aried d ir e c tly w ith the siz e of the tax in g ju r is d ic tio n , the la rg e s t d i s t r i c t s having about twice as many as the sm a llest. As provided by th e i n i t i a l 1932 le g is la tio n

2

c re atin g the

d ecen tralized county system fo r the ad m in istratio n of the s ta tu to ry ta x lim its , the county ta x boards were authorized to reduce, but 1# Acts of 1937, Chapter 119. 2 # A c ts o f 1 9 3 2 , C h apter 1 0 .

94

T a b le X I I I

NUMBER OP LOCAL BUDGETS AND SPECIFIC FUNDS REVIEWED BY COUNTY AND STATE TAX BOARDS YEARS 1943-1948

Year a

Number of Local Budgets

1943

249

1,049

4.2

1944

248

1,015

4.1

1945

248

1,057

4.3

1946

249

1,046

4.2

1947

249

1,076

4.3

1948

250

1,120

4.5

1,493

6,363

4.3

Large urban u n its

157

1,031

6.6

Medium urban u n its

222

1,152

5.2

Small urban u n its

480

2,126

4.4

Small r u r a l u n its

634

2,025

3.4

1,493

6,363

4 .3

T otals

Number of S p e c ific fiands

Average Number of Funds p er Budget

By Size of U nit fo r 1943-1948 Combineds

T otals

95

not in c re a s e , th e sp e c ific fund le v ie s and expenditures budgeted by the lo c a l u n its#

Moreover, they were lim ite d to making changes only

in resp ec t to t o t a l amounts w ith in each budget c la s s if ic a tio n p rescrib ed by the S ta te Board of Accounts and e x p lic itly p ro h ib ited from reducing or re v isin g any of the d e ta ile d items of expenditures making up th e s p e c ific funds#

The o v e ra ll extensiveness of these

red u ctio n s, in terms of budgets and sp e c ific funds, i s shown in Table XIV#

Table XIV HUMBER OF LOCAL BUDGETS AMD SPECIFIC FUNDS REDUCED BY THE COUNTY TAX BOARDS YEARS 1943-1948 Local Budgets Adjusted as Number p ercent of Reviewed Adjusted

Year

S pecific Funds Adjusted as percent Number of Reviewed Adjusted

1943

100

40.2

150

14.3

1944

84

33.9

116

11.4

1945

87

35.1

130

12.3

1946

82

32.9

123

11.8

1947

80

32.1

140

13.0

1948

101

40.4

173

15.4

534

35#8/£

832

13.0#

T otals

I t appears th a t th e number of lo cal u n its which had th e ir o rig in a l budgets reduced ranged from 32 to 40 percent of the number

96

reviewed a n n u ally .

But the percentage was as high in 1943 as in

1948, th e two years of the period which were probably the most d is ­ sim ila r in terms of p re v a ilin g p o l i t i c a l , economic and so c ia l c o n d itio n s.

Likewise, when the funds ad ju ste d are expressed as per­

centages o f the number reviewed, th e data fo r the period show th e com paratively sm all range of 11 to 15 p e rc e n t.

The la r g e s t number

of fund adjustm ents a lso occurred in 1943 and 1948 when they amounted to approxim ately 15 percent of the funds reviewed in the resp ectiv e y e a rs.

In o th er words, whether th e adjustm ents are expressed in

terms of o v e ra ll budgets or s p e c ific funds, the data in d ic a te th a t no s ig n if ic a n t d iffe re n c e e x is te d in the r e la tiv e extensiveness of the county ta x boards1 operations between the war and post-w ar e ra s . However, i t should be noted th a t th e a n a ly sis in terms of funds provides a more p re c ise measure than one based so le ly on the number of tax in g ju r is d ic tio n s involved.

Whereas, during th is six year

^period under co n sid eratio n the county tax boards adjusted the budgets of one out of every th re e lo c a l governmental u n its , only one out of every e ig h t s p e c ific funds was reduced.

Furthermore, the data show

t h a t th e sm a lle st number of budget adjustm ents occurred in 1947, but the sm allest number of fund reductions took place in 1944. The aggregate d o lla r amount of reductions in budgeted tax le v ie s fo r each of the years under c o n sid eratio n is shown in Table XV below.

97

T a b le XV

TAX LEVY REDUCTIONS MADE ANNUALLY BY COUNTY BOARDS OF TAX ADJUSTMENT YEARS 1943-1948 Budgeted Tax Levies Reviewed by CBTA and STB

Amount of Reduction by CBTA

Year

(lo o o )

($ 000 )

1943

$63,364

$

1944

Reductions as percent of Tax Levies Reviewed

827

1.3

65,227

539

.8

1945

70,786

1,202

1.7

1946

82,498

1,084

1.3

1947

94,388

1,300

1.4

1948

113,556

3,803

3.3

#489,819

1,755

T otals

l . i

Dollarw ise the t o t a l adjustm ents made by the county tax boards during the e n tir e s ix year period averaged le s s than 2 per­ cent of the o rig in a l funds budgeted by the lo c a l taxing j u r i s ­ d ic tio n s d e sp ite the post-w ar e ra ’ s marked in crease in tax le v ie s th a t was an in e v ita b le accompaniment of the in fla tio n a ry p ric e lev el changes and th e expansion of governmental functions th a t had been e ith e r r e s tr ic te d or elim inated during the war y e a rs.

The percentage

reduction in every one of the years a c tu a lly was less than the six year average except fo r 1948 when i t s lig h tly exceeded 3 p erc en t. Moreover, th e large 1948 adjustm ent can be p a rtly a ttr ib u te d to the sin g u la r #1.5 m illio n cut made by the Marion County Board of Tax Adjustment in the In d ian ap o lis c i v i l c ity budget levy which had been

98

e s ta b lis h e d o r ig in a lly a t $12 m illion*^

I f t h i s unique red u ctio n

i s excluded from th e c a lc u la tio n s , the rem ainder of th e adjustm ents made by th e county tax boards during 1948 averaged only 2 p e rc en t of th e ta x le v ie s o r ig in a lly budgeted by the o th e r 249 lo c a l ta x in g ju r is d ic tio n s included in th e study*

Thus, the d ata tend to coro ro b o rate th e conclusions drawn from Table IIV th a t the r e la tiv e

o v e ra ll ex tensiveness of th e o p eratio n s of th e county ta x boards during th e post-w ar years was not markedly d if f e r e n t from t h a t of th e war period* Although the above agg reg ativ e fig u re s appear unim pressive, th e impact of th e in d iv id u a l adjustm ents made by th e county ta x boards upon sny sin g le type o f ju r is d ic tio n may have been q u ite s ig n if ic a n t, e*g*, th e In d ian a p o lis case o f 1948* if

Furtherm ore,

the a n a ly sis is re la te d to s p e c ific c a teg o ries of funds, i t may

be discovered t h a t p a r tic u la r fu n ctio n s and se rv ic e s have been d r a s t ic a l l y reduced, o r even elim in ated , though the change in th e a ffe c te d ta x in g j u r i s d i c t i o n s t o t a l budget appears to be n e g li­ gible*

In o rd er to rev eal the d is tr ib u tio n p a tte rn of th e a d ju s t­

ments in term s o f:

( l ) th e types and s iz e s o f tax in g d i s t r i c t s

a ff e c te d ; (2) th e siz e of th e s p e c ific adjustm ents; (3) th e types of funds and se rv ic e s involved; and (4) th e c r i t e r i a used by the 1* This adjustm ent was unique in th a t i t represented th e la rg e s t sin g le red u ctio n made in any lo c a l budget by e ith e r the county o r s ta te ta x boards during th e s ix y e a r p erio d under considera­ tio n * The In d ia n a p o lis c iv i l c ity o f f i c i a l s appealed t h is case subsequently to th e s ta te tax board which re s to re d to the c ity $298,000, or approxim ately o n e -f if th of th e o rig in a l reduc­ tio n made by th e Marion County Board of Tax Adjustment* 2* Cf* su p ra, p. 95*

99

county ta x boards in making in d iv id u a l d eterm inations, the remain­ der o f th e a n a ly sis w ill be based on th e aggregate six year t o t a l s and on th e s p e c ific budgetary funds in stea d of the u n its of govern­ ment#

This procedure appears to be ap p ro p riate inasmuch as the

data fo r the in d iv id u a l war and post-w ar years shewed no marked d i s s i m i la r it i e s , and the fund a n aly sis provides a more accurate and p re c ise measure of th e extensiveness of the operations of the reviewing agencies*

D istrib u tio n of CBTA. Operations by Type and Size o f Local Unit The sample number o f s p e c ific budgetary funds reviewed and ad ju sted by the county ta x boards, c la s s if ie d by type and siz e of tax in g j u r is d ic tio n , is shown in Table XVI*

I t w ill be noted

th a t during t h is period the d is trib u tio n p a tte rn of the aggregate number of adjustm ents made by the county ta x boards, in terms of th e types of ju ris d ic tio n s a ffe c te d , followed q u ite c lo sely th a t of the aggregate number of funds,reviewed*

C iv il corporation

funds accounted fo r both th e la rg e s t number of reviews and a d ju s t­ m ents, 57 percent of the resp ec tiv e t o t a l s ; w hile county funds re ­ presented the sm a lle st, 11 and 14 p e rc en t, respectively*

On the

o th e r hand, the funds of school co rp o ratio n s, rep resen tin g almost 25 percent of th e t o t a l number of funds reviewed, accounted fo r le s s than 20 percent of the number a d ju ste d , and r e la tiv e ly were th e le a s t a ffe c te d by th e operations of th e county ta x boards dur­ ing the period under consideration*

Moreover, i t appears th a t

100

T a b le XVI

NUMBER OF BUDGETARY FUNDS REVIEWED AND ADJUSTED BY COUNTY TAX BOARDS CLASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 1943-1948 Type and S izea J u r is d ic tio n

Funds Reviewed Percentage Number D is trib u tio n

Funds A djusted Percentage Number D istrib u tio n

Counties : C-I C-II C -III C-IV Total

173 167 208 145 693

2.7 2.6 3.3 2.3 10.9#

36 41 22 14 113

4.3 4.9 2.7 1.7 13.6#

Townships: T-I T -II T -III T-IV Total

186 319 513 782 1800

2.9 5.0 8.1 12.3 28.3#

29 69 67 85 250

3.5 8.3 8.1 10.2 30.1#

C iv il C itie s : M-I M-II M -III M-IV .Total

488 429 761 642 2320

7.7 6.7 12.0 10.1 36.5#

71 65 96 77 309

8.5 7.8 11.5 9.3 37.1#

School C i ti e s : S -I S -II S -III S-IV Total

184 237 643 486 1550

2.9 3.7 10.1 7.6 24.3#

49 31 43 37 160

5.9 3.7 5.2 4.4 19.2#

Total A ll Units

6363

100.0#

832

100.0#

.

(a) N otation fo r s iz e c la s s if ic a tio n s same as in Table XI*

101

g en erally th e sm a lle st u n its of government, i . e . , the two low estsiz e s t r a t a , a lso were ad ju ste d during t h is p eriod r e la tiv e ly le s s fre q u e n tly than the la rg e r u n its The incidence o f th e s e adjustm ents is f u r th e r revealed when the number of reductions are expressed as percentages of the t o ta l number of funds in each category reviewed by th e county ta x boards, as presented in Table XVII below: 1* As noted in Table X I, the sample contains a 100 p ercen t rep re­ se n ta tio n of the two u p p e r-siz e s t r a t a fo r a l l categ o ries of funds except tow nships. In oth er words, the 1754 Indiana ta x ­ ing ju r is d ic tio n s (com prising 62 c o u n tie s, 103 school corpora­ tio n s , 439 c i v i l c i t i e s , and 950 tow nships) not included in the sample used fo r t h i s study were a l l sm all u n its of govern­ ment w ith th e exception of 35 townships* Assuming th a t the average number of funds in each category of the unrepresented governmental u n its was the same as fo r the sample (Table XIV), and applying the r a tio of fund a d ju s t­ ments to reviews obtained f o r each category (Table XVII) to the u n iv erse, provides the follow ing percentage d is trib u tio n of the t o t a l number of funds reviewed and ad ju ste d by the county ta x boards during t h i s p erio d : Percentage Reviewed

Percentage Adjusted

Large urban u n its

3.9

5.5

Medium urban u n its

4.8

9.3

Small urban u n its

15.6

14.9

Small r u r a l u n its

75.7

70.3

100.0%

100.0%

Size of Unit

T otals

Thus, a f t e r e lim in a tin g th e b ia s fo r the predominance of th e la rg e r tax in g ju r is d ic tio n s in the sample, i t s t i l l appears th a t the sm aller u n its were ad ju ste d r e la tiv e ly le ss often than the la rg e r u n its .

102

T a b le XVII

NUMBER OF BUDGETARY FUNDS ADJUSTED BY COUNTY TAX BOARDS EXPRESSED AS PERCENTAGES OF FUNDS REVIEWED CLASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 1943-1948

Size o f Unit

County Funds

Town­ ship Funds

C iv il C ity Funds

School C ity Funds

Large urban u n its

30*8

15.6

14.5

26.6

17.9

Medium urban u n its

24*6

21.6

15.2

13.1

17.9

Small urban u n its

10*6

13.1

12.6

6.7

10.7

Small r u ra l u n its

9,7

10.9

12.0

7.6

10.4

Averages

16.3#

13.9#

13.3#

10.3#

13.1#

Average!

The d ata show th a t whereas one out of every s ix county funds was a d ju s te d , only one out of approxim ately every e ig h t and ten c iv i l and school co rp o ratio n funds, re s p e c tiv e ly , were reduced upon review*

The more freq u en t re v isio n of county funds may be a tt r ib u ­

ted p a r tly to th e composition of the county ta x board which presum­ ably i s re p re se n ta tiv e of the sundry forms of tax in g ju ris d ic tio n s w ith in the county*'*'

Inasmuch as the e sta b lish e d county r a te is

1* Cf* supra, p* 56, footnote 3* However, one c r i t i c of th e Indiana Plan p red ic te d th e follow ing s h o rtly a f t e r the county tax boards were created in 1932* "Urban in te r e s ts w ill in e v ita b ly be made su b serv ien t to the wishes of a county agency which in most coun­ t i e s of the s ta te w ill be in the hands of rural-m inded o f fic ia ls * The in e v ita b le c o n flic t w ill be extrem ely in te re stin g * What a w allop a rural-m inded board in A lien County can give to 'them gol-d am ta x spenders in Fort W a y n e • V* Sheppard, "Indiana Adopts a Tax Lim it Law", N ational Municipal Review, Volume XXII, No* 11# November, 1932, p. 642*

103

le v ie d upon a l l taxpayers reg a rd less of the p a r tic u la r community in which th ey re s id e , county budgets were sc ru tin iz e d more care­ f u lly than those of o th er ju ris d ic tio n s *

However, as i s to be

expected, th e re i s a d iscern ab le degree of v a ria tio n in th is re ­ spect between th e d if f e r e n t boards*

An examination o f the minutes

of th e county ta x boards* meetings fo r the s ix year period showed th a t a number of boards a p p aren tly considered the a d m in istrativ e review of lo c a l budgets to be merely a perfu n cto ry rubber-stam ping 1 chore* In fiv e of the s ix years under review more than oneq u a rte r o f the boards stu d ied did not make a sin g le adjustm ent in th e o rig in a lly budgeted ta x le v ie s or expenditures of lo cal u n its , w ith the notable exception o f county budgets*

2

In c o n tra s t, a

1* ”We know th a t some of the ta x adjustm ent boards haven’t done a very good job* In one p a r tic u la r county, the Tax Adjustment Board convened and in f if te e n minutes adjourned and passed the t r a n s c r ip t to th e Indiana Tax Board* I went to th a t county and p u b lic ly c r i t ic i z e d the board f o r not having performed i t s d u tie s* ” Beczkiewicz, op* c i t * , pp* 37-38* 2* The number of county ta x boards in the sample of 30 which e ith e r made no adjustm ents or lim ite d them e x clu siv ely to the reduction of county budgets, p a r tic u la r ly th e w elfare funds, fo r each of th e s ix years under review were as follow ss

Year 1943 1944 1945 1946 1947 1948 T otals

Humber of County Boards Making Ho Adjustments 6 5 7 7 10 6 41

Humber of County Boards A djusting County Budgets Only 2 0 1 3 2 2 10

Total 8 5 8 10 12 __8 51

104

number o f boards were so assiduous in the performance of t h e i r s ta tu to ry fu n ctio n s t h a t in a d d itio n to a d ju s tin g the budgetary funds of a m a jo rity of th e lo c a l tax in g ju r is d ic tio n s w ith in t h e i r c o u n tie s, they a c tu a lly reduced s p e c ific expenditure item s w ithin the budgetary fu n d s,^ a p ra c tic e which was e x p lic itly p ro h ib ite d by the o rig in a l le g is la tio n c re a tin g th e county ta x boards,

and

the amending l e g is la tio n red e fin in g t h e i r powers.® Table XV"II a lso in d ic a te s th a t the r e la tiv e frequency of the adjustm ents made by th e county ta x boards varied in a marked degree d ir e c tly w ith the siz e of the tax in g j u r is d ic tio n .

This i s p a r­

t ic u l a r l y ev id en t in th e case of th e county and school budgets* The la r g e s t u n its had approxim ately one out of every th re e , and one out of every fo u r, o f t h e i r re sp ec tiv e budgetary funds re ­ duced; w hereas, th e lo w e st-size s t r a ta show only one out of every te n , and one out o f every th ir te e n , a d ju ste d , respectively#

In

g en eral, t h i s d is tr ib u tio n p a tte rn by siz e is also evident fo r th e townships and c i v i l co rp o ra tio n s, but not in the same marked de­ gree#

Of course, the more frequent adjustm ent of the budgets of

the la rg e r taxing ju r is d ic tio n s may be a ttr ib u te d p a rtly to th e d isp ro p o rtio n a te q u a n tita tiv e importance of th ese budgets as mea­ sured by the d o lla r amount of ta x le v ie s and expenditures involved. 1# Minutes of th e County Boardsof Tax Adjustments Marion County, 1944-1948; S t. Joseph County,1947; andVanderburgh County, 1948; from th e f i l e s of the S ta te Board of Tax Commissioners, S ta te House, Indianapolis# 2# Acts of

1952, Chapter 10#

3 . A c ts o f

1 9 3 7 , C hapter 119*

105

There n a tu r a lly i s a stro n g d is p o s itio n on th e p a rt of the county ta x boards to foous t h e i r a tte n tio n on those ta x in g u n its th a t loom th e la r g e s t dollarw ise*^ Table XVIII p re s e n ts th e d is tr ib u tio n p a tte rn of th e aggre­ gate d o lla r amount of o r ig in a lly budgeted ta x le v ie s reviewed and a d ju ste d by th e county ta x boards, again c la s s if ie d by type and siz e o f ju r is d ic tio n *

I t w i l l be noted t h a t school and c i v i l c ity

co rp o ratio n s alone accounted fo r more than 70 p e rc en t of approxi­ m ately $500 m illio n o f th e o r ig in a lly budgeted ta x le v ie s reviewed by th e county ta x boards*

In c o n tr a s t, th e r e la tiv e in sig n ific a n c e

of th e Indiana township as a fu n c tio n a l u n it of government and tax ­ ing j u r is d ic tio n is s tr ik in g ly revealed by th e aggregate amount of township le v ie s which was only 6 p ercen t of the t o t a l fo r a l l lo c a l government, n o tw ithstanding th e f a c t t h a t township budgets re p re ­ sen ted more than 28 p e rc en t (Table XVI) of th e t o t a l number of budgetary funds*

However, th e d is tr ib u tio n p a tte r n of th e a d ju s t­

ments does not follow th a t of th e review s.

More than $4 m illio n ,

or almost o n e -h a lf of the t o t a l d o lla r reductions was a t the ex­ pense of c i v i l c i t i e s whose budgeted ta x le v ie s represented only o n e -th ird o f th e funds reviewed by th e boardsj whereas, reduc­ tio n s in school c ity budgets amounted to le s s than 20 percent of th e t o t a l adjustm ents although these funds c o n stitu te d w ell over o n e -th ird of the t o t a l amount reviewed* 1. Cf. supra,p* 102, fo o tn o te 1*

Thus, when th e operations

106

T a b le X V III

AMOUNT OF BUDGETED TAX LEVIES REVIEWED AND ADJUSTED BY COUNTY TAX BOARDS CLASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 1943-1946

Type and Size of J u r is d ic tio n a

Budgeted Tax Levies Reviewed Amount Percentage ($000) D is trib u tio n

Counties 3 C-I C -II C -III C-IV T otal

$64,179 27,828 14,669 7,211 $113,887

13*1 5*7 3*0 1.5 23.3%

Townships j T-I T -II T -III T-IV ^'otal

12,674 6,458 5,129 5,388 $ 29,649

C iv il C itie s : M-I M-II M -n r M-I7 T otal School C itie s : S -I S - II S -III S-IV Total

Amount o f CBTA Reductions Amount Percentage ($000) D is trib u tio n $

763 888 259 54 11,964

8.7 10 .1 3.0 •6 22.4%

2*6 1.3 1 .0 1.1 6.0%

544 305 193 71 $1,113

6.2 3.5 2.2 •8 12.7%

123,010 27,521 17,058 2 , 312 $169,901

25.1 5.6 3.5 •5 34.7%

2,616 929 430 87 $4,063

24.9 10.6 4.9 1.0 46.4%

114,555 35,006 20,177 6,644 $176,382

23.4 7.1 4.1 1 .4 36.0%

1,184 268 113 50 $1,614

13,5 3.1 1.3 .6 18.5%

T o tal A ll U nits13 $489,819

100.0%

$8,755

100.0%

(a) N otation f o r siz e c la s s if ic a tio n s same as in Table XI* (b) T otals may n o t equal sum o f p a rts because of rounding*

107

of th e county ta x boards are a n aly zed e ith e r in terms o f the r e la tiv e number (Table XVI) or d o lla r amount of adjustm ent, i t i s evident th a t o f th e fo u r major c a te g o rie s of lo c a l government in In d ian a, school co rp o ratio n s were r e la tiv e ly the l e a s t e f­ fected*

This may be a ttr ib u te d p a r tly to th e f a c t th a t school

budgets g e n erally are le s s complex than those of c i v i l c i t i e s and p a rtly to th e steady b u t q u ie t growth of s t a te le g is la tiv e co n tro ls over school fin an ce w hile th e h ig h ly p u b lic ize d admin­ i s t r a t i v e c o n tro ls embodied in th e Indiana Plan were evolving* A la rg e number o f s ta tu to ry p ro v isio n s regarding s p e c if ic , and in some cases m inute, asp ects of school budgeting, such as the s ta te p resc rib e d school teach ers 1 minimum sa la ry schedules and maximum expenditure and ta x r a te lim its over sundry o th er p a r t i ­ c u la r school funds, a l l have had the e f f e c t o f circum scribing th e d is c re tio n a ry powers of both school a u th o r itie s and county and s ta te ta x boards in e s ta b lis h in g school budgets and fix in g school ta x rates*^ 1* The follow ing rep re se n t a few of the s ta tu to r y c o n tro ls over Indiana school budgets in e ff e c t during th is period under con­ s id e ra tio n : (a) In order to obtain s t a te a id , township school budgets a re lim ite d to th e follow ing maximum exp en d itu res: re p a ir of b u ild in g s and care of grounds—#50*00 per room; re ­ p a ir and purchase o f school f u r n itu re and equipment— #1*50 p er e n ro lle d student-;-school su p p lies (o th er than j a n i t o r i a l ) —#1*50 p er e n ro lle d stu d e n t; j a n i t o r i a l s e r­ vice— #10.00 per room* (b) Maximum ta x r a te of #0.75 fo r cumulative b u ild in g funds* (c) Maximum ta x r a te o f #0.10 fo r school re c re a tio n funds* (d) Maximum ta x r a te of #1*25 fo r s p e c ia l school fund; and maximum ta x ra te of #1*25 fo r tu itio n fund; and combined maximum ta x r a te o f #1.50 fo r preceding two school funds*

108

In sharp c o n tr a s t, the g r e a te s t r e la tiv e impact o f the county ta x b o ard s' red u ctio n s was a c tu a lly upon th e q u a n tita tiv e ly l e a s t im portant type o f tax in g j u r is d ic t io n in In d ia n a --th e r u ra l township*

R epresenting only 6 p ercen t of th e t o t a l amount of o r i­

g in a lly budgeted ta x le v ie s review ed, township funds accounted fo r alm ost 13 p e rcen t of the t o t a l reductions made by th e county ta x boards during the s ix year period*

Ho o th er category had

t h e i r funds a d ju ste d to t h is extent* In terms o f s iz e c la s s if i c a t io n , the bulk of th e opera­ tio n s of the county ta x boards were concentrated in a handful of larg e tax in g ju r is d ic t io n s .

In every category, w ith the n o tab le

exception of th e county, the u p p e r-siz e stratum accounted fo r the major p ro p o rtio n o f the t o t a l ta x le v ie s reviewed and adjusted* For example, of the 250 tax in g ju r is d ic tio n s in th e study, th e 26 la r g e s t u n i t s , * c o n s titu tin g 16 p ercen t of the t o t a l number of funds (Table XVI) , accounted fo r alm ost 65 percent o f the budgeted ta x le v ie s reviewed and 60 p ercen t o f th e t o t a l d o lla r amount of re d u c tio n s.

Moreover, the budgets of th e e ig h t la r g e s t c iv il

c i t i e s , and t h e i r p r a c tic a lly coextensive school c o rp o ra tio n s, rep resen ted approxim ately 50 p ercen t of th e budgetary funds 1* Cf. supra, p . 90, Table XI* This stratum c o n sists of fiv e c o u n tie s, fiv e tow nships, e ig h t c i v i l c i t i e s , and eig h t school c o rp o ra tio n s, except fo r 1948 in which year the Floyd County C onsolidated School D i s t r i c t was added to th e school d i s t r i c t sample*

109

reviewed and more than 40 percent of th e t o ta l reductions made during th e period under consideration*

At the oth er extreme, the

sm allest tax in g ju r is d ic tio n s , numbering more than a hundred and rep resen tin g over a t h ir d of the t o t a l number o f funds (Table XVI), accounted fo r le s s than 5 percent of the ta x le v ie s reviewed and only 3 p ercen t of the t o t a l reductions*

I t is apparent th a t the

d is tr ib u tio n p a tte rn o f th e adjustm ents c lo se ly p a ra lle le d the re ­ views, and th a t both g en erally v aried d ir e c tly w ith th e siz e of th e tax in g unit* The r e la tiv e importance of th is type of a d m in istra tiv e co n trol is fu r th e r revealed when the d o lla r amount of adjustm ents made by the county ta x boards are expressed as percentages of th e o rig in a lly budgeted ta x le v ie s reviewed, as shown below in Table XIX*

Table XIX COUNTY TAX BOARD REDUCTIONS EXPRESSED AS PERCENTAGES OF ORIGINALLY BUDGETED TAX LEVIES REVIEWED CLASSIFIED BY TYPE AND SI2E OF JURISDICTION YEARS 1943-1948 County Funds

Town­ ship Funds

C iv il C ity Funds

School C ity Funds

Averages

Large urban u n its

1.2

4.3

2.1

1.0

1.6

Medium urban u n its

3.2

4.7

3.4

.8

2*5

Small urban u n its

1.8

3.8

2.5

.6

1.7

Small ru ra l u n its

.7

1.3

3.8

.8

1*2

Averages

1*7%

5*8%

2*4;%

*9%

1*8%

Size of Unit

110

Although the aggregate reductions f o r a l l u n its averaged le s s than 2 p e rc e n t, v a ria tio n s between th e sundry types and siz e s a re disceraab le#

School d i s t r i c t s , dollarw ise the most im portant

type of tax in g j u r is d ic tio n in In d ian a, showed the sm allest average percentage re d u c tio n --le s s than 1 p e rc en t; whereas townships, by any c r ite r io n the l e a s t im portant, evidenced the la rg e s t average percentage re v is io n , alm ost 4 percent#

Adjustments in the c iv i l

c ity and county funds approximated th e o v e ra ll average of 2 percent# C la s sifie d by s iz e s t r a t a , the data show t h a t in general the per­ centage reductions tended to vary d ir e c tly w ith the siz e of taxing ju r is d ic tio n , except fo r c i v i l corporations#

In th is l a t t e r cate ­

gory the budgets of th e la r g e s t u n its showed an average percentage reduction which was approxim ately only o n e -h a lf th a t of the sm all­ est* D espite th ese v a r ia tio n s , i t is p a te n tly evident th a t during th is period the county ta x boards* operations did not e x e rt more than a n e g lig ib le influence upon th e o v e ra ll s tru c tu re and lev e l of lo c a l finance in Indiana#

Moreover, the impact upon the aggregate

budgeted tax le v ie s of p a rtic u la r c la sse s of tax in g ju r is d ic tio n s seemingly m anifested a perverse re la tio n s h ip —i# e# , the adjustm ents when measured d ollarw ise were re la tiv e ly the la r g e s t fo r the quanti­ t a ti v e l y l e a s t im portant u n its , and r e la tiv e ly the sm allest fo r those which were the most important# The preceding a n a ly sis re la te d th e adjustm ents of lo cal bud­ gets to the amounts reviewed by the county ta x boards#

Such measures

do not rev eal to what extent the adjusted funds a c tu a lly were reduced#

I ll

In o rd er to in d ic a te t h i s , th e cu ts in the ta x le v ie s are expressed in Table XX as percentages o f only those funds which were a d ju ste d , and not o f th e t o t a l funds reviewed# Table XX COUNTY TAX BOARD REDUCTIONS EXPRESSED AS PERCENTAGES OF ORIGINALLY BUDGETED TAX LEVIES ADJUSTED CLASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 1943-1948

Size of U nit

County Funds

Township Funds

C iv il C ity Funds

Large urban u n its

3#4

13*2

5,2

2.1

3.8

Medium urban u n its

6.9

13,4

6*9

4.5

6.9

Small urban "units

8.1

15.1

6.2

5.3

7.3

Small r u r a l u n its

6#3

9.6

11.2

7.2

8.5

5.0#

13*2#

2.5#

4.7#

Averages

School C ity Funds

5.7#

Average i

I t appears th a t in th e aggregate the reductions averaged le s s than 5 p ercen t of th e budgeted tax le v ie s a c tu a lly re v ise d , but the cuts in the funds o f th e p a r tic u la r c ateg o ries ranged from a high of 15 p ercen t (sm all tow nships) to a low of 2 p ercen t (la rg e school d is tric ts )#

More s ig n if ic a n tly th e data corroborate the conclusions

drawn from the p rec ed in g a n aly sis in which the adjustm ents were re­ la te d to the number and amount of funds reviewed, and in d ic a te even a g re a te r v ariance in th e impact of th e county boards1 operations upon th e d if f e r e n t types and siz e s of ju ris d ic tio n s #

School d i s t r i c t s

continued to be the le a s t a ffe c te d , t h e i r ad ju sted funds having been cu t on the average by only 2#5 p e rc en t; While township budgets

112

su ffe re d th e g r e a te s t re d u c tio n , an average o f 13*2 percent*

Be­

tween th e s e extrem es, a d ju ste d county and c i v i l c it y funds were reduced by approxim ately 5 and 6 p e rc e n t, re sp e c tiv e ly *

Thus, i t

seems t h a t th e supposedly "rural-m inded” county ta x boards had a c tu a lly m anifested a marked d is p o s itio n fo r reducing th e budgets of th e p o l i t i c a l l y and f in a n c ia lly l e a s t im portant tax in g j u r i s ­ d ic tio n in Indiana—th e township*

Not only was a r e l a ti v e ly la rg e r

number of th e se funds a d ju s te d , b u t th e average percentage cut made in ad ju ste d township funds was more th an tw ice as la rg e as th a t e ffe c te d in county and c i v i l c ity funds, and more than fiv e tim es as la rg e as t h a t made in school co rp o ratio n funds#

Moreover,

i t i s e v id en t t h a t th e average percentage re v is io n v a rie d in v e rs e ly w ith th e s iz e of th e ta x in g j u r is d ic t io n , the la rg e r u n its having been reduced only about o n e -h a lf as much as the sm all ru ra l u n its fo r which th e adjustm ents were more than 8 percent*

And th is v ar­

iance by s iz e i s most pronounced in the cases o f th e c i v i l and school c o rp o ra tio n funds* In s h o rt, the o v e ra ll e f f e c t of the county ta x boardi* o p eratio n s on th e le v e l and d ire c tio n of lo c a l finance in Indiana during t h is p erio d appears to have been n e g lig ib le , and th e county boards as a group seem ingly m anifested a p re d ile c tio n fo r a d ju stin g the ta x le v ie s of th o se types and siz e s of lo c a l ju r is d ic tio n s which fu n c tio n a lly were the l e a s t im p o rtan t, notw ithstanding the r e la tiv e ly more freq u en t re v is io n of th e budgets of th e la rg e r u n its*

113

D is trib u tio n of the CBTA O perations by Type of Fund The e f f e c t of th e Indiana Plan fo r th e Control of Local Expenditures upon m unicipal fu n ctio n s and standards of se rv ic e is p a r t i a l l y d isc lo se d by an exam ination of th e reviewing agencies* operations when c la s s if i e d in accordance w ith the broad fu n c tio n a l categ o ries of funds p rescrib ed by th e S ta te Board of Accounts fo r fin an cin g lo c a l activities#*®'

The number of budgetary funds review­

ed and a d ju ste d by the county tax boards on th is b a sis is p resented in Table XXI#

I t should be noted th a t the importance of th e sundry

fu n ctio n s performed by th e lo c a l “u n its of government w ill be more a c c u ra te ly revealed by the a n a ly sis of th e aggregate d o lla r amounts of. budgeted ta x le v ie s reviewed by the county and s ta te ta x boards#

2

1# The fu n c tio n a l n a tu re of the p resc rib e d funds and a d e ta ile d c la s s if ic a tio n of th e s p e c ific item s to be included are d e fin ­ i t i v e l y s e t f o r th in a s e rie s of manuals prepared fo r the use o f lo c a l a u th o r itie s by th e S ta te Board b f Accounts* For ex­ ample, th e manual fo r C iv il end School Townships in d isc u ss­ ing the handling of school supplies fo r budgetary purposes s ta te s th a ts "Proper c la s s if ic a tio n o f sup p lies purchased must n e c e ssa rily depend upon th e use of th e a r t i c l e purchased* Small q u a n titie s o f p a in ts or n a i l s , fo r m iscellaneous use by the j a n i t o r , may p ro p erly be charged to ’Jan ito rs* S u p p lies1, but i f the p a in t, f o r in sta n c e , is fo r use in re fin is h in g fu rn itu re or o th er equipment, i t becomes ^ re p a ir of equipment* and not a supply under e ith e r of the c la s s if ic a tio n s ; i f fo r use in the teach ­ ing of the a r t s or o th er su b je cts i t is a proper charge to ’School S u p p lie s’ , and not 'J a n i t o r S u p p lie s '; i f fo r use in re fin is h in g woodwork of the school b u ild in g i t s co st is a charge to 'r e p a i r of b u ild in g s ', and not a charge to 's u p p lie s '" # S ta te Board of A ccounts, Budget C la s s ific a tio n s and Forms fo r C iv il and School Townships, In d ia n a p o lis, 1937 E d itio n , p# 6* Cf* S ta te Board of Accounts* Budget C la s s ific a tio n s fo r C ivil Towns, 1938; fo r C ounties, 1938; fo r C iv il C itie s , 1938* 2* Cf# i n f r a , p# 118, Table XXIII#

114

T a b le XXI

NUMBER OF BUDGETARY FUNDS REVIEWED AND ADJUSTED BY COUNTY TAX BOARDS CLASSIFIED BY TYPE OF FUND YEARS 1943-1948

Type o f Fund

Budgetary Funds Reviewed Number p e rc en t

General Government8, 1,090

Budgetary Funds A djusted Number p e rcen t

A djusted as percent of Reviewed

17*1

276

33.2

25.3

495

7#8

94

11.3

19.0

2,526

39#7

296

35.6

11.7

H ealth & H o sp ital

110

1.7

12

1.4

10.9

S tr e e t & Highway0

512

8*0

44

5.3

8.6

Park oc R ecreation

365

5.7

34

4.1

9.3

Debt Service^

641

10.1

36

4.3

5.6

Miscellaneous®

624

9.8

40

4.8

6,4

100.076

832

100.076

13.176

P ublic W elfare 'U Education

T otals

6,363

(a) C iv il c ity general funds include pu b lic safety# (b) A ll funds of school c o rp o ra tio n s, township school d i s t r i c t s , Knox County fund fo r support of Vincennes U n iv e rsity , Fort Wayne c i v i l c ity a rt,s c h o o l fund# (c) C iv il c i t y funds only# A ll township roads have been tr a n s ­ fe rre d to county system, and the l a t t e r is financed s o le ly from d is tr ib u tio n of s t a te gasoline tax# (d) M unicipal bond, sin k in g , i n t e r e s t and judgment funds fo r a l l ju r is d ic tio n s except school c itie s * L a tte r included in Educa­ tio n category# (e) U n c la ss ifie d , except f o r school c i t i e s , and includes such funds as flood c o n tro l, power, f i r e hydrant r e n t a l, a ir p o r t, r iv e r improvement, m em orials, cem fctaries.

115

Table XXI simply r e f l e c t s the number and r e la tiv e frequency of the adjustm ent procedure fo r th e d if f e r e n t categ o ries of funds and in d ic a te s th a t th e d is tr ib u tio n p a tte rn of the aggregate num­ ber of funds ad ju sted during the six year period under considera­ tio n g en erally followed the p a tte rn of th e funds reviewed*"*- Tax funds e sta b lis h e d f o r financing educational se rv ice s accounted fo r both the la r g e s t number of reviews and re v is io n s , 40 and 36 percent of the re sp e c tiv e to ta ls *

On th e other head, h e a lth and

h o sp ita l funds were num erically the le a s t im portant, rep resen t­ ing le s s than 2 percent of both to ta ls *

The second most numerous

category is represented by general government funds, p rim a rily e sta b lis h e d fo r financing the re g u la r a d m in istra tiv e , le g is la tiv e , ju d ic ia ry and pu b lic sa fe ty functions of co u n ties, tow nships, and c i v i l corporations*

This category, rep resen tin g o n e-six th of

the funds reviewed accounted fo r o n e -th ird of th e t o t a l number of red u c tio n s.

The th ir d la rg e s t number of adjustm ents made by the

boards is represented by the p u b lic w elfare category which c o n sists 2 almost s o le ly of county w elfare and township poor funds, inasmuch 1* An examination of the d ata fo r the in d iv id u a l years shows no marked s h i f t in th e d is tr ib u tio n p a tte rn between the war and post-w ar e ra s , except in the case o f the public w elfare funds, as discussed below* Cf* in f r a , pp* 116-117 and Table XXII; pp* 119-122 and Table XXIV* 2* These tax le v ie s p rim a rily rep re se n t the matching co n trib u tio n of lo c a l government required fo r obtaining fe d e ra l w elfare aid* During 1934-1939 the s ta te adm inistered the general r e l i e f programs, but since then t h is r e s p o n s ib ility has rev erted back to th e lo c a l u n its* The old-age and dependent children a s s is ­ tance programs are adm inistered by the c o u n ties, the dbate pro­ viding approxim ately 60 percent of the non-federal costs*

116

as the r e s p o n s ib ility fo r c arin g fo r the aged, in d ig e n t and sic k in Indiana has been removed com pletely from the ju r is d ic tio n of c iv il c itie s .

These f i r s t th re e categ o ries of funds represented

approxim ately 65 percent of the t o t a l number reviewed and more than 80 p ercen t of the number adjusted*

However, i t is evident th a t im

terms of the r e la tiv e frequency of adjustm ent, the major impact of th e county tax boards * operations f e l l upon the general government and p ublic w elfare c ateg o ries of funds, since they were adjusted a t a r a te of one out of every fo u r, and one out of every f iv e , re s p e c tiv e ly ; in c o n tra s t, the adjustm ent of a l l o th er c ateg o ries of funds averaged le s s than one out of every te n reviewed. Furtherm ore, i t may be noted th a t a marked s h i f t occurred in th e adjustm ent of p ublic w elfare funds between the war and p o st­ war e ra s , as shown in th e follow ing ta b le t Table m i HUMBER OF PUBLIC WELFARE FUNDS REVIEWED AND ADJUSTED ANNUALLY BY COUNTY TAX BOARDS YEARS 1943-1948 Adjusted as percent Number Number of Reviewec A djusted Reviewed Year 1943

84

16

19.0

1944

76

8

10.5

1945

80

5

6.3

1946

80

19

23.8

1947

87

21

24.1

1948

88

25

28.4

495

94

19.0#

T otals

117

I t i s ev id e n t t h a t th e county ta x boards were more suc­ c e s s fu l in re v is in g county w e lfa re and township poor funds during th e post-w ar years th an during th e war p e rio d .

The num­

b e r of funds a d ju ste d s te a d ily d eclined during the f i r s t th re e years and th en quadrupled during th e succeeding th re e years* T’h is marked change may be a ttr ib u te d p a r tly to th e increased amount of p u b lic w e lfa re a c t iv i t y t h a t immediately follow ed in 1 the wake o f th e war* However, i t appears to have re s u lte d in la rg e p a rt from an im portant controversy, described below, 2 t h a t developed between the County W elfare Boards and the County Boards of Tax Adjustment regarding th e s itu s of a d m in istra tiv e ju r is d ic tio n over th e county w elfare funds* Table XXIII in d ic a te s th e r e la tiv e q u a n tita tiv e impor­ tan ce o f the county ta x boards* operations fo r each o f the par­ t i c u l a r fu n c tio n a l c ateg o ries o f funds described above (Table XXI) by r e la tin g the aggregate d o lla r amount of red u ctio n a f­ fe c te d by th e county ta x boards to the amount of budgeted ta x le v ie s reviewed*

1*

The t o t a l ta x le v ie s a llo c a te d fo r p u b lic w elfare a c t i v i ­ t i e s during th e th re e post-w ar years was tw ice as la rg e as th a t fo r th e th re e war years* Cf* i n f r a , Table XXIV.

2* Cf* i n f r a , pp* 120-121*

118

T ab le X X III

AMOUNT OP BUDGETED TAX LEVIES REVIEWED AND ADJUSTED BY COUNTY TAX BOARDS CLASSIFIED BY TYPE OP FUND YEARS 1943-1948 Budgeted Tax Levies Reviewed Amount per­ ($000) cent

CBTA Adjustm ents Amount p e r($000) cent

$176,794

36*1

$4,273

48.8

2.9

38,690

7.9

711

8.2

1.8

191,209

39.1

2,023

23.1

1.1

Health & H ospital

13,729

2.8

391

4.5

2.8

S tre e t & Highway

7,870

1.6

312

3.6

4.0

Park & R ecreation

14,384

2.9

248

2.8

1.7

Debt S ervice

28,123

5.7

547

6.2

1.9

Miscellaneous

19,000

3.9

253

2.9

1.3

Type of Fund General Government Public W elfare Education

T otals

$489,819

100.0#

$8,755 100.0#

Amount of Adjustment as perc< o f Revi
7 m i l l i o n , o r more th a n h a l f o f th e combined n e t a d ju stm e n ts*

However,

t h e i r b u d g e ted ta x le v ie s w ere r e l a t i v e l y th e l e a s t a f f e c t e d h av in g been re d u c ed by o n ly s l i g h t l y more th a n 2 p e r c e n t.

A ll o th e r s iz e s t r a t a

showed p e rc e n ta g e r e d u c tio n s i n ex cess o f th e o v e r a l l av erag e w ith no i n d i c a t i o n o f any marked c o r r e l a t i o n betw een th e s iz e o f th e ta x in g u n i t and th e p e rc e n ta g e r e d u c tio n a f f e c t e d in th e b u d g eted ta x le v ie s review ed*

I t a p p e a rs t h a t w i th b o th a g e n c ie s u s in g th e same b a s ic

c r i t e r i o n f o r making a d ju s tm e n ts , i . e . , ad h eran c e to p r e s c r ib e d b u d g e ta ry p ro c e d u re s , th e l o c a l b u d g e ts t h a t seem in g ly s lip p e d by th e co u n ty ta x b o a rd s w ere s u b s e q u e n tly sc re e n e d and re v is e d by th e s t a t e t a x board* In g e n e ra l th e d a ta te n d to in d ic a te t h a t even th e combined a d ju s tm e n ts r e s u l t i n g from th e d u a l s u p e r v is io n o f th e In d ia n a F la n d id n o t e x e r t more th a n a r e l a t i v e l y sm all in f lu e n c e on th e le v e ls o f a g g re g a te ta x l e v ie s o f any p a r t i c u l a r ty p e o r s iz e o f ta x in g j u r i s d i c a t i o n d u rin g t h i s s i x y e a r p e r io d u n d er rev iew , w ith th e n o ta b le e x c e p tio n o f th e f u n c t i o n a l l y and f i n a n c i a l l y u n im p o rta n t to w n sh ip . The im pact o f th e combined o p e ra tio n s o f th e county and s t a t e ta x b oards on th e sundry bro ad ty p e s o f s e r v ic e s p ro v id e d by lo c a l

193

governm ent in In d ia n a i s p a r t i a l l y re v e a le d by th e combined n e t r e d u c tio n s in th e d i f f e r e n t s p e c if ic b u d g e ta ry fu n d s , c l a s s i f i e d on a f u n c tio n a l b a s i s , as shown in Table 50,111,

The d a ta in d ic a te t h a t

th e overw helm ing b u lk o f th e combined a d ju s tm e n ts , more th a n f o u r f i f t h s o f th e t o t a l number and amount, was lim ite d to funds f o r f in a n c in g g e n e ra l governm ent, e d u c a tio n , and p u b lic w e lfa re s e rv ic e s * T his i s to be e x p e c te d inasm uch as th e p re c e d in g a n a ly s is a ls o d i s ­ c lo s e d t h a t th e county and s t a t e ta x board r e d u c tio n s , when handled s e p a r a te ly , w ere m ainly c o n fin e d to th e s e th r e e f u n c tio n a l c a te g o rie s * A lthough th e l a r g e s t number o f re d u c tio n s was re p re s e n te d by sch o o l fu n d s, i t i s e v id e n t t h a t th e m ajor im p act, as r e f l e c t e d by th e r e l ­ a t i v e fre q u e n c y o f o c c u rre n c e , was upon g e n e ra l government funds and m ainly a t th e hands o f th e county ta x boards*

L ik ew ise, p u b lic

w e lfa re funds w ere a d ju s te d r e l a t i v e l y more o fte n th a n th e sch o o l fu n d s .

A ll o th e r c a te g o r ie s w ere reduced c o n s id e ra b ly l e s s f r e ­

quen tly *

The s m a lle s t number o f r e d u c tio n s , in b o th a b s o lu te and r e l ­

a t i v e te rm s , was f o r d e b t s e r v ic e , and o b v io u sly because o f th e fix e d n a tu re o f th e s e o b lig a tio n s * D o lla rw is e , th e approxim ate $6 m illio n o f re d u c tio n in g e n e ra l government funds a ls o re p re s e n te d th e l a r g e s t s in g le c a te g o ry o f a d ju s tm e n t, a c c o u n tin g f o r w e ll o v er 40 p e rc e n t o f th e alm o st #14 m illio n combined t o t a l ; w h e re a s, th e n e x t two c a te g o r ie s in q u a n ti­ t a t i v e im p o rtan c e , e d u c a tio n and p u b lic w e lf a r e , re p re s e n te d 30 and 14 p e r c e n t, r e s p e c t i v e l y .

When th e d a ta a re e x p re sse d as p e rc e n ta g e s

o f th e o r i g i n a l ta x le v ie s rev iew ed , i t w i l l be n o ted t h a t o f th e f i r s t

194

Table X U II COMBINED NUMBER AND NET AMOUNT OF BUDGETED TAX LEVIES REDUCED BY COUNTY AND STATE TAX BOARDS CLASSIFIED BY TYPE OF FUND YEARS 1943-1948

Type o f Fund

Funds As p e rc e n t Num­ of b e r Reviewed8,

Net Amount ($000)

As p e rc e n t

STB R eductions* of * a s p e rc e n t o f T o tal Reviewed

G en eral Government

468

42*9

$ 5,886

3 .3

35.6

P u b lic

138

27.9

1 ,8 7 4

4 .8

51 .8

584

23.1

4,176

2.2

5 2 .5

H e a lth and H o s p ita l

19

1 7 .3

466

3 .4

16.1

S t r e e t and Highway

88

17.2

468

5 .9

33.1

P a rk and R e c re a tio n

48

1 3 .2

270

1 .9

17.7

Debt S e rv ic e

46

7 .2

376

1 .3

19.7

M isc e lla n e o u s

54

8 .7

184

1 .0

17.9

2.

%$41.3J6

W e lfa r e

E d u c a tio n

T o ta ls

1,445

2 2 .7 ^

$13,700

(a ) See p . 114, T able XXI, f i r s t colum n, f o r number o f fu n d s i n each c a te g o ry review ed by b o th CBTA and STB# (b) See p# 118, T able X X III, f i r s t colum n, f o r amount o f t a x le v ie s in each c a te g o ry review ed by b o th CBTA and STB# (c ) See p* 163, T able XXXIV, f i r s t colum n, f o r amount o f ta x le v y r e d u c tio n s in e a c h c a te g o ry made by STB#

195

th r e e c a te g o rie s th e s m a lle s t r e l a t i v e im pact was upon sch o o l fu n d s, ap p ro x im ately 2 p e rc e n t, and th e g r e a te s t upon p u b lic w e lfa re fu n d s, alm o st 5 p e rc en t#

In th e case of th e o th e r c a te g o r ie s , th e red u c­

tio n s d id n o t exceed 4 p e rc e n t o f th e amounts review ed ex cep t f o r s t r e e t funds w hich as a group was q u a n tita ti v e l y th e l e a s t im p o rtan t *i

o f any fu n c tio n a l c a te g o ry , re p re s e n tin g le s s th a n 2 p e rc e n t of th e t o t a l funds reviewed# Thus, from an exam ination of th e d ata i t appears h ig h ly q u e stio n a b le t h a t th e review in g a g e n c ie s ' combined a d ju stm en ts of budgeted ta x le v ie s r e s u lte d in any marked re d u c tio n in th e g e n eral le v e ls of s e rv ic e s and fu n c tio n s perform ed by lo c a l government in In d ia n a , as r e f le c te d by th e above c l a s s i f i c a t i o n of fu n d s.

And i t

should be r e c a lle d t h a t re d u c tio n s in th e budgeted ta x le v ie s rep ­ r e s e n t an incom plete and ex ag g erated p ic tu r e s in c e le s s th a n oneh a lf of th e ta x lev y re v is io n s made by e i t h e r th e county o r s t a t e ta x boards were accompanied by any c u rta ilm e n t in th e budgeted expend­ i t u r e s o f lo c a l government#

M oreover, th e r o le played by a d d itio n a l

and emergency a p p ro p ria tio n s must be in v e s tig a te d b efo re any f i n a l c o n clu sio n s can be drawn re g a rd in g th e o v e ra ll im pact of th e In d ian a P la n on th e s tr u c tu r e of lo c a l fin a n c e in In d ian a d u rin g th e s ix y e a r p e rio d fo r w hich th e d a ta have been analyzed# 1, C f. s u p ra , Table X X III, p . 118. The reaso n fo r th e q u a n tita tiv e unim portance of s t r e e t and highway funds in th e budgeted ta x le v ie s o f lo c a l government in In d ian a i s t h a t a l l tow nship roads have been tr a n s f e r r e d to th e j u r i s d i c t i o n o f th e c o u n tie s which a re p r o h ib ite d from le v y in g p ro p e rty ta x e s fo r th e m aintenance o f roads inasmuch as th e y re c e iv e a sh are o f th e s t a t e g a so lin e ta x f o r road m aintenance. A c ts .o f 1933#

196

Additional and Emergency Appropriations I t has been contended t h a t i f you ’'squeeze revenue d ev ices r i g i d l y in one p la c e you a re a p t to develop a d is p ro p o rtio n a te b ulge somewhere e l s e " ,'1'

The w eakest li n k in th e complex system of

s t a t e a d m in is tr a tiv e c o n tro l o v er lo c a l fin a n c e in In d ia n a , p a r­ t i c u l a r l y over b u d g e tary e x p e n d itu re s , i s p ro b ab ly to be found in th e " d is p ro p o rtio n a te b u lg e" o f a d d itio n a l and emergency appro­ p r ia tio n s in excess o f , and e x c lu s iv e o f , th e r e g u la r budgets e s ­ ta b lis h e d and approved f o r th e f i s c a l year* shown:

I t has a lre a d y been

( l ) t h a t th e w idespread p r a c tic e o f r e s o r tin g to a d d itio n a l

a p p ro p ria tio n s has c o n s titu te d one o f th e lo o p h o les by w hich lo c a l ta x in g j u r i s d i c t i o n s have been a b le to escape th e r e p re s s iv e fe a ­ tu r e s o f th e s t a t u t o r y lim it a ti o n s over p ro p e rty ta x r a t e s ; (2) t h a t th e tre n d d u rin g th e l a s t decade has been toward a much g re a t­ e r , r a th e r th a n l e s s e r , use o f t h i s means o f fin a n c in g what a re g e n e ra lly co n sid e re d o rd in a ry e x p en d itu res o f lo c a l governm ent; and (3) t h a t th e e x te n s iv e u se o f a d d itio n a l a p p ro p ria tio n s has ten d ed to n u l l i f y some o f th e e f f e c t s t h a t o th e rw ise would r e s u l t from th e ty p e o f a d m in is tra tiv e s u p e rv isio n embodied in th e ad ju stm en t pro­ cedures o f th e In d ia n a Plan* The t h e o r e t i c a l b a s is on w hich a d d itio n a l a p p ro p ria tio n s a re p re d ic a te d appears to be g e n e ra lly sound*

For s t a t e s u p e rv isio n

over lo c a l budget making to be o p e r a tio n a lly s u c c e s s fu l, i t should 1 . John M* M aguire, quoted by G. L eet and R, M* P a ig e , P ro p e rty Tax L im ita tio n Laws, P u b lic a tio n No, 36, P u b lic A d m in istra tio n S e rv ic e , C hicago, 1934, p , 89.

197

n o t only p ro v id e th e m u nicip al a u t h o r i t i e s w ith a means o f fin a n c ­ ing u n fo re se e n em ergencies, b u t perhaps more im p o rta n tly , i t must a f f o r d a degree o f f l e x i b i l i t y in th e b u d g etin g o f normal revenues and e x p e n d itu re s , p a r t i c u l a r l y when th e lo c a l a u t h o r i t i e s a re com­ p e lle d to p r o je c t t h e i r e s tim a te s f o r a p e rio d as long a s 17 m onths. However, i t i s h ig h ly q u e stio n a b le i f th e "em ergencies" a r i s i n g in lo c a l fin a n c e d u rin g th e l a s t decade, and th e " f l e x i b i l i t y " re q u ire d f o r fin a n c in g th e o rd in a ry fu n c tio n s and s e rv ic e s perform ed by lo c a l government have w a rra n te d th e w idespread and e x te n s iv e use to w hich a d d itio n a l a p p ro p ria tio n s have been p u t i n re c e n t y e a rs —to th e p o in t ■where th e y re p re s e n te d a p p ro x im ately o n e -q u a rte r o f a l l lo c a l govern­ m ental e x p e n d itu re s made in In d ia n a in 1948. It p r ia tio n s

should be n o te d th a t th e s e a d d itio n a l and emergency appro­ cannot be a s c rib e d s o le ly to lo c a l ta x in g j u r i s d i c t i o n s

seek in g to recoup th e re d u c tio n s p re v io u s ly made in t h e i r a d ju s te d budgets by th e county and s t a t e ta x boards in th e p ro c e ss of regu­ l a r re v ie w .

In many in s ta n c e s th e y have r e s u lte d from th e G eneral

Assembly’s enactm ent o f l e g i s l a t i o n t h a t makes i t mandatory t h a t p a r t i c u l a r ty p e s o f lo c a l e x p e n d itu re s be fin a n c e d th ro u g h th e a d d it i o n a l a p p ro p ria tio n s r o u te .

However, an exam in atio n o f th e le d ­

g ers o f a d d itio n a l a p p ro p ria tio n s m ain tain ed by th e s t a t e ta x board 1 . Fore exam ple, in 1945 th e s t a t e l e g i s l a t u r e pro v id ed f o r a cumu­ l a t i v e school b u ild in g o r s in k in g fund fo r school d i s t r i c t s , th e fund to be r a is e d and expended u nder an a d d itio n a l le v y and ap­ p r o p r ia ti o n . A cts o f 1945, C hapter 57* The fo llo w in g y e a r , the s t a t e t a x b o ard , in commenting on th e e f ­ f e c t w hich such l e g i s l a t i o n has had on th e fu n c tio n in g o f th e b o a rd , s ta t e d t h a t i t " g re a tly in c re a s e d th e work of t h i s Board" and c o n s titu te d " a d d itio n a l work in a d d itio n to th e o rd in a ry d u tie s re q u e ste d of i t " . Annual R ep o rt, 1946, p . 918.

198

f o r th e s ix y e a r p e rio d under c o n s id e ra tio n ^ does n o t p ro v id e a 2 b a s is f o r s e p a r a tin g th e form er ty p e from th e l a t t e r . M oreover, th e le d g e rs do n o t p ro v id e s a t i s f a c t o r y d a ta f o r s e g re g a tin g th e so u rc es o f funds used f o r fin a n c in g th e approved a d d itio n a l appro3 p ria tio n s . For th e purpose a t hand, a rough measure o f th e ex­ t e n t to w hich a d d itio n a l a p p ro p ria tio n s have n u l l i f i e d th e im pact 1 . The y e a r ly t o t a l s of a d d itio n a l a p p ro p ria tio n s re q u e ste d and approved, as p u b lish e d in th e s t a t e ta x b o a rd 's annual r e p o r ts , 'a r e based on th e s t a t e governments f i s c a l y e a r commencing on J u ly 1 , b u t th e d a ta re p o rte d h e re in have been computed on a c a le n d a r y e a r b a s is s in c e t h i s c o n s ti tu te s th e f i s c a l y e a r f o r a l l lo c a l u n its o f government in In d ia n a ex cep t school c i t i e s . 2 . Inasmuch as th e le d g e r tr a n s a c tio n s do n o t re v e a l th e s p e c if ic funds o r purposes f o r w hich th e a d d itio n a l a p p ro p ria tio n s were re q u e ste d th e fo llo w in g a n a ly s is w i l l be based on ta x in g u n i t s r a th e r th a n s p e c if ic b u d g etary fu n d s . 3 . The o r ig i n a l le d g e r d a ta re g a rd in g th e means o f fin a n c in g th e a d d itio n a l a p p ro p ria tio n s approved—bond is s u e s , tem porary and emergency lo a n s , w orking b a la n c e s , and t r a n s f e r s from o th e r funds—w ere c o n sid e re d in ad eq u ate and n o t used in th e stu d y be­ cause th e exam ination o f th e d a ta d is c lo s e d t h a t item s had n o t been handled in a uniform manner d u rin g th e p e rio d under rev iew , and t h a t a number o f in a c c u ra te e n t r ie s ( e r r o r s o f com ission and om ission) had been made in c la s s if y in g th e so u rces o f fu n d s . I t may be n o te d t h a t th e s t a t e t a x b o a rd 's annual re p o rts show bond is s u e s w ere used f o r fin a n c in g on ly 22 p e rc e n t of th e 1145 m illio n in a d d itio n a l a p p ro p ria tio n s approved f o r th e s ix y e ar f i s c a l p e rio d from J u ly 1, 1942, to June 30, 1948. The re p o rts do n o t re v e a l what p ro p o rtio n o f th e re q u e ste d a p p ro p ria tio n s to be fin a n c e d by bond is s u e s w e re ,d e n ie d by th e b o a rd . (C f. Annual R e p o rts , 1943-1948.) Inasmuch as 97.2 p e rc e n t of th e t o t a l o f $149 m illio n in a d d itio n a l a p p ro p ria tio n s re q u e ste d was approved by th e board d u rin g th e p e rio d (C f. su p ra , Table IX, p . 83, and fo o tn o te 1 , p . 1 7 6 ), i t may be in f e r r e d t h a t th e p e rc e n ta g e of ap p ro v als on bonds was n o t lower th a n t h a t o f th e o th e r so u rc es o f funds* Thus, i t appears th a t th e s t a t e t a x b o a rd 's review powers over bond is s u e s have been used on ly to a r e l a t i v e l y sm all deg ree in c u r t a i l i n g lo c a l governm ental ex­ p e n d itu re s in In d ia n a sin c e 1933. Cf* s u p ra , Table I I I , p . 61, and Table IX, p . 83.

199

on th e a g g re g a te le v e ls o f e x p e n d itu re s r e s u l tin g from th e combined n e t ad ju stm en ts i s p ro v id e d by comparing th e n e t re d u c tio n s w ith th e number and amount o f a d d itio n a l a p p ro p ria tio n s approved fo r o n ly th o s e u n its in th e stu d y w hich w ere a d v e rs e ly e f f e c te d by th e reg u ­ l a r b u d g e tary review p ro c e ss*

This i s shown in Table XLIV in w hich

th e d a ta f o r th e s ix y e a r p e rio d u nder c o n s id e ra tio n a re c l a s s i f i e d by ty p e o f j u r i s d ic tio n * Table XLIV ADDITIONAL APPROPRIATIONS APPROVED COMPARED WITH TEE COMBINED NET REDUCTIONS MADE IN LOCAL BUDGETS BY THE STATE AND COUNTY TAX BOARDS, CLASSIFIED BY TYPE OF JURISDICTION, YEARS 1943-1948

Type o f U n it

Number o f Local U n its W ith Budgets A d ju sted Downward

Local U nits Re­ c e iv in g A d d itio n a l A p p ro p ria tio n s As p e rc e n t Num­ of A d ju sted ber

Amount o f A d d itio n a l A p p ro p ria tio n s Re­ ceiv e d by Local U n its 8, Amount As p e rc e n t o f A djusted^ (#000)

C ounties

115

115

100.0

#20,380

679.6

Townships

245

161

65*7

2,182

89.0

C iv il C itie s

320

183

57.2

10,929

219.4

School C itie s

210

129

61.4

39,441

1206.9

890

588

66*1$

T o tals

172,932

532.4$

(a ) A d d itio n a l a p p ro p ria tio n d a ta w ere a v a ila b le f o r only th e f i r s t s ix months o f c a le n d a r 1948* The d a ta fo r t h i s y ear have been doubled in o rd e r to make them comparable w ith th e re d u c tio n d a ta f o r th e same perio d * (b) See p* 188, Table XLI, t h i r d column, f o r combined n e t amount o f ta x le v y re d u c tio n in each c l a s s i f i c a t i o n made by b o th th e CBTA and STB*

200

The d a ta show t h a t tw o -th ird s o f th e t o t a l number o f ta x in g u n its w ith a d ju s te d b u dgets su b se q u e n tly re q u e ste d and re c e iv e d ap­ p ro v a l o f a d d itio n a l a p p ro p ria tio n s w hich exceeded $70 m illio n , an amount t h a t was a c t u a l l y f iv e tim es la r g e r th a n th e t o t a l n e t com­ bin ed re d u c tio h s made d u rin g t h i s same p e rio d by th e county and s t a t e ta x boards in review in g o rd in a ry budgets under th e In d ia n a P la n .

C iv il c i t i e s re p re s e n te d th e la r g e s t a b s o lu te number of t®x-

in g j u r i s d i c t i o n s re c e iv in g a d d itio n a l a p p r o p r ia tio n s , ap p ro x im ately o n e - th ir d of th e t o t a l ; w h ereas, school c i t i e s re c e iv e d d o lla rw is e th e b u lk o f th e t o t a l amount approved by th e s t a t e ta x b o ard , alm ost $40 m illio n s o r more th a n o n e -h a lf of th e t o t a l .

M oreover, of th e

t o t a l number o f ta x in g u n its w ith a d ju s te d b u d g e ts, ev ery co u n ty , 2 ou t of ev ery 3 tow nships and sch o o l c i t i e s , and one o u t o f ev ery two c i v i l c i t i e s o b ta in e d a d d itio n a l a p p r o p r ia tio n s , which f o r every c a te g o ry o f government exceeded th e t o t a l amount o f th e combined n e t re d u c tio n s , a g a in w ith th e n o ta b le e x c e p tio n o f th e to w n sh ip .

The

m agnitude o f th e s e a d d itio n a l a p p ro p ria tio n s a re made more s tr i k i n g l y e v id e n t when e x p re ssed as a p e rc en ta g e of th e t o t a l amounts o f com­ b in ed re d u c tio n s f o r each ty p e o f ta x in g u n i t .

In th e case o f th e

sch o o l c i t i e s a d d itio n a l a p p ro p ria tio n s approved were tw elve tim es la r g e r th a n th e c o rresp o n d in g re d u c tio n s made in th e s e b u d g ets; alm ost seven tim es la r g e r in th e case o f th e c o u n tie s , and a c tu a lly more th an tw ice as la rg e f o r th e c i v i l c i t i e s .

A lso , i t should be p o in te d out

t h a t th e approved a p p ro p ria tio n s f o r th e fo u r c a te g o rie s in th e sample re p re s e n te d more th a n 98 p e rc e n t o f th e t o t a l amounts re q u e ste d by

201

th e s e same u n i t s d u rin g t h i s e n t i r e perio d # The d a ta shown above, re a rra n g e d in accordance w ith th e s iz e o f th e ta x in g j u r i s d i c t i o n , is p re s e n te d in Table XLV. Table XLV ADDITIONAL APPROPRIATIONS APPROVED COMPARED WITH THE COMBINED NET REDUCTIONS MADE IN LOCAL BUDGETS BY THE STATE AND COUNTY TAX BOARDS, CLASSIFIED BY SIZE OF JURISDICTION, YEARS 1943-1948

S iz e o f U n its

Number o f L ocal U n its w ith Budgets A d ju sted Downward

Local U n its Rec e iv in g A d d itio n a l A p p ro p ria tio n s As p e rc e n t Num­ ber of A d ju sted

Amount o f A d d itio n a l A p p ro p ria tio n s Receiv ed by Local U n its a As p e rc e n t Amount o f A d ju sted ^ ($000)

Large urb an

118

110

93.2

|5 1 ,8 0 3

746.0

Medium urban

168

145

87.5

13,041

320.3

Sm all urban

264

178

6 7 .4

5,143

253.8

Sm all r u r a l

340

155

45.6

2,945

444.9

T o ta ls

890

588

6 6.1#

$72,932

532.3#

(a) A d d itio n a l a p p ro p ria tio n d a ta were a v a ila b le f o r o n ly th e f i r s t s i x months of c a le n d a r 1948# The d a ta f o r t h i s y e a r have been doubled in o rd e r to make them comparable w ith th e re d u c tio n d a ta f o r th e p e rio d # (b) See p . 191, Table X L II, t h i r d column, f o r combined n e t amount o f ta x le v y re d u c tio n in each c l a s s i f i c a t i o n made by b o th th e CBTA and STB#

1# The amount approved re p o rte d in th e above ta b le re p re se n te d 98,3 p e rc e n t of a t o t a l of $74,226,000 in a d d itio n a l a p p ro p ria tio n s re q u e ste d d u rin g t h i s p e rio d by th e 588 lo c a l u n i t s . C ounties had th e s m a lle s t r e l a t i v e amount approved, 96.0 p e rc e n t of th e t o t a l amount re q u e s te d , and school c i t i e s th e l a r g e s t , 9 9 .7 p ercen t*

202

The d a ta show t h a t th e r e l a t i v e number o f u n i t s w ith a d ju s te d b u d g ets u t i l i z i n g t h i s d e v ic e f o r f in a n c in g e x p e n d itu re s v a r ie d d i r e c t l y w ith th e s iz e o f th e ta x in g j u r i s d i c t i o n .

W hereas, more

th a n n in e o u t o f e v e ry te n o f th e l a r g e s t u n i t s o b ta in e d a d d iti o n a l a p p r o p r ia tio n s , l e s s th a n f i v e o u t o f e v e ry te n o f th e s m a lle s t t a x ­ in g d i s t r i c t s a v a ile d th e m selv e s o f t h i s m eans.

A ls o , i t a p p e a rs

t h a t th e s m a lle s t u n i t s , r e p r e s e n tin g a lm o st 40 p e rc e n t o f th e num­ b e r o f l o c a l b u d g e ts r e v is e d downward d u rin g th e s i x y e a r p e rio d a cc o u n te d f o r l e s s th a n $3 m ill i o n , o r ab o u t 4- p e rc e n t o f th e t o t a l d o l l a r amount o f a d d i t i o n a l a p p r o p r ia tio n s approved f o r a l l u n i t s w ith a d ju s te d b u d g e ts .

On th e o th e r hand, th e l a r g e s t s iz e s tra tu m ,

composed o f 26 ta x in g j u r i s d i c t i o n s —f iv e c o u n tie s and to w n s h ip s, r e s p e c t i v e l y , and e ig h t c i v i l and c o e x te n s iv e sch o o l c i t i e s , r e ­ s p e c t i v e l y - a c c o u n t e d f o r l e s s th a n 14 p e rc e n t o f th e number o f a d ju s te d b u d g e ts b u t r e c e iv e d alm o st $52 m illi o n , o r more th a n 70 p e r c e n t o f th e t o t a l a d d i t i o n a l a p p r o p r ia tio n s .

This amount was

more th a n sev en tim e s l a r g e r th a n th e t o t a l re d u c tio n s made by th e c o u n ty and s t a t e ta x boards in t h i s c a te g o ry o f b u d g e ts .

For th e

o th e r s iz e s t r a t a th e a d d i tio n a l a p p r o p r ia tio n s ranged from 250 to a lm o st 450 p e r c e n t o f th e amounts o f re d u c tio n s e f f e c t e d i n th e s e r e s p e c tiv e c a t e g o r i e s .

M oreover, as im p re ssiv e as th e d a ta a r e ,

th e q u a n t i t a t i v e im portance o f th e a d d iti o n a l a p p r o p r ia tio n s in th e above com parison has been u n d e r s ta te d r e l a t i v e to t h a t o f th e b u d g e ta ry r e d u c tio n s .

This fo llo w s , o f c o u rs e , from th e f a c t t h a t

i t c an n o t be assumed a l l downward r e v is io n s made by th e county and

203

s t a t e ta x boards r e s u l t i n co rre sp o n d in g d e c re a se s in th e o r i g i n a l l y budgeted e x p e n d itu re s*

The e m p iric a l ev id en ce p re s e n te d in th e

p re c e d in g s e c tio n s has shown t h a t such an assu m p tio n i s u n te n a b le and r e p r e s e n ts a g ro s s ly e x ag g e ra te d p ic tu r e o f th e ad ju stm en t pro ced u re un d er th e In d ia n a P la n . F i n a l l y , i t sh ould be n o ted t h a t d e s p ite th e f a c t t h a t i t has n o t been p o s s ib le to re v e a l th e p r e c is e amount o f a d d itio n a l a p p r o p r ia tio n s a t t r i b u t a b l e to lo c a l u n i ts a tte m p tin g to re c o v e r funds p r e v io u s ly p ared by th e county and s t a t e ta x boards under r e g u la r b u d g e tary review , i t i s p a te n tly e v id e n t t h a t th e amount o f in c re a s e d e x p e n d itu re s r e s u l t i n g from th e w id esp read and e x te n s iv e use o f t h i s means o f lo c a l f in a n c in g , w h eth er c l a s s i f i e d by ty p e o r s iz e o f lo c a l u n i t , more th a n com pensated f o r any downward im pact t h a t th e re d u c tio n s in r e g u la r budgets may have had on th e a g g re ­ g a te le v e ls o f e x p e n d itu re s and c o rre sp o n d in g fu n c tio n s and s e r ­ v ic e s perform ed by lo c a l government in In d ia n a d u rin g t h i s p e rio d u n d er re v ie w .

204

CHAPTEE VII CONCLUSIONS

The u n p re c e d e n te d h ig h p o s t-w a r l e v e l o f f e d e r a l e x p e n d itu re s c o n tin u e s t o r e c e iv e th e m ajor a t t e n t i o n o f th e p u b l i c , p o l i t i c i a n s and eco n o m ists a lik e *

But th e c o s t o f governm ent f o r l o c a l j u r i s ­

d i c t i o n s , c u r r e n t l y e s tim a te d a t $10 b i l l i o n —an amount w hich exceeds th e m ost " la v is h " sp en d in g o f th e n a tio n a l governm ent in any one o f th e p re -w a r New D eal y e a r s — i s s u f f i c i e n t l y im p o rta n t to w a rra n t e x te n s iv e and c o n tin u e d s tu d ie s in th e a re a o f lo c a l fin a n c e * I t a p p e a rs t h a t l o c a l governm ent i n U n ited S ta te s has been con­ f r o n te d w ith a seem in g ly in s o lv a b le , b u t b a s ic f i s c a l problem t h a t r e f l e c t s th e p a ra d o x ic a l demands o f th e p u b lic f o r an ex p an sio n o f governm ental fu n c tio n s and a r e d u c tio n in th e lo c a l ta x b i l l . ly ,

O bvious­

th e sim u lta n e o u s f u l f i l l m e n t o f b o th demands has been p r a c t i c a l l y

im p o s sib le s in c e i t n e c e s s i t a t e s o b ta in in g a s i g n i f i c a n t l y g r e a te r flow o f s e r v ic e s f o r le s s money*

To many s tu d e n ts o f p u b lic fin a n c e

i t has become a x io m a tic t h a t su ch a f e a t co u ld n o t be acco m p lish ed e x c e p t by d r a s t i c a l l y re o rg a n iz in g th e u n d e rly in g s t r u c t u r e o f lo c a l governm ent^ and i n s t i t u t i n g a r e v o lu tio n a r y refo rm in a d m in is tr a tiv e 1*

The problem has been view ed by P r o f e s s o r Anderson as fo llo w s : "The A m erican p e o p le have d e s ir e d two th in g s w hich seem to be in ­ com patible* One i s com plete se lf-g o v e rn m e n t in a system o f sm all u n i t s coming down from e a r l i e r d a y s; th e o th e r i s a s ta n d a rd o f s e r v ic e s h ig h e r th a n e v e r b e fo re and a d i s t r i b u t i o n o f expenses o v er w ide a r e a s , so t h a t no l o c a l a r e a , e s p e c ia l l y n o t a p o o r one, w i l l be u n d u ly b u rd e n e d ." W. A nderson, Local Government and F inance in M in n eso ta, U n iv e r s ity o f M innesota P r e s s , M in n e a p o lis, 1935, p* 327*

205

p r a c t i c e s and o p e ra tio n s *

A lth o u g h b o th a r e u n q u e s tio n a b ly d e s ir a b le

o b j e c t i v e s , n e i t h e r one has p ro v e n p o l i t i c a l l y f e a s i b l e .

L o cal g o v ern ­

ment i n th e U n ite d S ta te s c o n tii& s to be a v e r i t a b l e ju n g le o f more th a n 150,000 p o l i t i c a l l y and f u n c t i o n a l l y o v e rla p p in g and u n in te g r a te d m u n i c i p a l i t i e s , c o u n tie s , to w n s h ip s , s c h o o l d i s t r i c t s and s p e c ia l ta x ­ in g j u r i s d i c t i o n s g eared to a bygone e r a o r d e v ise d t o escap e th e more r e p r e s s iv e f e a t u r e s o f c o n s t i t u t i o n a l and s t a t u t o r y t a x and d eb t lim ita tio n s .

L ik e w ise , marked im provem ents in o p e r a tio n a l e f f i c i e n c y

on th e l o c a l governm ental l e v e l s a re p r i m a r i ly n o ta b le f o r t h e i r r a r i t y . I n s te a d , th e s i g n i f i c a n t lo n g -te rm tr e n d s in l o c a l fin a n c e show an a lm o st c o n tin u o u s r i s e in a g g re g a te e x p e n d itu re s and th e ten d en c y to s h i f t more and more of th e f i n a n c i a l burden to th e s t a t e and f e d e r a l g o vernm ents.

The n e t r e s u l t has been th e ex p an sio n o f lo c a l s e r v ic e s

accom panied by a c o rre sp o n d in g c u r ta ilm e n t o f lo c a l autonomy— in c re a s e d s t a t e s u p e r v is io n and a s h i f t in th e s i t u s o f d e c isio n -m a k in g o v er th e f i n a n c i a l a c t i v i t i e s o f lo c a l governm ent. In d ia n a has been no e x c e p tio n to th e g e n e ra l r u l e .

H o o sie rs

demanded and o b ta in e d im proved e d u c a tio n a l and r e c r e a t i o n a l oppor­ t u n i t i e s , b e t t e r ro ad s and p r o te c tio n and expanded p u b lic w e lf a r e and h e a lth s e rv ic e s .

They w ere n e i t h e r a t th e f o r e f r o n t n o r r e a r o f th e

g e n e ra l movement t h a t was c h a r a c t e r i s t i c o f th e n a tio n as a w h o le.

On

t h e o th e r hand, th e p u b lic demand f o r d e c re a se d lo c a l ta x e s m ain ly r e ­ f l e c t e d th e a c t i v i t i e s o f a r t i c u l a t e groups o f o rg a n iz e d p ro p e rty h o ld e rs whose m ajor i n t e r e s t was to keep th e t a x b i l l on r e a l p ro p e rty in p a r t i c u l a r a t a minimum.

The emergence o f th e h ig h ly p u b lic iz e d

206

" In d ia n a P la n f o r th e C o n tro l o f L ocal E x p e n d itu r e s ” presum ably was t o be th e answ er to th e s e c o n f l i c t i n g p u b lic demands*

However, as

shown by th e fo r e g o in g a n a l y s i s o f th e p la n th e r e i s p r a c t i c a l l y no e v id e n c e t o s u p p o rt a t h e s i s t h a t th e o p e ra tio n o f t h i s u n iq u e system o f s t a t e a d m in is tr a tiv e c o n tr o l o v e r lo c a l fin a n c e i n In d ia n a d u rin g th e t h r e e decades s in c e i t s in c e p tio n r e s u l t e d in a more e f f e c t i v e f u n c tio n a l r e o r g a n iz a tio n o f th e s t r u c t u r e o f l o c a l governm ent in I n d ia n a , o r m a t e r i a l l y im proved th e o p e r a tio n a l e f f i c i e n c y o f l o c a l a d m in is tr a tiv e u n i t s in th e form o f red u ced u n i t c o s ts *

Under th e s e

c o n d itio n s th e c u r ta ilm e n t o f lo c a l e x p e n d itu re s co u ld be acco m p lished o n ly by lo w e rin g m a t e r i a l l y th e s ta n d a rd s o f s e r v ic e p ro v id e d by l o c a l governm ent*

But in In d ia n a , as e lse w h e re , th e c o n tin u o u s de­

mand o f th e ta x p a y e rs a s s o c i a t i o n s , g e n e r a lly r e f l e c t i n g th e view ­ p o in t o f w e a lth y c o rp o ra te and n o n - r e s id e n t p ro p e rty ta x p a y e r s , t h a t l o c a l t a x l e v ie s and e x p e n d itu re s be red u ced was in c o m p a tib le w ith th e d e e p -s e a te d community demand t h a t lo c a l s e r v ic e s and f u n c tio n s n o t be p e rm itte d t o d e t e r i o r a t e , i f n o t expanded*

For th e s t a t e

l e g i s l a t u r e , th e p o l i t i c a l l y e x p e d ie n t a l t e r n a t i v e to t h i s im passe proved t o b e , n o t th e In d ia n a P la n , b u t th e r e l a t i v e lig h te n in g o f th e p r o p e r ty h o ld e rs* p o t e n t i a l ta x burden by s h i f t i n g i t to le s s a r t i c u l a t e and u n o rg a n iz e d groups o f ta x p a y e rs v ia th e co n tin u o u s in tr o d u c tio n o f s ta te w id e n o n -p ro p e rty " re p la c e m e n t" ta x e s o f a

207

r e g r e s s iv e n a tu r e —n o ta b ly th e In d ia n a G ross Income Tax*'*'

Thus, in

th e main In d ia n a * s e x p e rie n c e i n l o c a l fin a n c e was n o t r a d i c a l l y d i s s i m i l a r from t h a t w hich has c h a r a c te r iz e d th e g e n e ra l d e v elo p ­ ment o f s t a t e - l o c a l f i s c a l r e l a t i o n s f o r th e n a tio n as a w h o le , n o tw ith s ta n d in g th e em ergence and o p e ra tio n o f th e u n iq u e In d ia n a F la n f o r th e s t a t e c o n tr o l o f l o c a l e x p e n d itu r e s . I t w i l l be r e c a l l e d t h a t th e In d ia n a P la n had been f a th e r e d by th e ’'ab o m in a b le ’1 a d m in is t r a ti o n o f th e g e n e ra l p r o p e r ty ta x d u r­ in g th e decade p r i o r to W orld War I , and n u r tu r e d by th e f i s c a l em erg en cies o f th e n i n e t e e n - t h i r t i e s .

D e sp ite th e o r i g i n a l i n t e n t

o f th e fo u n d e rs o f th e p la n who co n ten d ed t h a t s t a t e c o n tr o l o v er th e d e te r m in a tio n o f l o c a l ta x r a t e s and le v ie s was a n e c e s s a ry b u t s u b o rd in a te c o r a l l a r y to o b ta in in g u n ifo rm a ss e ssm e n ts and o th e r p r o p e r ty t a x re fo rm s , th e r e i s no c l e a r ev id en c e t h a t th e o p e ra tio n o f th e In d ia n a P la n d u rin g th e su b se q u e n t th r e e decades m a t e r i a l l y f u r th e r e d th e ach iev em en t o f a more e q u ita b le and e f f i c i e n t 1.

I t i s e s tim a te d t h a t s t a t e a id to lo c a l u n i t s from su n d ry " r e p la c e ­ m ent" t a x e s , such as th e In d ia n a Gross Income Tax, B everages Tax, G a so lin e Tax, C ig a r e tte Tax, e t c . , c u r r e n t l y p ro v id e s a p p ro x im a te ly 50 p e r c e n t o f th e t o t a l sch o o l c o s t s , 60 p e rc e n t o f th e n o n -f e d e ra l s o c i a l w e lf a r e c o s ts f o r o ld age a s s is ta n c e and a id t o d ep en d en t c h ild r e n and 80 p e r c e n t o f l o c a l s t r e e t and highway c o s t s . F e d e ra l R eserve Bank o f C hicago, " S ta te A id to L ocal Government” , B u sin ess Condi t i o n s , a Review o f th e F e d e ra l R eserve Bank o f C hicago, O c to b er, 1949, p p . 6 -8 . I t i s i n t e r e s t i n g to n o te t h a t one o f H a l l ’s c o n c lu s io n s in h is stu d y o f th e o r ig i n o f th e In d ia n a Gross Income Tax was " t h a t th e r e d u c tio n of th e p r o p e r ty ta x burden need n o t have been as la r g e as th e Gross Income Tax p e rm itte d i t to be" d u rin g th e e a r ly n i n e t e e n - t h i r t i e s in o rd e r to meet th e f i s c a l emergency o f t h a t p e r io d . H a ll, o p. c i t . , p . 462.

208

a d m i n i s t r a t i o n o f th e g e n e r a l p r o p e r ty t a x in I n d ia n a ,

M oreover,

i t i s q u e s tio n a b le w h e th e r th e s i g n i f i c a n t ch an g es t h a t o c c u rre d in th e I n d ia n a s t r u c t u r e o f l o c a l f in a n c e d u rin g t h i s p e rio d can be a t t r i b u t e d d i r e c t l y t o an y i n f l u e n c e e x e r te d by th e I n d ia n a P la n . I n s t e a d , i t a p p e a rs t h a t th e m ajo r changes in th e f in a n c in g o f th e e x p an d in g p a t t e r n o f l o c a l f u n c tio n s and s e r v i c e s w ere cau sed by th e in a d e q u a c y o f th e g e n e r a l p r o p e r ty ta x b u t more fu n d a m e n ta lly by th e u n d e r ly in g econom ic and s o c i a l c o n d itio n s w h ich w ere a h e r i t a g e o f two w o rld w ars i n t e r s p e r s e d w ith a lo n g p e rio d o f c h ro n ic d e p r e s s io n .

The c o n c lu s io n i s se e m in g ly in e s c a p a b le t h a t

th e I n d ia n a P la n n e i t h e r a c c o m p lish e d th e avowed o b je c t iv e s o f i t s p r o p o n e n ts , n o r r e s u l t e d in th e b u r e a u c r a tic s tr a n g le h o l d o v e r lo c a l f in a n c e f o r e c a s t by i t s o p p o n e n ts. M o reo v er, th e e x a m in a tio n o f th e d e t a i l e d d a ta showed t h a t e x c e p t f o r th e f i r s t y e a r o f i t s o p e r a tio n , th e p la n d id n o t p r o duce any " s t a g g e r i n g l y la r g e ta x p a y e r s a v in g s " , and a t b e s t d id n o t e x e r t more th a n a n e g l i g i b l e in f lu e n c e on t h e d i r e c t i o n and l e v e l s o f a g g re g a te t a x l e v i e s b u d g eted by th e su n d ry l o c a l ta x in g j u r i s ­ d ic tio n s .

And i t s im p a c t upon th e l e v e l s o f b u d g e ted e x p e n d itu re s

was p r a c t i c a l l y i n f i n i t e s i m a l p r im a r i l y b e ca u se f o r b o th th e c o u n ty and s t a t e t a x b o a rd s th e m ajo r c r i t e r i o n f o r r e v i s i o n was th e l o c a l u n i t ' s a d h e ra n c e t o th e p r e s c r i b e d b u d g e ta ry p ro c e d u re s — a c r i t e r i o n t h a t r e s u l t e d in a d ju s tm e n ts c o n fin e d a lm o st s o l e l y to th e b u d g e ted t a x levy*

And th e r e l a t i v e l y few r e d u c tio n s in e x p e n d itu re s w ere

n o t n e c e s s a r i l y accom panied by any c o rre s p o n d in g d e t e r i o r a t i o n in

209

l o c a l f u n c tio n s inasm uch as th e w id e sp re a d and e x te n s iv e u se o f a d d i t i o n a l a p p r o p r ia tio n s te n d e d to more th a n c o u n te rb a la n c e w h a te v e r im p a c t th e a d ju s tm e n t p ro c e d u re may have had upon th e s ta n d a rd s o f s e r v i c e .

I t i s e v id e n t t h a t l a b e l l i n g th e In d ia n a

P la n as an a d m i n i s t r a t i v e d e v ic e f o r th e c o n tr o l o f " lo c a l expend­ i t u r e s " i s a misnomer and te n d s t o c o n c e a l th e r e a l n a tu r e o f th e consequences r e s u l t i n g from th e o p e ra tio n o f th e In d ia n a P la n . In a s i m i l a r m anner, th e g e n e ra l b e l i e f , in la r g e p a r t f o s ­ t e r e d by th e opponents o f th e p la n , t h a t th e m ajor im pact o f th e re v ie w in g a g e n c ie s ' o p e r a ti o n s , p a r t i c u l a r l y th o s e o f th e " r u r a l m inded” c o u n ty ta x b o a rd s , i n e v i t a b l y w ould f a l l upon th e l a r g e r and w e a l t h i e r u rb a n c e n t e r s , a ls o a p p e a rs t o b e lo n g in th e realm o f p o p u la r m y th s.

The a n a ly s is o f th e d i s t r i b u t i o n p a t t e r n o f th e

in c id e n c e o f th e a d ju s tm e n ts f o r th e most r e c e n t s i x y e a rs f o r w hich d a ta w ere a v a i l a b l e in d ic a te d c o n c lu s iv e ly t h a t i f th e co u n ty and s t a t e t a x b o a rd s m a n ife ste d any d i s p o s i t i o n f o r r e v is in g th e fluids o f p a r t i c u l a r ta x in g j u r i s d i c t i o n s , i t was tow ard th o s e ty p e s and s i z e s w hich f u n c t i o n a l l y , p o l i t i c a l l y and f i n a n c i a l l y w ere th e l e a s t im p o rta n t i n th e In d ia n a h ie r a r c h y o f lo c a l governm ent—th e tow nship and th e sm all u rb a n and r u r a l c o r p o r a tio n .

C o n tra riw is e , th e hand­

f u l o f im p o rta n t ta x in g j u r i s d i c t i o n s , p a r t i c u l a r l y th e e ig h t l a r g e s t c i v i l c i t i e s and t h e i r o v e rly in g sc h o o l c o r p o r a tio n s , w ere r e l a t i v e l y th e l e a s t a f f e c t e d .

Even when th e o p e ra tio n s o f th e co u n ty ta x bo ard s

w ere a n a ly z e d s e p a r a t e l y , i t was shown t h a t d o lla rw is e th e sm all and p re d o m in a n tly r u r a l ta x in g j u r i s d i c t i o n s s u f f e r e d th e g r e a t e s t

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r e l a t i v e r e d u c tio n in fu n d s , n o tw ith s ta n d in g th e county b o a rd s ' more f r e q u e n t a d ju stm e n t o f th e b u d g ets o f th e la rg e urban u n i t s . In term s o f th e p a r t i c u l a r c a te g o r ie s o f fu n d s , w h e n -c la s s i­ f i e d in acc o rd a n ce w ith th e f u n c tio n a l a c t i v i t i e s fin a n c e d , th e combined re d u c tio n s d id n o t s i g n i f i c a n t l y in flu e n c e any c ateg o ry # The d is c e r n a b le v a r i a t i o n in d ic a te d a ten d en cy on th e p a r t o f b o th th e co u n ty and s t a t e ta x boards to r e v is e r e l a t i v e l y th e l e a s t th o s e funds w hich w ere q u a n t i t a t i v e l y th e most im p o rtan t#

And as n o te d ,

th e c o n tin u o u s grow th o f f e d e r a l and s t a t e g ra n ts and sh a re d ta x e s f o r f in a n c in g th e more e s s e n t i a l l o c a l s e r v ic e s — e d u c a tio n , p u b lic w e lf a r e , and s t r e e t s and highw ays, p lu s th e e x te n s iv e use o f a d d i­ t i o n a l a p p r o p r ia tio n s have te n d e d to d im in ish even f u r t h e r w h atev er e f f e c t th e re v ie w in g a g e n c ie s ' o p e ra tio n s m ight have u lti m a te ly produced on th e g e n e ra l le v e l o f lo c a l s e r v ic e s and fu n c tio n s # W hether th e d a ta a re a n aly z e d in term s o f ty p e s and s iz e s o f ta x ­ in g j u r i s d i c t i o n s , o r f u n c tio n a l c a te g o rie s o f fu n d s , th e r e is l i t t l e ev id en ce t o s u p p o rt th e c o n clu sio n t h a t th e In d ia n a P la n has e x e r te d more th a n an i n s i g n i f i c a n t im pact on th e s tr u c t u r e o f lo c a l fin a n c e d u rin g th e th r e e decades o f i t s e x iste n c e # The ’'c o n tr o l of lo c a l e x p e n d itu re s ” and " a p p e lla te review " g e n e r a lly have been c o n sid e re d th e tw in h allm ark s o f th e In d ia n a Plan#

The l a t t e r in p a r t i c u l a r , a c c o rd in g to th e e a r ly r e p o r ts o f

th e s t a t e ta x b o a rd , was to be th e "d em o cratic" f e a tu r e o f th e p la n w hich would a v o id th e b u r e a u c r a tic " c e n t r a l i z a t i o n o f power in th e s t a t e body over th e lo c a l o f f i c i a l s " w h ile a t th e same tim e p ro v id ­ in g th e ta x p a y e rs w ith a means o f re d re s s a g a in s t th e spending

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p r o p e n s i t i e s o f th e l o c a l a u t h o r i t i e s .

B ut th e r o le p la y e d by

a p p e l l a t e re v ie w underw ent a r a d i c a l change d u rin g th e c o u rse o f r e v is io n s o f th e In d ia n a P lan *

T axpayer a p p e a ls became in c r e a s ­

in g ly l e s s im p o rta n t a f t e r 1932 when s t a t u t o r y t a x l i m i t s w ere r e ­ in tr o d u c e d , and p r a c t i c a l l y in c o n s e q u e n tia l a f t e r 1937 when th e s t a t e t a x b o ard was once a g a in empowered w ith m andatory rev iew and lo c a l a u t h o r i t i e s w ere a l s o g ra n te d th e r i g h t to a p p e a l t o th e s t a t e board*

I t has been th e l a t t e r ty p e o f u n p u b lic iz e d a p p e l l a t e

re v ie w t h a t has become i n c r e a s in g ly im p o rta n t in r e c e n t y e a r s .

In

s h o r t , th e d e v ic e , o r i g i n a l l y i n s t i t u t e d to p r o t e c t th e ta x p a y e rs from th e " ta x s p e n d e rs 1* and " ta x e a t e r s 1* has been tra n s fo rm e d i n t o an in s tru m e n t f o r th e p r o t e c t i o n o f th e governm ental u n i t from an o v e rd o se o f " d e c e n tr a liz e d s u p e r v is io n 11 a t th e hands o f th e lo c a l re v ie w in g a g e n c ie s w hich in many c a se s have r e f l e c t e d th e v ie w p o in t o f th e o rg a n iz e d p r o p e r ty ta x p a y e rs*

W ith th e p r a c t i c a l d i s ­

a p p e a ra n c e from th e scen e o f a p p e ll a te re v ie w based on ta x p a y e r re m o n s tra n c e s , t h i s s p u rio u s d e m o cratic d e v ic e no lo n g e r can be c o n s id e re d an i n t e g r a l f e a t u r e o f th e In d ia n a P lan * Thus, th e c o n c lu s io n i s a l l b u t in e s c a p a b le t h a t d e s p ite th e many r e v is io n s o f th e In d ia n a P la n d u rin g th e lo n g y e a rs o f i t s e x is t e n c e , i t has n o t r e s u l t e d in th e s t a t e c o n tr o l o f l o c a l expend­ i t u r e s , n o r s i g n i f i c a n t ta x p a y e r " s a v in g s " , n o r re d r e s s f o r th e p r o p e r ty ta x p a y e r v ia a p p e l l a te re v ie w .

B a th e r, i t a p p e a rs to th e

w r i t e r t h a t th e m ajor c o n tr ib u tio n o f th e p la n has been th e a s s i s t ­ ance t h a t b o th th e co u n ty and s t a t e ta x b o ard s have re n d e re d in

212

o b ta in in g s t r i c t conform ance by p r a c t i c a l l y a l l l o c a l ta x in g j u r i s ­ d i c t i o n s w ith th e e s t a b l i s h e d b u d g e ta r y , a c c o u n tin g , and f i n a n c i a l r e p o r t i n g p ro c e d u re s *

These p ro c e d u re s a r e l e g a l l y p r e s c r i b e d by

th e S t a t e Board o f A c c o u n ts , im plem ented by th e s t a t e t a x b o a rd , and j o i n t l y a d m in is te r e d and e n fo rc e d by b o th a g e n c ie s*

I t has

b een in t h i s a r e a o f s t a t e s u p e r v is io n o v e r l o c a l b u d g e t-m a k in g , and n o t i n th e c o n tr o l o f th e d i r e c t i o n and a b s o lu te l e v e l s o f e i t h e r t a x l e v i e s o r e x p e n d itu r e s , t h a t th e m ost d e s i r a b l e r e s u l t s o f th e In d ia n a P la n a r e to be found* I t h as been shown t h a t a d h eran c e to th e p r e s c r ib e d p ro c e d u re s r e g a r d in g b u d g e t p r e p a r a t io n and ra te -m a k in g c o n s t i t u t e d th e o n ly r a t i o n a l ' c r i t e r i o n u sed by b o th th e c o u n ty and s t a t e t a x b o a rd s in re v ie w in g l o c a l b u d g ets*

As may be e x p e c te d , t h e r e e x i s t s a p o s i t i v e

r e l a t i o n s h i p betw een s iz e o f ta x in g u n i t and e f f i c i e n c y o f b u d g e t p r e p a r a tio n *

From a p u r e ly t e c h n i c a l s ta n d p o i n t, th e p o o r e s t p r e ­

p a re d b u d g e ts w ere th o s e o f th e s m a lle s t r u r a l and u rb a n u n i t s o f g overnm ent, and th e t e c h n i c a l l y b e s t w ere th o s e r e p r e s e n t a t i v e o f t h e l a r g e s t u n its *

The fo r e g o in g a n a ly s is o f th e d i s t r i b u t i o n

p a t t e r n o f th e a d ju s tm e n ts has shown t h a t th e r e l a t i v e fre q u e n c y \Vt\»e r s e l y

and amount o f r e d u c tio n v a r i e d djffo e t i y in a marked manner w ith th e s i z e o f t h e ta x in g j u r i s d i c t i o n .

There i s no o f f i c i a l e v id e n c e to

i n d i c a t e th e re v ie w in g a g e n c ie s w ere c o n cern ed w ith more g e n e ra l b u t fu n d a m e n tal c r i t e r i a such as th e f i n a n c i a l a b i l i t y o f th e com­ m u n ity , minimum s ta n d a r d s o f s e r v i c e , e lim in a tio n o f o v e rla p p in g

213

f u n c t i o n s , o r th e ach iev em en t o f minimum u n i t o p e r a tin g c o s ts th ro u g h im proved a d m in is tr a tiv e p r a c t i c e s .

The la c k o f any b a s ic d e s ir e on

th e p a r t o f th e s t a t e t a x b o a rd t o in f l u e n c e g overnm ental s e r v ic e s p erfo rm ed by l o c a l u n i t s i s f u r t h e r e v id e n c e d by th e r e l a t i v e l y i n ­ s i g n i f i c a n t amount o f e x p e n d itu re r e d u c tio n r e s u l t i n g from th e r e ­ view o f r e g u l a r b u d g e ts a s w e ll as o f a d d i t i o n a l a p p r o p r i a t io n s . M oreover, i t a p p e a rs t h a t th e re v ie w in g a g e n c ie s w ere p r im a r i ly co n cern ed w ith two p a r t i c u l a r a s p e c ts o f b u d g et-m ak in g , n e i t h e r one o f w hich had any peroeptible in f lu e n c e on governm ent s p e n d in g , nam ely: ( l ) th e p r o p e n s ity o f l o c a l a u t h o r i t i e s to u n d e re s tim a te th e a n t i c ­ ip a te d re v e n u e s fo rth c o m in g from a v e r i t a b l e hodge-podge o f s o u rc e s t h a t c o n s t i t u t e s th e p r e s e n t s t r u c t u r e o f l o c a l rev en u es in In d ia n a ; and (2 ) th e c o r o l l a r y te n d e n c y t o o v e re s tim a te th e r e q u ir e d w orking b a la n c e , th e d e te r m in a tio n o f w hich r e s o lv e s i t s e l f in to a m a tte r o f c o n je c tu r e w hereby th e o p in io n s o f one group o f o f f i c i a l s a re p i t t e d a g a in s t th o s e o f a n o th e r .

The f a c t t h a t th e b u lk o f th e a d j u s t ­

m e n ts, a c c o rd in g t o th e o f f i c i a l r e c o r d s , w ere made by b o th th e co u n ty and s t a t e t a x boards on th e b a s is o f th e above two re a so n s a ls o i n d i c a t e s t h a t s t a t e a d m in is tr a tiv e s u p e r v is io n o v er lo c a l fin a n c e was p r im a r ily concerned w ith th e te c h n i c a l b u d g e t-p re p a rin g and r a t e making p r o c e s s .

I f the sources of funds f o r financing lo cal services must con­ tin u e as heterogeneous and complex as in the past so t h a t i t becomes almost in e v ita b le t h a t lo c a l a u th o r itie s w i l l underestimate revenues and o v e rs ta te working balances in order to hedge a g ain st adverse changes t h a t may possibly occur in t h e i r income flows during the

e n su in g se v e n te e n month b u d g et p e rio d , th e n th e rev iew in g o f lo c a l b u d g e ts sh o u ld n o t be dependent upon a system b ased on u n r e a l i s t i c s t a t u t o r y t a x l i m i t s w hich in a d d itio n to e n g en d erin g an unwhole­ some a t t i t u d e tow ard th e law , must be v io la te d on p r a c t i c a l l y a u n iv e r s a l s c a le i n o rd e r f o r th e s t a t e to a d m in is te r and e n fo rc e th e p r e s c r ib e d b u d g e ta ry p ro ced u res*

Nor does th e r e seem to be any

r a t i o n a l b a s i s , e x c e p t p erh ap s h i s t o r i c a l p re c e d e n t and p o l i t i c a l e x p ed ie n c y , f o r th e m aintenance of th e p r e s e n t d iv is io n o f th e s u p e rv is o ry f u n c tio n o v er t h i s a s p e c t o f lo c a l b u dget making between th e two s t a t e a d m in is tr a tiv e a g e n c ie s as w e ll as th e n in e ty -tw o co u n ty ta x boards*

T h e re fo re , in l i g h t o f t h i s s tu d y , th e fo llo w in g

recom m endations a re made; (a ) The power o f m andatory review should be t r a n s f e r r e d from th e County Boards o f Tax A djustm ent and th e S ta te Board o f Tax Commissioners to th e S ta te Board o f A ccounts; (b) The funds o f a l l lo c a l ta x in g j u r i s d i c t i o n s sho u ld be review ed and approved by th e S ta te Board o f A ccounts f o r com pliance w ith th e p re s c rib e d b u d g etary p ro c e d u res b e fo re th e budgeted ta x l e v i e s , ta x r a t e s and e x p e n d itu re s a re l e g a l l y e s ta b li s h e d ; (c ) The p r e s e n t s t a t u t o r y o v e r a ll ta x l im it a ti o n laws should be re p e a le d ; (d) The 92 County Boards o f Tax A djustm ent sh o u ld be a b o lis h e d and (e) A p p e lla te review i n s t i t u t e d by ta x p a y e rs o r lo c a l ta x in g j u r i s d i c t i o n s sh o u ld be d is c o n tin u e d . By r e a lig n in g th e fu n c tio n s o f b o th th e s t a t e ta x bo ard and th e S ta te Board o f A cco u n ts, th e a d m in is tr a tiv e s u p e rv is io n over b o th th e g e n e ra l p ro p e rty ta x and th e b u d g e tin g p ro c e ss would be im proved. The l a t t e r b o a rd , p o s s e s s in g a r e p u ta tio n f o r b ein g one o f th e more

215

e f f i c i e n t s t a t e a d m in is tr a ti v e a g e n c ie s i n I n d ia n a , a lr e a d y i s l e g a l l y v e s te d w ith th e s u p e r v is o r y powers o v er l o c a l b u d g et-m ak in g . H ence, in a d d i t i o n to i t s p r e s e n t f u n c tio n o f p r e s c r i b in g th e budg­ e t a r y form s and p ro c e d u re s t h a t a r e to be fo llo w e d by lo c a l u n i t s o f governm ent, i t l o g i c a l l y w ould be made r e s p o n s ib le f o r th e im­ p le m e n ta tio n and e n fo rc em en t o f i t s r e g u l a t i o n s .

This c o u ld be done

by i n s t i t u t i n g a system o f m andatory re v ie w , in a manner an ala g o u s to th e p r e s e n t a u d i t i n g o f l o c a l a c c o u n ts , by w hich th e S ta te Board o f A ccounts w ould p r e - a u d i t th e b u d g ets o f a l l l o c a l ta x in g j u r i s d i c t i o n s b e fo re t h e i r t a x r a t e s and l e v ie s w ere o f f i c i a l l y e s t a b l i s h e d .

As

t h i s agency i s a ls o r e s p o n s ib le f o r c a r r y in g o u t th e t e c h n i c a l d i s t r i ­ b u tio n s o f th e su n d ry g ra n ts and " re p la c e m e n t" ta x e s i t w ould be in an ad v an tag eo u s p o s i t i o n to a s s i s t th e l o c a l a u t h o r i t i e s in a r r i v i n g a t re a s o n a b le d e te r m in a tio n s o f t h e i r m ajor a n t i c i p a t e d rev en u es from s o u rc e s o th e r th a n p ro p e r ty t a x e s .

And p erh ap s more s i g n i f i c a n t l y ,

i t w ould a c h ie v e th e c o r o l l a r y b e n e f i t o f d iv o rc in g th e s u p e r v is io n o f th e b u d g e ta ry p ro c e s s from th e u n r e a l i s t i c and r e p r e s s iv e s t a t u ­ t o r y t a x l i m i t s w hich " a re opposed to th e b e s t i n t e r e s t s o f a m ajo r­ i t y o f c itiz e n s " ,'* ' and w hich no lo n g e r co u ld be r a t i o n a l i z e d as a b a s is f o r m andatory re v ie w .

In e f f e c t , th e s u s t i t u t i o n o f m andatory

1 . A. H illh o u s e and R. W elch, Tax L im its A p p ra is e d , P u b lic a tio n H o.55, P u b lic A d m in is tra tio n S e r v ic e , C hicago, 1S37, p . 1. L e e t and P a ig e , i n t h e i r stu d y o f s t a t u t o r y and c o n s t i t u t i o n a l ta x l i m i t s , a ls o conclude t h a t " i t may be s t a t e d w ith o u t q u a l i f i c a t i o n t h a t th e p re p o n d e ran c e o f o p in io n among t a x a u t h o r i t i e s i s u n fa v o r­ a b le to b o th c o n s t i t u t i o n a l and s t a t u t o r y ta x l i m i t s . " L e e t and P a ig e , o p . c i t . , p . 88.

216

review by th e S ta te Board of Accounts f o r the presen t dual system would not only c o n s t it u t e a more e f f i c i e n t a d m in istra tiv e technique f o r accomplishing the county and s t a t e tax b o a rd s1 major supervisory o b je c tiv e —o btain in g s t r i c t conformance w ith th e prescribed budgetp reparing and rate-making procedures—but i t would have a highly d e sira b le psychological e f f e c t upon the lo ca l a u t h o r i t i e s .

I f upon

assuming t h i s fu n c tio n the S ta te Board of Accounts made i t p a te n tly c le a r t h a t i t s primary concern was obtaining adherance to the budg­ e ta r y procedures and not w ith c u r t a i l i n g expenditures, manufacturing "taxpayer sav in gs", and o th er s im ila r o b jec tiv e s which in the p a st have been a t t r i b u t e d to organized property taxpayers and the s t a t e tax board, the lo c a l o f f i c i a l s would not be provided w ith a basis f o r b e lie v in g t h e i r autonomy over lo ca l f i s c a l p olicy was being en­ croached upon by a b u rea u cra tic s t a t e agency.

Moreover, such a

re v is io n probably would reduce the lo c a l a u th o ritie s* p ro p e n s itie s to "pad" budgets and would reduce t h e i r extensive use of a d d itio n a l and emergency ap p ro p riatio n s fo r financing ordinary expenditures which e i t h e r were pruned from, or never included in , the re g u la r budgets.

Thus, reg a rd less of the absolute amount of re a l taxpayers

savings accruing from the operation of the cu rren t version of the Indiana P lan, i t i s evident t h a t such savings would continue, or a c t u a l l y be in creased , i f the S ta te Board of Accounts was made re ­ sponsible fo r the p re -a u d itin g of a l l lo ca l budgets. F u rth e rm o re , th e tr& n sfe ra n c e o f t h i s f u n c tio n w ould r e l i e v e th e s t a t e ta x b o a rd o f burdensome d e t a i l e d d u t i e s , th e perform ance

217

o f w hich d u rin g th e t h r e e d ecad es o f th e o p e r a tio n o f th e In d ia n a P la n d id n o t r e s u l t in any fu n d a m e n tal changes o r marked im provem ents in th e a d m in is tr a tio n o f th e g e n e r a l p ro p e r ty t a x .

The s t a t e ta x

b o a rd w ould th e n be i n a p o s i t i o n , f o r th e f i r s t tim e s in c e th e i n ­ c e p tio n o f th e p la n i n 1919, to d i r e c t and d e v o te i t s f u l l tim e and e n e r g ie s t o a c h ie v in g an e q u ita b le and j u s t p r o p e r ty ta x sy stem b a se d on u n ifo rm and f u ll - m a r k e t v a lu e a s s e s s m e n t- - th e o b je c tiv e w h ich p resu m ab ly was th e r a is o n d fe t r e f o r th e en actm en t o f th e o r i g i n a l Tax Reform Law o f 1919.

T his w ould c o n s t i t u t e th e s t a t e

ta x b o a rd * s s o le r e s p o n s i b i l i t y . Of c o u rs e , th e e lim in a tio n o f th e s t a t u t o r y ta x l i m i t s and th e tr a n s f e r e n c e o f th e m andatory re v ie w f u n c tio n t o th e S t a t e Board o f A c c o u n ts, i n t u r n , w ould e lim in a te th e n e c e s s it y f o r th e c o n tin ­ uance o f t

( l ) th e County B oards o f Tax A d ju stm en t and (2 ) th e h ig h ly

p u b lic iz e d ta x p a y e r a p p e a ls .

R egarding th e fo rm e r, th e re d u c tio n

in t h e number o f f i s c a l a d m in is tr a t iv e a g e n c ie s and th e s tr e a m lin in g o f th e s u p e r v is o r y p ro c e s s by th e e lim in a tio n o f one s e t o f budg­ e t i n g h u rd le s sh o u ld r e s u l t i n a d e cid e d improvement in e f f i c i e n c y , p a r t i c u l a r l y s in c e more th a n o n e - q u a r te r o f th e co u n ty ta x b o ard s view ed t h e i r f u n c tio n a s a " ru b b e r-sta m p in g " c h o re , and th e o th e rs e v id e n c e d a p r e d i l e c t i o n f o r a d ju s t in g th e fu n d s o f p a r t i c u l a r t a x ­ in g j u r i s d i c t i o n s .

R egard in g a p p e l l a t e rev iew b ased on ta x p a y e r

re m o n s tra n c e s , t h i s f e a t u r e co u ld be c o n tin u e d i f th e p o l i t i c i a n s , t a x p a y e r s ' a s s o c ia ti o n s and th e e l e c t o r a t e in g e n e ra l e x p re ss e d a d e s ir e t o r e t a i n i t a s p a r t o f th e t r a d i t i o n a l H o o sier i n s t i t u t i o n a l

218

environm ent*

However, th e s c r a p p in g o f t h i s ’’d i s t i n c t i v e f e a t u r e ”

w ould e n t a i l no r e a l lo s s s in c e p r a c t i c a l l y i t has had a ’’f i f t h w h e el" s t a t u s a s an a d m in is tr a ti v e d e v ic e d u rin g th e l a s t two decades* A lth o u g h th e w r i t e r i s aw are o f th e f a c t t h a t th e i n s t i t u t i o n o f th e above recom m endations w ould n o t r e s o lv e th e more b a s ic f i s c a l problem s c o n f r o n tin g l o c a l governm ent in I n d ia n a , he b e lie v e s t h a t i t w ould be a move i n th e r i g h t d i r e c t i o n f o r im proving s t a t e - l o c a l r e l a t i o n s , and th e r e b y p ro v id e an en v iro n m en t in w hich In d ia n a co u ld p io n e e r in a tte m p tin g to a c h ie v e a more r a t i o n a l and e f f e c t i v e s y s ­ tem o f s t a t e a d m i n i s t r a t i v e c o n tr o l o v er l o c a l fin a n c e *

APPENDIX A— THE SAMPLE

220

APPENDIX A

THE SAMPLE

The sam ple o f 250 l o c a l ta x in g j u r i s d i c t i o n s u sed in th e s tu d y was p u r p o s e f u lly s e l e c t e d to in c lu d e a l l o f th e r e l a t i v e l y la r g e u n i t s w h ile a t th e same tim e p ro v id in g a d e q u a te r e p r e s e n ta ­ t i o n o f th e sm a ll r u r a l j u r i s d i c t i o n s w h ich n u m e ric a lly a c c o u n t f o r such a huge p r o p o r tio n o f th e t o t a l number o f u n i t s making up th e s t r u c t u r e o f l o c a l governm ent in I n d ia n a .

The s e l e c t i o n and

s t r a t i f i c a t i o n was p r im a r i ly made on th e b a s is o f p o p u la tio n s in c e th e n a tu r e and m agnitude o f g o v ern m en tal f u n c tio n s and s e r v ic e s a r e so in t i m a t e l y r e l a t e d t o th e dem ographic f e a t u r e s o f th e u n i t s . The number o f o v e rly in g j u r i s d i c t i o n s *

l o c a t i o n , f i s c a l a b i l i t y and

e x te n s iv e n e s s o f f i s c a l o p e ra tio n s w ere a ls o c o n s id e re d . The sam ple was b a se d on a m o d if ic a tio n o f th o s e u sed by th e B ureau o f Census i n i t s s e r i e s on l o c a l governm ent f in a n c e .

The

p rim a ry c o re c o n s is te d o f 30 c o u n tie s w hich in c lu d e d th e 22 c o u n tie s and 18 l a r g e s t c i v i l c i t i e s o f In d ia n a u sed by th e B ureau o f Census i n i t s s tu d ie s o f co u n ty and c i t y fin a n c e s in U n ite d S t a t e s . '1' M oreover, when t h i s sam ple o f 30 c o u n tie s s e le c te d on th e b a s is o f p o p u la tio n was ranked and compared w ith M cPheron's ra n k in g o f 1.

U. S . Bureau o f C ensu s, County F in a n c e s ; 1941-1945, and C ity F in a n c e s : 1942-1947, ( C i t i e s H aving P o p u la tio n s o v er 2 5 ,0 0 0 ), W ash in g to n .

221

In d ia n a c o u n tie s on th e b a s is o f h is t e s t s o f g o v ern m en tal f i s c a l a b i l i t y , 1 i t re v e a le d th e u n u s u a lly h ig h ra n k c o r r e l a t i o n c o e f f i c i e n t o f *979, a s shown in A ppendix A— T able 5*^ A ll o f th e o th e r ta x in g j u r i s d i c t i o n s in c lu d e d in th e sam ple, i . e . , sc h o o l and c i v i l c o r p o r a tio n s and to w n s h ip s , a re lo c a te d w ith in th e s e 30 b a s ic c o u n tie s , and th e lo w e s t- s iz e s tra tu m o f each was s e l e c t e d a t random*

The s t r a t i f i c a t i o n o f th e s e u n i t s by ty p e and

s i z e , w ith a p p r o p r ia te n o t a t i o n , was as f o llo w s : C o u n tie s : C -I P o p u la tio n 100,000 and o v er C -II " 50.000 to 100,000 C -III ” 25.000 t o 50,000 C-IV M u n d e r 25,000 T ow nships: T -I P o p u la tio n 25.000 and o v er 10.000 to 25,000 T -II " 5 ,000 t o 10,000 T -III " T-IV ” u n d e r 5000 C iv il C i t i e s : M-I P o p u la tio n 50.000 M-1I M 25.000 2 ,500 L i - I I I ” u nder M-IV ” S chool C i t i e s : S -I O v e rlie S -II " S -III " 5-IV "

and o v er t o 50,000 to 25,000 2,500

M-I M -II M -III M-IV

1 . £• B. M cPheron, M easuring F is c a l A b i l i t y o f In d ia n a C o u n tie s , u n p u b lis h e d d o c to r a l d i s s e r t a t i o n , In d ia n a U n iv e r s ity , B loom ington, I n d ia n a , 1948* 2 . C f. in f r a , p . 227.

222

An e x a m in a tio n o f th e t a b l e s w h ich f o llo w i n A ppendix A, b a se d on th e above c l a s s i f i c a t i o n , i n d i c a t e s th e s i g n i f i c a n c e and r e p r e s e n t a t i v e n e s s o f th e sam ple u n i t s when com pared w ith th e a g g r e g a te d a ta f o r th e t o t a l number o f t a x i n g j u r i s d i c t i o n s i n In d ia n a *

223 Appendix A— Table 1

SUMMARY OF COUNTY SAMPLE COMPARED WITH UNIVERSE ON BASIS OF POPULATION

S iz e o f U n its C -I C -II C -III C-IV T o ta l

Number o f C o u n tie s Uni v e r s e Sample 5 8 25 54 92

5 8 8 9 30

S iz e o f U n its C -I C -II C -III C-IV T o ta l S iz e o f U n its C -I C -II C -III C-IV T o ta l S o u rc e s :

1940 P o p u la ­ t i o n (ooo) Uni v e rs e Sample

1940 Urban Pop* (000) U ni­ v e rs e Sample

1,202 566 778 882 3,428

996 364 335 189 1 ,888

1,202 566 287 151 2,205

996 364 143 32 1,535

P e rc e n ta g e D i s t r i b u t i o n 5 9 27 59 100%

17 32 25 26 100%

35 17 23 26 100%

54 26 13 7 100%

53 19 18 10 100%

65 24 9 2 100%

Sample as p e r c e n t o f U n iv e rse 100 100 32 17 33%

100 100 37 17 64%

100 100 43 17 81%

U. S . Bureau o f C ensus, P o p u la tio n Census o f 1940. o f I n d ia n a , 1947. H e r e a f te r , t h i s r e p o r t w i l l be c i t e d as " S t a t i s t i c a l R e p o rt" , u n le s s n o te d o th e rw ise*

224

Appendix A— T a b le 2

SUMMARY OF COUNTY SAMPLE COMPARED WITH UNIVERSE ON BASIS OF NUMBER OF LOCAL TAXING JURISDICTIONS INCLUDED IN COUNTIES

S iz e o f U n its C -I C -II C -III C-IV T o ta l

Townships U ni­ v e r s e Sample 61 116 288 545 1,0 1 0

61 116 89 94 360

S iz e o f U n its C -I C -II C -III C-IV T o ta l

S o u rc e :

48 69 167 255 529b

48 69 52 47 216

School C itie s ' Uni v e rs e Sample 80 138 334 630 1182

80 138 104 108 430

P e rc e n ta g e D i s t r i b u t i o n 0 6 12 28 54 100%

S iz e o f U n its C -I C -II C -III C-IV T o ta l

C iv il C it ie s Uni­ v e rs e Sample

17 27 27 30 100%

9 13 32 46 100%

22 32 24 22 100%

7 12 28 53 100%

19 32 24 25 100%

Sample as p e rc e n t o f U n iv erse 100 100 31 17 36^

100 100 30 19 41^

100 100 31 17 36^

U. S . B ureau o f Q ensus, G overnm ental U n its in U n ite d S t a t e s , 1942.

(a ) S chool C i t i e s in c lu d e d to w n sh ip sch o o l d i s t r i c t s . (b ) T o ta l e x clu d e d d u p lic a tio n o f 10 c i v i l c i t i e s w hich l i e in more th a n one c o u n ty . (c ) T o ta ls may n o t e q u a l sum o f p a r t s b ecau se o f ro u n d in g .

225

Appendix A— Table 3

SUMMARY OF COUNTY SAMPLE COMPARED WITH UNIVERSE ON BASIS OF SEIECTED FISCAL FACTORS0,

1?U6 Assessments Size of Units C-I C-II c -m C-IV Total

Universe

Sample

Universe

Sample

1,731 721 905 9h0

1,731 721 306 175

5Kk k .l 5 .8 7.2

9*k lu l 2 .0 1.1

li37

$2,937

$26.6

$16.7

Size o f Units C-I C-II C -III C-IV Total S ize o f Units C-I C-II C -H I C-IV Total Source;

19h6 Property and P o ll Taxes

Percentage D istrib u tion 39 16 20 2k

$9 2!5 10 6

36 16 22 27

57 25 12 6

100$

100$

100$

100$

Sample as percent o f Universe 100 100 3k 17

100 100 35 15

66$

63$

State Board o f Accounts, S t a t is t ic a l Reports* 19^6-191*7.

(a ) T otals may not equal sum of parts because of rounding*

226

Appendix A—Table i*

SUMMARY OF COUNTY SAMPIE COMPARED WITH UNIVERSE ON BASIS OF SELECTED FISCAL FACTORS8,

19U6 Disbursements Size of Units C-I C-II C -III C-IV

Unxverse Sample 18.3 9.5 16*6 20.0

18.3 5 .5 5 .9 3 .3

•it

$37.0

Total SizeS of Units C-I c -n C -III C-IV Total Size o f Units

Total Source;

5.5

5 .5 .9

.9 1 .5 1 .3

.6 .5 '.5

Percentage D istribution 29 15 26 31

50 26 16 9

59 10 16 11*

100$

100$

100$

73 12 8 ___6 100$

Sample as percent of Universe 100 100 36 il6

C-I C-II c -in C-IV

12/31/1*6 Gross Debt ($000, 000) Universe Sample

58$

100 100 1*1 36 81$

State Board o f Accounts, S t a t is t ic a l Report, 19l*7.

(a) T otals may not equal sum o f parts because o f rounding*

227 Appendix A—Table 5 POPULATION RANK COMPARED WITH MCPHERON'S FISCAL ABILITY TEST,a AND COMPUTATION OF RANK CORRELATION COEFFICIENT, FOR THE THIRTY COUNTIES IN SAMPLE Rank by 19^0 Popula­ tio n Size

Rank by McP's F is c a l A b ility Tests 2 1 h 3 5

-1 1 -1 1

l x l l

Vigo Madison Delaware Elkhart La Porte W^yne Grant Tippecanoe

1 2 3 k 5 A O 6 7 8 9 10 11 12 13

7 6 8 9 10 11 12 lii

-1 1

l l

-1

l

Howard Knox Henry Cass Floyd Green Marshall Clay

Hi 13' 16 17 18 19 20 a

13 15 16 17 18 a 20 22

1

l

-2

h

-1

i

Adams Warrick Rush Orange Hancock Harrison Washington Blackford Warren

22 23 2h 25 26 27 28 29 30

19 29 23 27 25 28 26 2it 30

3 —6 1 -2 1 -1 2 5

9 36 1 h l l 1 25

Totals

-,1ir

—

0

9h

Counties Marion Lake St# Joseph A llen Vanderburg

(D) D ifference in Rank

(B)2 D ifference in Rank Squared

Spearman's formula fo r rank co rr ela tio n c o e ffic ie n t: p * 1 -

6 € d2

su b stitu tin g :

1 -

6C9U)

.9791

(A) E. B. McPheron, Measuring F isc a l A b ility of Indiana Countiest unpublished doctoral d isser ta tio n , Indiana U niversity, Bloomington, Indiana, 19ii8*

228

A p p en d ix A— T a b le 6

SUMARY OF TOWNSHIP SAMPLE COMPARED WITH UNIVERSE ON BASIS OF POPULATION®1

S iz e o f U n it T -I T -II T -III T-IV T o ta l

Number o f Townships U n iv e rse Sample 19 30 48 913 1,0 1 0

5 9 16 30 60

S iz e o f U n it T -I T -II T -III T-IV T o ta l

S iz e o f U n it T -I T - II T -III T-IV T o ta l S o u rc e s ;

1940 P o p u la tio n ________ (OOP)______ U n iv e rse Sample 1,407 415 329 1,277 3 ,4 2 8

533 159 115 41 849

P e rc e n ta g e D i s t r i b u t i o n 0 2 3 5 90 100%

8 15 27 50 100?

41 12 10 27 100?

63 18 13 5 100%

Sample as p e rc e n t o f U n iv e rse 26 30 33 3 ' 6%

38 38 35 3 "2 5 ?

U. S . B ureau o f C en su s, P o p u la tio n Census o f 1940. S t a t e Board o f A c c o u n ts, S t a t i s t i c a l R e p o rt, 1947.

(a ) G eneral p r o p e r ty ta x e s and d is b u rs e m e n ts f o r th e in d iv id u a l s iz e c a te g o r ie s o f to w n sh ip s w ere n o t a v a i l a b l e , b u t t o t a l p r o p e r ty t a x i n 1946 f o r u n iv e r s e was # 4 ,1 3 3 ,0 0 0 , and g e n e ra l d is b u r s e ­ ments w ere $ 5 ,5 9 9 ,0 0 0 . (b ) Sample p o p u la tio n f o r t h i s group a p p ro x im a te d on b a s is o f a v erag e p o p u la tio n p e r to w nship f o r t h i s s iz e s tra tu m in u n iv e r s e .

(c) T otals may not equal sum of p a rts because of rounding.

229

A p pendix A— T able 7

SUMMARY OF CIVIL CITY SAMPLE8- COMPARED 1AIITB UNIVERSE ON BASIS OF POPULATION

S iz e o f U nit M-I M-I I M-I I I M-IV T o ta l

Number o f C iv il C itie s U niverse Sample 8 10 80 431 529

S iz e of U n it M-I M-I I M -III M-IV T o ta l S iz e o f U nit M-I M -II M -III M-IV T o ta l S o u rce s:

8 10 28 44 90

1940 P o p u la tio n U niverse 1,003 329 555 321 2,209

Sample 1,003 329 203 33 1,568

P e rc e n ta g e D is tr ib u tio n 2 2 15 81 100$

9 11 31 49 100$

46 14 25 15 100$

64 21 13 2 100$

Sample as p e rc e n t o f U niverse 100 100 35 10 17%

100 100 37 10 H I?

U. S. Bureau o f C ensus, P o p u la tio n Census o f 1940. S ta te Board o f A cco u n ts, S t a t i s t i c a l R eport , 1947.

(a ) School c i t y sam ples f o r th e u p p e r-th r e e s iz e s t r a t a ( S - I , S - I I , S - I I l ) , e x c lu s iv e o f tow nship sch o o l d i s t r i c t s , a re th e same as f o r th e c i v i l c i t i e s s in c e th e y o v e r lie th e s e urban u n i t s . A lthough In d ia n a has 431 r u r a l c i v i l c o rp o ra tio n s (towns and c i t i e s o f le s s th a n 2,500—M-IV) o n ly 74 have o v e rly in g sch o o l d i s t r i c t s and th e sample in c lu d e s 23 o f th e s e s e le c te d a t random. C f. U. S . Bureau o f Census, Governmental U n its in U n ited S t a t e s , 1942.

230

A p pendix A— T ab le 8

SUMMARY OF CIVIL CITY SAMPLE COMPARED WITH UNIVERSE ON BASIS OF FISCAL FACTORS

S iz e of* U n it M-I M-I I M -III M-IV T o ta l

1946 P r o p e r ty Taxes0, ($ 00 0 , 0 0 0 )______ U n iv erse Sample 18.0 4 .0 5 .8 1 2.6

$30*3

i o f U n it M-I M-I I M -III M-IV T o ta l S iz e o f U n it M-I M-I I M -III M-IV T o ta l S o u rce : (a ) (b) (c ) (d ) (e ) (f)

18.0 4 .0 2 . 1( ,3 j 124.3

1946 Dis burs ernentsa ( $ 000, 000) U n iv erse Sample 23 .4 6 .9 9 .4 C 3 .8 $43.5

2 3 .4 6.9 3 .5 e .46 $34.1

P e rc e n ta g e D is tr ib u tio n 60 13 19 9 ■IOO56

74 16 9 1 100$

54 16 22 9 100%

69 20 10 1 100%

Sample as p e rc e n t o f U niverse 100 100 36 10f 80%

100 100 37

10s 78%

S ta te Board o f A cco u n ts, S t a t i s t i c a l R e p o rt, 1S47.

T o ta ls may n o t eq u al sum o f p a r ts b ecause of ro u n d in g . Five towns and two c i t i e s d id n o t r e p o r t f o r t h i s y e a r . Three towns d id n o t r e p o r t f o r t h i s y e a r . Five towns and one c i t y d id n o t r e p o r t f o r t h i s y e a r . Three towns d id n o t r e p o r t f o r t h i s y e a r . D ata u n a v a ila b le f o r t h i s c a te g o ry , b u t e stim a te d on r a t i o o f sample p o p u la tio n to t o t a l p o p u la tio n f o r o th e r u n its o f govern­ ment . (g) D ata u n a v a ila b le f o r t h i s c a te g o ry , b u t e stim a te d on b a s is o f r a t i o of sample p o p u la tio n to t o t a l p o p u la tio n f o r o th e r u n its o f governm ent.

APPENDIX B

DETAILED ANNUAL DATA FOR STATE AND COUNTY TAX BOARDS YEARS 1943-1948

232

Appendix B—Table 1 NUMBER OF LOCAL BUDGETS ADJUSTED ANNUALLY BY COUNTY TAX BOARDS CIASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 191*3-191*8 type and Sizea of J u ris d ic tio n

191*3 1 9hh 191*5 191*6 191*7 19l*£

C ounties; C -I "Pop. 100,000 and over c -n " 50,000 to 100,000 C -III " 25,000 to 50,000 C-IV " Under 25,000 T otal Counties

l 15

“7

Townships: T -I Epp* 25,000 and over T -II » 10,000 to 25,000 T -III “ 5,000 to 10,000 T-IV « Under 5,000 T otal Townships

5 78 12 3?

1* 7 7 12 29

3 1* 5

3 3 1 -

2 5 1 1

1* 5 3 3

3 5 3 1

3 5 5 3

IF

15

16

1* 5 7 9

3 6 5 9

3 5 7 10

55

55

3 7 1* 8 55 3 6 10 7 26

T

5F

C iv il C itie s? M-I Pop* 50,000 and over M-II » 25,000 to 50,000 M -III M 2,5OO0to 25,000 M-IV « Under 2,500 Total C iv il C itie s

7 5 U 13

5 6 10 10

3 7 13 10

56

51

55

7 6 9 5 57

School C itie s : S -I O verlie M-I C itie s S -II ” M-H " S -III » M -III " S-IV « M-IV » Total School C itie s

1* 5 5 5 19

6 3 1*

6 1 1* 6 17

7 5 1* 1*

17

5 3 6 6 20

56

5 1* 7 5 21

Total A ll Units

100

81*

87

82

80

101

Size of J u ris d ic tio n : Large urban u n its tedium urban u n its Small urban u n its Small ru ra l u n its

19 21 29 31

18 19 22

H* 20 27 26

20 18 21

16 23 21 20

17 21 32 31

Total A ll Units

100

81*

87

82

So

101

I*

(a) The same system of n o tatio n used in the follow ing ta b les w ill r e f e r to th e siz e c la s s ific a tio n s designated above*

6 7 13 13

5?

233

A ppendix B— T ab le 2

HUMBER OF BUDGETARY FUNDS ADJUSTED ANNUALLY BY COUNTY TAX BOARDS CLASSIFIED BY TYPE AND SIZE OF JURISDICTION YEARS 1943-1948

Type and S iz e of J u ris d ic tio n

1945

1944

1945

1946

1947

1948

8 6 6 1 21

5 4 1 10

4 5 2 1 12

7 8 3 4 22

7 9 4 3 23

5 9 6 6 25

7 11 16 16 50

5 10 11 18 44

6 11 13 11 41

4 13 9 11 37

3 15 7 12 37

4 9 11 17 41

C iv il C i t i e s : M-I M-I I M -III M-IV T o ta l

12 7 16 15 50

7 9 12 12 40

5 13 17 15 50

13 9 11 7 40

16 10 15 10 51

18 17 25 18 78

School C i t i e s : S -I S -II S -III S-IV T o ta l

6 8 8 7 29

7 4 6 5 22

7 4 8 8 27

8 2 7 7 24

12 7 6 4 29

9 6 8 6 29

150

116

130

123

140

173

C o u n tie s : C -I C -II C -II I C-IV T o ta l

T -I T - II T -III T-IV

T o ta l A ll U n its

r l H3

5O 8O n

rH>^

SO 8O n

p

H =S®s

Appendix B— Table

PA

C'~ H UN CA M3 A UN H O O C— On M3 4 r#1 «S #h #t •\ H -3* OJ i-4 CM

o

pH

K>

M3 CM O n 4 OO CO

r—

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^ ^ ^

CM rH HI

f— I

pH

A O 4 0 On O rH

M3

CM O M 3' ' H O* H fA - 4 •» *\ *i H U \ A CM PA

to k>

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r lr H O N p a O O n _4 C— A l A O

PA CM

to M3 M3 •> M3 A

UN On O-OO On On - 4 On M3 - 4 CO M3 CO •v CM

CO A H O O - fA CM CO UN C*« r l fA

PA C"-cO - 4 CM U \ O A (S- IN- 4 PA H p H

U \ M3 M3 M3 rA - 4 C— O - 4 UN Is- C— C—

r - M 3 UN H On H - 4 O n PA 03 O CM- 4 PA O •* CO 4 CM A CM H

C— p H UN On CM A H - 4 M3 UN 30 •v - 4 CM CM 4 CM

rH CM O f\_ 4 ] 4 A C -C M l H r - 4 iA | •V »V *\ U N - 4 CM H

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CM H CM UN CO M3 H OO O UNCO CO A •i •» * » « * ON A H

C O tA C M P C— r l O CO UNCO M3 M)

CM M3 H O p H- 4 A - 4 A C— ON A *> »\ n M3 A p H CM pH

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On A

CM

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$70,786

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no

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H H 4 0 KO H XA CM CO nO CO l>- C— XA 30 CM

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$129,553

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$118,627

H -G

CO o d Q C?\ o

$170,236

235

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CA O CO CM d X A C O no r~- rH o \ d CA *n *k n *k On O XA CM CM CM

IS

ONOO CA CM CM CM CO rH O CA d M D NO cm ON «k *k «k #1 *k CA C—d rH O CM CA

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CM nO nO rH rH - G O CM

Total All Units

a

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$106,296

I m

236

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238

A p p en d ix B— T a b le 7

HUMBER OF BUDGETARY FUNDS REVIEWED ANNUALLY BY STATE AND COUNTY TAX BOARDS CLASSIFIED BY TYPE OF FUND YEARS 1943-1948

Type of Fund

1945

1944

1945

1946

1947

1948

General Government

182

179

180

180

180

189

84

76

80

80

87

88

404

404

414

423

438

443

H ealth and H o sp ital

17

15

18

18

20

22

S tr e e t and Highway

88

81

90

89

84

80

Park and R ecreation

53

54

63

64

63

68

Debt Service

133

118

109

89

89

103

M iscellaneous

88

88

103

103

115

127

1,049

1,015

1,057

1,046

1,076

1,120

P u b lic W elfare Education

T otal A ll Funds

239

A p p en d ix B— T a b le 8

NUMBER OF BUDGETARY FUNDS ADJUSTED ANNUALLY BY COUNTY TAX BOARDS CLASSIFIED BY TYPE OF FUND YEARS 1943-1948

Type o f Fund

1943

1944

1945

1946

1947

1948

G en eral Government

51

43

46

41

39

56

P u b lic W e lfa re

16

8

5

19

21

25

E d u c a tio n

55

49

56

43

48

45

3

1

1

2

3

2

S t r e e t and Highway

10

3

4

3

7

17

P a rk and R e c re a tio n

3

3

4

5

7

12

D ebt S e rv ic e

8

7

7

4

6

4

M isc e lla n e o u s

4

2

7

6

9

12

150

116

130

123

140

173

H e a lth and H o s p ita l

T o ta l A ll Funds

240

coo

JO

sa

XA CM r•k CM

CA

A00 ON

- J

CM On XA •k

-J

VO O vO XA - J *% •V CA rH rH

vO

XA

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3

CA

XA XA

a

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On ©

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■5(8 rH

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C-

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a-

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pH

o

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(a) Line numbers refer to State Board of Accounts' form, "ESTIMATE OF FUNDS TO BE EAISED", c f * supra, p* 128* (b) Duplication represents cases where more than one reason was reported as basis for a sin g le adjustment*

CO O

244

A p p en d ix B— T ab le 13

NUMBER OF LOCAL BUDGETS ADJUSTED DOMvARD BY STATE TAX BOARD ANNUALLY CLASSIFIED BY TYRE AND SIZE OF JURISDICTION YEARS 1943-1948

Type and Size of , J u r is d ic tio n

1943

1944

1945

1946

1947

194£

C o u n ties: C-I C -II C -III C-IV T otal

3 4 5 3 15

1 3 3 3 10

0 2 3 5 10

3 4 4 6 17

1 4 5 3 13

2 2 6 5 15

Townships: T-I T -II T -III T-IV T otal

— 5 6 14 25

—

2 4 6 11 23

4 '4 6 13 27

3 8 7 13 31

3 7 8 15 33

—

C iv il C itie s : M-I M-II M-I 11 M-IV T otal School C itie s : S -I S -II S -III S-IV T otal Total A ll Units

3 3 12 18

,

5 16 11 32

2 3 6 14 25

5 5 11 21

3 5 16 17 41

3 8 11 18 40

4 8 16 17 45

1 2 6 _5 14

3 3 7 4 17

1 2 8 10 21

3 6 9 8 26

2 6 7 9 24

5 5 10 13 33

86

70

75

111

108

126

—

245

Appendix B— Table 14

NUMBER OF BUDGETARY FUNDS REDUCED ANNUALLY BY STATE TAX BOARD CLASSIFIED BY TYPE AND SI2E OF JURISDICTION YEARS 1943-1948

Type and S iz e o f J u ris d ic tio n C o u n tie s : C -I C -II C -III C-IV T o ta l T ow nships: T -I T -II T -III T-IV T o ta l

1943

1944

1945

1946

1947

1948

3 4 7 __3 17

1 4 3 3 11

3 3 7 13

3 4 5 6 18

2 5 6 3 16

3 3 8 7 21

11 8 26 45

4 3 17 24

2 6 9 18 35

7 6 8 17 38

5 14 12 22 53

6 14 15 22 57

C iv il C itie s : M-I M-I I M -III M—IV T o ta l

5 19 11 35

2 3 6 16 27

— 6 7 12 25

5 7 24 22 58

4 10 15 20 49

5 11 33 20 69

S ch o o l C i t i e s : S -I S -II S -III S-IV T o ta l

4 3 10 _1 24

3 4 9 5 21

1 3 11 13 28

6 9 17 17 49

2 7 7 12 28

7 7 11 20 45

121

83

101

163

146

192

T otal A ll U n its

—

CO CM

o r— 11T\ COoOStfA

kfr rH •k CM

HI

0 0 CM CO O 30 O s CM U S CO A C— A A C M O s

H 1A C V I

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CM u s H Q 30 s o O ssO ~ k f A s O A H C*-

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rH fA UN UN kp rH NO CA rH rH

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$1,266

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P

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$rH

fA

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H

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r

$396

O t —NO OO I A CM rH r l

l§

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Units

1-1 _l l_

cd -p

M Eoh H MMMH O I I I I 0 ko co co co X o co H H b ;

248

A p p en d ix B— T a b le 17

NUMBER OF BUDGETARY FUNDS REDUCED ANNUALLY BY 8 TATE TAX BOARD CLASSIFIED BY TYRE OP FUND YEARS 1943- 1948

Type o f Fund

1943

1944

1945

1946

1947

1948

G en eral Government

50

36

32

55

48

57

7

4

9

6

21

21

53

36

50

77

57

80

H e a lth and H o s p ita l

1

—

1

2

1

2

S t r e e t and Highway

8

5

6

13

8

15

—

—

3

2

5

5

2

1

—

3

3

6

—

1

—

5

3

6

121

83

163

146

192

P u b lic W e lfa re E d u c a tio n

P a rk and R e c re a tio n D ebt S e rv ic e M isc e lla n e o u s T o ta l A ll Funds

101

249

On rH fA

CM NO CM

CA

ON

-d

rH O

CO

-d

XA

a

O

NO

00 rH

13

ON On A

co A

58

A

rH •» rH

5* A O -d o

On O rH 40=

o

NO

r-

A

CM

o

CM

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*k

OO

A

1CO H

CM

rH

pq

£ O -P O •H xi CQ •H £ £ A>

CO CQ

CQ

•H P

i t was deemed t h a t the census s e rie s on C ity and County Finances did not provide s u ita b le data fo r th e p a rtic u la r purpose a t hand.

BIBLIOGRAPHY

268

BOOKS

Anderson, W illiam , Local Government and Finance in Minnesota* M inneapolis; U n iv e rsity “of Minnesota P re s s , 1935. B e tte r s , Paul V*, e d ito r , S ta te C e n tra liz a tio n in North C arolina> S tu d ies in A dm inistration Wo* 26. W ashington, D. C .: Brook­ ings I n s t i t u t e , 1932. C a rr, Robert K*, S ta te C ontrol of Local Finance in Oklahoma. Norman, Oklahoma's U n iv e rsity of Oklahoma^Press, 1937. Council of S ta te Governments, Report on .State-Local R e la tio n s* Chicago, 1946* Fagan, Elmen D ., and C* Ward W cy, e d ito r s , P ublic Finance. New Yorks Longmans, Green and Company, 1934. F in e r, Herman, Theory and P ra c tic e of Modern Government. Yorks D ial P re s s , 1934. Groves, Harold M., Financing Government. New York; 1939. Trouble Spots in T axation. P rin c e to n ; s i t y P re s s , 1948*

New

Henry H olt,

P rinceton Univer­

H a ll, F ran k lin P ., Indiana Gross Income Tax, ■unpublished d o c to ra l d i s s e r t a t io n . Madison; U n iv e rsity of W isconsin, 1946. Hansen, A lv in , and Harvey P e r l o f f , S ta te and Local Finance in the N ational Economy* New York; Norton, 1944. H illh o u se , A. M*, and R* B* Welch, lax Lim its A ppraised, p u b lica­ tio n N8. 55. Chicago; P u b lic A dm inistration S e rv ice , 1937. H illh o u se , A. M*, and M. M agelssen, Where C itie s Get Their Money* Chicago; M unicipal Finance O ffic e rs A sso c ia tio n , 1946* Jensen, Jens P*, P ro p erty Taxation in the United S ta te s * Chicago; U n iv ersity of Chicago P re s s , 1931. W ylie, S ta te A dm inistrative Review o f Local Budget Making# p u b lic a tio n No. 3 * New Y o rk :M u n ic ip a l A dm inistration S e rv ice , 1927.

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L eet, Glen, and Robert M. P aige, P ro p erty Tax L im itatio n Laws, th e Evidence f o r and a g a in s t them by Twenty-four A u th o ritie s , P u b lic a tio n No. 36. Chicago* P ublic A dm inistration S e rv ice , 1934. L u ts, H. L ., P u b lic Finance. 1936.

New York:

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Cambridge*

Harvard U n iv ersity

McBain, Howard Lee, American C ity Progress and th e Law. Columbia U n iv e rsity P re s s , 1918.

New York*

McCorkle, S tu a rt A ., S ta te F in a n cial Control over C itie s in Texas. D a lla s, Texas* Southern M ethodist U n iv e rsity P re s s , 1937. McPheron, Edwin B*, Measuring F is c a l A b ility of Indiana C ounties, unpublished d o c to ra l d i s s e r ta tio n . Bloomington, Indiana: Ind ian a U n iv e rs ity , 1948. M itc h e ll, George, and o th e rs , S ta te and Local Finance, P ublic Fin­ ance and P u ll Employment, Postwar Economic S tudies No. 3. Washington* F ederal Reserve System, 1945. M unicipal Finance O ffic e rs A sso c ia tio n , Proceedings of a Conference on S ta te S upervision of Local Finance. W ashington, 1941. Munro, W illiam B ., The Government of American C i ti e s . Macmillan, 1926.

New York*

Reed, Thomas H*, F ed eral-S tate-L o c al F is c a l R e la tio n s. M unicipal Finance O ffic e rs A sso c ia tio n , 1942.

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Report to th e S e c re ta ry of the T reasury, F e d e ra l, S ta te , and Local Government F isc a l R e la tio n s. W ashington, 1943. S ik e s, P re ss ly S ., Indiana S ta te and Local Government. Indiana U n iv e rsity , 1926*

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S ap p en field , Max M., F in a n cial A dm inistration in th e S ta te s of I l l i n o i s , Ohio, and In d ian a , unpublished d o cto ra l d is s e rta tio n # Urbana, I l l i n o i s : U n iv e rsity of I l l i n o i s , 1934.

270

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H a ll, F ra n k lin P . , "Indiana Taxation P rio r to Reform of 1919”, B u lle tin of N ational Tax A sso c ia tio n * May 1945* —— , ”Indiana Experience w ith General P ro p erty Tax Rate Limi­ t a t i o n s ”, B u lle tin of R atio n al Tax A sso c ia tio n , May 1946* — —■ — , "In cep tio n o f Indiana Gross Income Tax”, B u lle tin o f R atio n al Tax A ssociation* October 1947* H eer, C larence, " E ffe c tiv e S ta te Control o f Local E xpenditures", P roceedings, N atio n al Tax A sso c ia tio n , 1931* Johnson, Milbank, "The C a lifo rn ia Taxpayers* A sso c ia tio n ", P roceedings, N ational Tax A sso c ia tio n , 1931# Jones., H* P . , "Indiana Plan in Iowa", N ational M unicipal Review, May 1937. K ettleborough, C h arles, "Indiana L e g isla tu re R evises Tax Laws", N ational Municipal Review, October 1920. K ilp a tric k , W ylie, "S ta te S upervision o f M unicipal Finance in New J e rs e y " , N ational M unicipal Review, August 1925* ---------- , "P rospective A ction by S ta te s in R elatio n to Local Finance", N ational M unicipal Review, January 1933. — -------, "A W estern Chapter in th e C ontrol of Local E xpenditures", B u lle tin o f N ational Tax A sso c ia tio n , February 1933. -------—, "Inventory o f S ta te Supervision of Local Finance", Annals of American Academy o f P o l i t i c a l and S o cial S cience, January 1936* ...

"Neglected A spects of Intergovernm ental F is c a l R e la tio n s", American P o l i t i c a l Science Review, June 1947 •

L an caster, Lane W*, "S ta te S upervision and Local A dm inistration S tan d ard s", Southwest S o c ial Science Q u a rte rly , March 1933* Leland, S* E ., "Trends in S ta te -L o c al F is c a l R e la tio n s", S ta te Government, November 1941* L utz, H. L ., "Control of P u b lic E xpenditures", P roceedings, N ational Tax A sso c ia tio n , 1931. -

9 “S ta te Supervision of Local Finance", Journal of P o l i t ic a l Economy, June 1935*

272

M artin, J . W., "S ta te S upervision o f County finances in Kentucky", N ational M unicipal Review, February 1939* McCorkle, S tu a rt A ., "S ta te Control of Local Budgeting", Southwest S o c ial Science Q u a rte rly , September 1940* M iesse, H arry, "The Functions of an A sso ciatio n of Taxpayers in Connection w ith the C ontrol of P ublic Expenses", Proceedings, N ational Tax A sso c ia tio n , 1931. Newcomer, Mabel, "Tendencies in S ta te and Local Finance and T heir R ela tio n s to S ta te and Local F unctions", P o l i t i c a l Science Q u a rte rly , March 1928. P o r te r , K. H ., "Remote C o n tr o l- S ta te Supervision of Local Finance", S ta te Government, February 1934. Sheppard, V ir g il, "Indiana Adopts a Tax Lim it Law", N ational Municipal Review, November 1932. ---------1 "Middle Way—American P lan i Local Government Autonomy and th e S ta te Control o f Finance", N ational M unicipal Review, May 1940. S p ic e r, G. W., " F isc a l A spects of S tate-L o cal R e la tio n s", Annals of American Academy of P o l i t i c a l and S o c ial S cience, January 1940. S tra y e r, Paul J . , "Public Expenditure P o lic y " , The American Economic Review, March 1949. Z oercher, P h ilip , "C entral Supervision o f Local E xpenditures", P roceedings, N ational Tax A sso c ia tio n , 1924. — "I ndi ana Schemer.of C entral Supervision o f Local E xpenditures", N ational M unicipal Review, February 1925. —

"S ta te Supervision o f P ublic E xpenditures", Proceedings, N ational Tax A sso c ia tio n , 1928.

---------"Regarding the Indiana Tax Plan—A rep ly to O bserver", N ational M unicipal Review, May 1932. _______9 " P re s id e n tia l A ddress", Proceedings, N ational Tax A sso ciatio n , 1936.

273

GOVERNMENT PUBLICATIONS

Indiana House Jo u rn a ls, 1913-1921# In d ian a Senate J o u rn a ls , 1913-1921* Ind iana S ta te Board o f A ccounts: Annual R eports, 1919-1947# Budget C la s s if ic a tio n s

and Forms fo r C iv il C itie s , 1938.

Budget C la s s if ic a tio n s

fo r C iv il and School Townships, 1937#

Budget C la s s if ic a tio n s

and Forma fo r C iv il Towns, 1938*

Budget C la s s if ic a tio n s

fo r C ounties, 1938#

Guide to P u b lic a tio n of Legal N otices, 1948# S t a t i s t i c a l R eports of th e S ta te o f Indiana, 1935-1947# Indiana S ta te Board of Tax Commissioners: Annual R eports, 1919-1948# B iennial R eports, 1912-1918# B u lle tin on Indiana Tax L im itatio n Law, c ira c 1937# I n s tr u c tio n B u lle tin to F ie ld Examiners, c irc a 1946# Indiana Yearbook, Annual, 1919-1947# Proceedings o f Indiana Couiity A ssessors A sso c ia tio n , 1910* Proceedings, Indiana Tax Board and Indiana County A ssessors Asso­ c ia tio n , 1941# Report o f Indiana S p ecial Commission on T axation, 1916# U* S* Department of Commerce, Bureau of th e Census: C ity Finances: 1942-194?, (C itie s Having Populations over 25,COO), StatisticalC om pendium s* Large C ity Finances: over 2507000)# County Finances:

1 9 4 6 -1 9 4 8 , (C itie s Having Populations

1941-1945, S t a t i s t i c a l Compendiums*

274

County Finances i

1946, A Summary* 1948*

Financing F e d e ra l, S ta te , and Local Governments: 1941, S ta te and Local Governments S p ecial Study No# 20, 1942. Governmental Finances in th e United S ta te s : 19461 '

1942, Summary,

~

Governmental U nits in th e United S ta te s , 1942. Government U nits Overlying C ity A reas, 1947# H is to r ic a l Review o f S ta te and Local Finances, S ta te and Local Governments ^precial Study No# 25, 1948# Population Census of 1940.