tained; and, in a word, our prosperity is as complete and ample as though no tread of armies or beat of drum had been heard in all our borders. I submit herewith a statement of the permanent debt, funded and unfunded, of the State There has been purchased and paid off by the State, with the Central Railroad Fund, from December 1, 1862, to December 15, 1864, State indebtedness, as follows: Principal........ Interest, arrears of interest, ete.. $875,988 41 30,158 98 10 per cent. paid on registered canal bonds, by Canal Trustees, installments July, 1863 and July, 1864, 5 per cent. each. $906,147 39 ..... 289,133 33 $1,195,280 72 PERMANENT DEBT, funded and unfunded. Statement, showing amount of different classes of State indebtedness outstanding, Dec. 16, 1864: alister, would amount, Jan. 1, 1865, to about.. Canal scrip, signed by Governor,. 121 Macalister and Stebbins bonds, which, according to statement of C. Mac 1,679,100 00 1,618,000 00 1,631,688 89 17,661 33 2,616 97 57,000 00 $11,178,564 45 STATE DEBT. Since December 1, 1862, in addition to the regular semi-annual payments of accruing interest on the State debt, the following amounts have been liquidated, with the proceeds of the fund derived from the Illinois Central Railroad, viz: Refunded stock of 1860, redeemed under the Governor's proclamation of September 28, 1663, including accrued interest on the same,. $68,507 50 State bonds, purchased at par, cancelled and deposited with the Auditor, the principal and interest of which amount to.... 706,182 12 23,643 36 Scrip, coupons, etc., paid off at par, under the act of February 22, 1861,.. Amount of principal and interest extinguished with the Central Railroad fund, from December 1, 1862, to November 30, 1864,......... $798,332 98 In addition to this, a further amount of $107,815 42, of the same fund, has been used in the purchase of State indebtedness, since December 1, making, in the whole, $906,148 40 of the public debt extinguished in a little over two years. The amount derived from the twomill tax, on the assessment of the year 1863, applicable to dividend on State indebtedness, presented to the Auditor January 1st, 1865, is some six hundred thousand dollars. This added to the amount extinguished with the Central Railroad fund, makes an aggregate of one and a half millions of payment on the debt of the State, since December 1, 1862. And the indications of increased receipts from the Central Railroad, and from the two-mill tax, are such as to warrant the belief that at least one million of dollars, per annum, will be hereaf ter realized from these two sources. RECEIPTS FROM THE CENTRAL RAILROAD. The amount received from the Central Railroad, for the seven per cent. on the gross earnings of said company, of the past two years, has been as follows: For the six months ending April 30, 1863...... $126,634 83 173,759 75 170,055 08 235,458.96 $705,908 62 It will be seen that the amount received for per centage on the earnings of 1864 is more than one-third larger than that for 1863. REVENUE-RECEIPTS AND EXPENDITURES. The receipts into the treasury for revenue purposes, for two years, ending Nov, 30, 1864, have been $497,616 11; of which amount $109,547 64 was received for tax levied in the year 1862, and $315,088 46 for tax levied in the year 1863; the remainder of the amount received being from miscellaneous sources. The amount in the treasury, December 1, 1862, was $374,697 19, which, added to the amount received, makes an aggregate of $872,303 30The amount of warrants drawn against this fund, from December 1, 186 2, to November 30, 1864, is $884,014 97, and the amount of the same outstanding, unpaid December 1, 1864, as appears from the Auditor's report, was $20,510 98. It will be seen that a continuation of the expenditures, in the same ratio, as for the past two years, and of the receipts from taxation, as for the collection for 1863, will result in a deficiency of the receipts, as compared with the expenditures, of more than one hundred thousand dollars per annum; and this, without considering the greatly enhanced prices necessary to be paid for all articles purchased for the use of the State, and of all services rendered, except such as the compensation for which is fixed in amount. The rate of tax now levied for revenue purposes is one and one-fifth mill on the dollar of valuation, producing, for the year 1863, (as before stated) $315,088 46 of actual receipts at the treasury, whilst one-half of the amount expended in two years will be found to be $442,007 48. The conclusion is obvious that an increase of taxation or a reduction of expenditures is of absolute necessity. COLLECTION OF TAXES. The act of the last General Assembly authorizing the collection of taxes in legal tender notes and postal currency expired, by limitation, on the 1st of January, 1865, thus leaving the act of 1853 in force; which act requires payment of taxes in gold and silver. I presume that no argument is needed to show that a re-enactment of the law authorizing payment of taxes in United States notes is a matter not only of public policy but of absolute necessity. APPROPRIATION ACT OF FEBRUARY 14, 1863. The act of the last General Assembly, approved February 14, 1863, entitled "An act to provide for the ordinary and contingent expenses of the government until the adjournment of the next regular session of the General Assembly," and containing provisions for the payment of the incidental and contingent expenses of the government and of the different State departments, clerk hire of the different State officers, etc., and in aid of sick and wounded Illinois soldiers, has been pronounced by the Supreme Court to be void. Previous to the rendering of this decision several warrants had been issued by the Auditor, for purposes contemplated by said act; none of which have been paid. In fact the decision of the Supreme Court was rendered in suits brought against the Treasurer, with the view of compelling him to make payment of said warrants. All these warrants were regularly issued by the Auditor, on account for services actually rendered and articles actually furnished; and all of the same should rightfully be paid. The aggregate amount of such warrants is less than seven thousand dollars. The cost of clerk hire and incidental expenses of the several State departments have been borne by the State officers, from private means, for the past two years; and I would therefore recommend the re-enactment of the law, with a provision legalizing the warrants outstanding, and requiring the State Treasurer to treat the same, in all respects, in like manner with warrants issued under other laws. It will be recollected in this connection, that in June, 1863, a disagreement having occurred between the two Houses of the General Assembly as to the time of adjournment, I [6] availed myself of the power vested in me by the constitution, to prorogue them. Seeing, as I supposed, a disposition to embarrass the government in the prosecution of the war, and a refusal to make the necessary appropriations to carry on the State government, and provide aid for the relief of our sick and wounded soldiers, and also to interfere with the prerogatives of the State Executive, I deemed it my duty to avail myself of the contingency which the constitution placed in my hands, of rescuing our noble State from obloquy, by a prorogation of the General Assembly. It will be seen, however, that such a necessity, and the subsequent decision of the Supreme Court, declaring the said law, making the contingent appropriations aforesaid void, devolved upon the State authorities the alternative of raising the means necessary to carry on the government, by advances from private citizens, which would necessarily be large, by reason of greatly increased service and expenditures in every department of the government, growing out of the complications of the war. I therefore recommend the re-enactment of the said law, with a clause for adjusting and paying all accounts for expenditures incurred, as above stated, to be audited by the Auditor, and warrants issued, upon the approval of the Governor. I herewith submit a report of the expenses incurred in my office, and other necessary expenses, incurred according to the intent of said appropriation. Much credit is due to liberal and patriotic citizens of Chicago, Springfield and Knox county, for advances made by them so generously to the State, in its emergency. ARMY AUDITING BOARD. I submit herewith the final report of the Board of Army Auditors, appointed under the "Act creating a war fund and to provide for auditing all accounts and disbursements arising under the call for volunteers." It embodies a detailed statement showing the dates of all claims filed, names of the parties filing the same, their amounts, what for, and amounts allowed; also the amount of claims rejected, suspended, withdrawn, barred, etc. The report is valua ble, and should be published. BARRED WAR ACCOUNTS. Under the fifth section of the act of May 2, 1861, creating a war fund, and providing for auditing accounts of war expenses, all claims for such expenses were required to be presented for adjustment within three months from the accruing of the same-in default of which, such accounts were required to be "considered donated to the State, and not thereafter allowed under any pretense whatever." This provision of the law has, in many instances, worked very great hardship. Many persons furnished articles, and rendered service, in utter ignorance of this provision of the law, and others were ordered away from the State, in the military service, and had not the opportunity to present their claims until long after the three months had expired. The Board of Commissioners, wishing to do all that lay in their power to facilitate the collection of claims which they considered meritorious, have examined and passed upon a considerable number of such claims, and have stated that they would have allowed the same for payment, but for the limitation made in the law. I would recommend that the Auditor be authorized to issue warrants in payment of such accounts as were so passed upon by the Commissioners, the same being first approved by the Governor. The accounts so passed upon are now on file in the Auditor's office. THE PHYSICAL RESOURCES OF OUR STATE. The physical resources of a State are the foundation of all others. They make it great or little. They shape its destiny. They even affect its moral and religious character. History teaches this truth. All the great nations of ancient and modern times demonstrate it. Egypt, Syria, Greece, Rome, Great Britain, France, the United States, are so many proofs that favorable physical situations and resources are absolutely necessary to material and moral development. Illinois, in this respect, stands pre-eminent among the States of the Union. She is the heart of the Northwest. In agricultural resources she is unsurpassed. In manufacturing and commercial facilities she has no superior. On the east, south and west, the Great River of the continent and its tributaries water her border counties, while their branches penetrate to every part of the State, irrigating her soil, draining her low lands, and affording water power for her manufactures. The Illinois river runs for over two hundred miles through the State, from northeast to southwest, forming a natural highway between the lakes and the Mississippi, the key of which is entirely in our possession. This highway is one of the most important of the physical resources of the State; while, in a military point of view, it enables us to dominate the lakes on the one hand, and the Father of Waters on the other. A State, holding this great water-way, must always be a power on the continent, as well as in the Union. Then, we have, on the northeast, an outlet to the ocean through the great lakes, those inland seas of the continent; while that one of them, Michigan, which laves our northeastern border, is almost land-locked, and thus the least liable to hostile incursions from foreign powers. This secures to us the site for a naval depot, for dock-yards, for the building and repair of vessels, for foundries for cannon, for workshops for all descriptions of war material, at some point on Lake Michigan, between the Wisconsin and Indiana State lines. Our State is also on the direct route of the Pacifie railroad, which must intersect it from east to west; thus making it a portion of the great highway between Europe and the Indies. Then, again, all our lines of communication, from the inte rior of the State to shipping points connected with tide-water, at which bulky articles of merchandise or agricultural products can be received or delivered, are short. This saves the cost of lengthy transportation of such articles by railway, which must always be expensive. At present, in some of the States to the west and northwest of us, large quantities of grain have been stored on the navigable rivers for the last two seasons. On account of low water it cannot be sent to market by steamboat, while the cost of railway transportation would eat up its value. This can never be the case in Illinois, as long as water runs in the Mississppi, and that of the great lakes flows unobstructed to the sea. But not alone do we possess agricultural resources of an almost unlimited character; we have also within the limits of our State, fa, cilities for manufactures, which equal those of nearly all the other States of the Union combined. Beneath the surface of our blooming prairies and beautiful woodlands are millions of tons of coal, easy of access, close to the great centers of commerce and manufactures, on great navigable rivers, and intersected by railway facilities of the best description. Illinois, in 1860, was the fourth State in the Union in the number of tons of coal produced. But what has been produced bears no comparison to what may be. Our State Geologist assures me that in a single county in this State there are a thousand millions tons of coal awaiting the various uses to which the civilization of the future will apply it. It will thus be seen that Illinois possesses within itself the physical resources of not only a great State, but a great nation. But if Providence has been bountiful in the natural resources of the State, it is necessary that man must be able and willing to use them to advantage; that he must have the capaci ty both to discern the capabilities of our situation and turn them to the advantage of our own and the people of other climes and countries. While, as I have shown, the physical resources of a State are the foundation of all other, it is also true that the people of a State must be equal to the demands and requirements of its physical capabilities. The most favored situation may be thrown away on a degenerate or incapable people. But, happily, we not only possess the physical resources of a great nation, but the mental and moral capacities of a dominant and progressive race. All it needs, then, for a proper development of our resources is, that our efforts be well directed; that we organize and direct labor, to the end that the greatest amount of development may be attained by the least possible expenditure of brute force; that by combination of effort, by organization of industry, by bringing into harmonious working development the three great branches of human industry-agriculture, manufactures and commerce-we may so weld each apparently hostile but really mutually dependent interest, into such a symetrical whole, as to produce the most perfect social system. And this has been the aim of philosophy and statesmanship since the world began. But it can only be attained by the triumph of mind over matter; by a continual progress, in which the apparently inert forces of nature are made to subserve the highest uses of man. The war now being waged has tended, more than any other event in the history of the country, to militate against the Jeffersonian idea, that "the best government is that which governs least." The war has not only, of necessity, given more power to, but has led to a more intimate prevision of the government over every material interest of society. By creating a large debt, it has necessitated an extended and elaborate system of taxation. This system takes note of every man's business, its profits and its probable future increase, so that the State may know what revenue it has at the present time and what it may depend on in the future. But, by creating a large debt, the war has also created a means of stimulating the industry of the country. It has created a credit, in the shape of public securities, which is so much banking capital for the industry of the nation, and forms a sure basis for creating more wealth through all the ramifications of industry. A merely agricultural country, such as the ideas of the great minds of the earlier period of the democratic party believed to be the ultima thule of the social state, never could sustain the immense debt which we are compelled to provide for. It is only through the enlargement of the manufacturing and commercial industries of the country that it can be borne. But through those it can be made that which the people of Great Britain proudly call theirs: "a great national blessing." It can be made to enlarge, strengthen, and place upon an enduring basis of prosperity, those great ma terial interests of the country, which are the pride as well as the distinguishing features of every civilized nation. It will be the development of manufactures and commerce to the highest possible point, which will finally rescue the present social state from the many evils which accompany it, and usher in the millenium day of true social and political equality. While I cannot say that I desire a large national debt, yet, as we are to have it, we can console ourselves that while a large debt has its disadvantages it also has its compensatory blessings. It brings the government nearer to the individual. It makes the man recognize himself as part and parcel of the State. He supports it, and he feels that it is bound to protect him. The man who pays twenty dollars of a school tax expects that his children will receive a proper education. The manufacturer, or farmer, or merchant, or ship owner, who pays his taxes on his particular branch of industry, justly expects that that industry will be fostered and protected. It is true that a great national debt binds us more closely as a peoplemakes us realize the great benefits of a government, while it causes us to feel its burdens. All duty is reciprocal. "With whatever measure ye mete, it shall be measured to you again." But it is to our debt, as a means of stimulating our industrial interests, that I particularly desire to call your attention; because it lies in your power to provide the means through which those interests can be enlarged and extended. We must utilize the credits of the State and nation, if we would keep pace with the progress of the other states and peoples; if we desire to bear our share of the burdens of the present war; if we hope when the whitewinged messenger of peace shall glad a distracted country, to provide employment for the thousands of our "gallant boys in blue," who are now braving the storms of battle on many fields, when they return to the peaceful avocations of industry, we must encourage the formation of corporations for extending agriculture, manufactures and commerce. We must mobilize capital, so that it shall not be "buried in a napkin," but shall earn for itself the ability to increase, and, by such increase, stimulate industry and re-create itself. I feel deeply on this subject, because, from a careful study of the condition of our national finances, I am irresistibly led to the conclusion that, in order to pay the interest on our debt and carry on the war to a triumphant close, it is absolutely necessary that the resources of the nation should be enlarged and extended. The labor and capital of the country are the bases and sources of all its wealth. It is possible that these may be overtaxed, and thus eventually permanently contracted into narrower channels; but it is not possible; with such vast material resources as are possessed by our favored land, that the former can ever be too widely extended or too minutely varied, or that the latter can be too greatly increased or too widely diffused. Where would our State be now, as to agricultural, manufacturing and other resources, or even military power and prestige, if the internal improvement system, of which the lamented Gov. Duncan was the able and persistent advocate, had been entirely neglected and the Empire State of the northwest allowed to vegetate in the imperfect condition of a merely agricultural and pastoral State? AGRICULTURAL, MECHANICAL AND COMMERcial Bureau. In connection with the above subject, and for the benefit of the industrial interests of the State, I would respectfully recommend the creation of an Agricultural, Mechanical and Commercial Bureau of Statistics. This would be a highly useful department of state government, as well as a great assistance to immigration. But this is but a small part of the benefit it would confer. The nation is passing into a new era of its existence. Old forms must be abandoned, and enlarged views of the principles of government accepted. The garments of the youth are too contracted for the man. With increasing and varying industrial pursuits, the people demand increased duties on the part of the State. At present, corporations representing special interests, take upon them duties which properly belong to the State at large. Thus the only statistical tables are those prepared by the Chambers of Commerce of our cities, or by corporations interested in a special branch of industry. These tables are, of course, but partial representations of the condition of the industrial interests of the State. We should have a Bureau, which would prepare statistics and present facts regarding all the industrial interests of the State, agricultural, mechanical and commercial. These would be of use, not only to the farmer, the manufacturer and the merchant, but to the statesman and social economist. A short time since, when a distinguished foreign statesman requested to see a compilation of the social and industrial statistics of the State, it was a matter of embarrassment to me, when compelled to inform him that there was no such work in existence. Such a work would be more highly useful than most persons are apt to imagine. It would enable the merchant to regulate the quantity of his stocks, the farmer to fix his prices, the manufacturer to determine his wants, and the statesman to draw up the most comprehensive and least oppressive system of taxation. As we now stand, in this respect, all these things are done at haphazard. The consequence is, a loss of time and money, and, very often our people are driven from certain markets and overstock others, through ignorance of the particular wants |