The Louisiana Funding Bill. 



.A REPLY 

TO THE 


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GOVERNOR \Vl\I. P~ KELLOGG. 

NEW ORLEANS: 

PRTh"TED .AT THE REPUBLlC.A-5 OFFICE, 94 CAllP STREET· 

1874. 

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University of It,,,, 

Austin, Texas 

I THE PROTEST OF NEW YOHK BONDHOLDERS. 
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GOVERNOR KELLOGG'S REPLY. 
STATE OF LOUISIANA, EXECUTIVE DEPARTMENT, 
New Orleans, February 4, 1874. 

To J. & W. Seligman & Co., J. J. Anderson, :Morgan & Co., Chester Griswold, 
John L. l\Iacauley, G. W. Stanton, Jr., John Poudir, Oliver .Ames, and 
others, NewYork: 

GENTLEMEN-A printed document, dated January 16, 1874, with 
your names attached, and protesting against the funding bill lately 
passed by the General Assembly of this State, was delivered at my 
office by some unknown person on the morning of the second 
instant. It seems, however, that advanced. sheets were furnished to 
the New Orleans Picayune previously, since the substance of your 
memorial, though addressed to the Governor and Legislature, 
appeared in that paper some days before I was aware, otherwise, of 
its existence. I am, therefore, in doubt as to what degree of 
authenticity should be attached to the document; bat, in view of 
the names appended thereto, and, especially in view of the great 
importance of the subject, I a!Il induced to waive objections to the 
suspicious accessories to its presentation, and treat it as a genuine 
expression of your views on the subject. You will not, I trust, consider 
it offensive if I use, in my reply, the same plainness of speech 
that characterizes your protest. 

It is evident that you could not have been in possession of the 
official :financial reports of this State for the years 1872 and 1873. 
It is impossible to reconcile your singularly inaccurate conclusions 
with the exact and specific evidences to the contrary contained in 
those reports. I have caused copies of the same to be mailed to 
each of you, and respectfully invite your attention thereto. 

Your statement, taken from my message, that the debt of the State 
is $24,283,886 is substantially correct. Your statement that "the 
.actual amount of interest now annually due upon the debt," estimated, 
I presume, by yourselves, is $1,493,358, is not correct. The 

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interest now annually due upon the debt is $1,577,620. Your quotn:
tions·from ~ym~ssage, to the effect that. the commonwealth had, 
during the past year, raised a revenue exceeding $4,000,000, and 
that my estimate-placed the necessar.y:"expenses of the State government 
at $1,0Q0,000 are correct so far as they go, but your inferences 
therefrom are wrong. To be more explicit, I quote your tabulated 
statement: 
The actual amount of interst now annually due upon the 


debt ...•...·....'.~ ................. _..............$1,493,358 
The necess.uy annual expenses of the commonwealth are 
· stated by the Governor, not to excee4 ..•..••..•...•. ~ 1,000,00Q 

Making a total annual outlay of ..........•••••....$2,493,358 
Revenue of the State for 1873-4 ..............••...... 4,(100,000 
Necessary outlay, including interest•.••••..••••....... 2,493,35~ 


Excess of income over outlay .....................$1,506,642 
Whereupon, you observe "that it is apparent, therefore, from the 
message that the State of Louisiana at this moment possesses in her 
treasury a sum of money largely in excess of her necessary outlay." 
Yon will pardon me if I reply, in terms as broad as your insinuation, 

that no such conclusion is apparent or fairly deducible from the message, 
or from any other authentic published facts and documents; 
but the contrary. I ref!3r yon for proof to those portions of my 
message which treat of the subjects of public schools and levees, and 
to the annual reports foi; 1873 of the State Auditor and State Treasurer. 
Yon can not be ignorant of the fact that our interests are 
almost entirely agricultural, and depend mainly for their exist~ 
ence upon the protection of our soil from inundation by a vast system 
of levees, built at a cost of many mi~lions of dollars, and that 
these levees were destroyed by the war. The State has since been ;'. 
struggling to repair them and build new ones. The cost is immense, 
and is not included in the estimate of "expenses of the State government.'' 
The amount expended for levee purp~ses in 1873 was 
~583,021 45 (see Auditor's report.) Again, our public schools were 
inadequately sustained !Jy an expenditure in 1873 of $405,26'( 04, 

_which item is not included in the estimate of expenses of the State 

government. You will see from this that your conclusion, abovw; 

referred to, was erroneous. 


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You take the revenue of 1873, namely, $4,000,000, and. substract 
therefrom your estimate of interest for 1874, and a partial and 
greatly reduced estimate of expenditures for 1874, which does not 
include levees and schools, deducting in that way a balance which 
you call "excess of income over outlay,'' and spread before the 
pub!ic as the amount which "the State of Louisiana at this moment 
posses~es in her heasury," at the same time clothing your .statements 
in such language that persons who have seen only your address 
would inf er that they were a transcript of my message. I am certain 
that the gentlemen whose names I have before me could not 
all have carefully considered the purport of what they were signing. 
The following is a true statement of " income '' and " outlay" for 

1873. (See official reports) : 
Income . . . . • •••.•.••••..• ••...•....••..........$4,0lG,000 00 
Outlay, instead of $1,000,000, as assumed 
in the address, the ordinary 
State expenditures, not including 
interest, schools and levees, were.$1,649,832 05 
Expenses for account of interest, 
schools, and levees, were .....•.. 2,047,080 87-3,696,912 92 

Balance. . . • . . . . . . . . . . • . . . . . . . . . • . . . . . . . . $319,087 08 
From this balance must be deducted more than $300,000 of past 
due interest of 1872, paid from the income of 1873. n should also 
be remembered that a considerable portion of the revenue of 1873 
was colJected in outstanding warrants of previous years, which 
reduced the floating debt by that amount, but was not available for 
any other purpose. 
A fair statement of the probable outlay for the year 1874, estimating 
interest on the debt as it now stands, would be: 
_For interest....••••••.....................••••..$1,577,620 00 
Necessary expenses for general purposes ••••••...... 1,000,COO 00 
Necessary expenses for levee purposes -• • • • • . . • • • • . . 600,000 00 
Necessary expenses for school purposes............. 400,000 00 

Total outlay...•......••••.... ~ . , .•......•.....$3,577,620 00 
This wotild leave our floating debt wholly unprovided for, and 
our-necessary expenses for general purposes may, notwithstanding 
our best exertions to prevent it, reach the sum of $1,200,000. It is 


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thus plain that we should have to collect for 1874 nearly $4,000,000 
in cash. It does. not follow that because this was done in 1873, it ' 
is easy or even possible to do it again. The results of the past year 
were obtained by the rigid enforcement of severe laws, and were 
attended with hardships so great that no person of ordinary humanity 
could witness them without the desire to relieve them; yet with 
the debt at its present amount we should be compelled to resort 
again to the same course. I stated in my message, and repeat, that 
I was and am utterly opposed to this for several cogent reasons, the 
most conclusive of which, to our C!"editors at least, being that a 
few more repetitions would result in our hopeless bankruptcy. 
During the past year large sales of real estate have been made in 
all parts of the State, and a large amount of property adjudicated 

to the State·for taxes, penalties and costs thereon. This is not the 

result of unwillingness to pay, but of sheer inability. Many, by 

straining every nerve, paid taxes in 1873, who can not do so again at 

the rate of that year. In one parish alone sixty-five plantations 

were forfeited fo1· taxes. All this land is of no use . to the State 

government. It produces no income and is elimated from the 

assessment rolls. 

Your statement in regard to the rate of taxation in New York, 
thirty-fm1r mills, can hardly be regarded as conclusive in any respect. 
I presume that is the total for State and city. The mention 
in my message of our tax being twenty-one and a half mills, had reference 
only to State taxes. Local taxation is equal or greater· 
throughout the State. The city of New Orleans, which pays fiveeighths 
of all the taxes collected in Louisiana: has a municipal debt 
of more than $23,000,000, and the total of its city and State tax is 
fifty-one and a half mills, and this on a very full assessment. The 
drain is so exhaustive that no improvements can be made either 

here or in the country. Many bayous and streams heretofore navigable 
and penetrating fertile districts, are choked with logs and 
drift, and we can spare no portion of our revenue to clear them 
out. Large tracts of rich lands might be redeemed from overflow 
and cultivated, had we more means to repair old levees and build 
new ones. Thousands of children throughout the State are without 
schools because we have no money to sustain them. In your 
State your people have an incentive to pay, which we have not 
here. Your debt is measurably represented by splendid and 


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wealth-producing improvements. For our debts we have almost 

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no improvements, the chief evidences of the expenditure--notably 
that portion· incurred since the war-being the visits of the tax co];.. 
-lector. 

! , I reiterate the declaration in my message, that the people of 
Louisiana are willing to pay every dollar of their just debts that 
they are able to pay. I may add that they are equally determined 
·not to be forced into bankruptcy. They have made to the world a 
bona fide exhibit of their abilities, and are willing to give every 
possible guarantee that they will pay accordingly. Yon speak of 
what yon confidently assume to be a temporary impairment of our 
ability. I beg to remind you that more than one-third of our 
bonded debt was created before the late war, when the slave property 
in the State constituted more than half the assessment, and half the 
security on which those bonds were predicated. That portion of 
the security is not "temporarily impaired'' it is annihilated. Since 
the war other values have decreased so much that the remaining 
security for all bonds is seriously impaired. Wherein then does our 
case differ from that of the debtor whose assets have depreciated 
through no fault of his, and who tenders to his creditors, in settlement, 
all he is able to pay ? Our only remedy;--in which our 
creditors are equally concerned-is to lighten our burdens, and 
artest the decay of our assets. 

Yon ask what assurance creditors will have that our bonds may 
not be again funded at a still further reduction? I answer by 
referring yon to the bill itself. I am satisfied that the people can 
·and will cheerfully pay the tax provided for iherein, and I do not 
hesitate to assure creditors that the bonds authorized by the bill will 
be guaranteed in the constitution. If they are not thus rendered 

·unquestionable, it will be impossible for the State of Louisiana to 
make a good bond. With the prospect of diminishing taxation 
before the people, I believe all our interests will be stimulated into 
new life. and that we may reasonably hope for an era of permanent 
and increasing prosperity. But while the present status continues, 
with financial ruin impending, your exhortation to the people to 
maintain their "honor and credit" by paying your bonds in full, is 
a species of mockery not calculated to secure a temperate consider


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ation of your claims. 
· I have pursued the argument thus far on the presumption that 


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the bonds you hold are valid and unchallenged. I, however, have 
ihformation, which I believe to be reliable, to the effect that several 

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of the gentlemen who have signed this protest, if not the majority, 

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hold bonds of one series only, that series being the $4:,000,000 of 
Chattanooga rai~road bonds, which are popularly believed to be 
tainted with fraud, and are now under investigation in the court~. 
Am I uncharitable if I suggest that this niay in part account for 
your declaration that yon, "as American citizens, felt a sense of 
shame on reading these (my) recommendations in the guise of a 
funding bill ?" 

Two and a half millions of these bonds were issued without any of 
the safeguards required by law. The bill providing for their issue 
was hurried through the Legislature during the last hours of the 
session. It was kept by my predecessor for several weeks, and was 
finally signed one .day, promulgated the next, and the bonds issued 
the next. They were delivered hy the Secretary of State at his 
house, in the night, without the Governor's signature, the Secretary 
of State having been required first to sign them and attach the seal 
of State. They were signed by the Governor in a hurried and 
surreptitious manner and immediately removed from the State. It 

is even asserted, and I ~elieve can be substantiated, that they were 
.signed on a train of cars between this city and Mobile. No record 
wns made of the issue of these bond~ in the offices where the Jaw 
directs such records to be kept, nor does such record now exist. 
Only a Jae simile of tl1e Treasurer's signature was attached to th.em. 

The State has received no consideration for these bonds. H is 

believed they were riot. originally purchased in good faith, though I 

mfly do you the justice to say I do not know that you became pos


sessed of them in any other way. In truth, some of them were not 

purchased at alJ, but were distributed as the proceeds and in aid of 

a scheme of plunder. Some were paid away under previous arrange


ments entered into to secure the passage of the ac~ under which 

they were issued. and others were turned over to persons at that 

time connected with a leading conservative journal of this city, as 
the price of the silence or covert support of that paper. 

I do not wish to do you injustice. If I am correct in my supposition 
in regard to the class of securities you hold, I submit that yon 
are justly open to the charge of seeking, by an ostentations show of 
hostility to the funding bill, to secure for your bonds an exemption 

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from that scrutiny which they will receive if brought within the provisions 
of the funding law. While there is no thought on the part 
of the government I represent of impeding the collection of just 
claims against the State, the opposition to the funding of doubtful 
bonds will not be relaxed until their validity shall b~ first established 
in the courts of last resort. 

I have urged the passage of the· funding bilJ, believing it to be an 
·imperative necessity, and the best and fairest adjustment for a.ll 
parties that it was possible to obtain. In this I believe I am sustained 
by the majority of our most meritorious creditors, and by the 
almost unanimous voice of the people; and, since the bill has become 
a law, I propose to spare no exertion to secure the results contem-: 
plated. I have the honor to remain, gentlemen, 

Very respectfully, your obedient servant, 

WILLIAM P. KELLOGG. ( /l5