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The Commission began its operations regularly on the 1st of March, 1862, and up to the 1st of January, 1863, had received from various sources in goods and money, the sum of $66,088 51. During the same period they have supplied to sick and wounded Indiana soldiers $60,379 31, in such articles as were best suited to their wants and condition, leaving a balance in their hands of $2,912 80 in goods, and $2,768 40 in money.

I avail myself of this opportunity to tender on behalf of the State, to the officers of the Commission, and the gentlemen associated with them, my sincere thanks for the unremitting industry and devotion with which they have labored without reward or the hope thereof, in this great work of patric tic benevolence.

The above statement only embraces those supplies of stores and money which have passed through the hands of the Commission, and does not include those large but irregular contributions which flowed through so many other channels for the relief of our sick and wounded soldiers.

The greater part of all the stores, in whatever manner sent, have been contributed by the noble and patriotic women of Indiana. Not only have they contributed most liberally of their money, but they have labored unceasingly with their hands, in preparing those articles so necessary to the comfort and recovery of the sick and wounded.

They have their reward in the inexpressible gratitude that swells the hearts of the brave men who are the recipients of their deeds of mercy. On this subject I quote a brief extract from the report of the Commission. "The committee desire to express in the strongest terms, their gratitude to the women of Indiana who have responded, with all the enthusiasm and generosity of their sex, to the calls of the committee; they have in fact done the work, by their labors, their contributions and their example; the committee have been merely their agents in receiving and dispensing the fruits of their unbounded liberality. The same work and labor of love is still before them, and the same spirit which has so far actuated them will no doubt continue to furnish occupation for the Commission so long as the occasion requires it."

Immediately upon the first establishment of camps in this city, the treatment of the sick was committed to the care of Drs. Kitchen and Jameson. I subsequently authorized the establishment of a Hospital here, known as the "City Hospital," under the care and direction of the same gentlemen.

Their administration has been highly successful and satisfactory, and the Hospital is justly regarded as one of the very best in the United States. The whole number of patients treated at this Hospital, from May 1, 1861, to January 1, 1863, was 5,495.

Your attention is invited to the report of Drs. Kitchen and Jameson, and to the just acknowledgment therein made of the services of the "Sisters of Providence."

WAR LOAN.

By an act of the Legislature, approved May 13, 1861, the Governor was authorized to issue bonds to the amount of $2,000,000, bearing interest at the rate of 6 per cent. per annum, payable semiannually, and falling due 20 years after date, and Hugh McCullough, James M. Ray and John H. O'Boyle, Esqs., were appointed a Board of Loan Commissioners to negotiate their sale.

Hugh McCullough, Esq., having failed to accept the position, I appointed Jesse J. Brown, Esq., to fill the vacancy. The report of the operations of the board is herewith submitted, from which it will appear that the bonds were sold on terms favorable to the State, in view of the then depressed condition of the money market, and when compared with the sale of other Western securities. Of the whole amount sold $1,225,500.00 remains outstanding, and are a debt against the State. The remainder having been redeemed at the same price at which they were sold, adding only interest for the time they were outstanding. To provide for the payment of this debt, a tax was levied, the proceeds of which, it is estimated, will extinguish it in four years.

NATIONAL DIRECT TAX.

By the 6th section of an Act of Congress approved August 6th, 1861, a direct annual tax of twenty millions of dollars was levied the United States, and apportioned among the several States. The apportionment devolved the payment of $904,875 33 on the State of Indiana.

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By the 53d section of the Act it was provided that any State might assume, assess and collect its portion of the tax and pay the same into the Treasury, and if thus paid on or before the last day of June of the year for which it was levied, should entitle such State to a deduction of fifteen per cent. of the gross amount to be paid by such State. The section further provides that notice of the intention of the State to assume and pay her portion of the tax, without the intervention of the Federal officers, must be given to the Secretary of the Treasury by the Governor, or other proper officer, on or before the second Tuesday of February of each year in which the tax is to be paid. The section also contains this proviso: That the amount of direct tax apportioned to any State shall be liable to be paid or satisfied in whole or in part by the release of such State, duly executed to the United States, of any liquidated and determined claim of any such State, of equal amount against the United States; Provided, that in case of such release, such State shall be allowed the same abatement of the amount of such tax as would be allowed in case of the payment of the same in money.

From the very beginning of the war, the State was compelled to advance large sums of money to equip and supply our volunteers, and, in fact, furnished supplies of every kind until the Fall of 1861,

and it was believed shortly after the passage of that act, that our advances, over and above all reimbursements, would soon be sufficient in amount to set-off the amount of tax apportioned against the State. Accordingly I opened a correspondence with the Secretary of the Treasury on the subject, and ascertained from him that the advances made by the State on behalf of our troops would be regarded as a "claim" within the spirit and meaning of the Act, and would be admitted in payment of the tax to an amount which should be found due on settlement. After consultation with the Auditor, Treasurer and Secretary of State, and in conjunction with them on the day of December, 1861, I filed in the office of the Secretary of the Treasury at Washington, a paper officially signed, of which a copy is herewith transmitted, in which we assumed that the State would pay her portion of the direct tax without the intervention of Federal officers, and proposing to set-off against the same a like sum due to the State for advances made in furnishing our troops, and to release the United States from further liability for the sum thus set-off and advanced against the tax. This paper was accepted by the Secretary of the Treasury, who thereupon declined to appoint the officers provided by the law to collect the tax within this State. On the day of Jan., 1862, Mr. Lange, the Auditor of State, proceeded to Washington with the papers and vouchers embracing our claims against the Government up to that time, for the purpose of making settlement. He found, however, that the mode of settlement with the several States had not been determined upon, by the Treasury Department, and that the press of business in the Department was such as to prevent the taking up of our accounts. He was directed to file them in the Department to be taken up for adjustment whenever they could be reached. It then became obvious that our accounts would not be settled and adjusted by the last day of June, 1861, so as to be "liquidated and determined" within the meaning of the Act of Congress, as before quoted, and that, after all, our set-off against the tax was about to fail.

Accordingly, I brought the matter to the attention of our Congressional delegation, and asked them to procure, if possible, such legislation as would facilitate the settlement of our accounts, and if that could not be done, to procure an extension of the time in which accounts could be filed and settlements made, so that the advantage of the set-off need not be lost. After much trouble and delay, they procured the passage of an Act, which was approved on the 13th day of May, 1862, the concluding part of which is as follows: "Provided, that in case of such release, such State, Territory or District shall be allowed the same abatement of the amount of such Tax as would be allowed in case of the payment of the same in money," shall be construed as applying to such claims of States for reimbursement of expenses incurred by them in enrolling, subsisting, clothing, supplying, arming, equipping, paying and transporting its troops employed in aiding to suppress the present insurrection against. the United States, as shall be filed with the proper officers of the

United States before the thirtieth of July next. And in such cases the abatement of fifteen per centum shall be made on such portion of said tax as may be paid by the allowance of such claims, in whole or in part, the same as if the final settlement and liquidation thereof had been made before the thirtieth of June."

This act healed the difficulty, and under it we have filed with the proper officers, anterior to the 30th of July last, claims against the United States, due to the State, more than enough to cover the amount of tax due from the State, after deducting the fifteen per cent. from the gross amount.

By this operation, the State has saved fifteen per cent. of the original amount which is $135,731 30, reducing the amount from $904,875 33 to $765,144 03, and the latter sum is set-off and paid by our advances. The arrangement is mutually advantageous to the State and General Government. It would do the Government no good to draw a large amount of money from the people of the State for taxes, while she was debtor to the State to a still larger amount, which indebtedness must sometime be paid by money raised by taxation. Besides this, the Government was in no condition to re-imburse the State in the full amount of her advances, and if these advances. were not used to pay the direct tax, the tax must have been collected from the people of Indiana immediately, while the advances would, in all probability, remain as a suspended debt for years to come, on which the Government, if it followed former precedents, would pay no interest. I respectfully recommend that the Legislature approve my action, and that of the State Officers, in the premises.

At the last session of Congress, the operation of the act levying the direct tax upon the States was suspended for three years.

WAR EXPENSES.

The whole amount of expenses incurred on account of the war, by the State, is one million nine hundred and sixty-nine thousand two hundred and forty-eight dollars and thirty-six cents, ($1,969,248.36.) The whole amount paid is one million eight hundred and twentytwo thousand nine hundred and sixty-eight dollars and forty-nine cents, ($1,822,968.49.) Leaving unpaid and outstanding on the 1st day of January, 1863, claims amounting to one hundred and forty-six thousand two hundred and seventy-nine dollars and eightyseven cents, ($146,279.87) all of which have been duly audited and certified by the Military Auditing Committee.

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The account of the State against the United States for expenses incurred for war purposes, to January 1, 1863, stands as follows:

Total amount of expenses incurred.............
Government draft returned to U. S. Treasury....

Total......

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On this account, the United States are entitled to the following credits:

Proceeds of $450,000 Treasury Notes.....$432,639 30
Paid by U. S. Quartermaster....
Paid on account of Ammunition.

196,728 16
279,803 71

Direct tax of 1861, deducting 15 per cent. 769,144 03

$1,678,315 20

Leaving due from the U. S. Jan. 1, 1863........... $359,634 75

In the account against the United States, are included expenditures to the amount of $43,160.62, for which the State could not claim to be reimbursed under existing laws, but which are an equitable debt against the United States, and to cover which I have no doubt an act of Congress will yet be passed.

PUBLIC DEBT.

The indebtedness of the State up to the first day of January, 1863, has been increased by the war as follows:

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The entire public debt of the State now stands as follows:

Five per cent. stocks growing out of adjustment with

creditors in 1846......

$5,325,500 00

Two and a half per cent. stocks having the same ori

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2,058,173 50

War debt as above stated..

1,371,779 87

In all......

$8,745,453 37

This statement, however, does not include 391 old Internal Improvement Bonds of $1,000 each, said to be outstanding, the holders of which failed to comply with the adjustment made in 1846.

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