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The reason for California's expenditures is aptly stated by Colonel Biddle of the War Department, namely, that the cost to California of organizing and maintaining troops was greater than it was in other sections of the United States, and the prices of labor and material on the Pacific coast, under the then existing laws of supply and demand, were of necessity greatly in excess of the amounts allowed by the Government.

Therefore, it is submitted that California's expenditures could not be considered other than necessary and proper under the exigencies confronting the State and should be reimbursed.

VALIDITY OF EXPENDITURES RECOGNIZED BY CONGRESS As reported by the Judiciary Committee of the Senate, Congress after many years of consideration of the expenditures as made acknowledged the merit, justice, and validity of such expenditures. In the Seventieth Congress the State of Nevada was reimbursed for similar expenditures made under exactly similar circumstances and authority. On January 26, 1929, the Comptroller General reported a net balance of $595,076.53 then due the State of Nevada. A bill providing for the payment of Nevada passed Congress and was approved by the President March 3, 1929. Therefore, Congress is now estopped from denying their validity.

The conditions and exigencies which made necessary the expenditures authorized by the acts of the Legislature of Nevada to equalize the pay of its volunteers and "to do a plain act of justice to the soldiers” as stated by the Army board, were 80 similar to the conditions and exigencies which made necessary in a much greater degree and extent than in the case of Nevada the expenditures authorized by the several acts of the Legislature of California during the same period on behalf of the United States with the knowledge and approval of the Federal authorities, that the equitable considerations in the one case may not be distinguished from such considerations in the other case. By Nevada's reimbursement Congress has finally recognized the validity and the equitable character of these expenditures.

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STATEMENT OF HON. CLARENCE F. LEA, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF CALIFORNIA
(See additional statement on p. 46)

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Reflecting the position of the Federal Government at that time, and as tending to show the absolute necessity of the loyal States coming to its rescue, I quote the following from the report of the Third Auditor of the Treasury, R. J. Atkinson, to the Secretary of the Treasury, dated November 29, 1861:

“It is known that large expenditures have been incurred by loyal States in organizing, arming, equipping, etc., for the field their respective quotas of militia called into the service by proclamation of the President, as well as volunteers raised under acts of Congress. A large portion of these expenditures were incurred at a time when the General Government was utterly unable, for want of appropriations or money, to meet them, and the State authorities came forward to its relief, thereby relieving the Government of the pecuniary liability for the time being and putting into the field, with unexampled rapidity, a force completely equipped and armed, equal to the emergency.

“Prior to the meeting of Congress there was a necessity for such expenditures being made by the States in order to put their troops into the field with as little delay as possible, the General Government being without the appropriations or means to defray said expenses. At such a time and under these circumstances the several State authorities came forward and took upon themselves, in a great degree, the burden of supplying, equipping, etc., their several quotas of troops trusting to Congress to make provision for reimbursement of all such expenditures as were necessary and proper and for the benefit of the United States.

* In this connection it should be understood that the reimbursement of California from the Federal Government on account of expenditures made during the Civil War for the maintenance of the national defense is not an isolated one. At least 25 States have presented their claims, had them allowed and paid, as indicated by the statement of the Third Auditor of the Treasury under date of March 15, 1892, covering Civil War allowances.

Since that time one State, at least, Nevada, whose case was exactly similar to that of California, has been allowed and paid. A similar claim in behalf of Texas covering expenditures from 1865 to 1877, was allowed by Congress.

I will place in the record the statement of the auditor I just referred to, as follows: Statement of Third Auditor of the Treasury dated Mar. 15, 1892, covering Civil War

allowances Connecticut

$2, 102, 965. 29 Massachusetts...

3,969, 225. 23 Rhode Island..

723, 530. 15 Maine...

1, 027, 633. 99 New Hampshire.

977, 008. 48 Vermont

832, 557. 40 New York.

4, 259, 672. 82 New Jersey

1, 523, 575. 24 Pennsylvania

3, 886, 100. 63 Ohio.--

3, 316, 667. 78 Wisconsin,

1, 059, 162, 03 Iowa.

1, 043, 464. 80 Illinois.

3,081, 975. 43 Indiana..

3, 741, 738. 29 Minnesota

71, 537. 65 Kansas

386, 436. 36 Colorado.

55, 238. 84 Missouri

7, 581, 417. 80 Michigan.

845, 755. 69 Delaware

31, 988. 96 Maryland

136, 281. 64 Virginia

48, 469. 97 West Virginia

471, 063. 94 Kentucky-

3, 551, 603. 97 Total....

44, 725, 072. 38 (For additional payments, see following pages.)

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States.'»

The question of interest and the legality of this claim was discussed by the Supreme Court in the case of the State of New York, which has already been referred to. I quote some excerpts from the opinion of the Supreme Court in that case as follows:

"The duty of suppressing armed rebellion, having for its object the overthrow of the National Government, was primarily upon that Government and not upon the several States composing the Union. New York came promptly to the assistance of the National Government by enrolling, subsisting, clothing, supplying, arming, equipping, paying, and transporting troops to be employed in putting down the rebellion.

"When New York had succeeded in raising 30,000 soldiers to be employed in suppressing the rebellion, the United States, well knowing that the national existence was imperiled, and that the earnest cooperation and continued support of the States were required in order to maintain the Union, solemnly declared by the act of 1861 that “the costs, charges, and expenses properly incurred” by any State in raising troops to protect the authority of the Nation would be met by the General Government. And to remove any possible doubt as to what expenditures of a State act would be so met, the act of 1862 declared that the act of 1861 should embrace expenses incurred before as well as after its approval. It would be a reflection upon the patriotic motives of Congress if we did not place a liberal interpretation upon those acts and give effect to what, we are not permitted to doubt, was intended by their passage.

“Liberally interpreted, it is clear that the acts of July 27, 1861, and March 8. 1862, created on the part of the United States an obligation to indemnify the States for any costs, charges, and expenses properly incurred for the purposes expressed in the act of 1861, the title of which shows that its object was 'to indemnify the States for expenses incurred by them in defense of the United

"So that the only inquiry is whether, within the fair meaning of the latter act, the words 'costs, charges, and expenses properly incurred' included interest paid by the State of New York on moneys borrowed for the purpose of raising, subsisting, and supplying troops to be employed in suppressing the rebellion. We have no hesitation in answering this question in the affirmative. If that State was to give effective aid to the General Government in its struggle with the organized forces of rebellion it could only do so by borrowing money sufficient to meet the emergency; for it had no money in its treasury that had not been specifically appropriated for the expenses of its own government. It could not have borrowed money any more than the General Government could have borrowed money without stipulating to pay such interest as was customary in the commercial world. Congress did not expect that any State would decline to borrow and await the collection of money raised by taxation before it moved to the support of the Nation. It expected that each loyal State would, as did New York (and as was done by California), respond at once in furtherance of the avowed purpose of Congress, by whatever force necessary, to maintain the rightful authority and existence of the National Government.

We cannot doubt that the interest paid by the State on its bonds issued to raise money for the purposes expressed by Congress constituted a part of the costs, charges, and expenses properly incurred by it for those objects. Such interest, when paid, became a principal sum as between the State and the United States; that is, became a part of the aggregate sum properly paid by the State for the United States. The

principal and interest so paid constitute a debt from the United States to the State. "It is as if the United States had itself borrowed the money through the agency of the State.”

Pursuant to that opinion of the Supreme Court, Congress, in the Deficiency Appropriation Act, approved February 14, 1902, appropriated “in refunding to States expenses incurred in raising volunteers”, the following amounts, being actual interest on State expenditures: To the State of Pennsylvania, $689,146.29; to the State of Maine, $131,515.81; to the State of New Hampshire, $108,372.53; and to the State of Rhode Island, $124,617.79.

And in the Deficiency Appropriation Act, approved July 1, 1902, Congress further appropriated for refunding to States expenses incurred in raising volunteers”, the following sums: To the State of Indiana, $635,859.20; to the State of Iowa, $456,417.89; to the State of Michigan, $382,167.62; to the State of Ohio, $458,559.35; to the State of Illinois, $1,005,129.29; and to the State of Vermont, $288,453.56.

And in the Deficiency Appropriation Act, approved March 3, 1903, Congress further appropriated "for refunding to States expenses incurred in raising

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volunteers”, the following sums: To the State of Kentucky, $1,323,999.35; to the State of Wisconsin, $458,677.90; to the State of Maine, $228, 186.94; to the State of New Hampshire, $172,928.27; to the State of Connecticut, $606,560.59; to the State of New Jersey, $479,833.20; and to the State of Rhode Island, $31,289.71.

Also, Congress by the act approved March 30, 1888, appropriated the sum of $927,177.40 for the State of Texas, and a further sum of $148,615.97 was paid Texas in the Deficiency Appropriation Act, approved September 28, 1890; these amounts having been found due by the Army board under the acts of 1882, 1886, and resolution of 1889, which also reported the amount found due California.

In the deficiency appropriation act approved April 27, 1904, Congress appropriated to the State of Massachusetts "For refunding to States for expenses incurred in raising volunteers”, the sum of $1,611,740.85. In the deficiency appropriation act approved March 3, 1905, Congress appropriated the following sums: For reimbursing Missouri for militia expenses during the Rebellion, $475,198.13 (that being a precedent in the case of the California militia); for refunding to New Jersey expenses incurred in raising volunteers, $222,418.39; and for refunding to the State of Wisconsin expenses incurred in raising volunteers, $725,881.88.

And finally, Congress, by the act of March 4, 1929, appropriated the sum of $595,076.53 to reimburse the State of Nevada for expenses incurred in raising volunteers, which expenses were identical in character and incurred on the same recommendations of the commanding generals of the Pacific as were the expenses of the State of California.

The Nevada bill (S. 5717, 70th Cong., 2d sess.) was favorably reported from the Judiciary Committee of the House of Representatives on February 28, 1929, in House Report No. 2781.

All of California's war expenditures were expressly authorized by acts of the State legislature, induced thereto by urgent calls for troops from the Federal Government, and were incurred directly on account of the abnormal conditions prevailing which made such expenditures absolutely necessary in the common defense, and such acts had, as before stated, the approval and recommendation of the commanding generals of the United States, who reported the same to the authorities at Washington.

It may be safely taken for granted that the State legislature composed of men who had come to California from nearly all States of the Union and the Governor of California would not have passed and approved acts, nor would the commanding generals of the Pacific, representing the Government, have recommended such acts, appropriating large sums of money which were not necessary and proper to the common defense, especially as at that time the State's treasury was depleted and she had to issue and sell bonds at a large discount and pay high rates of interest, as well as heavily tax her citizens, to raise the funds to pay such expenses.

So, in conclusion, Mr. Chairman, it may properly be said that the expenditures made by California, for which reimbursement is asked, were made in amounts that are unquestioned.

These expenditures were made for the sole and only purpose of aiding the Nation in its national defense. They were made at the suggestion and after conference with the highest military authorities of the Federal Government available to the authorities of California.

The expenditures made were necessary to establish and to maintain the military strength that was thus provided for the Federal Government.

The usefulness and importance of these expenditures and the value thereof in the common defense are not disputed. In seeking reimbursement at this late day, after persistent efforts to be repaid, California is asking only a degree of justice that has been accorded to many of her sister States in the past.

TEMENT OF HON. ALBERT E. CARTER, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

Mr. CARTER. Mr. Chairman and gentlemen of the committee, I think Mr. Lea's statement has covered the situation very fully; but in addition to that I would like to say just a few words.

The board of Army officers under the direction of the Secretary of War, who critically examined these expenditures, reported to Congress that the money had not only been actually expended by the State but that it had been honestly disbursed to uphold the authority of the National Government.

I do not want the committee to lose sight of the fact that California was a new State in the Union. California had attracted people from almost every State in the Union as well as from all over the world, owing to the gold rush there in 1848, 1849, and 1850.

If my memory serves me right, the first transcontinental road was completed in 1868. I regret that I cannot state whether at that time we had a transcontinental telegraph line, but my impression is that we did not.

Being a State was a new thing to the people of California. But nevertheless they responded to the urgent requests of the President of the United States and the Secretary of War and made these expenditures with the assurance given to them that the expenditures were to be repaid.

I endeavored to find in my office this morning a photostatic copy of one of those old bonds. I have seen some of the original war bonds issued by the State of California and I have either here or in my office in Oakland a photostatic copy of one which states in the bond itself that it is to be repaid when the money is refunded by the Government of the United States, showing clearly that that was the intention, or the understanding at least, of the State authorities. And I think the record resolves all doubt in that matter, in favor of the fact that the Federal Government was obligated and intended to repay.

The State of California paid cash to the soldiers in gold. Mr. Lea has explained the necessity for making these cash payments to the soldiers serving in the far West and with such extra payments it only brought the pay of the soldier up to $13, the same as the soldiers serving in other military departments were paid.

Without that extra paid to the soldier in the frontier State of California a private was actually receiving only $6.50 or $7 per month in purchasing power, because with $100 in gold you could purchase $170, approximately, in paper money.

Now, as I have said, we paid our good money; we advanced it to the Federal Government at its request and solicitation.

I believe that legally, when this committee reads the various acts of Congress, and the opinion of the Supreme Court, you will reach the conclusion that California has a legal claim at this time.

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on it?'

Now, there is just one other matter I want to mention, and that is this: The chairman has stated that for some reason or other this claim has not been paid. That is true, but Mr. Lea told you in his statement that the bill had passed the Senate eight times and lreen reported a number of times by House committees. I do not believe the State of California should be charged with lack of diligence in the matter. The next Congress, if the pending Senate bill is not acted upon favorably by this Congress, will say, “Why did not the preceding Congress act

We are here asking you to pass this bill. We believe it is just. We believe that the State of California is entitled to be repaid for the actual dollars and cents, including interest, that she expended at the request and direction of the Federal Government. California is not asking reimbursement of a dollar she has not actually expended for the benefit of the United States.

I believe California is legally and equitably entitled to be reimbursed.

It is California's contention that the State's expenditures made at the request of the United States and in reliance upon its promise to repay, came well within the terms of the act of July 27, 1861, under any fair and reasonable construction of that act, and should have been repaid by the Federal Government a long time ago.

The promise of reimbursement held out to California in Secretary Seward's letter of October 14, 1861 (S. Rept. 320, 73d Cong., p. 13), written at the request of the President, created not only a moral obligation of the strongest character in itself, but also constituted an administrative interpretation of the act of 1861 on which California had the right to rely as furnishing a legal basis for the repayment of its expenditures.

There can be no question but that the expenditures for which reimbursement is now sought went directly “to support and aid the Federal Government” and "for general defense”, as proposed in the letter of Secretary Seward. That the expenditures were first “made the subject of coníerence with the Federal authorities as directed by the Seward letter, is abundantly proven by the voluminous official correspondence and the Government's own records. “Being thus made with the concurrence of the Government for general defense”, declared Secretary

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