the Spanish seized funds, and funds seized from insurgents, and special deposits in the treasury, and to recommend a scheme for converting the same into cash in the insular treasury, subject to such claims as may be established against the funds. The committee has not yet made its report, but it is expected that the report will soon be forthcoming and suitable legislation will be enacted upon the subject.

INSULAR BUDGET.

It is impracticable to make estimates for the fiscal year 1903 that will be entirely accurate, but to that end a most careful investigation has been made of the necessary operating expenses of every department and bureau in the islands and of the extraordinary expenses that are liable to be incurred, the extraordinary expenses being mainly for new equipment and permanent improvements, and the expense incident to taking the census required by the act of Congress of July 1, 1902.

For the first quarter of the fiscal year 1903, ending September 30, 1902, the total appropriations have been $2,646,994.83, of which $2,074,820.94 were for current expenses, and $572,173.89 were for extraordinary expenses. The appropriations for the city of Manila are included in this statement, all payments on account of the city of Manila being made from the insular treasury.

Using as a basis these data, as well as the actual disbursements for the latter portion of the fiscal year 1902, when substantially all the bureaus had been organized, and making a suitable allowance for extraordinary expenses that are now foreseen for the fiscal year 1903, the estimate is that the total expenditures required will be $11,570,637.22, of which $8,583,209.38 are for current expenses and $2,987,427.84 are for extraordinary expenses. All disbursements for

the city of Manila are included in this estimate.

Included in the estimate for extraordinary expenses for the fiscal year 1903 are $75,000 for the suppression of epidemic diseases and pests, and $50,000 for expenses in connection with the establishment of a leper colony, $31,149.60 for apparatus and books for a new laboratory building; $875,612.67 for the construction of vessels for the coast guard and transportation, construction of light-houses and purchase of lanterns; $362,056.32 for the construction and maintenance of public buildings, including the new government laboratory; $28,406 for the construction of wharves at Lligan, Siassi, Jolo, and ParangParang; $500,000 for harbor improvements at the port of Manila; $125,000 for the Philippine exhibit at the Louisana Purchase Exposition, at St. Louis; $150,000 for the construction of a road into Benguet Province; $54,706 for the purchase of a rock crusher, alteration of markets, completion of city pound, improvement and widening of the streets of Manila; $56,182.25 for the installation of the pail system of sanitation in the city of Manila; $561,853 for taking the census, and $100,000 for improvement of the harbor of Cebu.

The revenues of the insular government from all sources, aside from refunds, during the first quarter of the fiscal year 1903, ending September 30, 1902, including the city of Manila, amounts to $3,272,283.52. Using as a basis the revenues last stated and the amount collected during the latter portion of the fiscal year 1902 it is estimated that the revenues for the fiscal year 1903 will be as follows:

From all departments of the insular government proper
From the city of Manila

Making a total of....

$9,389,858.36 1,407,926.78

10,797, 785. 14

Showing an apparent deficit of $772,852.08.

It is anticipated that some revenue will accrue from the bureau of agriculture during the fiscal year 1903, but no estimate of such receipts has been included in the above computation, because of the uncertainty of results, nor are the expenses or revenues of the forestry bureau included in the estimate, because under a recent law enacted by the Commission the revenues of the forestry bureau will be returned to the provinces from which they are collected after deducting the expenses of collection. Should it be determined that the revenues accruing from that source should go into the insular treasury, and the expenses of collection be charged to the insular government, the expenses for the fiscal year 1903 should be increased by $106,568 and the revenue by, approximately, $300,000.

The receipts from the city of Manila for the fiscal year 1903 will probably be more than is above estimated.

In the statement of revenues collected the refundable export duties collected in Manila on exports to the United States are not included, nor in the estimate of revenues is anything included for the customs receipts for Philippine goods imported into the United States, accurate data for this latter sum being not available and the amount thereof being inconsiderable according to such information as has been received.

Taking everything into consideration, it is probable that at the end of the fiscal year 1903 there will be in the treasury available for appropriation approximately the sum of $3,226,574.39, aside from seized funds and special deposits now in the treasury and from the sum of $208,000 received from the Navy Department for gunboats purchased out of insular funds and taken over by the United States Navy, being $772,852.08 less than the sum available for appropriation at the end of the fiscal year 1902.

All sums are stated in money of the United States. The details of the purposes for which the expenditures for the fiscal year 1903 will be made and the sources of revenue from which they will be met are contained in the tabulation hereto annexed and marked "Exhibit VI.”

BUDGET OF THE CITY OF MANILA.

The charter of the city of Manila took effect on the 7th day of August, 1901, and the data of its financial condition for the fiscal year 1902 cover the period from August 7, 1901, to June 30, 1902, and show the actual receipts and disbursements down to June 11, 1902, and the estimated receipts and disbursements from June 11 to June 30, 1902. They appear in the report hereto annexed, which has been prepared by the municipal board, and is marked "Exhibit VII." The aggregate of expenses during that period was $1,603,893, in money of the United States; and the receipts deposited by collecting officers during the same period were $992,359.05 down to June 10, 1902. The estimated deposits by collecting officers from June 19 to June 30, 1902, were $69,139.80. Thirty per cent of the expenses of the city of Manila are, by law, borne by the insular government, and that 30 per cent amounts to $481,167.90. There is, therefore, an overdraft which the municipal government has made upon the insular treasury of $61,226.25, which will be easily taken care of from the proceeds of collections for the fiscal year 1902. The estimate of collections from all sources of revenue for the fiscal year 1903 is $1,874,280, and of ordinary expenses for the fiscal year 1903, $1,556,666; of extraor

dinary expenses, $300,000, making a total of $1,856,666; from which it appears that the income will be sufficient to meet the ordinary and extraordinary expenses for the fiscal year 1903 now contemplated, without reference to the contribution thereto from the insular treasury. The exhibits marked respectively VIII and IX contain inventories of lands, buildings, and other real property belonging to the city of Manila on the 30th day of June, 1902, and of personal property belonging to the city at the same date.

It will be observed that the estimates for receipts and disbursements for the fiscal year 1903, as shown by Exhibit VII, prepared by the municipal board, differ from the estimates of the same receipts and disbursements contained in Exhibit VI, the municipal board estimating their receipts for the fiscal year 1903 at a larger sum than that stated in Exhibit VI, and their expenditures at a less sum. The appropriations that have already been made for the city of Manila for the first two quarters of the fiscal year 1903 indicate that the expenditures for the city will be larger for the whole year than the municipal board have estimated, and it is doubtful if the revenues will be as large as the board had estimated. Should the revenues of the city prove as large as the board have estimated, and the disbursements not exceed their estimates, then the deficit in the insular budget will be diminished accordingly. It has not been deemed advisable for the purpose of this report to change the estimates contained in Exhibit VI.

CUSTOMS TARIFF.

As stated in the last former report of the Philippine Commission to the Secretary of War, the new customs tariff was enacted on the 17th day of September, 1901, and took effect on the 15th day of November, 1901, with the proviso that during the first sixty days after the law became effective importers of goods en route to Manila might elect to pay under the new tariff or the old. The large reductions that were made in the duties imposed upon the necessaries of life, and the important free entry list upon articles imperatively needed in the islands operated to reduce the income materially. It was hoped that the increased consumption which would thereby be made feasible by reason of the lower price of imported commodities might make the revenues as great as under the former tariff, or greater, and such may be the result ultimately. But the hoped for reduction in retail prices has not resulted. The fluctuations in currency have been made excuses for constant increases in prices by retail dealers, so that a very large proportion of imported commodities are now sold throughout the islands at a higher price than one year ago, computed in United States currency values. If a stable currency shall be established it may be anticipated that competition will correct the evil of high prices after a time, although the reduction of duties in Cuba and Porto Rico seemed for a long time to produce little effect upon ordinary retail prices. The reduction of duties by the Philippine tariff revision law of 1901 was not less than 25 per cent, and the accruing revenues have been probably 25 per cent less than they would have been under the former tariff.

One result of the reduction of the tariff upon certain commodities has apparently been to increase the importation thereof, although other causes have operated to influence the increased importation.

The reduction of duty upon wheat was from 47 cents per 100 kilos to 25 cents per 100 kilos, but practically no wheat was imported under

either schedule. The reduction on wheat flour was from $1.63 per 100 kilos to 40 cents per 100 kilos. The importation of flour has shown an increase during the past year from 114,000 to 151,000 barrels. The former duty upon forage, hay, and bran was 14 cents per. 100 kilos, and the present duty is 5 cents per 100 kilos, and the importations have increased from 700 to 3,000 tons. The former duty on canned fruits was 15 cents per kilo, and the present duty is from 2 cents to 4 cents per kilo, and the importations have increased from 42,000 to 700,000 pounds. Former duty upon canned meats was 15 cents per kilo, and the present duty is from 5 cents to 20 cents per kilo, most of the goods going under the lower schedule. There has been an increase in the importation of canned meats from about 6,000 to 165,000 pounds. The former duty on hams was $9.13 per 100 kilos, and the present duty is $3 per 100 kilos, and the importations thereof have increased from 692,000 to 1,800,000 pounds. The former duty on lard was $9.13 per 100 kilos, and the present duty is $1.60 per 100 kilos.. The importations of this article have increased from 1,200,000 to 2,000,000 pounds. The former duty on canned salmon was 15 cents per kilo, and the present duty is 34 cents per kilo, and the importations have increased from about 8,000 to 1,500,000 pounds. The former duty on unhusked rice was 59 cents and husked rice 63 cents per 100 kilos, while the present duties are 40 cents and 50 cents per 100 kilos respectively. The total amount of rice imported has increased from 194,500,000 to 340,000,000 pounds. This last increase is largely owing to the diminished production of rice in the islands, caused by the disasters of war, and by the death from rinderpest of animals essential to the cultivation of rice.

Attention is invited to the supplemental report of the collector of customs for the Philippine Archipelago upon this subject, which is hereto annexed and marked "Exhibit X."

There has been nothing developed by the working of the new tariff law to indicate that on the whole, and with a view to final results, the tariff adopted was not such as ought to have been adopted. Individual paragraphs appear to have imposed too high or too low a duty, but in general the theories upon which the tariff was constructed seem now to have been wise and for the best interest of the islands.

On February 6, 1902, the Commission passed act No. 355, entitled "An act to constitute the customs service of the Philippine Archipelago and to provide for the administration thereof," with a short title of "The Philippine customs administrative act." The portion of the act which provides for a court of customs appeals has already been referred to and need not be here further discussed. The act has made an effective organization of the customs service of the islands possible, and under it practically all the revenue warranted by law has been collected. It is based largely upon the principles of the customs administration laws of the United States.

On March 3, 1902, the Commission passed act No. 367, to reorganize the personnel of the Philippine customs service and to give thereby uniformity to classification, grades, and qualifications of customs offi cials and employees.

The facilities at the Manila custom-house for the transaction of efficient clerical work and for the rapid receipt and discharge of imported merchandise are inadequate. The sum of $75,000 has been provided for extension of the present custom-house, and the work has already been entered upon.

There has been very great complaint in regard to the expense of

bringing imported merchandise from steamers in the harbor to the custom-house and wharves and of landing them and placing them in the proper warehouses, and of the delay in such operations, owing to the insufficient character of the lightering and landing facilities and the method of carrying on that business, and from sorting the cargo on board the incoming steamers in such way that each owner might receive his own merchandise in his own casco or lighter, or cascos and lighters engaged by him for that purpose. Steamers have heen subjected to great demurrage by the delay incident to that process and to the insufficient landing facilities at the custom-house wharves. A draft of a law has been prepared providing for an official lighterman who should be awarded, after competitive bidding, the exclusive right of landing all imported merchandise arriving from foreign ports, the operations to be all under the direction of the collector of customs. Public hearings have been held upon the proposed bill and much opposition to it has been manifested on the part of agents of steamship lines arriving here, and owners of cascos, lighters, lorchas, and barges heretofore engaged in that business. The bill is now under consideration by the Commission and has received no final action. The discussion, however, has developed several points in which improvement can be made, and no doubt increased and much better facilities will be secured by reason of such legislation as will be enacted.

The special report of the collector of customs for the Philippine Archipelago of the operations of the Philippine customs service from June 1, 1901, to September 1, 1902, is hereto annexed and marked "Exhibit XI."

During that period a large number of coastwise ports have been opened and equipment and supplies for the open ports have been purchased, many permanent repairs have been made, and Army officers acting as customs officers have been replaced by civil employees mainly, and a small revenue-cutter service has been purchased, equipped, and put into operation.

During the fiscal year ending June 30, 1901, there was imported into Manila foreign merchandise to the value of about $28,500,000, upon which the duties collected amounted to about $6,867,000, the average ad valorem rate under the foreign tariff being slightly over 24 per cent. During the fiscal year 1902 foreign goods were imported to the value of over $36,500,000, upon which the duties collected amounted to approximately $6,289,000, with an average ad valorem rate under the present tariff of something less than 18 per cent.

The pro rata cost of collecting customs revenue in the Philippine Islands is less than it is in the United States. At Manila, during the fiscal year ending June 30, 1902, the cost of collecting $1 of customs revenue was $0.0477, including the cost of customs launches, maintenance of the immigration division, cost of supplies, janitor's service, and night watchman, fuel, lights, water, repairs, and preservation of public buildings, compensation for detectives and informers. these items were deducted from the total expenditures at the port of Manila for the fiscal year 1902, as many of them are deducted in the statistics of the United States, the actual cost of collecting $1 would be $0.0345—materially less than the cost of collecting at the port of San Francisco or New Orleans, and practically the same as at the larger port of Boston.

In connection with this statement of comparative expenses it should be remarked that the customs duties in the Philippine Islands are practically one-half of what the average customs duties are at ports of