FINANCIAL STATEMENT.

An examination of the budgets of the Spanish Government of Porto Rico for the ten years preceding the American Occupation shows an average annual expenditure of two million, three hundred thirty-three thousand, six hundred sixty-six (2,333,666) dollars. The Spanish badget was swelled by certain expenditures which have ceased or are now borne by the federal government at Washington, such, for instance, as the appropriations for the Church, the colonial administration and the army and navy, while on the other hand the American Government has largely increased the expenditure for public schools, road-building, poor relief, and public sanitation. The net result is a perceptible diminution in the total expenditure of the American as compared with the Spanish Government.

For the fiscal year, 1899-1900, the Military Government appropriated one million, nine hundred six thousand, fifty-one and 20-100 (1,906,051.20) dollars, and in the ten months July, 1899, to April, 1960, inclusive actually expended one million, five hundred forty-two thousand, seven hundred ninety-five and 29-100 ($1,542,795. 29), or at the rate of one million, eight hundred fifty-one thousand, three hundred sixty (1,851,360) dollars a year. During the first year of Civil Government, that is, from May 1, 1900, to April 30, 1901, the expenditures amounted to one million, nine hundred fifty-seventhousand, eight hundred sixty-one and 90-100 (1,957,861.90) dollars. The insular budget for the fiscal year, 1900-1901, aggregated one million, nine hundred eighty-four thousand, six hundred forty-five and 31-100 (1,984,645.31) dollars. Deficiency and special appropriations were made by the Legislative Assembly for the same fiscal year to the amount of one hundred forty-nine thousand, four hundred two and 50-100 (149,402.50) dollars. The general and special appropriations made by the Legislative Assembly

for the fiscal year, 1901-1902, aggregate one million, nine hundred seventy-six thousand, eight hundred two and 21-100 (1,976,802.21) dollars.

The monthly expenditures and receipts from July 1, 1899, to April 30, 1901, are given in some detail in this volume.

Probably the most interesting tendency revealed by the figures of this table is the decrease in the customs collections and the gradual increase in the internal revenue receipts.. These results, while in a measure due to natural economic forces beyond the public control, represent for the most part the fixed financial policy of the government in the domain of taxation,-viz: to reduce indirect taxation upon general consumption, represented by customs duties, and to increase the returns from direct taxes and sumptuary taxes upon alcoholics, tobacco, and articles of injurious or luxurious consumption. In accordance with this policy, a number of the most important imports were placed upon the free list; duties upon other imports from the United States were, upon May 1, 1900, reduced eighty-five (85) per-cent, while a special session of the Legislative Assembly was called in order to secure the abolition of all duties upon exports and imports between Porto Rico and the United States. On the other hand, the collection of internal taxes has been prosecuted with increased vigor during the civil administration, and on July 1 the system of property taxation was changed so that the revenue accruing from internal taxes will exceed the customs receipts. The importance of this shifting of the center of gravity of taxation may be realized from the statement that the customs collections heretofore have been greater than all other receipts combined, while in the approaching fiscal year the excise stamp taxes upon alcoholics, tobacco, and certain other articles are expected to yield practically the same amount as the customs duties. The government has no standing debt. The Island has two important

sources of revenue which are not entered in the "Receipts" -viz: the customs duties collected in the United States upon imports from Porto Rico, amounting to three hundred sixty-seven thousand, one hundred thirty-six and 83-100 (367,136.83) dollars upon March 31, 1901, and the remainder of the fund of customs duties collected in the United States upon merchandise from Porto Rico imported prior to the passage of the Foraker Bill, amounting on the same date to seven hundred ninety-five thousand, seven hundred thirty-six (795,736) dollars and devoted to the use and benefit of the people of Porto Rico by the "Two Million Refunding Act". In case of emergency both funds are available for the expenses of the government, but in accordance with a fixed financial policy the latter fund is reserved for the construction of permanent public works, such as roads and public schools, which in the ordinary course of events would be paid for by long-time public loans.

The total expenditures of the Island during the ten months of Military Government-from July 1, 1899, to April 30, 1900-aggregated one million, five hundred forty-two thousand, seven hundred ninety-five and 29-100 (1,542,795.29) dollars. The total receipts during the same period were one million, three hundred seventy-seven thousand, six hundred ninety and 67-100 (1,377,790.67) dollars, showing an excess of expenditures over receipts of one hundred sixty-five thousand, one hundred four and 62-100 (165,104.62) dollars. If the operations of July and August, 1899, be deducted, the results are more striking, showing for the remaining eight months aggregate receipts of one million, three hundred thousand, four hundred four and 95-100 (1,300,404.95) dollars, aggregate expenditures of one million, seven thousand, six hundred forty-seven and 89-100 (1,007,647.89) dollars, and an excess of expenditures over receipts of two hundred ninetytwo thousand, seven hundred fifty-seven and 06-100 (292,757.06) dollars.