at length and in detail. Any report on the state of the State, however,
would be deficient without some reference to the fiscal condition of
the State.

Our financial condition, I am gratified to report, is healthy and
sound. I should like to point out here, however, that a result of com-
mitments and obligations which the State has assumed, arising out of
formulae laid down in legislative enactments, the State has become
heavily involved in appropriations to its political subdivisions. Some
of these are direct appropriations, others take the form of grants-in-
aid. In the budget under which we are now operating, for example,
more than 50 per cent of the total general-fund appropriations are ap-
propriations made to the counties and the City of Baltimore, leaving
less than 50 per cent of these funds for State agencies directly respon-
sible for carrying on the housekeeping and governmental programs
of the State.

It is of interest to note, also, that of the total budget, including
both general and special funds, more than 70 per cent is spent for
highways, education, welfare, health, hospitals and mental hygiene.

All of you maintain a close relationship with your local govern-
ments, and you therefore are well aware of the mounting pressures
which are being exerted for more financial assistance from the State.
The Legislative Council, upon the recommendation of its Committee
on Taxation and Fiscal Matters, will ask you this year to appropriate
an additional sum of approximately $10, 000, 000 to the local sub-
divisions to help them finance their programs of education and wel-
fare. I favor such action, and hope you will give it your support.

If we are to discharge our duties in a financially responsible man-
ner, this will mean that we must raise additional revenues to meet
these additional costs. I will have more to say on this subject in my
budget message. Meanwhile, I would point out to you that the State
could, if it were not necessary to render this additional assistance to
the subdivisions, operate through the next fiscal year under its pres-
ent revenue structure. It is possible—even probable—that we could
complete our four-year term without a tax modification, if all we had
to do was to provide the necessary funds to operate the State Gov-
ernment.

I have a strong conviction that responsible government financing
dictates that a decision to spend be accompanied by a decision to tax.
And therefore, if we do decide to give the local governments more
money, I will recommend that we alter our tax program to meet the
costs.

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