last June 30 with a $10. 5 million surplus. All the reports I have received
indicate that this surplus probably will be substantially increased by
June 30, 1960, the beginning of our next fiscal year. All of this is cause
for some rejoicing by those of us who are responsible for preparing a
budget for the State for the coming fiscal year. But we have seen the
dangers inherent in such a situation and we know that we must proceed
with great caution. If we become too elated and yield to the temptation
of spending too much, we might find ourselves bewailing our woes a few
years from now.

Reports from the experts indicate that we may expect a continued
upswing in the economy for some time to come, but already some of the
authorities in the field are talking about a leveling off, or worse, by 1961.
In handling State affairs, we ought to be prepared for such an event if
it does occur.

My fiscal advisers report to me that the trend in revenue increase
under our existing tax structure appears to be at the rate of around $10
million a year. At the same time, the trend of increase in appropriations
seems to be at the rate of approximately $17 million a year. It takes no
wizard to calculate what will happen if these two trends continue. Our
revenues now are above the level of appropriations, but this gap is
closing and the two lines will meet within a few years if appropriations
continue to increase at a greater rate than revenues.

The question then arises: What can we do to guide the State properly
under these conditions?

Well, for one thing, we can study its needs of the future in relation
to its revenue possibilities. That we are trying to do. This is one of the
reasons my administration, in the first few months of its existence, has
laid so much emphasis on long-range fiscal planning. At my request, a
committee of the Legislative Council is making a study which under-
takes to project the State's spending and its revenues several years in the
future so that we may make a planned approach to the State's fiscal
problems.

It makes little sense to me to try to handle our complex financial
affairs on a year-to-year basis. I hope to develop this long-range fiscal
planning much further and will recommend that the Committee extend
its studies into areas which up to now it has not had the opportunity to
enter. Only in this way, as I see it, can we hope to operate the people's
government in such a way that they are assured of getting the maximum
benefits from the taxes they pay.

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