pass current as before. These derangements in the money market have their source, not in the issues but in the deposits of banks. Great competition exists among these institutions to secure large deposits at a low rate of interest. These deposits become the basis of extended and profitable discounts, thereby unduly expanding the circulation. Various expedients, more or less complicated, have been suggested to guard against this danger. But a simple and effectual course would seem to be, to require each bank to keep on hand a fixed relative proportion of coin to the total amount of its cash liabilities, exclusive of its notes, and to impose adequate penalties for the violation of this law. This would go to the root of the evil; for the cost of keeping in the vaults so much unproductive coin would be certain. There would be less desire, therefore, for large deposits; and these would be more equally diffused among many banks of itself, an advantage, instead of being, as now, monopolized by a few. Entertaining these views, I submit, for the consideration of the Legislature, the expediency of requiring, by law, under adequate penalties, that every bank shall keep on hand twenty-five per cent. in coin, on the amount of all its cash liabilities, exclusive of its notes. In order to avoid unnecessary inconvenience in carrying such a provision into effect, it might be so graduated as to time, as to reach the minimum by a progressive monthly percentage; but whenever reached, at a day to be fixed, not to be departed from. Under a law similar to this. the chief banks of New Orleans, alone of all the banks of the country, were enabled to resist the pressure of universal suspension elsewhere, and maintain their integrity. Such a law in this State, together with the weekly statements, under oath, of the New York city banks-now so judiciously required to be published-and the operation of the daily settlements at the clearing house, would, it is believed, go very far to prevent catastrophes such as that

from which we are just emerging. I can perceive no objection, in expediency or equity, to such a restriction upon the banks, which, as creatures of the State, may and should be required so to conduct their operations as that the public safety should not be postponed to the desire of adding to the profits of their private stockholders.

The condition of the banks, in all of these details, will be communicated to you at an early day, by the Superintendent of the Banking Department, to which I would beg leave to refer you for such further information as you may desire upon these subjects.

The condition of the finances of the State is such as to require, I am concerned to say, continued taxation, in order to the maintenance of the public credit, and the due provision for the ordinary expenses. The canal revenues are again deficient, and it becomes a duty to express the opinion that under existing circumstances, the Legislature may, with equal fitness and justice, repeal the law of the 10th of July, 1851, entitled "An act to abolish tolls on railroads," and then, by a further act, re-establish the tolls on competing railroads, which had been pledged by the Constitution, as part of the canal revenues, for the security and ultimate redemption of the public debt.

Railroads are great public benefits, and there should be no desire to deal in an illiberal spirit with their owners and managers. It is for the general safety and convenience, that those who invest their money in such enterprises, should be permitted to derive therefrom a just return of profits, but always in subordination to the public good and the rights of others. It is in this view I recommend, as an equivalent for re-establishing the tolls on freight, that railroad companies paying such tolls, be permitted to make such equitable increase in their present charges for the transportation of passengers as the Legislature may authorize.

There will doubtless be addressed to you applications for grants of money to various deserving enterprises and institutions; but it is my duty to say that, in the present condition of the treasury, a deaf ear should be turned to all such applications; for it can only be through the exercise of the strictest economy, and retrenchment wherever retrenchment can properly be made, that we shall be able to meet our ordinary expenditure, and to fulfil our obligations to those State institutions which habitually rely upon our annual appropriations.

The reports annually presented to the Legislature, will make known to you the general condition of the State, of its eleemosynary institutions, of its houses of refuge, its prisons and penitentiaries, and to these I refer without reproducing their statements here.

The Superintendent of the Onondaga salt springs reports to me that the inspection of salt manufactured on the Onondaga salt springs reservation, during the past year, is 4,312,000 bushels. This is a falling off of the production of the preceding year of about 1,700,000 bushels. The Superintendent ascribes this falling off to the recent general derangement of business in the country; but expresses the confident belief that this important staple will speedily recover from its depression, and go on, as heretofore, with steady increase.

Of the canals, however, I must speak at some length, and with entire frankness, not concealing whatever there may be of disappointment and discouragement in the statement to be made, but as certainly not doubting nor desponding, either as to the ability, the obligation, or the expediency of persistent efforts and sacrifices, if need be, speedily to complete the enlargement; and therein and thereby put the State in possession of a system of internal navigation, unsurpassed in its extent and completeness, and unequalled in its productiveness. The net tolls of the past year, ex

tending from 1st October, 1856, to 1st October, 1857, fall short, as appears by the annexed abstract from the report to me, of the Auditor of the Canal Department, by $110,984.40 of the sum of $1,700,000 required by the Constitution to be annually set apart from the surplus revenues of the canals, as a Sinking Fund for the redemption of the canal debt, as it existed in 1846. The Constitution further requires that $350,000 be annually set apart from the surplus funds, to provide for the interest and principal of the General Fund Debt. This also is deficient, thus making the whole deficit of the tolls to satisfy the requirements under 1st and 2d sections of article 7 of the Constitution, $461,984. The work of enlargement has, it is believed, been advantageously and steadily prosecuted during the past year, though I am unable to furnish you with any details. These will be presented to you in the report which the State Engineer is preparing, and will make to the Legislature at an early day. Assuming, however, as accurate, the estimates in his annual report of the cost of completing the enlargement

from 1st December, 1853, at.. And giving credit for the sums since appropriated thereto, viz, amount of four loans of $2,250,000 each, under constitutional amendment of 1854....... Premium thereon, and interest on premium.

$14,250,000.00

$9,000,000.00

1,400,000.00

To meet this there is only the loan of $500,000 authorized by the last Legislature, not yet negotiated. It will devolve upon you, therefore, to provide the additional means. I have already suggested, that tolls on competing railroads be restored, and would further suggest as an additional resource, such increase of canal tolls as may be found expedient, and for the balance, we can only look to direct taxation; and accordingly, I recommend that recourse be had thereto, in such measure, and with such apportionment of the burthen over two years, as will render it least onerous to the people, while fulfilling the end proposed, of ensuring the speedy enlargement. That result, if adequate means were on hand, might be accomplished within the current year; but inasmuch as no such means can be provided within that time, we must be content to wait a little longer for this great consummation, well assured that when it does come, it will come crowned with abundant and lasting prosperity. Meantime it may be safely estimated that, with the tolls on competing railroads, and a tax of one-half mill annually, for two years, a sufficient sum will be raised to effect the desired object, and thus at the commencement of the year 1860, put the State in possession of this great property, with a sinking fund adequate to the rapid extinction of all the debts charged upon it, and with an income that will thenceforth obviate the necessity of taxing the people.1

The Superintendent of Public Instruction has furnished me in anticipation of his annual report, with the following statement of the condition of the public schools of the State:

1 The Legislature adopted the Governor's suggestion as to a one-half mill tax for the canal debt, which was imposed by chapter 353, passed April 17. Other canal legislation was of the usual character, providing for enlargement, improvement and ordinary administration.