for the administrators to plan ahead and map out policies. If, however, the sum is insufficient to cover the total number of eligible applicants on an adequate scale, choice must then be made between (1) paying fairly adequate allowances to a limited number of persons and forcing the rest to wait or to apply for public relief or (2) of caring for all eligibles in need, reducing the average benefit proportionately. It is unnecessary to point out, of course, that neither arrangement can be said to be meeting the problem of old-age dependency. There is danger also in a fixed appropriation from year to year, even though it may have been fairly liberal in amount in the beginning. It leaves no margin with which to meet the expansion which is inevitable during the early years of the plan, while new persons are reaching the age of eligibility each year and before the early pensioners drop out in any considerable numbers through death. The State of Delaware where, since the inception of the system in 1931, the annual funds have been held to the original amount of $200,000 furnishes an example of the evils of the continuing, fixed appropriation.

In the early old-age pension acts, when special sources of revenue were named, taxes on property were common. Diminishing returns from this source and increasing demands for funds, as the coverage of State acts increased and the State proportion of assistance grew, led legislatures to look for more productive sources of revenue. These have included liquor taxes, poll or per-capita taxes, levies on liquor or horse racing, and inheritance, gasoline, automobile registration, and sales taxes, or a combination of several of these.

Several States have provided that the pension system shall depend for support upon the proceeds of special taxes levied for the purpose. Such a financial arrangement has the twin disadvantages (1) of being so indefinite in amount as to make impossible any advance planning by administrative authorities on a social-work basis, unless accompanied by a definite appropriation in anticipation of receipts, and (2) of resulting in practical nullification of the old-age assistance system, if returns fall below the expected results by any substantial margin. Extreme examples of this are North Dakota where the property tax yielded a revenue sufficient for monthly benefits averaging only 69 cents in 1934 and $1.08 in 1935, and Nebraska where the per-capita tax was sufficient only for allowances averaging $1.22 and $3.98 per month in 1934 and 1935, respectively.

In Michigan in 1934 the per capita tax actually yielded only about 6 percent as much as had been expected. The system of financing was changed in 1935 to that of straight appropriations from the general fund. The increased funds were used not to augment the individual allowances (in fact the average fell from $9.99 to $9.65) but to assist a greater number of persons (nearly four times as many in 1935 as in 1934).

Sources of Funds Under State Laws

THE Sources from which the acts on the statute books at the end of 1935 provided that the funds necessary for financing old-age benefits should be furnished are shown in table 9. From this table it is evident that in most States the money for old-age assistance came out of the general funds of either the State or county.

Special taxes, the proceeds of which were earmarked for the purpose of old-age assistance, were utilized less frequently and were, reports from the States indicate, frequently disappointing. Among the special taxes have been those levied on property, sales, liquor, inheritances, automobile registrations, and horse racing; and percapita taxes ranging from 50 cents to $3.

Table 1.-Sources of Revenue for State Old-Age Benefit Systems in 1935

! Changed to State-aided system during 1935 but no benefits paid under new provisions. Reimbursed by cities or towns.

Changed to State system during 1935 but no benefits paid under new provisions.

Changed to State-aided system in 1935; although no payments were made under new provisions, State actually furnished nearly 40 percent of funds (see table 2, p. 822).

Pension act provided for county-financed system, but later (appropriation) act of same year provided some State aid from proceeds of tax on horse racing.

Of city or town.

Temporary act, effective until Mar. 1, 1936.

Counties pay for any additional administrative and investigational expenses incurred by them.

Table 1.-Sources of Revenue for State Old-Age Benefit Systems in 1935-Con. New provisions not yet in force in 1935

Financial Provision for Pension Systems in 1935

SEVEN-TENTHS of the cost of old-age assistance under the plans provided for in State laws in 1935 was met by the States themselves and the remainder came from county treasuries (table 2).

In general the funds were provided from the sources and in the proportions contemplated in the law. In Arizona and Wisconsin the State failed to meet its entire legal obligation, but in Kentucky, New Hampshire, and Oregon, the State, although not legally chargeable, assisted the counties with sums ranging from 1 to 39.7 percent of the total cost.

In Colorado the old-age assistance act under which pensions were paid in 1935 imposed the whole cost upon the State. The reports show, however, that several counties supplemented the State allowances; one of these levied a 1-mill tax in order to do so.

Wide variation is found in the liberality with which old-age assistance was financed in 1935. In some States the funds can be said to be fairly generous in amount, but in others the financial support was far from sufficient.

The provision made in 1935 in those States for which data are available is discussed briefly in the following pages. The relative adequacy of the funds supplied in each case can be judged by considering them in connection with table 10 of the article on page 832.

Table 2.-Proportion of Cost of Old-Age Benefits Borne by States and by Counties

1 Percentages refer to act under which benefits actually were paid, even though in some States a later act (not in force during 1935) changed this provision.

Year ending Oct. 31, 1935.

Temporary act, effective only until Mar. 1, 1936.

'Provided Federal Government reimburses one-half.

Alabama.-Persons who had qualified under the terms of the act were cared for during the last few months of 1935 from relief funds. On January 1, 1936, some State funds were made available to the department of public welfare to enable it to put the pension system into effect on that date and to tide over until funds could be appropriated by the special session of the legislature which convened February 11, 1936.

Arkansas. No payments were made under the new act of Arkansas during 1935. Two revenue acts were passed in Arkansas by the 1935 legislature, however, for the benefit of the social security program. One of these (Act No. 65) imposed a tax on the manufacture and sale of wine, the proceeds being allocated to the old-age pension fund. The other (No. 321) appropriated from the welfare commission's funds $500,000 to be used for the payment of pensions and for relief during the fiscal year ending June 1935; $3,500,000 for 1935–36; and $3,500,000 for 1936-37.

Colorado. The Colorado act is financed from funds realized from estates reverting to the State; taxes on alcoholic and other beverages; a 10-percent increase in the business incorporation fee and in the inheritance tax; an increase of $1 in the automobile-registration fee; and part of the proceeds of the 2-percent State sales tax. Suit was brought in 1935 contesting the validity of the use of the inheritance tax in this way, but the clause was upheld by the State supreme court in a decision rendered in September (re Estate of Estelle Hunter, Hughes v. State, 49 Pac. 1009).

The 1935 legislature appropriated (ch. 172) from the emergency relief funds, the sum of $100,000 per month, from April 1935 to June 1937, to be used for the assistance of aged persons.

Connecticut. The Connecticut act will be supported by an annual State tax upon the towns, aggregating $2,100,000, payable annually on or before April 1 and prorated on the basis of the town's population. The towns, in turn, are authorized to collect an annual tax of $3 from every person between 21 and 60 years except disabled veterans, persons receiving public aid, and those too poor to pay the tax. Delaware. In this State the system continued in 1935 to be "frozen" within the limits imposed by the fixed annual appropriation of $200,000. Experience in other States indicates that a pension roll normally tends to increase each year for a number of years until a peak is reached. This natural expansion has been impossible in Delaware, where the number of pensioners has of necessity remained practically stationary during the 5 years the system has been in effect, whereas the number on the waiting list has increased steadily, rising from 958 in 1931 to 2,554 at the end of 1935.

Hawaii.—The new Hawaiian act providing for financial participation by the Territory did not go into effect until after the beginning of 1936. The 1935 legislature appropriated $10,000 for expenses of administration and $60,000 to meet the Territory's share of the cost of benefits, for the year 1936-37.

Illinois. The State legislature appropriated (S. B. 641) $5,000,000 to defray the cost of the system which went into effect early in 1936. The sum of $9,000,000 was appropriated by the special session of 1936. Indiana. The Indiana Legislature appropriated for the pension system the sum of $1,996,067 for 1935.

Iowa.-The Iowa system is financed by a per-capita tax. Late in 1934 a suit involving the question of whether State or counties were liable for the expenses of the local boards was brought before the district court of Floyd County. The opinion of that court that all expenditures must be met from State funds was appealed to the State supreme court. The supreme court's decision of February 13, 1936, held that such expenses must be met from State funds (Jones v. Dunkelberg et al. 265 N. W. 157).