Financial History of the United States: Fiscal, Monetary, Banking, and Tariff, Including Financial Administration and State and Local Finance

By Paul Studenski; Herman E. Krooss | Go to book overview
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CHAPTER 12: STATE AND LOCAL FINANCE, 1800 TO 1860

During the first three decades of the nineteenth century, state and municipal activities were getting slowly under way. But beginning with the thirties state and local governments began to bear the brunt of the demand of the rapidly increasing urban and rural populations for new social services and public improvements. Their increased expenditures, particularly in the forties and fifties, more than made up for the Federal passivity of the period, described in the previous chapter.

Expansion of State Functions and Expenditures . The states became active service agencies, reasserting their original primary position in the scheme of government. They took over from the Federal government the responsibility for internal improvements and from the local communities a considerable share of responsibility in the field of correction and charities. They also opened up new areas for government responsibility. They built penitentiaries, reformatories, and institutions for the aged, the mentally unfit, and the disabled. They inaugurated aid to common schools, usually by segregating the proceeds from the sale of public lands in special funds. Later, they supplemented these funds from their shares of Federal surplus and provided additional aid from general revenue or from special taxes.1 They furnished aid to private colleges, and several states in the South and the new West established state-supported universities, while others, with New York leading, established free normal schools for the training of teachers.

State subsidies were furnished to county and state agricultural societies for the dissemination of information and the improvement of agriculture. Regulation of business vested with special public interest--banks, insurance companies, and railroads--was also inaugurated.2

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1
New York established a Common School Fund in 1805. In 1851 it imposed a special property tax for school purposes, raising the annual apportionment to $800,000. However, free common schools did not become generally established in New York until the 1840's, although Pennsylvania had established them in 1834, and public high schools began only a decade or so later.
2
New York State established regulation of banks by a board of bank commissioners in 1829 and a state banking department in 1851, supervision of insurance companies in 1850 and an insurance department in 1859, supervision of railroads in 1850, and a general incorporation law for manufacturing enterprise as early as 1811. It established a board of agriculture to administer grants to county agricultural societies in 1819 and a subsidy to the state agricultural society in 1841.

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Financial History of the United States: Fiscal, Monetary, Banking, and Tariff, Including Financial Administration and State and Local Finance
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