REPORT OF THE GOVERNOR GENERAL.

JANUARY 1, 1916, TO DECEMBER 31. 1916.

MANILA, August 10, 1917.

SIR: The year 1916 is significant in Philippine history by reason of the passage by the United States Congress of a new organic act for the islands. Political autonomy was thereby given to the Filipinos together with a promise of future independence as soon as a stable government can be established. The appointive Philippine Commission was moreover replaced by a Senate elected by the Filipino people. The wisdom as well as the justice of this legislation is already demonstrated because not only is the new form of government working most satisfactorily, but the Jones law has greatly cemented the friendship between the American and Filipino people. All doubts and suspicion as to the purpose of the United States in the islands have now been removed in the minds of the inhabitants, and a genuine and widespread feeling of loyalty to the United States was made very apparent upon the entrance of our country into the war.

The regular elections for members of the Assembly, since designated the House of Representatives, were held in June and passed off in good order and practically without disturbance. Pursuant to the terms of the new organic act, elections were held for members of the new Philippine Senate on October 3, 1916, and on the 16th of the same month the new Legislature organized. For the first time this body contains a membership completely and entirely Filipino. The appointive members of the new body were selected. by the Governor General as closely as possible actually to represent the non-Christian territories formerly under the exclusive jurisdiction of the Philippine Commission and prescribed by the Jones. law to be represented by appointment instead of election. Hadji Butu, the former prime minister of the Sultan of Sulu, was selected as a Senator, and Datu Piang, of Cotabato, and Datu Benito, of Lanao, two of the leading Moros in Mindanao, were nominated to the House of Representatives. In the Mountain Province, Juan Cariño, a Benguet Igorrot, and Rafael Bulayungan, one of the leading men among the Ifugaos, were also nominated to the House of Representatives. It seemed wise to the appointing power to allot representation as far as possible to all the different elements in the Philippine Islands in order to give voice to the various bodies of the Filipino people and bring home to them the fact that a popular and autonomous government has been now established. The results seem to have completely justified favorable expectations.

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The attention of the new Legislature was first of all directed to the reorganization of the departments of the government. Act No. 2666 established the department of the interior, comprising the bureau of non-Christian tribes, the Philippine General Hospital, the boards of pharmaceutical, medical, and dental examiners, the executive bureau, and the Philippine Constabulary; the department of justice, comprising the bureau of justice, public-utility commission, code committee, courts of first instance and inferior courts, Philippine Library and Museum, and bureau of prisons; the department of finance, comprising the bureaus of customs, internal revenue, treasury, and printing; the department of agriculture and natural resources, comprising the bureaus of agriculture, forestry, lands, science, and the weather bureau; the department of commerce and communications, comprising the bureaus of public works, posts, supply, labor, and coast and geodetic survey; and the department of public instruction, which comprises the bureau of education, Philippine health service, and the quarantine service. The department of public instruction is under the direction of the Vice Governor, appointed by the President of the United States, and all the other departments are under the supervision of Filipinos appointed by the Governor General, as follows: Hon. Rafael Palma, secretary of the interior; Hon. Victorino Mapa, secretary of justice; Hon. Alberto Barretto, secretary of finance; Hon. Galicano Apacible, secretary of agriculture. and natural resources; and Hon. Dionisio Jakosalem, secretary of commerce and communications. The heads of departments have been constituted into a cabinet, holding weekly meetings with the Governor General and discussing general policies of government as well as the affairs of their own departments. Each department has also an undersecretary, appointed by the Governor General, as follows: Hon. Teodoro M. Kalaw, undersecretary of the interior; Hon. Jose Escaler, undersecretary of justice; Hon. Miguel Unson, undersecretary of finance; Hon. Rafael Corpus, undersecretary of agriculture and natural resources; Hon. Catalino Lavadia, undersecretary of commerce and communications: and Hon. Felix M. Roxas, undersecretary of public instruction. The undersecretary acts in the place of the secretary during the absence of the latter and in general assists him in his general supervision of the bureaus under his control.

The Legislature also passed a new salary act devised to meet the anomalous situation caused by the presence in the insular service of officials of two different races-Americans and Filipinos. While the salaries originally fixed during the American occupation were adjusted to the needs of men who frequently abandoned their occupations in the United States and came out for a longer or shorter term of service in the Philippines, these salaries have been generally recognized as too high for permanent residents in the Philippine Islands, certainly too high in comparison with the insular revenues. From time to time in the last few years certain reductions in the salaries of the officials had already been effected as described in previous reports, and in Act No. 2668 the Philippine Legislature attempted to fix a permanent basis for the future. While establishing a materially lower scale of salaries for the officials of the government the act leaves it largely to the discretion of the cabinet as to when the new

scales were to be put into effect, and it is not expected that for the first year or two reductions will take place, excepting in the case of new appointments to vacancies when the new salary scale will automatically take effect. By a system of contracts with technical experts provision can be made for retaining Americans in the service at salaries commensurate with their needs and abilites. While some uneasiness and apprehension on the part of the Americans was created by the passage of this act, it has come to be generally recognized as a sincere and earnest attempt to solve a most vexatious problem with justice and generosity to Americans in the service. The most significant reductions actually in operation now are those of the salaries of the secretaries of departments or cabinet officers. Under the former organization a secretary of department, whether American or Filipino, received P27,900. Each secretary of department under the new organization receives P12,000.

The annual appropriation bill was duly passed before the end of the year, and it took effect on the 1st of January, 1917. In general the Legislature entirely justified the hopes and expectations of its friends.

The new charter for the city of Manila went into effect on July 1, 1916, and by its terms the mayor still remains an appointee of the Governor General, while a municipal board of 10 is elected by the people.

The chiefs and assistant chiefs of bureaus, of whom there were on the 1st of January, 1917, 31 Americans and 22 Filipinos, are substantially the same as heretofore and, except in the case of a few new appointees, are receiving substantially the same salaries as before.

In general it may be said that the government is operating most harmoniously and efficiently and entirely justifies the confidence shown by the United States Congress in the Filipino people.

In reviewing the work of the different branches of the Government for the year 1916, only a general statement will be made as to matters covered by their reports, but the undersigned during the year acted as secretary of the interior for the period July 5 to September 8, and as secretary of public instruction during the absence of Vice Gov. Henderson S. Martin in the United States. This report will therefore dwell in some detail upon the work of different bureaus in these departments.

Attention is especially invited to the report of the insular auditor, which is printed separately, and which sets forth the exact financial condition of the government. It is most gratifying to note that the current surplus of the government, as a whole, including all departments, bureaus, offices, Provinces, municipalities, and other political subdivisions, increased in 1916 P4,521,022, resulting in a total of P23,344,323 represented by cash and cash items on hand at the close of the year in excess of all current indebtedness.

Frequent references have been made in preceding reports to the successful efforts to reduce annual recurring deficits of the central government and to establish the treasury upon a sound basis. The expenditures for 1913 exceeded the revenues by P7,196,482; the expenditures for 1914 exceeded the revenues by P2,841,118.81. It was with satisfaction that the undersigned was able to report that for the year 1915 the revenues exceeded the expenditures by P1,116,387. The year 1916, however, shows results far more satisfactory, the ex

cess of revenues over expenditures being P4,798,042. This addition to our current surplus results in a total of 15,032,159 as of December 31, 1916, of which P11,819,499 was unappropriated. The accumulation of such a surplus enables the government to proceed with the undertaking of necessary public improvements on a much larger scale. The amount of cash on hand in excess of immediate demands is greater than ever before in the history of the government, and there is every indication of a substantial increase during 1917. It is worthy of note that although the operations for the year 1916 resulted in a very handsome cash balance, there has been no diminution in the public welfare activities of the government. On the contrary, the amount withdrawn from the treasury for public works and permanent investments is P3,976,626 more than for 1915. In this connection, attention must be invited to the fact that P1,831,212 in cash accrued to the treasury as the result of the profits from the sale of 15,000,000 silver pesos in the certificate reserve fund for conversion into gold. This extraordinary income, however, is more than offset by the withdrawal from the treasury of P3,297,497 for investment in the stock of the Philippine National Bank.

The budget statement of the central government is of particular interest and is accordingly here presented:

THE CENTRAL GOVERNMENT.

Consolidated budget statement, fiscal year 1916, compared with fiscal year 1915.

Consolidated budget statement, fiscal year 1916, compared with fiscal year 1915-Continued.

Upon the appointment of Mr. Samuel Ferguson to the vice presidency of the Philippine National Bank on February 20, 1916, Mr. H. L. Hershey, the dircetor of civil service, succeeded him as secretary to the Governor General, and thus became acting executive secretary until the appointment of Commissioner Jaime C. de Veyra to the position of executive secretary on April 7, 1916, where he served until he was elected Resident Commissioner in the United States. The office of executive secretary has been abolished by the new Administrative Code, and the office headed by the chief of the executive bureau. Mr. Manuel de Yriarte, second assistant executive secretary, went with the division of archives, patents, copyrights, and trade-marks of the Philippine Library and Museum when that part of the executive bureau was transferred there.

Expenditures for 1916 were considerably less than those of 1915.

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