This section is from the "The Subvention In The State Finances Of Pennsylvania" book, by Frederic B. Garver.
The Financial Policy of the State, 1844 to 1873
The year 1844 marks the end of the period of expansion of the Pennsylvania system of state works and, therefore, the end of one epoch of the financial history of the state. From that time until the works were sold, in 1857 and in 1858, *1 only the completion of lines already undertaken and the construction of branches or feeders was attempted. During the years immediately succeeding 1844 the state attempted to sell the canals, but since no bidders could be found to purchase them under the conditions imposed, they remained under state control. *2 They were, however, a liability rather than an asset.
The net revenue derived from the canals was very small during the entire period 1844 to 1858. In 1856, for example, the gross receipts of the entire system were only about $60,000 in excess of operating expenses, payments for renewals and certain small extensions. In 1857 Governor Pollock stated that the total of all receipts from the state works was $2,006,015.66, and that " The extraordinary payments during the year  amounted to $808,892.16; ordinary expenditures, $1,135,004.00; net revenue, (excluding extraordinary payments and for motive power) $871,011.00. " *3 Since we are concerned only with the effect of the management of the works upon the state's financial policy, and not with the profitableness of the canals as isolated business ventures, the important thing to notice is that of the $871,011.00 "net revenue" (excluding cost of motive power!) $808,892.16 was used in canal maintenance or extension. The interest on the debt contracted to build the canals, which was in excess of a million and a half annually, was met by taxation. *4
1 The sale of the main line was authorized by Act 16 May, 1857, P.L. pp. 519-526. The main line of the public works included: " the Philadelphia and Columbia railroad; the canal from Columbia to the Junction at Duncan's Island; the Juniata canal from thence to Hollidaysburg; the Allegheny Portage railroad, including the new road to avoid the inclined planes, and the canal from Johnstown to Pittsburg with all property thereto appertaining or in anywise connected therewith." Ibid. The sale of the various branch lines was authorized by Act 21 April, 1858, P.L. pp. 414-419. The branch line canals were constructed as feeders of the main line of state works. There were four divisions known as the Upper and Lower North Branch, the West Branch, and the Susquehanna division. Ibid. The Pennsylvania Railroad Company purchased the main line for $7,500,000 giving its bonds in payment, with the stipulation that these bonds should be repaid at specified intervals. Annual Message of the Governor, 1858, Pennsylvania Archives IV Ser. VII p. 935. The Sunbury and Erie Railroad Company agreed to pay the state $3,500,000 for the branch lines, Annual Message of the Governor, 1859, Idem, VIII, p. 93.
2 Aud. Gen. Report (1880), pp. 285-287.
3 Annual Message of the Governor, 1857, Pennsylvania Archives IV Ser. VII, pp. 874-875.
The attempt to stop the increase in the bonded indebtedness of the state was not successful as long as the works remained under state control, as the following table shows.
During Year (000)
During Year (000)
1 These figures are taken from the Reports of the Auditors General. The amount of the debt is given as outstanding on the first day of the fiscal year, Dec. 1. The interest payments are for the year preceding. The interest figures contain amounts, usually less than $50,000, for interest on temporary loans, which are apparently not included in the total debts. These interest payments cannot be accurately separated. Cf. Tenth Census, VII, Taxation, Valuation and Public Indebtedness, p. 542. The amount of the debt includes funded debt, relief notes, interest certificates, temporary loans and amounts borrowed from banks.
2 Amount of debt is given for Dec. 1 of year indicated.
4 See "An Act to retire the State Debt ..." Secs. 32-48, Act 29 April, 1844, P.L. pp. 497-503.