This section is from the "The Subvention In The State Finances Of Pennsylvania" book, by Frederic B. Garver.
As was shown in the first section of this chapter, the last twenty-five years has witnessed a steady growth of the subvention to private charitable institutions. Along with the increase in the total has also come increasing complexity. New kinds of institutions have been added. The latest addition is a special subsidy for hospitals that have or shall have psychopathic wards. *117 It might appear, therefore, that any discussion of the advisability of discontinuing these grants was purely academic.
Protests against the policy have, however, appeared from time to time both in the utterances and reports of state officials and in the publications and propaganda of voluntary organizations. In 1897 the Auditor General protested against the entire subvention system as leading to waste and irresponsible expenditure. *118 Men of the medical profession have at times freely criticised the system. *119 The committee of the National Conference of Charities and Corrections on State Supervision and Administration has reported against the system. *120
117 Act 9 June, 1911, P.L. p. 855.
118 Report (1897), pp. xxi-xxii.
119 See Statements of Dr. H. W. Cattell in Pennsylvania Medical Journal, Vol. XIII, (1910), pp. 276-277; also of Dr. W. L. Estes, idem, pp. 273-274; also the paper read by Dr. J. B. Roberts at a meeting of the Pennsylvania Medical Association, entitled, State Appropriations to Hospitals not under State Control. What Pennsylvania is Doing. Idem, pp. 253 ff.
120 30th Annual Conference (1903), p. 365.
The principal arguments against the present procedure are as follows:
1) that the funds appropriated are often wasted or misapplied;
2) that unwise appropriations have multiplied institutions unnecessarily;
3) that the state should not appropriate funds to persons or corporations when it does not have control over the application of such funds;
4) that institutions for the insane, the feeble-minded and for criminals have been neglected in favor of the politically more useful subsidies;
5) that the grants are used for political purposes of an undesirable kind;
6) that the subsidy system discourages private giving;
7) that money obtained from the state by the hospitals and other institutions is not so carefully guarded as funds derived from private contributions and, therefore, many who are able to pay are treated without charge;
8) that the hospitals, orphanages, and homes supply local needs and should, therefore, be locally supported.
Now it is obvious that the first five of these objections apply to the subventions as they are administered in Pennsylvania at the present time. If the state should put its budget into scientific form and should arm the Board of Public Charities with greater power these evils could be eliminated. The sixth objection—that the subsidies discourage private giving—has not been sufficiently substantiated by facts to warrant its consideration at the present time.
The last two objections, however, apply to all subventions to privately managed institutions of the types subsidized, no matter how well administered. To a certain extent the pauperizing effect of the subventions could be done away with by more careful supervision, but the fact would still remain that funds derived from the state would be less carefully safeguarded against bogus charity cases. The last objection, when elaborated, develops into the general proposition that money collected by taxation from the entire state should not be expended for the benefit of particular localities.
This general statement may be subdivided into two more specific objections. In the first place it is said to be inequitable to favor certain localities by making large grants for their benefit while other communities receive little of the benefit of the state's liberality. The homes, the free hospitals, and the various organizations for social reform are most numerous in the populous industrial centers, while the farming communities, which have fewer types of classes requiring public assistance and in which these classes are not concentrated, have very few such institutions.
This objection is not wholly sound since many lines of state activity benefit particular classes and communities more than they do the whole body of the population within the commonwealth. This is true of agricultural schools and of experimental stations. It is true of commissions to regulate the services and charges of gas, electric lighting, and water companies, of the navy, and of municipal fire departments. But the principle that the state in our system of government should confine its activities to services of state-wide benefit and interest is a sound one.
The second minor proposition is that local governments or local voluntary organizations can best administer purely local affairs. But if the state aids in supporting local projects, it must have some control over them. This may be undesirable in some respects, but it is fiscally necessary. Hence subventions to local services should be avoided. But a difficult problem is encountered when the localities do not have sufficient revenues to finance all the services that are commonly deemed necessary. The solution of this problem arrived at in Pennsylvania is the subvention. Now, if it is true that the local tax payers, who are chiefly owners of real estate, are already contributing more than their share to the support of the government, it would hardly be equitable to require them to bear additional burdens. But this would necessarily follow if the subsidies should be withdrawn.
The persons who pay local taxes have for many years protested against the exemption of corporation securities from local duties and against the exemption of all the property used by transportation companies from local taxes. But the vexed question whether the payers of state or of local taxes are more heavily burdened has never been settled. Nor is it likely to be, until a permanent non-partisan tax commission is given an opportunity to study the facts carefully for a period of years.
A certain number of people desire to see all subsidies to privately managed institutions discontinued, without substitution of local assistance. They assert that the larger cities have municipal hospitals and that all counties maintain almshouses in which the aged poor and other paupers can be cared for. Moreover, it is asserted that if state aid should be withdrawn, private giving would supply the funds to continue as much free service as is desirable. The examples of Illinois, Massachusetts and Ohio are cited to show that state aid is unnecessary. This argument from example is indeed a strong one, but it is not conclusive because the reply is easily made that Pennsylvania makes better provision for her dependants than do these states. Here again we have only assertion and counter-assertion with insufficient data upon which to base conclusions.
It must be conceded, however, that the subsidy system as administered in Pennsylvania has many undesirable aspects and the first five objections cited seem to be well substantiated by fact. The first step, therefore, in the program of reform is to remove the evils that are admitted not to be inherent in the system. The program which might profitably be followed was indicated many years ago by Warner after a study of the subsidies of the District of Columbia. "At its best," he wrote, "the government must attend to three things. First, on behalf of the poor as well as the taxpayers, it must provide for thorough inspection of subsidized institutions, and the systematic auditing of these accounts. This work cannot be done by grand juries, or legislative committees, or exofficio inspectors, who may from time to time thrust their inexperienced noses into matters which they know nothing about. The work of inspection must be done by some thoroughly experienced and otherwise suitable administrative officer, who is definitely responsible for the thoroughness of his work. Second, the state must keep in the hands of its own officers the right of deciding what persons shall be admitted to the benefits for which it pays, and how long each person may continue to receive those benefits. If it pays for beds in a hospital one of its own officers should have entire control of admitting and discharging the patients cared for. This is necessary in order that there may be some gauge of indigency, and some assurance that the gauge will be used. Third, subsidies should only be granted on the principle of specific payments for specific work. When any one of these three conditions is lacking, the policy of subsidy granting is necessarily pernicious. *121
121 American Charities, 1st. ed. p. 353.
In short, the first and most necessary step is to bring about better control, and after that has been accomplished and after investigations have been made to settle controverted points, it will be possible to secure data upon which to decide the advisability of discontinuing the grants.