The burning of the Nebraska Asylum for the Insane on April 17, 1871, destroyed the locus of a fledgling state institution and had ramifications well beyond the destruction of a single building. The loss seemed typical of the gloomy year of 1871, when poverty gripped the state. Prices for agricultural products were low, markets were distant, and business conditions were further depressed by impending industrial panic in the East. "Official peculation and factional strife," according to the Morton-Watkins History of Nebraska (1913), had demoralized the populace.
The "official peculation and factional strife" stemmed from the troubles of Governor David Butler and his administration. In the spring of 1871, soon after taking office for his third term, Butler was confronted with the destruction by fire of one of the buildings at the new state capital of Lincoln. The segment of the state press that opposed both Butler and the capital removal from Omaha that he had helped bring about, blamed the governor.
The first asylum had been built on a 160-acre site about two miles southwest of the site of the old town of Lancaster. The brick structure was composed of five stories with a four-story wing to the north. The architect was D. Winchell of Chicago, and the contractor was Joseph Ward, the contract price for the work being $128,000. However, even before its opening day in late 1870 or early 1871, the building had suffered a fire. The flames were extinguished before much damage was done, but many Nebraskans recalled this seemingly minor incident the next year after a larger fire occurred.
On the night of April 17, 1871, the building was burned to the ground. Whether the fire was deliberately set was not determined, but contemporary popular opinion was "that the origin of the fire was incendiary and a dual motive was assigned for the destruction of the building by fire. It would save the state administration from further obloquy by forestalling the expected collapse of the walls on account of bad construction, and the considerable sum thereby procured from the insurance companies would tend to placate public hostility." Ten convicts who escaped the night of the fire, it was rumored, were released to help kindle it.
At least one asylum patient died. The city of Lincoln made temporary arrangements to house the remaining patients left homeless, advancing $4,500 for that purpose, perhaps to prevent the relocation of the asylum away from Lincoln. This sum was afterward repaid by the state.
The burned asylum building had been insured for $95,000. Amid general denunciation of the shodiness of the original construction, the state settled with the insurance companies for a total payment of $72,000.