Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1873-03-06
THE FUNDING SCHEME.
Remarks Of Senators Bmithson and
Rxcnariscn ON the Bill to Fund the
state Debt.

! Smishson saioi era
Mr. Speaker! The bill now before the
Senate proposes to fund the past due
bonds and past due interest. 1t proposes
| to give State bonds for past due interest,
| the bonds to bear interest at six per cent
per annum. Should we pass it?
AT the outset assure the Senate that I
am not for reputation In any form or
shape. On the contrary am for paying
all legal debts of the State in full.
The facts are that the State heretofore
| issued its bonds, for various purposes, bear
| ing interest at six per cent per anntim.
No interest has been paid on these bonds
since July l., 1869, and it has accumulated
| to the sum of $5,2S6, 654.00. This sum
does not now bear interest; there being no
| interest upon Interest. Nor can said past
| due interest ever bear interest unless the
State expressly agrees to pay interest on 1t.
That is what this bill proposes to do. 1t
proposes to pay the past due interest in
ak per cent State bonds--that is to fund 1t
in bonds bearing six per cent interest.
It must be remembered that funding is
not paying. To fund is simply 10 increase
the State debt and "postpone the evil day."
Taxes will pay the public debt; nothing
else will. five fund the past drie interest
now, we have to do the same thing again
In a year or two, unless we levy tax suf-
ficient to provide very considerable 'sink-
ing fund" in addition to the amount neces-
sary to pay the expenses of the State gov
eminent. This am willing to do, but am
utterly opposed to increasing. the public
burdens one cent beyond what is absolutely
necessary.
This bill presents two questions: /.
Would its passage ultimately and pern1d.
nently improve the State credit 2. Is 1t
fair or just to The peoplef
Would the passage of this bill perma-
nently improve the State credit The
Comptroller's report of Jan. /, 1873, shows
that the whole State debt to that time, in
Guiding past due interest, amounts to nearly
forty-four millions, but states that The
amount of bonds paid in and due from SOL
vent railroad companies, and the proceeds
OF delinquent railroads sold viii reduce the
State debt to little less than twenty-one
millions.
Judging the future by the past, it would
be very rash to expect much from delin-
quent railroad companies. It would be far
safer TO expect that those claimed as SOL
vent viii fail to pay their interest or re-
deem their bonds. 1t is submitted that the
State has no reliable assurance that the rail-
road companies will pay the State bonds
loaned them or the interest due thereon,
and that such hopes will in due course of
time prove illusory.
By comparing the Comptroller's last re-
port with former ones, 1t will be apparent
that he puts the amount of the State bonds
and accrued interest out standing at the
very lowest figure If not lower than the
facts warrant. This opinion is strengthen
ed by the fact that the past due interest was
funded from time to time under the admin
istrations of Cows. Brownlow and Senter.
The debt includes interest upon interest
compounded.
Again, Blackburn's report Of Sept. 80,
1869, (pages 1919 20,) showed that the
State debt proper, and railroad bonds for
the payment of which the State was liable,
together with interest funded and past due
on the LIST day of July, 1869, amounted to
nearly forty millions. If the whole sum
mad been at interest to March 1, 1878; the
interest would be nearly nine millions, and
the whole debt would be over forty-eight
millions; but since part of that sum was
-, interest, and does not bear interest,
the public debt does not amount 10 quite so
much.
But if Blackburn's report is correct it
seems that the debt and interest would
now amount to at least forty-six millions,
less the payments made by railroad COM
panies. According to former reports the
debt is nearer thirty millions than twenty
after deducting all reliable assets, and the
past due interest Is nearer eight millions
than five.
AT all events the Comptrolier's last report
shows the debt and past due interest as
small as the facts could possibly warrant, if
not smaller.
Mr.. Pennebaker's last report (Jan. l,
1879 shows that after deducting all assets,
including bonds paid in, and due from solv-
ent railroad companies and outstanding
revenue due the State, the net balance of
State debt is nearly twenty-one millions.
or this sum there are over five millions, in
Guiding past due interest, treasury warrants
and Tennessee money not bearing interest.
Besides the bonds endorsed for, or loaned
to solvent railroad companies, and for the
payment of which the State is bound, there
are, according to said report, Sic, AIS, 5l2 Of
bonds.
The annual interest on this sum is. 1926, ITO 90
The expenses of the State Govern
ment for 1872 were 1854 1898, and for
this year win probably be........ $4,000 90
The State school tax (six per cent
on 81, 512, 000) will be....-.......... 150,720 90
Add for incidentals. ................ 4,17O 90
Total amount to be raised annual
ly exclusive OF sinking fundl. 81, 750, 900 90
From taxes on privileges We will pro-
DaDly get'.....'.. 4OO,UOo W
TAavipo a balance IF Ii n0n m
to be raised ty taxes upon property. It is
thought that the taxable property of the
Sta;e under the new assessment laws will
reach $300,0O0,O00. If it reaches this sum,
and could all be collected, the al UGlorem
tax on property would be about forty -fve
cents on the 500. But it will be safe to
estimate that the losses by insolvepcies,
tax sales, defaulting officers, and for fees for
collecting the taxes, will reduce the sum
realized sufficiently to mike it necessary to
put the tax at sixty cents on the 500, and
the taxable property may fall below $780,
100000.
Add to this the county school tax ard
other taxes levied by the counties which
will be at least forty cents on each 500,
we will then have an GduaLorem tax, on
property, of one dollar on the 800. This
Is certainly heavy tax, and it will not
grow lighter hereafter, unless We provide a
sinking fund and begin to reduce the prin-
cipal of our debt.
If we pass this bill, we undertake to pay
six per cent. interest on about $5,2S6, 654
more, which viii add to the amount to be
raised, annually, the sum of S317, 199,
making our annual interest altogether ST.
242, 300, anil increasing the advalorem tax
at least twelve cents on the 500 of prop
erty. 1t is proposed to pay the sum of
$3l7,199 not for one or two years, but for
forty years! Will not our creditors see
that we are recklessly increasing our debt?
Will they not see that we have added to
the annual burdens Of the people the large
sum of S317, 1889? If the past due interest
is funded, the taxes will be so high that
we could not levy an additional tax to
raise sinking fund. TIE people could
not stand it. They would certainly elect a
General Assembly at the next election who
would repeal the law and reduce their
taxes regardless of consequences. Bond
holders understand this perfectly.
Business men have no confidence in a
| debtor who is so lavish with his promises.
If debtor were to propose 10 compute the
past due interest on his note and give new
note, bearing interest for the interest, his
creditors would at once conclude that he
never intended to pay. For two reasons,
| 10 roolzioe. NJ, - L.