The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1885-06-09
THE STATE UNIVERSITY ENJOYMENT.
The Attorney General Says the Fund Can
Be Used Under Certain Conditions.

The discovery that the State has no authority
to borrow from the State University permanent
endowment fund. new amounting TO about
$60, 900, the effect of which will be to deprive the
university from receiving any interest on the
money and the benefits for which the fund was
created, has excited much interest among the
friends of tire institution, and Attorney general
Hord has received many inquiries for his opin
ion regarding the matter. In order to roach an
explicit understanding of the questions involved.
state Auditor Rice addressed a letter to the
Attorney general. asking his opinion upon the
several points at issue. The Attorney general
yesterday gave written answers to these ques-
tons. follows:
Question-Under the provisions of an act en-
titled IAN act TO provide for the permanent en-
dowment of Indiana University and for the in
vestment of the same. approved March B. 1883, !"
can the State issue bonds for any part OF said
loan for the purpose of paving the interest on the
States Indebtedness or any part thereof or shall
said money only be borrowed for the payment of
the interest hearing indentednesSf
Answer-It is my opinion that said permanent
endowment fund may be lawfully applied in the
payment and cancellation of the interest bearing
Indebtedness which may be due. or which, 10y the
terms of the contract creating such indebted
ness. may be paid off when the use OF such fund
is necessary and required bv the State. Interest
bearing indebtedness of the State, within the
meaning of said statute. is an affirmative prom
Use OF the State to pay money ON which interest
may accrue. Interest does not ordinarily bear
interest and under such circumstances it could
not be properly designated as interest
bearing Indebtedness within the meaning
of said statute to which said fund could
he applied without the payment and cancellation
of the principal of the bond. If, however the
principal OF bond of the State should be paid
with said endowment fund. the accrued in
terest thereon. as Incident thereto, could also
be paid with said fund, because the bond could
not be paid off and Cancelled as prescribed by the
statute without the payment of the interest
thereon. (Gray vs. the State. " Ind. sos. 579. J
But when bonds are issued by the State of
Indiana, with coupons annexed for the payment
of interest, each coupon after maturity becomes
principal debt entitled to draw interest ana
such coupons at maturity become interest
bearing indebtedness, and the said endowment
fund could lawfully be applied TO the payment
thereof But said endowment fund cannot be so
applied unless there is deficit of neces
sary State funds, and a failure of
other proper and sufficient appropriations
bv the General Assembly therefor. 1t is the
policy of the State to avoid Understanding in
debtedness unless absolutely necessary, and so
long as it possesses adequate funds in the treas
nry to meet said Indebtedness it would not be
proper or lawful to apply said endowment
fund on said Indebtedness and issue interest
bearing bonds therefor Whenever the use of
shall be applied as commanded by said statute,
then it would be lawful to make and execute
the necessary bond therefor, as prescribed by
sections 2 and of said statute
Question--If the State has made provision for
the payment of its appropriations and obliga-
tons. and is in need of money it make a
loan provided IN section six (G)f
Answer-No Under such circumstances do
not think that the said endowment fund could
be borrowed under Sections 2, or of said
statute.
Question-If the general fund becomes ex
hausted and needs money to pay it's appropra
tions and obligations, can the State make loan
| and give bond as provided in rhe said actl
Answer-It would be lawful to apply said
permanent endowment fund TO the payment and
cancellation of the interest bearing Indebtedness
as prescribed by Sections and of said act.
and explained above and TO issue the bonds of
the State therefor. as provided therein, when
said fund shall be so applied. ] do not
think that Section 6 of said act, in itself,
itself confers on the State officers authority TO
borrow said fund for tie payment and discharge
OF appropriations or Indebtedness unaided by
some other statute authorizing a loan. 1t is as
follows: eff at any time hereafter the State
shall need the loan of any part or of all of said
permanent endowment fund, the State shall be
preferred borrower of so much of said fund as
shall not be loaned at the time" This statute
confers on the State a privilege only The eff
feet of 1t is that, in case the General Assembly
shall at any time. by express statute. authorize
loan to be made to the State, the State shall
be Il preferred borrower Of said fund.
No loan can be made to the
State without express authority therefor.
The General Assembly of the State
of Indiana at its session Of 1885 did provide for
loans to the State and the execution of proper
bonds therefor. The State would have been a
preferred borrower of said endowment fund, if it
had elected to take the same at the rate of inter
est prescribed by said statute or it could law
fully procure the money at a lower rate of inter
est from other sources. IT is my opinion that
Section of said statute does not authorize the
State officers to borrow said money and execute
bonds therefor. bat there must be some other
statute directing and authorizing tho loan and
then the State if it elects take said fund.- would
be preferred as a borrower thereof