The record-union. [volume] (Sacramento, Calif.) 1891-1903, 1892-10-11
THE REFUNDING ACT.
Proposition to be Voted Upon in No
yember Next.
Secretary of State Waite Points Out
Why He Thinks it Should be
Defeated.

Secretary of State Waite has called the
attention of the press of the State to the
very important proposition to be voted
upon at the approaching election i'll re-
gard to refunding the State debt. The
Secretary says his pamphlet is not issued
to be copied into newspapers, but that he
wishes the press to examine the subject
and instruct the public. His statement
of the case, however, is so concise and to
the point that we publish it just as we
find it, as follows:
1t is of considerable importance to the State
and its schools that the proposition to refund
the debt OF the state Should be well under
STOOD by all voters, who are to approve or
condemn the measure at the November cleo
ton.
The debt of California amounts, all told, 10
50, 52S, 500, divided as follows:
University fund ........... S751. 900
Common school fund $40, 500
Bonds In private handS.,................ PSI, 900
,528, 800
The whole debt falls due, by the terms Of the
law of April 2, 1870. on January ., 1898.
The Legislature of ! SCI passed IAN Act for
the payment Of the funded Indebtedness Of the
state OF California, and to contract a funded
Indebtedness for the purpose, which was APP
proved by the Governor March 81, 1891.
The full text OF the Act is found in the pam
phlet ! have issued and circulated in large
numbers, containing the election laws of the
State and proposed amendments to the Con-
stitution, and every proposition on which the
people Will be called on to.yote at the coming
election.
The Refunding Act claims for one of its OBJ
iects the lessening of the burdens OF taxation.
The Act provides that if 1t becomes law by
the vote OF the people it shall be irrepealable
Tor twenty years. 1t provides that the bonds
on which the State is now paying interest at
the rate of per cent. per annum may be sur
rendered and exchanged for new bonds bear
ing but per cent. per annum, but at any rate
the debt in its full volume shall be continued
with an interest thereon of 4 per cent. The
law also makes provision for the extinguish-
ment of the entire debt in twenty years, in in
stallmentS of $4,000 each. after advertise
ments in Sacramento and San Francisco for
each installment.
Now, if the debt were OF the ordinary kind
this Act would, perhaps, not call for criticism.
But it will be seen that the State practically
owes most of the debt to herself The whole
sum owed TO outsiders is but 81 al 900, which
needs to be eXtinguished or refunded. The
State Treasury has now in ii 100000. The
bonds in private HANDS should be paid OFF out
of the surplus in the treasury, and not re-
funded at all. 1t cannot be claimed as good
financial sense to pay interest at even per
cent, when 1T can be stopped at once by using
surplus in the treasury TO pay the principal.
II VIII not embarrass the finances of the State
in the slightest degree 10 extinguish this part
OF the deDt when it falls due, but will be saw
ing to the State or an act of economy.
The balance OF the debt belongs as / have
said, to the common school and State Uni
versity funds. 1t is well known that the
schools OF the State get no more support than
they ought. II the Old six per cent. bonds are
exchanged for four per cents, the State will be
obliged TO make up the other two per cent. by
direct taxation, which is no gain to the peo-
pie at all. The interest money now paid on
these bonds is paid by the people to them
selves. 1t is like taking money from one
pocket and putting it in another. SO long as
the common schools must be supported, the
simpler the means and the less laws on the
subject, the better. There is no simpler mode
than that of paying interest on the bonds al
ready existing. 1t avoids the numerous items
OF expense OF engraving new bonds and ad-
vertising, to say nothing of other laws and
other costs OF raising a balance by direct taxa
ton 10 support the schools.
In regard to the bonds belonging to the State
University, the last Legislature seems to have
been Ignorant of the fact that the old six per
cents. cannot be exchanged tor four per cents
because, by the Act OF Congress providing for
the splendid endowment of the institution
the Regents are prohibited from investing
the funds in any manner unless the income
therefrom Shall net five per cent and the
State, in accepting the trust from Congress.
has bound Itself to make good any deficiency
But there Will be no deficiency in this case be-
cause the Regents OF the University will not
accept new bonds, and the State must furnish
the coin for all the University bonds when
they fall due.
By the Act of Congress of July Q. 1862.
there were granted 10 the State 10000 acres
OF land for each Senator and Representative
" luIIllSll an GllUOWIlSDG 1Of q State lJniVnr-
Sity. The Act provided that all EXPENSES in
locating the land, ETC.. should be paid by the
state, 50 that the entire proceeds of the sales
Of the lands should be saved for educational
purposes. 1t provided that all moneys de-
rived from the sales of the lands granted
should be invested in safe securities Welding
not less IMAM nve per cent. per annum. It
provided that II any portion of the money or
the interest thereon, shall, by action or con-
tlngency, be diminished or lost, il shall be re-
placed by the state, SO that the capital fund
md f,r~Tl ,or
ylded that no part OF the fund could be used
for material purposes except ten per cent
winch might be expended in the purchase of
land Tor experimental farms.
BY an amendment, enacted March 3, 1883,
the privilege was given the State of INTESTINE
the University funds in other than State
stocks after the assent of the legislature hnt
the condition was retained that the invest
ment must yield not less than five per cent,
per annum.
Pursuant to tie law of Congress, and Artf-
Gle *, Section of the State Constitution. the
Legislature proceeded to lass an Act to create
AND organize the University of California
The section of the Constitution before men,
toned makes the University a public trust
and binds the State to make good any loss To
the institution through neglect, misappropri-
alton or other contingency, the State 10 re-
place any losses, so that every dollar given nv
the National Government shall be secured
forever for the purposes for which it was
given.
AS an indication of what NAV be done nv
the legislature, should the people vote down
the heipnQlng Act, the law Of March /, 1881
Is cited: Moneys belonging to the Endow
ment Fund of the State University to the
amount of SO, 700, had been used for State
purposes. The Legislature appropriated. to
be paid annually, the sum OF SASS. the
same being the interest, at six per cent on the
amount withheld from the University Fund.
WHAT was done in this case, can be followed
by the next Legislature, in regard to the in
terest accruing on the Old University bonds
and the bonds properly belong to the Common
School Fund, as well. An Act appropriating
money to pay the interest annually on all Of
the debt Of the State, virtually due to herself.
il is presumed, would be satisfactory to all
parties interested.
Ii ought TO be plain TO every one that there
should be no enforcement of the State nom
her schools. The more intimate the colnec-
ton the better. This proposed Act has the
tendency of alienation. There is no gain to
the people In it. 1t does not reduce the bur
the people whether they pay 6 per cent. inter
est to the school fund or 4 per cent and .