Los Angeles herald., 1892-10-15
THE REFUNDING ACT.

An Opinion the Matter From the
State Treasurer.
The following is the material portion
# communication addressed to the
HERALD by the state treasurer:
EDITORS HERALD: l have been asked
by many citizens to say what 1 think of
the refunding act of 1891. to be voted
upon by the people at the election No
vember s, 1892, and whether am in
favor of it's adoption. take this means
of replying to all inquirers. The act of
March 81, 1891, to be submitted to the
people at the coming election, is almost
an exact copy of the act of April 2,
1870, under which our present debt was
funded. and so far as know has worked
satisfactorily. By the act of 1870 the
interest authorized to be paid was per
cent; under the act of 1891, if voted by
the people, the interest will be reduced
to per cent, making thereby saving
OF per cent per annum to the state.
say saving, but the saving is per-
haps more apparent than real, for the
following reasons: The present bonds
of the state are held as follows:
State school fund. d...................$1 526 500
State university. y...................... 75l 900
Total to be refunded ...........$2.5 .52s.b 500
Now bear in mind that the public
| schools and the university are supported
| entirely by direct tax on the property
| in the state, less the revenues derived
| from the funds invested in bonds of this
state, and county bonds, which fund was
obtained by the sale of lands donated by
congress to this state for the support Of
these schools.
1t will be seen that $2,277 800 of the
state debt is held by these schools, and
that the schools are drawing 6 per cent
on their investment. If the vote of the
people be favorable for the refunding
act the schools will have to submit to a
reduction of 2 per cent or take their
money and invest in other securities
making better return. 1t makes not
the slightest difference to the taxpayer
whether he is taxed enough to pay 6
per cent on the bonds held by the COM
mon school fund or per cent for that
purpose and the other per cent to
make up the deficiency caused by the
loss of 2 per cent on their bonds. In
either case the money must be raised by
taxation.
The University fund is somewhat
different. Should the refunding act be
carried, the $751; 900 held by the uni
versity would have to be redeemed,
aa the university is prohibited
by act Of congress from investing
their funds in securities that
bring a less interest than 5
| per cent net. This would entail some
loss upon the university, as it will take
| time to reinvest that amount of money.
| Yet l do not apprehend much difficulty
| in investing their funds in 5 per cent or
their per cent bonds; for instance,
there are plenty of irrigation district
| bonds thai. can be had, bearing 6 per
cent, and the courts hold that they are
| perfectly good.
| The only real saving the state is max
| ing in the refunding act is the 2 per cent
reduction on the $251 900 held by pri-
state bonds held as above stated will be
due and payable on January I'd next.
and therefore there should be provision
made for their payment, and 1 see no
way to do that unless the people vote to
refund the debt.
| 1t would seem to be impossible under
| the act, if adopted. to get up the bonds
and have them sold in time to meet the
debt when due, but it would only be a
few months at most for bondholders to
wait. Should the act not be voted, it
will, it seems to me, complicate matters
very much. Private parties will want
their money, and there will be none to
pay them. I know the legislature could
make an appropriation to pay the bonds
in private hands, and also to pay inter
eat on the remainder, but it seems to me
unwise for the people to reject the act,
when by 80 doing the bond business ol
the state will be left in very unsatis-
factory condition, while by adopting il
the indebtedness OF the state would be
put on a satisfactory and business
basis. j. r. MCDONALD.