The record-union., 1892-10-28
THE REFUNDING ACT.

State Treasurer Mcdonald favors the
Refunding Act and urges its adoption
Mr.. Mcdonald is sincere in his advocacy
and the RECoRD-UNIoN, respecting his
convictions, has given him freedom tc
present his views in these columns
Yesterday he replied to the position O
the RECoRD-UNIoN which opposes the
Refunding Act.
The sum and substance of his argu.
ment is that the State pays per cent
upon the debt bonds; that it is raised as is
other revenue, and therefore comes from
the people as would direct school tax.
Hence, 1t is argued, it makes no differ
ence to the people as to the form of the
sum used to support the schools. If
now, it is urged, the debt is continued, a
precedent will be established that will
cause all school funds to be loaned to the
state at per cent, though the prevailing
rate of interest may be less.
Precedents are of no value in this argu-
ment; what is right and wise is the guide
to true economy, regardless of what has
been. But the error of the argument for
refunding is in treating the sum of the
bonds to the credit of education as a debt.
1t Is no more debt than the saving the
housewife makes for the support of the
household. The sum the school fund
accumulated is the States. If to this we
add annually another sum equal to per
cent. upon it, we are but adding to our
own, not paying to a creditor.
Moreover, we agreed with the Federal
Government that the University fund
should not yield less than per cent. net.
and, IN honor, we cannot repudiate it.
But, the Treasurer argues, if we continue
the so-called debt the enemies of the
schools can each Legislature assail the
educational system Just as easily as if a
tax direct were levied for the support of
the schools. But this is fallacious. for the
people must be consulted as to the di-
version of the fund, as in this instance.
TO secure a change in the system regard
ing the so-called debt.
1t is urged that presently the school and
University funds will amount to s6 O0O :
900, and under the non-refunding policy
the State will be paying per cent. upon
that large sum. But, if for arguments
sake that were conceded. it will be paw
ment by the State to the State. tits in
no sense an outgo that is not counterbaI-
anced by an income.
tits urged further by the Treasurer that
the school funds can be invested in
county and irrigation bonds at a better
rate than 4 per cent. But this does not
affect the question of the policy proposed
ior the sum now represented by the State
bonds. To refund and borrow at 4 per
cent. means the payment of interest to
outsiders-to capitalists loaning the
money. Suppose we adopt refundlng. at
considerable cost issue new bonds, sell
hem and pay what the State owes to the
school funds, and for the accommodation
lay Eastern capitalists per cent. upon
the money so borrowed. and tax our
selves to support the schools for the diff
ference between the per cent. paid to
outsiders and the 6 per cent. paid to our
selves, as at present, how has the State
been profted?
This is the touchstone of the whole
matter. At present the fund, principal.
and interest revolves; under the change.
4 per cent. will go off at a tangent to
creditors now we are our own creditors.
1t is urged that to borrow anew and
put the borrowed sum into the school
pocket, and invest that sum in outside
securities, is a more economic plan than
TO keep the school fund in the school
pocket, and upon it pay for education
percentage, instead of direct tax, suf-
ficient to maintain the schools. It does
not seem to us that the new plan is any
gain, and if no gain, then there is no
reason for change. 1t does appear that
the new plan. by introducing more cogs,
complicates the machinery of the matter.
The Treasurer supposes A to owe on a
note $1,000 to B; but A cannot pay. He
must ask renewal of the note. But
suppose A declines to renew, even at a
lower interest rate, then the conclusion