The Columbian. [volume] (Bloomsburg, Pa.) 1866-1910, 1898-11-03
planation of what is proposed UNDER


this resolution.
The states fiscal year begins Dec. l.
The last two fiscal years are designated
1856 and 1887 and 1887 and 1888 In those
years the state lost nearly a quarter of
million dollars by the emismanagement
of the sinking fund under the then
commissioners. l propose to show how
this was done.
In 1888 the legislature enacted a law
giving, in terms, to the sinking fund
commissioners the power to invest the
surplus cash in United States bonds;
and this act was passed, as is shown
IN its face, for the purpose of allowing
the commissioners to purchase these
bonds when the best interest of the
state could be served in this way, rath-
er than in the purchase at a high pre-
MUM of the states own loans, so that
when the commissioners find that the
states own loans are held at an exorbi-
tant premium the commissioners could
buy United States bonds, if they could
realize larger rate of interest on the
states money. This is a premise on
which this whole argument is based.
How the commissioners have lost
money amounting to nearly One-fourth
of million in the two fiscal years
spoken of has been in three ways:
First. BY the sale of United States
bonds already held by the state to pur-
chase state bonds at an enormous pre-
MUM.
Second. BY the purchase of state
bonds at an enormous premium when
a large profit could have been realized
by the purchase of United States bonds
instead of state bonds.
tpI Ip,. Fn;I,
funds in United States bonds, which
would have borne interest for the state,
when 1t could have been DONE and left
large cash balances still in the fund
for all necessary future transactions.
/ invite your attention now to the
following publication. which you have
received, entitled "Mismanaged state
bonds
MIsMANAGED STATE FUNDS.
An Examination of the Sinking Fund
for the Past Two Years. How the
Commonwealth Has Lost a Quarter of
Million Dollars.
Stop the Flow Into the Sinking Fund
Treasury and Invest Its Enormous
Cash Surplus.
Harrisburg. Pa. March 81. 1889.
The reports of the state sinking fund
commissioners operations for the
fiscal wears 1886 and 1887 and 1887
and 1888, including transactions
from Dec. l, 1886. to Dec. /,
1888. have been made to the legis-
lature. Let the public look at the re-
suits. The operations for these two
years have entailed a loss of about a
Ctto NJ nf
accumulation in the fund of a cash ball
ance of two million three hun
dred and sixty-eight thousand. three
hundred and forty-three dollars and
seventy-three cents, which the commits
sioners are at a loss to know what to
do with. The most curious and inde-
fensible operation of the sinking fund
commission for those two years was the
sale in the early part of the fiscal
years 1887 and 1888 Of 81, 1000, 900 of United
states per cent government bonds
at one hundred and twenty four and
seven-tenths.
This was done with an already cash
balance of nearly $1,000. 900 in the sink
Ing fund treasury. What could have
been the motive for this transaction,
which Is astonishing in whatever light
II Is viewed? 1t is inconceivabe that
the sinking fund commissioners inag-
Inc that United States per cents would
fall to one hundred and eighteen in
1882, when these bonds would have been
needed to redeem the outstanding 5
per cent loan. Yet If these bonds were
sold to meet a declining market, the
fall must have been so great as to reach
one hundred and sixteen in 1892 before
the state could possibly have suffered
any loss for the very simple reason
that these bonds would have drawn
II cents on the dollar (par value) in in
terest between the time of their sale
and February, 1892, when they would
have been needed to meet the outstand-
ing per cent loan. That they were
not sold for the purpose of purchasing
outstanding state bonds is shown from
the fact that without the proceeds of
these bonds and after having purchased
$685. 900. par. our state SIS, and having
met all obligations of the sinking fund
for the year, there would have been
left at the end of the fiscal year in the
treasury over a million dollars in cash.
Even IL 1t had been necessary to have
disposed of these bonds to purchase
state bonds at the price paid by the
state in that year. 1t will be shown
later on that this would have been n
losing transaction, unless the United
States per cents had declined to be-
low one hundred and sixteen in 1892,
result which is almost an utter finan-
.!al impossbilty.
In considering the operations of the
sinking fund commissioners it may be
assumed upon the authority OF one of
the best financial officers in Pennsylva-
mia that not even a financial panic,
such as occurred after the failure of
j. Cooke in 1873. would put per cent
government bonds below one hundred
and twenty at any time between now
and February, 1892. The estimate of
losses sustained by the state in the
sinking fund operations for the last two
years has therefore been based safely
upon a hypothesis that per cent bonds
will be at one hundred and twenty or
over In February 1892; but along with
this calculation Is carried another call
culation showing a total loss of over
100000, even should the United
States per cent go to one hundred and
rt. t.,