Evening star., 1927-09-18
INDEBTED STATES
! TO GET j. S. FUNDS
McCarI Reverses Ruling
Which Withheld Federal
/. Money in Three Instances.

Controller General McCarl's ruling
will be held up in the Treasury to pay
off ancient debts owed by those States
to the Federal Government, was re-
yersed yesterday.
In a letter to Secretary Of Labor
Davis, made public at the Labor De-
partment, Mr. McCarl decided that ap-
preparations to the States of Montana.
Tennessee and Louisiana under the
maternity act. would be paid regard
less of the fact that those States owed
money to the Treasury.
The decision was considered by
Labor Department officials to set a
precedent, since the controller gen
erals original ruling, had it stood.
would have hampered the work of the
Forest Service the Board for Voca-
tional Education and the Bureau of
Public Roads, as well as the maternity
act. All of these operate with in
dividual States by duplicating State
appropriations with Federal funds.
w. w. Husband. Second Assistant
Secretary of Labor. commenting upon
the change in the controller generals
ruling, characterized it as a clear-cut
reverse, which left no doubt regard
ing all such appropriations in the
future.
Funds Formerly Refused.
The original trouble began on June
81. when Mr.. McCarl notified the
Labor Department that a sum of
$4,000 to be paid the State of Montana
for child welfare and maternity pro-
motion under the maternity yNact had
been deposited in the Treasury against
ha indebtedness of hot 70
tana owes the Treasury a total of
$ii.41S.66 for fire prevention work of
the Department of Agriculture in the
years 1919. 1920 and 1927, since Mon
tana has an arrangement with the
Forest Service to protect her public
lands at a certain cost per year.
Again on July 81, Mr.. McCarl noti-
fed the Labor Department that an
appropriation of $500 to the State
OF Louisiana under the maternity act
had been held up and deposited in the
Treasury. Louisiana owes the Treas
ury $4,000 as a part of the Indian
trust fund, which the Federal Gov
ernment invested in State bonds be-
tween 1897 and 1856. At that time
considerable sums of money were due
to Indian tribes for lands, which they
sold to the United States in the East,
and these funds were reinveSted by
the Treasury, on behalf of the Indians,
in stocks and bonds. During the
Civil War, however, the State bonds
of Louisiana, as we'll as the other
Southern States, became valueless, and
the Treasury has never been able to
collect.
Finally an appropriation of $4,000
to the State of Tennessee under the
maternity act was turned over to the
n nv1lyy -
66 2-3. which that State owes the
United States also for pre-Civil War
Indian bonds.
The controller general cited as his
authority for Withholding these funds.
section 34S1 of the revised statutes:
whenever any State is in default
In the payment of interest or principle
on investments in stocks or bonds is
sued or guaranteed by such State, and
held by the United States in trust, the
Secretary of the Treasury shall retain
the whole, or SO much thereof as may
be necessary, of any moneys due on
any account from the United States to
such State, and apply the same to the
payment Of such principal and interest.
or either, or to the reimbursement.
with interest thereon, of moneys ad-
vanced by the United States on ac-
count of interest. due on such stocks
or bonds"
Congress Act Cited.
In asking for a reconsideration of
the controller generals ruling, Albert
E. Reitzel, acting solicitor of the Labor
Department, cited the act of Congress
OF August 5. 1861 specifying that no
part of the money collected from in.
dividuals and to be paid in trust as
aforesaid shall be retained by the
United States as a set-off against any
Indebtedness alleged to exist against
the State, territory or District of Gil.
umbia, in which such tax was col
lected.'
He also pointed out that the pay-
ment of money under the maternity
act was to be applied to a specific
purpose and was not to be paid to a
State Internationally.