The Coconino sun., 1927-02-04
SCANDALS ARE ROCKING
STATES FINANCIAL BOAT
Continued from Page /

| CIlaJ mucn OF Jne money loaned was
borrowed from the public school fund,
which was created by the federal en-
abling act under which Arizona was
admitted to the Union as a "perma-
nent and inviolable" trust fund, and
which accordingly must be reimbursed
| if depleted Senator Favour's bill, in
troduced at the request of Apache
county debtors to the state, specifical-
| ly provides that whatever sum may DC
/ forgiven them shall be reimbursed to
the permanent school fund, out of a
continuing appropriation of $4,000 a
year.
The total of the exemption which
they ask comes to sits, 6,932.78, based
on admitted land frauds best ex-
pressed by the fact that, when fore
closure proceedings were quietly insti-
tuted last August, the attorney ger
erals office found that of S629,672.66
lowed to the permanent school fund.
$372, ,853 was represented by notes and
mortgages executed by individuals of
Denver and only $256,818.55 ~ St.
Johns mortgages.
These individuals of Denver were
the original promoters of what began
as a private speculation and was TAX
en- over by the state when the dam
partially sloughed away during heavy
! August rains in 1915. They admit in
affidavits of record with the sixth
| legislature that they obtained these
mortgages by the use of dummies and
transparent frauds known to the state
| officials then and subsequently IN
! charge The nature of these trans
actions and the fact that most of the
money went outside the state is the
| foundation of the Apache mortgages
/ claim in equity for relief.
/ When the state closed out the Den
yer interest last August by foreclos-
ure it acquired 5000 acres of land
originally appraised at $25 an acre but
mortgaged in three successive loans
for $45 an acre Of this area, 1000
acres will never be better than graz
| ing land, owing to faulty construction
! of the dam and i'll advised engineer
ing. Of the 5000 acres still held in
St. Johns, only about one third were
/ under cultivation at last reports. And
most ironical of all, title to the dam
itself, the keystone of the whole spec
ulation, still vests in the Lyman Wat
! er company, in which the state, it is
not the outright owner.
There is no question that all these
underlying facts, every one of which
is matter of public record in one
/ department or another of the state
! government, must all be aired in the
legislature if the Favour bill is to re-
ceive the conscientious scrutiny which
its introducer says the present situa-
tion demands.
In all, three Lyman dam loans were
made, each taking up its predecessor,
for a total of $2,022,588.66. The $780,
600 now owing in round numbers rem
resents the settings of the whole boil
ing. Two of the loans were made in
Governor Campbell's administration,
but the taking over of the project and
the first of the confessed land frauds
perpetrated had its origin in the pre-
ceeding term of Governor Hunt. The
I net result of the imbroglio has been
virtual paralysis of the permanent
school fund.
Yet as early as March %, 1917, At
torney General Wiley n. Jones, in an
opinion to Governor Hunt and his
loan board, wrote as follows:
sMost certainly the moneys of the
permanent school fund received from
the sale of lands are directed by the
enabling act, the state constitution
and the public land code to be invest
ed in SAFE INTEREST BEARING
securities. It was intended by the en-
abling act and the state constitution
that the annual proceeds from the
loan Of such funds should be used for
the support of the state schools and
that the benefit of the schools could
only be realized by loaning such fund.
The entire troubled realm of state
finances is brought under sharp scrut-
iny in another resolution introduced
by Senator Kinney of Gila. He asks
the senate judiciary committee to as
certain what legal meaning and sig
nificance, if any" attach to the con-
stitutional prohibition against more
than $350,000 of state debt at any
one time; whether debts owed in ex-
cess of that sum are legally collectablc
or worthless and void; and finally, as
to the legal responsibility of those
! who incurred them.
One of the keenest cutting edges in
this bundle of blades has been honed
on the highway deficit. It existed,
admittedly, prior to issuance of the
registered warrants now outstanding
which also are a state obligation. II
all the highway debt above S350,O00
should be held void, what becomes of
the registered warrants? Doubt of
the answer is what led to the banking
opinion Of the eminent attorney al
ready referred to.
/ Compared to the gravity of these
questions, the university muddle sinks
| to the rating of personal squabble.
In the house, a resolution proposed by
the solid Cochise delegation peremp-
torily instructing the governor to dis
miss all the holdover members of the
board of regents missed adoption by
only two votes 1t was deliberate
/ invasion Of executive preserves and
an intentional affront, but it almost
carried. Immediately afterward, how
ever, another resolution by Lynch Of
Greenlee and Abel of Cochise was
adopted 40 to II. asking for the ap-
pointment Of a joint legislative COM
mittee to investigate the administrat
i've and financial affairs of the uniyer-
sity and report back within two weeks.
At this writing, the senate has not yet
acted.