The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1932-05-06
ScHMAHL HITS
FUNDS LOANS
State Treasurer Claims Farm
Loans are Poor Investment;
Deplete Trust Funds.

DCPkCIG trust r unQS.
Guarding the public funds against
raids by men who seek to use these
funds to advance their political am
billions is one of the most important
duties of state officials, Julius Schmahl,
state treasurer and member of the state
investment board, declared recently in
tracing the growth of public school
trust funds.
The public trust funds have been de-
rived from lands granted Minnesota
by Congress and today the permanent
school fund derived from these lands
is nearly $60.0O0.00O the swamp land
fund 100000, and the University fund
S., 100000.
1T can now be safely stated that even
if no further iron is discovered on
state lands the royalties yet to be re-
ceived from the iron taken from mines
belonging to these funds win ultimately
increase the funds to $500, 100000" Mr..
| Schmahl said.
Naturally wealth possessed by a
state in its guardian capacity must at
tract the attention of men seeking to
advance political ambitions. At the
outset money realized from the public
lands could only be invested in u. s.
bonds. Later investments were per-
mitted in bonds of certain specified
states, and still later in bonds of all
of the states. A further enactment,
after the fund grew much larger, pro-
vided for the investment in all bonds
of the political subdivisions of Mime
sofa, under certain restrictions.
Following the economic depression
growing out of the world war, a con-
stitutional amendment was adopted,
authorizing the legislature to provide
for farm loans to the extent of $70,-
100000 and authorizing the issuance of
bonds of the state, with Minnesota's
full faith and credit as a pledge for
the payment of the same. 1t also per-
mitted the state investment board to
buy these bonds
Mr.. Schmahl pointed out that in
South Dakota, where similar rural
credit experiment was tried from 1917
to 1924, the state will take loss of
! $24,000,000 and the tax rate must be
raised in order to make up this amount.
From 1917 to 1924, South Dakota
issued a total of 81, 000,000 in bonds.
No bonds, except refunding bonds, have
been issued since 1924. The board
made $4,000 loans of about $4,000 each
OF these, only 1000 have been paid off,
1000 are in good standing, 1000 have
been foreclosed, and 1000 are in de-
fault. A huge loss was foreseen sew
eral years ago. A tax levy was author
lied to raise 100000 per year, but
since it has been increased to 81 SOC, 900
per year to cover the loss. The South
Dakota Rural Credit Commissioner re-
Gently estimated that the total loss to
the state will be about 24,0O0, 900, and
the tax must continue until all the
losses have been paid"
The chairman of the Minnesota
rural credit board now admits loss
OF 100000 or more" he said using
South Dakota's experience as a basis.
If the present system is continued, the
loss will be over $25,000,00O. Our full
faith and credit must be maintained.
The interest and principal must be met
when due, and tax levy on all the
farm and other property of the state
real and personal-must be made to
raise the millions as they fall due. It
is dark and gloomy picture confront
ing the taxpayers of Minnesota.
"Of the Minnesota bonded indebted
ness of 500 100000 today, $61 ,615, 900 is
represented by rural credit loans, the
school, the university, and swamp land
trust funds hold $28,615,000 of these
bonds, the state investment board hay
ing made these loans at time when
it was impossible to sell rural credit
bonds with a coupon rate of Az or
less. There has already been spread on
the rolls as tax against the people of
this state $615,000 as a result of default
in interest on this account" Mr..
Schmahl reported
With this picture before us, the
majority members of the investment
board feel that until the 1888 legisla-
ture meets and passes on the financial
ENHANCEMENT brought about through
the investment of public money by the
rural credit board, there should be no
further loan of the money belonging to
school children of Minnesota, and ar
rangements should be made. by taxa
ton or otherwise, to meet bonds ma
turing In 1888 and succeeding years"
he concluded.