The Sauk Centre herald. (Sauk Centre, Stearns County, Minn.) 1886-current, 1932-05-19
PUBLIC FUNDS ARE
A SACRED TRUST
Attempts Often Made to Use
Them to Advance Polite
al Ambitions
OFFICERS ARE VIGILANT
Loans to Rural Credit Board
Have Been Expensive,
Treas. Schmahl Says

Guarding the public funds
against raids by men who seek to
use these funds to advance their
political ambitions is one of the
most important duties of state
officials, Julius Schmahl, state
treasurer and member of the state
investment board, declared recent
ly in tracing the growth of public
school trust funds.
The public trust funds have been
derived from the lands granted
Minnesota by Congress and today
the permanent school fund derived
from these ands is nearly $780,
100000, the Swamp land fund So
100000 and the University fund
$5,0OO,O0O.
"It can now be safely stated that
even if no further iron is discov-
cred on state lands the royalties
yet to be received from the iron
taken from mines belonging to
these funds will ultimately in
crease the funds to 100000, 000,"
Mr.. Schmahl said.
Naturally wealth possessed by
a state in it's guardian capacity
must attract the attention of men
seeking political ambitions. At the
outset money realized from the
public lands could only be invest
ed in U. S. bonds. Later invest
ments were permitted 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, provided
for the investment in all bonds of
the political subdivisions of Mime
sofa, under certain restrictions.
Following the economic depres-
sion growing out of the world war,
a constitutional amendment was
adopted, authorizing the legisla-
ture to provide for farm loans to
the extent of $70,000,000 and
authorizing the issuance of bonds
of the state, with Minnesota's full
faith and credit as pledge for
the payment of the same. It also
permitted the state investment
board to buy these bonds"
Mr.. Schmahl pointed out that in
South Dakota, where a similar
rural credit experiment was tried
from 1917 to 1924, the state will
take a loss of S24,O00,00O and the
tax rate must be raised in order
to make up this amount.
From 1917 to 1924, South Dakota
issued a total of $42,00O,OOO in
bonds. No bonds, except refunding
bonds have been issued since 1924.
The board made 10000 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
several years ago. A tax levy was
authorized to raise 100000 per
wear, but since it has been increas-
ed to $1,5OO,000 per year to cover
the loss. The South Dakota Rural
Credit Commissioner recently restl-
mated that the total loss to the
state will be about $24,OOO,OOO and
the tax must continue until all the
losses have been paid"
Minnesota seems headed for the
same experience in the rural credit
field, Mr.. Schmahl indicated.
"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
S25 600, 900. Our full faith and
credit must be maintained. The in
terest 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 confronting we taxpayers
of Minnesota.
"Of the Minnesota bonded in
debtedness of 99,500,000 today,
S61, SIS, OoO is represented by rural
credit board loans, the school, uni
versity, and swamp land trust
funds hold $2s,615,000 of these
bonds, the state investment board
having made these loans at time
when it was impossible to sell
rural credit bonds with coupon
rate of 4-1-4% or less. There has
already been spread on the rolls
as a tax against the people of this
state $615,O as a result of default
in interest on this account, Mr..
.Schmahl reported.
With this picture before us, the
majority members of the invest
ment board feel that until the 1888
legislature meets and passes on
the financial ENHANCEMENT brought
about thru the investment of pub
lie money by the rural credit board