Page images

principal, which provision is sometimes made irrepealable.3 Maryland' ordains that

no debt shall be hereafter contracted by the General Assembly unless such debt be authorized by a law providing for the collection of an annual tax or taxes sufficient to pay the interest on such debt as it falls due, and also to discharge the principal thereof within fifteen years from the time of contracting the same; and the taxes laid for this purpose shall not be repealed or applied to any other object until the said debt and interest thereon shall be fully discharged.

Colorado' and Nebraska" undertake the precarious task of fixing or limiting the rate of interest to be paid on state obligations. Iowa and Washington' provide that it shall not be less than six per cent. on indebtedness incurred to reimburse school fund losses by default, payable to the fund sustaining the loss. A time limit for redemption is frequently set, varying from fives to seventy-five years. West Virginia' has the unique clause that

payment of any liability other than that for the ordinary expenses of the state shall be equally distributed over a period of at least 20 years.

The constitution submitted to the voters of New York in 1915 contained the provision that

238. Serial Bonds.

all debts contracted by the state after the second day of November, one thousand nine hundred and fifteen, pursuant to an authorization therefor; heretofore or hereafter made and each portion of any such debt from time to time so contracted irrespective of the terms of such authorization, shall be paid in equal annual instalments, the first of which shall be payable not more than one year, and the last of which shall be pay. able not more than fifty years, after such debt or portion thereof shall have been contracted. No such debt hereafter authorized shall be contracted for a period longer than that of the probable life of the work or

se. g., Neb., XII, 1 ; N. Y., VII, 4; 0., XII, 11 ; S. D., XIII, 2.
III, 34.

$XI, 3. Three per cent. payable semi-annually at state treasurer's office or some place in New York City, in case of specific authorization of bonds to fund outstanding state warrants,

IX, 8. Rate op bonds, funding debt and warrants outstanding at time constitution adopted not to exceed 8 per cent. per annum.

VII, 3; IX, 5.
8 Wis., VIII, 6.
Cal., XVI, 3.

object for which the debt is to lie contracted, to be determined by general laws, which determination shall be conclusive.

The requirements for the issuance of bonds falling due serially is considered by financiers a distinct advance over the old method of building up a sinking fund to meet them when, at the date of expiration, the entire issue must be accepted for pay. ment. Obviously the new method is simpler and cheaper.

Constitutional provisions governing the indebtedness of 239. counties and cities and other local subdivisions of the states are

Indebtedness. varied and lengthy but, on the whole, involve nothing essential that has not already been noticed in the limitations on the leg. islatures' power of employing the public credit for state purposes. It is important to bear in mind the legal difference be tween the position of a creditor of the state who can bring suit to enforce his claim only by consent of the states and the creditor of a subdivision which can be haled into court under the same circumstances as can a private individual. The constitutional clauses, furthermore, especially in the case of cities, go into much greater detail and are likely to authorize indebtedness amounting to a much higher percentage of assessed property valuations; as high, indeed, as fifteen per cent. in at least two commonwealths. 4

Perhaps the most interesting and significant of the purely local provisions is that of Alabama to the effect that private, local or special legislation authorizing the issuance of bonds or other securities is forbidden unless authorized before the enactment of such law by a vote of the qualified electors of the locality in question at an election to be held for the purpose in the manner prescribed by law; though the legislature, without such an election, may pass special laws to refund bonds issued before the ratification of the constitution. Furthermore, the legislature may pass general laws authorizing counties to issue

2IX, 4, certain exceptions. See N. Y., VII.

3Suits against the state are authorized by nearly half the constitutions-
e. g., La., 192; 0., I. 16. Modern opinion generally frowns upon the practice
of the state's hiding behind its sovereignty to avoid its obligations. II. (IV, 26).
however, and a few other states expressly forbid suits against themselves. A ver-
dict against the state, where suits are allowed, usually results in an appropria-
tion to pay the debt.

Neb., XII, 2; S. D., XIII, 4.
SIV, 104; XII, 222.

240. General Considerations.

bonds; but there must also be held a vote of the qualified electors upon each proposition. This provision does not apply to the renewal, refunding or reissuing of bonds lawfully issued or authorized before the adoption of the constitution, nor does it apply to obligations incurred or bonds issued to pay for street and sidewalk improvements or sanitary or stormwater sewers, the cost of which is assessed in whole or in part against property abutting said improvements or drained by such sewers.

Regarding the whole question of the use of the public credit, the agreed wisdom of commentators seems to indicate that a citizen may sensibly look upon its use in the state's life just as he looks upon his own credit in his own business. There is nothing inherently good or bad in public indebtedness. So long as it is used for constructive purposes and kept within reasonable bounds, it is justifiable; when used for current expenses or to meet obligations for the purchase of goods that quickly perish, it is clearly vicious. The time limit for the payment of the debt should never be beyond the life of the thing for which it was incurred nor beyond the continuance of the generation of citizens whose desires prompted its purchase. Every law permitting a debt should, it is needless to say, provide also for the payment of the debt, by taxation or otherwise. Where the proceeds of borrowing are used to establish public utilities that will yield a profit, the amount of the bond issue may well be excepted from the limited amount for general purposes based upon the locality's assessed valuation.

There are in addition some considerations in relation to public debts that do not apply to the debts of individuals. Every effort should be made to keep the public bonds in the hands of citizens rather than to sell them to foreign investors; likewise to sell them to as many individual citizens as possible. The former will prevent the taxation of the citizens of a community to support the citizens of another locality or state. The latter will check the growth of a bond-holding class at home. The issuance of bonds in disregard of these precepts may result in an unhealthy distribution of wealth.

6 Ernest Cawcroft, then Deputy State Treasurer of New York, in his article on Eristing Constitutional Limitations on Sound State Fiscal Policy (V, Proceedings of the Academy of Political Science, 241) treats interestingly some of the questions raised in this chapter.

TENNESSEE Nore.—The use of public credit in Tennessee has played a very considerable part in the state's political history. The constitution, however, contains no provision upon the subject of state indebtedness save that the credit of the state shall not be extended to or in aid of private persons, corporations or municipalities, and that state bonds shall not be issued to railroads which have defaulted in interest payments upon previously owned bonds or have disposed of them for less than par. The credit of cities and counties can be extended to or in aid of private parties only after an election in which the assent of threefourths of the qualitied voters is obtained. The administration of the state debt is the function of the state funding board, composed of the governor, secretary of state, ceniptroller and treasurer.'




SELF-PRESERVATION is doubtless the first instinct of human

Introductory. ity, but human beings, both in their individual affairs and in the conduct of their common business through their governmental agents, have in practice made use of this instinct chiefly to resist the more overt and apparent dangers that have threatened their lives and property. Often they have entirely neg. lected those subtler and more insidious enemies that lurk in hidden places and bring death and destruction before they are suspected, much less understood. Individuals and states have from the beginning of time been on guard against war and violence. Only in very modern times have they systematically sought to shield human life from disease and natural resources from wanton destruction. Only in our own day has hopeful

7See Scott, op. cit., pp. 131, seq., Caldwell. ('onstitutional History of Tennessce, pp. 241. seq.

$11, 31, 33. These provisions are the natural result of unfortunate experience. II, 29.

See Acts of 1915, ch. 38. 67.

1General References: Commons and Andrews, Principles of Labor Legislation; Goodnow. F. J., Social Reform amid the constitution : Clark, L. D. The Law of the Employment of Labor; Eastman, Crystal, Work-iccidents and the Laur (Pittsburg Survey, Russell Sage Foundation) : Orth, S. P., Readings on the Relation of Gorernment to Property and Country ; Soager. II. R., Social Insur. 14); American Labor Legislation Rerieir: Monthly Rerior, issued by the l'. S. Bureau of Labor Statistics : Report of Industrial Relations Commission ili S.). 1915; Van Hise, C. R., The consertation of Natural Resources in the United States.

effort been put forth to rid society of the twin evils of poverty and crime.

The status of health laws has become fixed in American jurisprudence and their necessity is no longer disputed. Constitution-makers of the present, however, have thoroughly to consider the proposals that are being made to prevent the sacrifice of human life and vitality by the alleged mal-adjustments of present-day industrial organization. They may well consider, also, ways to preserve, as the common property of all, those natural resources—especially mines and forests—the quantity of which is distinctly limited and which are peculiarly in peril from the rapacity of individuals who think in terms of their own limited lives and not in terms of the perpetual life of society.

"We cannot,” President Roosevelt once said, addressing a conservation conference,

when the nation becomes fully civilized and very rich, continue to be civilized and rich unless the nation shows more foresight than we are showing at this moment as a nation.

He was seeking to stop the waste of the natural resources of the country, but his prophesy has even more weight when applied to what some writers call the country's human resources. If the people desire the life of the states and nation and the prosperity which is essential to their highest vitality and civilization to continue forever, they must take far-sighted steps to prevent the impairment of their own personal powers as well as the destruction of mines and forests and the soil and the streams. Needless to say the former is incomparably the more important, but the importance to human progress of adequate natural resources can scarcely be overestimated. The states and the nation have already begun to show activity toward the conservation of both.

From the numerous special phases of the question that might be discussed, those of labor legislation and the correct use of timber, mineral and water power resources are selected for treatment here. Their mention in the state constitutions is rather infrequent.

2 Proceedings of Conference of Governors, 1908, 3 (4).

« PreviousContinue »