THE DEBT OF THE STATE OF OHIO FROM
1900 TO 1938, INCLUSIVE
By HENRY F. WALRADT
One method of raising money with which
to make govern-
mental expenditures is to issue bonds or
certificates of indebted-
ness. The record of the State Government
of Ohio during the
twentieth century as to debt may well be
studied in this day when
so many political units too recklessly
meet their present desire
or need for revenue by the easy
expedient of going into debt.
At the beginning of the present century
the debt of the State
Government consisted of the funded or
bonded debt and the irre-
ducible debt. The funded debt, which
originated in 1825, arose
mainly in connection with the
construction of the State's system
of canals. The irreducible debt
originated from the practice by
the State of using, for the expenditures
it desired to make, the
proceeds from the sale of public land
given to the State by Con-
gress for religious and educational
purposes. The amounts thus
used by the State were set up as an
unfunded debt upon which
the State pledged itself to pay six per
cent annual interest. In
an attempt to insure that this debt
should be perpetual, there
was incorporated in the Constitution
adopted in 1851 a provision
that "the principal of all funds arising from the
sale, or other dis-
position of lands, or other property
granted or entrusted to this
state for educational and religious
purposes, shall forever be
preserved inviolate, and undiminished;
and the income arising
therefrom, shall be faithfully applied
to the specific objects of
the original grants, or
appropriations."1 Later the proceeds from
any bequests or gifts made to Ohio
State, Ohio and Miami
universities and turned into the State
treasury also became a
part of the irreducible debt of the
State.
A. The Funded Debt.
The State's outstanding bonds based on
the entire credit of
the State were redeemed in full during
the fiscal year 1903 with
1 Article
VI, Section 1.
(119)
120 OHIO ARCHAEOLOGICAL AND
HISTORICAL QUARTERLY
the exception of $1,655. This was an old
canal debt which ma-
tured in 1849 and upon which no interest
was paid after that
year. The last payment on the principal
of this debt was made
in 1870.2 As these bonds in all
probability will never be pre-
sented for redemption, for practical
purposes the public debt in-
volving the general credit of the State
was entirely paid before
the close of 1903.
There were outstanding, however, on
November 15, 1900,
certificates of indebtedness which were
issued by Ohio State and
Ohio universities. The General Assembly
on April 15, 1892,
passed an act authorizing the Board of
Trustees of Ohio State
University to issue certificates of
indebtedness, not in excess of
$120,000
for the erection of buildings and the
acquisition of
equipment.3 These certificates were issued in
anticipation of the
annual State levies on property for the
support of the university
and were to be entirely paid before July
1, 1897. A similar issue
of $30,000 had been sold by the trustees
under the authority
granted by an act passed May 4, 1891,4 but as these
were all re-
deemed before June 30, 1892, they do not
enter into the picture.
Only $110,000 of certificates were
actually issued of those au-
thorized by the Act of April 15, 1892,
but the Board of Trustees
found it necessary to obtain authority
from the legislature by the
Act of March 13, 1894,5 to refund these.
The refunding cer-
tificates were payable in eleven annual
installments of $10,000,
the first payable June 1, 1895,
and the last on June 1, 1905.
The proceeds from the sale of these
refunding certificates were
used to take up the outstanding
certificates.
Need for additional buildings resulted
in the General As-
sembly, on April 17, 1896,6 authorizing
a further issue of cer-
tificates of indebtedness in
anticipation of the annual State levies
on property in support of the
university. These were not to ex-
ceed in amount $300,000 and were to be
entirely redeemed be-
fore January 1, 1904. Under the
Acts of March 13, 1894, and
April 17, 1896, the indebtedness of Ohio
State University reached
2 Report of the Auditor of the State
of Ohio (Columbus), 1914, 167,
n.
3 89 O. L. 321.
4 88 O. L. 591.
5 91 O. L. 62.
6 92 O. L. 191.
OHIO'S DEBT,
1900-1938 121
a
peak of $380,000 on December 17, 1897, of which $35,000 was
payable
in 1898, $65,000 in each of the years 1899-1903 inclusive,
and
$10,000 in each of the years 1904 and 1905. Because of the
growth
of the university and its increasing need of more instruc-
tors
and equipment, the annual expenditures of the university
increased
to such a degree that this indebtedness could not be met.
All
attempts to. obtain any other form of relief failing, the Board
of
Trustees again requested from the legislature the right to refund
the
debt. On April 23, 1898,7 the General Assembly empowered
the
board to "extend the time and payment of portions of the
present
bonded indebtedness . . . as the same shall become due,
by
issuing other bonds in lieu thereof."
This was to be done
in
such a way that "the amount of principal falling due each
year
shall be $25,000." The act further
provided that the bonds
were
to bear interest not exceeding 4 1/2 per cent, payable semi-
annually,
and were all to be paid before January 1, 1913, out of
the
levies made for the support of the university. The outstand-
ing
indebtedness of the university as a result of this financial
procedure
at the end of the fiscal year (November 15) of the
years
enumerated is shown in the following table.
TABLE
1
OUTSTANDING BONDS (OR CERTIFICATES OF INDEBTED-
NESS)
OF OHIO STATE UNIVERSITY AS OF NOVEMBER
15,
1900-1913, INCLUSIVE
Year Amount Year Amount
1900 $330,000 1907 $155,000
1901 305,000 1908 130,000
1902 280,000 1909 105,000
1903 255,000 1910 80,000
1904 250,000* 1911 55,000
1905 225,000* 1912 30,000
1906 180,000 1913 ......
Source:
Reports of the Board of Trustees of Ohio State University
to
the Governor of Ohio, 1900-1913, inclusive.
*
Includes $30,000 certificates of indebtedness issued December 21, 1903,
and
payable December 15, 1904, but not paid until June 7, 1906. These were
bid
in by the treasurer of the university as an investment for the rents
arising
from the Page estate which had been bequeathed to the university
and
was under litigation.
7 93 O. L. 221.
122 OHIO ARCHAEOLOGICAL AND
HISTORICAL QUARTERLY
Similarly on April 22, 1896, the
General Assembly passed
an act8 authorizing the Board
of Trustees of Ohio University to
issue certificates of indebtedness, not
to exceed $60,000 in
amount, in anticipation of the annual
levies for the support of
the university to be used for the
erection of buildings and im-
provements and for buying equipment.
These certificates were
to be entirely redeemed before January
1, 1904. This act was
followed by another enacted on April 12, 1898,9
authorizing the
Board of Trustees to issue $15,000 of
certificates for the purpose
of redeeming certificates which were
maturing September 1, 1898
and 1899. Of the refunding certificates,
$5,000 were to be re-
deemed in 1904 and $10,000 in 1905.
Still the university faced financial
difficulty in redeeming the
certificates as they fell due. Consequently, the legislature on
April 3, 1900,10 authorized
the issue of certificates of indebted-
ness not to exceed $55,000, the proceeds
to be applied exclusively
to the redemption of certificates
already issued and maturing
$10,000 on September 1 in each of the
years 1900 to 1903 in-
clusive and 1905, and $5,000 on
September 1, 1904. Not less
than $5,000 of these refunding
certificates were to be redeemed
beginning in 1906 and the entire amount
was to be redeemed
before January 1, 1917.
Acting under the authority granted to
them by the Act of
April 3, 1900, the Board of Trustees refunded
the outstanding
certificates as they matured in the
years 1900 to 1903 inclusive.
Beginning in 1904, both the
certificates falling due each year and
the annual interest on the debt were
paid from appropriations
made for the purpose by the General
Assembly from the general
revenue fund of the State. As a result
the outstanding debt of
Ohio University on November 15 of the
years 1900 to 1903
inclusive was $55,000, after which the
debt decreased $5,000 a
year, the last installment maturing on
September 1, 1913.
Although these certificates of
indebtedness on bonds issued
by Ohio State and Ohio universities are
not generally considered
to be a part of Ohio's funded debt, the
fact that they were issued
8 92 O. L. 285.
9 93 O. L. 109.
10 94 O. L. 94.
OHIO'S DEBT, 1900-1938 123
in anticipation of general property
taxes levied by the State in
support of these universities, the acts
authorizing their issue
specifically stipulating that they were
to be paid out of the pro-
ceeds of such levies, and that actually
some of them were re-
deemed by special appropriations from
the general revenue fund
of the State, is sufficient from the
economic point of view to
justify their inclusion as part of the
funded debt of the State.
Thus by 1917 the State Government,
including its agencies,
had completely retired its funded debt.
At this time the United
States entered the first World War;
during the twenties there
was a very rapid increase in the
construction of expensive high-
ways; and then followed the prolonged
depression which caused
a substantial reduction in the revenue
from existing taxes and
forced large increases in public
expenditures to provide for the
unemployed. The State Government's
relative freedom from
debt throughout the entire period,
1900-1938 inclusive, in spite
of these circumstances, is probably due
to a considerable degree
to the provisions in the State
Constitution relative to the incurring
of debt by the State Government. Section
1 of Article VIII em-
powers the State to "contract debts
to supply casual deficits or
failures in revenues, or to meet
expenses not otherwise provided
for; but the aggregate of such debts . .
. shall never exceed seven
hundred and fifty thousand
dollars." Section 2 of Article VIII
provides that "in addition to the
above limited power the state
may contract debts to repel invasion,
suppress insurrection, de-
fend the state in war" and Section
3 of Article VIII stipulates
that "except the debts above
specified, no debt whatever shall here-
after be created by or on behalf of the
state." Section 6 of
Article XII, which was adopted September
3, 1912, added an-
other limitation which reads:
"Except as otherwise provided in
this constitution the state shall never
contract any debt for pur-
poses of internal improvement."
Of course, if there is sufficient
popular support for such a
proposal, it is possible to pass a
constitutional amendment for
the contraction of a debt by the State
for other purposes and be-
yond the seven hundred and fifty
thousand dollar limitation speci-
fied in the Constitution. Such action
was taken on November 8,
124 OHIO ARCHAEOLOGICAL AND
HISTORICAL QUARTERLY
1921,
when the voters adopted an amendment (Section 2a of
Article VIII) which provided for an
issue of bonds not to ex-
ceed $25,000,000 for the purpose of
raising money with which to
pay a State soldiers' bonus to the World
War veterans, or their
heirs, with a rank not higher than
captain in the Army or Marine
Corps or corresponding grade in the
Navy, who at the time they
began service resided in Ohio. The bonds
issued in accordance
with this amendment bore 4 3/4 per cent
interest per annum payable
semiannually and matured in equal
semiannual installments of
$1,250,000,
the
first to be paid on April 1, 1923, and the last on
October 1, 1932.
Another attempt was made in 1931 to pass
an amendment
for the issue of bonds to provide larger
and better facilities for
the criminal and welfare institutions of
the State, but it failed.11
The World War Compensation Bonds were
completely re-
tired by 1932 as planned, but due to the
severe damage suffered
from
a gas explosion on April 14, 1932, by the State Office Build-
ing then under construction, the State
issued $750,000 of certifi-
cates of indebtedness, the limit allowed
by the State Constitution.
These certificates bore 2 1/2 per cent
interest and matured July 15,
1933.
Although they were redeemed when due, the
General As-
sembly, because of the need for
additional funds to meet the cur-
rent operating expenditures, authorized
a new $750,000 issue of
certificates of indebtedness. This
issue, dated July 17, 1933, bear-
ing only 2 1/4 per cent interest, was
due and payable on or before
December 1, 1935.12
In 193513 the General Assembly created
the State Bridge
Commission with authority to acquire and
administer all toll-
bridges within the State or which had
approaches in the State.
The commission purchased the following
bridges for which it
issued over six million dollars of
bonds:
11 Report of the Auditor of the State of Ohio, 1933, 25.
12 Ibid., 24.
13 116 O. L. 456 (Act of June 3, 1935).
OHIO'S DEBT, 1900-1938 125
TABLE 2
BONDS ISSUED
BY THE OHIO BRIDGE COMMISSION AND
OUTSTANDING
ON DECEMBER 31, 1938
Bonds
Purchase
Outstanding
Name of
Bridge Date of Bond
Issue Price Dec. 31,1938
Sandusky Bay April 1, 1936
......... $1,925,000 $1,452,000
Fort Steuben October 1,
1936...... 1,600,000 1,418,000
Pomeroy-Mason October 1, 1936.......
350,000 350,000
East
Liverpool-Chester September 1,
1938.... 2,135,000 2,135,000
Total ......... .......................
$6,010,000 $5,355,000
Source:
Auditor of the State Bridge Commission of Ohio.
The bonds
issued were revenue bonds and it is this fact which
is given by
the Ohio Supreme Court as justification for uphold-
ing the
constitutionality of the issues, although the amount of the
issues
($6,010,000) was in excess of the $750,000 constitutional
limit. This
question was raised in State ex rel. State Bridge
Commission of
Ohio v. Griffith, Secretary of State (136 O. S.
334) and the
court in its opinion stated that "the state has no
claim on the
revenues of this bridge until the bridge revenue
bonds have
been paid" and "there is no obligation whatever to
pay these
bonds except from bridge revenues." Although tech-
nically the
law may not hold these bonds to be a debt of the State,
to the writer
it seems that the spirit of the constitutional limita-
tion was
violated as the bonds were issued by an instrumentality
of the State,
and, on the ground that economically speaking these
bonds are a
debt of the State, they are included in the table show-
ing the
funded debt of the State. It is interesting to note that
the law
authorizing the acquisition of these bridges provides that
as soon as
the bonds issued for the purchase of a given bridge
have been
entirely retired, that bridge shall become a free bridge.
126 OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
TABLE 3
THE FUNDED DEBT OF THE STATE OF OHIO AS OF THE END
OF THE FISCAL YEARS 1900-1938, INCLUSIVE
1900 $
701,665(a) 1904 $300,000 1926 $16,250,000
385,000(b) 1905 265,000 1927 13,750,000
1,086,665 1906 215,000 1928 10,000,000
1907 185,000 1929 7,500,000
1901
451,665(a) 1908 155,000 1930 5,000,000
360,000(b) 1909 125,000 1931 2,500,000
811,665 1910 95,000 1932 750,000
1911 65,000 1933 750,000
1902 201,665(a) 1912 35,000 1934 750,000
335,000(b) 1913-21 None 1935 None
536,665 1922 25,000,000 1936 3,825,000(c)
1923 23,750,000 1937 3,537,000(c)
1903
1,665(a)* 1924 21,250,000 1938 5,355,000(c)
310,000(b) 1925 18,750,000
Sources: Reports of the Auditors of the State of Ohio,
1900-1938,
inclusive.
Reports of the Board of Trustees of Ohio State
University to the
Governor of Ohio, 1900-1913, inclusive.
Reports of the Board of Trustees of Ohio University to
the Governor
of Ohio, 1900-1913, inclusive.
(a) State bonds. *Canal bonds evidently lost or
destroyed.
(b) University
bonds or certificates of indebtedness.
The figures
from 1904 through 1916 are also for these university
bonds or certificates.
(c) Revenue
bonds issued by Ohio Bridge Commission.
OHIO'S
DEBT, 1900-1938 127
B.
The Irreducible Debt.
TABLE
4
THE
IRREDUCIBLE DEBT OF THE STATE OF OHIO AS OF
THE
END OF THE FISCAL YEARS 1900-1938, INCLUSIVE
(Figures
are given to the nearest dollar)
1900
$4,672,810 1910
$5,181,875 1920
$5,376,308 1930
$5,541,063
1901
4,691,448 1911
5,203,033 1921
5,380,117 1931
5,542,063
1902
4,705,155 1912 5,229,850 1922
5,400,406 1932
5,559,793
1903
4,723,539 1913
5,266,291 1923
5,419,150 1933,
5,562,669
1904
4,743,920 1914
5,286,988 1924
5,425,410 1934
5,569,879
1905
4,876,989 1915
5,334,392 1925
5,435,312 1935
5,611,515
1906
4,966,300 1916
5,350,977 1926
5,477,821 1936
5,640,147
1907
5,094,185 1917
5,412,742 1927
5,484,655 1937
5,795,368
1908
5,126,279 1918
5,356,311 1928
5,500,653 1938
6,004,741
1909
5,168,733 1919
5,364,930 1929
5,533,743
Source:
Annual reports of the Auditors of the State of Ohio, 1900-
1938,
inclusive.
In
addition to the amounts as stated above the State holds
$41,024.0514 received from
the sale of saltlands in Delaware,
Jackson,
and Muskingum counties15 under the
authority granted
by an
act of Congress approved on December 28, 1824.16 The
proceeds
of such sale were to be applied for such literary pur-
poses
as the legislature might designate. Under the provisions of
an act
passed by the General Assembly on March 2,
1831,17 the
salt
land fund was allowed to accumulate until January 1, 1835.
After
this date the annual interest on the fund was to be "annually
distributed
to the several counties . . . in proportion to the num-
ber of
white male inhabitants above the age of twenty-one years
. . .
for the support of common schools." In 1839 the interest
which
had accrued on the fund from January 1, 1835, to January,
1839,
was thus distributed to the counties and the interest was
distributed
annually for the next six years. No interest has been
paid
since 1845. The last payment received by the State was in
1849,
but the State auditors continued to carry this fund as part
14
This includes $7,112.14 interest which accrued on the proceeds from the sale
of saltlands
prior to January 1, 1835, and which was added to the principal of the
salt land
fund.
15
Report of Auditor of the State of Ohio,
1933, 437.
16 United States Statutes at
Large (Boston), IV, 79.
17 29
O. L. 423.
128 OHIO ARCHAEOLOGICAL AND
HISTORICAL QUARTERLY
of the irreducible debt through 1870,
after which year it was
dropped.
The State also holds in trust $25,121.09 received from the
sale of 25,640 acres of swamplands in
the northwestern part of
the State,18 chiefly in
Ottawa, Sandusky and Wood counties,
which were granted to the State by an
act of Congress passed on
September 28, 1850.19 The General
Assembly in an act passed
on March 24, 1851,20 provided that
the proceeds from the sale
of the swamplands should be set aside
for the support of
the common schools and the interest
distributed to the several
counties in proportion to the number of
white21 male inhabitants
above the age of twenty-one years. The
first entry under the
heading "Swamp Land Indemnity
Fund" and included as a part
of the irreducible debt of the State was
in the State auditor's
report for 1885 and reads "Received
from United States as in-
demnity for swamp lands"
$21,770.82. By 1898 the principal of
this fund through the sale of swamplands
in six of the interven-
ing years increased to $24,772.09. There
has been only one year
since 1898 in which any of the State's
swampland was sold and
that was in 1905 when $349 was received
for such land. This
increased
the principal to $25,121.09. The State auditors' reports
carried this amount through 1916. Since
that time their annual
reports through 1933 contained a note
telling of the existence of
the salt- and swampland funds. This
reference to the saltland
fund disappeared in the 1934 report, and
beginning with the 1937
report there is no further reference to
the swampland fund.
Although there has never been any
distribution of interest on
this fund, the last statement made as to
the amount of interest
payable was that after January 1, 1915,
there would be $43,326.32
so payable.22 At six per cent simple interest the
total interest
payable after January 1, 1939, had
increased to over $81,000 or
considerably more than three and
one-half times the principal.
The irreducible debt in reality consists
of trust funds held
18 Report of Auditor of the State of
Ohio, 1936, 269.
19 United States Statutes, IX, 519.
20 49 O. L. 40.
21 Word "white" omitted in an
amendment to this act passed March 5, 1883 (80
O. L. 39).
22 Report of the Auditor of the State of Ohio, 1914, 154.
OHIO'S DEBT, 1900-1938 129
by the State. The figures for this debt
as given above23 may be
divided into three main groups: (I) The
Ministerial and School
Funds; (II) Special School Funds; and
(III) University Funds.
I.
The Ministerial and School Trust Funds.
On May 20, 1785, Congress passed an act24 providing for a
rectangular survey of the public domain
and for the sale of public
land. In this act there was a provision
reserving one thirty-sixth
of the public land, namely Lot or
Section 16, for educational pur-
poses.25 Of the land now included in the
State of Ohio, 764,488
acres were thus "earmarked"
for the public schools. In the
Western Reserve, located in northeastern
Ohio north of the forty-
first degree north latitude and
extending west to the eastern
boundary line of Sandusky and Seneca
counties,26 and in the
United States Military District27 the
allotments for the schools
were two and one-half miles square; in
the Virginia Military Dis-
trict28 the school allotments were three
miles square; but in the
case of the land sold to the Ohio
Company in 1787 in the south-
eastern portion of the State,29 and
in 1792
to the group headed
by John Cleves Symmes in the
southwestern portion of the State
in what is now part of Hamilton, Butler,
and Warren counties,
as well as in Congress lands the
allotment for school purposes in
each township was one mile square.
In the case of the Ohio Company's30 and the Symmes'
pur-
chases, Section 29 in each township was set aside for the aid of
religious organizations. These are the
only lands of this kind
in the United States.31 All
denominations with members living
within the original township survey are
entitled to share in the
23 Supra, Table 4, p. 127.
24 Journals of Congress (Philadelphia),
IV, 520.
25 See also United States Statutes, II,
225 (Act of Congress approved March 3,
1803).
26 Included all the land now in
Trumbull, Ashtabula, Lake, Geauga, Cuyahoga,
Medina, Lorain, Huron, and Erie counties
and part of the land in Ottawa, Ashland,
Summit, and Mahoning counties.
27 Comprised of all the land now in
Coshocton and Tuscarawas counties and of
portions of Noble, Guernsey, Muskingum,
Licking, Franklin, Delaware, Marion, Mor-
row, Knox, and Holmes counties.
28 See infra, p.
135.
29 Comprised of portions of Lawrence,
Gallia, Meigs, Athens, Vinton, Hocking,
Morgan, and Washington counties.
30 Contract of the Ohio Company with the
Board of the Treasury quoted in
W. E. Peters' Legal History of Ohio
University (Cincinnati, 1910), 43-8.
31 Report of the Auditor of the State of Ohio, 1931, 374.
130 OHIO ARCHAEOLOGICAL AND
HISTORICAL QUARTERLY
annual income from the ministerial trust
fund in proportion to
the number of members who are at least
fifteen years of age and
who live in the original surveyed
township.
On February 1, 1826, Congress passed an
act32 to permit the
State of Ohio to sell the lands reserved
for the benefit of the
schools provided that the capital sum of
such sales be kept in-
violate and the earnings of this trust
fund be turned over to the
schools in the districts in which the
land thus sold was located.
On February 18, 1830, the Ohio
legislature passed an act33 re-
quiring the State treasurer to place at
the disposal of the com-
missioners of the canal fund the capital
of the common school fund
which consisted of the proceeds from the
sale of school lands, and
these commissioners were authorized to
use the same, as any other
money they obtained through borrowing.
The commissioners
were to be charged six per cent on these
loans. After the com-
pletion of the canals the commissioners
were to use the money
borrowed from the trust fund for the
redemption of the State
debt. As stated above, the debt here
referred to was entirely
paid in 1903.34
Thereafter, all proceeds from the sale
of any ministerial or
school lands were put into the fund out
of which the annual six
per cent interest to the churches and
schools benefiting from
the original grants of land was paid.
Thus this part of the irre-
ducible debt--namely, the ministerial
and school funds--continued
to increase. The constitutionality of
this practice has been ques-
tioned35 and a change in policy was
effected by the Garver Act
of March 20, 1917.
It is clear that Ohio taxpayers of the
twentieth century are
paying six per cent annually, in spite
of the fact that current rates
of interest have been at times and are
at present much lower, be-
cause the State used up most of the
capital originally set aside for
the common schools to pay for the canals
of the State which have
long since outlived their original
usefulness. This policy, how-
ever, has not been detrimental to the
schools since they are re-
32 United States Statutes, IV, 138.
33 28 O. L. 56.
34 See supra, p. 120.
35 Report of the Auditor of the State
of Ohio, 1918, 172, quoting from the annual
report of the Commissioners of the
Sinking Fund.
OHIO'S DEBT, 1900-1938 131
ceiving a perpetual six per cent return
on the debt to them thus
incurred by the State. Throughout the
entire period under dis-
cussion, 1900-1938 inclusive, this has
been a high rate of return
on any good government security.
On February 16, 1914, the General
Assembly passed an act36
which authorized the State auditor to
lease unsold school lands
for oil, gas, coal and other minerals.
Prior to the passage of this
act private individuals were exploiting
solely for their own ad-
vantage the natural resources of the
State on these unsold school
lands.37
The collection and distribution of the
rent from the minis-
terial and school lands as well as their
care had been in the hands
of local trustees since 1806. These
duties were frequently in-
differently performed and many abuses
had crept into the man-
agement of the school land as already
implied. On March 20,
1917,
the General Assembly passed the Garver Act38 which pro-
vided that the State auditor be the
supervisor of all unsold school
and ministerial lands. Since this time
the income from royalties
and from the sale of lands or minerals
has been deposited in
the State treasury and as soon as
possible profitably invested in
bonds. The income from these deposits
and bonds as well as the
income from land under lease is
distributed to the townships en-
titled to such income for the benefit of
the churches and common
schools as already explained.
Thus, from 1918 on, there has been no
increase in the irre-
ducible debt to the ministerial and
school funds upon which the
State continues to pay six per cent
interest, as the annual return
from these lands still held by the State
and the actual interest
received from the deposits or bonds held
by the State as a trust
fund has been distributed to the
respective townships, instead
of being used by the State and the
amount added to the irredu-
cible debt. The State, however,
continues to distribute to these
same beneficiaries six per cent on the
amount of the State's debt
to the ministerial and school fund as it
stood on July 1, 1918.
The principal of the irreducible debt
which resulted from
36 104 O. L. 224.
37 Report of the Auditor of the State of Ohio, 1920, 273.
38 107 O. L. 357.
132 OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
the grants
made from the public domain for the benefit of the
common
schools is carried under four divisions, namely, Section
16, United
States Military District, Virginia Military District,
and Western
Reserve, because of the difference in the size of the
school
allotments in these districts39 as stated above.40
II. Special
School Trust Funds.
These consist
of bequests made by individuals for the bene-
fit of
particular schools. The proceeds were
deposited in the
State
treasury and the amount was added to the irreducible debt.
The State
pays six per cent interest on any such sum which is
turned over
to the particular schools designated by the donor.41
There have
been three such trusts established, but one of these
has
terminated.
TABLE 5
SPECIAL
SCHOOL TRUST FUNDS "HELD" BY THE STATE OF
OHIO AT
VARIOUS TIMES DURING THE PERIOD 1900-1938
INCLUSIVE
Fiscal
Year in Which
Bequest
was Received Amount
of
Name of
Donor by the State Beneficiary Bequest
John
Butler...... 1877 Bloom Township $ 332.50
(subdistrict
No. 4)
--Morgan
County
Blue Rock
Town- 332.50
ship (subdistrict
No.
8)--Muskingum
County
Rex Patterson.... 1911 Mt. Pleasant-Jeffer-
5,012.17
son County
George
Wright... Undetermined. Ap- Pleasant
Township 2,157.42
parently in
1871 or --Marion County
earlier
On May 23,
1933, Judge Lyne of the Common Pleas Court
of Morgan
County rendered a decision that the schools were
39 Report of the Auditor of the State of Ohio, 1918, 170.
40 See supra, p. 129.
41 Ohio General Code, Section 7581.
OHIO'S DEBT, 1900-1938 133
abandoned which had been the
beneficiaries of the Butler will
and that consequently the trust created
by this will was ter-
minated. Therefore, he directed that the
$665 of the Butler Fund
together with any interest due on the
same be distributed to the
heirs of John Butler. This was done in
July, 1933,42 and con-
sequently the amount of the Special
School Funds was reduced
from $7,834.59 at which figure it had
stood from 1911, to
$7,169.50.
III. University Funds.
(a)
Ohio State University. The larger portion of the ir-
reducible debt classified as University
Funds as it stood in 1900
arose from the sale of 630,000 acres of
the public domain which
Ohio received under the Morrill Act of
July 2, 1862.43 This
act provided for the grant of land scrip
to any state in an
amount equal to 30,000 acres for each
senator and representative
it had in Congress provided it would
establish at least one college
"where the leading object shall be,
without excluding other scien-
tific and classical studies, and
including military tactics, to teach
such branches of learning as are related
to agriculture and the
mechanic arts, in such manner as the
Legislatures of the States
may respectively prescribe." As Ohio had twenty-one senators
and representatives, its quota of land
scrip was for 630,000 acres.
The State of Ohio in 1864 accepted this
grant on the conditions
prescribed.44 The
land scrip was sold for $342,450.80.
The
State auditor in his 1867 report stated
that the entire proceeds
from the sale of this scrip, which he
reported to be $340,894.40,
had been paid into the State treasury
and that the interest due on
this sum January 1, 1868, would be
$18,823.97. In the next
year's State auditor's report, however,
it appears that $1,556.40
more came into the State treasury in
payment for land scrip mak-
ing a total of $342,450.80 received by
the State.
No interest was actually disbursed by
the State for a number
of years since the Agricultural and
Mechanical College had not as
yet been established. The General
Assembly in an act passed
42 Report of the Auditor of the
State of Ohio, 1933, 437-8.
43 United States Statutes, XII,
503.
44 61 O. L. 7 (Act of February 9, 1864).
134
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
February 10, 1870,45 provided that six
per cent interest be com-
puted semiannually on this fund, now
called the Agricultural
and Mechanical College Fund, and that
this interest be added
to the principal of the fund. The State
auditor in his 1870 report
computed the accrued interest to January
1, 1871, and stated
that on that date the principal of the
fund would be $435,138.27,
consisting of $342,450.80 received for
the land scrip plus $92,-
687.47 accrued interest. The Ohio
Agricultural and Mechanical
College opened in the fall of 1873 and
the fund on January 1,
1874, had increased to $504,807.28
including $34,500 of Franklin
County bonds which were placed in the
State treasury as pre-
scribed by the Act of January 20,
1871.46 These bonds were a
portion of the $300,000 bonds issued by
Franklin County for the
purpose of donating to the trustees of
the Agricultural and
Mechanical College this sum for the use
of the college provided
that the institution would be located in
Franklin County.47 These
bonds bore seven per cent interest which
was added to the prin-
cipal of the fund upon which the State
was paying six per cent
interest. They were redeemed in 1881.
From January 1, 1875, in spite of
the addition of $13,665.14
from the sale of Virginia Military
lands, the principal of the fund
grew slowly, since the college was
spending most of the income
from the fund, reaching $559,627.8848 as
reported for November
15, 1880. In the year 1885 the principal
had dropped to $537,-
846.46 where it remained constant
through 1890.
In 1900 the principal of this fund,
called the Ohio State
University Fund since 1878, was still
nearly eight thousand dol-
lars less than it had been in 1880 in
spite of still further additions
amounting to over $16,000 resulting from
its Virginia Military
land claims. This shows very clearly
that the fund at that time
consisted mainly of the $342,450.80
received from the land scrip
given to the State by the United States
under the Morrill Act
plus unused interest which was added to
the principal prior to
45 67 O. L. 15.
46 68 O. L. 13.
47 Authorized by Act of April 18, 1870
(67 O. L. 95).
48 This figure also included the $34,500
of Franklin County Bonds.
OHIO'S DEBT, 1900-1938 135
1881, in fact most of which was added by
the time the Ohio
Agricultural and Mechanical College held
its first classes.
Ohio State University, as just
indicated, has also benefited
from other land, namely, the Virginia
Military lands, given to the
State of Ohio by the National
Government. Virginia, under the
charter of May 23, 1609,49 granted by
King James I of England,
claimed all the land west to the
Mississippi River between her
northernmost point near Steubenville and
her southern boundary.
When Virginia on March 1, 1784,
relinquished its claims to the
lands west of the Ohio River in favor of
the United States,50 it
reserved rights to the land between the
Scioto River on the east,
the Little Miami on the west, the Ohio
River on the south, and
running north into what is now part of
Auglaize, Hardin, and
Marion counties,51 to satisfy
the claims of Virginia soldiers who
were veterans of the Revolutionary War.
Having done this there
still remained 76,735 acres unsold which
Virginia released to the
United States in 1852. Congress in turn
by an act of February
18, 1871,52 ceded these to Ohio. The
General Assembly on March
26, 1872,53 provided for the
conveyance of these lands to the trus-
tees of the Ohio Agricultural and
Mechanical College for the
benefit of that institution.
The land thus turned over to the
Agricultural and Mechanical
College should not be confused with the
one thirty-sixth of the
original Virginia Military District which
was reserved for the
benefit of the common schools. Although
the proceeds from the
sale of any of these lands were turned
into the State treasury, in
the case of the latter the amount was
added to the principal of the
irreducible debt until the passage of
the Garver Act on March 20,
1917 (after which they have been
invested in bonds),54 whereas,
in the case of the former, credit was
given in the general revenue
fund to the college or university, now
called Ohio State Univer-
49 Benjamin Perley Poore, comp., The
Federal and State Constitutions, Colonial
Charters and Other Organic Laws (Washington, 1878, 2nd ed.), Part 2, p. 1893.
50 Journals of Congress, IV, 342.
51 Thus this district included the land
now in Clermont, Brown, Adams, Clinton,
Highland, Fayette, Madison, and Union
counties and some of the land now in Scioto,
Pike, Ross, Pickaway, Franklin,
Delaware, Marion, Hardin, Auglaize, Logan, Cham-
paign, Clark, Greene, Warren, and
Hamilton counties.
52 United States Statutes, XVI,
416.
53
69 O. L. 52.
54 See supra, p. 131.
136 OHIO
ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
sity, where it was reserved for such
university purposes as the
legislature might authorize.
Owing to the fact that the Virginia
Military District was not
surveyed into townships of any regular
form and that individuals
who owned a Virginia Military land
warrant located wherever
they pleased and shaped their holdings
to suit their own desires
just so long as no one else was in
possession, a considerable amount
of litigation arose as time went on
relative to the legal title to
individual plots of land. The Ohio
General Assembly by an act
of March 14, 1889,55 attempted to
clarify the situation by providing
that the trustees of Ohio State
University should quit-claim title
to any of the land to which its title
was disputed, provided that the
claimant of the disputed land, or those
from whom the title was
claimed, had for twenty-one years
occupied and improved the
land. In return for the deed such a
claimant was to pay two dol-
lars to the university trustees and the
State auditor was to add
to the principal of the Ohio State
University fund in the irre-
ducible debt one dollar per acre for all
land to which the univer-
sity trustees surrendered legal claim.
This act was supplemented
later56 to permit persons who had been
compelled by suit or by
fear of suit to pay Ohio State
University for any of this land and
who could show to the satisfaction of a
State board set up for the
purpose that they would have been able
to take advantage of the
Act of March 14, 1889, to recover from
the university the amount
wrongfully paid. This act, however, was
amended on May 21,
1894,57 so as to provide that
where claims had been or should be
allowed under the act, the amount paid
by the university should
be added to "that part of the
irreducible debt of the state which
constitutes the endowment fund of the
Ohio State University."
The entire cash receipts from the sale
of the Virginia Military
lands granted to this institution in
1872 by the State legislature,
including interest received on notes
given in payment for the land,
up to June 30, 1900, amounted to
$65,425.28. The total expenses
incident to such sale including the
costs of survey, litigation and
55 86 O. L. 92.
56 90 O. L. 20 (Act of
April 21, 1893).
57 91 O. L. 375.
OHIO'S DEBT, 1900-1938 137
collection were $29,059.55. Thus the net
receipts from these sales
up to June 30, 1900, were
$36,366.73.58 Of this sum, under a
joint resolution of the General Assembly
adopted April 24, 1877,59
$1,592.56 was added to the endowment
fund and in 1880 the rest
of the entire net receipts from these
sales up to November 15,
1879, which amounted to $12,073.28 were
similarly added to the
university endowment fund. Under the
authority granted by the
legislature by an act passed April 17, 1882,60 the
university trustees
expended down to June 30, 1900, for the
construction and mainte-
nance of residences for professors
$22,637.57. This left a balance
of only $64.02. Thus of the total cash
received by the university
down to June 30, 1900, as a result of
the sale of these Virginia
Military lands only $13,665.14, or
slightly over one-fifth of the
total received was added to the
university endowment fund and as
a necessary consequence to the
irreducible debt of the State.
The endowment fund, however, was
increased to June 30,
1900, under the provisions of the Act of March 14, 1889,
and the
Act of May 21, 1894 (chiefly
the former), by $16,052.18. From
this date to June 30, 1919, the portion
of the irreducible debt
known as the Ohio State University fund
was increased $209,-
236.65
by this means. Little has been added from this source
since 1919--the total to June 30, 1938,
being only $2,371.99.
Thus to the end of the nineteenth
century that portion of the
irreducible debt constituting the
endowment fund of Ohio State
University is the direct result of the
land grants made to the State
by the National Government. Since the
turn of the century the
importance of these land grants in
building up the university en-
dowment fund has waned. On November 15,
1900, the Ohio State
University fund amounted to $551,633.92
and in 1902 by reach-
ing $559,878.20 surpassed its previous
high attained in 1880. From
this time on the increase of this fund
has been relatively rapid,
the principal in 1938 being over a
million dollars larger or nearly
three times as large as it was in 1900.
Of this increase $484,218.74
occurred during the period November 15,
1900,
to July 1, 1918.
58 Report of the Board of Trustees of
Ohio State University (Columbus,
1900), 15.
59 74 O. L. 539.
60 79 O. L. 144.
138 OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
It should be noted that of this last
amount $202,745.68 or a little
over forty per cent was due to the
granting of quit-claims by the
university to Virginia Military lands.
Thus, although the endow-
ment fund of the university continued to
be increased as a result
of the university's claims to land given
to the State by the National
Government, the larger portion of its
increase from 1900 to 1918
was the result of gifts to the
university. The largest of these was
a bequest of over $217,000 made by Henry
Folsom Page. All
money turned over to the State treasury
by either Ohio State,61
Ohio,62 or Miami universities63
which arises from gifts is credited
to such university and becomes a part of
the irreducible debt of the
State upon which it pays six per cent
annual interest. In these
days of low interest rates this practice
is a boon to these institutions
and is in the nature of a State subsidy
to them. Since 1918 the
increase in the Ohio State University
fund has been almost en-
tirely the result of bequests to the
university amounting to some
$530,000 so that on December 31, 1938,
more than half of the
$1,578,262.67 credited to this fund is
the result of donations.
(b) Ohio University. In the land
purchased by the Ohio
Company from the United States in 1787,
it will be recalled that
Section 16 and Section 29 in each
township were set aside for
school and religious purposes
respectively. In addition two town-
ships, each six miles square or a total
of 46,080 acres, were re-
served for the use of a college. The
townships of Alexander and
Athens, in Athens County, were selected
and on January 9, 1802,64
the territorial legislature provided for
the establishment of a uni-
versity, to be called "The American
Western University," in the
town of Athens. Two years later, Ohio
now being a State, the
State legislature on February 1865 reenacted this
territorial act
with a few changes including changing
the name "The American
Western University" to "Ohio
University." The institution was
opened to students in the spring of
1808, but the first diplomas
were not awarded until 1815.66 Ohio
University is the oldest
61 67
O. L. 22.
62 101 O. L. 208.
63 103 O. L. 564.
64 1 Sess. 2 G. A. T. 161.
65 2 O. L. 193.
66 Report of Ohio University
to the Governor (Athens, 1912), 7-8.
OHIO'S DEBT, 1900-1938 139
institution of higher learning in that
part of the United States
known as the "Old Northwest"67
and is also the first college in
the United States founded upon a land
endowment.68
The lands were appraised and the law
provided that there
should be a revaluation of all the land
outside of the town of
Athens at the end of thirty-five years,
another after sixty years,
a third at the expiration of ninety
years from the commencement
of each lease and the land was to be
leased for a "term of ninety
years, renewable forever, on a yearly
rent of six per cent on these
valuations." On February 21, 1805,69 the General Assembly
passed an act amending the Act of
February 18, 1804, and changed
the term of the, lease from ninety years
renewable forever to
ninety-nine years, renewable forever.
Absolutely nothing was said
in this act relative to revaluation of
the land. However, when the
time for revaluation arrived, the right
to make such revaluation
was questioned on the ground that it had
been the intention of the
legislature in this Act of February 21,
1805,
to repeal the provi-
sions in the 1804 act relative to
revaluation. This question was
brought to the Supreme Court of Ohio in
the case of Festus Mc-
Vey and others vs. The Ohio
University70 which in December,
1841, held that the 1805 act had not
repealed the provisions for
revaluation which were in the 1804 act. Those
interested in pre-
venting revaluation succeeded in
persuading the General Assem-
bly to pass an act on March 10, 1843,71
which stated "that it is
the true intent and meaning. . . of the
act. . .passed February 21,
1805, that the leases granted under. .
.said act, and the one to
which that was an amendment, should not
be subject to a revalua-
tion at any time thereafter. . . ."
Provision for selling these lands and
conveying them in fee
simple as well as for conveying to any
lessee of these college lands
the fee simple of such leasehold lands
was made by the legislature
in an act passed on February 4, 1826.72
The proceeds from these
sales and from changing leasehold
estates to estates in fee simple
67 Ibid., 7.
68 Emilius O. Randall and Daniel
J Ryan, History of Ohio (New York, 1912),
III, 174.
69 3 O. L. 79.
70 11 Ohio, 134.
71 41 O. L. 144.
72 24 O. L. 52.
140
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
were to be deposited in the State
treasury and the university was
to receive six per cent interest payable
semiannually upon such
deposits. On April 29, 1854,73
the General Assembly passed an
act rewriting this Act of February 4, 1826, as amended by
the acts
of January 10, 1829, and March 21, 1840. Section 4 of
this act
provided that the treasurer of Ohio
University deposit sums re-
ceived for deeds in the State treasury
"which said sums shall be
added to the irreducible trust funds
held by the State for educa-
tional purposes" and six per cent
interest paid to the treasurer of
the university.
As a considerable amount of the land was
leased for ninety
or ninety-nine years, not only was the
annual income from rents
low as the average rental was about ten
cents an acre,74 but the
university in spite of a start of over
sixty years was unable to
build up an endowment fund through the
sale of its lands as Ohio
State University did. Thus in the State
auditor's report of 1837
there is shown a payment into the Ohio
University fund of
$465.67 bringing the principal of the
fund up to $1,897.39. There
were only three additions to this fund
from 1837 until 1881--
$673.34 in 1868, $50.00 in 1871, and
$80.00 in 1873. These in-
creased the principal of the fund to
$2,700.73.
Beginning with receipts of $360.00 from
the sale of land in
1881, the Ohio University fund was
increased every year, ex-
cepting in 1882 and 1883, by the
proceeds from the sale of land
until by November 15, 1900, this fund
had increased to $14,771.88.
Sales continued to be made and the
increase in the principal to
$44,648.43 on July 1, 1918, was due to
such sales.
Starting with the fiscal year ending
June 30, 1919, and run-
ning through the fiscal year 1925, the
proceeds from the sale of
the university lands were largest,
adding over $21,000 to the uni-
versity fund. The university, however,
now began to increase
the principal of the debt owed to it by
the State through turning
over to the State treasurer gifts which
the university began to re-
ceive--a practice already described in
the case of Ohio State Uni-
73 52 O. L. 175.
74 Remember in this connection the act of
March 10, 1843, had in effect fixed
the annual rent at six per cent of the
valuation of these lands early in the nineteenth
century.
75 See supra, p. 138.
OHIO'S
DEBT, 1900-1938 141
versity.75 Thus from 1919 through 1938 over forty per cent of
the
increase in the principal of the Ohio University fund has been
the
result of gifts made to the university.
(c) Miami University. No part of the irreducible debt of
the
State was due to Miami University until 1913 in which year
the
university received a gift of $6,000 which it turned over to the
State
treasurer and thus the Miami University fund was started.
Inasmuch
as the State has never held any of the proceeds from
the
sale of the lands in the township in what is now Butler County
consisting
of 23,040 acres which under the terms of the Symmes
purchase
was granted by the National Government76 for "an
academy
and other public schools and seminaries of learning," the
growth
of the Miami University fund has been due to gifts sim-
ilarly
turned over to the State by the university.
The
development of the irreducible debt of the State since
1900
as described above may be summarized in the following
table. (The figures are given to the nearest
dollar.)
TABLE
6
SUMMARY
OF THE DEVELOPMENT OF THE IRREDUCIBLE
DEBT
OF THE STATE OF OHIO SINCE 1900
Fund Nov.
15,1900 July 1, 1918 Dec. 31,1938
Section
29 (11 counties) Ministerial
trust
. . . . . . . . . . . . . . . . . . . . . . $
140,439 $ 150,276 $ 150,276
Section
16 (68 counties) School trust 3,389,772 3,535,285 3,535,285
United
States Military District (12
counties)
School trust . . . . . . . . . . .
120,272 120,272 120,272
Virginia
Military District (23 coun-
ties)
School trust . . . . . . . . . . . . . . 195,598
197,144 197,144
Western Reserve
(14 counties)
School
trust . . . . . . . . . . . . . . . . . . . 257,499 257,499 257,499
TOTAL
ministerial and school trust $4,103,581 $4,260,476 $4,260,476
funds
(arising through the sale
of
public lands)
76 United States
Statutes, I, 266 (Act of Congress approved May 5, 1792); also II.
226
(Section 5 of an Act of Congress
approved March 3, 1803).
142 OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
Fund Nov. 15,1900 July 1,1918 Dec.
31,1938
John
Butler Fund.................. $ 333
$ 333 ......
John Butler
Fund ................... 333 333 ......
Rex
Patterson Fund ................ ...... 5,012 $ 5,012
George
Wright Fund................ 2,157 2,157 2,157
TOTAL of Special school trusts $ 2,822
$ 7,835 $ 7,170
(arising from
individual be-
quests)
Ohio
State University .............. $ 551,634
$1,035,853 $1,578,263
Ohio
University .................... 14,772 44,648 81,640
Miami
University .................. ...... 7,500 77,193
TOTAL
University Funds ........... $ 566,406 $1,088,001 $1,737,096
TOTAL
IRREDUCIBLE DEBT... $4,672,810
$5,356,312 $6,004,741
Sources:
Reports of the Auditor of the State of Ohio for 1900, 1918, and
1938.
THE DEBT OF THE STATE OF OHIO FROM
1900 TO 1938, INCLUSIVE
By HENRY F. WALRADT
One method of raising money with which
to make govern-
mental expenditures is to issue bonds or
certificates of indebted-
ness. The record of the State Government
of Ohio during the
twentieth century as to debt may well be
studied in this day when
so many political units too recklessly
meet their present desire
or need for revenue by the easy
expedient of going into debt.
At the beginning of the present century
the debt of the State
Government consisted of the funded or
bonded debt and the irre-
ducible debt. The funded debt, which
originated in 1825, arose
mainly in connection with the
construction of the State's system
of canals. The irreducible debt
originated from the practice by
the State of using, for the expenditures
it desired to make, the
proceeds from the sale of public land
given to the State by Con-
gress for religious and educational
purposes. The amounts thus
used by the State were set up as an
unfunded debt upon which
the State pledged itself to pay six per
cent annual interest. In
an attempt to insure that this debt
should be perpetual, there
was incorporated in the Constitution
adopted in 1851 a provision
that "the principal of all funds arising from the
sale, or other dis-
position of lands, or other property
granted or entrusted to this
state for educational and religious
purposes, shall forever be
preserved inviolate, and undiminished;
and the income arising
therefrom, shall be faithfully applied
to the specific objects of
the original grants, or
appropriations."1 Later the proceeds from
any bequests or gifts made to Ohio
State, Ohio and Miami
universities and turned into the State
treasury also became a
part of the irreducible debt of the
State.
A. The Funded Debt.
The State's outstanding bonds based on
the entire credit of
the State were redeemed in full during
the fiscal year 1903 with
1 Article
VI, Section 1.
(119)