6 77. year, still cur '3 66 poll The interest on the bonds reported above is the yield of securities held in trust for the State School Fund, consisting of bonds of the State of California, amounting to $1,737,500, together with bonds of different counties of this State, aggregating $251,900, and described as follows: y the Contend and ndix, STATE SCHOOL LAND FUND. d: 5,730 58 ,429 13 869 48 3,700 1,683 24 57 40 2,469 86 5,090 % 5,366 66 ),457 62 2,012 24 The revenue of the School Land Fund is governed by the provisions of Section 4, Article IX, of the State Constitution, which reads as follows: "The proceeds of all lands that have been or may be granted by the United States to this State for the support of common schools, which may be or may have been sold or disposed of, and the 500,000 acres granted to the new States under an Act of Congress approved A. D. 1841, shall be and remain a perpetual fund, the interest of which shall be inviolably appropriated to the support of common 2,012 2 schools throughout the State." 2,469 4,964 8,816 30 7,922 8,861 60 In order that this provision of the Constitution shall be carried out, it is made the duty of the State Board of Examiners, by the requirements of Section 680 of the Political Code, and the Act of the Legislature approved February 2, 1872, whenever and as often as there is in the State treasury the sum of $10,000 as proceeds of the sale of State school lands, to invest the same in bonds of this State, 9.237 bonds of the United States, or in the bonds of the several counties of this State. 2,883 1,458 31 3,579 18,996.98 $2,576 % The provisions of the section of the Code referred to limit the Board to investments in bonds of this State and of the United States at the lowest price at which they may be offered by the holder thereof. Precedent to the purchasing, the Board is required to advertise for a period of thirty days for sealed proposals offering such bonds for sale. With the view of investing the money that had accumulated in this fund, the Board at different times during the past two years advertised for bonds. As our State bonds are prac tically out of the market, none were offered, and the price put upon bonds of the United States being invariably above the ruling rate, A the Board was prevented from purchasing. The Act of 1872 was passed for the purpose of giving the Board authority to make investments in bonds of the several counties of this State. Under the provisions of the Act, whenever the Board desired to purchase this class of bonds it was not required to advertise for proposals, but it could go into the market for them, with the restriction, however, that not more than the par value should be paid. Formerly no difficulty was experienced in making investments from this fund, as is attested by the large amount of bonds, viz., $1,989,400, at this time held in trust. Now, owing to the fact that the several counties have attained such a healthy financial condition. that county bonds cannot be obtained within the par limit, and by reason of the embarrassment, in being required to advertise for the other classes of bonds, the Board has been unable to make any investments, and, as a consequence, the fund has accumulated-having at this time to its credit the sum of $198,648 69, which, with the further sum of $98,387 04, temporarily loaned to the General Fund, makes a total of $297,035 73, which should be at interest for the benefit of our public schools. b St SŁ I doubt whether, hereafter, under the restriction of not bidding Se more than par for county bonds, the State will be able to purchase P any of this class of bonds for the School Fund. The laws under which these bonds were issued, generally authorized the bonds to bear interest at from seven to ten per cent, and at that rate all of the desirable bonds are held in the market at a large premium. In time to come, some of these counties will refund their bonded indebtedness at a lower rate of interest, when, if the Board of Examiners is permitted to become a bidder, such bonds could be purchased at par.tl Another reflection suggests itself, that in any future legislation authorizing a county to issue bonds, the State Board of Examiners B may be made a preferred purchaser, at a stated rate of interest. I have no doubt that the Board could go into the open market and purchase bonds at a less premium than it has to pay under the present system of advertising for them. Indeed, I am informed by a former clerk of the State Board of Examiners, that on one occasion a certain amount of bonds was once offered for sale in the open market at so much less premium than the Board was forced to pay for the same class of bonds, that the difference was nearly one per cent interest in favor of the open market. I therefore recommend that all restrictions be removed, save that which prohibits the Board from investing in the bonds of any county the debt of which at the time exceeds fifteen per cent of the assessed value of the taxable property of said county, and that the Board be authorized to purchase whenever and wherever it can do best for the School Fund, or that the State shall give her obligation for the amount in the School Land Fund, and become the debtor at a low rate of interest, say four per cent per annum. а F F he UNIVERSITY FUND. The amount of bonds now on deposit in the State treasury, under Act of March 19, 1878, creating the "Consolidated Perpetual Endowment Fund" of the University of California, is $1,330,000. The rd bonds are described as follows: of to 0 he on by he ny LV- Oakland Sewer Bonds of 1875 he Alameda School Bonds of 1878 id. San Luis Obispo County Bonds of 1870. San Luis Obispo County Bonds of 1872Kern County Bonds of 1880.. he ng ise ler to he me ed- The interest upon bonds on deposit in the State treasury to the IS credit of the Consolidated Perpetual Endowment Fund, for the ar thirty-second fiscal year, amounted to $74,913 79, and for the thirtyon third fiscal year to $78,150 15, which was, by order of the Board of ers Regents, paid to the Treasurer of the University for its support. nd Warrants were also drawn upon the General Fund in pursuance of appropriations made by the Legislature for purposes pertaining to he the University, aggregating $32,944 59, for the thirty-second fiscal by year, and $25,785 for the thirty-third fiscal year, as shown by the ca following: STATE DRAINAGE CONSTRUCTION AND THE CONSTRUCTION FUND OF DRAINAGE DISTRICT NUMBER ONE FUNDS. These funds were created by the authority of an Act entitled an Act to promote drainage, approved April 23, 1880. It was provided that for the State Fund a tax at the rate of five cents upon each $100 valuation should be levied upon all of the taxable property in the State. For the District Fund, the same rate of tax, upon all the property in the district, with also a tax upon all mines washing earth or ores with water running into the district of one half of one cent upon each miner's inch of water of each twenty-four hours run, used during the year. + The provisions of the law with reference to drawing money from the treasury in payment of liabilities incurred in prosecuting the work contemplated by the Act, were liberal in the extreme. The Board of Directors was authorized to audit and certify bills to the t Controller to the extent of the estimated amount of revenue that would be realized for the funds from the tax levy of the year. It thereupon became the duty of the Controller to draw his warrants for the amounts thus certified. As the authority to allow claims was limited to an imaginary instead of a fixed sum, it required the exercise of much discretion in issuing warrants to avoid over-issuing. and thus leave some for which there would be no means of payment provided, and which at that time would have been considered as representing indebtedness of the State. Upon receiving complete returns showing the total assessed value of property for the year, and making the deduction required by law. in computing the tax, the probable amount that would be realized for the funds was concluded to be as follows: For the State Fund For the District Fund, from property tax.. For the District Fund, from water tax Total Upon this assumption warrants were issued as follows: ت I To show that my conclusions were based upon fair judgment, again give the total amount of warrants issued, also the total amount of taxes paid into the treasury: Total amount of warrants. Total amount of taxes paid. Excess of warrants over receipts....... $363,990 362,625 09 $1,364 97 In reviewing the last summary, which shows the excess of war rants over receipts to be $1,364 97, the fact must not be lost sight of that in following the provisions of the law, the warrants were issued before the revenue to meet them was paid into the treasury. Had it OF an ive the rty res >on sed om the The the not have been for the delinquency of taxes, which was not foreseen, upon a prominent class of property, this small overdraft would not have occurred. The amount of warrants issued would have been within the limit of the amount paid into the treasury to the credit of the funds. I have been thus explicit in detailing the transactions pertaining to these funds, for the reason that statements were publicly made charging that the Controller had issued warrants upon them largely in excess of the revenue applicable to their payment. In the consideration of these funds, I have treated them as one, as under the law they were both used for the same purpose. Segregated, the State Fund will show a debit balance of $12,687 85, the District Fund a credit balance of $11,322 88; the difference, $1,364 97, corresponding with the amount of excess heretofore referred to. Referring again to this law, the ambiguity of its provisions caused the question to be raised as to whether the year in which the law declared that the expenditures should not exceed the estimated revenue, was the calendar or fiscal year, the latter year commencing nts the first of July. hat It ms the ng, ent The Board of Directors taking the view that the calendar year was meant, audited and certified bills to this office amounting to $164,503 36. Being of the opinion that the fiscal year was to govern, I declined to issue any more warrants prior to the commencement of another such year. Subsequently a case testing the constitutionality of the law was brought before the Supreme Court of this State. lue On September 26, 1881, the Court rendered its decision, holding that law the law was invalid. The said audited bills remain on file in this zed office, for none of which have warrants been issued. as :0 22 100 '1 00 12 22 STATE DEBT. At the date of my former report,, the funded debt of the State was $3,403,000; since that time, $1,000 of the bonds of 1860, called for July 31, 1875, and $99,000 of the bonds of 1873, called September 1, 1881, have been surrendered, leaving the debt now at $3,303,000, classified as follows: 32 16 90 06 it, I unt The funded debt is held as follows: Bonds in private hands. Bonds held in trust for the State School Fund Total 3' $613,000 00 1,737,500 00 952,500 00 $3,303,000 00 |