USA > Indiana > A history of education in Indiana > Part 16
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By the law of 1843 it was provided that there should be a superintendent of common schools, among whose duties should be the submission of an annual report to the General Assembly relative to funds held for purposes of education, plans for their better management and improvement, and estimates and accounts of expenditures of such moneys. It was doubtless because of this influence, in part at least, together with the already fairly liberal provision of school funds, that, in 1844, it was ordered by the Legislature that " all money already in hand or to arise hereafter," from the salt lands, "be divided ratably among the counties." It was very little at best, but it was something. The total re- ceipts from this source up to 1844 were $45,771.37. The next ten years made considerable additions. Up to 1847 there had been sold of the original grant 21,351 acres, all but 2,000 acres of it being in Orange County. At this time (November 1, 1847) the Superintendent of Common Schools reported the total receipts at $73,515.28. The actual contri- bution to the school fund was considerably less. This seems
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 183
now to be all ; though Prof. Mills mentions in his third message to the Legislature, 1848, that there was credited to the Saline Fund $69,448.36. Two years later he speaks of the average annual distribution of the Bank Tax and Saline Funds together as about $9,150.
In 1852, all the valuable lands of this grant having been disposed of, the remainder (1,000 acres), broken and sterile, were ordered sold by the authority of Congress at auction, and at a minimum price of fifty cents per acre. Even under these circumstances, however, the lands were not finally dis- posed of and all payments made for twenty years. From later sales up to 1865, additional proceeds had been reported, amounting to $34,323.89. Eight years afterward, in 1873, final settlement was made, and $6,211.45 turned over to the School Fund.
The total proceeds of saline lands aggregated $89,478.47, the actual amount realized to the permanent fund * perhaps being about $5,000 less.
3. County Seminary Funds. /85 Ca
Reference has been made elsewhere to the source of sup- port of the old county seminaries. This included exemp- tion moneys, fines for breaches of the penal laws, and, by the law of 1838, unclaimed gaming money recovered.
About 1843 it was provided that in certain localities salt inspectors should be appointed, and further that "if any person or persons should offer for sale or vend any salt by the barrel without being inspected or branded, he should for every such offense be fined in any sum not less than three nor more than twenty dollars . .. for the use of the County Seminary.t But these were in themselves revenue -not invested funds, and were so expended in the year as income. It was a contingent revenue also, exceedingly
* A table of the amounts distributed from 1845 to 1853 may be found in the Report of the Superintendent of Public Instruction for 1872, Part II, p. 169.
+ Revised Statutes, 1843, chapter xxvii, p. 411.
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UNDER THE NEW CONSTITUTION, 1851-'91.
variable, and always meager. Much of it, in recent years most of it, went for tuition ; more or less of it, especially under the earlier workings of the law, was put into build- ings, and so saved from absolute loss, the funds so used being supplemented by private subscription, individual ser- vice, public donation, and occasional voluntary tax. These houses have already been described as fairly substantial structures, usually brick, two stories, and, for that day and in comparison with common school-rooms, liberally fur- nished. The lots upon which they stood were sometimes bought and held as State property, more frequently donated by some public-spirited neighbor, and usually so held as to revert to the former owner if diverted from educational uses.
Throughout the session of the Constitutional Convention, among delegates generally, the advisability-indeed, the ne- cessity-of disposing of the County Seminary and its belong- ings appeared as a settled conviction. Accordingly, Article VIII of the Revised Constitution provided for their closing, and that the fund derived from their sale, and the moneys and properties held for such seminaries, should be turned into and form a constituent part of the Common School Fund.
To this disposition of the properties there seems to have been scarcely a dissenting voice. An occasional seminary had done the State valuable service. But, with few excep- tions, the most efficient ones were private or incorporated, and the proposed sale of the County Seminary buildings met with a hearty affirmative response. Prof. Mills had for years urged their reorganization. The official messages of the Governors of the State for more than a decade had noted their inefficiency, and recommended more or less radical changes in their constitution. The members of the Educa- tional Convention (May 26, 1847) almost unanimously favored their legal disestablishment, and, as a body, formu- lated a bill which was presented to the next Legislature (1847-'48), and which included a provision for the consolida-
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 185
tion of funds and the reorganization of the seminaries. Throughout the convention also the continuance of the County Seminary was generally conceded to be unwise.
The like opinion prevailing through the State, as shown in newspapers and public utterances, upon education, the sentiment easily crystallized the year following in statutory form as " An Act to provide for the sale of county semina- ries and the property belonging thereto, and to transfer the proceeds thereof to the Common School Fund, after deduct- ing advances made by individuals, and to repay such ad- vances."* Sections four and fifteen, the only portions of the act having immediate bearing upon this topic, provided that interest should be paid in advance upon purchase money, and the principal in equal annual installments. The pro- ceeds, after making the above deductions and necessary ex- penses, were to be placed "to the credit of the Common School Fund, to be disposed of in such a manner as shall be directed by law."
Governor Wright, in his first messaget under the new Constitution, estimated the proceeds of the sale of seminary buildings at not less than $100,000. In the official statement of the treasurer, as superintendent of common schools (1851), the returns to date were given at $30,000. Three years later the sum had almost doubled; and in the year 1854 the receipts for the year were $46,679.79, making a total of $103,238.03.
But few facts pertaining to the closing up of the semina- ries are to be had. In most counties the "closing " meant no more than a transfer of property rights-the school con- tinuing under the same teachers, using the same courses of study, maintained with like funds, and under all the old conditions of social and civil environment.
Many of the seminaries, and often the most prosperous ones, had but just been opened-at least within five or ten . years-and some of them had still hanging over them debts
* Approved June 12, 1852.
t December, 1851.
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UNDER THE NEW CONSTITUTION, 1851-'91.
for money advanced or for unpaid service, and so yielded little more than to meet these obligations. A few were sold for nominal sums only, others transferred to the public schools. The Madison County building was open but seven years, being burned in 1856. The one at Centreville was sold in 1852. The year following, the building of the Monroe County Female Seminary passed into private hands; that in Putnam County to Asbury University; and those in Franklin and Henry Counties to the town schools. While the proceeds from the Henry County building netted $1,100, Marshall County gave up her rights to building and lot for one dollar. The Morgan County building brought $1,100, and that in Muncie $1,780. In Randolph County an association formed for the purpose purchased the building, and for many years carried on, under Prof. Cole and others, a most prosperous school, even after the new law became operative in Win- chester.
These are to be taken as typical examples of the disposi- tion of the old buildings rather than an attempt at complete statement-the meagerness of the records making the latter impossible.
The total sum realized from this sale of seminary proper- ties was $103,238.03.
4. The Bank Tax Fund.
In the early history of Indiana there had been established the Bank of Vincennes, having branches at Corydon, Vevay, and Brookville. The institution was at once adopted by the State as the State Bank of Indiana. Here were the official deposits. About 1820 it became known that its business was being loosely managed, and the charter was revoked by act of the Legislature, December 31, 1821.
The bank was charged with specific violations of its char- ter, and legal proceedings ordered upon the following points : 1. Contracting debts double the amount of its deposits. 2. Issuing more paper, and with fraudulent intent, than the bank could redeem. 3. Making large dividends while
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 187
refusing to pay specie for its notes. 4. Embezzling de- posits .*
Much of the bank's paper had become entirely worthless. and both Indiana and the General Government suffered losses-the latter most of its $200,000 deposit of proceeds from lands sold.
The State further contemplated a system of internal im- provements, whose prosecution involved ready money that might most easily be provided through a safe banking policy. Besides, under President Jackson (1833) the Federal deposits which had just been withdrawn from the old United States Bank had been either made the nucleus of State banks in other parts of the West, or used to extend the resources and business of existing institutions. It was determined to reor- ganize Indiana's banking system, and, by a comprehensive policy of internal improvement, enlarge the State's resources and influence.
The act establishing the State Bank was approved Jan- uary 28, 1834. The institution included (at first) ten branches in various parts of the State, and a central office at Indiana- polis. These branches were afterward increased to twelve, located at Indianapolis (central office and district No. 1), Lawrenceburg, Richmond, Madison, New Albany, Evans- ville, Vincennes, Bedford, Terre Haute, Lafayette, Michigan City, Fort Wayne, South Bend, each independent, but sus- taining prescribed legal relations with every other and with the general organization.
The charter was to run for twenty-five years, all banking powers to close January 1, 1857. The original capital stock was $1,600,000 in $50 shares, one half to be held by the State, the other by individuals or corporations. For the purpose of providing funds on the part of the State to pay her sub- scription of stock in said bank and certain advances to stockholders, the State Canal Commissioners were authorized to contract a loan of $1,300,000, bearing not to exceed five per
* See Blackford, vol. i, p. 267, and Dillon, p. 547.
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UNDER THE NEW CONSTITUTION, 1851-'91.
cent interest, and payable after thirty years at the pleasure of the State.
It was provided that the State Bank, and each and every branch of it, should be mutually responsible for all the debts, notes, and engagements of any of them. Dividends, how- ever, of the several banks were declared independently. The portion of our permanent School Fund now under considera- tion is derived from the provisions of section 15 of the act,* which reads as follows:
"There shall be deducted from the dividends and retained in the bank each year the sum of twelve cents and a half on each share of stock other than that held by the State, which shall constitute part of the permanent fund to be devoted to purposes of common-school education, under the direction of the General Assembly, and shall be suffered to remain in the bank and accumulate until such appropriation by the General Assembly; and said tax shall be in lieu of all other assessments on stock in said bank."
About 16,000 shares were so held by individuals or cor- porations, yielding more than $2,000 annually. The pro- ceeds were allowed to accumulate in bank and in charge of the Sinking Fund Commissioners, but after 1843 were depos- ited in the State treasury and loaned, as were the university and other funds, providing that so much of the Bank Fund as should be applied to the use of the State should "remain a debt against the State, due to said fund, to be repaid with interest.+
By an act of 1845 more than $30,000 were distributed to the counties, which has since been augmented to about $80,000. Since 1852, of course, it forms a part of the Common School Fund, and does not have separate appearance in the official. reports of the department. #
* See Revised Statutes, 1838, p. 96.
+ Revised Statutes, 1843, p. 257.
# For an exhibit of the distribution of this fund to counties, see State Superintendent's Report for 1872, Part II, p. 169.
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 189
5. The Sinking Fund.
At the time of the organization of the State Bank, from which originated the last fund named, and to pay for stock, as has been already mentioned, the State issued and sold in London its coupon bonds, bearing five per cent interest. Looking to the meeting of these obligations at maturity, a Sinking Fund was created, as provided in sections 113 and 114 of the bank charter, as follows :
"SEC. 113. There shall be created a fund to be called the 'Sinking Fund,' which shall consist of : 1. All unapplied balances of the loan or loans procured on the part of the State for its stock in the State Bank, or for the purpose of being loaned to stockholders to enable them to meet their stock installments in the bank. 2. The semi-annual pay- ments of interest on the State loans to stockholders and the sums that shall be received in payment of said loans. 3. The dividends that shall be declared and paid by the State Bank on the State stock and the dividends accruing on such portions of the stock belonging to the other stockholders as shall have been paid by the loan on the part of the State, and which shall not have been repaid by such stockholders.
"SEC. 114. The principal and interest in said Sinking Fund shall be reserved and set apart : 1. For the purpose of liquidating and paying off the loan or loans and the inter- est thereon that shall be negotiated on the part of the State. 2. For the payment of its stock in the State Bank and the second and third installments on the shares of other stock- holders in said bank. 3. And shall not be expended for any other purpose until said loan or loans and the interest there- on and incidental expenses shall have been fully paid; and after the payment of said loan or loans, the interest, and expenses, the residue of said fund shall be a permanent fund, and appropriated to the cause of common-school edu- cation, in such manner as the General Assembly shall here- after direct."
This is an admirable instance-one in a thousand-of the
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UNDER THE NEW CONSTITUTION, 1851-'91.
fathers building better than they knew. Banking interests in Indiana gave no precedents of large returns. Two dec- ades of experience were anything else but encouraging. It was meant that the Sinking Fund should pay; it might do more. In this event it was suggested by the Hon. John Beard, representative in the Legislature from Montgomery County, that the surplus profits of the bank should be de- voted to education. Perhaps, as has been feelingly said by the Hon. John Coburn, " not one man in a hundred in our State knows the name of him who proposed that the surplus proceeds of the stock of the State in the State Bank of In- diana should be appropriated as a School Fund. He is one of our greatest public benefactors, a venerable, simple-heart- ed, clear-headed, sound-minded old gentleman, living in Montgomery County, named John Beard. His name ought to be precious in the heart of every boy or girl who enjoys the benefits of free schools. When he proposed the meas- ure it was hardly treated seriously. Nobody thought any- thing would be left as a surplus; he himself doubtless did not realize its importance. But so it was, he put the net where it caught the golden fish, and we thank him for it ten thousand times ; and we thank those steady, straightfor- ward, strictly upright financiers who husbanded these funds for us." *
It was a happy thought of a noble son of the Old North State. For fifteen years he honored his county and the State in the halls of legislation with a service that easily dignifies the century for Indiana and bestows perpetual blessing upon her children. And in the constitution of our School Fund the service of John Beard must stand alongside those of Nathan Dane, Colonel Timothy Pickering, and Dr. ' Manasseh Cutler.
It is an interesting coincidence that the two men who did most to shape the early school administration of In- diana-the one its finances the other its system-were both
* See Tuttle's History of Indiana, p. 413.
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 191
from Montgomery County ; Caleb Mills, originally from New Hampshire, scholarly and professional, worthy de- scendant of the ultra-devout, severely Calvinistic Puritan; John Beard, from the far South, stanch advocate of free- dom, friend of the people, and of characteristic soundness and balance of mind. Reaching Montgomery County in 1823, Mr. Beard was in the Legislature in 1827, where he stood for the abolition of imprisonment for debt, a liberal exemption of property from execution, life sentence as a substitute for capital punishment, and a generous system of internal improvement, not less than a liberally supported, free State education. He was receiver in the land office at Crawfordsville from 1841 to 1843, and is described by one who knew him as " a walking history of Indiana " for the fifty years of his life in the State. He died September 29, 1874.
It was estimated by Mr. Kinney, writing in 1835, that within eleven years, if wisely managed, the Sinking Fund would be sufficient to pay off the original loan. And the Hon. Hugh McCulloch, cashier of the Fort Wayne branch bank, director of the State Bank, and afterward Secretary of the United States Treasury, in his Men and Measures of Half a Century, said: "Long before their maturity the State was in condition to retire the bonds. But, although her general credit had been broken down in the crisis of 1837, and her other bonds were for a number of years regarded as being well-nigh valueless, these bank bonds could not be reached, although a handsome premium was offered for them."
Within seven years, indeed, the fund had so accumulated that the Legislature enacted a law (February 6, 1841) to the effect that when debts due the fund had been collected the amount should be invested in the State Bank stock, whose proceeds in dividends and interest, after paying interest on bank bonds, should be paid into the State treasury. This payment was held to be a loan to the State from the Sinking Fund, bearing six per cent interest, the principal and interest of which were to be paid to the School Fund at the expira- tion of the banking period. Under this act the State treas-
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UNDER THE NEW CONSTITUTION, 1851-'91.
urer received for that year (1841) $27,061.51, and for the year following $29,476.32. The total payments made up to December, 1843, aggregated $115,781.27, and prior to Decem- ber, 1847, $280,070.64.
The official reports of 1855 show the accumulated surplus to have been $1,465,788.97, in 1857 it amounted to $1,955,- 461.59, and in 1858 $2,780,604.36, so profitable did the enter- prise prove to be. By an act of the Assembly of 1859 this residue, or a part of it, was, under specified conditions, or- dered to be distributed to the several counties. According- ly, in September, 1859, $145,000 were so distributed, and in January, 1860, $84,574.86 more, reaching altogether sixty- one counties, and equalizing the amounts of Common School Fund, held by the counties severally, in proportion to the number of children listed for common-school purposes .* This money was made a part of the Common School Fund, and as such loaned and made subject to the same conditions as other school funds.
By acts of December 20 and 21, 1865, the balance still in the hands of the Sinking Fund Commissioners was ordered to be converted into State stocks, the office of the Commis- sion abolished after January, 1867, and the entire fund there- after to be known as "School Fund."
These bonds were as follows:
January 1, 1867
$709,024 85
January 20, 1867
2,658,057 30
May 1, 1868.
184,234 00
January 20, 1871
177,700 00
May 3, 1873.
175,767 07
Total.
$3,904,783 22 +
Some additional amounts have been realized, and either distributed to the counties (1860) or included in the State
* See Eighth Annual Report of the Superintendent of Public Instruc- tion of Indiana, p. 18.
+ By act of the Legislature, 1889, these moneys also were distributed to the counties.
1
ORIGIN AND HISTORY OF THE COMMON SCHOOL FUND. 193
bonds noted above, making the total proceeds of the Sinking Fund to be about $4,255,731.87, or 43 per cent of the entire School Fund of the State.
For the preservation of these funds, and their faithful devotion to the interests of common-school education, the honor of the State was pledged-in the words of the act-
"For the perpetual preservation of the principal of said school and other trust funds, and for the payment of the semi-annual interest accruing thereon, for the purposes con- templated in the creation of said funds, the faith of the State is hereby irrevocably pledged." The spirit of the statute was reaffirmed also in the Constitution of 1851, which declares that " the fund arising from the one hundred and fourteenth section of the charter of the State Bank of Indiana shall be and remain a perpetual part of the Common School Fund of Indiana." )
CHAPTER XV.
SCHOOL FUNDS (Continued).
6. The Surplus Revenue Fund.
PRIOR to 1825 the monetary and other interests of the United States had been characterized by much confusion and complexity. The Federal debt of the Revolution amounted to nearly $40,000,000, and the State debts assumed by the General Government to twice as much more. The Louisi- ana purchase of 1803, together with certain individual claims upon the French, made a debt of $15,000,000, paid by the United States in bonds drawing six per cent interest, and due in fifteen years. The debt incident to the war of 1812 added another $100,000,000.
Notwithstanding all which, by the second quarter of the century, and within a single generation of Washington, and especially during the decade after 1827, the prosperity of the country was almost without precedent. The National debt
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UNDER THE NEW CONSTITUTION, 1851-'91.
had been liquidated, and there actually remained in the treas- ury a surplus of about $40,000,000. By an act of Congress, ap- proved June 23, 1836, initiated and championed by Mr. Web- ster, it was provided "that the money which shall be in the Treasury of the United States on the first day of January, eighteen hundred and thirty-seven, (after) reserving the sum of five millions of dollars, shall be deposited with such of the several States in proportion to their representatives in the Sen- ate and House of Representatives of the United States as shall by law authorize their treasurers, or other competent authori- ties, to receive the same on the terms hereinafter specified."
These "terms" required an official receipt for the money. and an obligation on the part of the State to pay the same, or any part thereof, when called for by the Secretary of the United States Treasury .* It was estimated by Mr. Webster and his colleagues that there would be at the time of distri- bution $37,468,859.47 to be disposed of. Upon this basis the division was made. The entire amount was to be paid in four equal installments, each amounting to $9,367,214.87, and all during the year 1837.
The partition being made to twenty-six States, Indiana's share was $1,147,005.92. By act of the State Legislature, February 6, 1837, in advance of their receipt, the first and second installments, each of $286,751.48, were set apart for the purposes of common schools, and the third and fourth ordered to be invested in bank stock in the recently estab- lished State Bank. The first three installments were promptly paid; what should have been the fourth was by act of Con- gress t deferred for a year. # The treasury still being empty, this was never paid. The total revenue deposit consequently was but $28,101,644.61, of which Indiana's share was $860,- 254.44. In the actual outcome, therefore, the schools, being given the first two installments, received the full amount of
* Not more than ten thousand dollars should be demanded at any one time from a single State without thirty days' notice; and all the States were to be called upon at the same time for their pro rata.
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