the constitution upon its adoption in 1914.150 This section provides that "such of the school and other public lands of the state as are better adapted for the production of timber than for agriculture, may be set apart as state school forests, or other state forests, as the legislature may provide, and the legislature may provide for the management of the same on forestry principles." This permits the state to reforest such of the state lands as are from their stony and untillable character unfit for agricultural purposes. The other amendment proposed in the same year provided for the creation of a fund of $250,000 to "be set apart from the fund derived from the sale of school and swamp lands, to be used in constructing roads, ditches and fire breaks in, through and around unsold school and swamp lands and in clearing such lands."151 The fund was to be replenished from the increased value realized from the sale of the lands so benefited.

There has been one amendment to section 3 dealing with the expenditure of the income arising from the school fund. This was adopted in 1877 and prohibits the appropriation of any of the school funds or of any public moneys or property "for the support of schools wherein the distinctive doctrines, creed or tenets of any particular Christian or other religious sect, are promulgated or taught."152

9. ARTICLE 9-FINANCES OF THE STATE AND BANKS AND BANKING. No article of the constitution has proved more unsatisfactory throughout the history of the state than this relating to the state's finances. In all thirty-four amendments to this article have been proposed, and of this number fifteen have been declared adopted by the state canvassing authorities. Another one, making sixteen successful amendments in all, was declared adopted after litigation in one of the state district courts. Eighteen proposed amendments, or more than half of all that have been submitted to the voters, have failed to carry. It is interesting to observe that since the change in the amending process in 1898, only four amendments to this article have been adopted, while fifteen have failed of adoption. Before the change twelve were adopted and only three of the fifteen proposed were defeated.

The amendments which have become part of the constitution group themselves under the following headings: Three have had reference to the socalled five-million-dollar loan; five have related to the basis and methods of taxation in the state; one to the safe-keeping of public moneys; one to the authorization of a special loan for public asylums and hospitals; two to the extension of county and municipal aid to railroads, and four to the state road and bridge fund. Some proposed amendments falling under several of these

150 Sess. Laws 1913 ch, 592

151 Ibid., 1913, ch. 593. Minn. Const., art. 8, sec. 2.

182 Ibid., 1877, ch. 3. This provision is practically the same as that proposed by the Republican wing of the constitutional convention in 1857. See p. 124.

heads have also been defeated. In addition amendments have been proposed and defeated relating to the repeal of the section requiring the publication of an annual report by the treasurer, the authorization of a tax to support state hail insurance, the promotion of reforestation, a special tax on dogs, and the development of publicly owned ore deposits under public waters.

One of the arguments which Governor Gorman put forward in favor of statehood in January, 1857, was that the territory had no public credit and that not until the establishment of a state government could the people of Minnesota "command such means as may be deemed indispensable to our welfare."153 When the constitution of the state was adopted, however, it contained in section 10 of the instant article the following prohibition: "The credit of the state shall never be given or loaned in aid of any individual, association or corporation." Furthermore, section 5 limited the permissible state debt for general purposes to $250,000 and the first legislature found it necessary to use a great deal of this amount to set the state government upon its feet. However, there was urgent need of railroads for the development of the resources of the state and the times following the financial panic of 1857 were exceedingly hard. The magnificent land grant which had been made by Congress for the purpose of promoting the building of railroads in the state would very likely lie idle unless something could be done by the state to stimulate the building of the roads. This, at least, was the substance of the argument put forth by the friends of the four companies to which the last territorial legislature had transferred the rights to the railroad lands. So effective were their arguments that the first state legislature, prior even to the admission of the state to the Union, proposed two amendments to the constitution which were designed to give the railroads a "loan of credit" to set them on their feet. One of these amendments, which has been discussed above, provided for the setting up of the state government on May 1, 1858, without any regard to what action Congress might have taken by that time to bring about the admission of the state to the Union.154 Thus was to be created, possibly even in defiance of the national authorities, the party of the second part who was to enter into the contract with the railroad companies.

The other amendment provided that section 10 of the article now under discussion should be amended for the purpose of authorizing a loan of the state's credit to the four railroad companies of five million dollars to be divided equally among them.155 Positive assurances were given the voters by all parties concerned in the submission of this amendment, that this was not a loan of state money but merely one of credit, and that the taxpayers of Minnesota could never in any possible contingency be called upon to pay any tax for the repayment of this loan.156.

153 See p. 56.

184 See pp. 135-36, 173-74

155 Sess. Laws 1857-1858, ch. 1.

150 Folwell, The Five Million Loan, in Minn. Hist. Col., 15:189, 196.

It is not necessary to recount here all the details of the experience which followed. The story has been well told in various histories and historical publications of the state.157 Suffice it to say that the whole scheme ended in almost total failure and was a most disastrous affair for the infant state. The companies were unable to fulfill their part of the contract even after they had received and disposed of state bonds to the par value of $2,275,000. The people who had been so utterly misled by their political leaders were willing to believe that the whole railroad scheme was nothing more than an outright attempt to swindle the people out of their money. No doubt this fact had much to do with the complete defeat of the Democratic party in the state elections in the fall of 1859.

The new legislature which met in 1860 proposed two new amendments to the constitution of the state. They were designed to prevent any further waste of the public funds. One of them was a proposal for a new section 10 which repealed and supplanted the amendment adopted in 1858 and provided also that there should not "be any further issue of bonds denominated Minnesota State Railroad Bonds under what purports to be an amendment to section ten of article nine of the constitution, adopted April 15, 1858, which is hereby expunged from the constitution, saving, excepting and reserving to the state nevertheless all rights, remedies and forfeitures accruing under said amendment."158 The other amendment changed section 2 of article 9 by adding thereto the following words: "But no law levying a tax, or making other provisions for the payment of interest or principal of the bonds denominated Minnesota State Railroad Bonds shall take effect or be in force until such law shall have been submitted to a vote of the people of the state and adopted by a majority of the electors of the state voting upon the same."159 It is interesting to observe that the same session of the legislature which proposed these amendments to the people also adopted a resolution calling upon the governor to destroy all unissued bonds of the state railroad bond series and to do so in the presence of a joint committee of the two houses.160

The amended section 10 speaks of "what purports to be an amendment to section 10," implying that the bond amendment of 1858 was invalid. It appears that the charge of invalidity was based principally upon the fact that the state had not been admitted to the Union at the time the amendment was adopted, and that there was no state governor then in office to sign it before its submission to the electors. This question was subsequently fully settled by the courts. The bonds which had been issued in 1858 were held

167 Folwell, The Five Million Loan, in Minn. Hist. Col., 15:189, 196. Observations, pp. 246-51; Minn. in Three Cen., 4:346 ff.

158 Sess. Laws 1860, concur. resol. no. 1, p. 297.

150 Ibid.

100 Sess. Laws 1860, jt. res. no. 4, p. 303.

And see also Hall,

to be contractual obligations of the state government.161 The amendment to section 2 quoted above which would have required a vote of the people anterior to the taking effect of any tax law for the payment of the interest or principal of the railroad bonds was later held, both by the state and the federal supreme courts, to be a violation of the obligation of contracts.162 Whatever assurances may have been given to the people at the time that the state would never have to pay these bonds, the fact remains that in the bonds themselves and in the amendment the state loaned its credit, and when these bonds reached the hands of an innocent purchaser there could be no question that sooner or later the bonds would have to be paid. The manner in which they were finally adjusted is touched upon in another place in this volume and is fully discussed by other writers.168 The interesting fact to note at this point is that even amendments to the state constitution may be in violation of the federal constitution, and therefore null and of no effect.

The amendments which have related to the basis and the methods of taxation are not so unified a group as those which related to the railroad bonds. It may be pointed out, however, that sections 1, 2, 3, and 4 of the original article 9 constituted a complete statement of the manner in which taxes were to be levied in this state. No one of these sections can be discussed without some consideration of the other three. They provided briefly that taxes should be "as nearly equal as may be" and that "all property on which taxes are to be levied shall have a cash valuation, and be equalized and uniform throughout the state."164 Sections 3 and 4 specified additional subjects of taxation and provided for the exemption of certain classes of property from any taxation, but it was clear that all of the various classes of property subject to taxation were to be taxed upon their cash valuation.

One of the first difficulties to arise under these provisions was of peculiar interest to cities and villages. It was held in an early decision that municipalities could not be authorized to levy special assessments upon abutting property owners in proportion to benefits received from the introduction of such local improvements as streets and sidewalks, but that such taxes must be apportioned according to the cash valuation of the properties.165 This was, of course, an entirely unsatisfactory method for financing local improvements and there was proposed in 1869 and adopted the same year an amendment permitting the legislature to authorize municipal corporations to levy

101 State ex rel. Hahn v. Young, 29 Minn. 474; 9 N. W. 737, (1881); Farnsworth et al. v. Minnesota and Pacific Railroad Co., 92 U. S. 49; 23 L. Ed. 530, (1875).

162 Gilfillan, C. J., said, in State ex rel. Hahn v. Young, 29 Minn. 474,550, that "The amendment of November 6, 1860, taking away the power of the legislature to provide for payment of the bonds, is in violation of this contract and lessens the efficiency of the remedy. It is, therefore, repugnant to the constitution of the United States, and void."

103 See p. 168. See Folwell, The Five Million Loan, Minn. Hist. Col., 15:189, 199-214. 104 Sec. I.

165 Stinson v. Smith, 8 Minn. 366 (Gil. 326), (1863); Bidwell v. Coleman, 11 Minn. 78 (Gil. 45), (1865).

special assessments for local improvements either upon abutting property or upon all the property benefited without regard to a cash valuation, and in such manner as the legislature might prescribe.166 This amendment was followed by another in 1881 which provided that the legislature might authorize municipalities of 5,000 or more to levy annual assessments upon all lands fronting on water mains in such municipalities according to the foot frontage upon the mains.167 These two provisions continued to be a part of the constitution down to 1906.168

In 1867 some question arose as to the power to tax the stock of the shareholders of national banks. A decision rendered by the Minnesota supreme court in 1866 would seem to have settled this question in favor of the power of the state. 169 However, in 1867, the legislature proposed to amend the constitution by adding the following sentence to section 4 of article 9: "Laws may be passed for the taxation of the stock of the shareholders of banks, whether existing under the law of this state or of the United States, by a uniform rate of taxation."170 The proposed amendment, which appears to have been quite unnecessary, was defeated.

During the nineties, a series of amendments was proposed, the general purpose of which was to bring about an increase of the taxes upon large corporations and large fortunes. In 1891 there was proposed an amendment to section 3 providing for gross earnings taxes upon railroads, sleeping, parlor, and drawing-room car companies, telegraph and telephone companies, and insurance companies, or the owners thereof, or in lieu thereof an annual license fee or tax.171 In addition there was to be "in lieu of other taxation on mining property, a specific tax upon products of all mines in this state." The latter implied, of course, a tonnage tax, as we use the term today. This amendment was not adopted. In 1893 was proposed an addition to section I which was designed to authorize inheritance taxes.172 This amendment was adopted in 1894 and continued to be a part of the constitution until 1906. It provided "that there may be by law levied and collected a tax upon all inheritances, devises, bequests, legacies and gifts of every kind and description above a fixed and specified sum, of any and all natural persons and corporations. Such tax above such exempted sum may be uniform, or it may be graded or progressive, but shall not exceed a maximum tax of five per cent." This amendment shows in an indirect way one of the limitations upon the taxing power of the state expressed in the original section 1 of this article. There was scarcely any new form of taxation which could conform to

168 Sess. Laws 1869, ch. 51.

107 Ibid., 1881, ch. 1.

108 See pp. 189-90.

109 Smith v. Webb, 11 Minn. 500, (Gil. 378), (1866).

170 Sess. Laws 1867, ch. 118.

171 Ibid., 1891, ch. 2.

172 Ibid., 1893, ch. 1.