3. The Surplus Revenue Distribution

Between 1821 and 1841 the questions of how to dispose of the national lands and the surplus revenue received much attention. Of the reports, resolutions, and bills relating to these subjects, the following extracts from a long and eloquent report made to the House present the essentials of one of the proposed plans.

[American State Papers, Vol. 31 (Public Lands, IV), p. 750.]

Mr. Strong, from the Committee on Public Lands, to whom was referred the resolution of December 21, 1825, instructing them "to inquire into the expediency of appropriating a portion of the net annual proceeds of the sales and entries of the public lands exclusively for the support of common schools, and of apportioning the same among the several States in the proportion to the representation of each in the House of Representatives," reported:

That... the resolution under consideration proposes to appropriate a portion of the proceeds of the public lands to a new and specific object; to convert it into a permanent fund for the sole use and support of common schools in the several States; and to divide this fund among the several States in proportion to the representation of each in this House.

Of appropriating a portion of these proceeds to a new and specific object. A part of the public domain was acquired by the fortunes of war, and a part by purchase. The whole constitutes a common fund for the joint benefit of the States and the people. This domain amounted to some hundred millions of acres, and of it probably some two hundred millions of acres of good land yet remain unsold. It is true that the proceeds of these lands, together with those of the internal duties, and the duties on merchandise, and the tonnage of vessels, to the amount of ten millions of dollars annually, are appropriated and pledged to the "sinking fund." But is this a valid objection to the appropriation of the whole or of any part of the proceeds of these lands to any other proper object? Since the act of March, 1817, making this appropriation and pledge to the sinking fund, the annual average amount of the public revenue has been about twenty millions of dollars. So long, therefore, as ten millions of dollars are left to the sinking fund, the appropriation is answered and the pledge redeemed; and the surplus revenue,

E

from whatever source derived, not having been appropriated or pledged, remains to be disposed of in such way and for such purposes as the Congress may direct.

Of apportioning this fund among the several States. Equality of rights and privileges, both as it regards citizens and States, is the fundamental principle of our government. Hence the people, as far as the integrity and independence of the States will permit, are equally represented in the popular branch of the national legislature. Guided by this rule, the committee have no doubt that the apportionment should be made among the several States according to the representation of each in the House of Representatives. This will distribute the fund, and dispense the blessings resulting from it, upon the strictest principles of equality. The ordinary disbursement of the public money does not directly support all alike. But the proposed appropriation for the benefit of common schools is an object general in its nature and benefits. It is an appropriation in which every American citizen has a deep interest, and by the operation and influence of which the ignorant and the wise, the rich and the poor, the government and the governed, will receive direct and lasting benefits.

The resolution before the committee does not indicate, in terms, whether the principal annually apportioned, or the interest on the principal only, shall be paid over to the States. Nor does it point out any mode, in case the interest only is to be applied, of investing the principal. This part of the subject merits some examination. It seems to be manifest, that the more certain and permanent the fund, the greater and more lasting will be the benefits flowing from it. To apportion and pay the principal annually to the several States will be doing equal and exact justice. But the principal, in that case, would be annually expended. The consequence of this will be, that, as the public domain diminishes by sales until the whole is sold, the fountain whence the fund is to be drawn will be gradually and finally exhausted, and the fund and its benefits, of necessity, diminish and cease altogether. As this domain is not exhaustless, if the principal set apart for the use of these common schools be annually expended, its benefits will be chiefly confined to our own time; but by investing the principal, and dividing the interest only, the fund will accumulate, and its benefits may continue to future ages. The committee, therefore, propose that the sum annually appropriated shall be invested by the United States in some productive fund, the interest or other proceeds of which shall be annually apportioned among the several States according to the representation of each State in the House of Representatives of the United States.

No action was taken on this report, but the questions of national aid and the distribution of the surplus revenue came up for consideration many times during the succeeding fifteen years, The surplus revenue question reached a culmination in 1836, when the following bill was passed:

[U. S. Statutes at Large, V, 55.]

AN ACT To regulate the deposits of public money. Approved, June 23, 1836.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That **:

SECT. 13. And be it further enacted, That the money which shall be in the Treasury of the United States, on the first day of January, 1837, reserving the sum of five millions of dollars, shall be deposited with such of the several States, in proportion to their respective representation in the Senate and House of Representatives of the United States, as shall, by law, authorize their Treasurers, or other competent authorities, to receive the same on the terms hereinafter specified; and the Secretary of the Treasury shall deliver the same to such Treasurers, or other competent authorities, on receiving certificates of deposit therefor, signed by such competent authorities, in such form as may be prescribed by the Secretary aforesaid; which certificates shall express the usual and legal obligations, and pledge the faith of the State, for the safe keeping and repayment thereof, and shall pledge the faith of the States receiving the same, to pay the said moneys, and every part thereof, from time to time, whenever the same shall be required, by the Secretary of the Treasury, for the purpose of defraying any wants of the public treasury, beyond the amount of the five millions aforesaid: Provided, That if any State declines to receive its proportion of the surplus aforesaid, on the terms before named, the same shall be deposited with the other States, agreeing to accept the same on deposit in the proportion aforesaid: And provided further, That when said money, or any part thereof, shall be wanted by the said Secretary, to meet appropriations by law, the same shall be called for, in rateable proportions, within one year, as nearly as conveniently may be, from the different States, with which the same is deposited, and shall not be called for, in sums exceeding ten thousand dollars, from any one State, in any one month, without previous notice of thirty days, for every additional sum of twenty thousand dollars, which may at any time be required.

SECT. 14. And be it further enacted, That the said deposits shall be made with the said States in the following proportions, and at the following times, to wit: one quarter part on the first day of January, 1837, or as soon thereafter as may be; one quarter part on the first day of April, one quarter part on the first day of July, and one quarter part on the first day of October, all in the same year.

Only the first three payments were ever made, as the Treasury was practically empty by October. In October, 1837, the power to recall or assign the obligation was taken from the Secretary of the Treasury and given to Congress, and the money has never been called for. The School Fund of a few states has profited by this "deposit " of public funds, though in most of the states the money was spent or lost.

SUMMARIZED HISTORY OF THE UNITED STATES DEPOSIT FUND BY STATES. (From data given by Bourne.)

1. Alabama.

1836

1837

1840

1843

184?

Received seven quotas; $669,088.95.

Deposited in the state Bank.

Interest on surplus devoted to form a part of the annual payment of $200,000 by the bank to aid in establishing a school system.

Law of 1840 repealed.

Probably borrowed from the Bank by the state.

1854 Deposit fund included in the state educational fund, and interest on fund at eight per cent pledged for schools. 1861-1868 Interest in arrears. Fund lost then, or before.

1867

Included in school fund, and debt recognized.

1875 - Omitted from school fund; interest charge too heavy. 1876- Reincluded, but at rate of four per cent. Now part of annual state appropriation for schools.

2. Arkansas.

1836

1836

1843

1843

1850

Received three quotas; $286,751.49.

- Made part of the capital of the state Bank.
Appropriated to meet deficits in state revenue.

Interest on remainder to go to school fund. Fund almost
all used, and law a dead letter.

Balance remaining to credit of educational fund, $9163.76.
This soon lost,

3. Connecticut.

1836

Received eight quotas; $764,670.60.

1836-Governor recommended that it be added to the school fund. Legislature decided that it be deposited with the towns, proportionally, and the principal to be preserved intact. One half of the interest to be used for schools; balance for towns' general expenses.

1855

Total income to be devoted to schools. Much of the money has been lost, and the income to-day is a tax on the people in many cases.

4. Delaware.

1837 - Received three quotas; $286,751.49.

1837- Invested in bank stock and railway securities, which have been preserved and are worth much more than the original amount of the deposit.

5. Georgia.

1836

Received eleven quotas; $1,051,422.09.

1836 - Deposited in the Bank of Georgia.

1837 - One third of the income devoted to support of schools. 1840 Put into the poor-school fund. Laws soon a dead letter. Income paid into treasury, but no separate account kept of it. Used for state expenses. Bank failed in 1853, and remaining two thirds lost. Fund practically all lost.

6. Illinois.

1836

Received five quotas; $477,919.14.

1837 By a peculiar interpretation, a small amount over two thirds was used to pay the state's debt to the school fund, and was considered as devoted to education. This was then borrowed by the state and spent. Interest also used for a time.

Interest at six per cent paid to the school fund on $335,592,32.

7. Indiana.

1836

Received nine quotas; $860,254.44.

1837- One half to be loaned to the counties for the benefit of schools; remainder to be a fund for internal improvements.

New constitution added all to school fund. First half nearly all lost; second half doubled in value and made good the losses.