STATE REVENUE FROM FUNDS.
1. The existence of funds.
2. The origin of many of them.
3. Permanent funds.
4. The supplementary school funds.
6. Trust funds.
1. Many of the States have funds, the income from which is devoted to the payment of specific purposes. One of the best known of these is the school fund. They have been accumulated in various ways, by the sale of lands, direct appropriations, fines, and through other in come accruing to the State.
2. Many of the funds, however, are nothing more than permanent or sessional appropriations under another name. Thus, in the accounts of many States appear gen eral funds, which are simply general appropriations. An interest fund, for example, is nothing more than a perma nent appropriation for paying interest, corresponding with the permanent appropriation of Congres for the same purpose. By providing that such a fund must be paid is another way of declaring that the State must pay what ever interest it may owe.
3. Permanent funds, which are sustained by securities of various kinds acquired by the sale of land and other property, are much fewer in number. The largest and most important of all is the school fund. Many States have such a fund. That of Connecticut was derived years ago from the sale of the Connecticut Western Reserve, the northeastern part of Ohio. The money is largely in vested in land mortgages. The school fund of Texas, one of the largest of any State, is chiefly derived from the sale and lease of State lands. Likewise, in Wiscon sin the fund comes from the same source, besides prop erty that escheats to the States, fines, payment for exemp tions from military duty, and 5 per cent, on the net sale of State lands belonging to the United States. A few years ago Massachusetts determined to add $1oo,000 an nually to her school fund until the amount reached $5, 000,000. From an economic point of view, of course,
nothing more was gained than would have been by ap propriating, raising and paying a sum equivalent to the interest thus set apart from the general appropriations. If the $ioo,000 was an addition to the appropriations that otherwise would have been made, the people were taxed for it ; if it was not, some other appropriation was reduced a similar amount; or, it might have been borrowed. If so, the operation consisted simply in creating a new debt to enlarge the school fund. The gain to the school sys tem was the insuring of a larger permanent income.
4. In many of the State accounts a supplementary fund for education appears under different names. This is nothing more than an annual appropriation which is to be paid from the receipts of taxes. Thus this term, fund, so often used in State finance, rarely means a resource from which the State derives pecuniary assistance.
5. In this connection may be mentioned State sink ing-funds, which consist of money derived from taxation or securities purchased with it, that are to to be devoted to the payment of debts due at a future time. Instead of buying these, it is often preferable to invest the money that might be thus applied in other securities that can be converted into money whenever it is needed to pay the matured obligations of the State.' 6. Lastly, the State may hold various trust funds, like those given by foreign insurance companies for the priv ilege of transacting business within a State.
'The theory of a sinking fund and the operation of Ameri can sinking funds are the subject of an article by Prof. E. A. Ross, 7 Pub. of Am. Economic Assn. 195; see also IL C. Adams' Public Debts.