ing in incorporated towns, 7 per cent; for erecting a schoolhouse for a joint graded school upon authorization of the voters residing in incorporated towns or cities of the fifth class and of the voters residing in the same township but outside such city or town, 4 per cent. In North Dakota, 5 per cent; funding or refunding bonds, 6 per cent. In Arizona, California, Delaware, Idaho, Kansas, Kentucky, Montana, Nebraska, Nevada, New York, Ohio, Tennessee, Virginia, Washington, and Wyoming, 6 per cent. In Iowa, school-building bonds, 6 per cent; certain other bonds, 5 per cent. In New Jersey, 6 per cent; bonds issued for a school of detention or money borrowed by a township committee for the maintenance of schools, 5 per cent. In New Mexico, original bonds, 6 per cent; refunding bonds, 5 per cent. In West Virginia, in districts having an enumeration of youth of school age of 300 or more, 6 per cent. In Minnesota and South Dakota, 7 per cent. In Illinois, common-school district bonds, 7 per cent; special school-district bonds, 5 per cent. In Oklahoma, original bonds, 7 per cent; funding bonds, 6 per cent. In South Carolina, original bonds, 8 per cent; money borrowed to repay school claims, 7 per cent. In Colorado, in districts of the third class and for refunding bonds in all districts, not exceeding 8 per cent; in districts of the first and second classes, 6 per cent. In Florida and Michigan, 8 per cent. In Missouri, 8 per cent; funding and refunding bonds, 8 per cent or 5 per cent, according to conditions. In Oregon, at a rate not exceeding legal interest. In Pennsylvania, money borrowed as a temporary debt, not exceeding the legal rate of interest.

SELLING PRICE.

1

Restrictions are also placed by 29 States upon the selling price of bonds. In 25 of these States there is provision that bonds of any description may not be sold for less than par or less than par with accrued interest; in the remaining 4 States bonds may or may not be sold for less than par, according to the conditions or nature of the bonds.

Bonds may not be sold for less than par or less than par with accrued interest.—In Arizona, California, Colorado, Idaho, Iowa, Kentucky, Louisiana, Montana, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania (for payment of temporary indebtedness), South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming.

Bonds may or may not be sold for less than par, according to conditions or nature of bonds.-In Indiana, for a bond issue not exceeding $50,000 in incorporated cities and towns for sites or buildings, at not less than 94 cents on the dollar; in unincorporated districts, to meet the conditions of a gift or bequest of $5,000 or more for a school building, at not less than 95 cents on the dollar; other bonds in all other districts, at not less than par. In Kansas, for school buildings, at not less than 95 cents on the dollar; funding and refunding bonds, at not less than par. In Missouri, for sites and buildings and for refunding bonds, at not less than 90 cents on the dollar; refunding bonds under certain conditions, at not less than par. In New Mexico, for buildings, at not less than 90 cents on the dollar; refunding bonds, at not less than par.

CARE OF THE SINKING FUND.

Another form of restriction deals with the manner of taking care of the sinking fund for the redemption of bonds. The laws of the States legislating in this particular very generally designate that the sinking

1 Arizona, California, Colorado, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming.

fund is to be used in purchasing outstanding bonds, or invested in bonds of the State or some unit thereof, or of the United States. A few States permit investment in securities of other States or of units in other States. A less general provision is that the sinking fund may be invested in first mortgages on real estate at a stated percentage of its assessed value. In a few States there are restrictions concerning the rate of interest that must be realized from the investment of the sinking fund. A still less frequent provision is that the sinking fund may be deposited in approved banks. In all, 17 States legislate in regard to the care of the sinking fund.

In Colorado, the sinking fund may be used, first, in the retirement of outstanding bonds; second, as nearly as possible, in investments in United States bonds or State bonds of Colorado.

In Idaho, the sinking fund may be invested in United States bonds, State bonds, county bonds, or county or State warrants, when the market value thereof is not below par: it may also be invested in first mortgages on improved farm lands, but such loans may not exceed one-third of the market value of the land, exclusive of improvements thereon, given as security, and must yield an annual interest of 7 per cent.

In Kansas, the sinking fund must be invested in the bonds of the same district, in the bonds of any county, township, city or other school district, or in bonds of Kansas or of the United States. Other conditions attached to the purchase of county, township, city, or school-district bonds are the following: First, bonds purchased must be certified by the attorney general of the State as acceptable security under the State depository law; second, they must mature and become due prior to the time fixed for the payment of the bonds for which the sinking fund was created; third, the sinking fund may not be invested in the bonds of any county, township, city, or school district whose bonded and floating indebtedness exceeds 10 per cent of its assessed valuation; fourth, no premium may be paid for any bonds purchased which will have the effect of reducing the annual income from the investment to less than 3 per cent.

In Minnesota, the sinking fund may not be used to purchase bonds issued to aid in the construction of any railroad; it may be invested in State bonds of any State, or in he bonds of any county, school district, city, town, or village in Minnesota, provided that such investments yield a rate of income of not less than 34 per cent per annum for the whole period elapsing before maturity.

In Missouri, the general school law of the State is that the sinking fund must be used to purchase outstanding bonds; if these can not be obtained, then the sinking fund is to be invested in bonds of the United States or of Missouri, or, at the discretion of the board of school directors, it may be loaned in the same manner and subject to the same restrictions as township school funds are loaned until outstanding bonds can be obtained. In districts under township organization, the sinking fund may be invested in first mortgages on real estate of at least double the value of the amount loaned for a period not beyond the maturity of the district's indebtedness, at not less than 4 per cent nor more than 8 per cent interest per annum; in addition, the board of school directors may require from the borrower a bond from one or more solvent sureties.

In Montana, with the surplus of the sinking fund when the same is $1,000 or more, boards of school trustees may purchase outstanding bonds; if such bonds can not be purchased, then the sinking fund must be invested in interest-bearing bonds of the United States or of the State of Montana.

In Nebraska, the sinking fund must be used, first, in redeeming outstanding bonds; after this it may be invested, in the order stated, in registered bonds of the county in which the district is situated, in the bonds of the State of Nebraska, or in United States bonds.

In North Dakota, in common-school districts, the sinking fund may be used to purchase outstanding bonds or may be deposited in National or State banks located in the county and furnishing bonds in at least double the probable amount of deposits, at the discretion of school boards. In special and independent districts the sinking fund may be used to purchase outstanding bonds, or may be invested in the bonds of North Dakota or of the United States, or may be deposited in National or State banks subject to the same restrictions as in common-school districts; in addition, in special school districts the sinking funds may be invested in first mortgages on farm lands for a period of time not exceeding 10 years and at a rate of interest not less than 6 per cent per annum, said interest to become a part of the sinking fund, provided such loans may be made only on cultivated lands which have an appraised value of at least $7.50 an acre, and then in sums not in excess of 40 per cent of the appraised value of such lands. In Ohio, the sinking fund may be used for the purchase of outstanding indebtedness or may be invested in bonds of the United States, of Ohio, or of any municipal corporation, county, township, or school district of any State.

In Oklahoma, the sinking fund may be used to purchase outstanding bonds of the district when such bonds may be purchased at or below par; or it may be invested in .bonds or warrants of Oklahoma or of any county, city, town, township, school district, or other municipality thereof; or in any public-building warrants maturing prior to the date of bonded indebtedness for the payment of which any such sinking fund is created.

In Pennsylvania, the sinking fund may be invested in bonds of the United States, of Pennsylvania, or of any county, city, borough, township, or school district of Pennsylvania, or in any bonds in which savings banks of Pennsylvania are authorized by law to invest their deposits, and not otherwise.

In South Carolina, the sinking fund must be deposited in some savings institution or bank approved by the board of school trustees at the best rate of interest that can be obtained.

In South Dakota, the sinking fund must be used to purchase outstanding bonds; otherwise it must be invested in bonds of South Dakota or of the United States.

In Tennessee, in municipalities or taxing districts having a sinking fund commission the sinking fund is to be used to retire maturing bonds; in municipalities or taxing districts having no sinking fund commission the mayor or other principal officer, with the approval of the recorder, treasurer, or city clerk, loans the sinking fund upon first mortgage real estate security in an amount not exceeding 50 per cent of the cash value thereof, the interest to be added semiannually to the sinking fund.

In Texas, the sinking fund may be used to purchase outstanding bonds or may be invested in bonds of the United States, of Texas, or of counties, cities, towns, and independent school districts within the State of Texas which have been approved by the attorney general.

In Utah, the sinking fund must be used, first, to redeem bonds maturing during the year; second, the remainder must be invested in bonds of Utah, or of any school district, town, city, or county thereof, or of the United States.

In Washington, the sinking fund may be used to purchase outstanding bonds or may be invested in school, county, or State warrants of Washington, at the discretion of school boards.

STATE LOANS TO LOCALITIES.

Loans proffered by State authorities for the purpose of assisting localities to erect schoolhouses are rigidly restricted in each of the three States in which money is so proffered. Precautions are taken to secure the safety of the loans; the loans must yield a stated rate

of interest; and they must be repaid in installments within a specified number of years.

In North Carolina, loans from the State literary fund for the purpose of erecting schoolhouses may be made by the State board of education to a county board of education; such loans bear 4 per cent annual interest, constitute a lien upon all county school funds, must be repaid in 10 equal installments, and are subject to such regulations as the State board of education may adopt. Under the same provisions as to purpose, interest, and repayment, county boards may reloan such money to school districts.

In Virginia, loans from the State literary fund for the purpose of erecting schoolhouses may be made by the State board of education to district or city school boards under certain conditions: First, the plans, estimated cost, location of buildings, and advisability must be passed upon by the State board and the State superintendent; second, the building erected must cost at least $250; third, the amount loaned may not exceed 50 per cent of the cost of the building; fourth, the State fund loaned must be fully protected against loss; fifth, when the loan does not exceed $3,000 it must bear interest at the rate of 4 per cent per annum, and when it does exceed $3,000, up to a maximum of $10,000, at the rate of 5 per cent; sixth, loans must be repaid in 15 annual installments.

In Wisconsin, loans for the purpose of erecting schoolhouses may be made to school districts by the State land commissioners from the State trust funds. Such loans must be ratified by the people at an election in which all the formalities of the law have been fully complied with, must not exceed $25,000, and in no case (including all other outstanding indebtedness) exceed 5 per cent of the assessed valuation of property within the district (not less than two-thirds of which valuation must be on real estate), must bear interest at the rate of 4 per cent per annum, and must be repaid in annual installments within 15 years.

OTHER RESTRICTIONS RELATING TO BOND ISSUES.

Certain other restrictions imposed by States upon localities concerning the issuing of bonds tend to bring local authority more directly into contact with State authority, thus increasing central control. Such restrictions include the required redemption of bonds or interest coupons at the State treasury; registration of bonds or approval of their legality, or both, by a designated State official; and the reservation by the State of the preferential right to purchase bonds upon stipulated conditions. In all, 10 States1 have adopted such restrictions.

Redemption of bonds or interest coupons at the State treasury.-In Kansas, at least 10 days before the maturity of any bonds or coupons, the treasurer of the school district concerned must remit to the State treasury, where all bonds and interest are payable, an amount sufficient to redeem any bonds or interest thereon falling due.

Registration or approval of the legality of bonds by a designated State official.-In AriDona, if local authorities fail to make the levy necessary to pay any bond or interest at maturity, and payment has actually been refused, the owner of the bond may file it with the State auditor, who registers it and gives his receipt therefor; thereupon the State board of equalization adds to the State tax to be levied in such district a rate sufficient to realize the amount of principal or interest past due, and when such tax

Arizona, Colorado, Kansas, Louisiana, Missouri, Nebraska, New Jersey, Oklahoma, Oregon, Texas.

has been levied and collected, pays the proceeds to the owner of the bond in question. In Colorado, bonds issued by school districts must be registered, when issued, by the State auditor, thus establishing the legality of such bonds against contests by the district or any person or corporation on behalf of the district for any reason whatever. In Louisiana, all bonds, after the lapse of the period of contestability as to validity— 60 days from the date of the promulgation of the result of the election authorizing the issuing of such bonds-must be registered by the secretary of state. In New Jersey, certified copies of the proceedings authorizing the issuing of bonds must be transmitted to the attorney general for his approval of the legality of such proceedings, and duplicate copies of such proceedings must be filed with the State commissioner of education. In Texas, before bonds are sold, they must be examined by the attorney general of the State and registered by the controller of public accounts. In Missouri, Nebraska, and Oklahoma, in order to be valid, bonds must be registered with the State auditor and certified by him to the effect that all proceedings attached to the issue have been regular.

Reservation by the State of the right to purchase bonds upon stipulated conditions.—In Kansas, all school bonds must first be offered to the State school fund commission, which has the option of purchasing them at not more than par. In New Jersey, no school bonds may be sold at private sale to persons other than the trustees of the school fund or to the sinking fund commissioners for the support of public schools, unless such trustees or sinking fund commissioners have refused to buy them; the sale price of such bonds may never be less than par, nor the rate of interest in excess of 5 per cent. In Oregon, all school bonds must first be offered to the State land board, which has the right to purchase them at not more than their par value, at a rate of interest not less than 5 per cent per annum. In Texas, the State board of education has an option of 10 days in which to purchase school bonds at the price offered for such bonds by the best bona fide bidder.

DISCUSSION.

The analysis of this standard shows that original power in regard to borrowing money and issuing bonds resides with the localities, no State in the Union making such action mandatory. The fact that localities have the right to borrow money and to issue bonds, or not, as they prefer, indicates localization. In the exercise of this power, however, localities are very closely restricted by nearly all of the 44 States in which localities are authorized to borrow money or to issue bonds. It is true that these restrictions are inoperative so long as localities do not exercise their power; nevertheless, in actual practice, the necessity for borrowing money or issuing bonds is widespread, and therefore, although the first impression gained from a study of the standard might seem to indicate localization, yet a closer analysis of the nature and frequency of the restrictions really indicates centralization. The extent of this centralization is increased when a State reserves the right to purchase local bonds, requires their redemption at the State treasury, or demands that they be registered by State officials and become a part of State records. The conditional loaning of money by the State to localities, points, in a degree, toward a form of State control bordering upon the paternal,

State control within the scope of this standard is no doubt due to a desire on the part of the States to protect the interests of public