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 Arizona, 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

1Arizona, 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

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education. While the burden of increased taxation is immediately felt and often resented by taxpayers, the ease with which obligations be thrust forward upon future generations usually causes a proposed loan or bond issue to meet with popular favor. With a large sum of money so easily obtained on hand, a strong temptation to unwise expenditure is presented to school officers. To offset this, the States impose restrictions not so severe as to prevent localities from incurring indebtedness for necessary school purposes, but yet severe enough to make them cautious in the exercise of their prerogative.

Summary of restrictions attached to the borrowing of money and the issuing of bonds.

V. STATE REGULATION OF THE TAXING DUTIES AND POWERS OF

LOCALITIES.

A study of local taxation from the viewpoint of control must have at least two aspects: First, in very few States are the State distributive moneys sufficient in amount to maintain efficient schools; hence States generally require localities to levy a local tax for the purpose of raising additional funds for school purposes. Second, many

localities, because of a strong belief in the value of public education, desire from time to time to expand the scope of school activity, a process carrying with it increased expense, and therefore offering a field for legislative regulation. In practice, most States have adopted legislation involving both these aspects of control.

More in detail, legislation concerning the levying of required local taxes is either indefinite or definite; that is, some States merely require that local taxes must be levied for the support of schools without specifying any certain rate or amount, while other States do specify a fixed or a minimum rate or amount of tax. On the other hand, the States generally grant considerable latitude to localities by permitting them to increase the rate or amount of taxation for required taxes, or by permitting localities to levy privilege taxes, but at the same time limit such taxes as to their maximum.

UNSPECIFIED, MINIMUM, OR FIXED REQUIREMENTS.

In order to provide an amount of money additional to State appropriations sufficient to maintain schools properly, 40 States require localities to levy taxes for general or specific purposes. In all of the remaining States-Alabama, Arkansas, Georgia, Illinois, Indiana, Kansas, Texas, and West Virginia-local school authorities, usually by sanction of the voters, are permitted to levy local taxes for school support, in addition to the money received from the State taxes and the income from the school fund. Further, in Indiana, such a local tax must be levied if the State tuition fund is insufficient to maintain school for at least six months. In Texas, the State appropriation must be sufficient to maintain schools for at least six months. In West Virginia, no district may receive any appropriation from the State unless it votes to levy a local tax for the support of schools.

The general purpose for which taxes must be levied is the support of schools. The specific purposes are the erection, enlargement, repair, and furnishing of schoolhouses, and the erection of suitable outbuildings therefor, the insurance of school property, the introduction and maintenance of school libraries and free texts, the furnishing of school supplies, the supplementing of the fund for the payment of salaries of teachers, of members of school boards, of attendance officers, and the satisfaction of judgments.

REGULAR LEVY.

State regulations concerning the levying of required local taxes vary. A State may let the rate or amount of tax to be levied remain unspeci

1 Arizona, California, Colorado, Connecticut, Delaware, Florida, Idaho, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Novada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, Wyoming.