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IV. RESTRICTIONS UPON THE RIGHT OF LOCALITIES TO BORROW MONEY AND TO ISSUE BONDS.

Under the American system of education the successful administration of public schools depends largely upon the spirit of independence and enterprise possessed by the various localities, and upon their readiness to assume financial responsibility. Recognizing these facts, nearly all the States1 have adopted legislation authorizing localities to borrow money and to issue bonds for school purposes. This form of participation in the financial support of public schools is not made compulsory upon localities by the States; nevertheless there is manifest a very general desire on the part of the former to provide types of schools representative of community interests. In order to accomplish this aim, it is often necessary for localities to borrow money and to issue bonds, because limited State appropriations and the proceeds of local taxation do not afford revenue sufficient for the introduction and maintenance of the superior educational advantages which a large number of the more progressive localities desire. Furthermore, the amount of taxes necessary to be raised in any one year for certain purposes may be deemed by local school authorities to be burdensome; the borrowing of money or the issuing of bonds tends to distribute the burden of taxation and to provide for immediate needs. Therefore we find that 44 of the 48 States authorize localities to borrow money and to issue bonds. In 3 of these States-North Carolina, Virginia, and Wisconsin-loans are made to localities from the State school fund. In borrowing money and issuing bonds, localities are restricted by State legislation. Such restrictions may name (1) the persons authorized to borrow money or issue bonds, (2) the purpose for which money thus raised may be expended, (3) the amount that may be borrowed, (4) the period for which bonds may run, (5) the denomination in which bonds may be issued, (6) the rate of interest they must bear, (7) the selling price they must command, (8) how the sinking fund for their redemption must be cared for, (9) the conditions under which States proffer loans to localities, and (10) other details.

AUTHORITY.

The first detail of restriction deals with the designation by central authority of the persons ultimately responsible for authorizing the borrowing of money and the issuing of bonds. This policy is common to 41 States. In 28 States 2 such responsibility is vested solely in legal voters; in 8 States, in legal voters who are taxpayers; in 3 States,1 either in legal voters or in school trustees, according to the purpose

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1 Except Alabama, Maine, Maryland, Massachusetts.

2 Arkansas, Connecticut, Delaware, Illinois, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

3 Arizona, California, Colorado, Florida, Louisiana, Mississippi, Texas, Utah.

4 Georgia, Idaho, Ohio.

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for which or the district in which bonds are to be issued; in 1 State,1 in school trustees alone; in 1 State, either in the township trustee upon authorization of the township advisory board, or in school trustees, according to the kind of school unit concerned.

Although legal voters most frequently have the actual power as to the issuing of bonds, yet in a number of States where this is so, local school authorities are intrusted with certain minor powers, such as preparing an estimate of the probable amount of money needed, as in Colorado, Michigan, Nevada, and Ohio. In Arkansas, for erecting and equipping school buildings in special school districts, boards of directors prescribe conditions and regulations as to amount, time, and manner of payment of bonds. In Michigan, before bonds may be issued, the school board must pass upon the legality of the proceedings in voting the bonds. In Iowa the school board may not attempt to defeat the wish of the voters clearly expressed, yet a vote to issue bonds is regarded somewhat as permissive authority. In New York (in union free-school districts for building schoolhouses) and in Missouri, local school authorities may issue bonds for a less sum than the amount authorized by vote. In New Mexico, when a school district does not own a schoolhouse, the county superintendent has power upon a petition signed by 20 residents to order the school directors to submit the question of issuing bonds for such purpose to the voters. In the States in which bonds are issued on vote of the electors or of the voting taxpayers a notice must be given either by the district itself or by local school authorities stating the time of election, the amount of money to be raised, the purpose or purposes for which bonds are to be issued, the rate of interest thereon, and the number of years they are to run. Although the issuing of original bonds is vested primarily in legal voters, the power of renewing, extending, and replacing bonds is generally vested in school trustees. For example, when school sites are to be purchased, schoolhouses erected, furnished, repaired, etc., the people must vote upon the question; but if it becomes necessary to refund bonds already authorized by the people, local school authorities have the power to take such action. It should also be noted that in some of these States, although the legal voters must pass upon the original issue of permanent bonds, a school board, in addition to the power of renewing, extending, and replacing such bonds, has original power to issue temporary bonds or warrants in anticipation of its regular income from taxes.

PURPOSE.

Another restriction attached to the borrowing of money or the issuing of bonds is the designation by States of the purpose for which money thus raised may be expended. This restriction holds in all of

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1 Pennsylvania.

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2 Indiana.

the 44 States authorizing the borrowing of money or the issuing of bonds. The most common of the purposes designated are the purchase, condemnation, and improvement of sites; the erection, repair, and furnishing of schoolhouses; the building of additions thereto; the maintenance of schools; and the refunding of bonds. The least frequent purposes are the payment of teachers' salaries; the introduction and maintenance of school libraries and vocational education, including manual training; the establishment of a school of detention; the establishment and maintenance of playgrounds and gymnasiums; the insurance of school property; and the meeting of unusual conditions. The following chart shows in detail these purposes, as specified by the various States: Survey of purposes for which money may be borrowed and bonds issued.

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AMOUNT.

Restriction is also placed upon the total amount of bonded or other indebtedness which may be incurred by localities. Such restriction occurs in 33 States and may be expressed in terms of dollars, in a certain percentage of the valuation of taxable property, or in a combination of such terms.

These limitations are as follows:

In Arizona, 6 per cent. In California, 5 per cent. In Colorado, 5 per cent in districts of the first and second classes and 3 per cent in districts of the third class. In Idaho, for building and furnishing schoolhouses, 4 per cent; for sites, buildings, and furnishing schoolhouses in independent districts, 5 per cent. In Illinois, 5 per cent. In Indiana, 2 per cent; for constructing and equipping a room or building in ̧ which to teach the arts of agriculture, domestic science, or physical or practical mental culture, or for general township use, 1 per cent. In Iowa, 1 per cent; for building and furnishing schoolhouses in independent districts, 4 per cent. In Kansas, for erecting and purchasing schoolhouses, 14 per cent, except that upon petition of at least one-half of the number of electors entitled to vote the State board of school fund commissioners may, for the purpose of erecting buildings, authorize a school district to vote bonds to an amount of 50 per cent in excess of 11⁄2 per cent, or a total of 21 per cent; for the refunding of outstanding debt no bonds may be issued where the total indebtedness of such school district or board of education would thereby exceed 1 per cent of the assessment for taxation. In Kentucky, in cities, 2 per cent; in common graded school districts, $150,000. In Louisiana, 10 per cent. In Michigan, 10 per cent; in districts having 100 or more census children, $100 per capita of such census. In Mississippi, 5 per cent. In Missouri, 5 per cent. In Montana, for purchasing sites and buildings and equipping schoolhouses, 3 per cent, but not exceeding $500,000 (one district in the State excepted). In Nebraska, in districts having 100 or more children of school age, such a rate as may be agreed upon, not to exceed 12 per cent of the assessed valuation; in smaller districts, not to exceed 5 per cent, such maximum rate being subject, however, to the maximum amount in dollars hereafter stated; in districts having 50 or more children of school age but less than 100, $5,000; in districts having 25 or more children of school age, but less than 50, $2,000; in districts having 12 or more children of school age but less than 25, $500; in districts having less than 12 children of school age no bonds may be issued.

In New Jersey for purchasing sites, erecting buildings, etc., 3 per cent; for establishing a school of detention, one-half of 1 per cent of the ratables of the county. In New Mexico, 4 per cent. In New York (special school districts), 5 per cent. In North Dakota, 5 per cent. In Oklahoma, 5 per cent. In Oregon, 5 per cent. In Pennsylvania (except in districts of the first class), 7 per cent; in school districts having no indebtedness or whose indebtedness is less than 2 per cent, a temporary debt may be incurred in districts of the first and second classes not exceeding twotenths of 1 per cent, and in school districts of the third and fourth classes, one-half of 1 per cent, provided that in both cases the whole school-district indebtedness does not exceed 2 per cent. In Rhode Island, 3 per cent, the giving of a new note or bond for a preexisting debt, or for money borrowed and applied to such debt, excepted, and the amount of any sinking fund having been deducted in computing such indebtedness. In South Carolina, 4 per cent. In South Dakota not more than $2,500 for any one schoolhouse, except in towns or villages of more than 100 inhabitants, where 4 per cent is the limit; when two or more schools are consolidated, $4,000, within a limit of 4 per cent; in independent districts of at least 100 inhabitants, 5 per cent. In Tennessee for all public

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