1-Summary of Bonds Issued for Educational Purposes--- 2-Total Amount of Bonds Issued, Showing Date, Amounts and Maturity of Each Issue____ 3-Summary of Total Amounts of Principal and Interest due each Fiscal Year on Bonded Indebtedness for School Pur- 4 Detailed Record of all issues of School Bonds____ 5-Bond Redemption Fund-Analysis of Receipts_-_- 6-Record of Levies for Bond Redemption Fund--- 7-Record of Bond Redemption Fund Payments_-_. 8-Record Payments of Interest and Principal‒‒‒‒‒ No. 1-Trends In School Bonded Debt In the United States__. Page 36 37 39 43 CHAPTER I HOW CAN SCHOOL BUILDING PROGRAMS BE FINANCED School Costs Classified. All school expenditures may be classified under one of the three following headings: (1) running or current expenses; (2) capital outlay; and (3) debt service. These classifications may be sub-divided as follows: d. Operation of plant. (Provision and care of property-proprietary service.) e. Maintenance. Upkeep of plant. f. Fixed charges. g. Auxiliary agencies and other sundry activities. 2. Capital outlay. (The payment of money for anything which results in an increase in the total amount of permanent property possessed by the school system.) 3. Debt service. (The payment of interest on bonds and short term loans and the payment of the principal of bonds and short term loans.) It is at once apparent that money spent for land, new buildings, and new equipment constitutes the major portion of a school system's "capital outlay." The question which now arises is "How shall this money be raised?" To be still more specific, "How shall school building programs be financed?" This is a problem which confronts boards of education and superintendents of schools many times, and is very often extremely perplexing. Financing Building Programs. There are two methods of financing school building programs. The "pay as you go" plan provides that either a single tax shall be levied and collected the same year in which the buildings are erected and equipped, which shall be large enough to pay for the required property, or that a certain portion of each year's school taxes shall be put aside, thereby forming a sinking fund which will be sufficient to pay for new sites and buildings as needed. In considering methods of financing school building programs, it may prove advantageous to ascertain and inspect the practice of business concerns in providing funds for necessary expenditures. In accordance with the custom of modern business, when a person is employed by a commercial institution, an agreement is made whereby the employee shall receive his due salary weekly, bi-monthly, or monthly as is the custom of that particular house with that particular position. Again, this same concern pays bills for gas, electricity, express, et cetera, as they are incurred and properly presented. Such must be the practice of all commercial organizations if they desire to enjoy the highest credit rating. Maintenance costs must be paid as they are contracted, and such expenses must be met from current revenues. If such revenues are not adequate to meet running expenses, it is apparent that the business is operating at a deficit and cannot long endure. So much for the way in which mercantile establishments meet current expenses. For the sake of a still more concrete illustration in the financing of a building program, let it be supposed that the annual revenue of a dry-goods store totals $50,000 more than all current expenses. Let it be further supposed that because of a growing business, keen competition, and high fire insurance rates on the building occupied, this concern needs to purchase an adjoining lot worth $50,000, and erect a new building which will cost $500,000. It is evident that this corporation cannot pay for this program of capital outlay from current revenue in one year. How then is it possible for this establishment to finance the needed expansion? The answer that is made, in many instances, similar to the one just cited is the issuance of bonds, to be paid in from five to twenty years. Such a practice is a familiar one. Nearly every day reliable bond houses offer such securities for sale to private investors. Such a procedure must surely be deemed sound by the owners of the businesses issuing these bonds. Such bonds must be considered safe or they would not be handled by reputable financial houses. The analogy between school systems and business organizations is evident. Maintenance costs of public education should as truly be paid from current revenues as should the current expenses of other organizations. This hypothesis is accepted nearly universally and the exceptions to it are the unusual. In a properly administered system the rule will never be broken. Present School Tax Limits Low. Under existing tax limits, it is also obvious that few, if any, communities can pay for new school buildings from the funds raised in one year. Even if present tax limits were increased, it would still be impossible in most localities. Such being the case, the first division of the "pay as you go" plan, namely a single annual tax, is automatically eliminated. Sinking Fund Plan Impracticable. The second possibility of the "pay as you go" plan, namely the sinking fund plan, is nearly as impracticable as the first. If the administration of public money were conducted in a thoroughly scientific and accurate manner, the "sinking fund" plan of financing school building programs would be highly satisfactory. That such is not the case, and that this plan has proved unsatisfactory, is a rather well-known fact. None of the larger communities have been able continuously to employ the "pay as you go" plan in providing funds for their new school buildings. St. Louis, Missouri, and Portland, Oregon, furnish the most outstanding examples of attempts to finance school building programs by the "pay as you go” plan, but they have found it necessary to issue bonds in order to provide adequate funds for school building purposes. The following quotations reveal the prevalent attitude concerning sinking funds in the United States. "I presume that there are a great many, even of our best and most financially sound, municipal corporations of this state, if you put an expert accountant on their books, you would discover that they didn't have the proper sinking fund on hand because they hadn't levied it. Every public official, whether he has such a view when he enters office or not, before he gets through, sees the demand for money for operating expenses, tries to keep down the tax rate and the amount to be raised by taxation, and is tempted to put off paying something that falls due fifteen, twenty or twentyfive years hence, which is something for somebody else to worry about, as he wants all he can get at present. "In the estimation of school people we have reached a point where mere economy of management and mere efficiency in administration fail to give relief from embarrassed finances. We must look to a larger step-either a more radical method of securing larger revenues, or a decided curtailment of present-day educational programs. Until |