of its trust funds. Down to the year 1845 there was a general fund, the revenue of which went to the general support of the State government; and it is an interesting fact that down to the year 1816 there was practically no tax levy for the support of the State government; it was supported largely from the revenues derived from these funds. From 1816 down to 1845 this general fund gradually decreased, until in the latter year it entirely disappeared and gave place to a general fund debt; and the State debt continued until the year 1878.

It was natural, therefore, that the wise men who labored to establish free schools as a part of our governmental system should have endeavored to make the system permanent by creating a fund for its maintenance. Accordingly, in 1805, an act was passed by the Legislature (chapter 66), which provided that the net proceeds of the first five hundred thousand acres of State lands sold by the Surveyor-General should be appropriated as a permanent fund for the support of the common schools. This was the origin of the common school fund. No distribution of its revenues, however, was made until the year 1815, as the act creating it prohibited any distribution until the annual income should be $50,000. But from that time to 1845 the revenues derived from this fund provided all the money the State paid towards the support of its schools.

In 1851, after a struggle which is historical, the State committed itself to the policy of levying a State tax for the support of schools, and in 1867 it abolished district rates, and assumed large portions of the burden of school support as a State charge. From that time to this the amount appropriated has steadily increased until for the year 1893 it reached the sum of $4,340,381.99. In this connection it may be well to note that the total amount expended in this State for educational purposes during the last fiscal year reached $19,763,962.37. This includes State, municipal and local expenditures. Schedule A annexed shows the amount raised by tax by the State each year for school purposes from 1867 to 1894.

The only increase in the common school fund for many years was the $25,000 per annum secured to it from the United States deposit fund by the section of the Constitution above cited, if we except the $500,000 transferred to it from the general fund in 1882. This fund can only be invested in certain classes of securi

ties selected by the Legislature for their safety rather than their profit and as wealth has increased, these securities have been in such demand that the rate of interest has been steadily reduced, so that the average annual income from the fund for the ten years, from 1885 to 1894, is nearly $20,000 less than for the ten years, from 1865 to 1875. Schedule B annexed shows the amount of the fund for each of the years since its establishment, and the annual income therefrom.

From these schedules it is apparent that the amount derived from this fund has long ceased to play any important part in the amount annually appropriated for schools.

Schedule D annexed shows the present investment of this common school fund in detail.

The United States deposit fund consists of money turned over to the State under an act of Congress passed June 23, 1836, and its investment was provided for by chapter 150 of the Laws of New York for 1837. By the investment act this fund was to be distributed among the counties in proportion to population, and invested by loan commissioners on real estate security; and this was accordingly done. Since 1880, successive Comptrollers have attempted to reduce the amount of mortgage investment of this fund by declining to reinvest the moneys received in that class of security. The total amount of the fund is $4,014,520.71, and of this sum $1,439,557.73 was invested in mortgages October 1, 1893, and the remainder in other and more available securities. Losses from such mortgage investments are constant. Under the section of the Constitution cited the capital must remain inviolate. The losses of capital are made up from the revenue of the fund, thus reducing the amount available for educational purposes.

Schedule C annexed shows the amount of losses in each year since 1873, and the net rate of interest for each year.

The mortgage investments of this fund cannot readily be realized upon, and I am of the opinion that the State should not force payment from its citizens oppressively, and that only as the principal of the mortgage falls due and is paid in should these amounts be covered into the treasury, or converted into other classes of securities. I am informed that in nearly all of the States which were beneficiaries of this distribution by the federal government in 1836, the money has been covered into the treasury or distributed among the civil divisions of the State,

and is simply maintained on the records of such States as a matter of bookkeeping. To be sure, the act transferring this fund to the States provides for its return when demanded. But the contingency of such demand would seem to be very remote in view of the fact that even in the terrible financial stress of the war such a measure never received serious consideration; and if the general government should make such demand, the mortgage securities of the fund would be wholly unavailable for meeting payment. It was in view of their unavailable character that the act providing for the investment of the money, also provided that the Comptroller, in case of demand, might borrow the money necessary to make repayment.

Schedule E annexed shows the investment of the United States deposit fund in detail.

The college land scrip fund represents the proceeds of the land scrip received by this State under the terms of chapter 130, United States Laws for 1863, which were accepted by this State by chapter 460 of the Laws of 1863. The purpose of the transfer of the scrip to the State was to encourage and enable the State to provide "colleges for the benefit of agriculture and the mechanic arts." Under powers conferred by chapter 585 of the Laws of 1865 Cornell University was made the sole beneficiary of the income of this fund. It is understood that the university has complied with the conditions of the grant on its part in a manner satisfactory to the State, and the institution is now so strongly entrenched in public estimation, as well as financially, that the State's contract with it may well be considered permanent. It was contended by the university that the State was obliged to pay to it five per cent on the gross amount of the fund. But the Court of Appeals, in the case of Cornell v. Davenport (117 N. Y., 549), holds that the contention was not well founded, and that the State was liable only for what it was able to obtain from a safe investment of the fund.

The amount and present investment of the fund is shown in schedule F annexed.

The first mention of the literature fund, which I find in our laws, is contained in chapter 38 of the Laws of 1790. By the terms of this act the Regents of the University were empowered to lease certain lands therein specified, and to apply the rents, issues and profits for the better advancement of science and literature in the colleges and academies under their superintend ence. By chapter 222 of the Laws of 1819 one moiety of the quitrents and commutations for any quit-rents were appropriated for

the increase of the literature fund. By chapter 228 of the Laws of 1827 bonds and mortgages obtained on sale of any lands belonging to the canal fund, to the amount of $150,000, were to be appropriated and transferred to this fund. These were the original sources from which the fund arose. It has been increased somewhat by adding premium on securities sold, to the capital, rather than to the income.

Schedule G shows the present amount and investment of the literature fund.

By section 26, chapter 378, Laws of 1892, the amount derived from this fund is supplemented annually by $34,000 of the income of the United States deposit fund, and $60,000 from the general fund, and the total is distributed among the academies and union schools of the State. The number of institutions receiving from this fund for the year 1894 is 375, and the amount received by each goes largely for the purchase of books.

The investment of the common school, United States deposit and literature funds is provided for by the Revised Statutes (8th ed., vol. 1, p. 568, sec. 4), and by chapter 50 of the Laws of 1889. This confines investments to public securities of the United States, of this State, and of the cities, villages and towns, counties and union free school districts of the State.

In the foregoing I have briefly given you the origin, history and the present status of the several funds named in the resolution of your honorable body. In this connection it may not be out of place for me to also briefly lay before the Convention some of the arguments urged for the abolition of these funds, and those advanced in favor of their maintenance. As a general proposition against maintaining these funds it is argued that they do not yield to the State more than three or three and one-half per cent, while the taxpayer who has to borrow money is obliged to pay five per cent and upwards; that there is danger of loss from unfortunate investment, particularly in the United States deposit fund, when the money is invested in real estate mortgages; that these funds may be and have been used for partisan advantage to the detriment of the State.

As to the school fund, it is urged that while it had its origin in a patriotic desire to make permanent provision for a free school system, it has long since ceased to play any conspicuous part in school maintenance, and that it is a relic of a public policy that has long since been abandoned, viz.; the policy of maintaining the State government from the revenues of its permanent funds;

in short, that this fund is of little practical benefit to the schools at present.

The same general arguments are urged against the maintenance of the United States deposit fund, with the additional fact that most of the States that received these moneys from the federal government have already made permanent disposition of them. It is also urged that, at this time of depression, when general business is stagnated, when the wheels of industry are silent, when labor is so generally idle, and when the product of the husbandman is bringing less in the market than it costs to produce it, the covering of a portion of these idle millions into the treasury, thus largely reducing the burden of taxation, would be a measure of public relief that would be appreciated more now than at any other time in the country's history.

On the other hand, it is urged with great force that while these funds have practically outlived the purposes for which they were constituted, they are now performing a great public service, and should be maintained. For several years past it has been the policy of the Comptroller's department to invest these trust funds in school-district, village and town bonds that had been issued for public improvements. In this way sparsely settled and poor school districts have been able to build new school houses with money obtained from the sale of bonds to the Comptroller that probably could not have been placed anywhere else; villages and towns have been able to dig sewers and build water systems in the same way; towns that have made unfortunate investments in railroad bonds at high rate of interest have been able to refund their debts at low rates of interest and escape serious embarrassments; in short, that these funds have been of inestimable value to the smaller political subdivisions of the State, and have enabled them to make improvements for the betterment of health and business conditions that could not have been made were it not for the low rates at which the money of these funds could be obtained. At the present time fifty-five civil divisions and eight school districts of the State are enjoying the benefits of these funds having expended $5,966,989.72 in the manner indicated above.

In behalf of the literature fund, it is urged that by it a permanent fund is provided for the maintenance of school libraries throughout the State, which are of great value in educational work. Were it not for this fund the money would have to be pro