credit, in view of the upward trend which has been so characteristic a phenomenon subsequent to the introduction of new revenue codes.

Levied on this rapidly expanding base, the twenty cent rate for revenue purposes increased faster than ordinary expenses. For the two years ending 1852, the revenue tax yielded $443,503. Governor Ford recommended that the rate be reduced to ten cents,56 a suggestion which was adopted forthwith. At the suggestion of the auditor, all unappropriated and surplus funds in the treasury were to be turned into a surplus revenue fund to be applied to the purchase of state indebtedness.57 But because of the cut in the rate for revenue purposes, a cut which reduced the receipts to the revenue fund from $443,503 to $387,510, the amounts turned over to the Surplus Revenue Fund were inconsiderable.58

The State Debt and Interest Funds.

But in spite of debt payments, the governor's estimate of the total debt on January 1, 1853, was larger than that of 1851, the figure being placed at $16,724,177. Accruing interest charges were, of course, not yet being met. But taxable property was increasing in the state more rapidly than the interest on the debt, so that the governor estimated that within five years the income from the interest tax would be sufficient to meet the full amount due annually upon the outstanding bonds.59 The task of paying off the debt was now much more hopeful than it had seemed before.

Each year the receipts into the State Debt Fund and the Interest Fund increased, due to the increase of taxable property in the state. Table 6 shows the receipts and disbursements for the State Debt Fund for the entire period

50S. J., 18 G. A., 1 Sess., pp. 12, 13.

57 Aud. Rept. 1852, p. 4; L. 1853, p. 200.

58$137,053.82 was paid into this fund in 1853 and 1854. $117,053.82 was used in purchasing state indebtedness and the balance, $20,000, was refunded to the Revenue Fund in 1856.

59S. J., 18 G. A., 1 Sess., p. 10 et seq.

during which the twenty cent tax was imposed. How important was the rôle played by this tax in paying off the state debt can be appreciated at a glance.

From Dec. 1, 1868 to Nov. 30, 1870............ 1,637,975.39

732,367.03

The receipts of the Interest Fund were correspondingly large, amounting for the biennium ending December 1, 1854, to $525,931, and for that ending December 1, 1856, to $904,420. With such an income as this the state was able to resume complete interest payments even earlier than had been anticipated. In January, 1857, this was accomplished and an end put to the increase in the state debt through the cumulation of unpaid interest charges.

60

Arrangements were made to fund the unpaid interest which had piled up before 1857. That which had fallen due before 1847 was to draw interest after 1857, while interest was allowed on the share which had gone unpaid between 1847 and 1857, after January 1, 1860.61

60S. J., 20 G. A., 1 Sess., p. 14.
61 Treas. Rept. 1856, p. 4; L. 1857, p. 104.

Now at last Illinois was once more financially respectable, meeting her legal liabilities in cash as they fell due, and holding out to her bond holders a reasonable expectation of repayment. On January 1, 1857, the net debt of the state was $12,834,144, over four and a half million having been paid during the preceding four years.62 As expressed in one of the ornate orations of the day, "The heavy debt, from the contemplation of which so many shrank back appalled, now presses no more heavily upon her energies than the curtain of the morning mist rests upon the bosom of her prairies."63

The Illinois Central Payments.

A source of revenue for debt payment which by 1857 was already of importance and which was destined to play a large part in the payment of the state debt was the Illinois Central Railroad contract. All railroads in Illinois were assessed under the general property tax except the Illinois Central which was taxed in a special manner because of special privileges granted to the railroad by the state. It is not within the scope of this study to make a detailed examination of the Illinois Central tax. Suffice it to say that in the early fifties the state assigned to the railroad considerable railroad property-salvage from the internal improvement project of 1837-and a princely grant of land which had been given to the state by Congress for the purpose. In return the company agreed to pay to the state a percentage of its gross receipts. The rate was to be five and later seven per cent. This was in lieu of all taxes.64

The returns from this contract began to reach the state treasury in 1855 and were devoted to debt payment. The amounts received from the tax during this period are shown in Table 7.

62S. J., 20 G. A., 1 Sess., p. 12 et seq.

63Oration of Robert Bell, Esq., delivered at Fairfield, Illinois, quoted by Gerhard, op. cit., p. 12.

64 Census, 1880, VII, 625.

TABLE 7.

REVENUE FROM THE TAX ON THE GROSS EARNINGS OF THE

ILLINOIS CENTRAL RAILROAD. (a)

(a) Compiled from Treas. Rept. 1904, p. 28. Before 1857 the revenues represent five per cent of the gross earnings; after 1857, seven per cent.

But the direct financial return was not the greatest benefit conferred by the Illinois Central Railroad. Its services in developing the economic resources of the state, in inducing immigration and increasing taxable values, just at the time when such service was particularly needed to aid in the solution of the problem of debt payment can scarcely be overestimated.

Another source of debt payment, a non-tax source, however, was the State Land Fund, which consisted of the receipts from the sale of state lands. For a short time. these amounted to considerable sums. Thus, during the two year period ending December 1, 1854, the receipts amounted to $280,894, and during the following biennium to $122,812. By 1856, however, practically all the lands had been disposed of.65

Summary of the Sources of Debt Payment.

From these sources, then, was the debt paid; (1) the receipts from the operation of the canal and from the sale of canal lands applied by the canal trustees to the canal indebtedness; (2) the State Debt Fund supplied from the twenty cent (two mill) tax on property in general; (3) the Interest Fund, supplied from a tax rate levied on property; (4) the Illinois Central fund, supported by the gross

65 Only 6,458 acres remained. Aud. Rept. 1856.

earnings payments; (5) the State Land Fund, consisting of the receipts from the sale of state lands; (6) the Surplus Revenue Fund, consisting of left-overs, unexpended balances in the treasury, etc.; (7) borrowings from the school funds; and (8) various payments from the Revenue Fund whose chief support was the state rate levied on property. In addition the receipts to some of these funds were in the form of state indebtedness instead of cash. Certificates of indebtedness were received, for example, in payment for state lands."

66

In 1857 and 1858 the debt was reduced $1,166,877, so that in January, 1859, the amount outstanding against the state was $11,138,454.67 By December 1, 1860, this figure had been cut down to $10,277,161.68 But now the rate of taxation, probably because of the financial depression, became the object of bitter complaint.69 A committee appointed by the legislature reported in 1859 that the taxes were "more onerous than is favorable to the growth of a new state, whose resources are developed by that class of population upon which they bear most heavily, and who will and do shun our borders in consequence of their existence." The most attractive point of attack for those who desired a reduction in the rates was the twenty cent rate for the State Debt Fund. The dissatisfaction of the bond holders with this tax has already been noted.71 The inconvenience of surrendering their securities annually to receive the dividend due them was so great that many persons simply refrained from presenting them. This made it appear that the tax was being needlessly assessed.

It has been decided to use the unclaimed portion of the State Debt Fund in purchasing state bonds in the open market. But the rise in the market value of the securities

Ibid. 1850, p. 20.

07S. J., 21 G. A., 1 Sess., p. 18.

68 This did not include the MacAllister and Stebbins claim. Repts., 22 G. A., I Sess., p. 5.

69 Aud. Rept. 1858, p. 5.

70G. A. Repts., 21 G. A., 1 Sess., I, 294.

71 Supra, p. 96 et seq.