The public debt constituted the liveliest of the period's financial problems. When the Coke administration succeeded the Davis on January 14, 1874, the general revenue account was confronted with estimated demands of $1,236,116 before the end of the fiscal year and with estimated receipts from taxes of only $481,714. The amount of cash in the treasury was only $36,173, and there was owing to the available school fund for its share of the general revenue about $60,000. The available school fund was in an equally critical condition; its balance on hand was $157,603, but this was below its requirements, and the fiscal year closed with warrants outstanding, or a deficit, of $104,577, and with unaudited claims of school teachers for more than $400,000. State warrants were hawked about for sixty and seventy cents on the dollar, reflecting the low ebb of the state's credit.1

There were three courses open for meeting the exigency; namely, the levying of a sufficient tax .to pay the outstanding floating debt, the sale of bonds, or the funding of the floating debt. The course favored by the governor was to cut off the warrants issued before January 14, 1874, from payment out of the current revenues and to fund them. All three expedients were resorted to. By the act of March 4, 1874, the issue of bonds to the amount of $1,000,000, bearing 7% interest and payable thirty years from January 1, 1874, was authorized, and it was provided that their proceeds should be applied exclusively to the payment of warrants drawn between January 1, 1866, and January 15, 1874, and of warrants since drawn on account of indebtedness incurred between these dates.2 Such warrants could be registered and draw 8% interest, and were receivable at par in payment for any bonds of the state. The bonds authorized were sold to private investors in 1874 and 1875 at 85 and 86 cents on the dollar. The gross amount realized was $851,465, which, less selling commissions of $17,029, netted $834,4361

1 Message of Governor Coke, February 10, 1874.

2 Laws of 1874, p. 14. The original act did not specify in what kind of money the interest and principal should be payable, but two amendatory acts stipulated gold.

In addition to the above issue, there was authorized the sale of $400,000 of the frontier defense bonds, as the 7% 20-40 year bonds of the act of August 5, 1870, were called, and $500,000 of the 7% 20 year revenue deficiency bonds of the act of December 2, 1871.2 The proceeds of the sale of these two bond issues were applied to the payment of Williams and Guion, of New York, with whom one hundred and fifty of the bonds had been hypothecated by the Davis administration, and the balance was turned over to the general revenue fund. These bonds were sold to private investors, the frontier defense ones bringing from 85 to 92.5 cents on the dollar, the revenue deficiency ones from 85 to 95 cents. The gross amount realized from the $900,000 sale was $799,671; commissions of $15,993 were paid, leaving $783,678 net. By the three 7% bond sales authorized by the two acts of March 4, 1874, a total of $1,900,000 was added to the bonded debt; the gross amount received was $1,651,137, or an average of 86.9 cents on the dollar; commissions paid at the rate of 2% amounted to $33,032; the net amount received was $1,618,114, or 85.1 cents on the dollar.3 The net proceeds of the sales were disposed of as follows: $607,357 to the payment of warrants on account of indebtedness incurred prior to January 15, 1874, excluding the warrants outstanding against the available school fund; $354,562 to Williams and Guion; $653,752 to the general revenue fund to meet current expenses; and $2,665 to legal expenses, express charges and miscellaneous.

The addition to the public debt made by the above bond issues is unquestionably chargeable in large measure to the Reconstruction administration. There has been a disposition to charge to it also the large bonded debt incurred on account of pensions. The legislature of 1870 granted very liberal pen-sions to the veterans of the Texas Revolution, but Governor Davis vetoed the items in the appropriation bill for 1871 and 1872. By an act of April 21, 1874, the pension act was repealed and it was provided that all arrearages of pensions due under the act up to July 1, 1874, should be paid in state bonds, bearing 10 % interest, payable 20 years after date, but redeemable at the pleasure of the state within five years.1 By 1879, $1,115,-009 of the pension bonds and $18,610 of certificates convertible into bonds were outstanding, making a total debt on this account of $1,133,619.

1 House Journal, 15th Leg., p. 166.

2 Laws of 1874, p. 16.

3 House Journal, 16th Leg., Reg. Sess., p. 803. The proceeds were in depreciated greenbacks. In gold the net proceeds were equivalent to $1,451,842. Galveston News, April 20, 1876.

The funding of the floating indebtedness was also resorted to as a means of relieving the pressure upon the treasury. , The act of May 30, 1873, which authorized the issue of one-half million dollars of 10% funding bonds, was amended so as to provide for bonds of denominations other than $100, for coupon instead of registered bonds, and for funding the interest on warrants as well as the warrants themselves.2 There were $89,800 of the 1873 bonds outstanding on August 31, 1874, and'. their exchange for the new issue was authorized, and all but $4,400 were exchanged. New bonds to the amount of $413,600 were issued, making a total outstanding on August 31, 1876, of $503,400.3 These bonds were payable ten years after January 1, 1874, but were redeemable at the pleasure of the state at any time after three years from their date.

The important feature of debt legislation in 1875 was the settlement of the International Railroad bond subsidy controversy. The question of the subsidy was reopened by the legislature immediately upon convening in 1875 by the introduction in the senate of a bill which would limit the subsidy to $3,000,000. This bill passed the senate by the narrow vote of 14 to 12.4 In the house of representatives there were amendments made which would require the company to purchase $320,000 of state bonds and to pay annually 2% of its gross earnings until the payments with other taxes should equal the principal and interest of the subsidy bonds.1 The senate concurred in the amendments and the bill went to the governor.2 There was a feeling of uncertainty as to what the governor would do, but it was settled shortly by his veto.

1 Laws of 1874, p. 117.

2 Act of May 2, 1874; Laws of 1874, p. 207.

3 Warrants received for funding aggregated for the years 1874. 1875, and 1876, $505,985.45; cash received in order to make even amounts of bonds, $1,190.98. There were also martial law certificates to the amount of $2,813 received in the collection of taxes and canceled.

4 Senate Journal, 14th Leg., Second Sess., pp. 104, 155, 204, 217, and 226.