The Constitution of 1876 does not require that the establishment of a sinking fund shall accompany the creation of a debt. It merely states that the legislature shall have the right to levy taxes for "the benefit of the sinking fund, which shall not be more than two per centum of the public debt."2

The bond act of July 6, 1876, provided for the establishment of a sinking fund of 2 per cent. This provision, though mandatory upon the treasurer, was not carried out. The item appeared in the appropriation bills, but no funds were reserved in 1876, 1877, or 1878. In 1879 Governor Roberts vetoed the appropriation items of $400,000 for interest and $100,000 for the sinking fund in order to force the legislature to reduce the share of the general revenue appropriated to the school fund, and after his suggestions were adopted he approved the debt items.3 In 1879 and 1880 $200,000 was set aside for the fund, but it was not applied to bonds, but to the payment of deficiency warrants.4

1 Galveston News, March 12, 1879. This had the effect of lowering the discount; message of Governor Roberts, January 11, 1881.

2 Art. 3, sec. 48.

3 Galveston News, April 24, May 8, 31, 1879. The veto was not taken in the financial world to signify a repudiation sentiment; the Commercial and Financial Chronicle, vol. 28, p. 495.

4 Message of Governor Roberts, June 10, 1879, and January 11, 1881. The report of the comptroller for 1879 and 1880 is confused on the sinking fund statement in that the fund is not credited in 1880 with the $100,000 which the general revenue fund states was transferred.

The bond acts of 1879 did not contain any provisions for a sinking fund. This method of paying the public debt was changed to one which used the surplus in the treasury and the proceeds of the sale of the public lands. In 1879 the vacant and unappropriated lands in the fifty-five Panhandle counties, or the territory north of the thirty-third degree of latitude and west of the one hundredth degree of longitude, were set aside for sale at fifty cents an acre, and one-half of the proceeds was appropriated to the payment of the public debt.1 Only $5,718 was received up to the end of the fiscal year 1880, and $2,308 was applied to the redemption of bonds.

The recognized funded debt on August 31, 1874, was $1,493,-800; the ascertained floating debt, $1,136,527; and the debt of doubtful validity, exclusive of accumulated interest, due the school and university funds was $537,008 - or a total debt of $3,-167,335. On August 31, 1880, there was no floating debt, and the funded debt, including that of doubtful validity, was $5,-566,928. The increase of $2,399,593 was due principally to the pension bond act of 1874 and to the use of bond sales to meet the annual deficiencies in the current revenues. The increase due to pensions was $1,117,300, and that on account of deficiencies was approximately $1,152,000. The receipts to the general revenue fund from bond sales amounted to $1,058,228, distributed as follows:2

Pensions and deficiencies combined were responsible for an addition of approximately $2,269,300, and the balance of the increase was due to the funding of claims antedating January 16, 1874.

1 Message of Governor Roberts, January 29, 1879. Laws of 1879, p. 48.

2 The proceeds in 1875 represented bonds sold at an average discount of 15 per cent; all the other sales were at par or at a premium. In order to get the face value of the debt which the proceeds of 1875 represent, 15 per cent is added.

The close of this period witnessed a gratifying advance in the credit of the state, for whereas 10 per cent bonds sold in 1874 and 1875 at a discount, 5 per cent bonds brought par in 1880. In 1874 14 per cent of the funded debt, including that of doubtful validity, bore 6 per cent interest, and the remainder bore 10 per cent and 7 per cent. In 1880 56 per cent was on a 6 per cent and 5 per cent basis. Five per cent was as low as the state could get money in the open market, and had it not been for the fact that the school and other special funds took so large a share of the debt, it is doubtful if a 5 per cent rate could have been secured. The wiping out of the harassing floating indebtedness, the refunding operations, and the establishment of the treasury on a cash basis after a long period of deficiencies are among the most notable achievements during this period.1

1 According to the report of the Tenth U. S. Census, the bonded debt of the state in 1880 was $5,566,928; the debt of counties, $2,509,287; the debt of cities and towns, $3,588,178.