At the beginning of this period the assets to the credit of the school fund were $1,753,317 of 6 per cent railroad bonds, $320,-367.13 of 6 per cent state bonds, and $19,474 in state warrants.

The amended Constitution of 186.6 reserved to the school fund its former endowments of securities and lands, but it did not provide, as had the old constitution, that a part of the annual revenue of the state derived from taxation should belong to the fund. As a result, the receipts during the five years 1866-1870 were from lands and railroad bonds only and were insignificant in amount. The Constitution of 1869 made some important changes. Endowments theretofore made were confirmed, and all of the proceeds of the public domain, one-fourth of the annual revenue from taxation, and a poll tax of $1 were granted. By the act of August 13, 1870, the present division of the school funds into a permanent fund and an available fund was made. Under the new tax provisions a total of $1,053,625 was received by the available fund during the four years 1871-1874. Apportionment, which had been suspended since the war, was begun in 1872, the per capita varying between $1.81 and $1.95. As there was little local taxation to supplement the state apportioned funds, the school facilities afforded were meager, but any facilities at all represented a step, forward. Such opposition as was expressed to taxation for schools was not against the state taxes but against the taxes which the county or school districts were empowered to levy. Most strongly protested was the 1 per cent ad valorem tax which the directors of each school district could, by the act of April 17, 1871, levy for the purpose of building schoolhouses and maintaining schools.1

A question which came up for consideration during this period, and which was of great importance to the school fund, was the adjustment of the indebtedness of the railroad companies to the fund. The act of November 10, 1866, gave the companies the privilege of paying the interest due in installments, the last payment to be made June 1,1870. During 1867 and 1868, $60,871.73 was paid. On March 1, 1868, the companies owed $450,140.08 on account of accrued interest, and $1,753,317 as principal, or a total of $2,203,457.08.1 The Reconstruction Convention of 1868-9 was disposed not to be lenient with the companies. It granted relief to the Houston and Texas Central, to which was joined the Washington County Railroad, and to the Southern Pacific, but the Houston Tap and Brazoria, and the Texas and New Orleans were ordered sold.2 Relief was extended to all the roads by the act of August 13, 1870, permitting payment of interest and in addition 1 per cent toward a sinking fund every six months. Past interest due to May 1, 1870, was charged as principal, and the total amount in state warrants in 1864 and 1865 was $979,069.86. The only road sold for failure to accept these provisions was the Houston Tap and Brazoria. The amount obtained from this sale was $130,000.3 As a result of this default and forced sale the school fund lost the sum of $165,800 principal and $178,970 interest.4 The Houston and Texas Central and the Southern Pacific were authorized to exchange for their indebtedness new 7 per cent bonds, and the Central was further favored by having credit allowed it for the sums paid for interest in treasury warrants during the fiscal years 1864 and 1865.5 The comptroller, however, upon the advice of the attorney general. refused to allow credit to the Houston and Texas Central for the payments made in warrants in 1864 and 1865, and the exchange of bonds was never made.6 The validity of the payments in state warrants during the war was subsequently legally contested, however, and was settled in favor of the railroads.7 Interest payments were resumed by the companies in 1870, but the experience was responsible for the constitutional provision that future investments of the school fund should be in United States bonds.

1 Proceedings of the Taxpayers' Convention, Austin, 1871, pp. 22 and 27. Kinney v. Zimpleman, 36 Tex., 554 (1872). See also Clegg v. the State, 42 Tex., 605 (1875).

1 Report of the Comptroller, 1868-9.

2 Ordinances of the Constitutional Convention, 1868, pp. 46, 77, 35, 36. 3Report of the Comptroller, 1871. 4Report of the Comptroller, 1891, p. XIX.

5 Ordinances of the Constitutional Convention, 1868, pp. 46, 47. Laws of 1870, Called Sess., p. 325.

6 Message of Governor Roberts, January 11, 1881.

7 H. & T. C. R. R. Co. v. Texas, 177 U. S., 66-103 (1899).

In 1868 $82,168.82 in 5 per cent state bonds appeared among the assets of the permanent school fund. These bonds replaced that amount of cash which was derived from the payment of United States bonds belonging to the fund and which had been used by the state government. They were regarded as a valid debt of the state, but no interest was paid on them. The 6 per cent bonds amounting to $320,367.13, which were executed to the school fund during the war in exchange for state treasury warrants received from railroads in payment of the interest and principal of their indebtedness, were not recognized as a valid debt during this period.1