There has been no increase in the bonded debt of the state since 1879 except in 1885, when a deficit in the general revenue led to the issue of $200,000 of state bonds.1 Not classified by the comptroller as a part of the public debt of the state, however, is the bonded debt of the prison system, and for the reason that the bonds are not a charge upon the general revenues of the state but upon the revenues of the prison system. As the prison system is a part of the state government, its debts are really state debts, and certainly no account of the public debt should omit mention of them. The prison system is the only division of the state government which has been authorized by the legislature to issue bonds or which has been permitted to incur at will a floating indebtedness. The industrial activities of the system has made necessary an extensive use of its credit. On December 31,1911, there were outstanding against the railroad, which was a part of the prison system, $100,000 of 5% bonds. These were called Texas State Railroad bonds and were held by the permanent school fund.2 In 1913 the prison commission was authorized to issue bonds to the amount of two million dollars ($2,000,000) to pay its debts, erect buildings, equip factories, and the like.1

1 An issue of bonds for deficiency purposes was authorized in 1889, but the issue did not have to be made. Laws of 1889, p. 81.

2 Message of Governor Colquitt on Prison Affairs, January 30, 1913. Laws of 1913, p. 65. The amount originally issued and purchased by the permanent school fund in 1908 was $150,000. These were redeemed in 1909, and an issue of $200,000 was purchased by the fund. On August 31, 1914, the fund held $100,000 of the bonds.

A constitutional amendment was voted upon by the people and defeated in 1913 which proposed to empower the legislature to authorize the issue of bonds for the purpose of purchasing additional ground and of erecting buildings for the University of Texas and for the purpose of erecting buildings for the different state institutions.2 The proposed amendment provided that the income of the permanent university fund should be available to meet the interest on, and provide a sinking fund for, the university bonds.

Deficiencies in the general revenue have led to a floating debt in the form of warrants outstanding at the close of the fiscal years 1894, 1895, 1904, 1905, 1906, and 1913. The amounts were as follows:

Deficiencies at other times than at the close of the fiscal year appeared in other years.3

The prison system has had a floating indebtedness throughout its history, but there are no records of its true amounts. The indebtedness of the system on account of losses by fire and freezes, railroad losses, increased operating costs and the like was $1,528,458 on January 1, 1913.4

Treasury deficiencies have been accepted with entire equanimity by the legislature and the people of the state, despite the fact that they are in the end costly to the state and work a hardship upon its creditors. The creditors of the state have usually been forced by reason of their financial circumstances to have their warrants discounted, and the discount and the loss of the use of their money suffered by the creditors are losses which are to the discredit of the state. A state which permits losses of this character to recur again and again is either ignorant or dishonest, or both. The most obvious method of preventing loss to creditors would be to have all warrants bear a good rate of interest until they were called for payment. This was done in 1860 and 1874 and would seem therefore to be constitutional; but if it is not constitutional, it should be made so. Another method of caring for deficiencies in the general revenue is to sell short time deficiency bonds. Unless they could be sold in anticipation of a deficiency, this method should be supplemented by the preceding method. The present constitution limits the debt which may be created to pay deficiencies to $200,000. This is wholly inadequate. A constitutional amendment to raise this limit to $500,000 was defeated In 1913. It' is perhaps well that it was defeated, because the amount would have been insufficient; it would not have been sufficient, at least, for the deficiency in 1913-1914. Another method of handling deficiencies in the current revenues is for the treasury to have a large working balance. This is the least desirable method, since it would require the state to raise a larger amount of revenue by taxation than it would ordinarily have use for and would constitute a constant temptation to political governors and legislatures.

1 Laws of 1913, p. 110.

2 Laws of 1913, p. 457.

31886, 1896, and 1914 are some of the years in which such deficiencies have occurred.

4 Report and Findings on the Penitentiary Investigating Committee,. July 24, 1913, p. 1.