the states incur debts. The total of the gross debt for all the states in 1919 was $744,382,933, or $7.08 per capita. New York led the states with a total debt of more than $238,000,000; but Massachusetts, with more than $133,000,000, had the greatest per-capita debt-$34.77. New Jersey and Nebraska had the smallest per-capita debts, standing at four cents and sixteen cents, respectively. These debts may be classified as (1) funded, that is, money borrowed on the security of bonds sold to the public; (2) floating, for which there is no cash in the treasury or other assets specifically provided; and (3) the current debt, for the redemption of which provision is fully made by cash on hand or revenues levied but uncollected.

tional limi

debtedness:

for which

may be

All the states are prohibited from incurring a debt for any- Constituthing but a public purpose. What a public purpose is may be tations on determined in each particular case on the basis of a taxpayer's state insuit. In general, while money may be raised by taxation or (1) Purpose obtained through borrowing for the establishment of public the debt works or for the relief of the poor, for educational purposes, and incurred for pensions and bounties, it may not be borrowed and appropriated for the purpose of improving or aiding individuals.3 In addition to this general constitutional restriction, the constitutions of the different states make other limitations. Many states (2) Debt prohibit the legislature from creating any state debt, but imme- restrictions diately thereafter enumerate exceptions; for example, Georgia and Texas prohibit the creation of any debt except to pay the existing debt. Other states, like Illinois, Iowa, and New Mexico, limit the incurring of debt except to repel invasion, to suppress insurrection, or to defend the state in war. In addition to these limitations of purpose, most states provide limitations in amount. These limitations, known as the debt limit, may be in the nature [Debt limits] either of a specific sum or of a percentage of the assessed value of taxable property. Only three of the forty-eight states have no debt limits of any sort.

1 See Department of Commerce, Bureau of the Census, Financial Statistics of States (1919), p. 112.

2 This is an action brought by a taxpayer to test the validity of the laws levying the tax assessed against him.

3 See Emlin McClain, Constitutional Law of the United States, pp. 124127, with cases.

Payment of state debts:

(1) Sinking fund

By far the greater portion of the debts of the state are funded; that is, secured by bonds held by the public. Originally there were no provisions made for the payment of these bonds at their maturity. Few states had the courage or the resources to levy taxes in any current year so far in excess of the expenses as to enable them to redeem the bonds which fell due. They therefore resorted to the practice of issuing and selling fresh bonds to pay the obligations of the preceding issue. In this way, although the interest charges might possibly be diminished in the subsequent issues, the amount of the state debt did not decrease. Two methods are now in vogue for the extinction of bond issues.

The sinking-fund system provides for the annual appropriation of money which is invested and which, at compound interest, is expected to be sufficient to extinguish a debt at its maturity. Theoretically, there is little objection to this system, and perhaps it may be somewhat less expensive than the system later to be described, but there are very strong practical objections which the experiences of many states have shown to outweigh any theoretical advantage. In the first place, the annual appropriation may possibly not be made because of unforeseen expenses or demands upon the resources of the state. Once let the legislature omit a single appropriation, and it becomes increasingly difficult for subsequent legislatures to make up the deficit. In the second place, the money so appropriated is cared for by the state treasurer, the sinking-fund commissioner, or some board who invests the money. It is true that most states restrict and limit the free discretion of the sinkingfund commissions. Nevertheless, even within these limits, there is too often an opportunity for making bad investments. Moreover, since the states borrow money for terms of twenty, thirty, or even fifty years, an entire generation may lapse before the fund is called upon to make its payment. This length of time has occasionally given a sense of security to commissioners which they have grossly misused. Thus, it has happened that in case after case an issue of bonds for which an adequate sinking fund was provided by law cannot be retired on its maturity because the fund is not sufficient to fulfill that purpose.

bonds

The more modern way of managing a state debt is by the (2) Serial issuance of serial bonds. A certain proportion of these bonds mature annually, biennially, or at any period the legislature sees fit to determine. The state is thus called upon to pay a constantly decreasing amount for interest. But more important than that: the state is compelled every year or at certain periods to raise by taxation a sum sufficient to redeem the quota of bonds due at that date. Thus, at the end of the period for which the debt has been incurred the entire issue has been redeemed. Should the legislature fail to appropriate the money to redeem the bonds due at any particular date the credit of the state would suffer immediately. In the case of failure to appropriate for the sinking fund the injury to the credit of the state is more remote. This method has none of the disadvantages of the sinking-fund system, but it does require each legislature to appropriate a sum and thus raise a larger annual appropriation than is necessary under the sinking-fund system. The sinking fund gains by compound interest; the serial plan gains by saving interest which the state has to pay on the entire issue. As has been said, there is very little difference in the actual expense. Experience shows, however, that there is a very great saving in practice.

Importance of state

laws

Definition of law

CHAPTER XXXII

THE LEGAL SYSTEM OF THE STATES

1. SOURCES OF STATE LAW

State laws are more important to the average citizen in his daily life than Federal laws. This is more clearly understood when it is remembered that the states and not Congress possess the police power. By the police power is meant the power to regulate the health, morals, convenience, and general welfare of the citizens. This is but another way of saying that practically all criminal law is state law, not national. Moreover, it should be remembered that the political activities of the citizens are determined by state, not Federal, law. The Constitution guarantees to every state a republican form of government and prohibits any state from disfranchising a citizen of the United States on account of race, color, previous condition of servitude, or sex. Beyond this the state determines who shall take part in the government and what the form of government shall be, and makes the laws upon which the life, liberty, property, and welfare of its citizens depend.

Law has been defined as "a rule of civil conduct prescribed by the supreme power in a state, commanding what is right and prohibiting what is wrong." Certain words in this definition need explanation. (1) Law is a rule; that is, it is something permanent (until changed by the governing authority), uniform, and general. It must apply not to a single individual but to all individuals or to all of a certain class within the community or society. It differs from advice which a citizen is at liberty to follow or not, in that it depends not upon the approval of the citizen but upon the will of the maker. It differs from a contract entered into by the citizen in that the rule is a command 1 Blackstone, Commentaries, Introduction, pp. 44-46.

directed to the citizen. (2) A law is a rule of civil conduct, and is thereby distinguished from rules for moral conduct and rules of faith. Law deals primarily with the citizen in relation to other citizens and their union in the political community or society known as the State. (3) A law is prescribed; that is, it must be notified to the people. (4) A law is a rule prescribed by the supreme power of the State; in state governments by the people, acting directly by means of the initiative and the referendum, or indirectly through their representatives in the legislature.

state law:

Without attempting a complete classification of all the pos- sources of sible sources from which state law may be derived, the following outline will indicate the composition of by far the larger part of the law as administered by the state courts. This law is derived from four main sources: (1) statutory law, (2) international law, (3) common law, (4) equity.1 Statutory law, or, as it is sometimes known, written law, is statutory the conscious and formal attempt of the citizens to prescribe ́a rule of civil conduct, to make a law. Statutory law as administered by the state includes two main divisions, the Federal Constitution and the constitution of the state, and each of these divisions is subject to further differentiation into Federal statutes and treaties and state laws and municipal ordinances.

law:

eral Con

It is sufficient here to note that every right guaranteed by the (1) The FedFederal Constitution to the citizens of the United States and stitution every limitation prescribed by it upon state activities is, in the first instance, enforceable in the state courts; that is, the state courts may overrule the activity of any state official or declare unconstitutional any act of a state legislature in conflict with the Federal Constitution. In like manner all Fed- [Federal statutes] eral statutes passed in the fields of legislation which are granted to Congress are superior to state constitutions and state legislation.

1 This classification of the sources of state law is not a mutually exclusive one. International law is composed in part of statutory law (that is, treaties and agreements) and in part of custom and usage. In the same way, although common law had its origin entirely in custom, it is modified and developed by statutes. So also equity, which originated in the decision of cases, has now largely been reduced to statutes.