APPENDIX E STATE GOVERNMENT LOANS TO FARMER Some states hand their permanent school and educational funds directly to farmers at a low rate of interest. Many states are withdrawing slowly from this practice. Duffus (1912) reported in detail to the Wisconsin State Board of Public Affairs that this policy had been followed for a number of years in Idaho, Indiana, Iowa, North Dakota, Oregon, South Dakota, and Utah with successful results.1 In South Dakota, loans aggregating $6,216,405 were in force on September 30, 1912. In the twenty years during which the state had been making loans only one foreclosure had been necessary. The system has met with equally successful results in other states. Many states have been planning a wide extension of their loan system in order that it may supply farmers with an unlimited amount of capital at low interest rates. Some states have gone so far as to make provisions for loaning to farmers from the State Treasury, and issuing tax exempt bonds and treasury certificates. The loaning of state and educational funds to farmers are summarized as follows: Arizona Arizona State Law provided (1915) for the proceeds from state lands to be invested in farm mortgages. California The State Land Settlement Board (1918) offered to settlers 3,421 acres of land purchased from Stanford 1 W. M. DUFFUS, Report of the Wisconsin State Board of Public Affairs on State Loans to Farmers, 1912, pp. 80-102. University, and 2,500 acres purchased from adjoining owners. The first tract has been divided into fifty-three farms, and twenty-one allotments for farm laborers. The board provides irrigation until the settlers are sufficiently organized to take it over. The board has also made improvements, erected houses and farm buildings and offered settlers and laborers the following terms: Prices of Land and Terms of Payment for Land and Improvements1 The subdivisional plan which is at both of the board's offices above described, shows the location and area of the different allotments with their allotment numbers and table (1) gives the price of each farm and of the improvements already made by the board thereon. Five per cent of the cost of the land must be paid at the time of purchase and 40 per cent of the cost of the improvements. Payment of the remainder of the purchase price of land and improvements can, if desired, be made in semi-annual payments extending over twenty years, with interest at the rate of 5 per cent per annum, payments of principal and interest to be made semi-annually. These payments will be amortized in accorIdance with the table of the Federal Farm Loan Board. If settlers desire they can make a larger initial payment or they can pay off any number of installments of the principal at any installment date after five years from the first payment. The settler, on making the initial payment, is given a contract of purchase which sets forth the conditions of payment and the obligations a settler assumes. He is given a deed to the land when payments are completed. This is in accord with the Land Settlement Act of 1917 which states its purpose to be that of: promoting closer agricultural settlement, assisting deserving and qualified persons to acquire small improved farms, providing homes for farm laborers, increasing opportunities under the Federal Farm Loan Act, and demonstrating the value of adequate capital and organized direction in subdividing and preapring agricultural land for settlement. 1 State Land Settlement Board of California Bull., May, 1918, pp. 4-5. Colorado Colorado State Law permitted (1915) certain funds derived from public lands to be invested in farm mortgages. Idaho Article IX, Sec. 2, of the State constitution as amended in 1900 provides for loans to farmers on first mortgages on improved land up to one-third the value of the land exclusive of buildings, as fixed by the state appraiser. These loans run from one to five years and the principal is payable at maturity. Since 1912 the amount of a loan that may be made to one person is limited to $5,000. September 26, 1912, the State had outstanding $1,509,191.33, in farm loans. This scheme of farm loans has been in operation in Idaho for twenty-seven years, and since 1911 the state has not been able to supply the demand by a great deal. Indiana Under constitutional authority of Art. 8, Sec. 185 and 187, the State Common School funds of Indiana have been at the disposal of the county authorities, when distributed to them for investment in real estate mortgages and other securities since 1859 and possibly before. The Auditor's report for the year ending September 30, 1911 shows that the interest on the school fund loaned for that year amounted to $526,986. The state does not discriminate in favor of farm loans but merely provides that loans may be made on real estate security. Loans are made only on first mortgage security. The amount of a loan may equal one-half the appraised value of the land, if located in the borders of the county making the loan, otherwise the loan must not exceed 40 per cent of the appraised value of the premises. In no case shall one loan exceed $4,000. The system has been a success. Indiana has also given to rural loans and savings associations the privilege of requiring the auditor of the State to serve as trustee of the farm mortgages securing their bonds. Iowa Through Art. IX, part 2, Sec. 1 of the State constitution loans are made on mortgage security. Just how much is loaned to farmers is not known, but the aggregate amount of all loans on mortgage security, June 30, 1910, was $4,595,731.19. Loans are made on first mortgages for one-half the value exclusive of buildings. So far as the law is concerned there is no limit to the length of loans. However, the permanent school fund of Iowa has been loaned on farm mortgages and mortgages on real estate for about sixty-five years. Previous to 1860 the system was not a success and losses were sustained amounting to $50,000 but since that time the scheme has been better organized and is successful as well as most helpful. Montana The State Law of Montana created (1915) a department of farm loans with the state treasurer as commissioner and the county treasurers as local representatives to issue bonds and make tax exempted loans on farm lands. North Dakota Article 9, Sec. 162, of the Constitution, adopted in 1889, provides that money of the permanent school funds and other educational funds may be loaned on first mortgages on farm lands, not to exceed in amount one-third the actual value as determined by the board of appraisers of school lands. The state had little call for funds till recently. Most of the loans have been made since 1907. On June 1, 1912 the state held 1,069 farm mortgages as security for loans aggregating $1,680,012.25. Loans are made on first mortgages for a term not to exceed twelve years. The principal and interest shall be repaid as follows: For five years the interest is to be paid annually; commencing with the sixth year the borrower may pay, in addition to interest, installments in amount equal to 10 per cent of the principal or multiples of 10 per cent. After three years the borrower may repay the loan in full on any interest date, provided, if he pay the loan before. it is due, he shall pay an additional six months' interest on the principal for the privilege. Loans are made only upon cultivated lands within the state to residents of the state. The appraisal value of the land must be at least $10 an acre, and no loan shall exceed $5,000 to any one person. So far there has been but one foreclosure in the state. The system is a success. Oklahoma Article XI, Sec. 6, of the state constitution adopted 1907, provides for the loaning of the permanent common school and other educational funds on first mortgages upon improved farm lands within the state. No loan shall exceed 50 per cent of the reasonable value of the land or be made for a longer term than five years. August 2, 1912 the aggregate amount of loans made to farmers since 1907 was $4,079,225. There has never been a foreclosure in the state under this system. In 1915 the state of Oklahoma made provisions to loan money up to $2,000 to men wishing to become farm owners and these men will have twenty-three and onehalf years to pay back the loan. They will take a mortgage on farm land the value of which is twice the value of the loan. The borrower will pay 8 per |