What to Do When State, Nation, Even the World Can't Pay Its Debts, 1932

“Breaking Faith With Schools of State to Keep Faith With N.Y. Banks” by Tom Bost of the Greensboro News, as reprinted in the Brevard News, July 14, 1932.

Raleigh, July 12—Proposed salary slashes, rated the most popular official pastime in Raleigh, appeared today to be at least doubtful enough among the rulers to make them give ear to school leaders all over North Carolina and they will be here tomorrow to present the other sides to the advisory budget commission and the council of state.

Must Balance Budget

The solemn session today, precipitated by a recently published letter of State Treasurer John P. Stedman, considered the suggestions of Mr. Stedman that the state cut $7 million from its $50 million appropriations and “balance the budget.” To get this perfect financial Fairbanks, it is necessary to cut heavily and illegally into the teachers’ salaries, in all state employes’ salaries and wages, then into the appropriations. This paring has gone along steadily for three years. The 1931 appropriations have been reduced to 70 percent. And the reduction now proposed takes the total down to 60 percent.

So far, so bad. The public has not cared deeply about it. It is quite conceivable that the populace can look without weeping upon larger salary and appropriations cuts. But not until the current conference of the financiers has the real reason been disclosed. These slashes are not made in behalf of the terribly over-taxed people but in the interest of North Carolina’s unimpaired credit. The heavy cuts are to be ordered to make possible “curtailment” of state obligations and to retire the state’s obligations in the usual way.

Cut for Teachers Illegal

The teachers in the state are protected by statute from this attack on their salaries. The raid upon them must be extra-legal. The state can temporarily withhold what they have and get legislative sanction for the proposed cut. The citizens have not become greatly interested in this issue until right now. But it isn’t anything like so vital as it appeared to be several days ago. The teacher are to be held up, not because the state cannot raise the revenue to pay what it has covenanted, but because New York bankers are demanding “curtailment” on notes and bonds held at a rate of 6 percent.

“Repubiation” has been dropped into the discussions. North Carolina people are a little sensitive of that subject. When New York makes demands for money that North Carolina owes for which New York hesitates accept renewals at 6 percent, the state is warned of the desperate situations. It may turn out that the state can’t get any more money. New York talks about us and says we don’t pay our debts. Then the cutting begins. Vox Pop stands by and says nothing. But until now he has not had a chance to know that these slashes are not in his own interest….

….

Everybody knows that North Carolina can’t pay its debt service now, that the United States cannot, that the world cannot. Everybody knows that if the council of state and the advisory commission decided tomorrow to cut 20 percent of the salaries and appropriations, that if the $7 million is saved, this will simply carry North Carolina to the first of the year, perhaps get a renewal of the notes at a horribly high figure and leave the state exactly where it is now.

Everybody knows that if salaries are cut in half, the appropriations in the same ratio, the schools suspended a year or orphaned by withdrawal of support, the problem has not been solved. North Carolina, which owes $180 million of its own and $380 million of subdivisional debts, cannot pay these obligations on present commodity prices.

….