History of the Ohio Sinking Fund Commission
On February 4, 1825, during the administration of Governor Jeremiah Morrow, the Ohio Canal Commission was established and authorized to borrow money for the construction of the state’s canal system. That first issuance of state debt (via stocks) led to the inaugural Ohio sinking fund, a means by which the state set aside money over time to retire, or sink, its debt. The canal commissioners used the sinking fund to pay the stockholders who invested in the canal.
The sinking fund was inactive between 1825 and 1845 due to the state’s poor fiscal condition and its inefficient tax collection. No principal and interest payments were made during this time. The sinking fund was used for short term loans, not as it was initially designed.
Reform of the system of taxation in 1846 put Ohio’s finances on sounder footing. Such stability enabled the sinking fund to make its first payment on the principal of the state’s debt.
Two years later, a state law re-establishing the sinking fund included new provisions for the collection of sufficient taxes to provide an annual sinking fund, plus payment of the principal strictly from the sinking fund, and the first refunding of outstanding canal bonds. These provisions enabled the orderly management of the state’s principal and interest payments on its debt.
Section 8 of Article VIII of the Ohio Constitution, adopted on September 1, 1851, called for commissioners to manage the sinking fund. The following year the Ohio General Assembly passed the necessary enabling legislation for the organization of the Board of the Commissioners of the Sinking Fund. The board took over all books and funds of the previous Commissioners of the Canal Fund (1825). An act to “create” a sinking fund was passed in March 1853 and provided that such a fund was to be faithfully applied to the payment of principal and interest of debt and only to pay public debt. The commission was originally comprised of the Auditor of State (as president), the Secretary of State, and the Attorney General. Article VIII, Section 8, was amended on November 4, 1947 to add the Governor and the Treasurer of State to the Board of the Commissioners of the Sinking Fund.
The Commissioners of the Sinking Fund were responsible for issuing many types of debt for the State of Ohio after 1851, as well as administering and applying the “sinking fund” to the payment of principal and interest of the public debt, and reporting its activities semi-annually to the Governor and the General Assembly.
On January 1, 2001, the 123rd General Assembly passed House Bill 640 which transferred to the Ohio Public Facilities Commission from the Board of the Commissioners of the Sinking Fund the authority to issue general obligation of the State for coal research, development projects for state and local parks and other natural resources capital projects. The bill also transferred from the Commissioners of the Sinking Fund to the Ohio Treasurer of State the authority to issue general obligation bonds for highway capital improvements.
Today, the Commissioners of the Sinking Fund have no issuing authority. The Office of Debt Management performs the ongoing roles and responsibilities which entail administering debt payments for the State of Ohio and reporting its activities to the Governor and the General Assembly on a semi-annual basis. The last meeting of the Board of Commissioners of the Sinking Fund took place March 19, 2008.