This section is from the "The Subvention In The State Finances Of Pennsylvania" book, by Frederic B. Garver.
Before entering upon the consideration of the history of grants made before 1826, it is necessary to define several terms which will be frequently used in this and succeeding chapters. The term "subvention" has not been commonly used by writers on public finance; hence no accurate definition is ready at hand. Dictionaries are of little assistance in a search for the explanation of technical economic terms, but the general ideas that pervade the dictionary definitions are helpful in showing what is the non-technical or every-day meaning of words. The meaning attached by a majority of lexicographers to the word "subvention" is that of a government aid or bounty to any public enterprise. *1 But most dictionary definitions would include subsidies to private commercial concerns, a kind of "grant" that does not fall within the scope of this essay. Hereafter when the term "subvention" is used in this essay it will be taken to mean a grant of services, wealth, or property from a superior to an inferior governmental authority, or to a quasi-public corporation, or to an individual, with respect to some service commonly regarded as public in its nature.
English writers make use of the term "grant in aid" to mean a grant from a superior governmental authority to an inferior, with respect to some statutory duty imposed upon the latter. This term is obviously narrower than the term "subvention." The difference between subventions and grants in aid is that the former may be made to governmental authorities or to corporations and individuals; while the latter is made only to governmental organizations. This difference suggests at once the first basis for a classification of subventions: the legal or political nature of the recipient. In the second place, grants may be classified according to the kind of service assisted. Thus education, poor relief, or road building would fall into different categories. These two classifications are fundamental in arriving at a clear understanding of the nature of subventions.
1 The Standard Dictionary defines a subvention as "a grant, as of money, in aid of something; a subsidy, especially when regarded as legitimate and proper." A subsidy is defined as "pecuniary aid directly granted by the government to an individual or commercial enterprise deemed productive of public benefit." Webster defines a subvention as "a government aid or bounty; a subsidy."
Two other bases of classification are also significant. Subventions may be permanent annually recurring payments, or single lump-sum grants, or payments made at irregular intervals. Finally, subventions and grants may be classified according to the amount of control over expenditures exercised by the government making the grant. Thus subventions may be unconditional, as when no check is put upon the recipient, except perhaps, the mere statement of the maker of the grant that it is intended for a certain purpose. Conditional subventions are those that cannot be obtained by potential recipients, except by compliance with the terms of the grant or subvention. In extreme cases, a subvention may be so strictly controlled that the recipient acts merely as an agent of the controlling authority or maker of the grant.
The following schematic arrangement presents the four classifications.
I. Classified according to the political and legal nature of the recipient subventions are
1. Grants in aid, or subventions to political sub-divisions of the governmental authority making the grant
2. Subventions to quasi-public corporations
3. Bounties and subsidies, or grants to individuals and corporations engaged in enterprises commonly regarded as purely private in their nature
II. Classified according to the services aided subventions may be divided into as many kinds as there are services receiving aid:
1. General government (not often found)
2. Protection to life and property
b. Protection against fire
c. The military2
a. Common or elementary schools
b. Secondary schools
c. Colleges and universities
d. Technical schools of medicine, agriculture, mechanic arts, etc.
e. Schools for special classes such as the deaf and the blind
8 See Chapter VIII infra.
a. General poor relief
b. The insane
c. General and special hospitals
e. Homes for the aged
f. Miscellaneous institutions, e.g., reformation of prostitutes
5. Recreation: parks, etc.
III. Classified according to duration subventions are
2. Temporary—for a limited period of time, either one, two or more years
IV. Classified according to the control exercised by the authority making them, subventions are
1. Strictly controlled
With this classification in mind we may proceed to an examination of the development of the occasional subventions from 1776 to 1826. But before that task is undertaken it is necessary to review briefly the financial policy of the state during this period in order to get a background upon which to project our picture of the subventions.
3 Supra, p. 16.