What happened in Virginia in the years following the passage of the Funding Act of 1871 quizlet?

The Compromise of 1877 was an informal agreement between southern Democrats and allies of the Republican Rutherford Hayes to settle the result of the 1876 presidential election and marked the end of the Reconstruction era. 

Immediately after the presidential election of 1876, it became clear that the outcome of the race hinged largely on disputed returns from Florida, Louisiana and South Carolina–the only three states in the South with Reconstruction-era Republican governments still in power. As a bipartisan congressional commission debated over the outcome early in 1877, allies of the Republican Party candidate Rutherford Hayes met in secret with moderate southern Democrats in order to negotiate acceptance of Hayes’ election. 

The Democrats agreed not to block Hayes’ victory on the condition that Republicans withdraw all federal troops from the South, thus consolidating Democratic control over the region. As a result of the so-called Compromise of 1877 (or Compromise of 1876), Florida, Louisiana and South Carolina became Democratic once again, effectively bringing an end to the Reconstruction era.

Compromise of 1877: The 1876 Election

By the 1870s, support was waning for the racially egalitarian policies of Reconstruction, a series of laws put in place after the Civil War to protect the rights of African Americans, especially in the South. Many southern whites had resorted to intimidation and violence to keep blacks from voting and restore white supremacy in the region. 

Beginning in 1873, a series of Supreme Court decisions limited the scope of Reconstruction-era laws and federal support for the so-called Reconstruction Amendments, particularly the 14th Amendment and 15 Amendment, which gave African Americans the status of citizenship and the protection of the Constitution, including the all-important right to vote.

Did you know? After the most disputed election in American history, the Compromise of 1877 put Rutherford Hayes into office as the nation's 19th president; outraged northern Democrats derided Hayes as "His Fraudulency."

In addition, accusations of corruption within the administration of Ulysses S. Grant and an economic depression had heightened discontent with the Republican Party, which had been in the White House since 1861. As the 1876 presidential election approached, the Democrats chose Governor Samuel B. Tilden of New York as their candidate, while the Republicans nominated Rutherford B. Hayes, governor of Ohio. In his acceptance of the nomination, Hayes wrote that if elected, he would bring “the blessings of honest and capable local self-government” to the South–in other words, restrict federal enforcement of unpopular Reconstruction-era policies.

Compromise of 1877: Election Results

On Election Day that November, the Democrats appeared to come out on top, winning the swing states of Connecticut, Indiana, New York and New Jersey. By midnight, Tilden had 184 of the 185 electoral votes he needed to win and was leading the popular vote by 250,000. The Republicans refused to accept defeat, however, and accused Democratic supporters of intimidating and bribing African-American voters to prevent them from voting in three southern states–Florida, Louisiana and South Carolina. As of 1876, these were the only remaining states in the South with Republican governments.

In South Carolina, the election had been marred by bloodshed on both sides of the party line. Supporters of the Democratic gubernatorial candidate Wade Hampton, a former Confederate general, had used violence and intimidation to confront the African-American voting majority. A clash between black militia and armed whites in Hamburg in July ended in the death of five militiamen after their surrender, while at Camboy (near Charleston), six white men were killed when armed blacks opened fire in a political meeting. 

With both sides accusing each other of electoral fraud, South Carolina, along with Florida and Louisiana, submitted two sets of election returns with different results. Meanwhile, in Oregon, the state’s Democratic governor replaced a Republican elector with a Democrat (alleging that the Republican had been ineligible), thus throwing Hayes’ victory in that state into question as well.

Compromise of 1877: Congress Steps In

To resolve the dispute, Congress set up an electoral commission in January 1877, consisting of five U.S. representatives, five senators and five Supreme Court justices. The commission’s members included seven Democrats, seven Republicans and one independent, Justice David Davis. When Davis refused to serve, the moderate Republican Justice Joseph Bradley was chosen to replace him.

During the commission’s deliberations, Hayes’ Republican allies met in secret with moderate southern Democrats in hopes of convincing them not to block the official counting of votes through filibuster and effectively allow Hayes’ election. In February, at a meeting held in Washington’s Wormley Hotel, the Democrats agreed to accept a Hayes victory and to respect the civil and political rights of African Americans, on the condition that Republicans withdraw all federal troops from the South, thus consolidating Democratic control in the region. 

Hayes would also have to agree to name a leading southerner to his cabinet and to support federal aid for the Texas and Pacific Railroad, a planned transcontinental line via a southern route. On March 2, the congressional commission voted 8-7 along party lines to award all the disputed electoral votes to Hayes, giving him 185 votes to Tilden’s 184.

Compromise of 1877: The End of Reconstruction

Hayes appointed Tennessee’s David Key as postmaster general but never followed through on the promised land grant for the Texas and Pacific. Within two months, however, Hayes had ordered federal troops from their posts guarding Louisiana and South Carolina statehouses, allowing Democrats to seize control in both those states. As Florida’s Supreme Court had earlier declared a Democratic victory in the 1876 gubernatorial election, Democrats had been restored to power all across the South.

The Compromise of 1876 effectively ended the Reconstruction era. Southern Democrats’ promises to protect the civil and political rights of Black people were not kept, and the end of federal interference in southern affairs led to widespread disenfranchisement of Black voters. 

From the late 1870s onward, southern legislatures passed a series of laws requiring the separation of whites from “persons of color” on public transportation, in schools, parks, restaurants, theaters and other locations. Known as the “Jim Crow laws” (after a popular minstrel act developed in the antebellum years), these segregationist statutes governed life in the South through the middle of the next century, ending only after the hard-won successes of the civil rights movement in the 1960s.

The Readjuster Party came into being as a result of the prolonged political crisis of the 1870s while the state government struggled unsuccessfully to pay the interest on the public debt left over from before the Civil War. Because the state had paid no interest during the years of the Civil War and Congressional Reconstruction, by the beginning of 1871 the debt had risen to more than $45.6 million. The General Assembly passed and on March 30, 1871, the governor signed “An Act to Provide for the Funding and Payment of the Public Debt,” which was then and has thereafter always been known as the Funding Act of 1871. It provided for issuing new bonds worth two-thirds of that amount (with a promise that the state would pay the remainder after reaching an agreement with West Virginia about the precise amount that state owed) to replace all the existing bonds. Bondholders therefore had to exchange their old bonds for the new bonds, which, like the pre-war debt, paid 6 percent interest and were to mature in thirty-four years.

The Funding Act appeared to make good, sound business sense. Its supporters predicted that Virginia’s payment of the interest and principal would encourage bankers and businessmen from outside the state to invest in Virginia and thereby help stimulate and revive its economy. However, the size of the debt was so large and the rate of interest so high that payment of the interest required more than half the annual revenue. Moreover, the Funding Act made the interest-bearing coupons on the new bonds receivable for taxes, and every dollar paid in taxes with a coupon was a dollar that the state could not spend to run the government, support the new public school system, or even pay the interest. By 1872 Virginians paid about half the state revenue in coupons, and during the remainder of the decade the state ran large budget deficits.

The assembly reduced the interest rate to 4 percent in 1872, but the state’s financial condition grew worse after the Panic of 1873 brought on a long economic recession. Tax revenue continued to fall, and revenue collected in money fell even more, leading to calls for refinancing the debt on more advantageous terms. A principal argument in favor of refinancing was to provide more money for the popular new public school system that the Constitution of 1869 created. For the remainder of the decade Virginians debated whether to refinance the whole debt or repudiate some of it and try to pay a reduced principal.

Advocates of refinancing the debt—adjusting it, or readjusting it—to pay a reduced principal at a lower rate of interest became known as Readjusters. People who insisted on paying the full principal and interest were known as Funders. As the debates about the debt and about the shortage of money available for the schools became more intense, the state’s dominant Conservative Party, founded in 1867 in opposition to Congressional Reconstruction, split into two factions. White men who identified themselves as Democrats and as Republicans also split into Funders and Readjusters. By the end of the 1870s, it is likely that most African Americans in Virginia, who by then were nearly all Republicans, sympathized with the Readjusters.

William Mahone, of Petersburg, emerged as leader of the Readjusters. He was a short man with a long beard and inexhaustible energy who had commanded Confederate forces at the Battle of the Crater (1864) and created what became the Norfolk and Western Railroad. Originally a leader in the Conservative Party and an opponent of the radical reforms of Congressional Reconstruction, Mahone forged a coalition of politicians from both parties and both races who opposed the reduction of school appropriations and wished to refinance the debt. Readjusters appealed to white and black families on the grounds that the Funders had failed to support the public schools, and specifically to African Americans on the additional grounds that the Conservatives had imposed a poll tax as a prerequisite for voting that made it more difficult for black men to vote.

In 1878, Readjusters in the General Assembly passed a bill to require that a portion of the state’s tax revenue be collected in money and not in coupons in order that the money could be spent on the public schools. It was known as the Barbour Bill, for its sponsor, James Barbour, a member of the House of Delegates. During debate on the bill, a Funder member of the Senate of Virginia, John W. Daniel, declared that he would rather see all the public schools in the state burned than divert money from paying the creditors in order to support the schools. Governor Frederick W. M. Holliday vetoed the bill and denounced the public school system as unnecessary. His veto message stated that tax money should be used to pay the state’s creditors and not to fund the schools.

In the 1879 session of the assembly, the legislators passed a refinancing act popularly called the McCulloch Act, named for former Secretary of the Treasurer Hugh McCulloch, who represented the state’s bondholders during negotiations between the government and the creditors. Readjusters called it the Broker’s Bill because they believed that bond brokers and owners of bonds were the chief beneficiaries. The law provided that the existing bonds be replaced with new bonds that matured in forty years and paid 3 percent interest for the first ten years, 4 percent for the next twenty, and 5 percent for the last ten. They were often referred to as ten-forties or as McCulloch bonds. The legislature again made the interest-bearing coupons tax receivable.

In February 1879, Mahone and like-minded men called for a state convention to found the Readjuster Party. They invited all supporters of readjustment irrespective of race, and from then until the party ceased to exist, African Americans held party offices and won election to the General Assembly and to local offices as Readjusters. The new party also won strong support from white voters in some of the cities and rural areas, particularly in the mountains and valleys of western Virginia where the number and percentage of African Americans was smaller than elsewhere in the state. Opponents of the Readjusters charged then and later that the party was under the domination of northern Republicans and radical black men, but that was not the case.

The Readjusters’ arguments in favor of the schools and Mahone’s organizing skills produced victories at the polls. In 1879, the Readjusters won majorities in both houses of the General Assembly, which in 1880 elected Mahone to the U.S. Senate. The assembly passed a bill to refinance the debt with fifty-year bonds that paid 3 percent interest and repudiated about one-third of the principal established in the Funding Act of 1871. Called the Riddleberger Bill, it was named for Harrison H. Riddleberger, a member of the Senate of Virginia from the Shenandoah Valley. Holliday vetoed the bill, and that set the stage for the next statewide election.

In March 1881, a convention of Republicans, all of them African Americans, met in Petersburg and voted to make an alliance with the Readjusters. The Readjuster state convention that summer nominated William E. Cameron, mayor of Petersburg, for governor, and Readjuster candidates for lieutenant governor and attorney general. In the general election, Cameron defeated Daniel, the Conservative Funder candidate for governor, and Readjusters won all the statewide offices and larger majorities in the General Assembly.

Early in 1882, the assembly passed and Cameron signed a revised version of the 1880 bill. Known as the Riddleberger Act, it reduced the principal and interest rate much as Riddleberger’s 1880 bill had done and was intended to replace the bonds issued in 1871 and 1879. The interest-bearing coupons on the Riddleberger bonds could not be used to pay taxes. Later in the session, the legislators elected Riddleberger to the other Virginia seat in the U.S. Senate.

The Readjusters appointed auditors who enforced the tax laws strictly, and the government collected hundreds of thousands of dollars in delinquent taxes. Readjusters also reduced taxes on farms and small businesses and raised taxes on corporations and corporate property. Their policies relieved heavily burdened taxpayers and replenished the state treasury and at the same time more than doubled the funding for the public schools. The Readjusters also abolished the poll tax as a prerequisite for voting, and eliminated the brutal, humiliating whipping post, left over from slavery days, for punishing African Americans. The Readjusters created what became Virginia State University, the South’s first publicly supported college for training African American teachers, they overhauled higher education in the state, and within two years replaced the Funders’ chronic deficits with a surplus in the treasury.

Early in the 1880s, seven Readjusters also won election to the U.S. House of Representatives. The Readjuster ascendancy in Virginia politics was as short-lived as it was dramatic. As soon as the party had accomplished the main task for which it was founded, refinancing the debt, it began to fall apart. The main reasons were that the party’s leading spokesmen, such as Mahone, Cameron, and Riddleberger, welcomed African American men into the party as fully enfranchised citizens and Mahone joined the Republicans. The emerging egalitarian thinking among the party’s leaders appealed to farmers and working class people of both races, which alienated many white voters and political leaders who opposed participation of poor men and black men in politics. That raised fears of racial equality or black domination, which opponents of the Readjusters seized on to regain control of the General Assembly.

In 1883, the Conservatives and Funders reorganized themselves as a new state Democratic Party. In preparation for legislative elections that autumn they endorsed the Riddleberger Act as the final settlement of the debt controversy in order to draw white voters away from the Readjusters, and they prepared to campaign against the Readjusters on the issue of white supremacy. John S. Barbour, president of the Orange and Alexandria Railroad and a longtime adversary of Mahone, was the architect of the new Democratic Party. He was a political organizer as skillful as Mahone. A few days before the election, a street fight in Danville, where several African American men held positions of civic responsibility, offered the Democrats an opportunity to attack the biracial character of the Readjuster movement. What Democrats called the Danville Riot allowed them to characterize Readjusters and Republicans as advocates of black domination. Their strategy undermined the public appeal of the Readjusters’ carefully crafted coalition that was based on economic progress and fairness, and deliberately muted issues related to race. The Democrats won a large legislative majority that year and, through a combination of racial appeals and restrictive electoral regulations, solidified the party’s power in subsequent years.

Two years later, in 1885, the Democratic Party won all the statewide offices, placing former Confederate general Fitzhugh Lee in the governor’s office. The Readjuster Party then ceased to exist. Most African Americans entered or reentered the Republican Party and a substantial number of white men who had supported the Readjusters also became Republicans. The problems with the debt continued, however, and following a long series of federal and state court cases challenging the assembly’s laws to prevent payment of taxes with coupons, the General Assembly adopted the Olcott Act of 1892 that withdrew the coupon bonds from circulation and paid the remainder of the debt that the Riddleberger Act of 1882 had promised to pay.