In 1825, a bill was passed that established The Literary Fund, and the effort became North Carolina’s first attempt to establish public schools. The program received funds from stock dividends, a retail liquor tax, and the sale of swampland. Historian Milton Ready regretfully points out that The Literary Fund received what was leftover after the state had used stock profits for internal improvements. Education was a secondary concern.
The Fund’s purpose was to help communities build common schools by distributing its monies across the state, county by county, according to the free population. It was managed by the governor, the chief justice, both speakers of the both legislative houses, and the state treasurer.
The Literary Fund never accomplished its mission. Efforts to increase its revenue were rejected time after time. That may be in part because The Literary Fund was used for purposes other than education. A decade after its beginning, the program had accumulated $243,000 and spent $239,000. Only approximately 20 percent was spent for public schooling. The government frequently dipped into the fund to pay for legislators’ salaries as the state waited for taxes to be received.
Another problem was corruption. John Haywood, the state treasurer, for instance misappropriated $28,000.
The Literary Fund lasted until the Civil War. It ran completely out of funds; the state had invested heavily in Confederate bonds.