Ok, the lights and PTO do not ground through the switch. The switch case is grounded, and so are the lights and PTO. But not through the switch.
This terminal is the grounded one. The lights, PTO and motor will all work and run whether this terminal is connected or not. Only thing is, you won't be able to shut the tractor down with the key. (Still may work though as the switch body itself is also grounded. This wire is a "just in case".) Find and repair your bad ground, and check the key switch for a short to ground through the start terminal.
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