Rhode Island to Pony Up Initial 38 Studios Payment

Rhode Island’s $8.2 billion budget, including a $2.5 million bond payment for 38 Studios moral obligation debt, is headed for Gov. Lincoln Chafee’s desk after the Senate approved it by a 32-6 vote Thursday night.

Also included is $50,000 for a market analysis of what could happen should Rhode Island default on debt related to bankrupt 38 Studios, the video-game company owned by former Boston Red Sox pitcher Curt Schilling.

Its demise put Rhode Island on the hook for a $75 million loan guarantee, backed by the state’s moral obligation, that the Rhode Island Economic Development Corp. provided Schilling in 2010.

There was a rancorous debate about whether or not Rhode Island should honor that guarantee.

Senate debate on the budget, including the 38 Studios payment, was less heated than that in the House of Representatives earlier in the week before the House approved the budget on a 54-20 vote, four votes over the required supermajority.

One House session lasted 12 hours, extending until 1:30 a.m. Wednesday.

Moody’s Investors Service threatened a downgrade to Rhode Island’s general obligation bonds if the state had failed to make good on the 38 Studios commitment. Moody’s rates Rhode Island’s GO bonds Aa2, while Fitch Ratings and Standard & Poor’s assign AA.

Chafee, who has said the state should pay the debt, is expected to sign the budget bill.

Chafee proposes the state pay $2.4 million on the 38 Studios loan in fiscal 2014 and roughly $12.5 million for each of the seven following years. Those payments, plus $15.4 million available through capitalized interest and the capital reserve fund, would total $104.6 million, budget officials estimate.

Legislators also restored a $12.9 million transfer to the pension fund, taking $3 million originally planned for a new roads and bridge revolving loan fund, $6 million in personnel and operating expenses from all three branches of state government, $850,000 from the mortgage fraud settlement and $3 million from other one-time sources.

The budget bill also delays the implementation of tolls on the Sakonnet River Bridge from Tiverton to Portsmouth -- which were scheduled to begin next month -- until at least Feb. 1, 2014, while legislators work to identify other ways to fund bridge maintenance in Rhode Island.

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