Rhode Island’s House of Representatives approved an $8.2 billion state budget Wednesday night that includes an initial $2.5 million bond payment related to failed video-game company 38 Studios.
The spending plan restores a $12.9 million surplus transfer to the pension fund by making budget cuts elsewhere, including $3 million from a planned road and bridge revolving loan fund.
On Thursday afternoon the full Senate, whose finance committee quickly approved the spending plan after the House vote, was scheduled to debate the spending plan.
The budget includes $50,000 for a market analysis of what the consequences would be if the state defaults on the 38 Studios bonds.
“It’s something we should have been doing for the past year,” said House Minority Leader Brian Newberry, R-North Smithfield, who has opposed paying the debt.
Debate over the payment has drawn national attention to Rhode Island. The state’s Economic Development Commission provided a $75 million loan guarantee in 2010, backed by the state’s moral obligation, to lure former Boston Red Sox pitcher Curt Schilling’s company from Massachusetts. The company filed for Chapter 7 bankruptcy last year.
The first payment is due in May. Under a payment schedule proposed by Chafee and his top financial advisers, the state would pay 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.
Moody’s Investors Service two weeks ago downgraded the bonds to Baa1 from A2 and warned of a multi-notch downgrade to Rhode Island’s general obligation bonds should it skip the payment. Moody’s rates the GOs Aa2, while Fitch Ratings and Standard & Poor’s rate them AA.
“Let’s just keep our eyes on the big prize, move the budget forward and protect the credit rating,” said Rep. Michael Marcello, D-Cranston.
On Tuesday, when heated debate pushed the session past midnight, House rank-and-file lawmakers defeated a measure by Gov. Lincoln Chafee and Speaker Gordon Fox, D-Providence, not to transfer a $12.9 million revenue surplus to the pension fund.
The House covered the gap by cutting $3 million from General Treasurer Gina Raimondo’s proposed $10 million infrastructure fund, $6 million in personnel and operating expenses from all three state government branches, $850,000 from the mortgage fraud settlement and $3 million from other one-time sources.
Also on Wednesday, the House delayed the implementation of tolls on the Sakonnet River Bridge between Tiverton and Portsmouth on the East Bay, pending a study.
