June 26 (Bloomberg) -- Rhode Island lawmakers backed using $2.5 million next year to cover a payment on $75 million of bonds that drew ex-Boston Red Sox Pitcher Curt Schilling’s failed 38 Studios LLC video-game company to Providence.
Members of the House of Representatives will reconvene later today to continue debate on a fiscal 2014 budget after a move to strip the payment from the plan failed by a vote of 20-54. The margin was four votes more than are needed to include the money in the final spending measure.
Moves to avoid covering the payment led Moody’s Investors Service to put the state’s Aa2 credit rating under review for a cut, saying that an unwillingness to make good on bonds backed by the state’s “moral obligation pledge” would erode the credit quality of more than $2 billion in debt.
“It’s going to have a huge ripple effect on all of us,” if Rhode Island reneges on the obligation, Representative Linda Finn, a Middletown Democrat, said on the House floor during the debate. Even talking about not making the bond payments “is such a bad reflection on our state,” she said.
The Rhode Island Economic Development Corp. issued the revenue securities in 2010 to get Schilling to move the company to Rhode Island from Maynard, Massachusetts, bringing the promise of hundreds of jobs. About two years later, 38 Studios entered Chapter 7 bankruptcy liquidation amid allegations of mismanagement and unmet obligations. About 400 people lost their jobs as a result.
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