RI lawmakers considering defaulting on 38 Studios debt

House Finance Committee reviewing bills that would prevent state from making payments related to controversial 2010 $75 million loan.

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Rhode Island lawmakers are considering defaulting on the money owed related to the state's investment in former Red Sox pitcher Curt Schilling's failed game outfit, 38 Studios.

Image credit: Steven Senne, AP.
Image credit: Steven Senne, AP.

The Associated Press reports that Rhode Island's House Finance Committee this week reviewed a number of bills that would block the state or its Economic Development Corp. (EDC) from making any payments related to the controversial $75 million loan that brought 38 Studios to Rhode Island in 2010.

The publication believes these proposals are unlikely to gain any traction in Rhode Island's General Assembly. On top of this, the bills face an uphill battle against Governor Lincoln Chafee, who has been clear that he will do everything in his power to protect tax-payer money.

When 38 Studios filed for bankruptcy last summer, it left Rhode Island on the hook for around $100 million. The state has since sued Schilling and other architects of the loan.

According to the Associated Press, supporters of the default plan say taxpayers should not be forced to pay for the 38 Studios situation. Representative and sponsor of one of the bills Karen MacBeth (D-Cumberland) told the publication that insurance on the loan will cover the costs.

"The state of Rhode Island cannot afford to put this burden on the backs of the taxpayers," MacBeth said. "Have the insurance company pay the bill. This is why we have insurance. The insurance company understood the risk. Now let them pay."

On the other side of the argument, EDC Chief of Staff John Pagliarini cautioned lawmakers that defaulting on the loan could make it more difficult to finance future projects and negatively impact the state's bond ratings overall.

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