38 Studios debt to top RI budget debate

PROVIDENCE, R.I. (AP) -- Discussion on whether Rhode Island should pay the debts associated with its failed investment in 38 Studios will likely dominate Tuesday night's General Assembly debate on an $8.2 billion state budget proposal.

The Rhode Island House of Representatives plans to vote late Tuesday or early Wednesday morning on the spending plan, but not before considering a variety of amendments submitted by lawmakers.

Lawmakers expect big debates on the 38 Studios bond payment, a plan to impose tolls on the new Sakonnet River Bridge and a proposal to shift more than 6,000 low-income parents from RItecare to the federal Affordable Care Act.

The budget proposal includes a $2.5 million payment to bond holders associated with the state's $75 million loan guarantee given to former Red Sox pitcher Curt Schilling's video game company, 38 Studios. Many lawmakers have said they want to default on the bonds, saying taxpayers shouldn't have to pay for the bad investment. But Gov. Lincoln Chafee and bond experts warn a default would harm the state's financial reputation and significantly increase the cost of future borrowing for roads, bridges and other projects.

Nonetheless, House Republicans and some Democrats are likely to push to default on the money.

The budget includes $50,000 to study the state's options for the debt. That will give lawmakers time before the $2.5 million payment is due in May to better understand the state's options, according to Rep. Helio Melo, who leads the House Finance Committee.

Lawmakers from the East Bay are expected to try to stop the imposition of tolls on the new Sakonnet River Bridge. State transportation officials say the tolls could begin as soon as next month, and are needed to pay for bridge maintenance. But East Bay businesses and residents have complained that the tolls will be a burden and could harm tourism to Aquidneck Island.

Finally, some lawmakers upset with a plan to shift low-income parents on RItecare to the new federal health care law are likely to try to prevent the change. House leaders want to transfer more than 6,000 parents from the state system to the new federally funded health care exchange. Parents would likely to have to pay more for the coverage than they do under RItecare, according to critics.

"We never thought that anyone would be worse off with health reform implementation," said Jane Hayward, president and CEO of the Rhode Island Health Center Association. "The proposed cuts have real human consequences for thousands of Rhode Island's low-income families."

The budget also contains $40 million in additional funding for public schools and higher education, $4.5 million for workforce training, $1 million for renovation at Harrington Hall, the state's largest homeless shelter for men, and $35 million in historic redevelopment tax credits.

It does not include Gov. Lincoln Chafee's call to cut corporate income taxes from 9 to 7 percent over three years, and includes $15 million less in aid to cities and towns.

The state's new fiscal year begins July 1.

Some 70 amendments have been drafted, according to Larry Berman, a spokesman for House Speaker Gordon Fox, though not all will be offered during the House debate. The legislation will head to the Senate after passage.

Lawmakers hope to adjourn for the year by July 4.