- Associated Press - Friday, June 6, 2014

PROVIDENCE, R.I. (AP) - Another budget, another debate about 38 Studios.

Two years after the bankruptcy of ex-Red Sox pitcher Curt Schilling’s video game company, the House of Representatives is likely to engage - again - in heated discussion over whether Rhode Island should repay the bonds that financed 38 Studios’ $75 million state-backed loan.

Speaker Nicholas Mattiello says the state should pay. Senate President Teresa Paiva Weed says the state should pay. So does Gov. Lincoln Chafee. The proposed 2014-2015 budget, approved Thursday night by the House Finance Committee, includes $12.3 million for the next installment of what is owed.

But some lawmakers still aren’t behind repayment.

“It is a deal-breaker for me,” said Rep. Karen MacBeth, D-Cumberland, who from her post as Oversight Committee chairwoman has been trying to get questions answered about the genesis of the deal. She has also held hearings on the potential impact of a bond default, which some experts say would raise overall borrowing costs significantly.

“I doubt I could support the budget with the bailout in there,” said Rep. Spencer Dickinson, D-South Kingstown. “I think there’s something very symbolic there. I think the people see it as attempting to set aside the investigations or in effect cover it up. It may or may not be a cover-up.”

House Minority Leader Brian Newberry, R-North Smithfield, said there are “a lot of good things” in the budget plan, including a reduction in the corporate tax rate from 9 percent to 7 percent and an increase in the estate tax threshold to $1.5 million. But he won’t be voting for it.

“The number one reason is the 38 Studios payment,” he said.

It’s likely to be a contentious issue in an election year, including in the governor’s race. The Republicans support a default, while the three leading Democrats say the debt should be honored.

Meanwhile, the House budget plan won plaudits from one of the state’s largest business groups. Greater Providence Chamber of Commerce President Laurie White praised the corporate and estate tax provisions and its authorization of a lease agreement for a shared nursing education center at the old South Street Power Station. She said the budget reflects the business community’s call for “bolder action” on the economy.

“There’s acknowledgment that a lot more needs to be done … to push economic reforms that will put Rhode Island into a growth mode,” she said. White called the state’s economic growth “anemic.”

The chamber supports the 38 Studios payment.

Others raised concerns about some of the budget’s priorities. Rep. Teresa Tanzi, D-South Kingstown, said she wants to see additional revenue that would be brought in by switching to a new tax reporting method for corporations go to fund things like infrastructure and education, not cover the corporate tax reduction. That has been a top priority of Mattiello in his effort to improve the business climate and the state’s reputation.

“I’m afraid we don’t have the luxury of fixing perception right now. We need to fix the problem,” said Tanzi. “I think that there are much smarter ways to spend that money, much more productive ways to spend that money.”

The House will take up the budget Thursday. It needs 50 votes to pass in the 75-member chamber. It would then go to the Senate.

Senate Finance Chairman Daniel Da Ponte expressed support for the plan Friday afternoon.

“While no budget is perfect, I firmly believe that given our economic challenges, this proposal invests in the expressed priorities of our constituents while also improving our state’s business climate and maintaining a reasonable safety net,” he said in a statement.

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