Should RI default on the 38 Studios bonds? A debate at noonJune 27th, 2012 at 9:40 am by Ted Nesi under Nesi's Notes, On the Main Site
The Stephen Hopkins Center for Civil Rights will hold a panel Wednesday at noon at The Old Statehouse (150 Benefit St., Providence) to discuss something that has been largely off the table in the state so far – whether Rhode Island should default on the moral obligation bonds it sold to benefit 38 Studios.
Revenue Director Rosemary Booth Gallogly criticized that idea on Newsmakers earlier this month, saying the state can’t afford to risk its bond rating even though the 38 Studios bonds aren’t general obligation bonds. The panel will hear a countervailing view from Bloomberg View’s Josh Barro, who previews his thinking today:
Performing on the 38 Studios guarantee will cost nearly $100 million, a nontrivial amount in a state with just more than a million residents. Rhode Island lawmakers owe taxpayers an explanation of why the state issues moral-obligation bonds. If the answer is in order to preserve the option of default, they should provide guidance as to what kind of circumstances would lead the state to consider defaulting — and how that guidance relates to 38 Studios.
If the answer is that the state uses moral obligations to create general obligations, lawmakers should admit that’s an invalid reason, and stop issuing moral-obligation bonds.
Joining Barro on the panel are former R.I. Supreme Court Justice Robert Flanders and Roger Williams University Law Professor John Chung. The Hopkins Center is a libertarian legal-aid group organized last year that has taken a number of stands, including siding with Governor Chafee in the dispute over Jason Pleau.
• Related: Josh Barro: Rhode Island should default on 38 Studios bonds (May 29)