Moral Obligation Bonds

What is a so-called “moral obligation” bond? Well, for starters, it is not moral and it’s not an obligation. It’s a bond that is passed and issued without the approval of the voters. As such, it is flat-out illegal. The Rhode Island Constitution clearly says (Article VI, Section 16) in just a few words, that bonds over $50,000 must have the approval of the voters. Part of the problem with the 38Studios disaster was that it involved illegal moral obligation bonds. That problem is still unresolved and the payments are still coming out of your taxpayer pocket. The legislature had the option to default (not pay) the bonds and make the insurance company pay them off. Incredibly, American Guaranty, the company that insured 38Studios, has never paid a claim. Think about that.

As if we didn’t learn our lesson, now there’s talk about using moral obligation bonds for the Pawsox deal. That shouldn’t surprise us. How else would you guarantee bond money for a project when you’re not sure the voters would support it? And how would that affect me as governor? Simple. If you elect me governor, there will be no money in my budget to pay off moral obligation bonds. No money to continue the 38Studios coverup. — And no money for a Pawsox deal that didn’t go to the voters. Anybody working on a Pawsox deal today might want to take that into account.

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