Rhode Island General Treasurer Seth Magaziner called for an overhaul of state debt management, saying the 38 Studios fiasco is not the only example of poor practices.
"Systemic reform is needed to address Rhode Island's debt management challenges." Magaziner told the Senate Committee on Governmental Oversight on Dec. 1 in Providence.
Magaziner, in his first year in office,
Rhode Island's well-chronicled 38 Studios fiasco left the state responsible for a $75 million loan, backed by the state's moral obligation, to lure former baseball pitcher Curt Schilling's video-game company to Providence. The company filed for Chapter 7 bankruptcy in 2012.
Other examples of poor debt management, said Magaziner, include poor cash management at the Clean Water Finance Agency (since rebranded as the Rhode Island Infrastructure Bank); the use of debt by the Department of Transportation to fund operating expenses; and excessive payments to Wall Street underwriters.
In addition, he cited weak oversight of the more than 100 Rhode Island entities that can issue public debt.
Magaziner wants to establish an office of debt management that would report to the Public Finance Management Board, a nine-member volunteer body that the treasurer chairs. He also called form PFMB approval of quasi-public debt issues and in-state exclusivity with the state's financial advisor.
He called the recent hiring of Public Resources Advisory Group as the state's financial advisor a step in the right direction. PRAG replaces First Southwest, which is entangled in a lawsuit against Rhode Island over the 38 Studios failure.
