The Economic Development Corporation's controversial decision to award a $75-million loan guarantee to Curt Schilling"s 38 Studios gave Lincoln Chafee a lot of campaign fodder during his successful run for governor last year.

One of his campaign promises, listed in a Web page devoted to his "First One Hundred Days Plan for Jobs," pledged to "introduce legislation to reform and redirect the $125 million Loan Guarantee Fund."

Those first 100 days ended on April 14, so we decided to check on the promise.

It turns out that there is no legislation.

Promise broken? On the surface, yes. But if you take the spirit of the promise, perhaps no.

Patrick Rogers, Chafee's chief of staff and executive counsel, said the intent of the promise was to prevent the EDC from giving another huge chunk of its loan money to one company. Chafee wanted to use the fund to help small businesses and also to open the program up to more public scrutiny.

There's been no legislation because "since taking office he's discovered that, through regulation, he can actually make substantial modifications to the program to quickly accomplish those goals," Rogers said.

So what's actually been done?

On Monday, the EDC gave preliminary approval to a new set of rules, proposed by the governor, that sets aside $5 million to supplement a Small Business Administration loan program and places a $10 million cap on individual loans. The rules will now be advertised and, if enough people object, a hearing will be held. A second EDC vote will be required for their adoption.  

Rogers said there's $50 million left of the original $125-million fund. The $5 million is designed to work in conjunction with the Small Business Administration's successful 7(a) loan program, which gives loan guarantees to small businesses. During the recession, the SBA program, which had been guaranteeing 75 percent of the loans, increased the guarantee to 90 percent.

"The federal government was willing to incur more risk to spur lending during the depth of the recession," said Rogers.

Now that it's back to 75 percent, Chafee wants the EDC to use the $5 million to bring the level back to 90 percent.

"That puts Rhode Island as the first in the nation to enhance the federal loan guarantee program so Rhode Island small businesses would be able to have a greater likelihood to secure credit because lenders are not at risk for 25 percent, but for only 10 percent," Rogers said. "We believe several hundred small business loans will benefit from this additional supplemental Chafee loan guarantee."

The $10 million per-project limit will apply to the remaining $45 million. The Chafee package also requires that the jobs created under the program must pay at least 2.5 times the minimum wage "with industry comparable benefits."

"The governor believes you can't put all your eggs in one basket. He wants to make sure the remainder of the $45 million is allocated among a group of small businesses to protect the taxpayers and make sure multiple small businesses get the benefit of the remainder of the loan guarantee program," according to Rogers.

EDC Executive Director Keith Stokes said "six to eight" applicants were in the process of applying for a loan guarantee when the program was suspended. Even with the regulations pending "we can reach out to the previous applicants" because "almost all were under $10 million" and would not be affected by the new rules.

In the end, Chafee pledged to "introduce legislation to reform and redirect the $125 million Loan Guarantee Fund." There is no legislation, but the regulations proposed by the governor and given preliminary approval by the EDC will do that just as effectively and, possibly faster, than trying to get something through the General Assembly.

We rate this a Promise Kept.