Rhode Island has set aside money in its budget to repay those who fronted the money for $75 million in loans to 38 Studios.
The studio went bankrupt last year, leaving the state on the hook for the money it used as an incentive to lure the Kingdoms of Amalur developer from neighbouring Massachusetts.
Until now, it was an uncertain and hotly debated issue whether or not Rhode Island would repay the money.
The Providence Journal reports the issue has been resolved, with confirmation coming from Senate Finance Committee Chairman Daniel DaPonte just hours before the House Finance Committee was set to reveal its budget proposal.
"As far as we've come so far, it is," he said of whether or not the debt would be paid.
"I am certainly not happy about the circumstances, but as a matter of principle, the state has to live up to this obligation."
The money owed could add up to more than $100 million after interest, and Governor Chafee's director of administration Richard Licht had to admit that in a best-case scenario the state would be better off defaulting on the loan.
But Licht said there was "already a cloud over the state's reputation," speaking of a possible downgrade of the state's debt by Moody's Investors Service, and noted that if the default was allowed to occur, Rhode Island would probably have to pay more as a result of higher interest rates.
"We'd be passing on unknown consequences to the next generation," said General Treasurer Gina Raimondo's chief legal counsel Mark Dingley.
"It's the best decision for Rhode Island now and for generations to come."