Rhode Island’s credit rating was put on review for a possible downgrade by Moody’s Investors Service after lawmakers debated defaulting on $75 million in bonds used to lure a company started by former Boston Red Sox pitcher Curt Schilling.

The state’s general-obligation debt is currently rated Aa2, the third highest. A change would affect $2.1 billion in outstanding debt for the smallest U.S. state, Moody’s said Monday in a statement.

The company also lowered debt for Schilling’s company, 38 Studios, by two levels to Baa1 from A2. Rhode Island used the proceeds from the 2010 bond sale as an incentive to get Schilling, a former All-Star, to move his video game company from Massachusetts. The bonds were issued by the Rhode Island Economic Development Corp. and backed by the moral obligation of the state.

“The potential for a decision by the legislature to withhold funds to replenish the debt-service reserve signals potential unwillingness to honor its obligations to bondholders,” Moody’s said.

The New York-based rating company said a state reserve fund will be unable be able to meet interest payments due May 1, 2014, without replenishment.

Governor Lincoln Chafee, a 60-year-old Democrat, included a $2.5 million payment on the debt in his spending plan for the budget year starting July 1, according to the Providence Journal. Yet, this month while debating the budget, the legislature held hearings on whether to default on the 38 Studios obligations.

Honoring Obligations

“I am confident that we will continue to honor our obligations,” Chafee said in a statement. “We want to send a clear message to the investment community that Rhode Island is a place that will make the difficult but necessary decisions for the long-term health of our state. I believe that the General Assembly will do the right thing to protect the reputation and borrowing ability of Rhode Island.”

Schilling’s company, which took its name from his jersey number, went bankrupt in May 2012, causing about 400 people to lose their jobs and leaving state taxpayers on the hook to repay Wall Street.