PROVIDENCE — Gov. Gina Raimondo and the state's economic development agency are moving to slap rules on a soon-to-launch business incentive program that they warn could result in large tax dollar giveaways to insider firms.

"We have learned the hard way here in Rhode Island, with 38 Studios and other failed attempts, we can't just give money out and hope for the best, which is what this program the legislature set up did — just give out the tax incentives and hope the businesses will be created," Raimondo said after a special meeting of the Commerce Rhode Island Board. "It is our duty to protect taxpayers."

To rein in the new program, called the Small Business Development Fund, the Commerce Board on Monday authorized agency staff to finalize a set of emergency rules for the $42-million tax credit program before it opens up Sept. 29.

A first draft of the new rules was not made public Monday, but descriptions at the meeting indicate they will increase the amount of information that tax-credit investment groups will have to provide the state, and also give the Commerce Corporation some leverage vetting proposals.

State lawmakers in June folded the Small Business Development Fund, which the state Senate had already passed, into the state budget despite an uneven track record in other states and Raimondo's protestations.

"This is why I want the line-item veto," she said Monday. "I would have vetoed this."

Responding to Raimondo's words, Larry Berman, spokesman for Speaker Nicholas Mattiello in an email Tuesday said the Small Business Development Fund was put in the budget to make up for some of the "shortcomings" of Raimondo's economic development policies.

"The Governor is off base in her criticism," Berman wrote. "The General Assembly included it in the budget because the Administration’s economic development policies of the last four years have not done enough to help home-grown small businesses. This program is designed to fill in the gaps where the Commerce programs have not been adequate or accessible for these types of businesses. As enacted, the program requires Commerce to establish rules and regulations and exercise oversight to ensure its success, and we expect that. It would be unfortunate if these criticisms were intended to distract from the performance and shortcomings of the existing Commerce programs."

The program, pushed by two companies that specialize in similar ideas in other states, proposes to incentivize $65 million in private investment in Rhode Island ventures with the $42 million in state insurance-premium tax credits.

Commerce Board member and ALF-CIO President George Nee called the existing law the "wild, wild west."

Critics of the law, including the three members of the Commerce Board's Investment Committee, say the 65% credit is unusually generous, the funds can soak borrowers with huge fees and there is no way to guarantee the investments will result in a public benefit.

"We cannot stand idly by while a select group of investment funds move from state to state, promising job creation while siphoning off taxpayer dollars without necessary oversight," the Investment Committee members wrote in a letter to Raimondo. "This statute, as written, appears to offer an unwise, unfair agreement: tax credits irrespective of actual performance."

The tax credits are first-come, first-served, and the law passed in June gave Commerce officials little power to reject an application as long as it is complete.

Some of the rules discussed Monday would prevent funds from counting "induced" jobs toward their job-creation estimates, require them to provide investment history and detailed descriptions of their business plans, file quarterly financial reports and post a bond.

Board attorney Thomas Carlotto acknowledged there could be "legal risk" around the new rules and directed questions about whether the board had the power to reject applications to a closed-door session.

"It came out of the House's budget somewhat of a surprise," Raimondo said about the program. "The House had never talked about it. The first time i saw it was when it came out of the House's budget. But as you know, without a line-item veto, it is not worth vetoing an entire budget."