The state of New Hampshire will become the first state in the union to provide a financial bailout to a struggling newspaper.

The state’s Executive Council unanimously agreed to guarantee 3/4 of$250,000 loan that the Eagle Times had taken out under new leadership.  Under the agreement, the state would cover more than $187,000 if the company that owns the small newspaper chain were to default on the loan.

The story was broken by a local blogger and former city councilman in the paper’s hometown of Claremont.

“So which government officials helped broker the loan guarantee for the Eagle Times?,” wrote former Claremont City Councilor Jim Sullivan, who first reported the deal on his blog, The Sullivan Report. “Because the New Eagle Times is now beholden to government officials for what appears to be crucial financing, this could prove to be a conflict of interest for the newspaper.”

The paper stopped publishing in July, leaving almost 100 part and full-time employees without jobs. New Hampshire Gov. John Lynch said that the deal had everything to do with job creation amidst recession.

“It’s really more of a job development, economic development type of issue,” said Lynch who said he has not met Sample and was not involved in putting the deal together. “I think it was the right thing to do, and it came up through the appropriate channels.”

New Hampshire is not the first state to discuss financial bailouts for the struggling industry–that distinction belongs to fellow New Englanders in Connecticut–but it is the first time a government entity has provided financial investment into a newspaper. Discussions of a federal bailout foundered in congress after only three House committee members attended the meeting on the subject, and even they were not impressed:

“I want to be very clear: This is not about bailouts. No one’s talking about bailouts. We’re through with bailouts,” said Joint Economic CommitteeChairwoman Carolyn B. Maloney (D-NY).

Executive Councilor Ray Burton dismissed the blogger’s claims, saying that he does not believe that state money will tarnish the newspaper’s integrity, nor will it influence its coverage of the statehouse.

Would I expect any deference when I walk into the door of the Eagle Times? Not at all,” he said. “I expect to be combed over, just like I’m being combed over right now.

The track record of government influence on media coverage through financial backing, however, is spotty. A study on Argentine newspapers found:

A “huge correlation” between, in any given month, how much money went to a newspaper and how much corruption coverage appeared on its front page. For example, if the government ad revenue in a month increased by one standard deviation — around $70,000 U.S. — corruption coverage would decrease by roughly half of a front page.

It must be noted that the study did not find causation into the relationship between government revenues in newspapers and corruption coverage. The study could not discern, for example, whether or not governments that support the press are inherently less corrupt. The study’s author, Harvard University’s Rafael Di Tella, did reach this conclusion, however:

The evidence they gathered seemed to support newspapers reacting to government money, not the other way around.