Tuesday, September 12, 2006

The Unexpectedly (to some) Long Life of CIRM

When is a 10-year embryonic stem cell research program not a 10-year embryonic stem cell research program?

Answer: When it is the California Institute for Regenerative Medicine.

Confused? We were too. We have been operating under the mistaken impression that the California stem cell agency has a 10-year life span that began when voters created it in 2004. In fact, CIRM has life in virtual perpetuity. And it can fund itself with the state's general obligation bonds apparently until it hits the $3 billion cap. All of which raise some interesting questions about life after $3 billion.

Two years ago when Prop. 71 was approved, news accounts repeatedly referred to a 10-year period in connection with the agency. Sometimes the time span was linked with the ability to issue bonds. Sometimes not. But regardless of context, 10 years kept popping up. Even the economic report by the Analysis Group, which was paid for by the Prop. 71 campaign, referred to funding over 10 years. And today the web site of the Alliance for Stem Cell Research, a spin off from the campaign organization, uses the 10-year term. The ballot measure itself says the intent of the measure was to authorize funding over a 10-year period. However, the analysis of the initiative by the state's legislative analyst is clearer. It says:
"The measure states its intent, but does not require in statute, that the bonds be sold during a ten-year period."
The longevity of CIRM came up when we wrote an item that said only 60 percent of the agency's life span remained.

That prompted a response from Dale Carlson, chief communications officer for CIRM, who asked for a correction. He acknowledged that he too was once under the misapprehension that CIRM would pass on at age 10. He said,
"I seem to have inherited a common misconception that CIRM is authorized to exist for only 10 years. I assume that stems from language in Prop. 71 regarding the issuance of an average of $295 million in bonds over 10 years, or it may be a legacy from the campaign. Whatever the case, there is in fact no timeline or deadline or sunset provision in Prop. 71.

"We are authorized to issue up to $350 million in bonds in a single year. Anything short of that can be rolled over to subsequent years. We don’t expect the funding to remain constant year over year. Instead, we expect to set each year’s amount based on the state of our strategic plans, the current research environment, scientific advances, newly recognized needs and opportunities, etc. It will be a dynamic process. Many (if not most) of the grants we award are likely to extend out over several years.

"The litigation has an effect, of course. It delays the issuance of authorized public general obligation bonds. It does not mean, however, that we’ll be issuing more than $350 million in a single year to 'catch up', nor that our effective half-life is shortened. The litigation is likely to extend the CIRM’s life and funding program, to make up for the delayed issuance of GO bonds."
As we remarked earlier, all of this raises interesting questions about life after $3 billion, a date that may not occur until about 2017 or perhaps several years later.

Given the nature of organizations and bureaucracies, it is not likely that CIRM will want to close its doors after the $3 billion runs out. It will be an organism that will want to survive, and there may well be good reasons for its life to continue. The state could fund it through the budget process, but without the usual oversight it gives other state agencies, which do not have the constitutional independence that CIRM does. It could also turn to private fundraising, as it has done so already to the tune of $50 million. California's biotech industry may find it useful to provide hundreds of millions of dollars to CIRM to continue pursuing work that is basic to the well-being of the business. Of course, some folks might object to a state agency behaving in such a fashion. But CIRM is virtually immune to control by the governor or the legislature.

And then there is a provision within Prop. 71 that provides for use of "alternate financial plans" instead of state bonds if they would significantly lower borrowing costs.

Is there a lesson in all this? Just the usual. Never assume. Expect the unexpected. Re-read the rules and instructions. However, there may be some folks who will not be happy to find that CIRM has perpetual life.

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