Lawsuit Challenges Proposed Issuance of Bonds To Temporarily Fund CIRM
A lawsuit was filed last month in Sacramento Superior Court raising questions about the validity of Treasurer Phil Angelides' (D) plan to temporarily fund the California Institute for Regenerative Medicine with bond anticipation notes until legal challenges to the stem cell institute's funding are resolved, the San Diego Union-Tribune reports (Somers, San Diego Union-Tribune, 7/30).
The treasurer's office is attempting to sell $200 million in high-risk bond anticipation notes to fund the institute's first grants because the state cannot begin selling $300 million in annual bonds for CIRM provided under Proposition 71 until lawsuits challenging the constitutionality of the arrangement are settled.
The state plans to sell bond anticipation notes to investors willing to risk that CIRM will win the legal challenges. The state then could repay the investors with bonds provided under Proposition 71 (California Healthline, 7/13).
In addition, the state might face "a big hurdle" in finding investors willing to buy the bonds because there is no guarantee that the notes will ever be repaid, unlike ordinary bond anticipation notes which typically are paid off within 60 to 90 days, the Union-Tribune reports.
The treasurer's office has circulated the notes to institutional investors but has found no interested buyers. The office is now approaching philanthropic investors, such as organizations that provide funding for medical research.
CIRM attorney James Harrison said, "It's always been our view that prospective purchasers would be charitable foundations whose mission it is to fund medical research." Harrison added that the notes "are tailor-made" for CIRM's situation because, if purchased, they would provide the institute with funding "without the state exposing itself to any liability whatsoever."
Harold Johnson of the Pacific Legal Foundation said, "I wouldn't be surprised if there aren't any takers," adding that the notes are "a ploy to end-run -- really, to nullify -- the legal challenge to the bonds while that challenge is still being considered by the courts" (San Diego Union-Tribune, 7/31).
In related news, Independent Citizens' Oversight Committee Chair Robert Klein on Friday in a conference call with reporters expressed concern over Senate Majority Leader Bill Frist's (R-Tenn.) recent announcement that he supports a bill that would increase federal funding for stem cell research.
Klein said such legislation could include "undisclosed provisions" that might "handicap or destroy" promising stem cell studies that are already under way.
Klein said Frist's opposition to the creation of new embryos for research could lead to a ban on therapeutic cloning. Frist's position could also lead to federal funding that only goes toward "altered nuclear transfer," an alternate approach to embryo creation supported by some opponents of abortion and other types of stem cell research, Klein said.
Klein said, "To harness the nation to one single approach is taking an extraordinary risk with the research capacity of this nation," adding that such a situation would be "a tragedy of the highest magnitude" (Mecoy, Sacramento Bee, 7/30).
"California Connected" -- a weekly, hourlong newsmagazine produced by PBS stations in Los Angeles, Sacramento, San Diego and San Francisco that covers state events and issues -- on Friday included an interview with Klein about CIRM's first year ("California Connected," KVIE, 7/29). Video of the segment in Quicktime media format is available online.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.