The $150 Million CIRM Bailout, Politics and Oversight

Call him Arnold the Adroit.

That's Arnold Schwarzenegger, the governor of California, who capitalized on this week's stem cell hoopla by announcing a loan of $150 million to the state's financially troubled stem cell agency. The timing was exquisite politically. It casts the Republican governor in a favorable light in his re-election bid, distancing him significantly from what may be the biggest piece of baggage he has in the race – the Republican president of the United States.

As for the agency itself, the money is undoubtedly a blessing, but one that has a dark side. CIRM Chairman Robert Klein has made much of his agency's independence from the usual ties that state agencies have to the Capitol and politics. This loan gives all in Sacramento an entry point – if they didn't have it already – for dabbling in one fashion or another in CIRM affairs. The loan by the state also provides another avenue for a legal challenge by foes of the agency, which reporter Lee Romney of the Los Angeles Times indicated they are already considering.

That said, it would have been foolish for the agency to have turned down the money on the basis of preserving its independence. But one always has to pay the piper, something CIRM must come to grips with.

Speaking of pipers, state Sen. Deborah Ortiz, D-Sacramento, who is carrying a bill to tighten oversight of CIRM, released a statement on the governor's action that received virtually no attention. It said,

"The governor is honoring the will of the California voters who overwhelmingly approved Proposition 71. Again, California is leading and our president should learn from our state.

"At the same time, the governor’s action underscores the need for stronger public accountability standards for stem cell research in California, as proposed by my Senate Bill 401. These standards will ensure public transparency, eliminate potential conflicts of interest, and ensure that the state receives a fair share on its investment over time, as promised by the initiative.”

CIRM, of course, was delighted by the money, which will allow it to devote its full resources to its prime mission instead of fundraising, which seemed to be the chief occupation of Chairman Robert Klein.

As quoted by Lynda Gledhill in the San Francisco Chronicle, CIRM President Zach Hall said, "With one stroke, the governor has energized stem cell research in California. This is the new frontier in biomedical research, and the United States needs to be working in it. California will become a surrogate for the nation's efforts."

Klein was equally effusive, heaping praise on the governor – praise that is certain to turn up in ads againsts his Democratic opponent, State Treasurer Phil Angelides.

Two of the CIRM watchdogs, the Center for Genetics and Society and the Foundation for Taxpaper and Consumer Rights, were not entirely happy with the governor's move.

The center said:

"Unfortunately, Gov. Schwarzenegger failed to take an important opportunity to implement real, enforceable oversight of the California Institute for Regenerative Medicine (CIRM). Like the majority of Californians and Americans, we support using public money for embryonic stem cell research. But along with public funding should come public oversight. Instead, the governor gave CIRM a blank check.

"Proposition 71, the initiative that created the CIRM in 2004, specifically exempted CIRM from oversight by California’s elected officials. Its governing board is riddled with conflicts of interest, and reports to no one. This lack of accountability is dangerous for the Institute and dangerous for the research."

John M. Simpson of the taxpayer foundation welcomed the funding but said:

"You wouldn't shoot a $150 million movie without a script. Before funding a major scientific project, you need a plan and regulations governing ownership of any discoveries. Otherwise we're truly talking about a blank check for biotech."

The funds are expected to be forthcoming in the next few months and be available for grants in 2007. The mechanism appears to be the bond anticipation notes that CIRM can issue. They will not be repaid if CIRM loses the lawsuit against it. None of the news reports we saw indicated where the governor was going to find $150 million in a supposedly lean state budget. However, the amount is small change in a budget the size of California's -- $131 billion.

A couple of tidbits from the news coverage: Reporter Lisa Krieger of the San Jose Mercury News noted that the governor's pro-stem cell, anti-Bush move came on the same day he attended two fundraisers headlined by the former President Bush. And The People's Daily in China carried an item, contrasting Schwarzennegger's stem cell decision to Bush's veto.

Here are links to other stories on the loan: Terri Somers, San Diego Union Tribune; David P. Hamilton, Wall Street Journal; Laura Kurtzman, The Associated Press; Kevin Yamamura, The Sacramento Bee; Sandy Kleffman, Contra Costa Times.