Thursday, February 19, 2009

California Passes Budget, Issuance of Stem Cell Bonds Still Distant

In the predawn hours today in Sacramento, California lawmakers passed a budget aimed at dealing with a $42 billion state deficit, but the spigot that feeds CIRM remains firmly closed.

Nonetheless, the action does assist with CIRM's own plans to bootstrap itself out of its cash crunch.

The state legislature has sent the spending proposal to the governor, who is expected to sign it in the next few days. The action sets the stage for possible issuance of state bonds, the funding mechanism for the California stem cell agency, which is facing a major financial shortfall.

State Treasurer Bill Lockyer is evaluating the new state budget to determine whether it enables the state to return to the bond market and under what conditions. However, even if bonds are sold in the next month or so, bonds for CIRM are not at the top of the $53 billion list.

In response to a query from the California Stem Cell Report, Tom Dresslar, a spokesman for Lockyer, said,
"We need to analyze the product(the budget) and get a firm handle on cash flow before we can say anything about how the budget will affect our ability to return to the bond market."
However, passage of the budget should help with the CIRM plan to sell privately $400 million in state bonds to provide funding for CIRM. The legislative action removes significant uncertainty and should help counter possible objections from potential buyers.

The treasurer's office has also assisted indirectly by leading the way on the private placement of state bonds, which has never been done in state history. Lockyer's office has already cut a deal with the San Francisco Bay Area Toll Authority to buy $200 million in state bonds. That means CIRM will not be in the unenviable position of being the first out of the trenches with a private sale and can point instead to a precedent.

Here are links to some budget stories: Wall Street Journal, Sacramento Bee, Los Angeles Times, San Francisco Chronicle and New York Times.

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