Monday, November 07, 2011

Searching for Facts About Cash: CIRM to Treasurer to Finance

"Even if your mother says it is true, check it out," an old saying goes. So we did.

The case in point was the new financial arrangement for the $3 billion California stem cell agency.

CIRM Chairman Jonathan Thomas laid out the plan last month for the California Stem Cell Report in the wake of a state bond issue that provided only $51 million for the agency, which fell far short of its needs over the next year or so. He said, however, a new arrangement was in place that amounted to a win-win for the state and the stem cell agency. The plan minimizes the amount of state bond borrowing immediately needed and instead provides, if necessary, short-term commercial paper, also backed by the state, but at less interest cost.

Thomas said both the state treasurer and the Brown Administration, through its state Department of Finance, were on board.

But -- keeping the admonition about mothers in mind -- we routinely asked the Finance Department and the state treasurer's office about the arrangement. What happened then provides some insight into how difficult it is sometimes to verify even what appear to be simple facts. It also tells a story about the responsiveness of state agencies and their dedication to openness and transparency.

Let's start with CIRM and Thomas. After we raised questions by email following the state bond sale Oct. 19, he offered a telephone interview about the situation and persisted despite dropped cellular signals and several callbacks from our post here in the bay off Panama City.

After we filed our item on the interview, we queried on Oct. 24 the other two agencies involved. The state treasurer's office responded quickly. The state Department of Finance, on the other hand, has remained silent on the subject to this day, despite three emailed queries.

Unfortunately, the state treasurer office's initial response was off the mark. "We haven’t seen any agreement.  We were not aware of the reported agreement until we read about it in your blog.  So, we have no comment about the reported agreement," the treasurer's office said initially.

That raised eyebrows a bit. So we renewed our queries to the Finance Department, even suggesting that a failure to respond could be construed as an indication that the Brown Administration is not fully behind CIRM.

Ten days after our initial query to the two agencies, we sent an email to Thomas briefly describing what we had planned to write and asking him if he would like to comment. He did not respond. But the next day, Steve Cooney, chief deputy state treasurer, said in an email that the earlier comment from the treasurer's office was incorrect. Cooney said,
"Our office DOES (Cooney's capitalization) and DID know that CIRM and the Department of Finance reached an understanding about future funding.

"The Treasurer’s Office has been aware since before last month’s sale of GO (general obligation) bonds that the Department of Finance and CIRM are in general agreement that the state will take necessary action to ensure that CIRM has adequate funds to meet its operational, grant funding and reserve needs, including the use of the state’s commercial paper line in the event the state cannot timely access the bond market.  It is neither necessary nor usual for our office to be informed of the specifics, if any, of any future commitment made by the Administration to any other state agency, including CIRM, and this case is no exception."
Cooney additionally re-affirmed the commercial paper arrangements for CIRM as laid out in the initial response from the treasurer's office.

The response said,
"The issuance of commercial paper has always been a part of our bond financing program.  The size of the CP line is about $1.5 billion, and it is available for use by all infrastructure programs, including stem cell research.  When we issue commercial paper to finance infrastructure projects, including CIRM, the paper is repaid with bond-sale proceeds.  So, if CIRM received funds from the issuance of commercial paper, the 'loan' would be retired not by CIRM, but by the proceeds of a subsequent bond sale."
Cooney also said,
"If you still need further clarification on the issue of future CIRM funding beyond the proceeds of the recent bond sale, the best place to get that information continues to be the Department of Finance."
Silence, however, has only been heard from the state Department of Finance. Sphere: Related Content

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