Thursday, January 31, 2013

Hyping the Economic Impact of the California Stem Cell Agency

The $3 billion California stem cell agency today served up a warmed-over version of a study that would have the public believe that the research program has had a major economic impact on the state.

The latest study was prepared last August by a firm that was hired under an RFP in 2010 that said it must execute "a vibrant and aggressive strategy to support the goals and initiatives of CIRM.” 

The agency paid $300,000 for the original study but contends the report is “independent” of CIRM.

According to the CIRM press release today, the latest version of the study by Jose Alberro of the Berkeley Research Group claims creation of 38,000 “job years” and $286 million in “new tax revenue” from the award of $1.5 billion. Those awards actually cost something in the neighborhood of $3 billion, given that state taxpayers must pay interest the borrowed funds that finance the agency. 

The Institute of Medicine's recent blue-ribbon report on the stem cell agency carried remarkably different information than the economic figures reported today. The institute's study was also financed by CIRM but at a cost of $700,000. The report said,
“In the short term, CIRM’s expenditures are supporting approximately 3,400 jobs and their innovative efforts have also attracted substantial additional private and institutional resources to this research arena in California CIRM’s long-term impact on such critical aspects of the California economy as state tax revenues and health care costs beyond the shorter-term and temporary impact of its direct expenditures cannot be reliably estimated at this point in CIRM’s history."
Here is what the California Stem Cell Report wrote in 2011 when the first study was released:
“No doubt exists that the stem cell spending has had a beneficial economic impact. But whether it has had a 'significant' impact on the California economy is in the eye of the beholder. The state's economy runs to something like $1.7 trillion a year. If California were a nation, it would rank among one of the larger economies in the world. The workforce totals around 18 million, making 25,000 jobs statistically less than a hiccup. Keep in mind as well that CIRM, until 2009,  paid the interest on its borrowing with more borrowed funds, all of which adds to the total cost of the borrowing, which is about $3 billion on top of the $3 billion CIRM is handing out.”
By ballyhooing economic impact reports the stem cell agency would seem to be inviting assessment of its efforts as an industrial development enterprise, which involve criteria significantly different than that of a research enterprise. A few years ago, we asked the agency's then Chairman Robert Klein whether he wanted to have CIRM assessed as industrial development effort. His quick response was a very emphatic no. Klein nonetheless frequently touted the figures produced under the contract with the agency.

The latest figures are undoubtedly likely to be cited as the agency begins a road trip around the state to meet with newspaper editorial boards to trumpet CIRM's reponse to the Institute of Medicine study.

See below for a full copy of the report. We have asked CIRM for a copy of the contract with the group that prepared it. We will carry it when we receive it.
   
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