Sunday, February 24, 2013

California Stem Cell Agency Bonds On Sale in March

Early next month, the state of California will sell $2.7 billion in bonds, a tiny fraction of which will go towards the California stem cell agency.

It is all part of an arrangement that currently involves short-term borrowing as well to keep the cash pipeline at CIRM properly filled.

To refresh some of you, the agency subsists off money that the state borrows (bonds) instead of going to the legislature annually for financial support. While that avoids competing against school children, the poor, the University of California, state colleges, parks, highways and other interests seeking state funding, it also means that the cost of a $20 million grant is something closer to $40 million because of the interest expense.

The California Stem Cell Report last week asked the state treasurer's office about the bond sale March 12-13 and what it means for the stem cell agency. Here is what Tom Dresslar, spokesman for the treasurer, replied in an email.
“CIRM’s funding needs now are met via the issuance of commercial paper (CP).  They’re authorized a certain amount of CP periodically.  Then we work with them on a regular basis to issue the commercial paper on an as-needed basis.  Last fall, they were authorized $160 million of CP.  We will issue the first $27 million under that authorization (this) week.  This spring, CIRM is scheduled to receive another $100 million authorization. The Department of Finance , consulting with CIRM officials, determined the $100 million would be needed to meet CIRM’s funding requirements through the end of 2013.

“Now, here’s where it gets a little complicated.  The state pays down the CP with bond proceeds.  The March sale includes $60 million of stem cell bonds.  Those proceeds won’t provide new money for CIRM, but will pay down the CP proceeds CIRM already has used.”
Proposition 71, which created the stem cell agency in 2004, authorized bond sales for stem cell research for only 10 years. CIRM's financial timekeepers say the clock started running when the first bonds were sold. The upshot is that the agency will run out of money for new grants in less than four years.

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