California To Proceed with Fall Bond Sale; Stem Cell Agency Could Benefit

The California state treasurer's office today reaffirmed that it intends to move ahead with a state bond sale this fall, which could be good news for the $3 billion California stem cell agency.

CIRM will face a severe cash crunch in less than 12 months, roughly May or June of next year, without additional dollars. Its only real source of funding is through the sale of California general obligation bonds.

Tom Dresslar, spokesman for state Treasurer Bill Lockyer, told the California Stem Cell Report today that details for the fall sale are still being worked out. He said in an email,

"At this point, the only thing we can say with a good degree of certainty is that we'll sell (government obligation) bonds this fall. The number, size and structure of those transactions remains undetermined. Much will depend on priorities set by the Administration (of Gov. Jerry Brown), and how much new bonds they want to issue to keep current projects going or start new ones."

Last May, the state said that it would sell only $1.5 billion in bonds this fall to keep borrowing costs down in light of the ongoing state budget crisis. Roughly $37 billion in long term bonds are awaiting sale, according to the state treasurer's office, including $1.9 billion in bonds for CIRM. That is likely to mean that CIRM will face competition in receiving an allocation from this fall's sale.

Reporter Kathleen Pender quoted Dresslar in this morning's San Francisco Chronicle as saying,

"We need to get a firm handle on the financial situation of ongoing infrastructure projects, how much money they need, how far can they go with their current cash."

In June, the stem cell agency's new chairman, Jonathan Thomas, spoke frankly about CIRM finances just before he was elected chair. He told CIRM directors,

"The agency faces the real possibility that it will not have timely access to the amount of bond proceeds it expected and may be forced to look elsewhere in very short order to the full funding required to meet its projected short term needs or to evaluate how to push grants out or otherwise modify expenses if that becomes necessary. And let's not kid ourselves – this problem could last for a long time." 

Thomas was nominated for his post at CIRM by both Lockyer and Gov. Brown, which should be of benefit to CIRM in securing bond proceeds.

Earlier state plans called for a $2.4 billion bond offering in the spring of 2012, which the stem cell agency might also share in. However, that might cut very close in terms of CIRM's cash flow. Additionally, the state could be in the midst of another major budget crunch because of cutbacks that could be triggered in January.