Monday, May 14, 2012

California Budget Slashing Misses Stem Cell Agency

The $3 billion California stem cell agency dodged the governor's financial knife today.

This morning, Gov. Jerry Brown announced sweeping cuts throughout California state government as he attempted to close a new, $15.7 billion deficit. A report in the Los Angeles Times said the governor was "grabbing any spare change available." But this afternoon, in response to a query, Kevin McCormack, CIRM's spokesman, said,
"The answer is no, we won't be affected."
The question arose because California's financial picture is much bleaker than it was just four months ago. And the stem cell agency's only real source of cash is money borrowed by the state -- general obligation bonds.

Under Prop. 71, which created the agency in 2004, the bond funds flow directly to the agency without intervention by the legislature or the governor. However, Brown has been chary of additional bond sales since they create an increasing burden in the form of interest costs. Those costs must be financed out of money that otherwise might go to the University of California, K-12 schools and medical help for the poor.

Under an agreement arrived at last year, CIRM has what amounts to a $225 million line of credit with the state, which should take care of its needs until January. The cash is coming from short-term borrowing by the state instead of bonds.

The Brown Administration has cut back on bond borrowing and intends to cut more this fall. According to the state Department of Finance, the cost of borrowing has declined $173 million this fiscal year, down to $5.2 billion. CIRM's share of the debt service is more than $200,000 a day.  

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