Text of Comments on Awards to Stem Cell Directors' Institutions

Here is the full text of comments made by the California stem cell agency, Joe Mathews, co-author of “California Crack-Up” and Bob Stern, former president of the Center for Governmental Studies and co-author of the California Political Reform Act, in connection with the Sept. 23, 2012, article in The Sacramento Bee headlined “Stem Cell Cash Mostly Aids Directors' Interests.” The comments were abbreviated for publication in The Bee because of newspaper space constraints.

Comments by Alan Trounson, president of CIRM:

“To make sure we do the best job of managing taxpayer's money it's natural that we turn to people who know most about stem cells and stem cell research. In fact, as the state's own Little Hoover Commission reported in its analysis of CIRM: “The fact that CIRM funding has gone largely to prestigious California universities and research institutes is hardly surprising and should be expected, given the goals of Proposition 71 and the considerable expertise resident in these research centers.” But in recruiting the best minds, we also adopt best practices to ensure that there is no conflict of interest. Every board member has to recuse themselves from voting on, or even being part of a discussion on anything to do with their own institution, or to an institution or company that they have any connections to. All this is done in meetings that are open to the public. CIRM’s conflict of interest rules have been subject to multiple reviews – by the Bureau of State Audits, the Little Hoover Commission and the Controller – and there is no evidence that any of CIRM’s funding decisions have been driven by conflicts of interest. Indeed, CIRM rigorously enforces its conflict of interest rules at each stage of the funding process to ensure that all decisions are made on the merits of the proposal for funding and not as a result of any conflicts of interest. 

“In addition all funding applications are reviewed by an independent panel of scientists on our Grants Working Groups, all of whom are out-of-state and meet strict conflict of interest requirements, and it is their recommendations that help guide the ICOC (CIRM governing board) on what to fund.”

Joe Mathews' comments:

“California ballot initiatives are a terrible way to make public policy. And they are even worse as a method for making scientific policy. 

“It's not merely that this initiative was drafted in such a way as to benefit the enterprises of its directors. It's that, under this initiative's own provisions and the California constitution, it's so hard to change Proposition 71 and fix what ails CIRM. Effectively, these provisions are baked in, and nothing short of another vote of people can really make the change. (Yes, there are provisions, as you know, that permit the legislature by super-majority to do things, but supermajorities are effectively out of reach in California). 

“Sadly, initiatives like Proposition 71 are not uncommon. Many measures are drafted to benefit the people who would support the measure, or oversee the program established. This has been very common with bonds. Essentially, to win the support of various groups whose money and backing is important to passage of a bond, a sponsor of an initiative bond will set up rules and include money specifically intended for each group. This is a form of pay-to-play. Agree to back the initiative and you're in. And it happens because there's no rule against it and because passing initiatives in California require difficult, expensive campaigns. 

“And this sort of thing will continue to happen. There is no serious push to do anything about this. Indeed, good government groups and reformers in California have opposed changes to the initiative process -- because they want to use the process for their own schemes.”

Bob Stern's comments:

“It would have been better had institutions receiving grants not to have had their representatives on the board awarding grants. On the other hand, we want to have the most knowledgeable people on the board overseeing this very important program. The question: Were these people the only qualified ones to sit on the board?”

$70 Million Research Proposal Up Next Week at California Stem Cell Agency

Directors of the $3 billion California stem cell agency will hold a special, teleconference meeting next Tuesday to deal with business that was put off last month, including a new, $70 million research round.

The meeting is necessary because directors could not finish their business July 26 after they lost the supermajority quorum required to do business. They delayed action on a number of matters, including the translational research proposal, which is scheduled to be posted as an RFA next month.

The governing board also had discussed dealing with changes in its intellectual property rules at next week's meeting, but that proposal is not on Tuesday's agenda. The next meeting of the board is Sept. 5 and 6 in San Francisco. The agency has confirmed that it will be a two-day session.

At least one new appeal is expected to come up in September in the $243 million disease team round that consumed so much time in July.

Next week meeting involves a host of locations throughout California. The public is entitled to participate in the session from any of those sites. The specific addresses can be found on the agenda.

Researcher Alert: Opportunity for Fresh Appeal in $243 Million Disease Team Round

A tiny opening exists for scientists who failed to win approval last month of their bids for $20 million research awards from the California stem cell agency.

On July 26, the agency's governing board okayed $151 million for eight scientists during a day filled with emotional testimony from patients, as well as appeals by researchers seeking reconsideration of rejection by grant reviewers at the California Institute for Regenerative Medicine. The board also asked reviewers to take a fresh look at five applications in its signature disease team round.

However, the board failed to act on eight applications, meaning that they are still pending. Normally the board will approve -- as a group -- one set of applications. Then, at the same meeting, it will vote to reject another set of applications. On July 26, however, the hard-pressed directors late in the afternoon lost the supermajority quorum (65 percent) required to do business and adjourned without acting on all the applications.

This situation rarely occurs on award rounds. In our recollection, it has happened only once before although there may have been other occasions.

That leaves an opening for more researchers to ask the board to act favorably at its Sept. 5-6 meeting in San Francisco on applications rejected by reviewers. Money is available. The July 26 round was budgeted for $243 million.

At the meeting last month, discussion by directors provided several clues to appropriate avenues for reconsideration. They were interested in appeals, formally called extraordinary petitions, that brought genuinely new information to the table. Serious errors in the reviews – something more than differences of opinion – were of interest. Wide variance in the spread of scientific scores on specific applications, including the preliminary scores, also triggered directors' interest.

Researchers considering appeals would be well-advised to listen to the audiocast of the meeting to hear the discussion of appeals. The transcript of the meeting also should be posted soon on the CIRM website, probably this week. The transcript can be found via this page when it is posted. The audiocast instructions can be found on the July 26 meeting agenda.

(The best available information on the CIRM web site shows a Sept. 5-6 governing board meeting. However, that schedule also shows other two day meetings earlier this year, which actually have turned out to be only one day.)

Stem Cell Blowback from Proposition 71

Proposition 71 last week once again stood in the way of action by the $3 billion California stem cell agency.

This time it was a bit of minutia embedded in state law that prevented the agency's governing board from going forward. The result is that the board will have to hold another meeting in August to approve matters that need to be acted on in a timely fashion.

The minutia involves the supermajority quorum requirement for the board, the percentage of board members needed to conduct business legally. Proposition 71, the 10,000-word ballot initiative that created the agency in 2004, stipulates that 65 percent of the 29 members of the board be present for action.

Here is what happened: Late last Thursday afternoon, CIRM directors were moving fast after a long day of dealing with $151 million in research awards. But as they attempted to act on proposed changes in the agency's important intellectual property rules, one of the board members left the meeting, presumably to catch a flight. The result was that the meeting quickly ended after it was decided to deal with the IP proposal and another matter during a telephonic meeting this month.

The quorum problem has plagued the CIRM board since its inception, although the situation has eased since J.T. Thomas, a Los Angeles bond financier, was elected chairman in 2011. A few years back, the board also changed its rules to allow a limited number of board members to participate in meetings by telephone, reducing the pressure on board members to physically attend meetings.

The obvious solution would be to change the quorum to 50 percent, a reasonable standard. However, the board is legally barred from doing that. To make the change would require a super, supermajority vote, 70 percent of each house of the state legislature and the signature of the governor. That is another bit that is embedded in state law, courtesy of Proposition 71. To attempt to win a  70 percent legislative vote would involve a political process that could be contentious and also involve some horse-trading that the stem cell agency would not like to see.

Why does the 65-percent quorum requirement exist? Normally, one would think such internal matters are best left to the governing board itself. It is difficult to know why former CIRM Chairman Bob Klein and his associates wrote that requirement into law. But it does allow a minority to have effective veto power over many actions by the governing board.

Of course, there is another way to look at the problem: CIRM board members could change their flights and stick around until all the business is done. But that would ignore the reality that all of them are extremely busy people and have schedules that are more than full.

All of this goes to one of the major policy issues in California -- ballot box budgeting and the use of initiatives that are inflexible and all but impossible to change, even when the state is in the midst of a financial crisis in which the poor, the elderly and school children are the victims. One California economist has called the situation "our special hell."

For more on some of the other problems created by Proposition 71, see here(cap on size of staff, which took legislation to remove), here (board cannot nominate its ownchairman), here (dual executive arrangement).

The Ins and Outs of CIRM's Push to Keep the Geron hESC Effort Alive

The $3 billion California stem cell agency has confirmed that it is looking for companies to take over Geron's hESC business, but remained vague on the details of just what it is proposing as well as any financial incentives.

A certain ambiguity may appropriate because Prop. 71, the ballot initiative that created CIRM seven years ago, constrains the state research effort, which is engaged in an aggressive push to bring stem cell therapies into the marketplace.

After last week's New Scientist article in which CIRM President Alan Trounson said he was talking to at least three companies, the California Stem Cell Report emailed this inquiry to the agency:

"Re Trounson's comments about CIRM trying to find an enterprise to pick up the Geron hESC business, what form is that taking? Are CIRM officials contacting companies, asking them to consider the Geron business? Are promises being made that Geron's loan would be passed along to a new company? Are CIRM officials giving any sort of assurance that the new enterprise would be looked on favorably in terms of possible CIRM financing help, even a wink or some such thing?"

In response, Maria Bonneville, executive director to the CIRM board, said yesterday,

"Dr. Trounson is encouraging companies to take a hard look at the potential of this project. If any companies express a solid desire to continue the project, they would be thoroughly vetted through CIRM's existing procedures."

The stem cell agency is limited by law in what it can do encourage a deal for Geron's orphan business. Nonetheless it will have to move quickly if it wants to keep Geron's hESC team intact. Otherwise, those folks will be heading for more secure employment.

With some crafty lawyering, however, CIRM might be able to move its $25 million Geron loan over to a some sort of new entity if the clinical trial remains virtually identical.

The agency might also find a way to use a newly created $30 million "strategic partnership" program to support a deal involving Geron's stem cell program. CIRM's new program is industry friendly and aimed at early stages of clinical development.

However, by law, only a public vote of the 29-member board of directors can approve a loan or grant. That vote is taken in what is supposed to be a blind process in which the names of the applicants are not known. However, it is clear from last May's approval of the Geron loan that the directors knew the identity of the applicant although it was not announced publicly until after the formal 16-1 vote. The agency's procedures also call for action prior to the board vote by its grant review group, which makes the de facto decisions on grants.

The timeline on normal award rounds is lengthy – more than a year from concept to finish – and may not be appropriate in this case. Plus the rounds are open to more than one applicant.

CIRM's current award rounds for business involve loans not grants. The loan policy was developed, in part, because businesses objected to the financial hooks in grants. Originally, the loan program was created to fund business projects that otherwise could not find funding. The program was originally slated to run as high as $500 million. The interest was expected to finance additional research.

The agency also has geographic constraints. It cannot pay for work outside of California. So that would mean that a potential buyer probably would need a substantial presence in California unless the agency could put together a deal in which Geron is still in the game and doing some of the work.

The agency can receive warrants in loan deals but does not make stock investments. It probably cannot legally directly buy a stake in a company and thus provide a cash infusion.

A new arrangement for Geron's hESC business would need some likelihood of a substantial stream of cash over the next several years, based on what Geron said last week. But the current environment for early stage biotech investment is quite difficult. And then there is the FDA, which authorized the clinical trial and is likely to have something to say about who operates it.

Whether CIRM can overcome all these obstacles would seem to be problematic. But, of course, Geron is also shopping its business around. And some buyers might be attracted by a bargain basement price enhanced by the expectation of continued cash from the California stem cell agency.

California Stem Cell Agency Approves $68 Million in New Funding

In a matter of a few minutes this afternoon, directors of the California stem cell agency approved $68 million in new financing rounds, including a $30 million business-friendly effort to speed development of clinical therapies.

The proposals received almost no discussion as four board members scurried for flights or to return home. Their departure left the 29-member board without the 19-member quorum needed to act legally. The board was already short of a full contingent of members.

In addition to the business loan program, the board approved a $35 million basic biology round and a $3 million program to provide internships for high school students at research labs. The funding goes to the labs, which then pick the students.

Action on the items came swiftly after CIRM Chairman Jonathan Thomas told directors they had only 20 minutes to approve them before the quorum was lost.

Here is the CIRM press release on the plans.

CIRM Directors Adjourn

Directors of the California stem cell agency adjourned their meeting early this afternoon after hastily acting on a number of multimillion dollar items.

Four members of the board left to catch planes or return home, leaving the 29-member board without sufficient members to act legally. The board has a super-majority requirement written into state law, courtesy of Prop. 71, the measure that created CIRM. Loss of quorums has been a problem for CIRM since its inception.

The board had been scheduled to meet until 5 p.m. PDT today. The board adjourned at 2:39 p.m.

Board member Bert Lubin, president of Childrens Hospital of Oakland, told remaining board members that all board members should stay for the entire scheduled meeting. He suggested to CIRM Chairman Jonathan Thomas that he write a letter to the board to that effect.

The hasty departure of the board members followed a lengthy discussion earlier in the day about CIRM's shaky public image and ways to improve it.

Two minor items were put off until December. We will have more on board actions in the next couple of hours.

Stem Cell Board Racing Through Agenda

California stem cell agency directors are hurrying through their agenda in Irvine this afternoon as four directors will be leaving to catch planes.

That will leave the board shy of its super-majority quorum requirement. The 29-member board needs 19 members present to legally act. Maintaining a quorum has been a problem since day one of the organization. The quorum requirement was written into state law by Prop. 71.

Stem Cell Agency Slated for Share of California Bond Sale This Week

The California stem cell agency, which faces a cash crunch next spring, is scheduled to receive additional funding as the result of a $2 billion state bond sale this week.

The exact amount is not yet set. Tom Dresslar, a spokesman for state Treasurer Bill Lockyer, said,

"The amount will not be known until after the sale is completed on Wednesday."

The stem cell funds will come from the taxable bond portion of the sale, which totals $200 million. Individual investors can still participate in the bond sales today(see here).

Earlier this year, the state suspended bond sales, which are the only significant source of CIRM funding, because of the state's financial crisis. California has the lowest credit rating of any state in the nation. CIRM earlier said it had sufficient funds to operate until June of next year.

It is not clear whether the state will continue bond sales after the beginning of the year, when it will face more financial difficulties. Massive, automatic cuts are expected since the state is not meeting its current revenue projections.

As originally conceived by backers, Prop. 71, approved by voters in 2004, was to have ensured steady funding for stem cell research through the use of bonds, which flow directly to the agency – skipping the normal state budget process.

Reliance on bond funding, however, is expensive, effectively doubling the cost of CIRM research because of interest costs on the borrowed money.

CIRM Directors Tackle Touchy Management Issues

Key leaders of the California stem cell agency have scheduled a 60-minute meeting tomorrow to decide long-standing, thorny matters at the $3 billion enterprise, ranging from the province of the new chairman and the current president to just exactly who is a senior officer of CIRM.

The matters, which come under the rubric of "internal governance policy," have been around for some time – in some cases for years, particularly the much-criticized dual executive arrangement involving the chair and the president. In this latest episode, only bits and piece of that management issue have surfaced. (Here are links to an introductory memo and the text of the proposal.)

The proposed changes in the structure of CIRM involve both major and minor matters, including the agency's bond financing and budgeting and adding staff in the chair's office, boosting it from eight to nine persons. Currently CIRM has about 50 employees. The board has 29 members.

The governance proposals were originally prepared by CIRM President Alan Trounson and grew out of the evaluation last year of his performance by the CIRM governing board. The plan has triggered an unusual exchange of memos on the agency's web site that illustrates the contentiousness of some of the issues. First is a "Memo from two staff members to Governance Subcommittee of Board." Then comes a "Memo from Vice-Chair Senator Art Torres in response to memo from two staff members."

The nomenclature describing the memos has significance. The description is controlled by the office of the chair, which posts material to meeting agendas -- in this case the directors' Governance Subcommittee, which is the group that meets tomorrow. The memo from "two staff members" did not originate with ordinary CIRM employees but Trounson and Ellen Feigal, who is the recently hired No. 2 executive at CIRM with the title of vice president for research and development.

The "two staff members" memo takes issue with a number of provisions in the proposed internal governance policy. The memo also appears to seek a 30-day delay in considering the plan. At that time, Trounson and Feigal propose consideration of a presidential reoganization plan as well as another from the new chair, who is to be chosen June 22-23 at a meeting in San Diego.

Among other things, the Trounson-Feigal memo says the new chair may not be qualified to supervise public meeting and conflict of interest issues as well as the legal and financial accountability of the CIRM board. Thus, they suggest a provision to that effect in the new policy should be deleted. Trounson and Feigal said the executive director of the CIRM board and the new public media director should not – and they underlined not – be considered senior officers of CIRM. They also said the new position of chief financial officer, who will direct budget and bond financing matters, should reside in the office of the president for the purposes of budgeting. Presumably that would give the president a bigger handle on the compensation for the CFO, who is supposed to report to both the chair and the president.

In his response, CIRM co-vice chairman Torres took issue with nearly everything in the Trounson memo.

All this involves devilish details that can add up to much more than their surface appearance. During debate last month on the plan at both the Governance Subcommittee and the full board meetings, the discussion became so touchy (see debate excerpt below) that the committee and the board felt compelled to go into executive session. During the board meeting, Trounson exited the room before the topic came up. Feigal and Elona Baum, CIRM general counsel, were left to represent his position and ran into some resistance from board members.

Given that a new chairman is yet to be elected, two board members, co-vice Chairman Duane Roth, a San Diego businessman, and Claire Pomeroy, dean of the UC Davis Medical School, have objected to action on the plan, even though it is couched as a "starting point." The response has been that the plan has been in the works since Trounson's evaluation last year and needs to be moved forward.

It would be easy to dismiss the flap over internal governance as inside bureaucratic baseball. But the proposal and discussion about it highlight issues at the heart of how CIRM does its business for the people of California. Without effective management, it is not at all certain that taxpayers will get a meaningful return on their $6 billion investment (including interest). The issues also speak to the limitations and handicaps that Prop. 71, drafted by outgoing Chairman Robert Klein, places on the research effort. The 10,000-word proposal wrote into state law management minutia, which is now nearly impossible to change, also because of Prop. 71. Beyond that, CIRM and its conduct are  providing a civics lesson in whether the ballot initiative process can or should be used in connection with complex California issues. Finally, how CIRM conducts its affairs will have major impact on the hESC research worldwide and help determine whether the public supports stem cell research or regards it as something less than worthy.

Also on Monday's agenda is the first-ever code of conduct for the CIRM board. (See here and here.)

If you are interested in taking part or listening in on Monday's meeting, teleconference locations are available throughout California, including San Francisco, Los Angeles, South San Francisco, La Jolla, Irvine, Stanford and Palo Alto. Specific addresses can be found on the meeting agenda.

Here is an exchange from the May 4 CIRM board meeting debate on the internal governance policy.
CIRM Management -- Excerpt from debate at the directors meeting May 4, 2011

Look for Candidates for Chair of Stem Cell Agency in Late May

The California stem cell agency, which did not have much choice about the matter, has decided to go along with a delay in picking a new chairman for the $3 billion organization.

Outgoing Chairman Robert Klein, who is scheduled to depart in June, said the CIRM board is "amenable" to postponing until May 23 nominations to fill his shoes. Four state officials – the governor, treasurer, controller and lieutenant governor – are charged with nominating candidates for the part-time position, which could pay as much as $400,000 annually.

The CIRM board is limited to electing a chairman from those candidates, although it does not have to accept any. If the board were truly unhappy with the nominations, presumably it could designate an acting chairman or simply let the vice chairman assume responsibility in absence of a chairman. The latter action probably would not even require a vote of the board. On the other side of the coin, the officials cannot be compelled to make a nomination.

Klein's brief letter, also signed by co-vice chairman Art Torres, to the nominating officials came in response to a March 24 letter from all four officials balking at a CIRM board request 10 days earlier for nominations by April 11. The officials said more time was needed because of the importance of the position.

Klein said,

"We appreciate your desire to find a high caliber leader to replace CIRM's current board chair and the board is amendable to your proposed schedule."

California Budget Mess Threatens CIRM Funding

The collapse of efforts to resolve California's financial crisis in June seems nearly certain to place the state's $3 billion stem cell research program perilously close to a serious cash crunch come next year.

The situation should come as no surprise to lame duck CIRM Chairman Robert Klein, who stunned the agency's governing board in 2009 with similar news. Additionally, in December of last year, only days after he told the CIRM directors Finance Subcommittee that no funding problems existed, Klein warned the full board that it was "essential" that the agency quickly provide assurances of "reliability of our funding."

Klein, a real estate investment banker, considers himself something of a government bond expert because of his experience with housing bonds. He says he and a handful of associates crafted the ballot initiative that created CIRM, Prop. 71, to avoid the financial vagaries that have plagued the NIH. To do that, he relied on borrowed money (state bonds), which makes everything CIRM does cost twice as much as it would on a normal basis. For example, the $20 million grant to scientist Dennis Carson at UC San Diego actually will cost state taxpayers about $40 million because of the interest on the borrowing. Interest costs for CIRM currently run $200,000 a day on the $1 billion it has borrowed so far.

Klein's plan assumed that the state would regularly issue bonds. However, beginning last January, the state suspended the sales of bonds for six months to avoid $248 million in additional interest costs. Today, the state budget remains many billions in the red, and most signs point to continuation of that bond delay decision.

Two days ago, The Bond Buyer financial newspaper reported that state Treasurer Bill Lockyer will not sell bonds until the state budget is balanced. Reporter Rich Saskal quoted Lockyer's spokesman, Tom Dresslar, as saying,

"The bottom line in terms of (revenue anticipation notes) and infrastructure bonds is the timely adoption of a balanced budget."

The California Stem Cell Report first discussed the bond sale problem on March 23. That was before the collapse of budget negotiations in Sacramento. The situation is much more serious today.

At this point, a balanced state budget is not likely to occur unless voters approve in November tax increases  – which they have previously rejected -- through a ballot initiative that is yet to be written. Even then, bond sales are not likely until sometime in 2012, according to Lockyer.

While CIRM says it has sufficient cash on hand to deal with its existing obligations until June of 2012, the agency's timetable calls for new grant rounds to continue to move forward aggressively this year and next. Extreme pressure will be felt in the treasurer's office from competing interests for urgent and early bond sales when they resume. And a good possibility exists that CIRM bond sales will not come up in the first round in 2012, assuming sales are resumed then.

On May 3-4, the 29 directors of the stem cell agency are scheduled to meet in Los Angeles. High on their agenda should be a discussion of finances and alternatives to ensure that CIRM's grant programs continue to move forward – albeit slowly -- even if bond revenues do not materialize until well into next year. Delay could be the operative response. Postponing new grant programs, RFAs for existing efforts and even payments to researchers and institutions – all could be on the table. One additional matter to discuss – designation of someone to deal with the full range of bond issues, given that Klein is leaving his post in less than three months, if not sooner.

CIRM Directors Move to Alter Role of Chair of $3 Billion Stem Cell Program

Directors of the California stem cell agency, in sharply divided moves, today said that its next chairman should serve in a part-time capacity in largely an oversight role.

The board's actions are aimed at giving guidance to four elected state officials who have the authority to nominate persons for the job, which carries a salary that can reach as high as $500,000 for fulltime work. The moves are the latest effort by the board to deal with top-level management issues that have troubled the agency since its inception.

In a 17-5 vote, the 29-member board approved a motion designating the position as parttime with the "best assessment" that it needed only a 50 percent to 80 percent time commitment, depending on the candidates.

On an 11-8 vote with three abstentions, the board approved a motion indicating that the new chair would fill more of an oversight role with the board delineating the responsibilities of the chair and president. The state's top fiscal officer, Controller John Chiang, warned yesterday that the current co-executive situation "severely compromises" accountability at CIRM.

The board hopes to elect a new chair perhaps as early as May but possibly in June to replace Robert Klein, whose term has expired.

Finding a replacement roiled the board last fall. Discussion was also vigorous today during the debate over the role of the chair – an issue that has troubled CIRM since its earliest days. Prop. 71, which created CIRM in 2004, established a dual executive situation that has created friction and still troubles the agency today, CIRM President Alan Trounson acknowledged during today's meeting.

Duane Roth, co-vice chair of the board and a San Diego businessman, noted the longstanding problem
He said,

"This has been flagged...as something we need to get fixed."

Director Claire Pomeroy, dean of the UC Davis School of Medicine, said that CIRM has evolved to the point that the board must ensure that the staff is respected and allowed to run the organization. She said,

"We should empower them to go and do their job without the micromanagement of our board."

She said the public understands that CIRM has not been optimally functional because of the "lack of clarity" between the roles of the chair and the president.

Art Torres, co-vice chair of the board and a fomer state legislator, also warned that the nominating state officials – governor, treasurer, controller and lieutenant governor – may well find themselves hard pressed to nominate someone for a $500,000 state job as the state faces a financial crisis.

Some board members offered suggestions that the time commitment range be altered to 20 to 80 percent or from 20 to 100 percent but those proposals did not win sufficient support.

The board also recommended additional criteria for the position that included "experience with advocacy, proven vision and leadership abilities, and prior scientific understanding and experience with governance."

The board 's timetable calls for nominations from the officials by April 11 with public presentations by candidates at the May board meeting.

Here is the text of the successful motion by Director Jeff Sheehy, a communications manager at UC San Francisco on the role of the chair.

"The Governance Subcommittee recommends that the board clearly delineate the discrete responsibilities of the chair, vice chairs and president, and that the chair and vice chairs lead a robust oversight effort, including taking advantage of the skills of the board members in conducting their oversight role, and if the chair and vice chairs possess expertise in the areas of responsibility assigned to the chair in Proposition 71, then the board may elect to take advantage of their expertise operationally in those areas as well."

Here is a link to the CIRM press release that deals with the succession issue and other matters at today's meeting.

California Stem Cell Agency Already Has Posted Some Statements of Economic Interests

The California stem cell agency was Johnny-on-the-spot last week when its directors approved posting statements of economic interest on the CIRM web site.

Moments after the vote, Don Gibbons, chief communications officer for the agency, emailed the California Stem Cell Report, pointing out that the statements of the top executives were already up. They can found at this location or by searching the CIRM site on the term "form 700," the number of the state form used, or "economic interests."

Statements are available today from the chairman (Robert Klein), the two vice chairs(Art Torres and Duane Roth), president(Alan Trounson), vice president of operations(John Robson), general counsel (Elona Baum), executive director of scientific activities (Patricia Olson) and Gibbons.

Gibbons said the statements from all the 29 directors will be posted soon. Expense claims for directors and executives will be posted beginning in April.

If you would like to see statements of economic interest sooner, you can find them here. They were posted on the Internet by the California Stem Cell Report last summer after CIRM had failed to act on the unanimous recommendation from the Citizens Financial Accountability Oversight Committee that the statements be made available online. The panel is the only state body specifically charged with overseeing CIRM finances. It made its recommendations 12 months ago.

The CIRM form 700s can be found more easily than those of the top aides to Gov. Jerry Brown. Indeed, his web site does not even have a search function. Former Gov. Arnold Schwarzenegger began posting the forms and expense claims for his top staff and appointees following a flap about conflicts of interest and expense claims. It is not clear whether Brown will post the statements. A handful of other state officials are also posting the statements online.

The $3 billion stem cell agency differs significantly from other state agencies and contains built-in conflicts of interests dictated by Prop. 71, which created the agency in 2004. Its directors are employed by institutions that have received nearly all the $1.1 billion in grants that the agency has handed out.

Here is a list of institutions that have or had seats on the board and their grant totals as of last week:  Stanford, $176 million; UCLA, $135 million; UCSF, $111 million; UCSD, $77 million; USC, $72 million; UC Irvine, $72 million; UC Davis, $61 million; City of Hope, $42 million; UC Berkeley, $37 million; Scripps, $37 million; Salk, $37 million; Sanford-Burnham, $31 million; UC Santa Cruz, $19 million; UC Santa Barbara, $13 million; UC Merced, $8 million; UC Riverside, $6 million, Cedars-Sinai, $9 million; Caltech, $2.3 million, and Childrens Hospital Research Institute, $55,000. One CIRM director, Sherry Lansing, a UC regent, accounts for many of the connections to the smaller UC campuses.

Last Thursday, directors awarded more cash to the following institutions with current or former CIRM directors: Stanford, $10.5 million; UC Berkely, $3 million; UCSD, $2.7 million; UCLA, $2.6 million; Salk, $2.3 million, Cedars-Sinai, $1.8 million, and UCSF, $1.8 million.

Directors with financial ties to applicants are barred from voting on their applications. Directors, however, approve concepts for grant programs and the rules for administering them. A former director tied to the Sanford-Burnham Institute and others ran afoul of conflict rules in 2007. The issue with Sanford-Burnham was disclosed by the California Stem Cell Report. The case resulted in a warning by the state Fair Political Practices Commission. The Sanford-Burnham official acted after he was advised to do so by CIRM Chairman Klein, an attorney who later said his advice was an "inadvertent error."

(Editor's note: An earlier version of this item incorrectly indicated that Salk was currently represented on the CIRM board. In fact, Salk last week lost its seat.)

Salk Loses Seat at California's $3 Billion Stem Cell Table

Bert Lubin, new CIRM board
member

The Salk Institute has lost its seat on the 29-member governing board of the $3 billion California stem cell agency.

The La Jolla, Ca., research enterprise had held a position on the board since its inception in 2004. Most recently, William Brody, president of Salk, which has received $37 million in CIRM grants, filled the slot. Brody was appointed in August of 2009.

Brody was was replaced by Kristiina Vuori, president of the Sanford-Burnham Research Institute, also of La Jolla. At the same time, her boss, John Reed, CEO of Sanford was replaced on the CIRM board when state Controller John Chiang appointed  Bert Lubin, president and CEO of Children’s Hospital and Research Center Oakland. Lubin made news three years ago when he became the first grant applicant to publicly appeal a negative decision on his application by CIRM's scientific reviewers. Lubin lost his bid during a heated debate among directors. At the time, directors expressed considerable discomfort with having to deal with a public appeal. Since then, the problem of appeals has continued to dog the board, although its Scientific Subcommittee is attempting to deal with the issue.

Kristiina Vuori, new
 CIRM  board member

Childrens Hospital Oakland currently holds a single $55,000 grant from CIRM.

Chiang's office had no immediate comment on the reasons behind Lubin's nomination. We are also querying Lubin and Brody for comment.(The controller's office later said Lubin would serve as an advocate for children's health.)

Vuori was appointed by former Lt. Gov. Abel Maldonado before he left office earlier this month. Sanford-Burnham has received $31 million from CIRM.

It is common for CIRM grants to go to institutions linked to its board. Many members of the board are employed by institutions that have received tens of millions of dollars from CIRM. The following institutions have seats on the board: Stanford, $176 million in grants; UCLA, $135 million; UCSF, $111 million; UCSD, $77 million; USC, $72 million; UC Irvine, $72 million; UC Davis, $61 million; City of Hope, $42 million; UC Berkeley, $37 million; Scripps, $37 million; UC Santa Cruz, $19 million; UC Santa Barbara, $13 million; UC Merced, $8 million; UC Riverside, $6 million, Cedars-Sinai, $9 million. One CIRM director, Sherry Lansing, a UC regent, accounts for many of the connections to the smaller UC campuses.

Directors with financial ties to applicants are barred from voting on their applications. Directors, however, approve concepts for grant programs and the rules for administering them. Reed and others ran afoul of conflict rules in 2007. The issue with Sanford's Reed was disclosed by the California Stem Cell Report. Reed was later warned by the state Fair Political Practices Commission. Reed acted after he was advised to do so by CIRM Chairman Robert Klein, an attorney who later said his advice was an "inadvertent error."

The structure of the board was dictated by Prop. 71, whose authors, including Klein, were interested in giving a seat at the financial table to the institutions who ultimately benefited from the largess.

The new appointees have six-year terms. They receive $114 a day while working on CIRM matters.

The appointments were disclosed this afternoon in a news release from CIRM. The statement said there were no changes in the other members of the board. Nine were reappointed. Others have eight-year terms.

(An earlier version of this item incorrectly said that Brody was replaced by Lubin.)

CIRM Directors to Consider Plan to Pay Some Board Members up to $15,000 Annually

The California stem cell agency has released more information on issues coming before its directors next week, including a plan to pay some of the patient advocate members on its board up to $15,000 a year for their work.

Ten patient advocate members sit on the 29-member CIRM board of directors. The proposal would apply to six, those who serve on the Grants Working Group and the vice chair and co-chair of the Facilities and Standards Working groups. Barred from the compensation plan would be the chairman and statutory vice chairman of the agency, Robert Klein and Art Torres respectively, who are also patient advocate members. They already are paid for their work.

The new pay plan -- to be considered next Thursday in Burlingame -- would establish a daily rate of $562.50 for patient advocates who sit on the groups as regular members. Patient advocates serving as vice chair or co-chair would be entitled  to that rate plus an additional, unspecified amount.  A cap of $15,000 would be placed on the pay.

The rate is 75 percent of what CIRM pays its outside scientific reviewers, whose expenses are also covered by CIRM. The patient advocate compensation would be in addition to their expenses as well.

The chairman of the CIRM board would determine the total compensation for each advocate based on the number of days required for "preparation and participation" in grant reviews as well as for meetings of the facilities and standards groups. (Our comment: The plan would give the chairman additional leverage on some board members. It may be more appropriate to require that the compensation decision be made by the chairman and the two vice chairmen of the board.)

Currently members of the board receive per diem of $114 per day and $14 an hour for attendance at meetings and preparation time, plus expenses.

The CIRM information about the plan did not contain an estimate on the total cost of the compensation. It also does not fully explain the justification for the pay. However, patient advocate members sometimes lose salary from their regular jobs when they take time off to participate in CIRM activities. Their attendance is also more critical because other board members often have legal conflicts of interest that prevent them voting on some matters. CIRM directors who are not patient advocates and who hold top executive positions may not lose salary, depending on the polices of their employers. Such members additionally can often use the staff of their institutions to perform work in connection with CIRM activities.

Some of the patient advocate members may decline the new compensation. Here is a list of those who would be affected, based on information posted on the CIRM web site but not on the agenda: Sherry Lansing, former Hollywood studio chief, co-chair of the standards group and member of the grants group; Jeff Sheehy, a communications manager at UC San Francisco, a member of the standards, facilities and grants groups; Jonathan Shestack, a Hollywood film producer, member of the standards group and grants group; Marcy Feit, CEO of ValleyCare Health System, member of the standards, grants and facilities group; Joan Samuelson, founder of the Parkinson's Action Network, vice chair of the grants group, member of the standards and facilities groups, and David Serrano Sewell, a San Francisco deputy city attorney, vice chair of the facilities group, member of grants group.

Other information posted by CIRM on its web site for the directors meeting includes the grant reviewers' summaries of the 56 applications submitted for the $40 million tools and technology round. In response to a question, Gibbons said seven businesses applied for grants. However, CIRM refused to provide a breakdown between non-profit research institutions and academic applicants because, Gibbons said, the non-profits "have always had an academic component." Five of the 56 applicants have German collaborators, who will receive their funding from non-CIRM sources.

The top ranked grant was given a scientific score of 90. The lowest ranked grant approved by reviewers was scored at 62. Fourteen grants that appear to be ranked above 62 were rejected by reviewers. The summary of the reviewer comments indicated that a portion of the grant was recommended for funding because of "programmatic" reasons. That portion of the review said,

"The proposed materials may offer some advantages over competing materials in the current marketplace for soft tissue reconstruction. Reviewers discussed the emergence of clinical data for utility of hASC and agreed that there might be potential for nearer term translation of formulations as proposed in Aim 1."

So far we have not seen any appeals from researchers whose grants were rejected by CIRM reviewers.

The directors agenda also now has links to information concerning the determination of the criteria for the person who is elected in June to succeed CIRM Chairman Klein, who has said he will step down then.

(Editor's note: An earlier version of this item incorrectly characterized the amount of compensation for the co-chairs and vice chairs, based on inaccurate information provided by CIRM. For more details on the error, see this item.)

Trounson and Torres and the Battle for Chair of the California Stem Cell Agency

The president of the California stem cell agency, Alan Trounson, may resign if the new chairman of the $3 billion research effort is not a person who has worked with the biomedical industry, Nature magazine reported today.

Trounson's position was disclosed publicly for the first time by writer Elie Dolgin in a profile of outgoing CIRM Chairman Robert Klein in the Dec. 2 edition of the internationally respected journal.

Trounson's preference could have an impact on the election of the chairman, which the CIRM board is expected to take up later this month. Art Torres, a former state legislator with little connection to industry, is one of the leading candidates, along with Alan Bernstein, head of HIV Global Vaccine Enterprise of New York, who is being backed heavily by Klein. The Trounson disclosure could also shape how the CIRM board receives the report Dec. 8 of the blue-ribbon panel that was chaired by Bernstein.

Dolgin wrote,

“Klein’s departure might also trigger the president to leave, thereby causing a complete overhaul of CIRM’s leadership. Trounson says he told Schwarzenegger that he would like that next chairperson to be 'somebody who’s in the delivery end of the spectrum — that is, somebody who has worked with the biotech or pharmaceutical industry.'
.
“But as this issue was going to press, the leading internal candidate to replace Klein, many say, is vice-chair Art Torres, a former state senator and chairman of the California Democratic Party. Torres and Trounson reportedly cannot stand each other. Trounson notes that Torres is 'a politician, so he’s in that end of the spectrum.' Torres, for his part, declined to comment on his relationship with the president.”

Trounson's foray into board politics came in a multi-dimensional look at Klein and his role in Prop. 71 and as chairman of the agency. The piece included both praise for Klein along with some of his warts.

Here are some excerpts:

“He (Klein) leaves behind an agency with a long list of accomplishments, including more than US$1.15 billion in grants, six new facilities dotted across the state and close to 700 scientific papers.

“Yet many critics say that Klein and CIRM have failed to fully deliver. Despite promises that money borrowed from the state — at least $6 billion over ten years, when interest is factored in — would be returned through commercial spin-offs and savings to health care, the first marketable therapies have yet to materialize. Only two CIRM-funded projects have made it to early-stage clinical trials, and neither of these involves embryonic stem cells — the main impetus for launching the agency in the first place. The embryonic stem-cell clinical trials that have recently been approved in the United States are the product of privately funded research.

“Klein’s critics say his promotion of stem cells’ therapeutic promise was zealous and oversimplified. He 'left voters with the impression that people will be jumping out of their wheelchairs and not being diabetic within a year,' says John Simpson, a long-time observer and critic of the agency’s governance, who is at the consumer-advocacy group Consumer Watchdog based in Santa Monica, California. 'There’s been this constant compulsion for [Klein] to say, ‘See, we’re delivering, we’re delivering’, and that’s something that’s haunted him throughout the whole thing.'

“Throughout CIRM’s existence, Klein has pulled the strings, maintaining control over nearly every aspect of its structure and science, often to the chagrin of its other leaders. Still, many observers say that no one else could have weathered CIRM’s early storms. 'With Bob, there’s always this indefatigableness,' says Douglas Wick, a movie producer and diabetes advocate who worked with Klein to get CIRM funded. 'His personal energy and charisma are so strong, and he has this ability to get punched, stand up and go at it again.'”

Dolgin continued,

“But not all the early organizers of Proposition 71 remain enthusiastic about the way Klein led the charge. 'It became Bob’s show almost entirely, and there was some friction about that,' recalls Peter Van Etten, former JDRF president and chief executive. (Home developer Tom) Coleman (an early key organizer for Prop. 71) has not spoken to Klein since the initiative passed, following disagreements over what Coleman viewed as Klein’s self-promotional approach. (Movie director Jerry) Zucker (another influential early organizer of the Prop. 71 campaign) remains on better terms with Klein, but still feels some lingering resentment.

“'If I had to do it over again I’d make the same call to Bob Klein because I don’t think the rest of us would have got it done without him,' Zucker says. But, he adds, 'What I was most unhappy about was the realization after a while that [Klein] wrote the initiative for him to be the chairman. That was something I was too naive to realize. It’s shameless almost.'”

Dolgin also spoke with Joel Adelson, a health policy researcher at UC San Francisco, who co-authored a study of the agency earlier this year. Dolgin wrote,

“'Klein has in effect acted like the chief operating officer beside Trounson and beside (former CIRM President Zach) Hall, and I can only say that this looks like it must have been very uncomfortable for these guys,' Adelson says. 'It’s an unusual situation,' says Trounson. 'And if you ask me what I prefer,I prefer the simple situation where the president is in charge of all management and reporting to a board on policies. But it’s bifurcated, and it was set up that way, so you don’t have a choice.” (Hall declined to comment for this story.)”

Dolgin also quoted a CIRM board member on Klein.

“'He’s an historic figure with real genius in terms of moving biomedicine forward,' says Jeff Sheehy, a CIRM board member and director for communications at the University of California, San Francisco’s AIDS Research Institute. 'He’s as good as they get if not better.'”

Dolgin also noted that some criticism of Klein focused on CIRM's emphasis on clinical applications. However, a significant number of folks in the biotech industry believe the agency is overbalanced towards basic research.

Torres and Bernstein Mentioned as Potential Candidates for CIRM Chair

The mystery of who will be nominated to chair the $3 billion California stem cell agency for the next six years could be answered this week if four of the state's top elected officials respond in a timely fashion.

It is up to those officials to make the nominations, but already at least two names are floating about – Art Torres, co-vice chair of the agency, and, surprisingly, Alan Bernstein, head of the external review panel that just filed its report on CIRM's programs. Duane Roth, the other co-vice chair of CIRM, is possibly in the mix as well. There could be more.

Bernstein's name has been mentioned by several sources and is reportedly being pushed by outgoing Chairman Robert Klein. Bernstein, executive director of the New York-based Global HIV Vaccine Enterprise, was not involved with CIRM until he led the external review. He has held his current position since 2007. A Canadian, he also was the founding president of the Canadian Institutes of Health Research, which had a budget of $1 billion.

We queried Bernstein about whether he was seeking the post. He replied,

“As to your second question, under Proposition 71, the constitutional officers are the individuals empowered to nominate candidates. To my knowledge, they have not yet sent their nominations to CIRM. If I were nominated, I would make a comment at that time.”

Some of the CIRM board members were skeptical of Torres when he came aboard as vice chairman in 2009, but he seems to have acquired a following. A former state legislator, he brought much-needed Capitol savy to the agency, which was plagued by serious legislative missteps early on, largely the result of actions by Klein. It is clear that Torres is seriously thinking about the post.

Roth comes out of the San Diego business community and has worked on legislative issues as well, particularly in Washington. He has been a strong advocate of bringing CIRM closer to the biotech industry, a position he shares with others on the board.

Also on the table is the question of a salary for the chairman, which he is entitled to under law. No one is publicly discussing numbers. But in 2008, the latest available figure, Bernstein was paid $593,133, including $60,836 in other compensation, at Global Vaccine. Torres currently receives $225,000 on an 80 percent basis. Roth does not receive a salary.

Klein, a real estate investment banker, initially declined a salary in 2004. But he sought one in 2008. The board decided to pay him $150,000 annually for what it considered a half-time position. The current salary range for chairman tops out at $529,000, which is also the maximum for the president and the yet-to-be-filled position of vice president of research and development. Should the new chairman receive a salary anywhere close to the maximum, it is bound to trigger cries of outrage from certain segments of the public. Such a move also would not help CIRM in its dealings in Sacramento, where lawmakers are mired in a financial swamp.

The four constitutional officers who are required by Prop. 71 to make nominations are the governor, lieutenant governor, the treasurer and the controller. The treasurer is a longtime colleague of Torres and is expected to nominate him. The controller has been critical of the agency in his role as chair of the Citizens Financial Accountability Oversight Committee, a panel created by Prop. 71 as a watchdog over CIRM's financial affairs. But he has given no sign of his preferences.

CIRM is hoping to see nominations this week. However, nothing compels the four officeholders to make them. No penalty exists for failure to do so. In cases of other state agencies, top spots are sometimes left open for months, if not longer. Nonetheless, the governor and lieutenant governor may want to make nominations before they leave office. CIRM directors also do not have to actually elect a chairman. If they fail to do so, Klein could continue as chair. Or he could leave the position, and the board could choose another person as acting chair. The board could then ask the politicians for different nominations. If the governor and lieutenant governor do not make nominations by early January, the task would fall to Jerry Brown and Gavin Newsom, who will assume office then as governor and lieutenant governor respectively.

The process for nominating persons for chair, essentially freezing the board out of an important role, was written into Prop. 71 by Klein and his co-authors of the measure. It is another case of inartful language that has made it difficult for the board to do its work.

The state's Little Hoover Commission, California's good government agency, last year recommended changes in the procedure to give directors more authority but those proposals have gone nowhere.

The board is not expected to take up the chairmanship at its Dec. 8 meeting, much of which will be devoted to a discussion and perhaps decisions on recommendations of the external review panel. The board's actions on the proposals could influence a later decision on chairmanship, which could come at a meeting in mid-December.

Bernstein, although chairman of the external panel, told the California Stem Cell Report that he will not be making the group's presentation to the board on Dec. 8. He said that task will be carried out by another member of the panel, Richard Klausner, managing director of The Column Group, venture capital fund.

Bernstein said,

“As you may know, the External Advisory Panel (EAP) has not yet presented its report to CIRM's governing board. EAP's Reporting Chair, Dr. Rick Klausner, will present the report and lead the discussion at the Board's December 8 meeting. In light of this, it would be inappropriate for me to make any comment about the report at this time, let alone respond to an anonymous blogger before CIRM's board has had an opportunity to review and discuss the report.”

In a follow-up email, Bernstein said he was not referring to the California Stem Report in his reference to an anonymous blogger.

Does the Stem Cell Agency Have Enough 'Bandwidth' to Do The Job?

SAN FRANCISCO – A blue-ribbon panel examining California's $3 billion stem cell agency began its second public session this morning with some of its members saying they are impressed by what they have learned so far and with some expressing concern about whether CIRM has enough “bandwidth” to achieve its goals.

Alan Bernstein, chairman of the panel and executive director of the Global HIV Vaccine Enterprise of New York, described the agency as a “very exciting experiment in science,” one that the “world is watching.” Others also said they were impressed by how much CIRM has accomplished during its nearly six-year existence.

But panelists also said it could be difficult for the agency to do all that it is proposing. Richard Klausner, managing partner of The Column Group, a San Francisco venture capital firm, and Igor Gonda, CEO of Aradigm of Hayward, Ca., were among those concerned about CIRM's “bandwidth” problems. Klausner said he was “completely amazed” at what CIRM is trying to accomplish. But both expressed concern about whether CIRM had the necessary “resources” to do all that it proposes

Their comments apparently referred to the size of CIRM's staff, which was limited by Prop. 71 to 50 persons in addition to a 6 percent cap on its administrative budget. The agency has never had 50 employees although CIRM President Alan Trounson earlier this year warned that the quality of work was in danger because of the limit. Since then, the legislature has removed the cap in a new law that will take effect Jan. 1. However, according to CIRM officials, the size of the CIRM staff is not likely to exceed about 54 persons any time soon.

Although recruiting and hiring usually takes months, CIRM also does not seem to be making a running start on its opportunity to hire more staff. The agency has not yet posted significant numbers of new openings on its Web site. One key position, the new vice president for research and development, has been vacant for about 14 months. The post was supposed to represent a major effort to engage industry, which has been less than happy about its meager share of CIRM grants, about 4.5 percent.

The limit on CIRM staff has forced it to rely heavily on outside contractors, whose expenses are the second largest component in its operational budget. This year contractors are expected to cost $2.8 million, up 21 percent from last year.

This morning, the external review panel conducted a three-hour public session and then moved into a closed-door meeting. Today's meeting was consumed by presentations from CIRM Chairman Robert Klein and others. Public comment was called for with about 15 minutes left in the session. No members of the public offered comments, and only perhaps one or two were in attendance. Another one-hour public comment session is scheduled for tomorrow morning at 8:30 a.m.

Klein and others offered an overview of the agency, its history and underlying philosophy. He noted that the use of bond financing (money borrowed by the state) was aimed at assuring long-term financial stability for scientific research. He also said the debt, which will extend over 42 years, will be paid by the beneficiaries of the results of the research. At one point, he noted that borrowing the $3 billion will cost another $3 billion or so in interest.

Scientist George Daley of Harvard, another of member of the external review panel, raised a question about whether efforts such as CIRM are a threat to the “paradigm” of federal funding of research through the NIH.

CIRM Vice Chairman Art Torres said that the results of CIRM research will benefit the entire nation. Klein said the California effort will put pressure on Congress to develop more stable ways of financing scientific research.

Legislation to Give CIRM More Employees Goes to Governor

Legislation to remove the 50 person cap on the size of the staff of the California stem cell agency won final legislative approval yesterday.

The measure, SB 1064 by Sen. Elaine Kontaminas Alquist, D-San Jose, is now on its way to the governor's desk where it is expected to be signed. The bill would go into effect at the beginning of the year.

The limit on the number of employees was written into law by the ballot initiative, Prop. 71, that created the $3 billion research effort. The cap was redundant since the agency has a legal limit on operational expenses. The restriction ultimately hampered the agency's ability to perform its work.

In addition to removing the staffing cap, the compromise bill would require performance audits, albeit limited, of CIRM beginning next year at the agency's expense, according to the latest state Senate analysis of the measure. It also allows the agency to pay the patient advocates who serve on its board up to $15,000 a year. The CIRM board has already acted to do so.

CIRM backed the bill after it was significantly watered down. Gone are many reforms recommended by the Little Hoover Commission, the state's good government agency, along with provisions sought by the state's top fiscal officer, Controller John Chiang.

They include elimination of a performance audit by a special, Prop. 71-created, financial oversight committee chaired by Chiang. Instead CIRM itself would pay ($400,000 plus) for the audit and control its scope. CIRM already has written into the bill a stipulation that the audit does not have to include “a review of scientific performance.”

The staff analysis of the bill that was presented yesterday when it cleared the Senate floor on a 35-0 vote said,

“The author's office states that, while stem cell research is an important and laudable goal, concerns about transparency, accountability and oversight raised by the public, the independent Citizen's Financial Accountability Oversight Committee, the Little Hoover Commission, and the state controller detract from CIRM's ability to provide grants and loans in the most efficient way.

“These concerns divert resources and attention from CIRM's ability to maximize voter's investment in stem cell sciences. In 2009 alone, CIRM spent $1.5 million in external contracts for legal services, lobbying, public relations and communications costs to improve its public image, which is a duplication of existing internal resources. Given that the debt from the bonds is serviced from the (state's) general fund, concern about CIRM's lack of transparency and accountability gains greater significance during these challenging fiscal times. By addressing many of these public concerns, this bill enhances CIRM's ability to make grants and loans, and the removal of such barriers frees up resources that were previously diverted from the grant and loan programs.”

According to the analysis, the CIRM performance audits would cover “programs, functions, operations, management systems, and policies and procedures to assess whether it is achieving economy, efficiency, and effectiveness in the employment of available resources.”

The analysis also said it would be at least 10 years before CIRM is likely to generate revenue for the state through the results of the research it finances. The analysis said,

“Due to the time it takes research to be done and a product to be commercialized, the general fund is unlikely to see significant revenue until about 2020. The amount of revenues is unknown and depends on the number and types of drugs and technologies that are commercialized as well as their commercial success.”