California's Stem Cell Research Program: How $3 Billion is Growing to $12 Billion

California's 16-year-old stem cell research program is a prodigious enterprise that is helping to finance 68 clinical trials and that has funded hundreds of California scientists for their work in an embryonic field, so to speak. 

The scope and importance of the program and its cost, however, are not necessarily apparent to most Californians. The program is not high on the radar of most people and certainly not the subject of breakfast table conversations in the overwhelming majority of the state's households. 

Over the past 16 years, the California Stem Cell Report has regularly described the stem cell agency, known officially as the California Institute for Regenerative Medicine (CIRM), as a $3 billion effort. But the use of that number did not make it clear that the cost ran significantly higher. 

When CIRM was created through a ballot initiative in 2004, the state Legislative Analyst estimated it could cost taxpayers $6 billion because of the interest on the money that the state borrowed to finance it. The figure has turned out to be closer to $4 billion because of unusually low-interest rates over the last decade or so. 

Under Proposition 14, the agency will receive an additional $5.5 billion from state bonds to spend on research and other new programs. The state legislative analyst has estimated the total cost will run about $7.8 billion because of -- once again -- interest costs. 

The Proposition 14 funding brings the total estimated cost of CIRM to nearly $12 billion.  And that is the figure that the California Stem Cell Report will use going forward to describe the program, unless someone can convince this writer otherwise. 

Referring to CIRM as a $12 billion enterprise immediately tells the reader that it is a significant effort. The number helps to draw readers into stories about CIRM. It is also more accurate than using a smaller figure, which would tend to minimize the cost and mislead taxpayers. Describing CIRM only as a $8.5 billion ($3 billion plus $5.5 billion) agency tends to conceal its true cost to the people of California. (In retrospect, this website should have used the 2004, $6 billion figure to describe CIRM over the last 16 years.)

CIRM is a rare bird among state agencies for a number of reasons. In this case, we know that its funding will cease at some point. Nearly all state departments do not live with that sort of financial guillotine.  

The 17,000-word ballot initiative, crafted by Robert Klein, a Palo Alto real estate developer, limits CIRM's annual CIRM bond sales to $540 million. Based on the experience under the previous initiative -- Proposition 71 of 2004, which created CIRM -- the agency is not likely to hit the $540 million cap each year. That could extend CIRM's possible life for another 15 years or so unless it becomes unusually tight-fisted.

As for the $12 billion figure, this writer is open to arguments for using another number, but I will have to be convinced. I am prepared to air those arguments (their full text) on this website. So if a reader thinks another figure is more appropriate, please let me know the reasons why either by filing a comment using the comment function at the end of this item or by sending me an email at djensen@californiastemcellreport.com.

Praise and Advice Given in Review of California's Stem Cell Research Program

The California stem cell agency today received both kudos and advice from the small state panel that is charged by law with reviewing its financial practices and is the only such state entity with that unique task. 

The panel is the Citizens Financial Accountability and Oversight Committee (CFAOC), which was created in 2004 as part of the ballot initiative that also created the California Institute for Regenerative Medicine (CIRM), as the agency is officially known. 

While it reviews the financial affairs of the agency, the CFAOC has no authority to require changes. CIRM's programs will cost state taxpayers an estimated $11.8 billion dollars before funds run out in 10 to 15 years. 

Betty Yee
Controller photo

State Controller Betty Yee is by law the chair of the CFAOC. It also has four other members, one of whom was sworn in just this morning. Yee and the others were liberal in their praise of the agency's work. In addition to the usual financial information, Maria Millan, CEO of the agency, presented the CIRM programs and their successes. 

Millan's presentation was greeted with praise by all the CFAOC members, including Yee. Towards the end of the meeting, Yee said that she and other members would like to be kept up-to-date regularly on CIRM matters since the CFAOC is required to meet only once a year. 

Yee said, "Numbers have lots of stories behind them. I think really to understand them fully, it is about exactly what we learned today."  She  said she hoped that part of the revision of CIRM's strategic plan next year will involve "how do we tell our story better."  Yee said she thought the agency was doing "great" but there was so much to be told. 

Catherine Sarkisian
UCLA photo

The new member of the CFAOC is Catherine Sarkisian, a UCLA physician who specializes in geriatric medicine, an area that Proposition 14 identified as a new target for CIRM.

Sarkisian raised a question about the need for diversity among recipients of  CIRM grants. CIRM officials pointed to existing training programs for high school and college students. Sarkisian said that those were important "pipelines" but that CIRM should consider creation of "on-ramps" to build up diversity among awardees. 

During the meeting, CIRM officials disclosed that the new strategic plan is expected to be approved next summer by the Independent Citizens Oversight Committee (ICOC), as the CIRM governing board is known. Work on it is already underway. Researchers and other members of the public can weigh in on what they would like to see funded over the next five years by emailing their comments to info@cirm.ca.gov.   

CIRM will be operating under a new, 17,000-word statute -- Proposition 14 -- that significantly expands the agency's scope and increases the ICOC size from 29 to 35. 

The new course of the agency is also likely to come up at a Dec. 21 meeting of the CIRM board. The public can address the board online or email comments. The agenda is legally required to be posted Dec. 11. It will contain instructions for online access to the meeting. 

'Demeaning and Uncalled For:' A CIRM Complaint About the Use of the Word 'Obscure'

The California stem cell agency today sharply criticized an item on the California Stem Cell Report as "demeaning and uncalled for" because it described the four-person Citizens Financial Accountability and Oversight Committee (CFAOC) as "obscure."

The offending word was used in an article yesterday that previewed the first meeting of the committee in nearly 15 months. The CFAOC was created as part of the initiative that created the stem cell agency in 2004, which is known officially as the California Institute for Regenerative Medicine (CIRM). 

The CFAOC reviews CIRM financial documents that have already been reviewed in public by CIRM's 29-member governing board, which is officially known as the Independent Citizen's Oversight Committee (ICOC). The CFAOC has no legal authority over CIRM beyond making possible recommendations.

The article in question began like this:

"One of the more obscure entities in state government is scheduled to meet this Friday to review the financial affairs of California's stem cell agency, a matter that now runs to nearly $12 billion.

"The panel is the Citizen's Financial Accountability Oversight Committee (CFAOC), which was created in 2004 along with the California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known. The CFAOC is charged with reviewing the financial practices of the stem cell agency. The CFAOC is the only state panel legally charged with that function. The governor and the legislature have no authority to do so."

Here is the text of the email expressing CIRM's displeasure with the use of the word "obscure." The email was written by Kevin McCormack, senior director of communication at CIRM.

"I think your characterization of the CFAOC in your latest column as 'One of the more obscure government entities' was demeaning and uncalled for. It may not have a high profile but it certainly has an important role. It was created by the voters in 2004 for a very specific purpose, to make sure we are held accountable, every year, for our financial performance. As one of the common, if erroneous, complaints about CIRM is that we are not accountable to the legislature or any other legislative body in Sacramento I would have thought the CFAOC should be praised not dismissed.

 

"This is a group of people who come together with the sole goal of making sure the state’s money is well spent. The members cover a broad range of professions but have one thing in common, they have vast experience in their area. They are appointed by the Controller, the Treasurer, the President pro Tempore of the Senate, and the Speaker of the Assembly (and one by CIRM). These are nobody’s fools, they are diligent in the way they work, meticulous in their analysis of how we work, and forceful in making recommendations. Which we then follow.

 

"At CIRM we are used to people criticizing us, more often than not incorrectly. The CFAOC deserves better."

As the author of the article in question, I have high regard for the CIRM staff and McCormack as well as the persons on the CFAOC. Nonetheless, it is an obscure state entitity, as are many state departments. More than 200 exist and most of them are obscure. Consider the State Allocation Board, for example, or the First 5 California. 

The count of 200 does not include state advisory bodies such as the CFAOC. If it did, the number would likely run into the thousands. Such bodies can do important work, such as was done by the Little Hoover Commission, an obscure state entity whose analysis and recommendations concerning CIRM won significant praise by the Institute of Medicine (IOM), which studied CIRM for months. 

What all these bodies have in common is that they are virtually unknown to the public, even to persons who consider themselves well-informed. 

The California Stem Cell Report writes about the CFAOC because of its connection to CIRM and the fact that both were created by the same 2004 initiative -- a measure criticized as ballot-box budgeting and that sometimes has also created impediments for CIRM. (See the IOM findings and recommendations.)

My bottom line? For a state body to be considered obscure is not a mark of shame. It is just a matter of fact.  

(Editor's note: A very early version of this item incorrectly said that Friday's meeting of the CFAOC will be the first in 19 months. The correct figure is 15 months.)

 

Financial Review of California's Multi-billion Dollar Stem Cell Research Agency Slated for Friday

One of the more obscure entities in state government is scheduled to meet this Friday to review the financial affairs of California's stem cell agency, a matter that now runs to nearly $12 billion.

The panel is the Citizen's Financial Accountability Oversight Committee (CFAOC), which was created in 2004 along with the California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known. The CFAOC is charged with reviewing the financial practices of the stem cell agency. The CFAOC is the only state panel legally charged with that function. The governor and the legislature have no authority to do so.

However, the CFAOC does not have authority to require changes by CIRM. It can only make recommendations.

Friday's agenda appears to be routine. However, some members of the committee may have comments on the approval of Proposition 14, which saved CIRM from financial extinction with $5.5 billion in money that the state will have to borrow.

Including Proposition 14, CIRM will cost taxpayers an estimated $11.8 billion by the time its funding runs out again in 10 to 15 years. Of that total, an estimated $3.3 billion will go for interest on the $8.5 billion in state funding for the agency, including the period since 2004. 

CIRM is likely to spend more than the $8.5 billion, however, because Proposition 14 provides for using private funds to hire additional personnel for the agency beyond a nominal cap of 70. CIRM has never had more than 62 employees and currently has about 33, two less than the 35 members of its governing board. 

On the CFAOC agenda are routine audits of the agency that have not identified any particular issues and presentations of previously reported budget plans. However, the meeting may include some discussion of CIRM's future, but don't look for a critical evaluation.

The last meeting of the CFAOC was in August 2019. State law requires an annual meeting. No meeting was held in 2018.

The chair of the panel is Betty Yee, the elected state controller. Other members include:

• Jim Lott, a psychologist and former health care industry executive specializing in health care organizations and strategic thinking. 
• Mark Fischer-Colbrie, CEO of Strateos,  Inc., of Menlo Park, Ca., and for chair of the international board of the Juvenile Diabetes Research Foundation, which is closely linked to Robert Klein, the sponsor of Proposition 14
• Michael Quick, a former provost at USC who left that post in 2019 to return to teaching. The Los Angeles Times wrote, "As the university’s top academic officer, Quick handled many of the complaints against former medical school Dean Carmen Puliafito, who The Times revealed used drugs and partied with criminals during his tenure. Quick reprimanded the dean and ultimately forced him to step down in 2016." 

Puliafito was once a member of the CIRM governing board. USC has received more than $114 million in CIRM awards.

Below is the text of state law concerning the CFAOC and the scope of its authority, which does not include an evaluation of its scientific performance. 

"There shall be a Citizen's Financial Accountability Oversight Committee chaired by the Controller. This committee shall review the annual financial audit, the Controller's report and evaluation of that audit, the financial practices of the institute. The Controller, the Treasurer, the President pro Tempore of the Senate, the Speaker of the Assembly, and the Chairperson of the ICOC shall each appoint a public member of the committee. Committee members shall have medical or patient advocacy backgrounds and knowledge of relevant financial matters. The committee shall provide recommendations on the institute's financial practices and performance. The Controller shall provide staff support. The committee shall hold a public meeting, with appropriate notice, and with a formal public comment
period. The committee shall evaluate public comments and include appropriate summaries in its annual report. The ICOC shall provide funds for all costs associated with the per diem expenses of the committee members and for publication of the annual report."

California's $5.5 Billion Stem Cell Boost: The Journal Nature Reports on "Split" Views, Conflicts and Priorities

The internationally respected journal Nature today took a look at the $5.5 billion refinancing of California's stem cell research program in an article that is not likely to please its supporters. The headline on the piece said:

"California's vote to revive controversial stem-cell institute sparks debate

"The California Institute for Regenerative Medicine will receive billions in state funding — but some scientists oppose the plan."

The first paragraph of the article said, "(S)cientists are split over whether the California Institute for Regenerative Medicine (CIRM) in Oakland is a worthwhile investment for the US state — or for the field of stem-cell research."

In significant ways, the article by senior reporter Nidhi Subbaraman echoed important elements of an examination of CIRM that Nature published in 2008. The journal, in fact, warned at the time of "cronyism" at the agency. (See Nature's editorial here and the article by Erika Check Hayden here.)

Today's latest article in Nature said,

"(C)ritics of CIRM are concerned about oversight at the state agency, which has faced complaints about potential conflicts of interest among its board members for years. They also point out that the field has grown and now receives federal support, making state funding hard to justify — especially amid a pandemic that has imperiled California’s economy."

Comments about priorities and the failure of the $5.5 billion measure (Proposition 14) to correct governance flaws at CIRM were also carried by Nature. Subbaraman wrote,

"'Unfortunately, Proposition 14 sets a bad example for the use of public money for the advancement of science,' says Zach Hall, a neurobiologist who led CIRM as its first president between 2005 and 2007."

Nature continued,

"'You could argue that California would do better, economically and scientifically, to have a CRISPR institute,' Hall says, arguing that the revolutionary precision gene-editing tool is better placed to benefit from such a huge infusion of cash."

 Subbaraman quoted another former top level scientist at CIRM.

"'As scientists, everybody always welcomes additional funding,' says Arlene Chiu, former director of scientific activities at CIRM. 'But as a Californian, one wonders if there are better ways to do this.'"

Nature mentioned a $700,000 study of the agency by the Institute of Medicine in 2012, which recommended a major restructuring of CIRM along with steps to deal with its conflicts of interest, which the IOM regarded as a serious problem. 

The California Stem Cell Report, which has followed the agency since 2005, has analyzed CIRM's awards and reported earlier this year that 79 percent ($2.1 billion) has gone to institutions with links to members of CIRM's governing board. Members of the board cannot vote on grants to their institutions, but they control the direction of the agency and approve plans for all award rounds.

Most of the recommendations by the IOM were not implemented by CIRM or Proposition 14. Nature interviewed one of the members, Cato Laurencin, of the IOM panel that spent months examining CIRM, which financed the study.

Subbaraman wrote,

"'It is very exciting that Prop. 14 passed and that CIRM will continue its funding,' says Cato Laurencin, a biomedical engineer at the University of Connecticut in Farmington, who is not funded by the institute. 'This field is at a bit of an inflection point in terms of our understanding of stem-cell science.'"

Subbaraman's piece included comments from Robert Klein, the real estate developer who sponsored Proposition 14 and poured millions into the campaign for it. Klein was also responsible for writing the 17,000-word measure.

The Nature article said,

"Responding to the criticisms, Klein says he crafted the proposal with the guidance of multiple groups of experts, and kept the mandate deliberately broad to allow for flexibility as the field grows. 'There's an intent here,' he says, 'to have the agency be responsive to the development of science.'"