Cash Problems at California’s Stem Cell Program

The California Institute for Regenerative Medicine (CIRM) has now spent almost all of the $3 billion of public funds (which entailed a further $3 billion in interest) allotted to it by a 2004 ballot initiative. The CIRM board seems to have no appetite for closing up shop; no better idea than to support another, even larger, ballot initiative that might lead to funds in 2021; and so far, not much of a plan for getting from here to there. But a ballot initiative is where they’re headed, and here in California, we’ll all be hearing a lot more about that as the 2020 election nears.

Here’s the back story: Proposition 71, the 2004 ballot initiative that established CIRM, was billed as the California Stem Cell Research and Cures Initiative, and launched in the middle of a national debate about embryonic stem cell research that the G.W. Bush administration refused to fund. It passed thanks to a wave of scientific optimism, Californian opposition to Bush, and about $30 million in campaign funds (at the time the largest amount ever spent for a ballot initiative in the state). Once the courts had ruled it constitutional, the state’s treasurer authorized the sale of bonds ($300 million/year for 10 years), with interest paid out of the state’s general funds that amounted to the same again (as with many household mortgages), so the total cost was $6 billion.

Both science and politics have changed since then. Induced pluripotent stem cells (iPSCs) have largely eliminated the need to generate embryonic stem cells (ESCs), and modern gene editing has changed the game completely. CIRM has funded a lot of infrastructure (since ESC research could not, under the Bush rules, take place in buildings where federal funds were also spent); a lot of research; about 50 clinical trials, most in the last couple of years; and essentially no cures, not in the sense that the initiative’s backers led voters to expect. A handful of patients have benefited from CIRM-funded research, but there has not been a revolution in the practice of medicine.

The agency decided a few years ago that it would support another initiative campaign, to ask California voters for a new infusion — this time for $5 billion (in practice, $10 billion, including interest). The energy behind that decision again comes from Bob Klein, the real estate mogul who masterminded Proposition 71 and was installed as CIRM’s first Chair. After some discussion about trying for the 2018 ballot, supporters deemed it preferable to wait for a higher-turnout Presidential ballot, not the primary but the general election in November 2020 (Sept. 2017 transcript, p. 13). That timing means that the soonest funds could be available, if the initiative passes, would be March 2021.

CIRM’s leadership has realized for some time that maintaining the current level of grant-making, which they seem bent on doing, would require identifying “bridge funding” to keep the place fully open until 2021. A long discussion in September 2017 considered this problem. That was probably already too late, but they had identified private sources for $7 million in administrative funds (p. 34) to cover winding down the agency, and decided they needed, and hoped to raise, $250 million to avoid winding down at all.

By December 2017, the board had estimated that to bridge from late 2019 (when funds for research grants will run out) to November 2020 would require $222 million (Dec. 2017 transcript, p. 138). The goal was to raise $55 million in 2018, $55.5 million more by the second quarter of 2019 (p. 140), and so on.

At the same meeting, Bob Klein claimed that public polling showed about 70% support for funding CIRM (p. 132), though he declined to reveal any details about what exactly was asked or who asked it. He also stressed that “very substantial bridge funding” was essential (p. 136), adding that, “It is a privilege to hopefully participate in the leadership of a public initiative in 2020.”

The board, which had “coordinated with Bob Klein’s office” (Dec. 2018 transcript, p. 8) seemed sure by December 2018 that Klein would indeed head up a $5 billion bond campaign ($10 billion, with interest).

But the bridge funding remained an issue. So far the $7 million seems to be all they’ve got, as noted by David Jensen at California Stem Cell Report. They are still looking for an “anchor investor,” who might encourage others (as an anchor store draws people to a shopping mall). Which makes CIRM board member Jeff Sheehy (long-term AIDS activist and former San Francisco Supervisor) sound prescient, since in September 2017 he had suggested that savvy voters might say (pp. 78–9):

“So you went to fund-raise. You didn’t get enough to keep you going, so you’re coming back to me with your hand out. So why didn’t you get enough? Why did the people who you’ve been asking for money not think you were a good investment? Why should I?”

Good point. Indeed, some of the board members were over-optimistic in that 2017 assessment.

CIRM’s fundraising team, which has consulted with lawyers, the State Treasurer’s Office, and the State Controller’s Office, among others, has also come up with a stranger and perhaps even more controversial concept. The pitch to donors for bridge funding would be (Dec. 2018, p. 9):

So if you were to put in, for example, 50 million and the measure passed, you’d have a hundred-to-one leverage that would result from that, a good chunk of which could go towards whatever your specific interest was.

Really? A rich person can donate (invest) a substantial chunk of their private money in CIRM for the bridge period on the promise that if the proposition passed, their favorite research project will be given preferential access to those public funds? Is this an appropriate way to allocate public money?

If the propriety of this approach is questionable, so is the logic. What if some multi-billionaire donates $100 million – will they get only fifty-to-one leverage? Or if someone kicks in a mere $10 million, will the leverage be five-hundred-to-one? Or I’ll give them a dollar, and ask for five-billion-to-one. Some refinement of this spiel would seem to be in order.

Propositions take considerable time to be approved. The deadline for submitting a proposed measure to the Attorney General that’s intended for the November 2020 election is August 20, 2019. In practice, that means that the proposition is probably being written now, or will be completed very soon, and preliminary backers have likely been identified and contacted already. Unless, of course, such funders cannot be found.

Will CIRM’s problems be solved? We’ll soon know.