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CIRM funding Troubles

Apr. 05, 2011 5:25 PM ET
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The collapse of efforts to resolve California’s financial crisis places the $3B stem cell research program perilously close to a serious cash crunch.

Previous reliance on borrowed money (state bonds) makes CIRM costs twice as much as it would on a normal basis. For example, the $20M grant to scientist Dennis Carson at UC San Diego will cost state taxpayers about $40M because of the interest on the borrowing.

Interest costs for CIRM currently run $200K a day on the $1B it has borrowed so far. The previous plan assumed that the state would regularly issue bonds. However, beginning last January, the state suspended the sales of bonds for 6 months to avoid $248M in additional interest costs. The state budget remains many billions in the red, and most signs point to continuation of that bond delay decision.

The Bond Buyer financial newspaper recently reported that state Treasurer Bill Lockyer will not sell bonds until the state budget is balanced. “The bottom line in terms of (revenue anticipation notes) and infrastructure bonds is the timely adoption of a balanced budget.”

The Bottom Line: 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 have previously rejected through a ballot initiative that is yet to be written. Even then, bond sales are not likely until sometime in 2012. While CIRM says it has sufficient cash on hand to deal with its existing obligations until 6/12, 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. A good possibility exist that CIRM bond sales will not come up in the 1st round in 2012, assuming sales are resumed then. On 5/3-4/11, the 29 directors of the stem cell agency are scheduled to meet in Los Angeles.  Postponing new grant programs, RFAs for existing efforts and even payments to researchers and institutions could be on the table.

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