Court Challenge Stalls Calif. Stem Cell Funding

A lawsuit has held up more than $3 billion in state funding that California voters approved for stem cell research. Sarah Varney of member station KQED reports on the court challenge, and on the private investors who have stepped in to fund the initiative until state funds are released.

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MADELEINE BRAND, host:

This is DAY TO DAY, from NPR News. I'm Madeleine Brand.

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In California, a judge will decide soon whether the state can start spending the $3 billion that voters approved for research on embryonic stem cells. This is controversial science. The federal government will pay for it only in a very limited way.

Some people want to stop California's involvement, too, and they have filed lawsuits. From member station, KQED, Sarah Varney has our report.

SARAH VARNEY reporting:

California voters passed Proposition 71 a year-and-a-half ago to fund scientific research forbidden by the federal government. Taxpayer advocates and anti-abortion rights groups quickly filed legal challenges that have prevented the institute from issuing bonds to raise $300 million a year.

At a trial earlier this month near San Francisco, plaintiffs in the lawsuit argued California's stem cell program is unconstitutional because a group of unelected citizens control taxpayer funds.

Mr. TED COSTA (CEO, People's Advocate): Well, our California state constitution mandates that the legislature shall have oversight over all public tax funds.

VARNEY: Ted Costa is CEO of People's Advocate, a taxpayer advocacy group challenging the stem cell agency in court.

Mr. COSTA: What we have here is an initiative which sets up a special little body, independent of the legislature, to spend tax dollars. And it's a terrible, bad precedent to get started, so we'd like to stop it.

Professor HANK GREELEY (Professor of Law, Stanford; Chairman Steering Committee of Biomedical Ethics Center): Frankly, I don't think that's a very strong argument in this case.

VARNEY: Stanford University Law Professor Hank Greeley is Chairman of the Steering Committee of Stanford's Biomedical Ethics Center.

Prof. GREELEY: The California Institute for Regenerative Medicine, which the proposition set up, is structured to be a state body. It has a fairly independent citizen's oversight committee. It's an effort that's been made to try to insulate the operation of the project from direct political interference while still keeping it broadly responsible to the government.

VARNEY: Greeley says California courts approved of a similar independent committee charged with dispersing tobacco settlement money. And anyway, say attorneys for the state, the proposition passed by voters amended the state constitution to give the stem cell institute's board special status.

While one group of lawyers has been busy fighting off constitutional challenges, the state's finance committee has been devising a nifty financial instrument called a bond anticipation note. The BANs, as they're called, amount to a promise that the state will repay investors if the Stem Cell Institute wins in court. Chairman of the institute's governing board, Bob Klein, says investors know their money is at risk.

Mr. BOB KLEIN (Chairman, Stem Cell Institute Governing Board): If we win the lawsuit as intended, they will be paid back with interest, interest not to exceed 5 percent. If we were to lose, they have just made a grant to the state of California for medical and scientific research.

VARNEY: A group of philanthropic organizations and wealthy business leaders bought $14 million worth of BANs earlier this month. Investors include Richard Blum, husband of California senator Dianne Feinstein, and Qualcom co-founder, Irwin Jacobs.

Investors cannot apply for a grant from the Stem Cell Agency or have any kind of loan or contract. Taxpayer watch dogs say that safeguard should insure investors can't influence the institute's decisions. With money finally in hand, the Institute mailed its first checks, more the $12 million to California universities and nonprofit research organizations.

Mr. KLEIN: This is one time when, if the check is in the mail, it's a huge accomplishment.

VARNEY: Klein says the grants will be used to train nearly 170 graduate students and post-doctoral researchers in basic stem cell science, clinical medicine, and ethics.

Because federal funding for stem cell research has been limited and unpredictable, Dr. Arnold Kriegstein, Director of UCSF's Stem Cell Biology program, says few students have been pursuing the field, and the training programs are crucial to building California's scientific brain trust.

Dr. ARNOLD KRIEGSTEIN (Director, Stem Cell Biology Program, UCSF): This is a field that is going to take a long time to mature. We're at the very early stages right now, and this generation of scientists that we will now begin to train are going to take their positions in years to come.

VARNEY: The stem cell institute is authorized to sell another $86 million worth of bond anticipation notes to fund the next round of grants. Those will likely fund so-called innovation projects, untested experiments that could yield scientific breakthroughs.

A breakthrough in the legal battle over stem cell funding in California isn't likely anytime soon. Although a superior court judge is expected to rule this month on the constitutional challenge, both sides say they'll appeal.

A final decision from the state's Supreme Court could take another year.

For NPR News, I'm Sarah Varney in San Francisco.

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