CA stem cell agency boosts spending amidst state budget deficit

It was a $24-million-a-minute meeting for California’s stem cell and gene therapy agency.

On the table was a nearly half-billion-dollar research plan to develop revolutionary stem cell and genetic treatments for afflictions ranging from cancer to heart disease. The proposed budget boosted spending by 41 percent for 2023-24 over expenditures for the current fiscal year.

Cut by 27 percent were awards for basic research. Increased by 53 percent was spending on clinical stage research. It took only 19 minutes and 13 seconds to approve the proposal, a rate of $24 million a minute.

The proposal came as the state of California faces not-so-good financial times – a $32 billion overall state budget deficit. To fill the gap, tax increases are in the air in the state Capitol along with cuts in aid for poor people. But there was no talk at the stem cell meeting of budget cuts in the program or how its spending plans might be viewed by the public, which provides the agency’s only means of support.

That was the online scene during a Monday morning meeting May 22 of the Science Subcommittee of the governing board of the California Institute for Regenerative Medicine (CIRM), the official name of the stem cell agency. The session opened a small window into some of its practices and the law that both controls the 18-year-old agency and sustains it – at least until the money runs out.

CIRM is regulated by a 17,000-word ballot initiative that is its operating manual and vision for the future. California “must take the lead” in financing “potentially life-changing medical therapies,” says the initiative. “Better than hope” was at one point one of CIRM’s slogans.

Proposition 71 of 2004 created CIRM. The measure was modified by voters in 2020 via another ballot initiative, Proposition 14. Both are designed to keep CIRM off the state budgetary chopping block that nearly all state agencies face annually. CIRM is immune to the usual official legislative and gubernatorial oversight, courtesy of the initiative process. Ballot initiatives are themselves also isolated from oversight by the legislature and governor.

Over the past 18 years, CIRM has been financed with borrowed money – bonds that the state issues. It can receive up to $540 million each year that flows directly to the agency. The agency sets its own priorities, but the initiative does dictate spending in some small and large areas: $1.5 billion must eventually be spent on neuro disease research (autism, Parkinson’s, etc.) and $50 million must go for “shared labs” at academic and research institutions.

But when the money runs out in eight to 10 years (depending on the rate of spending), CIRM will have to ask voters for more billions should its board decide that its work should continue.  Or it could seek funding from lawmakers and the governor or attempt to raise private funding. No other state agency operates under that sort of financial axe.

CIRM also is exempt from state public meeting and open records laws, again courtesy of the ballot initiative that created it in 2004. However, CIRM follows many of the requirements of those statutes. It posts its meeting agendas, for example, 10 calendar days in advance of the meetings. Such was the case before the May 22 meeting of the Science Subcommittee.

While posting of the agenda occurred in a timely fashion, a final version of the background material for the research budget was not available to the public or subcommittee members until May 19, only one business day before the 9 a.m. meeting. In past years, the failure to post background material in a timely manner, especially budgets, rankled some members of the CIRM board, which consists of 35 busy people in occupations ranging from CEOs of nonprofit organizations to high-level academic executives.

CIRM only presents slides of budget proposals at its meetings. No lengthier scientific rationale is generally posted. In the case of the 23-24 research budget, the final version of the slides on May 19 carried an annotation that said: “(Updated 5/19/23).”

No indication was provided, however, about what was altered in the budget. That is standard practice for CIRM. It does not follow the usual government protocol of indicating specifically what changes have been made in original documents. And members of the Science Subcommittee did not ask.

The Science Subcommittee consists of 14 persons from the 35-member governing board. Larry Goldstein, a stem cell scientist from UC San Diego, is the chairman. The committee is charged by CIRM with “recommending policies relating to CIRM’s scientific program.”

The agency has not yet funded a stem cell therapy that has reached the marketplace. Without a result that resonates with voters, a request for additional billions could be a hard sell when more cash is needed.

The subcommittee was the last stop before the research budget goes to the full board on June 29, just two days before the beginning of the new fiscal year. The spending plan is not reviewed by the board’s Finance Subcommittee, which considers only the much smaller operational budget, which totals $26 million for the current fiscal year. By law, CIRM is limited to spending only 7.5 percent of its current $5.5 billion in funding for operational matters.

The rate of research spending is critical in determining CIRM’s lifespan. The agency’s “burn rate” plus electoral calculations determine the timing of any new ballot initiative. Mounting another ballot initiative campaign can require at least two years, a period that includes finding an organization or person who will lead the effort, drafting an initiative, gathering more than one million signatures and raising funds for the campaign.

CIRM cannot legally conduct a ballot initiative campaign, although it can write a proposed initiative.

The rate of research spending is also critical in sustaining gene therapy and stem cell research. CIRM awards have become increasingly important in supporting cutting-edge and risky research within California over the past 18 years. Cash is the lifeblood of research. Without funding, no research occurs.

Research spending additionally involves juggling acts. Should basic or discovery research be funded at higher levels to better understand the mechanisms of diseases in order to ultimately design therapies? Should CIRM focus more on clinical trials, which are the last stage before a therapy can become widely available?  Does the proposed budget have sufficient funds to treat the 28 “bubble babies” on a waiting list for receiving a cure that has been developed with $43 million from CIRM? Those sorts of questions were not raised at the committee meeting.

The agency has not yet funded a stem cell therapy that has reached the marketplace. Without a result that resonates with voters, a request for additional billions could be a hard sell when more cash is needed. The refinancing of CIRM in 2020 with $5.5 billion was approved by a narrow 51-49 percent margin that is well below the 59-41 percent approval of the 2004 measure that created CIRM.

When asked by Capitol Weekly about its budget process, CIRM called it “routine.” Here is the full text of the agency’s response.

“We would like to clarify that the subcommittee review of the budget is just one step in the process, and should not be misconstrued as final approval. The subcommittee has recommended that the ICOC (the CIRM governing board) approve the budget when it convenes in June.

“It is also important to note that the full presentation and a detailed ‘pre-read’ document were given to the subcommittee in advance to review. The finance team provided additional detail during this meeting.

“This is a routine process, even if the budget amounts may seem relatively large. There will be further opportunities for feedback and discussion when the full board meets in June for final approval of the budget.”

In a follow-up question, Capitol Weekly asked whether the “full presentation and ‘pre-read’ document consisted of more than what was provided on May 19 to the public and board members on the agenda.

CIRM said no, confirming that the agenda background material was all that was provided to the Science Subcommittee.

Last June, CIRM’s board approved the current year’s research budget only three days before the end of the fiscal year. During the meeting, no substantive questions were asked about the spending plan. No changes were made. It took only 11 minutes, not counting the unanimous vote. It is unlikely that it will be much different this year.

(Here is a link to the video of the meeting of the CIRM Science Subcommittee May 22, 2023.)

Jensen is a retired newsman and has covered CIRM since 2005, writing on his newsletter, The California Stem Cell Report.