Citing weakness in the bond market as a result of the recent global financial crisis, the governing board of the California Institute for Regenerative Medicine has announced that it will halt the scheduled funding of stem cell scientists at six Bay Area research laboratories. Of the $58 million in stem cell funding which has been halted, approximately $17 million was earmarked for university programs throughout California which were intended for the training of laboratory technicians, and without which many laboratories will be understaffed.
Voted into law in 2004 with the passing of Proposition 71, the California Institute for Regenerative Medicine is the agency that was specifically created for the purpose of funding stem cell research, with a high priority on embryonic stem cells, in the state of California through sources unrelated to federal tax dollars. Such an initiative was therefore perfectly legal as it did not constitute a violation of the restrictions imposed by President Bush on the use of federal tax dollars for embryonic stem cell research. However, the California Institute for Regenerative Medicine was financially structured such that its mere existence is heavily dependent upon the bond market, which has suffered seriously in recent months. Although its board members have determined that the Institute still has enough money to fulfill its grant obligations through September of 2009, the decision was nevertheless made to delay the actual distribution of funds until March, in order to assess the full extent of losses incurred to and by the bond market.
According to the original plan, the total “fiscal impact” of Proposition 71 was structured at approximately $6 billion, half of which was designated as principal and the other half of which was expected to be generated from the interest on general obligation bonds, a type of municipal bond, that would be issued to finance the funding that is to be awarded by the Institute. Although a certain percentage of the money is allocated to cover administrative expenses, the bulk of the $6 billion would then be distributed in the form of grant money at an annual average of $200 million over 30 years. Due to the current global economic crisis, however, which is the worst since the Great Depression of the 1930s, investments in a number of sectors, including the bond market, have unexpectedly evaporated in recent months.