Funding of Stem Cell Agency Is Hampered

California officials conceded Monday that a legal challenge has severely hampered the state stem cell agency’s ability to borrow even a penny of the $3 billion in research funds it had hoped to raise over the next 10 years.

Atty. Gen. Bill Lockyer and Treasurer Phil Angelides said their offices are aggressively fighting the lawsuits while pursuing alternative ways for the stem cell agency to borrow money to fund medical research.

Angelides is a member of a special finance committee created by the same proposition that established the California Institute for Regenerative Medicine, the state’s response to the Bush administration’s restrictive policy on stem cell research.

Federal funding of human embryonic stem cell research has been limited to about $25 million, a figure many scientists say is woefully insufficient. In November, 59% of California voters approved Proposition 71, which created the institute and authorized it to dole out an average of $300 million in research grants annually.

The finance committee that Angelides sits on met for the first time Monday and authorized the state to borrow $3 billion in bonds for the stem cell agency.

But because of a lawsuit pending in Alameda County Superior Court questioning the legality of the stem cell institute, the state is unable to sell the long-term bonds. Potential lenders are reluctant to invest in long-term state bonds that are threatened with litigation because they fear the lawsuits could somehow make their investments worthless.

Angelides said the finance committee is looking into alternative financing methods, including borrowing $200 million from short-term lenders, who may charge a higher interest rate than long-term lenders.

The finance committee also authorized Lockyer to take any action he deems appropriate to defeat the two lawsuits. One possibility is to file a “validation” suit, which, if successful, would allow for the bond sales.

Stem cell agency officials dismissed the lawsuits as meritless, and Angelides said they were filed by lawyers with connections to antiabortion groups. Many Christian conservatives oppose human embryonic stem cell research because days-old embryos are destroyed.

One lawsuit was filed by lawyers for the Life Legal Defense Foundation, which opposes abortion and had unsuccessfully fought in court to keep a brain-damaged Florida woman, Terri Schiavo, alive in a high-profile right-to-die case.

The lawsuit alleges that the state agency’s finances aren’t properly overseen by government officials in Sacramento.

The other suit, filed by a conservative public interest group, alleges that parts of Proposition 71 violate state law by exempting members of the agency from some conflict-of-interest laws.