The San Jose Mercury News (California)

John M. Simpson is the stem-cell project director for the non-partisan, non-profit Foundation for Taxpayer and Consumer Rights in Santa Monica. He wrote this article for the Mercury News, published Wednesday, November 22, 2006.
——————

One of the problems of Proposition 71 that created California’s $6 billion stem-cell research program is the way it built conflicts of interest into the committee overseeing the program, the Independent Citizens’ Oversight Committee.

Of the board’s 29 members, 13 must be from universities or research institutions, the bodies that will receive most of the initiative’s grants. A major decision that demonstrates the potential conflict is likely to come before the board at its next meeting in December.

Institutions around the state are already jockeying for stem-cell funds. But the board, before it actually hands out its billions, has to decide a policy point that could mean up to tens of millions of dollars to potential grant recipients.

Under Proposition 71‘s provisions, any institution that wants money for facilities has to match at least 20 percent of a grant. If projects have the same scientific merit, the one with the most matching funds gets priority. The question the board will need to resolve is whether grantees get credit as matching funds for money spent before the grant is awarded — for feasibility studies, site preparation or architectural consultations, for instance.

Over the next decade, the California Institute for Regenerative Medicine is supposed to dole out $3 billion in taxpayer funds for research and facilities grants to universities, non-profit research institutions and biotech companies. With bond financing, the program will cost $6 billion.

Only universities and other non-profit institutions can get money to build facilities. According to the institute’s draft scientific strategic plan, $272 million is earmarked for laboratories and other bricks-and-mortar projects. The first of those grants, for joint laboratory space, will probably be awarded early next year.

Giving priority to grantees with the most in matching funds is an attempt to get the biggest bang for the buck and spread the stem-cell institute’s money around to maximize its impact. So far, so good, but soon the Independent Citizens’ Oversight Committee will be wrestling with a thorny issue that will leave 13 of the 29 members in an extremely conflicted position.

Thirteen committee members represent universities or research institutions, the entities that will be eligible to receive the facilities money. Now, it is expected that if there is a specific application from a member’s institution, he or she would be recused from considering it. But what happens if it’s a policy that affects all non-profit research institutions in the state equally? Then it’s a “standard” and all the representatives of institutions can participate. And therein lies the rub.

While they may not act in a way that gives unfair advantage over other institutions not represented on the committee, will they act in a way that puts the institutions’ interests ahead of the interests of California taxpayers?

Remember that to qualify for a facilities grant, the institution must provide a 20 percent match. What constitutes a match? Can a university count money already spent on a project or will it be able to count only money spent after the grant is received?

From an institutional point of view, you would want to be able to claim credit for money spent before you receive a grant. If you’re a taxpayer, you want the stem-cell money to go as far as it can. It’s clearly in the taxpayers’ interest if expenditures count as matching funds only after the grant award is made.

The stem-cell oversight committee is going to have to decide. Though the committee has the word “independent” in its official title, it’s highly unlikely that the 13 institutional representatives will act in any way that is independent of the interests of their employers. And, as has been repeatedly demonstrated, what is best for the state’s universities and research institutions is by no means necessarily what’s best for all Californians.

Those representing the institutions that want the money ought not set the rules for how they get it. Unfortunately, that’s not what Proposition 71 provides.