The Oakland Tribune

A day after President Bush vetoed expansion of federal funding for embryonic stem cell research, Gov. Arnold Schwarzenegger on Thursday ordered a $150 million loan to the state’s stem cell agency, which has been hamstrung by litigation.

“We can no longer delay this critical scientific work,” the governor wrote in a letter to his finance director issuing the order.

Schwarzenegger, a Republican who is seeking re-election this fall, has been trying to distance himself from the president on the issue.

He wrote a letter to President Bush earlier this week urging him to not veto HR 810, passed by Congress on Tuesday, which would have reversed the president’s 2001 order to limit federal financing of embryonic stem cell research to a small number of lines, or colonies of cells.

In his first veto since taking office 51/2 years ago, President Bush rejected the bill Wednesday, equating the research to murder because it involves the destruction of human embryos.

The California Institute for Regenerative Medicine, CIRM, was created in 2004 by Proposition 71 as a way to thwart the federal restrictions on stem cell research. The measure approved $3 billion in bonds over 10 years toward financing stem cell research in the state.

Schwarzenegger supported Proposition 71, which had 59 percent voter approval.

But the state has not been able to issue any bonds because of lawsuits challenging the constitutionality of the CIRM, brought by taxpayer and consumer groups with ties to anti-abortion activists.

Instead, the CIRM has been surviving on foundation gifts and bond anticipation notes, which are essentially loans from philanthropy groups. The state has issued $14 million in the notes so far and is expected to close on another $30 million within the next month.

Robert Klein, the chairman of the board overseeing the CIRM, called the $150 million loan “remarkable.”

“California is now leading the nation with the burden of the hopes of patients on our shoulders,” Klein told reporters in a conference call. “It’s a leadership we take extraordinarily seriously.”

The general fund loan to CIRM will carry an interest rate of about 4.8 percent. It will be repaid when and if the state prevails in the lawsuits challenging the stem cell institute, said Molly Arnold, chief counsel of the state Department of Finance.

The state is expected to deliver a check to CIRM within few months, Arnold said.

Meanwhile, CIRM plans to issue a call for grant applications to researchers across the state. Money will go out to chosen researchers by early 2007, said Zach Hall, president of the CIRM.

The agency has been holding scientific meetings over the past several months to determine how best to spend taxpayer dollars, and officials have suggested that they will fund so-called “innovation grants,” or promising stem cell research unlikely to get funding elsewhere.

It has already issued $12 million in scientific training grants to leading institutions such as Stanford University and the University of California, San Francisco.

The $150 million loan is three times as much as the federal government spends today on embryonic stem cell research, Hall noted.

Patient activists said the loan will restore hope to millions suffering from diseases such as Alzheimer’s, Parkinson’s, cancer and heart disease. Embryonic stem cells can become any cell type in the body. Harnessing these master cells could lead to regenerative treatments such as tissue and cell repair.

The new funding “will help fill the tremendous gap left by President Bush‘s recent veto,” said Susan DeLaurentis, president and CEO of the Alliance for Stem Cell Research.

Even the governor’s most vocal critics praised the move. The Foundation for Taxpayer and Consumer Rights, a watchdog group, said the state loan meant fewer ethical entanglements than the bridge loans being solicited by the state from philanthropic and other private organizations.

With the state stem cell agency limping along for nearly two years, some criticized Schwarzenegger for choosing to approve the loan now, citing election-year politics.

State Treasurer Phil Angelides, the Democratic nominee for governor, called the move a “campaign smokescreen to cloud the memory of California voters that it was Arnold Schwarzenegger who campaigned for President Bush in Ohio and helped put him back into office.”

Schwarzenegger spokesman Adam Mendelsohn said the loan was not a campaign tactic. “This was done in response to the veto,” he said.

Klein defended the governor’s timing, saying the state needed a clear victory in the courts, which it got in late April when an Alameda County Superior Court judge sided with the state on every count in the lawsuits.

“That created a platform for action,” Klein said.

The state Court of Appeals is expected to take up the lawsuits by December.
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Contact Rebecca Vesely at [email protected]