having it both ways
Efforts by proponents of Proposition 71 to have it both ways seems to be emerging as a recurrent theme in discussions of that initiative measure and the institutions it created.
From the "Introduction" to
Stem Cell Wars, Volume 1:
"The essence of this [consolidated reverse invalidation action] case is that, under the terms of Proposition 71, the State of California was to issue and be responsible for the repayment of (at least) $6 billion to cover the cost of raising $3 billion from bond sales for the ICOC to spend, while the ICOC was to exist and operate independently of the bureaucratic and political control of the State of California, its elected officials, and the voter/taxpayers these officials represent."
Now we are learning that as early as May 23, 2005, and perhaps even before the November, 2004, election in which Proposition 71 was passed by a 3-2 margin by California voters, California State Treasurer Phil Angelides had been informed by state bond counsel
Orrick, Herrington & Sutcliffe LLP that intellectual property rights (IPR) generated by stem cell research funding from the proceeds of bond sales authorized by Proposition 71 would be considered "assets" under the terms of California law, rendering bonds created for such purposes ineligible for "tax-exempt" status.
Proposition 71's "fine print" vs. Proposition 71's "marketing hype"
While providing in its
dense and under-scrutinized text that unspecified-as-to-"tax-exempt"-or-"taxable" "bonds in the total amount of three billion dollars ($3,000,000,000)…may be issued and sold to provide a fund to be used for carrying out the purposes expressed in this article…," Proposition 71 was sold to the voters as authorizing the sale of $3 billion in "tax-exempt" bonds, as evidenced by
this line from the "Yes on 71/the California Stem Cell Research & Cures Initiative" web site:
"Proposition 71 authorizes a total of nearly $3 billion in
tax-free [bolding added], general obligation state bonds to support stem cell research at California hospitals, medical schools, universities and other research institutions over 10 years."
Sacramento Bee editorialist reveals pre-May 23, 2005, notice by bond counsel to California State Treasurer Phil Angelides of potential problems in trying to have it both ways, in terms of selling tax-exempt bonds that would return revenue to the State of California
In a September 2, 2005, interview with
California Politics Today, Stuart Leavenworth, Associate Editor on the editorial page of the
Sacramento Bee said:
"All I know is I have a memorandum from Orrick to Angelides dated May 23rd and in it it says, 'in an earlier memorandum outlining our initial analysis of Prop. 71 we advised you that it was likely that intellectual property rights derived from research which was financed from proceeds from state bonds would be treated as assets financed by the bonds.'"
Mr. Leavenworth and the
Sacramento Bee have so far been unsuccessful in their efforts to obtain a copy of this "earlier memorandum." According to
the August 29, 2005, editorial that appeared in the California capital's leading daily newspaper, Treasurer (and candidate for Governor of California) Angelides is claiming "attorney-client privilege" as the reason why he won't release that document.
You can read more about this and listen to the September 2, 2005,
California Politics Today interview with Mr. Leavenworth in its entirety by clicking
here.
a look back at a "study" used to support the passage of Proposition 71 that references both the "tax-exempt" status of the proposed stem cell bonds and the possibility of California receiving over a billion dollars from its investment in the project
While we're waiting for that document to be released, it might be useful to take a look back at a September 23, 2004,
California Politics Today article/news commentary entitled
"There's more than one way to skin an embryonic stem cell, and Proposition 71 is not the best one."
That piece focuses on the impossibility of getting any comment from the Stanford professor and author of the study that stood throughout the campaign for Proposition 71 as the only "serious" analysis of the financial impact of passing that initiative and includes
a recorded interview with California Republican Party spokesperson Karen Hanretty, who says in it that:
"The research that came out on that was paid for by the "Yes on 71" campaign, so already I'm going to discount a political proposal that has been put out as empirical data; there's no empirical data to back up those claims. They're misleading the public. They're raising hopes and expectations and to do so is terribly cruel to many families out there with children who have diabetes and aging parents who have Alzheimer's who desperately want cures and I think that these people should be called to task for raising such unrealistic expectations."
The executive summary of that report was published on the web site of the "Yes on 71/the California Stem Cell Research & Cures Initiative" under the title
"Economic Impact Analysis—Proposition 71: California Research and Cures Initiative."
Included in that report were simultaneous claims that "Proposition 71 authorizes a total of nearly $3 billion in
tax-free [bolding added], general obligation state bonds to support stem cell research" and "Specific revenues and savings that are modeled include:…
State royalty revenues of from $537 million to $1.1 billion, resulting from the provisions in Proposition 71 that give the state an opportunity to share in royalties resulting from research funded by the Initiative."
As pointed out both in the
Sacramento Bee editorial cited above, and in an extensive and exclusive September 3, 2005,
audio interview with Robert Feyer, lead bond counsel for the State of California and a partner at Orrick, Herrington & Sutcliffe LLP, state bond issues that return revenue to the State of California are not eligible, on that account, for tax-exempt status.
This "study," paid for by the proponents of Proposition 71, also contains other speculative and fanciful projections of the economic windfall said to result from the passage of the stem cell initiative.
Notwithstanding the bought-and-paid-for nature of the report, other news outlets took its "analysis" at face value, as shown in the headline from an article published shortly before the election on September 26, 2004, on the
"News-Medical.Net" web site entitled
"Prop. 71 will generate a total of at least $6.4 to $12.6 billion in new state revenues."
That article claims:
"A recent economic study, co-authored by a nationally-recognized economic research firm, the
Analysis Group, and
Stanford professor and economist Dr. Laurence Baker,
has determined [bolding added] that Prop. 71 will generate a total of at least $6.4 to $12.6 billion in new state revenues and health care cost savings during the payback period, providing a return on investment of at least 120% to 236%."
Also included in that pre-election article is a list of numerous local Chambers of Commerce in California who supported the passage of Proposition 71, along with this news item:
"In addition, the State's top fiscal officers, Controller Steve Westly and Treasurer Phil Angelides, have endorsed the measure. Former economic advisor to President Ronald Reagan and current Hoover Institution Distinguished Fellow George Shultz is also supporting Prop. 71."
This self-serving report was a follow-up to an earlier study entitled
"Analysis of the Financial Impact on the California State Budget of the Proposed California Institute of Regenerative Medicine," written by Professor Baker, dated October 27, 2003, and still available on the web site of the completely-disinterested
International Society for Stem Cell Research.
This preliminary "study," according to a statement at the end of the report, was "Paid for by Californians for Stem Cell Research and Cures, ID#1260661."
explore the backstory by reading and listening to Stem Cell Wars, Volume 1
opening credits, title, and authorship, "Analysis of the Financial Impact on the California State Budget of the Proposed California Institute of Regenerative Medicine," by Laurence Baker, Stanford University, October 27, 2003
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