Actually, however, by impeding progress on the stem cell institute, the lawsuits could be a godsend to California taxpayers. In its first eight months of operation, the institute and its 29-member Independent Citizens Oversight Committee (ICOC) -- an unwieldy sort of board of directors -- have burned through more than $2 million in cash and signed contracts promising $1 million more. And all this spending occurred without an approved operating budget or an organizational structure that defines who does what at the institute -- even as it passes out big money.
"It seems a little bit strange," says Christine Letts, a lecturer on nonprofit management at Harvard's Kennedy School of Government. "They may have a perfectly competent staff, but they have to be accountable for what is done before the official apparatus is constructed. There's no expectation or excuse for sloppiness in the name of hurrying the thing up."
On top of basic governance, the stem cell institute and its oversight committee haven't resolved other key issues that could cost -- or save -- California millions of dollars. Among other things, the institute hasn't adopted policies on who would own the interests in any marketable products its grants help create, or on what constitutes a conflict of interest for employees and oversight committee members.
The institute was established by the ballot measure Proposition 71 last November to fund stem cell research, the promising, nascent science that proponents believe will cure everything from cancer to spinal cord injuries. Institute grants -- funded by the proposed sale of $3 billion in state-backed bonds -- will go to California universities, nonprofits, and corporations.
When confronted with the lack of organization at the institute, supporters cite the enormity of their task: establishing an organization that will make billions of dollars in grants over the course of a decade. "I've been surprised at how complex it is. We're not only getting a big new scientific enterprise started, we're also building a state agency from the ground up," says interim institute President Dr. Zach Hall. Oversight board members compare the project to the establishment of a mini-National Institutes of Health, which took years and produced an agency with a national mandate to give out $22 billion in grants.
During the campaign for Proposition 71, Robert Klein, now ICOC chairman, projected that the institute's first grants would be made by summer. In March, when he joined the institute, Hall knew that timeline was unrealistic. "I think a lot of those projections were an expression of the enthusiasm and eagerness to get going. There's a tension between that and, 'Wait a minute, we've got to do this well,'" says Hall, a former biochemistry researcher and administrator at UCSF and NIH who served a short stint as CEO of a biotech start-up.
Indeed, stem cell institute proponents have repeatedly insisted that the apparent disorganization is a result of a desire to fund vital stem cell research quickly. With so many unanswered questions about the organization's finances, however, the institute should probably be thanking the Christian right for buying it time to get its very scrambled act together.
When it comes to spending money, the California Institute for Regenerative Medicine has not erred on the side of caution. According to financial data from institute interim Chief Administrative Officer Walter Barnes, who joined the institute in July after months on loan from the state Controller's Office, expenses will total $2.5 million this year, in addition to the commitment of at least another $1.2 million in contracts for the coming fiscal year. The money being spent comes from a $3 million loan from the state and a $5 million donation from audio entrepreneur Ray Dolby.
The spending has been authorized even though the institute has no formal budget and no formal organizational chart. The institute spent $737,000 on salaries and benefits during fiscal 2005, which ended in June, spread among 14 employees. Half of its current employees make six-figure salaries, including $389,004 for Hall, according to data provided by the institute. The institute also inked a $165,000 contract with executive search firm Spencer Stuart to find a permanent president. Based on standard executive search fees, the president's salary could reach as much as $500,000 -- roughly triple what the governor makes, and more than double the NIH director's salary. This would place the new institute president among state government's highest-paid employees. Prop. 71 doesn't mention caps on institute salaries, and the oversight committee hasn't instituted a salary-cap regulation.
The most controversial spending made public to date involves public relations. The stem cell institute is racking up $27,000 per month in bills from Edelman Public Relations, which counts more than a dozen large pharmaceutical and biotech companies, including Pfizer and Chiron, among its clients. On the institute Web site, Adam Silber, vice president of Edelman's Sacramento office, is listed as a press contact, with a CIRM e-mail address, a CIRM phone number, and no mention of Edelman.
The institute also has a $320,000 legal services contract with the Sacramento law firm of Remcho, Johansen & Purcell. While the attorney general will make arguments in the courtroom, Remcho partner James Harrison is acting as a fill-in for a yet-to-be-hired general counsel, advising on issues such as compliance with state rule-making procedures and open-government laws.
According to Prop. 71, the institute can retain outside counsel only when the "scientific, medical, and technical nature of the issues" requires services not provided by the AG's Office. Harrison describes himself as an experienced California ballot measure litigator, having worked with Klein to help craft Proposition 71. "[Ballot measure litigation] is not a legal issue that would flummox our office," a spokesman for the attorney general says.