McGeorge School of Law

Proposition 71

Proposition 71:
The California Stem Cell Research and Cures Act of 2004.

By Joshua Stevens

Copyright © 2004 by University of the McGeorge School of Law

JD, McGeorge School of Law, University of the Pacific
to be conferred May 2005
B.S., Psychology, California Polytechnical University, San Luis Obispo, 2002

Table of Contents

I. Executive Summary
II. The Law
III. Drafting Issues
IV. Constitutional Issues
V. Public Policy Considerations
VI. Conclusion

I. Executive Summary

Currently in California, as well as across the nation, there is a rapidly growing interest in the potential benefits of stem cell research. Voters across the state have become increasingly hopeful that stem cell research will result in new treatments for a variety of diseases that either they, or someone they know, suffer from. Although this area of science remains in its infancy, this research has already led to the development of treatments for some forms of cancer and blood disorders. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Due to this state of infancy however, what this research will actually lead to a cure for, if anything, is anyone’s guess. Id.

In response to these interests, Proposition 71, the California Stem Cell Research and Cures Act of 2004, will be placed on the November 2004 General Election Ballot. Proposition 71 would amend the Constitution of the State of California, to establish a constitutional right to conduct stem cell research while prohibiting the funding of human reproductive cloning research. Id. at 70. In addition, Proposition 71 has two basic goals: (1) to establish the “California Institute for Regenerative Medicine” to regulate stem cell research and provide funding for such research; and (2) to appropriate the money from the General Fund to pay for the bonds that will finance the Institute. Id.

Proposition 71 includes a number of means to make the Institute a viable scientific body for conducting research. Primarily, funding for the Institute will come from the issuance of several general obligation bonds amounting to a total of $3 billion. Id. This bond money will subject the Institute to an annual disbursement limit of $350 million per year. Id. In addition, the Institute will receive a loan from the General Fund of up to $3 million for its initial administration and start-up costs. Id. The total cost to the State of California will be approximately $6 billion spread over a 30-year period. Id. This amount will encompass the interest on the initial bonds. Id. Payments by taxpayers, from the General Fund, will amount to an average of $200 million per year, with no payments made from the General Fund for the first 5 years. Id.

The Institute would have a staff of up to 50 employees, and Proposition 71 also mandates the creation of a 29 member oversight committee to govern the Institute. Id. This oversight committee would be comprised of representatives from specified UC campuses, nonprofit academic and medical research institutions, and disease advocacy groups. Id. Furthermore, this oversight committee would be responsible for establishing standards for allowing the state to benefit from any patents, royalties, and licenses resulting from the Institute’s research activities. Id.

Finally, Proposition 71 has an eye towards both saving money through the reduction of health care costs, and earning money through local revenue gains as a result of the Institute’s research. Id. These potential fiscal benefits to the state are largely unknown, and are only based upon an estimation of the medical success of stem cell research. Id.

II. The Law

A. The Mechanics of Stem Cell Research

A stem cell is a specific type of cell, found in both animals and humans, that has the potential to develop into any one of a variety of “specialized” cells. National Institute of Health, http://stemcells.nih.gov/info/basics/ (accessed Sept. 10, 2004). By its very nature, a stem cell is “unspecialized,” meaning that it does not perform a specified function, such as carrying oxygen. Id. Additionally, under certain conditions, a stem cell can be transformed into a cell with a specified function. Id. Finally, a stem cell can potentially serve as a kind of repair system for the body by replenishing other cells, as long as the person or animal remains alive. Id.

Human embryonic stem cells appear in an embryo 5 to 7 days after conception. Id. Generally, stem cells in this manner are received for research by parents who tried to conceive a child through the use of a fertility clinic, and have donated their extra embryos for research. Id. These embryonic stem cells have the potential to develop into any type of cell that the human body possesses. Id.

On the other hand, adult stem cells are generally obtained through organ donation. Id. These stem cells, coming from a matured source (as opposed to a still-forming embryonic source), are generally only capable of becoming the same type of cell as the tissue from which they originated. Id. Thus, for example, an adult brain stem cell can only become a cell used in the brain.

As such, stem cell research could potentially become incredibly useful for the treatment of a variety of diseases. If a person is suffering from a disease, these stem cells could in theory be used as a renewable source of healthy cells to treat their disease. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). In addition, stem cells could be used for the improved testing of drugs to see how a particular cell will react to a drug’s effects. Id.

B. Existing Law

Under current California law, research involving stem cells is permitted, and such research is already the recipient of state funding. Id. at 68. The University of California (UC) system is currently engaged in the area of stem cell research. Id. UC funding in this area amounts to several million dollars annually. Id.

However, the use of embryonic stem cells is subject to the various laws regulating the donation of tissue, and the storage of embryos. California Codes, Health and Safety Code, Section 125300-125320, http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=85406914193+0+0+0&WAISaction=retrieve (accessed Sept. 10, 2004). Additionally, state law currently prohibits human reproductive cloning. California Codes, Health and Safety Code, Section 24185-24187, http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=85498115889+0+0+0&WAISaction=retrieve (accessed Sept. 10, 2004). Widespread use of “therapeutic” cloning, as a result of Proposition 71, is very much feared by the opponents of stem cell research. Sacramento Bee, The Buzz: Haves and Have-Nots of Stem Cell Research Measure. The cloning of a human being for the purpose of having “spare parts” for medical reasons is currently banned. San Francisco Chronicle, California’s Bizarre Cloning Proposition, http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/07/11/EDGD56N5SB1.DTL (accessed Sept. 1, 2004). The extremes to which stem cell research will be taken remains to be seen, but the mass manufacture of human embryos for the sole purpose of experimentation is clearly outside the bounds of the cloning laws. Id.

On the federal level, funding is provided for different types of stem cell research, including both embryonic and adult stem cells. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). In 2002, the federal government dedicated over $180 million to stem cell research across the nation. Id. Federal law currently places some restrictions on funding for research involving embryonic stem cells. Cybercast News Service, Stem Cell Restrictions Hurting Research, Scientists Charge. The current national policy allows federal funds to be used only on embryonic stem cell lines derived before August 9, 2001. Id.

Additionally, this debate over stem cell research is being swept up on the national political scene as a hot-button issue. President Bush has taken a longstanding anti-cloning stance, and for several years had a “far-reaching ban” on embryonic stem cell research; he only recently approved the use of federal money for funding such research. Sacramento Bee, Bickering Spotlights Stem-Cell Measure. On the other hand, Presidential Candidate John Kerry has taken a very pro-stem cell research position, and has chastised President Bush for his position on the issue. Id. Thus, the course of the upcoming Presidential Election could have an enormous effect on the direction stem cell research takes on a national, and thereby local, level.

Finally, on an international level, the United States is being swept up in a tide that is vehemently against the use of human cloning. San Francisco Chronicle, California’s Bizarre Cloning Proposition, http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/07/11/EDGD56N5SB1.DTL (accessed Sept. 1, 2004). Canada, Australia, and Germany have all banned cloning according to their federal laws, and France is on the verge of adopting a similar stance. Id. If this international trend towards the outright ban of cloning continues, our national position on the issue might be similarly influenced, depending upon how future administrations react to foreign policy.

C. The Effects of Proposition 71

Proposition 71, if enacted, would amend the California State Constitution to add a newly created Article XXXV, which would thereby establish a constitutional right to conduct stem cell research on virtually all types of stem cells. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). In addition, Part 5 of Division 106 would be added to the California Health and Safety Code to implement the goals of this newly created Article XXXV. Id. at Chapter 3.

Furthermore, voter approval of Proposition 71 would result in general obligation bonds being issued in the total amount of $3 billion to establish the California Institute for Regenerative Medicine. Id. at Chapter 3, Article 2, §125291.30. Of this $3 billion, up to 3 percent (a maximum of roughly $350 million) would be available to the Institute every year to fund stem cell research. Id. at 125291.45 (b). The Institute would also be entitled to a maximum of a $3 million loan from the General Fund to pay for its initial administrative and start-up costs. Id. at Article 1, §125290.70 (C)(5)(b). The Act has a provision, where for the first 5 years, the repayment of the principal would be postponed, and the interest on the bonds would be repaid using bond proceeds. Id. at Article 1, §125290.70 (C)(5)(c). After this 5-year grace period, taxpayers would be paying an average of $200 million per year out of the General Fund for a 30-year period. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). With interest, Proposition 71 will cost the State of California $6 billion. Id. The amount that can be returned or saved due to decreased health care costs, patents, royalties, and licenses, as a result of stem cell research is uncertain at this point. Id.

Additionally, while the Act states that its intent for the bonds used to finance the Institute are to be sold during the initial 10-year period, it does not require this in the statute. Id. These bonds are general obligation bonds that the State of California has guaranteed the repayment of their principal and interest. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Essentially, if the bonds are not sold during the first 10 years, the taxpayers of California will become responsible for paying for them. Additionally, the Institute will pay for the $3 million “start-up” loan from the proceeds of these bond sales. Id. at Article 1, §125290.70 (C)(5)(b). Any further proceeds from these bond sales would be placed in a newly created California Stem Cell Research and Cures Fund; with the fund open to continuous appropriation by the Institute without regard to fiscal year. Id. at Article XXXV, §4.

The Institute would then give priority for funding to research grants that meet its own criteria and are unlikely to receive any federal funding. Id. at Proposed Law, Section 3, Purpose and Intent. The Institute would also be prohibited from funding any research on human reproductive cloning. Id. Additionally, according to the drafting of the Act, the Institute would be exempt from certain aspects of the California “open meeting” law, which could prevent the public from monitoring the overall effectiveness of the Institute’s research. Id. at Chapter 3, Article 1, Section 125290.30 (d) (3).

Furthermore, given that federal funding of stem cell research is only available in such a limited way, the creation of a state constitutional right to conduct this research may conflict with the current federal funding policy. Largely, this means that the newly created Institute could potentially only receive funding from the issuance of the bonds found in this Act. Since federal funding to embryonic stem cell research is currently only available to stem cell lines derived before August 9, 2001, the Institute might venture into areas of research not funded by the federal government under this newly created state constitutional right.

Finally, Proposition 71 seems to create a right to have state funding for stem cell research. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Article 2, §125291.50 specifies that:

There shall be collected each year and in the same manner and at the same time as other state revenue is collected, in addition to the ordinary revenues of the state, a sum in an amount required to pay the principal of, and interest on, the bonds maturing each year. It is the duty of all officers charged by law with any duty in regard to the collection of the revenue to do and perform each and every act that is necessary to collect that additional sum.

Thus, it would appear that the Institute would possess a right to collect and receive its yearly revenues. The bond principal would have to be paid, out of the General Fund, every year and the Institute would be able to appropriate this money for its own expenditures, pursuant to its powers under the Act. Id. at Article XXXV, §4.

III. Drafting Issues

A. Funding

At first blush, Proposition 71 appears to clearly state its objectives and how it seeks to go about achieving those objectives. On its face, Proposition 71 would create the California Institute for Regenerative Medicine and would fund it accordingly. However, there exists some ambiguous terminology and curious exclusions in the language of Proposition 71, making it difficult to estimate its full effects.

As indicated above, there is no language mandating that the bonds funding the Institute be sold within the initial 10-year period. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Exactly how this might affect the financing of the Institute if the bonds are not sold in that time period remains unspecified.

Another funding matter of concern rests with the Institute’s administration costs. Id. The Act does not specify what would happen if the Institute’s administrative costs were greater than the amount of bond funding. Id. Under the language of the Act, the Institute may use up to 3 percent of the bond proceeds to pay for its administrative costs. Id. However, the potential exists for these costs to exceed the amount allotted to them; meaning that additional financial support from the General Fund would be required. Id. The total amount of this potential additional support remains unspecified. Id.

Furthermore, nothing in the language of the Act requires the Institute to evenly distribute funding among adult, embryonic, and cord blood stem cell research. Id. Opponents of Proposition 71 fear this loophole will allow the Institute to ignore both adult and cord blood stem cell research. Id. These two areas of research have led to some promising results, yet they could potentially receive no funding due to a feared preference for embryonic stem cell research. Id. The Act specifies that a two-thirds vote of the Institute’s “working group” is required to approve funding for any such particular area of research not already being funded by the Institute; a seemingly completely internal decision by the Institute with no voter control over the matter. Id.

B. Severability

Proposition 71 contains a severability clause which allows sections later found to be invalid, to be severed from the remaining valid sections. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Such a clause is a commonly used procedural safeguard to prevent the entire proposition from later being invalidated in its entirety due to a finding that a single clause is unconstitutional. Proposition 71’s severability clause provides:

If any provision of this act, or part thereof, is for any reason held to be invalid or unconstitutional, the remaining provisions shall not be affected but shall remain in full force and effect, and to this end the provisions of the act are severable. Id.

Although a severability clause is included in the language of the Act, this clause itself is not conclusive. A court examining the constitutionality of the Act will examine three key criteria to determine if a particular provision is invalid and should be severed. Gerken v. Fair Political Practices Commission, 6 Cal. 4th 707, 715 (1993). For a provision to be severable, (1) it must grammatically make sense to sever it; (2) it must be complete and functional in and of itself; and (3) the provision as severed must be something the legislature (or in the case of an initiative, the electorate) considered separately and would have adopted without the invalid provisions. Id.

The provisions of Proposition 71 appear to be clearly drafted, apparently meeting the relevant criteria so as to render no part unconstitutional. The Act is basically written as a “package deal,” but the language used appears to be carefully structured to effectively compartmentalize each section. This careful structuring would likely satisfy the first and second tests of severability under the Gerken standard because each section grammatically makes sense if severed, and any severed provision is likely to be ruled complete and functional in and of itself.

Furthermore, since the overarching purpose of the Act is to create an institution for conducting stem cell research, the third test of severability is also likely met because the Act would still meet the electorate’s goal of creating this institution. Thus, the severability clause appears to be clearly drafted, and would likely hold up if any part of the Act were found unconstitutional.

IV. Constitutional Issues

A. Federal Constitution

There are no federal constitutional issues raised by Proposition 71.

B. State Constitution

1. Constitutional Amendments

Article XVIII of the California Constitution provides that a majority of voters must approve all state constitutional amendments. Cal. Const. art. XVIII (West 2002). Thus, a proposed constitutional amendment must appear on a statewide ballot and pass with a majority vote before the state’s constitution can be amended. Id. The California Legislature may also submit a proposed amendment of the state constitution to the voters through a statewide ballot. Id. As such, Proposition 71’s proposed constitutional amendment will only take effect if a majority of the state’s voters approve it.

2. General Obligation Bonds

A general obligation bond is “a municipal bond payable from general revenue rather than from a special fund. Such a bond has no collateral to back it other than the issuer’s taxing power.” Black’s Law Dictionary 173 (7 th ed. 1999). Article XVI of the California Constitution allows the California Legislature to create a General Obligation Bond Proceeds Fund in the State Treasury. The proceeds from the sale of these bonds are to be placed into this fund. Cal. Const. art. XVI, § 1.5.

Additionally, Section 1.5 of Article XVI provides that an account shall be maintained of all the money deposited into this fund, and the proceeds of bond are to be maintained in a separate account. Id. These proceeds may only be paid out in accordance with the law authorizing the issuance of the particular bond from which the proceeds were derived. Id. Furthermore, the California Constitution states that every measure providing for the “preparation, issuance, and sale of bonds” of the State of California shall be put before the voters in the form of either a bond act or statute. Cal. Const. art. XVI, §2.

Proposition 71 complies with all of these state constitutional requirements in that it provides that the bonds in the total amount of $3 billion may be issued and sold to provide funding for the creation of the California Institute for Regenerative Medicine. Additionally, Proposition 71 is being submitted to the voters in the form of a bond act and constitutional amendment at the November 2, 2004, statewide general election.

3. Single Subject Rule

Article II, Section 8(d) of the California Constitution states that “an initiative measure embracing more than one subject may not be submitted to the electors or have any effect.” Cal. Const. art. II, § 8(d). The rationale behind this section was to promote disclosure, avoid voter confusion, and to avoid frustration of the electorate’s will. Senate v. Jones, 21 Cal. 4th 1142, 1156-1157 (1999). The California Courts have significantly broadened this seemingly straightforward constitutional statement. In Legislature v. Eu, 54 Cal. 3d. 492 (1991), the Court expanded the single subject standard to include instances where the provisions of an initiative are merely reasonably related to a common theme or purpose.

Thus, under this relaxed standard, Proposition 71 does not appear to violate the single subject rule. All of the provisions of this Proposition appear to be reasonably related to the common purpose of funding a research institute to conduct stem cell research. The financial bond issues, funding, organization of the Institute, and state constitutional amendment all appear to be interrelated enough so as to comprise a common theme or purpose under the Eu standard.

V. Public Policy Considerations

A. Proponents

Proponents of Proposition 71 view it as a vital area of research that could prevent millions of people from suffering and dying. Yes on 71, http://www.yeson71.com/facts.php (accessed Sept. 9, 2004). Many diseases, everything ranging from Cancer, heart disease, Alzheimer’s, Parkinson’s, HIV/AIDS, to spinal injuries are mentioned as potentially receiving new and innovative modes of treatment due to stem cell research. Id. Proponents believe that attempts to find cures for these diseases have been stymied by political squabbling over the stem cell issue, and this Act would finally “close the research gap” so new treatments and cures could be found. Id.

Proponents also contend that Proposition 71 was designed to protect California’s taxpayers and budget. Id. Supporters point to the fact that the Act was designed to have both a yearly average disbursement (of $295 million), and not tax California taxpayers for the first five years. Id. Additionally, the total amount due would be spread over a 30 year period. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). Proponents further point to the fact that this Act could make California the leader in stem cell research, giving the state exclusive rights to potentially incredibly valuable patent and licensing rights. Yes on 71, http://www.yeson71.com/facts.php (accessed Sept. 9, 2004). If all goes as hoped, this newly created industry could help the state economy by generating thousands of new jobs and millions of dollars in revenues. Id.

Aside from these direct fiscal benefits, proponents argue that if stem cell research is even only moderately successful, it could reduce health care costs by billions of dollars in the state. Id. California spends over $110 billion annually on health care; a huge share of these costs involve the treatment of diseases that stem cell research is hoped to treat. Id. Proponents argue that if stem cell research reduces these health care costs by a meager 1%, the Act will have more than paid for itself. Id.

Proponents argue that Proposition 71 is bound by strict ethical controls. Id. There will be an ethical oversight committee created, comprised of independent experts, which would subject the Institute to independent audits, public hearings, and annual reports. Id. Furthermore, Proposition 71 explicitly prohibits funding any research geared towards cloning human babies; rather the sole focus will be on finding the cures for diseases by studying all types of stem cells (adult, embryonic, cord blood, etc.). California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004).

Proposition 71 is ultimately an attempt to find cures that will save lives, with enormous potential economic benefits to the state. Id. Opponent groups of the measure are comprised primarily of anti-abortion conservatives that are merely using political scare tactics to keep the public from looking at the real issue. Los Angeles Times, Benefits of Stem Cell Bond Issue in Question, http://www.latimes.com/business/columnists/la-fi-golden23aug23,1,5577778.column?coll=la-home-utilities (accessed Aug. 23, 2004).

The proponents include: various medical groups, such as the American Nurses Association of California, the California Medical Association, and the Cancer Research and Prevention Foundation. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004).

B. Opponents

Opponents argue that Proposition 71 is essentially far too costly for the State of California to afford. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004). They say that it is wrong to launch such a huge new bureaucratic agency, when other vital state programs are being cut. Id. Further, they assert that another $3 billion worth of debt will occur, ballooning to $6 billion altogether, which is too much for the state budget. Id. General Fund Bond Debt is already estimated to increase a staggering 54%, from $33 billion to $50.75 billion, by June 30, 2005. Id.

Opponents also argue that supporters of Proposition 71 are using the imagery of suffering people to delude the public. Id. This act was put together by large pharmaceutical companies and venture capitalists only seeking to make a profit. Id. These parties stand to make billions with little or no risk. Id.

Opponents further state that if stem cell research was such a grand idea, private business would have dominated the field by now. San Francisco Chronicle, California’s Bizarre Cloning Proposition, http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/07/11/EDGD56N5SB1.DTL (accessed Sept. 1, 2004). This area of science is too speculative at this point to attempt to base an industry off of it yet. Id. California’s private business community has responded by ignoring the field altogether. Id.

Opponents are also concerned about so much money being pumped into such a speculative area of medical research, when other proven areas of research would be receiving far less money by comparison. Los Angeles Times, Stem Cell Initiative Attracts Backers, at B1, August 31, 2004. Opponents demand that more compelling evidence of the efficacy of stem cell research should be demonstrated before such a large public expenditure is undertaken. California Secretary of the State, California Official Voter Information Guide, Analysis of Proposition 71 (2004).

Opponents further contend that this Act does not provide any accountability on the part of this newly created research institute. Id. The proponents have given themselves power to exempt the Institute from certain portions of the California “open meeting” law, which was enacted specifically to stop this kind of back-room dealing. Id. The state has too little say in how the money will be effectively spent, especially since the Act calls for stem cell research to become a state constitutional right. Id. This means that no matter what our state’s financial picture becomes, we will be bound in future years to borrow and spend the money to support this Institute because it has been written into the State Constitution. Id.

Finally, opponents fear this Act is largely an attempt to loosen the restraints on embryonic cloning research. Id. They fear that the Institute will place a higher value on embryonic stem cells to the exclusion of other types of stem cells. Id. This would in turn greatly increase the likelihood that human clones will be produced to meet this demand for embryonic stem cells. Id.

Proposition 71 is ultimately too costly for California to afford, and its potential benefits are merely the subject of speculative estimation. Id. Opponents of Proposition 71 strongly support stem cell research, but this Act goes too far and merely serves to line the pockets of venture capitalists seeking to make a profit. Id.

The opponents include: California State Senator Tom McClintock, the Cancer Center Director and bioethics consultant H. Rex Green, M.D., and Orange County Treasurer John M.W. Moorlach. Id.

VI. Conclusion

On November 2, 2004, voters will determine whether to enact Proposition 71, The California Stem Cell Research and Cures Act of 2004. Proposition 71 would serve to create the California Institute for Regenerative Medicine to conduct potentially invaluable stem cell research. Enactment of this proposition would authorize the sale and issuance of state backed general obligation bonds in an amount of $3 billion, costing California a total of $6 billion over a 30-year period.

Public policy considerations warrant the immediate attention of voters. Proponents emphasize that millions of people are suffering and dying, and this research could lead to treatments and even cures for them. Id. Opponents are largely concerned about the fiscal burden this Act would place upon the state’s shoulders, as well as the increased risk of human cloning. Id. Regardless of the rhetoric put forth by both sides about Proposition 71, the voters will make the ultimate decision about whether stem cell research in California is either too costly a burden to bear for such speculative returns; or in the words of State Treasurer Phil Angelides, “. . . the possibility of putting California in the front ranks of biotechnology . . . It’s a risk worth taking.” Los Angeles Times, Benefits of Stem Cell Bond Issue in Question, http://www.latimes.com/business/columnists/la-fi-golden23aug23,1,5577778.column?coll=la-home-utilities (accessed Aug. 23, 2004).