California Family Bioethics Council v. California Institute for Regenerative Medicine

Filed 2/26/07

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

STORY CONTINUED FROM PART I..

The Council next argues that the provisions added to the Health and Safety Code by Proposition 71 run afoul of the single-subject rule because the Cures Act revises the application of conflicts of interest laws and specifically seeks to exempt the members of the ICOC from their conflicts of interest. The manner in which the Act qualifies and clarifies conflict of interest restrictions for members of the ICOC is described at pages 46-47, post. As indicated above, the Act also imposes rigorous qualifications for those who may serve on the ICOC and its working groups. The obvious intent is to require that those responsible for participating in the decisionmaking process and allocating research funds be knowledgeable in the applicable fields of science and medicine. Given the objective of delegating to persons knowledgeable in the relevant fields the advisory and decisionmaking responsibilities for the highly technical work of the institute, and the demanding qualifications for membership in the various arms of the institute, it is readily apparent why the conflict of interest provisions are both functionally related and reasonably germane to the single subject of the research authorized to be funded by Proposition 71. Persons qualified to serve in the various positions created by the measure are likely affiliated in some manner with institutions that directly or indirectly will participate in or be affected by research underwritten by the institute. The need to adapt, or at least to clarify, conflict of interest rules that otherwise might disqualify or be perceived to disqualify many of the people on whose expertise the functioning of the institute will depend provides ample justification directly related to the objectives of the institute for the conflict provisions. Broadening the pool of qualified candidates from which the ICOC may draw unquestionably is functionally related to the single purpose of the stem cell research and cures initiative.

Again relying on CTLA, supra, 200 Cal.App.3d 351, the Council argues, An insurance initiative that contained a single-sentence statutory exemption from only one conflicts of interest law violated the single-subject rule and was held unconstitutional . . . . The courts objection to the insurance measure in CTLA, however, was not the fact that the initiative contained a conflict waiver. The court objected to the fact that the conflict of interest provision was hidden in the middle of a lengthy initiative and dealt not with the regulation of insurance rates as the rest of the measure did, but with exempting insurers and others from laws regulating campaign contributions, a subject unrelated but for the fact that both pertained to insurance carriers. CTLA did not disturb the basic proposition that a measure does not violate the single-subject rule if its provisions are either functionally related to one another or . . . reasonably germane to one another or the objects of the enactments (Harbor v. Deukmejian (1987) 43 Cal.3d 1078, 1100), as the conflict provisions in this measure plainly are.[1]

Finally, the Council argues that the proposition violates the single-subject rule by the extensive range of subjects over which the ICOC is granted exclusive state authority. The Council points to the fact that provisions of the measure relate to the regulation of medical research, technical and funding standards, conflicts of interest, privacy rights of women and other related ethical questions, bond financing, and licensing of intellectual property rights. In particular, the Council quotes section 125290.35, subdivision (a), which provides, In order to avoid duplication or conflicts in technical standards for scientific and medical research, with alternative state programs, the institute will develop its own scientific and medical standards to carry out the specific controls and intent of the act, notwithstanding subdivision (b) of section 125300, sections 125320, 125118, 125118.5, 125119, 125119.3 and 125119.5, or any other current or future state laws or regulations dealing with the study and research of pluripotent stem cells and/or progenitor cells, or other vital research opportunities, except Section 125315. The ICOC, its working committees, and its grantees shall be governed solely by the provisions of this act in the establishment of standards, the award of grants, and the conduct of grants awarded pursuant to this act. (Italics added by the Councils brief.)

As in the trial court, the Council fails to explain how or why these provisions violate the single-subject rule. On their face, all appear directly germane to the single research mission of the institute created by the proposition. Medical and ethical standards clearly are appropriate, if not indispensable, for this new and sensitive area of research, which has given rise to intense moral concerns among a portion of the public and has led to the federal restrictions that this measure seeks to overcome. Protecting the privacy rights of stem cell donors unquestionably is within the same purview. As just noted, particularized conflict of interest standards for those members of the medical and scientific community who will authorize and oversee the research projects are designed to advance the research mission of the institute. Bond financing is the means provided by the measure to raise the funds necessary to implement the institutes mission. And appropriate licensing and regulation of the intellectual property that is anticipated from the work of the institute is similarly germane and functionally related to the conduct of the research. There is undoubtedly   a reasonable and common sense relationship among [the] various components in furtherance of a common purpose   of all of the provisions that make up Proposition 71. (Jones, supra, 21 Cal.4th at p. 1157, italics omitted; see also Manduley v. Superior Court (2002) 27 Cal.4th 537, 576-579 [initiative amending statutes regarding gang-related crime, sentencing of repeat offenders, and juvenile justice system did not violate single-subject requirement. Challenged provisions regarding repeat offenders bore both a topical and a functional relationship to provisions regarding juvenile crime].)

In short, as the trial court concluded, the Council has not demonstrated that Proposition 71 violates the constitutional provision that an initiative must be limited to a single subject.

2. The Proposition 71 Ballot Materials Were Not Misleading

The Council argues that Proposition 71 contains material omissions and misrepresentations that caused its adoption in the November 2004 election to violate due process of law. The Council contends that the analysis provided in the ballot materials by the Legislative Analyst was misleading because it misstated the interest costs on the bonds that were authorized, falsely promised new revenues from medical therapies to be developed, and failed to define the terms somatic cell nuclear transfer, products of in vitro fertilization treatments, and cloning. The Council also argues that the analysis fails to explain that the initiative is establishing a state public agency whose members are being exempted from conflicts of interest laws.

At the outset, the Councils challenge must be distinguished from a pre-election challenge based on violation of election laws. Except for challenges alleging misconduct rising to the level of a constitutional violation, the courts authority to invalidate an election is limited to the bases for contest specified in Elections Code section 16100 and that section is exclusive. (Friends of Sierra Madre v. City of Sierra Madre (2001) 25 Cal.4th 165, 192 (Friends of Sierra Madre).) Quoting Horwath v. City of East Palo Alto (1989) 212 Cal.App.3d 766, 777 (Horwath), the Council argues that the alleged flaws it identifies in the ballot materials rendered the information provided to the voters . . . inaccurate or misleading as to prevent the voters from making informed choices. The misleading information, the Council reasons, amounts to a denial of due process.

Horwath held that Determination of how much process is due in a local, direct decisionmaking contextwhere the complained-of irregularities consist of omissions, inaccuracies or misleading statements in the ballot materialswill depend on whether the materials, in light of other circumstances of the election, were so inaccurate or misleading as to prevent the voters from making informed choices. In conducting this inquiry courts should examine the extent of preelection publicity, canvassing and other informational activities, as well as the substance or content of such efforts. The ready availability of the text of the ordinance, or the official dissemination and content of other related materials, such as arguments for or against the measure, will also bear on whether the statutory noncompliance rendered the election unfair. Finally, courts should take into account the materiality of the ommission [sic] or other informational deficiency. Flaws striking at the very nature and purpose of the legislation are more serious than other, more ancillary matters. (Horwath, supra, 212 Cal.App.3d at pp. 777-778.)

In People ex rel. Kerr v. County of Orange (2003) 106 Cal.App.4th 914 (Kerr) the court addressed a challenge to an election adopting a county charter, which was similar to the challenge made here. The plaintiffs argued that the alleged deficiencies in the impartial analysis here are a violation of constitutional guarantees of due process. As they put it in their brief, the right to vote is fundamental in a democratic society and the impartial analysis, by conveying false and misleading information abridged that right by preventing voters from making an informed decision . . . .  (Id. at p. 933.) The court responded that plaintiffs logic sweeps too broadly. Election losers frequently claim that their message didnt get out or that they were the victims of false and misleading information. Simply as a matter of general principle, the idea that by constitutionalizing deficiencies in voter summaries you can undo an election is really quite antithetical to the democratic process. (Ibid.) The court concluded that the plaintiffs were attempting to circumvent the statutory requirement that challenges to an impartial analysis be brought before the election is held. [T]he need to mount any challenges to an impartial analysis before an election takes place and not after it cannot be so easily sidestepped as plaintiffs here would have us imagine. A litigant cannot simply intone the words due process and make the problem go away. Here, substantively, plaintiffs have really mounted only an election challenge, not a constitutional challenge (at least insofar as they attack the impartial analysis). [] We need only add that in light of the fact that the Legislature has determined in the Election Code that an election cannot be undone on the basis of alleged deficiencies in an impartial analysis, trying to achieve the same result under the rubric of constitutional due process, as was unsuccessfully attempted in Horwath, requires a showing that the impartial analysis profoundly misled the electorate, not just that it didnt educate the electorate as to all the legal nuances of the measure. We perceive in Friends of Sierra Madre and Horwath, when read together, that the bar is very high indeed for a litigant to successfully mount a post-election challenge to a ballot measure using a due process rationale based on defects in a county counsels impartial analysis. (Id. at pp. 933-934.)

Like the plaintiffs in Kerr, the Council not only does not clear this bar, it barely even get[s] off the ground. (Kerr, supra, 106 Cal.App.4th at p. 934.) The Council first argues that the ballot materials represented that the interest costs for repayment of the bonds would be $3 billion, while [i]n fact the State Treasurer estimates that the true cost of the interest on the Proposition 71 bonds will be an additional $423 million. The Legislative Analysts summary predicted a [s]tate cost of about $6 billion over 30 years to pay off both the principal ($3 billion) and interest ($3 billion) on the bonds. The October 26, 2005 letter from the State Treasurer to the president of the CIRM, on which the Council relies, points out that the measure authorizes both taxable and tax-exempt bonds, which gives the Institute the flexibility to design a research strategy to meet its objectives at the lowest cost to the taxpayers and in ways that comply with any federal restrictions on the use of tax-exempt bonds. The letter explains that, although the state may not be able use tax-exempt bonds to finance research projects in which the state would benefit by receiving royalties from the fruits of the research, the matter is far from settled law and that the financing options should be further explored. The Treasurer further stated that in some circumstances it might be more beneficial to the state to use taxable bonds since the royalties could exceed the additional costs of these bonds. My staff estimates that the interest rate difference between issuing taxable and tax-exempt 30-year general obligation bonds is currently about 0.75 percentage points. Even in the worst-case scenariowhere, to obtain royalties, the State must sell only taxable bonds to fund the Institutes entire research grant programmy staff estimates that the added interest cost to the State over the 30-year term of the bonds would be $423 million. By contrast, the economic study released by the Proposition 71 campaign last year estimated that the Institute could reasonably expect to receive as much as $1.1 billion in licensing fees and royalties over the next three decades. If that is the case, even the maximum use of taxable bonds would result in $677 million more in net revenues to the State and its taxpayers than if the Institute uses only tax-exempt financing and forgoes any royalties.

The trial court concluded that there was no evidence of misleading financial projections. The trial court is correct. There is nothing in the Treasurers letter that contradicts the Legislative Analysts estimate. First, the Treasurers figure is based on the assumption that the state will sell only taxable bonds. The state may sell tax-free bonds, taxable bonds, or a combination of both. The Treasurers letter adeptly outlines the considerations for each option but does not establish that the state will pay more than was estimated in the ballot materials for the bonds. Moreover, the $3 billion figure provided in the ballot materials is explicitly an estimate, not a firm figure. The analysis states, If the $3 billion in bonds authorized by this measure were repaid over a 30-year period at an average interest rate of 5.25 percent, the cost to the General Fund would be approximately $6 billion to pay off both the principal ($3 billion) and interest ($3 billion). (Italics added.) This statement cannot reasonably be read to mean that this would be the exact cost of repayment, since interest rates fluctuate and the state might choose to sell bonds with a different term for repayment. The Council does not suggest that the state cannot exercise its right under the Cures Act to sell both tax-free and taxable bonds, which of course would change the cost of the bonds. The trial court was correct that the Treasurers letter indicates that over the life of the bonds at issue the interest cost of taxable bonds would be $423 million more than the cost of tax-free bonds, but says nothing whatsoever about the Legislative Analysts projection of $3 billion in interest costs.

The Council next argues that Proposition 71 falsely represented to the voters that the initiative would Protect and benefit the California budget . . . by funding scientific and medical research that will significantly reduce state health care costs in the future.  (Italics in the Councils brief.) The Council argues that this is misleading because [t]here is no way to know whether or not any Proposition 71 funded research will ever result in any revenues or any health care cost savings to the State. The Council also complains that any royalty payments to the state from technology developed under the auspices of the institute are speculative. The trial court concluded that the statement to which the Council objects was not a promise but is an aspiration on the part of the people of the state to [p]rotect and benefit the state budget. 

As the Attorney General observes, the ballot materials repeatedly stressed the speculative nature of any savings from research or earnings to the state from licensing royalties under the Cures Act. The summary of the Legislative Analysts estimate of fiscal impact, which appeared in the voter information guide before the full analysis, referred to Unknown potential state and local revenue gains and cost savings to the extent that the research projects funded by this measure result in additional economic activity and reduced public health care costs. In the fuller discussion of fiscal effects, under the heading Other Potential Fiscal Effects, the analysis stated: If the measure were to result in economic or other benefits that would not otherwise have occurred, it could produce unknown indirect state and local revenue gains and cost savings. Such effects could result, for example, if the added research activity and associated investments due to the measure generate net gains in jobs and taxable income, or if funded projects reduce the costs of health care to government employees and recipients of state services. The likelihood and magnitude of these and other potential indirect fiscal effects are unknown. (Italics added.) Such speculation, phrased in conditional language as this was, is not misleading, let alone misleading to the degree that would prevent the voters from making informed choices. (Horwath, supra, 212 Cal.App.3d at p. 777.)[2]

The Council also argues that the analysis failed to explain the meanings of critical scientific terms used but not defined in Proposition 71, somatic cell nuclear transfer, products of in vitro fertilization treatments and cloning that is authorized under Proposition 71, as contrasted to human reproductive cloning, which is banned . . . . (Original italics.) In considering whether these omissions materially misled voters, the court considers not only the text of the measure and the analysis but also the extent of preelection publicity, canvassing and other informational activities, as well as the substance or content of such efforts. (Horwath, supra, 212 Cal.App.3d at p. 777.)

The court in Amador, supra, 22 Cal.3d 208 considered a similar challenge to a ballot summary by the Attorney General.[3] The court noted that the title and summary need not contain a complete catalogue or index of all of the measures provisions . . .  and that [a]s a general rule, the title and summary prepared by the Attorney General are presumed accurate, and substantial compliance with the chief purpose and points provision is sufficient. (Id. at p. 243.) In that case the plaintiffs complained that the title and summary omitted the fact that a two-thirds majority vote was required for local entities to impose the special taxes authorized by the measure. The court held that [t]he summarys omission of any reference to the two-thirds vote requirement was not critical for, as we noted above, the initiative measure was extensively publicized and debated, in all of its several aspects, and a corrected summary was contained in the voters pamphlet which was mailed to all voters. We repeat our observation of some time ago that we ordinarily should assume that the voters who approved a constitutional amendment . . . have voted intelligently upon an amendment to their organic law, the whole text of which was supplied each of them prior to the election and which they must be assumed to have duly considered.  (Id. at pp. 243-244.)

To say that the issues surrounding Proposition 71 and the issues surrounding stem cell research generally were well-aired prior to the election undoubtedly would be an understatement.[4] Though many voters probably do not understand the science underlying somatic cell nuclear transfer, therapeutic cloning, and in vitro fertilization, they are not required to grasp the intricacies of this research frontier to intelligently decide whether to support a measure providing funding for such research. The ballot materials included a box entitled Stem Cells and Stem Cell Research that provided objective nontechnical answers to three questions: What Are Stem Cells?, What are Embryonic and Adult Stem Cells?, and Why do Researchers Want to Study Stem Cells? No more was required to permit voters to vote intelligently. (See Kerr, supra, 106 Cal.App.4th at p. 934 [unnecessary to educate the electorate as to all the legal nuances of the measure]; Elec. Code,  9087 [analysis by Legislative Analyst shall avoid the use of technical terms wherever possible].)

Finally, the Council again broaches the subject of conflict of interest, arguing that voters were materially misled because the analysis fails to explain that the initiative is establishing a state public agency whose members are being exempted from conflicts of interest laws. However, without explicitly discussing the subject of conflicts of interest, the analysis of the Legislative Analyst in the ballot pamphlet pointed out that the ICOC would be comprised of representatives of specified UC campuses, another public or private California university, nonprofit academic and medical research institutions, companies with expertise in developing medical therapies, and disease research advocacy groups. Elections Code section 9087 provides that The Legislative Analyst shall prepare an impartial analysis of the measure describing the measure and including a fiscal analysis of the measure showing the amount of any increase or decrease in revenue or cost to state or local government, that the analysis be written in clear and concise terms, so as to be easily understood by the average voter . . . and that it generally set forth in an impartial manner the information the average voter needs to adequately understand the measure. The test is not whether the digest is complete, but rather whether it contains a statement of the major objectives or chief purposes and points of the measure. [Citation.] It need not refer to  auxiliary or subsidiary  matters, nor need it  contain a summary or index of all of the measures provisions. . . . Moreover,  substantial compliance is sufficient, and if reasonable minds may differ as to the sufficiency of the summary, it should be held sufficient.  (Horneff, supra, 110 Cal.App.4th at p. 820.) As in Kerr and Horneff,the impartial statement here set forth the major features of the proposition and substantially complied with the statutory requirements. For those voters seeking to ascertain all of the details of the measure, the voter information guide contains the complete text of the proposition. Requiring the Legislative Analyst to include every facet of a complex measure such as Proposition 71 would have the paradoxical effect of rendering the analysis nearly as impenetrable to the average voter as the text of the proposition itself.

In short, the Council attacks the analysis on grounds all of which were available prior to the election. Here, as in Kerr and the cases upon which it relies, the Council has really mounted only an election challenge, not a constitutional challenge (at least insofar as they attack the impartial analysis). (Kerr, supra, 106 Cal.App.4th at p. 934.) The ballot materials neither misled nor denied anyone due process nor do they provide any basis for invalidating Proposition 71.

C. The Content of Proposition 71

1. The Cures Act Does Not Violate the Constitutional Prohibition of Public Funding of Entities Outside of the States Exclusive Management and Control.

Article XVI, section 3 of the California Constitution provides: No money shall ever be appropriated or drawn from the State Treasury for the purpose or benefit of any corporation, association, asylum, hospital, or any other institution not under the exclusive management and control of the State as a state institution . . . . This constitutional prohibition was designed to prevent the appropriation of the moneys of the state for any purpose other than that which pertains to the state. (County of Sacramento v. Chambers (1917) 33 Cal.App. 142, 146.) However, it was not intended to unduly restrict the state in the expenditure of public funds for legitimate state purposes. (People v. Honig (1996) 48 Cal.App.4th 289, 352.) [A]rticle XVI, section 3 has been interpreted not to prohibit legislative authorization for some degree of autonomy in a government agency or innovation in the manner in which a government agency operates, but rather to prevent the appropriation of funds from the state fisc for a purpose foreign to the interests of the state and outside of its control. (CART, supra, 109 Cal.App.4th at p. 816.)

As indicated above, CIRM is an entity created by the Constitution itself. In this respect it differs from the statutorily created entities that were the subject of scrutiny in CART, in Howard Jarvis Taxpayers Assn. v. Fresno Metropolitan Projects Authority (1995) 40 Cal.App.4th 1359 (Jarvis), and in all of the cases that have considered the meaning of article XVI, section 3. Peoples Advocate recognizes that CIRM is a creature of the Constitution and established in state government. It states unequivocally, Peoples Advocate makes no challenge to the constitutional legitimacy of the CIRM, nor its power to use bonds to fund its operations. It contends, however, that CIRMs role is basically ministerial, that the significant decisions to make grants and loans are made by the ICOC, and that the authority conferred by the Cures Act on the ICOC contravenes article XVI, section 3 because the ICOC is empowered to disburse state funds without being under the exclusive management and control of the state. But, as the trial court correctly observed, the ICOC is not a discrete entity, separate and apart from CIRM, but rather its governing body.[5] The actions approved by the ICOC are the actions of CIRM. Thus, Peoples Advocate is plainly wrong in arguing that [t]o the extent that there is any state management and control over CIRM, it has no significance to the constitutional question raised here.

Whether viewed as management and control over CIRM or over the ICOC, and without considering whether as a constitutionally created organ of state government CIRM necessarily provides state management and control (cf. Wilson v. State Bd. of Education (1999) 75 Cal.App.4th 1125, 1135), the limits that the Cures Act places on the operations of the institute are consistent with the requirements of article XVI, section 3. Whether an entity is under the exclusive management and control of the state is determined through a case-specific evaluation of the applicable executive and legislative controls. [Citations.] However, the required exclusive control permits the Legislature or the electorate to fund entities that are provided a degree of flexibility and operational independence that encourages the development of innovative practices through experimentation with the objective of satisfying the underlying state purpose. [Citation.] It appears that exclusive management and control by the state means the existence of sufficient controls over the commissions by the executive and legislative branches of the state government to assure that state funds are used to further state purposes without unduly inhibiting innovative programs that serve those purposes. (CART, supra, 109 Cal.App.4th at pp. 816-817.)

The trial court correctly found that sufficient state controls exist within the statutory framework. First, elected officials of both the legislative and executive branches of government appoint or nominate 24 of the 29 members of the ICOC, and five are appointed by the chancellors of University of California campuses. This method of selection by public officials who are themselves accountable to the public is a significant assurance of state accountability. (CART, supra, 109 Cal.App.4th at pp. 817, 820-821; Board of Directors v. Nye (1908) 8 Cal.App. 527, 532-533.) We do not read article XVI, section 3, or CART, or any other decision to require that all members of the governing board be appointed by an elected official in order to pass constitutional muster. And the fact that there is no power of removal by the appointing officials does not diminish the sufficiency of the states control. In CART, the court rejected a claim that the requisite accountability was absent because, as here, the appointing officers have no power of removal and the appointees serve fixed terms and not at the pleasure of the appointing authority. The court pointed out, This feature is not unique. Commissioners of other state agencies do not serve at the pleasure of their appointing authority. (See, e.g., California Medical Assistance Commission [Welf. & Inst. Code, 14165.2], State Commission on Teacher Credentialing [Ed. Code, 44213], Student Aid Commission [Ed. Code, 69511], and Fair Employment and Housing Commission [Gov. Code,  12903].) Moreover, the Attorney General can initiate an action to remove a . . . member for failing to discharge his or her duties, incapacity, or conviction of a felony. (Code Civ. Proc.,  803; Gov. Code  1770, 3000.) (CART, supra, 109 Cal.App.4th at p. 822, fn. 14.)[6]

The method of selecting members of the ICOC stands in stark contrast to the process in Jarvis, supra, 40 Cal.App.4th 1359, on which Peoples Advocate places heavy reliance. In that case legislation delegating authority to levy a tax to a unique local entity was held to violate article XI, section 11, subdivision (a) of the California Constitution, which prohibits the Legislature from delegating the power to levy taxes to a private body. The Jarvis court explained, Herein lies the fundamental distinction between the Authority and a public body. With the exception of 2 of the 13 directors, the remaining 11 are chosen by private entities who have no public accountability.^[[7]] The electorate cannot remove those who are chosen as directors of the Authority and the electorate cannot remove those who choose. But the electorate must bear the consequences of the decisions of those who compose the Authority. And part of that consequence is public taxation and distribution of public taxes as determined by the Authorityunaccountable except to entities which have no public accountability. (Id. at p. 1388, italics added.) As we have seen, no private person or entity is given the authority to appoint a member to the ICOC, and most of its members are appointed by publicly elected officials.

Peoples Advocate argues that even if the majority of the ICOC members are appointed by public officials, the ICOC remains a private entity because its members are chosen as representatives of particular institutions and interests. As the trial court explained, however, [t]he Act sets up the ICOC as a panel of experts, whose members are appointed on the basis of their qualifications as they relate to matters within the ICOCs responsibility. Except for the executive officers from the five University of California campuses with medical schools, the criteria for selection do not focus on the institutions with which appointees are affiliated, but upon factors indicating that the appointees possess sufficient experience and expertise to perform the responsibilities of the position. (See fn. 10, ante.) Ten appointees must be California representatives of California regional, state, or national disease advocacy groups ( 125290.20, subd. (a)(3, 4, 5)), but they need not be selected from any particular organization.[8] Peoples Advocate makes much of the use of the word representatives in section 125290.20 but its emphasis is misplaced. Proposition 71 was intended to [c]reate an Independent Citizens Oversight Committee composed of representatives of the University of California campuses with medical schools; other California universities and California medical research institutions; California disease advocacy groups; and California experts in the development of medical therapies. (Prop. 71,  3.) In context, the word representative does not mean that each appointee represents the particular interests of the group from which he or she was selected, much less that he or she does so to the exclusion of the more general public interest. An ICOC member may be a representative of a particular institution or of a disease advocacy group and still make decisions that are in the best interests of the state. (Cf. Consumers Union of U.S., Inc. v. California Milk Producers Advisory Bd.(1978) 82 Cal.App.3d 433, 448.) As one witness testified at trial, members are drawn from those institutions based upon very specific criteria, documenting expertise and level of responsibility and knowledge of stem cell research. But they come and have an oath of office, they represent the State of California on our board. They do not come to represent those institutions.

The second aspect of state management and control over the operations of CIRM and the ICOC is the fact that the Cures Act places strict requirements on how the ICOC is to allocate moneys in the California Stem Cell Research and Cures Fund. ( 125290.70.) Implicit is the requirement that all funds be expended to accomplish the purposes specified in the purpose and intent section of the initiative (Prop. 71,  3; see fn. 4, ante) and in the text of the constitutional amendment (Art. XXXV,  2; see p. 2, ante). The Cures Act specifies criteria by which grant and loan applications are to be evaluated. ( 125290.60, subd. (c); see p. 43, post.) No less than 97 percent of the bond proceeds, net of costs, must be used to fund grants and grant oversight and at least 90 percent of the amounts used for grants must be used for research grants on a specific annual schedule. ( 125290.70, subd. (a).) Not more than 3 percent of the proceeds of bonds . . . may be used by the institute for research and research facilities implementation costs, including development, administration, and oversight of the grant making process and operations of the working groups. (Id., subd. (a)(1)(C).) The Cures Act sets as a priority immediately building facilities that ensure the independence of the scientific and medical research and allocates up to 10 percent of the bond proceeds, net of costs, to building research facilities for nonprofit entities within the institutes first five years. (Id., subd. (a)(4).) The ICOC [m]ay annually modify its funding and finance programs to optimize the institutes ability to achieve the objective that its activities be revenue-positive for the State of California during its first five years of operation without jeopardizing the progress of its core medical and scientific research program. ( 125290.40, subd. (m).) Beginning in November 2007, the Act is subject to amendment by a 70 percent vote of the Legislature and approval by the Governor. (Prop. 71,  8.)

Finally, there are significant public and financial accountability standards to which the institute is subject. ( 125290.30.) The institute is required to publish an annual report which sets forth its activities, grants awarded, grants in progress, research accomplishments, and future program directions. (Id., subd. (a).) Annually it must obtain and disclose an independent financial audit conducted by a certified public accounting firm. (Id., subd. (b).) The Cures Act requires the State Controller to review the financial audit and issue a public report of that review. (Ibid.) Still further, the Act creates a Citizens Financial Accountability Oversight Committee chaired by the State Controller and made up of members primarily appointed by elected officials, which is charged with reviewing the independent audit, the Controllers report and the financial practices of the institute. (Id., subd. (c).) The oversight committee is required to hold . . . public meetings, with appropriate notice, and with a formal pubic comment period. (Ibid.) The public accountability section of the Cures Act also requires that the members conduct business subject to the Bagley-Keene Open Meetings Act and comply with the Public Records Act. (Id., subds. (d), (e).)

Peoples Advocate acknowledges that the Cures Act provides for audits, open meetings, public records, annual reports and a Financial Accountability Committee, but argues that none of these requirements in any way provides for legislative or executive management and control over the [ICOC], or its all-important award granting function. Peoples Advocate contends, Whatever controls may exist on the tiny fraction of public money spent on the peripheral administrative functions performed by the CIRM by arms of the executive branch, they in no way affect, much less control, the disbursal of funds by the Independent Committee in grants and loans. The Act does not permit the State Auditor, or the State Controller, or the Treasurer, or the head of the Department of Finance, nor anyone else in state government to modify or rescind a grant awarded by the Independent Committee. If the Independent Committee awards a grant, the grantee gets the money.

This argument misapprehends the nature of the state management and control that is required by article XVI, section 3 of the California Constitution. The constitutional provision has been interpreted to prevent the appropriation of funds from the state fisc for a purpose foreign to the interests of the state and outside of its control. (CART, supra, 109 Cal.App.4th at p. 816.) Appellants do not question that the research funding authorized by the Cures Act serves legitimate public purposes of fighting disease and promoting the state economy. The state control that is mandated by article XVI, section 3 is the ability to define the public purposes for which public funds are expended and to ensure that the funds are used for their intended public purposes. It appears that exclusive management and control by the state means the existence of sufficient controls over the commissions by the executive and legislative branches of the state government to assure that state funds are used to further state purposes without unduly inhibiting innovative programs that serve those purposes. (CART, supra, at p. 817.) The constitutional provision does not mean that the executive or the legislative branches must have the right to second-guess the ICOC as to the wisdom of particular research or research grants. As in Wilson v. State Bd. of Education, supra, 75 Cal.App.4th at page 1146, appellants misunderstand the legislative function. Essentials of the legislative function include the determination and formulation of legislative policy. Generally speaking, attainment of the ends, including how and by what means they are to be achieved, may constitutionally be left in the hands of others.   In approving Proposition 71 the voters determined that grants and loans should be awarded by the experts who comprise the ICOC, chosen in the manner specified in the Act. So long as there are mechanisms in place to ensure that the grants and loans are being made for the specified public purposes and in accordance with all other legal requirements, article XVI, section 3 is satisfied.

In CART, the court held that county commissions are under the control and management of the state in part because the relevant statute establishes parameters on how the tobacco tax revenue is to be spent. (CART, supra, 109 Cal.App.4th at pp. 823-824.) The statute being scrutinized in that case identifies diverse programs on which the California Children and Families Commission (CCFC) is to use 20 percent of the tax revenue, such as mass media communications regarding early child development, prevention of tobacco use by pregnant women and detrimental effects of second hand smoke on early child development, parental education training, child care programs, and research and development of standards for early child development programs. The remaining 80 percent of the revenue is distributed to county commissions to be expended only for the purposes authorized by the Act and in accordance with strategic plans consistent with guidelines to be adopted by the CCFC. The guidelines must address a wide range of subjects specified in the statute, such as parental education and support services related to informed and healthy parenting and avoidance of tobacco, drugs and alcohol during pregnancy, the provision of high quality, accessible and affordable child care, and the provision of health care services emphasizing prevention and treatment not covered by other programs. (Ibid.) The court explained, although county commissions are conferred significant independence and discretion in adopting their strategic plans and programs to promote local decisionmaking, the commissions cannot expend tobacco tax revenue on programs inconsistent with the [statutory] guidelines and the purposes of the Act. This limitation on spending provides the necessary specificity to implement the electorates policy decision to delegate to the county commissions the responsibility of tailoring their programs to address the needs of their respective counties. (CART, supra, at p. 824.) State management was not lacking because no higher authority was authorized to review the content of the educational programs or media distributions. (Ibid.; see also Wilson v. State Bd. of Education, supra, 75 Cal.App.4th at p. 1146.)

Likewise, in the present case, the ICOCs discretion is limited by the purposes of the Cures Act and the statutory spending guidelines and priorities, but nonetheless permits the experts to use their independent judgment to determine which research grants and loans will best accomplish CIRMs constitutionally declared mission. Should the ICOC approve expenditures for purposes other than those specified in article XXXV, the State Controller has the authority to intervene. Government Code section 12410 authorizes the State Controller to audit any disbursement of state funds for correctness, legality and the availability of funds to support the payment. . . . The Controllers duty to audit includes the duty to ensure that expenditures are authorized by law.  (CART, supra, 109 Cal.App.4th at p. 825.) The trial testimony confirmed that prior to issuing a warrant to fund a CIRM grant, the Controller would look to see whether those grants were authorized by Proposition 71. If the Controller is concerned about the circumstances associated with a particular payment he can request a field audit of the payment request. While Peoples Advocate is correct that the Controllers duty does not include the power to review and approve or reject decisions of a department vested by the Legislature with authority over expenditures (Tirapelle v. Davis (1993) 20 Cal.App.4th 1317, 1335), such authority is unnecessary to provide constitutionally sufficient management and control. It is not for the Controller any more than the Legislature to determine the wisdom of a particular grant or loan. It is sufficient that the Controller can refuse to issue a warrant that is not authorized by law. (Id. at p. 1328.)[9] Finally, as a last resort, injunctive relief is available to prevent unauthorized expenditures. (See Ahlgren v. Carr (1962) 209 Cal.App.2d 248, 252 [taxpayer may bring action to enjoin alleged illegal expenditure of public moneys by a state official].)

The ICOCs structured discretion is far more comparable to the scheme utilized and approved in CART than to the statutory design that was disapproved in Bayside Timber Co. v. Board of Supervisors (1971) 20 Cal.App.3d 1, relied upon by Peoples Advocate. In that case, private timber owners were given unlimited discretion to formulate forest practice rules with a direct financial impact on themselves, without legislative guidelines or standards to prevent an abuse of discretion. (Id. at pp. 9-10, 14.)

Peoples Advocate contends that the training grants that the ICOC has already awarded with interim financing are beyond the authorized purpose of funding stem cell research and illustrate the deficiency in the controls provided by theAct. Even if Peoples Advocate were correct that the grants were improperly awarded, the violation would not necessarily demonstrate the invalidity of the Cures Act, since as just indicated other forms of corrective relief are available. However, the trial court concluded that the training grants are both consistent with the purposes of the Act and involve sufficient research-based activities to meet the statutory criteria. The evidence received at trial fully supports this conclusion. The ICOC approved grants to nonprofit academic and research institutions to foster training at the level of pre-doctoral students, post-doctoral students and clinical fellows. . . . All training programs must offer one or more classes in stem cell biology and medicine, and a required course in the social, legal and ethical implications of stem cell research . . . . The ICOC determined that there is a scarcity of scientists trained in stem cell research and that it was an early and important need in order to fulfill our mission of developing this research to train the investigators who were going to carry it out, both basic science and clinical investigators . . . . There was testimony that training grants are research grants because in the field of stem cell research training is conducted through research. The grants approved research fellowships for 170 of the best and brightest people in the nation who were pre-doctoral, post-doctoral or clinical . . . . And these fellowships will do real time research in the labs with mentors, some of the best people in the country who are all in California . . . . [T]heyre going to be doing cutting edge research with an accompanying education program with ethics and law and in advanced technology. . . . [T]hese research grants rebuilt the intellectual infrastructure for the state in this area and allowed to ramp up for the next level of research grants. Rather than demonstrating unauthorized expenditures, the training grants illustrate the reason for which the ICOC has been vested with the discretion to determine the appropriate use of the funds to accomplish the public purposes endorsed by Proposition 71. These grants certainly do not suggest that the ICOC has been given free reign to spend bond proceeds in any manner it wishes.

TO BE CONTINUED AS PART III.

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[1] The Council also argues, without citation to authority, that Waiver of conflicts of interest can only be argued to be germane to Proposition 71 if supported by evidence that without waiving conflicts of interest it would not be reasonably possible to appoint qualified board members of the ICOC. However, there is no need for such evidence to establish a logical nexus between the conflict of interest provisions and the purpose of the Act. Moreover, the very next argument in the Councils briefthat ICOC members are subject to conflicts of interest under other provisions of California lawconfirms the functional importance of the provisions in the Act qualifying those other provisions.

[2] The Council also argues that the ballot measure violated state law governing the offering of securities, citing Corporations Code section 25401, because it would work a fraud upon the electors through securing their votes for the approval of these bond issues upon terms and conditions which will not be kept.  As indicated above, nothing in the analysis constituted a promise, let alone a term or condition for return on sale of the bonds.

[3] Although Amador dealt with the Attorney Generals title and summary, the same principles are applied in reviewing the Legislative Analysts analysis. (See Horneff v. City & County of San Francisco (2003) 110 Cal.App.4th 814, 820, fn. 4 (Horneff).)

[4] (See, e.g., Silfen, How Will Californias Funding of Stem Cell Research Impact Innovation? (2005) 18 Harv. J. of Law & Technology 459, 468-469 [Stem cell research has generated enormous controversy over the past decade. Some believe stem cells hold promise for developing therapies and cures for spinal cord injuries and conditions such as Alzheimers disease, Parkinsons disease, and diabetes. For others, however, the idea of generating embryonic clones only to harvest them is troubling, evoking hot-button issues like reproductive cloning and abortion. Political pressures have prevented stem cell research from receiving federal funding for any work in which a human embryo is destroyed. The issue has featured prominently in the past two presidential elections, with candidates and activists causing political uproar by applying pro-life rhetoric to the stem cell debate], fn. omitted.)

[5] This type of organizational structure is not unique. (See Health & Saf. Code,  51614, subd. (a) [Cal. Housing Finance Agency vested with full power, authority, and jurisdiction over Cal. Housing Loan Insurance Fund]; Ins. Code,  11781 [The board of directors is hereby vested with full power, authority and jurisdiction over the State Compensation Insurance Fund]; see also People v. San Joaquin etc. Assoc. (1907) 151 Cal.797, 801 [legislation declaring the state agricultural society to be a state institution, organizing the state board of agriculture and charging it with the exclusive management and control of the state agricultural society as a state institution is constitutional].)

[6] It may well be, as Peoples Advocate argues, that removal from office cannot be obtained under Code of Civil Procedure section 803 because a member votes for an expenditure that is not authorized by the statute. We believe the more important point, however, is that other forms of judicial relief are available to prevent CIRM from making unauthorized expenditures. (See pp. 38-39, post.)

[7] The 13 members of the board at issue in Jarvis were selected as follows: (1) One representative of the Board of Supervisors of Fresno County. [] (2) One representative of the Fresno City Council. [] (3) One representative of the Eleventh District of the Parent Teachers' Association. [] (4) One representative of an ad hoc committee of retired judges from Fresno County's local and state benches. [] (5) One representative of the Fresno City and County Chamber of Commerce. [] (6) One representative of the Older Americans Association of Fresno County. [] (7) One representative of an ad hoc committee of representatives of the Taxpayers Association of Fresno County and the San Joaquin Taxpayers Association. [] (8) One representative of the Citizens for Community Enrichment. [] (9) One representative of the Fresno County Farm Bureau. [] (10) One representative of the Fresno-Madera Central Labor Council. [] (11) One representative of the League of Mexican-American Women. [] (12) One representative of the West Fresno Ministerial Alliance. [] (13) One representative of the California Retired Teachers Association, Fresno County Division. (Jarvis, supra, 40 Cal.App.4th at p. 1384.)

[8] Section 125290.20, subdivision (a), provides that (3) The Governor, the Lieutenant Governor, the Treasurer, and the Controller shall appoint members from among California representatives of California regional, state, or national disease advocacy groups, as follows: [] (A) The Governor shall appoint two members, one from each of the following disease advocacy groups: spinal cord injury and Alzheimer's disease. [] (B) The Lieutenant Governor shall appoint two members, one from each of the following disease advocacy groups: type II diabetes and multiple sclerosis or amyotrophic lateral sclerosis. [] (C) The Treasurer shall appoint two members, one from each of the following disease groups: type I diabetes and heart disease. [] (D) The Controller shall appoint two members, one from each of the following disease groups: cancer and Parkinsons disease. [] (4) The Speaker of the Assembly shall appoint a member from among California representatives of a California regional, state, or national mental health disease advocacy group. [] (5) The President pro Tempore of the Senate shall appoint a member from among California representatives of a California regional, state, or national HIV/AIDS disease advocacy group.

[9] In CART, the court also recognized that the State Auditor, the Department of Finance and the State Treasurer also have significant authority to monitor the expenditure of bond revenue. The Department of Finance is authorized by Government Code section 13070 to investigate all financial and business matters of the state and investigate state agencies that receive state funds. Under Government Code section 13030, it is a misdemeanor to fail or neglect to file with the Department of Finance any report required by the Government Code, to fail or neglect to follow its directions in keeping the accounts of an agency, or to refuse to permit or interfere with the examination of or access to an agencys records and books. Finally, under Government Code section 8545.2, subdivision (a), the State Auditor is authorized to examine and [reproduce] any and all books, accounts, reports . . . and other records, bank accounts, and money or other property, of any agency of the state, whether created by the California Constitution or otherwise, and any public entity, including any city, county, and school or special district for any audit or investigative audit. The State Auditor may also conduct financial and performance audits of any state agency, which includes every state office, officer, department, division, bureau, board, and commission (Gov. Code,  11000) . . . . At the request of the Joint Legislative Audit Committee, the State Auditor shall audit a state or local governmental agency or any other publicly created entity. The State Auditor is authorized to audit any contract involving more than $10,000 of public funds at the request of any state or local public entity that is a party to the contract or is undergoing an audit by the State Auditor. (Gov. Code,  8546.7.) Further, under the state whistleblower statute, the State Auditor is authorized to conduct an investigative audit on receiving specific information that any employee or state agency is engaged in any improper governmental activity. (Gov. Code, 8547.5.) If the State Auditor discovers evidence of wrongdoing, this information must be conveyed to the employing agency and, if appropriate, the Attorney General, the appropriate legislative policy committees and any other authority that the State Auditor determines appropriate. (Gov. Code, 8547.7.) (CART, supra, 109 Cal.App.4th at pp. 825-826, fns. omitted.)