LEGISLATIVE FISCAL ESTIMATE

                                                            [First Reprint]

SENATE COMMITTEE SUBSTITUTE FOR

SENATE, No. 1091

STATE OF NEW JERSEY

212th LEGISLATURE

 

DATED: JULY 9, 2007

 

 

SUMMARY

 

Synopsis:

"Stem Cell Research Bond Act," authorizes sale of bonds for $450 million and appropriates $5,000.

Type of Impact:

Increased funding for certain stem cell research projects;  annual debt service payments from the General Fund; potential revenue increase.

Agencies Affected:

New Jersey Science and Technology Commission; Department of the Treasury; State institutions of higher education.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Fiscal Year 2008 

Fiscal Year 2009 

Fiscal Year 2010 

 

State Cost-Debt Service                    Depends on Terms of Future Bond Issuance

 

State Cost-Bond Issue

Publication                          $5,000                                $0                                       $0

 

Revenue-Stem Cell Research Fund

Potential Indeterminate Increase

 

 

 

 

·        The issuance of $450,000,000 in general obligation bonds to finance stem cell research grants would, over time, result in significant debt service costs to the State.  The Office of Legislative Services (OLS) cannot provide specific cost information, as such a task would necessitate predicting the terms of the envisioned bond issuance. 

·        The OLS notes potential debt service costs based upon the following assumptions (one of many plausible set of assumptions for debt issuance under the substitute): if the bonds are issued at the rate of $45,000,000 per year for 10 years beginning in State fiscal year 2008, with each issue sold under current market conditions with a 20-year maturity and a level debt service schedule, annual debt service would commence in fiscal year 2009 at about $3,700,000 per year, then increase by that amount annually for the next nine years to a peak of about $37,000,000 per year, then decline after another 10 years by $3,700,000 per year for the next 10 years.

·        Eligible research institutions are required to pay the State a reasonable return on the State’s investment, under terms and conditions established by the State Treasurer, if the institution realizes a financial benefit or gain directly associated with research projects funded by stem cell research grants. Given the uncertainty that grants would result in financial gain, no estimate of increased revenue is feasible.  All revenue received is for deposit in the Stem Cell Research Fund and dedicated to additional stem cell research grants.

·        Prior to the issuance of bonds authorized under the substitute there will be no impact on State funds beyond the initial $5,000 appropriation.

·        This substitute authorizes the issuance of $450,000,000 in State general obligation bonds to be used to provide stem cell research grants to eligible public and independent research institutions.  Grants are limited in total to $45,000,000, plus unused prior years’ grant capacity, annually.

 

BILL DESCRIPTION

 

      Senate Committee Substitute for Senate No. 1091 (1R) of 2007, the “New Jersey Stem Cell Research Bond Act,” authorizes, upon voter approval at referendum, the issuance of $450 million in State general obligation bonds for the purpose of financing the costs of providing stem cell research grants to eligible research institutions. The substitute provides that no bonds shall be issued pursuant to its authority unless the State Treasurer first certifies that recurring revenues of the State would be available annually in an amount equal to the sum necessary to satisfy the annual debt service obligations related to the bonds.

       Research grants funded by the bonds, which must be appropriated from time to time by the Legislature, cannot exceed $45 million per year, except that any of the $45 million that is not awarded in a year can be carried over to subsequent years.

      As defined in the substitute, "eligible research institution" means an institution of higher education in the State, State or local government agency, or other public or private entity which has a substantial business presence in the State and conducts scientific and medical research in the State.  A for-profit entity must enter into a collaborative agreement with a nonprofit institution to be eligible for a grant under this substitute.

      The substitute provides that the Commission on Science and Technology shall establish an independent research review panel and an independent ethics review panel to evaluate grant applications and recommend grant awards.  The independent ethics review panel shall include, but need not be limited to, recognized bioethicists, members of academic and religious communities and at least one member who currently serves on an institutional review board.  An eligible research institution must be approved by both panels and by the commission.

      All grant applications shall be evaluated by the independent research review panel.  The commission, after receiving the recommendations from the independent research review panel, shall prepare a list of eligible stem cell research grants which are likely to result in research that can be applied to therapies to treat chronic, debilitating and often incurable diseases or injuries, and are conducted safely and ethically.  The list shall then be submitted to an independent ethics review panel for final approval to ensure that all research will be conducted in a scientifically sound and ethical manner.  The commission shall consult with the Economic Development Authority (EDA) concerning the commercial viability of the eligible projects.

      If an eligible research institution is awarded a grant and realizes a financial gain or benefit directly associated with the stem cell research funded by the grant, the State Treasurer shall require the recipient institution to make payments to the State representing a reasonable return on the State’s investment.  The EDA shall assist the State Treasurer in structuring the payment terms and conditions on the State’s return on investment.  In determining the amount of these payments, the Treasurer shall consider the payment terms and conditions required by other states with similar programs, to promote maintain the State’s competitive position while ensuring that potential applicants are not deterred from participating in this program.  The payments shall be deposited in a "Stem Cell Research Fund" and shall be used to continue the grant program beyond seven years and until all funds have been dispersed as grants.

      The substitute provides that the bond act shall be submitted to the people for approval at the next general election, and appropriates $5,000 to the Department of Law and Public Safety for expenses in connection with the publication of the public question.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

       None received.

 

OFFICE OF LEGISLATIVE SERVICES

                       

      The Office of Legislative Services notes possible debt service costs based upon the following assumptions: if the bonds are issued at the rate of $45 million per year for 10 years beginning in State fiscal year 2008, with each issue sold under current market conditions with a 20-year maturity and a level debt service schedule, annual debt service would commence in fiscal year 2009 at about $3.7 million per year, then increase by that amount annually for the next nine years to a peak of about $37 million per year, then decline after another 10 years by $3.7 million per year for the next 10 years.

      Given the uncertainty of stem cell research grants resulting in financial gain to a grantee that would then be shared with the State, no estimate of increased State revenue is feasible.  The OLS notes that any such revenue is restricted in use to additional stem cell research grants.

 

 

 

Section:

Legislative Budget and Finance Office

Analyst:

Frank Haines

Assistant Legislative Budget and Finance Officer

Approved:

David J. Rosen

Legislative Budget and Finance Officer

 

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67.