California voters have approved an $8.4 billion research bond that could send $4.2 billion in taxpayer-backed funding to a nonprofit institute that had just three employees as of September — an
eyebrow-raising arrangement seemingly designed to benefit a billionaire donor's fledgling project.
Proposition 38, which was leading with approximately 55.1% support to 44.9% opposition Friday, authorizes state borrowing for immunology research aimed at developing treatments and cures for cancer, Alzheimer's disease, heart disease, and other conditions.
But half of that money is reserved for a single, unnamed nonprofit institute whose eligibility requirements appear to match only one organization in California: the California Institute for Immunology and Immunotherapy (CIII), founded and primarily funded by billionaire medical-device inventor Gary K. Michelson.
And according to reporting by CalMatters, that institute had just three employees as of September — a chief operating officer, a general counsel, and a scientific adviser.
The arrangement has drawn scrutiny because Michelson was not only the institute's primary benefactor, but also wrote Proposition 38 and contributed $63.2 million to the campaign pushing voters to approve it; the campaign raised a total of $71.2 million. Opponents raised roughly $12,000.
The proposition directs $4.2 billion to the qualifying institute, with another $4.2 billion distributed through a grant process to a limited pool of public and nonprofit research institutions. Supporters say the money will help California remain a medical research leader as federal funding declines.
CIII's hiring has lagged behind its plans. Under a five-year business plan included in its affiliation agreement with UCLA, the institute expected to hire approximately 51 employees between the summer of 2024 and the summer of 2025, including six executives and five leading scientists. It planned to hire roughly 90 additional employees between 2025 and 2027.
Instead, UCLA Health CEO John Mazziotta told UC regents in September that the institute had hired only three people and was still searching for a director.
Its proposed headquarters at the former Westside Pavilion shopping mall near UCLA is not expected to be fully built until at least late 2028. The project also remains short of roughly $100 million in construction funding, according to Mazziotta.
Proposition 38 also exempts the institute from California's public records, public meetings, and political reform laws. The measure instead requires annual reports on research progress and financials, along with state audits.
UCLA senior officials sit on the institute's board. Their 2024 affiliation agreement gives the university 7.5% of the net revenue from drugs and technologies developed by the institute's staff that reach the market.
California's nonpartisan Legislative Analyst's Office estimates that the $8.4 billion in borrowing will cost taxpayers approximately $12 billion with interest, requiring annual payments of roughly $500 million to $600 million over about 20 years.
The measure requires 10% of revenue generated by bond-funded research to return to the state until borrowing costs are repaid. Supporters argue it could ultimately pay for itself; opponents say recouping the full cost would require more than $120 billion in research revenue over 20 years.
"It is remarkably hard to do, and I don't see any justification for the speculation that they're going to bring in this much money to pay back the people of California," UC Davis biologist Jonathan Eisen said at an October press conference opposing the proposition.
The Yes on 38 campaign says the institute will not receive bond money until it is ready to begin work. Campaign spokesperson Robin Swanson has also said the California Department of Public Health will ultimately determine whether the institute qualifies for the funding.
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