What Is Prop 38? California's $8.4B Medical Research Bond Explained

Voters in the November election will decide whether California should borrow $8.4 billion to fund medical research focused on the immune system and treatments for diseases including cancer, heart disease and Alzheimer's disease.

Proposition 38 would authorize the state to issue $8.4 billion in general obligation bonds for immunology and immunotherapy research conducted by California research institutes and universities. Immunology is the study of the immune system, while immunotherapy uses the immune system to help fight disease.

A "yes" vote on Prop. 38 would allow the state to borrow $8.4 billion to support the research. A "no" vote would prevent the state from borrowing the money.

At least half of the bond money, or $4.2 billion, would be dedicated to research involving cancer, heart disease and Alzheimer's disease.

About half of the funding would go to a University of California-affiliated nonprofit medical research institute. The California Department of Public Health would select the institute based on requirements outlined in the measure. Each year, the institute would have to issue a public report on its activities and have an independent financial audit.

The other half would be awarded as competitive research grants to California universities and nonprofit research institutions. A council made up of representatives from seven UC campuses and 10 to 15 other universities and nonprofit research institutions would set research priorities and award the grants. The council would have public reporting and audit requirements.

If the proposition passes, California would repay the bonds with interest from the state's General Fund. The nonpartisan Legislative Analyst's Office estimates repayment would cost $500 million to $600 million annually for about 20 years.

The state could recover some or all of those costs if research funded by the proposition leads to discoveries that generate revenue. Under the measure, 10% of revenue generated by the research would go to the state until the cost of the bonds, including interest, is repaid. The amount of revenue that could be generated is uncertain and could take decades to offset the state's costs.

Prop. 38 would also generally require treatments developed through the research and sold in California to be offered at a 20% discount. Grant recipients would be required to purchase at least half of their goods and services from California suppliers when reasonably possible.

The proposition was placed on the ballot through petition signatures.

Supporters include a number of organizations such as the Michael J. Fox Foundation for Parkinson's Research, ALS Association, Kidney Cancer Association, Prostate Cancer Foundation, and the American Nurses Association\California.

Supporters argue the proposition would help advance research into treatments and cures for diseases including cancer, heart disease and Alzheimer's disease while requiring independent audits and other accountability measures.

"Yes on 38 could save your life and someone you love," supporters wrote in the state's voter guide.

Robert M. Kaplan, a professor at Stanford University's School of Medicine, submitted the argument against the proposition.

Opponents argue the measure would leave taxpayers responsible for decades of new debt and restrict the state's ability to adjust medical research spending as health priorities change.

"California should continue supporting biomedical research, but Proposition 38 is the wrong approach," opponents wrote in the voter guide. "It would commit taxpayers to decades of new bond debt while limiting California's flexibility to address changing health priorities. Research funding should be guided through the normal budget process — not by ballot initiatives."