Thursday, August 10, 2006

Proposition 71 and 87: public funds to benefit private interests?

In 2001, James E. McGreevey won the New Jersey governorship with 56% of the vote. Trouble was he didn't make full disclosure, either about himself or his supporters' ethics-challenged manner of doing business. In 2004, nearly 60% of California voters went for Proposition 71. However, there were misrepresentations of how much money California could reasonably expect from patent royalties, and there are continuing issues of conflict-of-interest. The unwillingness of CIRM to articulate a clear picture of who will control intellectual property rights arising from the public funding underscores a serious problem.

In an editorial on August 3, 2006, the Sacramento Bee focussed on issues associated with the mechanism of funding of Proposition 71 and of Proposition 87. Taxpayers should not be misled into funding schemes that ultimately benefit private parties more than the public.

From the Bee:

Direct democracy in California is becoming the latest hot investment
for venture capitalists looking to merge their societal goals with a good
return on their money.

By backing ballot measures tailored to promote their personal and
financial interests, investors can quickly change public policy and make a buck
at the same time.

Proposition 87 on the November ballot, which would tax oil to
promote alternative fuels, is winning support from a key financier who is
heavily invested in the kind of technologies that the initiative would reward.

Vinod Khosla, one of the founders of Sun Microsystems and now a
prominent Silicon Valley venture capitalist, put up more than $1 million in seed
money for the alternative fuels measure earlier this year. He is also a big
investor in ethanol, an alternative to gasoline and one of the energy sources that
could benefit if Proposition 87 passes.

Khosla was also a big supporter of Proposition 71, the 2004 measure
that is supposed to pour $3 billion in state money into stem cell research.

When Proposition 71 was on the ballot two years ago, critics
suggested it was a vehicle for investors to get government subsidies for research that would benefit the measure's supporters. But most of the big money behind the
stem cell initiative came from individuals with a more personal interest in such
research, often because they had a family member who suffered from a disease that
one day might be cured by drugs or therapies that grow out of the work.

With Proposition 87, the link between public policy and potential
profit is much clearer, especially when it comes to Khosla.

Khosla has been a partner in the Silicon Valley venture capital firm
Kleiner Perkins Caufield & Byers, which funded Internet success stories Google
and among others. He founded Khosla Ventures on his own to
invest in technology with an environmental bent.

Earlier this year Khosla announced that he was forming an ethanol
manufacturing company in partnership with a grain-milling firm near
Visalia, south of Fresno. The new company plans to build eight plants that could
produce 440 million gallons of ethanol a year, achieving by itself Gov. Arnold
Schwarzenegger's goal for California to produce at least 20 percent of
the biofuels the state uses by 2010.

Coincidentally, Khosla announced his new ethanol deal on the same
day in June that Proposition 87 qualified for the November ballot. And on Jan. 27,
state records show, Khosla gave $1.1 million to the initiative's campaign
committee, known as Californians for Clean Alternative Energy, to help it collect
the signatures it needed to qualify.


Like the stem cell measure, Proposition 87 would also create a
quasi-independent board to spend the money outside the purview of the
Legislature and the governor, under guidelines set by the initiative.


But California voters should be concerned about the
proliferation of narrow-interest measures written to lay claim to a
piece of the public treasury to achieve a particular goal. That's generally not a
good way to make policy, because while each goal in isolation might sound great,
the piecemeal approach discourages voters from putting an initiative's
goals in the context of all of the state's other needs.


Blogger David Jensen said...

For more on how venture capitalists use the ballot in California, see this:

3:09 PM  
Blogger Robert Rapier said...

No doubt Prop 87 will increase gasoline prices:

Why Prop 87 Raises Gas Prices

However, I don’t live in California so it doesn’t affect me. Besides, I favor conservation measures, and I believe higher gasoline prices will spur more conservation. I just don’t believe that the proponents are engaging in truth in advertising.


Robert Rapier

9:58 PM  

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