Private Investment Requirement Could Hinder Texas Cancer Bonds

DALLAS - The Texas House this week is considering a $300 million appropriation to pay debt service for what would be the first issue from $3 billion in cancer research bonds, but the path to actual issuance is complicated by a requirement for private investment.

Under a state constitutional amendment approved by voters in 2007, every dollar of public funding for research must be matched by 50 cents of private investment. The provision was added to the proposal in the 2007 legislative session. Voters approved the measure in November that year.

However, the fundraising environment typically worsens in a recession, according to Indiana University's Center on Philanthropy. According to the center's philanthropic giving index, fundraisers' confidence fell from 88.8 to 64.8 points from June through December 2008. The 27% decline was the largest since the PGI began in 1998. The previous worst index was in 2001 when the PGI fell by 9%. Nearly 94% of nonprofit fundraisers surveyed said the economy was having a negative (65.3%) or very negative (28.5%) effect on fundraising.

In Dallas, home of the University of Texas Southwestern Medical Center, a $150 million fundraising campaign is under way to help finance replacement of Parkland Hospital, the medical school's primary teaching hospital.

Dallas County's plan to issue $747 million of general obligation bonds for the new Parkland is contingent on the Parkland Foundation's ability to raise the private donations. Voters approved the bonds last November. The fundraising effort got off to a fast start in 2008, with $80 million before the end of the year.

However a UT Southwestern doctor questioned the ability of fundraisers to come up with $1.5 billion to match the $3 billion pledged by the state for cancer research.

"In this economy ... where is this $1.5 billion going to come from?" Dr. Daniel Foster, professor of internal medicine at UT Southwestern Medical Center, asked in an article in Sunday's Dallas Morning News.

The agency that will administer the state funds, the Cancer Prevention and Research Institute of Texas, will also be funded by the state. Last month, the institute named William Gimson as executive director. Gimson, who brings 35 years of administrative experience to the post, was previously chief operating officer of the Centers for Disease Control in Atlanta.

The cancer bond program will come up in House budget debates tomorrow as lawmakers consider a $180 billion biennial budget that provides half as much for debt service as the Senate budget. The Senate would authorize $600 million in the first year of bond issuance versus $300 million in the House version. The Senate version also includes $2 billion for road bonds, an element missing from the House version.

Neither version proposes tapping the state's rainy-day fund, which is expected to have a balance of more than $9 billion within the next two years. Texas was spared a budget deficit this year by the federal stimulus funding signed into law by President Obama.

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