Proposition 38 Benefits its Billionaire Backers

Proposition 38, the November ballot measure designed to fund medical research, is designed to be directed exclusively to a single research institute founded by the top donor of the ballot measure: the California Institute for Immunology and Immunotherapy (CIII), a UCLA-affiliated nonprofit.

Proposition 38 allows the state to issue an $8.4 billion general obligation bond for research in immunology and immunotherapy.

The CIII was established as a public-private partnership with the State of California in 2024. According to Governor Gavin Newsom’s 2024 announcement, “California is transforming the site of an empty former mall in Los Angeles into a world-leading research and innovation hub where UCLA scientists and engineers will work on breakthroughs that will help solve the world’s greatest challenges — helping to prevent the next global pandemic and developing potential cures for cancer and other diseases.”

And then in 2026, this suddenly became a ballot initiative to fund the institute, apparently rather than dip into UCLA’s budget.

UCLA’s annual budget is approximately $11–14 billion in recent years. However, UCLA does not publish fully standalone audits separate from the UC system.

According to the Legislative Analyst’s Office, About half of the bond funds would go to a research institute specializing in immunology and immunotherapy. The California Department of Public Health (CDPH) would select the institute. The selected institute must meet several criteria, including criteria related to its size, funding, and collaboration with a University of California (UC) campus. The institute would use the bond funds for research. Each year, the institute must issue a public report on its activities and have an independent financial audit.

In the article I wrote and published last week about the 14 November ballot initiatives, I was questioning the need for Prop 38:

“As written, Proposition 38 is deceptive. It will funnel billions of dollars to benefit its billionaire donor,” said No on 38 campaign chair Dr. Robert Kaplan, a senior scholar at the Clinical Excellence Research Center at the Stanford School of Medicine and the  former associate director of the National Institutes of Health. “Voters should reject a measure that channels half of the state funds to one institution based on arbitrary criteria chosen by the proposition authors.  Grants for medical research should be awarded through a competitive process that gives all competitors an equal chance.”

Among other requirements, Proposition 38 requires the recipient to:

• Have existed by January 1, 2025;

• Have entered into an affiliation agreement with a University of California campus by that date;

• Be affiliated with a UC health system recording more than 35,000 inpatient admissions and 3.5 million outpatient visits annually;

• Control at least 200,000 square feet of research space;

• Have identified at least $250 million in philanthropic support; and

• Have secured two separate $50 million commitments for designated research programs.

CalMatters reports these requirements are tailored to benefit one existing entity: the California Institute for Immunology and Immunotherapy (CIII), a UCLA-affiliated nonprofit.

Gary K. Michelson, a philanthropist, medical inventor, and board chair, is a co-founder and major donor to the institute (including a reported $120 million commitment via his foundation) and the top financial backer of the Yes on 38 campaign, with affiliated entities contributing millions. Another co-founder and board figure, Meyer Luskin, is also a major campaign donor.

The measure does not name the institute explicitly; CDPH would make the formal selection, and there is language allowing criteria adjustment if no institute fully qualifies. But the ballot language criteria were carefully worded in a way that appears to exclude all but one institute in the entire state: the California Institute for Immunology and Immunotherapy, whose prominent donor and co-founder is the chief backer of the proposition.

The No on 38 campaign reports:

The selected institute would also receive influence beyond its direct allocation. Under the measure, that institute would be consulted on grant decisions involving funding for the other half of the program, other grant recipients would be required to offer the institute an opportunity to participate substantially in their research, and the institute would play a central role in agreements to commercialize discoveries made with public funding.

At the same time, the initiative specifies that the institute would not be treated as a public agency under several major California transparency and ethics statutes, including the Public Records Act, open-meeting requirements and the Political Reform Act.

“Increased State Cost of $500 Million to $600 Million Annually for About 20 Years to Repay the Bond.”

The Legislative Analyst says the state General Fund cost to repay the bond would be $500 million to $600 million annually for about 20 years. The annual cost would be about one-quarter of 1 percent (0.25 percent) of the state’s total General Fund budget. Since the state has to pay interest on the money it borrows, the total cost of the bond would be about 10 percent more (after adjusting for inflation) than if the state paid up-front with money it already has, the NO on Prop 38 campaign explains.

The state could receive revenue from research funded by Proposition 38, the LAO says. The amount of revenue is uncertain but could be significant. It would depend on how many research projects lead to marketable treatments and how much money any given treatment generates. The timing of these revenues and how long it would take to offset the state’s bond cost is also uncertain, but could take decades.

Novel scientific research often takes decades before discoveries become treatments. They must go through multiple stages of preclinical and clinical trials and then face a long and complex approval process, the NO on Prop 38 campaign explains.

“We strongly support medical research,” Kaplan said. “But worthy science does not justify an insider arrangement written in the shadows. Californians deserve open competition, genuine public accountability and a clear explanation of where their money is going.”

Voter beware. Gov. Newsom claims “The state is investing billions in research and development efforts and in career pathways initiatives to create good-paying jobs” – but it appears once again that it’s the taxpayers doing the heavy lifting.