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Arizona Ends Fixed Subsidy for TGen

NEW YORK (GenomeWeb News) – The Translational Genomics Research Institute is expected to see a reduction starting this year in its annual subsidy toward operational expenses from the state of Arizona, as a result of state officials formally approving TGen's alliance and affiliation agreement with the Van Andel Research Institute.

The Arizona Biomedical Research Commission last week signed off on the agreement, as well as a change in policy that ended the state's commitment to paying TGen a fixed annual $5.5 million subsidy. That figure does not include competitive grants awarded to its researchers by the commission.

Under the change, TGen would receive about 44 percent of the share of tobacco tax revenue received by the commission, up to $5.5 million each year — the proportion of total funding received by TGen in prior years.

The change will likely result in the institute receiving less than its customary $5.5 million from the state annually, starting this year, since tobacco sales tax collections have fallen along with sales of the products, Dawn Schroeder, the commission's executive director, told GenomeWeb Daily News.

TGen is expected to make up the gap through part of the undisclosed amount of funding it will receive under the agreement from VARI, the research component of the Van Andel Institute in Grand Rapids, Mich. In February 2009, TGen and VARI announced plans to form an alliance that will combine VARI's basic research knowledge with TGen's translational genomics and analysis capabilities to further studies of diseases such as cancer, neurological disorders, diabetes, and infectious diseases.

VARI is the sole member of TGen, which last month amended its corporate structure to a member-run organization from a director-run organization due to the alliance. The alliance prompted the commission to revisit its subsidy policy.

Schroeder said the change in state funding for TGen reflected the tobacco sales drop-off — as well as a desire by Arizona officials to ensure that even as those funds diminish, they will continue to be spread equitably among the Grand Canyon State's research institutions.

"The commission has more than one program funded by these funds. TGen is not the commission's highest priority," Schroeder said in an interview earlier this week. "It is the commission's second-highest priority, and that means we have to be able to distribute our resources amongst the programs that need to receive funding."

All those programs have seen reduced funding as tobacco tax revenues have slipped, she added.

When TGen was established in 2002, Arizona officials agreed to give the institute a $5.5 million subsidy each fiscal year from FY 2003 through FY 2012. The money comes from the Health Research Account of the state's Tobacco Tax and Health Care Fund.

For each pack of cigarettes sold in Arizona, the state collects $2 in taxes — of which $1 is set aside for healthcare programs. Of that $1, 5 percent is deposited into the Health Research Account, which is overseen by the biomedical research commission.

That sum was just over $11.8 million in FY 2009, down from $12 million the previous fiscal year. Had the new formula been in effect in FY '09, TGen would have received just under $5.2 million.

During FY '09, gross tax revenue collected from sales of all types of tobacco fell 7.8 percent year-to-year, to just under $380.6 million from $412.8 million in FY '08, according to the Arizona Department of Revenue.

But for the most recent month available, August 2009, a revenue department report showed tax revenues from cigarettes shrunk by 16.5 percent from the year-ago month, from $31.9 million to $26.6 million, while revenue from other tobacco products fell 12.4 percent, from $1.2 million to $1.04 million.

The commission is also seeing erosion of another funding source, as its share of revenues from lottery sales fell during FY '09 by $107,800 below its original projection of more than $2.57 million.

During the 2008 fiscal year, the commission awarded $6.6 million in 75 competitive grants for biomedical research, including $200,000 to TGen, in addition to the $5.5 million fixed TGen annual subsidy, according to an audit by the state Office of the Auditor General.

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