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SAN FRANCISCO - California Governor Arnold Schwarzenegger has moved to provide his state's voter approved stem-cell research institute with a loan of up to US$150 million (NZ$240m).

The governor's decision came after President George W. Bush vetoed a bill to expand federal funding of embryonic stem-cell research.

The loan will come from California's general fund and will support grants for medical research involving stem cells, which many researchers believe can be used to develop treatments and cures for various diseases, including Alzheimer's disease.

"We anticipate a couple of months at most before the money would go out the door," said H.D. Palmer, a spokesman for California's Department of Finance.

The money will help the California Institute for Regenerative Medicine fund initial research grants.

Voters backed the institute's creation in 2004 by passing a statewide debt measure giving it the power to sell up to US$3 billion in state general obligation bonds to finance stem-cell research.

The debt authority has faced a stiff challenge in state court. Earlier this year, a local judge backed the authority but that decision has been appealed, holding the institute back from issuing debt of up to US$300 million annually.

The state's loan would help augment the institute's bond anticipation note program so that it could sell up to US$200 million in notes until the court challenge is resolved.

"It allows us to get through the litigation," said Robert Klein, the institute's chairman.

The institute currently has approximately US$50 million in bond anticipation notes backed by philanthropists and private foundations. "We've closed on US$14 million," Klein said. "We have US$30 million more in the process of closing."

Klein said Schwarzenegger's office initiated the loan when it become clear on Wednesday that President Bush would veto the bill to expand federal funding for stem-cell research.

Putting California in research vanguard

Bush said the bill would have compelled taxpayers to fund the "deliberate destruction of human embryos" for stem-cell research. Stem cells may be harvested from embryos.

"Crossing this line would be a grave mistake and would needlessly encourage a conflict between science and ethics that can only do damage to both and harm our nation as a whole," Bush said in his veto statement.

Bush and Schwarzenegger are both Republicans but disagree on whether stem-cell research should include cells from embryos, reflecting a division within the Republican Party and, more broadly, in US society about abortion rights.

Schwarzenegger during a speech on Wednesday in San Francisco, said he wants California to be a leader in the research in part because his father in law, Sargent Shriver, has Alzheimer's disease.

"This is our response to what the federal government is not doing," Palmer said. "The governor wants to move aggressively forward on stem-cell research."

California Treasurer Phil Angelides, a Democrat aiming to unseat Schwarzenegger in November, said the loan is an election year stunt. Angelides issued a statement criticizing the Hollywood icon for helping President Bush win reelection.

- REUTERS