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Human embryonic stem cell research has become both controversial and salient as a political issue. Limitations on federal support for this research that were announced by the President on August 9, 2001. These limitations have given rise to several state-sponsored research programs, most notably the $3 billion program enacted by California voters as Proposition 71 in November 2004. This essay examines the problems that states face in implementing a successful basic research program. Some of these problems are shared with other research projects having commercial potential, such as a the danger of "pork barrel" effects and the problem of accommodating confidential peer review, which is necessary to obtain candid assessment of research proposals, with the special problems associated with this program: a narrow focus (which really is an example of the otherwise inefficient practice pf "earmarking" government research expenditures), an unresolvable state of bitter public and political controversy, and an unrealistic perception by political leaders and the general public that this research will produce substantial short-run therapeutic results and financial payoffs. This essay examines these problems in detail and evaluates the extent to which the organizational structure of the California Institute for Regenerative Medicine is likely to be an effective response to these problems.