HAYWARD -- Two lawsuits trying to abolish state-funded stem cell research have "tortured interpretations of the constitution," a deputy attorney general argued Monday at the start of a trial to determine a research institute's fate.

Three taxpayer groups filed a pair of lawsuits claiming the California Institute for Regenerative Medicine is not a legitimate state agency because it lacks proper oversight.

Proposition 71, passed by 59 percent of voters in 2004, created the agency and authorized it to dole out an average of $300 million in research grants annually over 10 years.

Fifteen months later, the agency has yet to hand out a dime because legal troubles have scared off lenders who won't buy the institute's bonds until the litigation is resolved.

Scientists hope to use human embryonic stem cells, created in the first days after conception, to replace diseased tissue. But many social conservatives, including President Bush, oppose the work because human embryos are destroyed during research.

The ballot initiative was a reaction to the Bush administration's decision to cap federal stem cell research funding at about $25 million annually and to impose strict guidelines that scientists say limit advances.

"Proposition 71 has drawn intense opposition," deputy attorney general Tamar Pachter said in defense of the institute. "It bypassed state and federal legislation and it expresses the will of the voters."

The lawsuits contend the committee overseeing the agency operates outside of state control and, thus, shouldn't be publicly funded.

Elected officials appoint 22 of the 29 board members, and five are appointed by the University of California. The chairman and vice chairman are appointed by the board itself.

David Llewellyn, a lawyer representing the California Family Bioethics Council, argued in his opening that the stem cell agency is rife with conflicts of interest.

The five University of California officials who sit on the board overseeing the agency could benefit because the school's various campuses are in line to receive millions in research funds, Llewellyn said.

Llewellyn also charged that the five UC members were also instrumental in establishing policies that determine how taxpayers will share potential drug profits generated by the grants while also serving in the same capacity at the University of California.

"They have vested interests and strong positions influencing these decisions," Llewellyn said. "It's a classic conflict of interest."

Bob Klein, chairman of the institute's oversight committee, was the first witness called in the trial and immediately defended the appointment of the UC officials.

"They take an oath," Klein said. "They do no come to represent those institutions."

Llewellyn also argued that several other board members on the Independent Citizens Oversight Committee are biotechnology executives or hold significant investments in medical companies that could benefit from stem cell grants awarded by the institute.

Agency officials said outside court that Proposition 71 specifically calls for appointing university officials and biotechnology executives with scientific expertise to run the novel research agency. When direct conflicts arise, members are supposed to recuse themselves from deliberations.

Klein, a wealthy Palo Alto real estate developer who led the $30 million campaign for Proposition 71, said outside court that the plaintiff's argument is akin to barring parents with school-aged children from serving on school boards.

Pachter said such a legal challenge has been successful only twice in California's history when one such endeavor was set up to benefit the Catholic Church and the other for a private company.

"The people decided that the state of California should spend money on stem cell research," Pachter said. "State money is not being drawn other than a public purpose: funding stem cell research."

The People's Advocate and National Tax Limitation Foundation filed the other lawsuit.

Alameda County Superior Court Judge Bonnie Lewman Sabraw is hearing the trial without a jury.

In November, the judge refused to toss out the lawsuits, but said the taxpayer groups had a high legal hurdle to prove the voter-approved agency was "clearly, positively and unmistakably unconstitutional."

The Alameda County case is People's Advocate and National Tax Limitation Foundation v. Independent Citizens' Oversight Committee, HG05206766.