– The state of Wisconsin has provided $750,000 in loans — and nearly $2 million more in tax credits for investors — to benefit a Madison biotech firm using tissue derived from aborted fetuses, practices that are being closely scrutinized by conservative lawmakers and GOP Gov. Scott Walker.

In the case of Flu-Gen Inc. and potentially other biotech companies in Wisconsin, the Wisconsin Economic Development Corp., created by Walker, is subsidizing work that could be criminalized under a new ban being considered by lawmakers and the governor.

There’s an apparent paradox in state officials’ approach to biotechnology, a key sector for Wisconsin’s economy, said Lisa Johnson, who formerly worked on economic development for the state.

“In a sense, there is this contradiction because they’re valuing it in one respect but not in another,” said Johnson, chief executive officer of BioForward, a bioscience industry trade group in Wisconsin. “The state has invested a ton in (biotechnology). They have financial commitments to this sector.”

Republican lawmakers have said that their final legislation will include an exemption that should allow Flu-Gen to keep using long-standing fetal tissue to pursue its goal of a more effective flu vaccine. But as currently written, the bill would make it a felony to use tissue from an aborted fetus.

In its work, Flu-Gen uses a line of human embryonic kidney cell tissue known as HEK-293, which was developed in the early 1970s in the Netherlands using material from a legally aborted fetus in that nation. These kidney cells have been reproducing since then in laboratories and are commonly used by researchers.

Similar bills to this current measure languished in Wisconsin during the past two legislative sessions, but that changed after the release of videos that were secretly recorded in California of a Planned Parenthood official discussing the cost of providing fetal body parts for medical research with anti-abortion activists posing as tissue buyers.

Assembly Speaker Robin Vos, R-Rochester, now backs the proposal in principle, as does Walker. On the presidential campaign trail, he has said that a main priority is stopping the practice of tissue from aborted fetuses being transferred and used in research. He hasn’t specifically addressed the question of the self-renewing tissue lines such as HEK-293 used by Flu-Gen and many other researchers that were derived from fetuses aborted years or decades in the past.

WEDC provided a $500,000 loan to Flu-Gen last year, while Walker was serving as chairman of the state’s top jobs agency. That followed a $250,000 loan made in October 2008 by what was then the state Department of Commerce under Democratic Gov. Jim Doyle.

The Department of Commerce also awarded $2 million in tax credits to Flu-Gen in 2007, with $1.9 million certified so far, WEDC attorney Steven Michels said Monday.

Rep. Joel Kleefisch, R-Oconomowoc, said Monday that his Committee on Criminal Justice will vote on the bill Sept. 9. He repeated his pledge that GOP lawmakers will include a still undisclosed exemption that will grandfather in existing tissue lines derived from an aborted fetus.

Paul Radspinner, chief executive officer of Flu-Gen, said he opposed the bill because it could hurt Wisconsin’s economy as well as potentially lifesaving medical developments. But he said that he believed Flu-Gen would be able to continue its work under the proposed amendment to the GOP bill and that he understood that lawmakers won’t always agree with the actions taken by the state’s economic development officials.