High-speed rail: Money, politics, timing come together

With billions of dollars at stake, California’s high-speed rail project is at a critical, do-or-die juncture: The Obama administration’s ultimatum to state lawmakers to fast-track the money resonates in the Capitol, but the state budget is riddled by shortages less than six weeks before the start of the new fiscal year and bullet-train politics remain volatile.

For Gov. Brown, there is no hesitation: “I’m a buoyant optimist and we’re going to build high-speed rail…,” he said while unveiling his revised budget that included a $15.7 billion shortfall.  

Some $2.7 billion in bond money already has been approved, but lawmakers and the governor must appropriate the money to actually start the cash flowing – and to leverage promised federal funds. There is Democratic support in both houses, while minority Republicans remain skeptical.

U.S. Transportation Secretary Ray LaHood recently urged the Legislature to authorize spending the $2.7 billion state bonds by next month. If it didn’t he said, the federal government would rescind the $3.3 billion in federal grants promised to the project and look to other states to absorb the stimulus funds. The federal money is crucial to California’s efforts to launch the $64.8 billion project, which would link the northern southern California through the Central Valley with trains going 220 miles per hour.

During his Sacramento meetings, LaHood bluntly rejected the August postponement that California legislators had requested as a deadline, saying, “August is too late.” LaHood had issued similar ultimatums to Wisconsin and Ohio in 2010, and both those states passed on getting $1.2 billion in stimulus funds for bullet trains.     

In California, the mood among ruling Democrats is different, and they see the timeline as negotiable.

“Our governor supports high speed rail and the Pro Tem supports high-speed rail,” said Alicia Trost, a spokesperson for Senate Leader Darrell Steinberg. “And the voters approved the bonds to pay for it, so we think it’s something we should move forward with.”  There is similar support among the Assembly’s Democratic leadership.

“It is not likely we will act to appropriate the funds in the budget within our budget deadline of June 15, but we hope to act soon. We are in consultation with Secretary LaHood on that timetable,” Trost said. “We’re working with him and we don’t want to lose precious federal dollars.”

The Legislature is required to pass the state budget for the 2012-13 fiscal year by June 15, and the governor’s required to sign the document by July 1, the beginning of the new fiscal year.

Project insiders have been tight-lipped as to the future of a bullet train in California if the Legislature does not move to appropriate the $2.7 billion in bonds to match funds with the $3.3 billion in federal grants. The $6 billion is needed to launch the first phases of the project.

But questions remain. What happens if post-Obama administrations don’t continue to provide funding in the years ahead? How will the public, angry at budget cuts coming from Sacramento, react to billions of dollars being spent on high-speed rail?

“Quite honestly, it might be the best thing for California [if the bond money is not appropriated], rather than building something where we don’t need it,” said Assemblywoman Diane Harkey, R-Dana Point, who serves as vice chair of both the Appropriations Committee and the Revenue and Taxation Committee. “Because right, now we are building a stranded project that will have to be financed by the state that does not have funding.”   

The first phase of high-speed rail construction begins with building tracks in the Central Valley.

“I don’t know if it would spell the end of the project, but it certainly stacks the deck against the project at this juncture. I don’t know what the alternative would be,” said Jim Earp, executive director for the California Alliance for Jobs and a leading proponent of high-speed rail.

Earp’s group represents 80,000 construction workers in California and 2,500 contractors. He estimated that the initial phase of the high-speed rail project would employ 25,000 construction workers.

“On the long term, it’s a game changer for California in terms of how people are going to move up and down the state. It will also be huge for the Central Valley, which has the highest unemployment rate in the state and one of the highest unemployment rates in the nation,” Earp said.

Democrats say the bullet train, potentially the biggest public works project ever in California, as beneficial to a lagging economy.

“California has [few] tools to actually stimulate the economy and create jobs. The one tool we do have is infrastructure projects and those bond dollars can go a great way in creating much needed jobs,” Trost said. “And that’s the thing, whether we move from high-speed rail or not, we are still going to have to invest billions and billions into our infrastructure whether it’s highways, airports, existing trains in order to accommodate our population growth.”

But Republicans have been vocal about their opposition to high-speed rail in California and have characterized it as wasteful spending. Harkey has recommended using a provision of the state constitution that she says allows lawmakers, in effect, to defund a voter-approved bond if situations have changed since the voters’ initial approval of the bond.

“High-speed rail is a nice thought but it’s not practical for California,” Harkey said. “People don’t need to get from San Francisco to L.A. by train, they need to get to work.”

 “Nobody has an accurate idea of how many people will ride this rail,” Harkey added. “We are still bankrupt, we’re just not declaring it. When you are that far underwater in cash-flow, structural deficits and long term debt, you need to start setting some priorities or basic necessities like education, public safety, our criminal justice system, it’s a no-brainer that we should set this aside.”

But supporters of high-speed rail say linking its cost to the woes of the state’s General Fund – the main coffer of income, sale, corporation and insurance taxes – is misleading.

“I think there will be some people who will try to make that connection that somehow not funding high-speed rail will improve the general fund. That’s not accurate,” Earp said. “The money that will service the bond is not coming out of the general fund.”

As for the critics of high-speed rail, Earp said that you never start a project this size knowing where every single dollar comes from.

“If you look at the Interstate Road Project and the California Water Project, all these were built incrementally. It was built as the money because available. For people to hold a different standard for this project is really small minded,” Earp said, adding he did not consider LaHood’s statement as an ultimatum.

“What he was expressing was his feeling that California needs to get off the dime and show commitment to this money,” Earp said.

Harkey was not convinced.

“It’s do-or-die because we’ve got $3 billion dollars that’s the cocaine for the train. If that gets removed from the equation then California can be rational about transportation. I just don’t see the votes in the Legislature right now,” Harkey said.

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Ed’s Note: Corrects earlier version by deleting reference in 22nd graf to general fund expenditure.