First, California’s budget proposal projects a $9.1 billion shortfall absent spending cuts and $6.9 billion worth of new sales taxes and income taxes. Besides certain cuts to spending plans, the budget threatens deeper cuts to schools and local public safety funding unless voters approve these new taxes. The budget does not place this same contingency on plans to move forward with the high speed rail, instead labeling this as one of the budget’s “bold investments in our future”.
Second, an independent commission just released a report on the feasibility — financial and otherwise — of California’s plans for a high speed rail. The commission concluded that the rail “represents an immense financial risk on the part of the State of California.” The context of the quote follows:
We cannot overemphasize the fact that moving ahead on the HSR project without a credible source of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California.”
In particular, the report cites (i) a lack of long-term funding sources and (ii) too much time before the project has sufficient private sector interest. One potential route to address the lack of funding, according to the report, is more taxes. It cited that the state could levvy
a dedicated fuel tax or some other form of added user charge that would not aggravate the existing State budget deficit. …[Otherwise,] the project as it is currently planned is not financially ‘feasible’”.
Besides a lack of money, the report cites several other factors that should cause concern. These include an incomplete business model, inadequate management resources, unverifiable ridership forecasts, and continually increasing capital cost projections.
In defending proposed spending cuts, the Governor used the sort of language that people all across California have used in recent years as they reign in their spending in the face of economic challenge. According to the LA Times, he remarked,
We have to hold the line on spending and make the tough cuts…We can’t spend what we don’t have. It’s not nice, we don’t like it, but….I mean, we’re in a box…. We have more needs, desires and demands than the money available. So we have to now reduce needs, reduce demands and reduce desires…. We’ve got to bite the bullet.”
He’s right. Although he should have been referring to trains.