California’s 2026 Draft Business Plan for high-speed rail is more realistic than its predecessors, but leaves serious unresolved issues. The High-Speed Authority’s leadership lacks the ability to fix this broken program under the current Proposition 1A framework and should either go back to the voters with a new ballot measure or give up.
The plan targets 2032 for completing construction of the Merced-to-Bakersfield segment and 2033 for the start of passenger service. That schedule is already contingent — the plan acknowledges it depends on “additional time for optimization and pending policy changes.” But the deeper problem is financial. The Authority’s own numbers show it cannot hit that schedule without borrowing against future revenues from the state’s cap-and-invest greenhouse gas reduction program. To bridge the gap between when construction costs peak and when the $1 billion-per-year Cap-and-Invest appropriation accumulates, the plan contemplates financing roughly $8.6 billion in near-term needs. After debt service, the Legislative Analyst’s Office estimates that borrowing alone adds around $4 billion in costs — turning what looked like a nominally covered budget into a $2 billion shortfall for just this first segment.
The problem is that borrowing against Cap-and-Invest revenues is considerably harder than the plan implies. At the Assembly Transportation Committee’s March 2 oversight hearing, the LAO identified two structural obstacles. First, the California Air Resources Board has the authority to change the cap-and-invest program in ways that could sharply reduce the revenues dedicated to high-speed rail — and some changes currently under consideration could do exactly that. Second, cap-and-invest auction revenues have historically been volatile; during the COVID-19 pandemic and in the period just before the program’s reauthorization, auctions went undersubscribed and revenues collapsed. Investors asked to hold bonds backed by this revenue stream would demand compensation for that uncertainty, likely pushing the Authority’s borrowing costs well above the 4.3 percent it is assuming.
The legislation passed last year to secure the $1 billion annual cap-and-investment funding commitment omitted the “non-impairment language” the Authority had sought — a guarantee that Sacramento won’t change the rules in ways that would impair bondholder repayment. Without that protection, bond buyers are unlikely to step up.
The funding arithmetic is only part of the problem. The 2026 Business Plan also sidesteps two requirements that California voters embedded in state law when they approved Proposition 1A in 2008.
The first is the travel time mandate. Proposition 1A requires that nonstop San Francisco-to-Los Angeles service take no more than two hours and forty minutes. California has operated under a blended system approach since 2012, in which high-speed trains share existing commuter rail tracks on the Peninsula and in parts of the Los Angeles Basin at a maximum speed of 110 mph. That compromise already strained the travel time guarantee. The 2026 plan makes things worse: rather than building a dedicated high-speed tunnel from Palmdale to Burbank as previously envisioned, it now proposes running trains on Metrolink’s existing Antelope Valley Line between Palmdale and Los Angeles.
The second is the no-subsidy requirement. Proposition 1A specifies that the system must not require an operating subsidy. The 2026 Business Plan projects that the Merced-to-Bakersfield corridor will cover only 35 to 49 percent of its operating costs from fare and ancillary revenue creating the need for an operating subsidy.
The funding hole gets even larger once you look past Merced-to-Bakersfield. The 2026 Business Plan prices the full Phase 1 system — San Francisco to Los Angeles and Anaheim — at $126.2 billion. After subtracting the $34.8 billion covered by Cap-and-Invest for Merced-to-Bakersfield and other sources, the remaining net cost exceeds $91 billion. No credible funding source for that $91 billion has been identified. The private sector, the LAO observed, is unlikely to take on revenue or ridership risk without state guarantees.
At this point, the honest answer is to go back to the voters for another $100 billion in bond issuance authority along with revisions to Prop 1A removing the travel time and no-subsidy mandates. Voters may well choose to continue. But they deserve to make that choice with the most accurate information now available.
Marc Joffe is a Visiting Fellow at the California Policy Center.
