Back to 2011 Issues

2011

Other Budget Issues

Further Detail

Background. California’s proposed high-speed rail project would link the state’s major population centers, including Sacramento, the San Francisco Bay Area, the Central Valley, Los Angeles, the Inland Empire, Orange County, and San Diego. The most recent cost estimate for completion of the first phase of the project, between San Francisco and Los Angeles to Anaheim, is roughly $43 billion. In November 2008, voters approved Proposition 1A, which allows the state to sell $9 billion in general obligation bonds to partially fund the development and construction of the high–speed rail system. In addition, the state has received roughly $3 billion from the federal government for its construction.

The California High-Speed Rail Authority (HSRA) recently approved plans to begin construction in fall 2012 on a portion of the system costing roughly $5.5 billion through the Central Valley that spans from north of Fresno to north of Bakersfield.

May Revision Continues to Move Project Forward. In our recently released report High Speed Rail Is at a Critical Juncture we outlined the Governor’s 2011-12 January budget proposals. The administration proposes a number of changes to its earlier January budget proposal in its May Revision. These changes include:

• An augmentation of $781,000 in funding from Proposition 1A for HSRA’s administrative budget for increasing its information technology contract services,
• $1.37 million in funding from Proposition 1A to pay for an increase in staff of 15 positions to accomplish a variety of necessary oversight and managerial functions,
• $1.25 million in funding from Proposition 1A to fund an interagency agreement with Caltrans for assistance in the planning and environmental review of instances where the planned project intersects the state highway system,
• An increase of $500,000 in funding from Proposition 1A for a total of $2.3 million to fund the outreach and communications contract.
• Changes to the various capital outlay budget requests to reflect both the refined needs for each segment and the identified carryover amounts from the current year budget. These changes result in a net reduction in capital outlay funding of $46.2 million from $179 million to $133 million.

The Governor’s revised budget continues to move the project ahead as planned, meaning the Legislature will likely be asked to appropriate several billions of state bond funds and federal funds next year in the 2012-13 budget.

LAO Analysis and Recommendations. On May 10, 2011, our office published a report containing our recommendations for the Legislature on the high-speed rail project. Consistent with the recommendations in our report, we recommend the Legislature take the following actions in regards to the Governor’s May Revision proposals.

• Approve the Governor’s proposals to increase funding for IT services by $781,000 and the 15 requested staff positions. The organization overseeing this project will need the authorized positions and resources necessary to properly administer the various functions required for the development of a state infrastructure project.
• Approve funding of $1.25 million for the interagency agreement with Caltrans. Coordinating the project with the state’s other transportation systems is an important aspect of system development.
• Reject the $500,000 augmentation for the outreach and communications contract. In our report, we recommend not funding any contracts until HSRA has renegotiated the terms of the project with the federal government and reevaluated how to proceed based on criteria that considers, in part, the state’s best interests. Once the new plan to proceed is decided, the administration can come back to the Legislature and request augmentation to HSRA’s budget consistent with the new plan.
• Reject the adjustments to the capital outlay proposals consistent with our recommendations in our recent report. Similar to the item above, we recommend not funding consultant contracts until a reevaluation has been completed and the state’s best interests have been considered. Most of these contracts have a carryover balance from the current year’s budget that can maintain a minimal amount of work for the few months it may take to conduct the reevaluation.