California High-Speed Rail Faces Funding Gap by End of 2027, Inspector General Warns
The California High-Speed Rail Authority may run out of money by December 2027 if it cannot borrow against expected cap-and-invest revenues, according to a July 31 report from the Office of the Inspector General. The report criticizes the authority's optimistic assumptions and highlights potential higher borrowing costs and unlikely federal funding.
The California High-Speed Rail Authority may exhaust its funding by December 2027 unless it can secure borrowing against the anticipated $1 billion per year from the state's cap-and-invest program through 2046, according to a July 31 report from the Office of the Inspector General (OIG) for the High-Speed Rail Authority.
Leveraging cap-and-invest funds would mirror how New York's congestion pricing program allows its transit authority to borrow against future revenues via municipal bonds—an approach the authority is currently considering.
For this strategy to succeed, the California attorney general must first approve the authority's eligibility to issue revenue bonds, and the state legislature must enact a law preventing future reductions to cap-and-invest revenues, the OIG stated.
The authority "continues to assume legislative changes to improve the conditions of the project will occur almost immediately" and persists in "making overly optimistic assumptions," the OIG noted.
The authority's 2026 business plan estimates interest costs for borrowing against future cap-and-invest funds at $3.6 billion, but the OIG warns that such costs could escalate to as high as $6.6 billion. In an emailed response, the authority explained that it did not include "speculative interest costs or inappropriately combine interest costs in the capital estimate," arguing that these figures could depend on future policy choices, which is why only the lower estimate was cited.
The California project is also seeking funding from private investors and has entered a co-development agreement with a consortium of high-speed rail, infrastructure, and investment firms to attract outside investors. Such private financing would likely carry higher interest rates than internal state loans or revenue bonds.
In its 2026 business plan, the authority states that it "remains optimistic federal funds will become available for the project in the future." However, that prospect appears unlikely under the current administration. The Federal Railroad Administration, directed by Transportation Secretary Sean Duffy, has terminated approximately $4 billion in unspent federal grants previously awarded to the authority.
Negotiations continue in Washington over the next multi-year surface transportation legislation, but a stopgap measure extending through Dec. 11 cuts passenger rail funding by 83% from current levels, according to the American Public Transportation Association.
The authority "continues to engage with stakeholders and pursue funding opportunities, and it intends to address financing risks and schedule considerations in the [upcoming] 2027 Project Update Report as informed by ongoing legislative and policy discussions," it said in an emailed statement.