California high-speed rail could run out of money by 2027, inspector general warns

LOS ANGELES - California's high-speed rail project could exhaust its funding by December 2027, Inspector General Benjamin Belnap warned state leaders in a new report criticizing the authority for obscuring rising costs and scheduled delays.

What we know:

Belnap's updated review of the revised 2026 business plan lays out several critical financial and operational details regarding the project's current status. 

While the High-Speed Rail Authority has identified $39.3 billion in total long-term funding, including $1 billion annually from Cap-and-Invest revenues, the funds arrive too slowly to cover expenses during peak construction years, according to the report. 

As a result, current cash resources will be completely exhausted as early as December 2027, requiring $2.2 billion in fiscal year 2027–28 alone to keep ongoing construction on schedule, the report stated.

To address a cumulative $9.5 billion funding gap between fiscal years 2027–28 and 2031–32, officials are considering options such as internal state borrowing, revenue bonds, or private financing. However, borrowing will add between $3.6 billion and $6.6 billion in interest costs, which were excluded from the authority's official $35.7 billion estimate for the Central Valley line. 

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Additionally, the inspector general found that current cost projections omit a $1.2 billion gap in default-level contingency budgets, $816 million in construction costs expected to be covered by third parties, and $1.7 billion for required infrastructure under existing local agreements that project leaders hope to modify.

The report highlights that recent savings stem primarily from building less infrastructure rather than increasing operational efficiency.

The authority's preferred plan shortens the Merced-to-Bakersfield segment from 171 miles to 162 miles, moves the planned Merced station away from downtown into a suburban area, and temporarily halts track construction north of downtown Bakersfield. 

Also, while official documents acknowledge a nine-month delay pushing initial operations to 2032–2033, the inspector general's risk-based statistical model indicates completion could slip as late as September 2034. 

On the procurement front, an Aug. 6 notice revealed the authority cut its initial trainset order from six to three, extended delivery targets to February 2030 under a potential lease-purchase structure, and removed federal "Buy America" domestic manufacturing rules for the initial trainsets.

What we don't know:

It's unclear where the authority will secure long-term capital after losing $4 billion in federal funds and failing to secure private investment. 

What they're saying:

In a letter to lawmakers and the governor, Belnap noted that the authority has "obscured basic facts about the project, hindering lawmakers’ ability to provide effective oversight." Belnap added, "Because the Authority has thus far not demonstrated a willingness to establish and reinforce a process that ensures accuracy and transparency in project reporting, we have directed our report recommendations to the Board."

An Authority spokesperson released the following statement in response: 

"The California High-Speed Rail Authority (Authority) values constructive oversight and partnership that helps strengthen the program, and we are committed to working together to bring California’s voter‑approved high‑speed rail system to reality. The Authority has fundamentally reoriented the high-speed rail project by moving into its tracklaying phase, while making real, measurable progress through strong collaboration with the private sector and our partners across the state."

What's next:

 The Inspector General recommended that the Board of Directors adopt a strict policy governing annual reports to guarantee adequate review timelines and public transparency before publication. 

Legislative oversight hearings by the Assembly Transportation Committee are expected to address the looming $9.5 billion funding gap and evaluate potential internal borrowing mechanisms.