Transportation Secretary Sean Duffy has announced a potential withdrawal of federal funding from California’s high-speed rail project, citing a recent Federal Railroad Administration (FRA) report that highlights extensive mismanagement, significant cost overruns, and a substantial $7 billion funding gap. The report, released on Wednesday, criticizes the project’s failure to meet deadlines and its reliance on volatile funding sources such as cap-and-trade revenue, which raises concerns about its financial stability.
The project, initially envisioned as an ambitious 800-mile system connecting Los Angeles to San Francisco and beyond, has seen its scope dramatically reduced to a 171-mile segment in the Central Valley. Despite this reduction, the estimated cost to complete the Early Operating Segment (EOS) has ballooned to between $35.4 billion and $37.8 billion, far exceeding the California High-Speed Rail Authority’s (CHSRA) own projections. This discrepancy underscores the project’s financial challenges and raises questions about its viability.
Duffy has stated that the FRA’s findings have demonstrated that the CHSRA has not met its obligations and has failed to provide a feasible plan to complete the EOS by the 2033 deadline. The administration is now giving the CHSRA 37 days to respond to the FRA’s concerns or risk losing up to $4 billion in federal grants. President Donald Trump, who has previously criticized the project as a ‘boondoggle’, has publicly supported Duffy’s position, highlighting the project’s staggering cost overruns and calling them ‘totally out of control.’
The FRA’s report has also implicated issues with the project’s management, including delayed contracts and unresolved cost overruns, which have contributed to the project’s financial instability. While California Governor Gavin Newsom has expressed commitment to the project, he has outlined a revised budget plan that includes allocating $1 billion annually for the next 20 years using state cap-and-trade funds. However, without a clear and viable plan to address the financial and operational challenges, the project faces an uncertain future, with potential federal funding at risk of being redirected to other infrastructure initiatives.