Cali’s HSR Reset: Scaled Down, Yes, But a Path Forward

by Jim Mathews / President & CEO

When the California High-Speed Rail Authority released its draft 2026 Business Plan recently, reactions across the rail community were immediate. Some praised it as a pragmatic strategy for reducing near term costs on the initial operating segment to keep the project alive. Others were disappointed that the new strategy envisions fewer trains, longer trip times, and lower overall capacity.

Both reactions are understandable.

The truth is that the new plan reflects a harder reality: a project that began with sweeping ambition is now adapting to a far more difficult political and financial environment. Whether that makes the glass half full or half empty depends largely on what you hoped California high-speed rail would become — and what you believe it still can be.

Anyone who has followed this project from the beginning can see that the vision laid out in the early years was bigger and more ambitious than what’s now on the table. The new draft business plan leans heavily on staged delivery, revenue generation, and commercial partnerships in ways earlier plans did not. Some of that boldness from the original vision, a sweeping, transformative statewide system, has clearly been scaled back or deferred.

It’s reasonable to feel disappointed about that. High-speed rail was never meant to be primarily a revenue-maximizing exercise. At its heart, it was meant to reshape how Californians move, linking communities, expanding access to jobs and housing, and providing a fast, clean alternative to congested highways and crowded airports.

But it’s also important to acknowledge the reality in which this plan was written, and the on-the-ground situation that confronted CEO Ian Choudri — no stranger to leading large, complex mega-projects — when he replaced CEO Brian Kelly in the summer of 2024.

Over the past decade, California’s high-speed rail program has had the rug pulled out from under it more than once, most recently last summer when the new Trump Administration yanked $4 billion in appropriated money from the program. Federal support has swung wildly depending on who occupies the White House, supportive one year, hostile the next. For a capital-intensive project measured in decades, that kind of instability is devastating.

In our view the new business plan is, above all, an attempt to stabilize the program in the face of that uncertainty.

Instead of relying on unpredictable Federal appropriations, California is doubling down on what it can control. The extension of cap-and-trade revenues now provides a roughly $1 billion annual funding stream through 2045. That single policy decision changes the strategic picture dramatically: for the first time, the project has a predictable funding base stretching decades into the future. It’s not the scale originally envisioned, but it’s predictable and largely controllable.

Predictability is crucial. Infrastructure investors can tolerate risk, but they can’t tolerate political whiplash. Long-term commercial partners simply won’t engage if funding appears and disappears every election cycle. By anchoring the project to a stable state funding stream, California is trying to create the conditions where private investment and long-term partnerships become possible.

In other words, if Federal policy is unreliable, the project must find ways to move forward without it.

Now, that’s not how infrastructure in the U.S. should work—and with other modes, the funding structure is very different. When California makes decisions about highway spending, they know they’ll receive a predictable amount from the federal government ever year that covers 80 cents of every dollar spent on roads (subsidized heavily by general fund transfers). Yet when the conversation turns to passenger rail, even a much smaller Federal role somehow becomes the subject of decades-long political controversy. We treat highway spending as a routine national responsibility, while rail investment is treated like an experiment that must be debated anew every budget cycle.

The deeper problem is structural. Our national infrastructure policy was built around highways and aviation, not modern passenger rail. Federal funding arrives through unpredictable discretionary grant programs instead of stable multi-decade commitments. Environmental review processes like NEPA, as important as they are, can stretch timelines for years when applied to long linear infrastructure projects. And every change of Administration risks reversing the policies of the last. Under those conditions, even strong projects struggle.

California’s program also faces challenges unique to the state: complex environmental requirements, fragmented local authority, and the immense difficulty of building a new right-of-way through one of the most economically productive regions in the world.

Here it’s worthwhile to quote directly from the Draft Business Plan document (which you can download as a PDF and read yourself by clicking here), because the Authority lays out an example of the mind-numbing challenges in just one segment (the initial 119 miles in the Central Valley) that sums it up much better than I can.

“To initiate construction, the Authority needed to coordinate with 80 separate and unique entities along the linear corridor. Approval, permitting and/or consultation was necessary from five federal agencies, eight state departments, six cities, five counties, 31 utility owners, 22 quasi-governmental agencies, and three freight railroads,” the Authority explains in the Plan. “Each entity requires distinct standards, and has different priorities, needs, and approval timelines. Due to intricate interdependencies, any of these entities had the potential to create cascading delays to ongoing construction.”

Now, those realities don’t excuse the mistakes that have been made along the way, but they do help explain why this project has proven so difficult. If this had been almost any other state, the program would have been knocked out long ago. Instead, California has kept building.

The new Draft Business Plan reflects that persistence. It focuses on completing the Merced–Bakersfield segment, connecting the Central Valley to larger markets, and expanding outward as revenue and partnerships grow. It also embraces a wider set of commercial opportunities to supplement traditional fare revenue: things like real estate development around stations, energy infrastructure, telecommunications corridors. As we all know, there’s no transportation system anywhere that can cover its operating costs from the farebox alone.

Those choices may seem a distance removed from a two-hour, one-seat ride between San Francisco and Los Angeles. But they are evidence of a program determined to keep moving forward. And in infrastructure, momentum is sometimes just as important as design. Once trains are running, once people can see, ride, and depend on the system, we think the political and financial dynamics change dramatically. What looks uncertain on paper can become inevitable once it becomes part of everyday life.

So yes, this business plan represents a narrower vision than many of us once hoped for. But it also represents something else: resilience.

California’s high-speed rail program has taken its share of punches. At times it has looked like a fighter staggering in the ring. Yet despite funding shocks, political opposition, and policy headwinds, the project is still on its feet and still moving forward.

That persistence should send a message to Washington.

If the Federal government wants to see modern passenger rail succeed in the United States it cannot continue treating it as an afterthought, something that’s funded sporadically, debated endlessly, and subjected to political reversals every four years. Highways receive stable multi-decade funding commitments and dedicated financing tools. Passenger rail deserves the at least same. And until that changes, states will continue improvising their own solutions, cobbling together funding streams, commercial partnerships, and creative financing simply to keep projects alive.

California’s new plan may not be the grandest vision for high-speed rail. But it’s a powerful reminder that Americans still want it — and that sooner or later, national policy will have to catch up.