On the heels of Sacramento County Superior Court Judge Michael Kenney’s decision halting an $8 billion bond sale for the construction of the California high-speed rail (“HSR”) project, Governor Jerry Brown has submitted a budget proposal to reapportion money from California’s surplus fund to the HSR project. 

Notably, the surplus fund includes $850 million generated by AB 32’s cap-and-trade auctions, paid by industries participating in California’s new market on greenhouse gas emissions, which allows businesses to exceed the cap on carbon dioxide.  Governor Brown has proposed using $300 million of the $850 million for the construction and integration of the HSR project, and has defended the re-allotment as helping to curb greenhouse gas emissions by allowing people to rely less on their cars and supporting the growing economy. 

The viability of the HSR project has recently come under attack after Judge Kenney’s recent decision.  This recent development has now raised questions about whether the Governor’s reallotment can legally be spent on the HSR, and furthermore, if this money will be sufficient to meet the Authority’s earlier estimate of $68 billion to complete the HSR project.  The proposed budget must still be approved by the Legislature on or before June 15 and, given the outspoken opposition to the Governor’s plan, this is a hurdle that many anticipate will be difficult to overcome.  The new budget is slated to go into effect on July 1.

Co-authored by Juliet H. Cho and Michael N. Mills.