Denham to Introduce Bill to Suspend Federal Spending on California’s High-Speed Rail Project

Jan 15, 2014 Issues: Education, Transportation, Water

Click here to view remarks online

WASHINGTON — Transportation and Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials Chairman Jeff Denham (R-Turlock) will introduce legislation this week to suspend federal spending on California’s high-speed rail project, for which the High-Speed Rail Authority (Authority) has failed to secure state and private dollars.

“This is about priorities,” said Rep. Denham. “Continued spending of federal dollars on high-speed rail when the California High-Speed Rail Authority has no viable method of generating state funds puts all federal money for the state of California in jeopardy. The federal government can and would withhold money for other top infrastructure priorities, such as education and water, from the state of California, should the state fail to provide state funds.”

Under the grant agreement between the Federal Railroad Administration (FRA) and the Authority, federal spending much be matched by state bonds. To date, the federal government has committed roughly $3.4 billion to the project. In November, Sacramento judge Michael Kenny denied the Authority’s funding plan and ruled that the Authority could not issue their requested roughly $10 billion in Prop 1A bonds. The ruling leaves the Authority with no path forward to generate the state money which is required under the FRA agreement. 

During today’s Transportation and Infrastructure subcommittee hearing, testimony from Ms. Karen Hedlund, Deputy Administrator of the Federal Railroad Administration, and Ms. Alissa Dolan of the Congressional Research Service confirmed that should the Authority default on its commitment to provide state funds to for the rail project, the federal government would withhold funds for other key California needs. Their remarks are transcribed below and full video of the exchange is available here.

Chairman Denham: Ms. Dolan, Mr. Richard testified a minute ago that FRA, the Administration, the U.S. Government, if the Anti-Deficiency Act is not followed, if they cannot come up with their 50 percent match, then we could hold up other funds… What other money could be held up? Could federal education dollars be held up?

Ms. Dolan: Under the terms of the cooperative agreement, FRA reserves their right to require repayment of all or part of the funds that have been given to the grantee. That repayment can be done through what’s called an administrative offset, and I believe that that would reach, in this order, FRA funds, and then DOT funds, and then in the event that those funds cumulatively are not enough money, funds from the rest of the money that’s owed to California from the federal budget.

Chairman Denham: So the federal government, if the state does not repay its 50 percent match – which the state is already in the hole – if the state cannot come up with its match, the federal government could first withhold all rail funding, then withhold all highway funds and aviation funds, and then go into deeper pockets of education when our school systems are already failing our kids in California. Is that correct?

Ms. Dolan: The FRA reserves that right in the cooperative agreement. As it’s written at the moment, it is within their discretion to decide how to exercise that right.

Chairman Denham: Also infrastructure dollars to water storage. Water is being shut off in my Central Valley right now. We’re having huge droughts with tens of thousands of jobs that will be lost due to water. That’s another issue that could be held up. This is why this is such a big issue for California. It’s about priorities. This is not just an endless pot of money, this is not just free money, this is not just let’s take it from Florida and every other state and give it all to California. We have priorities. We’re dealing with budgets. We have to be good stewards of the federal taxpayer’s  dollar.

Click here for additional information from today’s hearing, including testimony, video, and background information.