California High-Speed Rail at a Crossroads
California’s high-speed rail project has never lacked for drama, but the challenges converging on the California High-Speed Rail Authority in early 2026 represent something qualitatively different from the delays, cost overruns, and political skirmishes that have defined the project for the better part of two decades. The Authority now faces a reckoning that is simultaneously financial, institutional, and reputational — and the path forward has never looked murkier.
The Federal Funding Collapse
The most consequential blow came from Washington. The Federal Railroad Administration terminated roughly $4 billion in federal grants in July 2025, concluding after a compliance review that the Authority had failed to meet its obligations in nine distinct areas, including a $7 billion funding shortfall just for the Initial Operating Segment and a missed 2024 deadline to procure a trainset vendor — an essential step without which revenue service is impossible. For years, critics argued that the project’s business plans were built on optimistic assumptions and aspirational federal commitments. That optimism has now collided with reality.
Making matters worse, California quietly dropped its lawsuit against the federal government over the withheld funds in December 2025, with California Attorney General Rob Bonta’s office filing a notice voluntarily dismissing the case without prejudice — and this despite a federal judge having recently rejected the Trump administration’s bid to throw the case out. Whatever the legal calculus behind that decision, the practical effect is the same: billions of dollars that the Authority had counted on are gone, and there is no active legal mechanism to recover them.
A Business Plan Written in Uncertainty
Against this backdrop, the Authority faces a statutory deadline of March 2, 2026, to release its Draft 2026 Business Plan. That document will be the first business plan produced since the Authority’s 2024 Business Plan — a plan drafted when federal funding was still intact and a renewed federal partnership was explicitly celebrated as a cornerstone of the project’s future. That partnership is now gone, and the 2026 plan must reckon honestly with what remains.
In the interim, the Authority issued a 2025 Supplemental Project Update Report that offered three scenarios for the project’s future. The most ambitious — and the one CEO Ian Choudri had signaled as his preference — is a Gilroy-to-Palmdale spine estimated at $87 billion that would provide San Francisco-to-Los-Angeles connectivity through Caltrain in the north and Metrolink in the south, targeting operations by early 2038. Critics have noted that this plan may not be legally compliant with the terms of Proposition 1A, since trains terminating at Gilroy rather than operating over dedicated high-speed track all the way to San Francisco would likely push travel times above the two-hour-forty-minute limit enshrined in the ballot measure.
The business plan is not merely a bureaucratic exercise. It is the document that legislators, bond counsel, oversight bodies, and the public use to evaluate whether continued investment of state dollars makes sense. A plan that acknowledges the funding gap honestly will be painful to read. A plan that papers over it with projections and contingencies will invite the kind of skepticism the project can ill afford right now. The Authority’s planners are being asked to produce a credible roadmap at precisely the moment the terrain has shifted most dramatically beneath their feet.
Leadership in Turmoil
Into this already difficult moment came a deeply troubling personnel situation. CEO Ian Choudri was arrested on February 4 at his home in Folsom on suspicion of misdemeanor domestic battery. His fiancée, Lyudmyla Starostyuk, was arrested on suspicion of the same offense and also on suspicion of cruel or inhuman corporal punishment of a child — apparently Choudri’s daughter, who police dispatch records indicate had called 911 to report that Starostyuk pulled her hair and pushed her. The Sacramento County District Attorney’s office declined to file charges against either individual, citing an inability to establish a dominant aggressor. Choudri subsequently took a voluntary leave of absence, with Chief of Staff Mark Tollefson assuming day-to-day responsibilities.
The personnel matter was complicated further by a separate conflict-of-interest disclosure: Starostyuk is an advisory manager at KPMG, which holds a $24 million financial advisory contract with the Authority. The couple’s attorney maintained that her role at KPMG is unrelated to the rail authority contract, but the Authority did not immediately respond to questions about whether her position posed a conflict of interest under agency policy. Whether or not that defense ultimately holds, the episode raises serious questions about procurement integrity and internal oversight at an agency that is asking the legislature and the public for continued trust.
The practical consequences for the project are serious. Appointed in August 2024 after working on high-speed rail systems in Europe, Choudri had arrived with an outsider’s credibility and a mandate to stabilize the project’s finances and accelerate delivery. He pursued private-sector partnerships, laid out ambitious 2026 milestones at the Authority’s November board meeting, and authored the Supplemental Report’s reframed vision for a commercially viable system. Whatever one thinks of the project’s ultimate merits, Choudri had brought a clarity of purpose that the Authority had long lacked. His removal from day-to-day operations precisely as the March 2 business plan deadline bears down — and as the federal funding collapse demands a coherent strategic response — could not come at a worse time.
The Case for Winding Down
California high-speed rail has now consumed more than $18 billion in public funds over more than a decade of construction, and not a single track has been laid. The project sold itself to voters in 2008 as a roughly $33 billion system connecting San Francisco to Los Angeles by 2020. It has since metastasized into an enterprise that officials now estimate could cost more than $120 billion, with even the scaled-back Gilroy-to-Palmdale vision priced at $87 billion and full connectivity not arriving until 2038 at the earliest. The Authority has already admitted that the Merced-to-Bakersfield segment would not be profitable even once operational, meaning California would be perpetually subsidizing a stub line in the agricultural Central Valley that serves no major urban market and fulfills none of the original promise made to voters.
The original case for high-speed rail also rested heavily on the assumption that airports serving the Bay Area and Southern California were nearing capacity saturation. That assumption has not aged well. The Bay Area is served by three major commercial airports — SFO, Oakland, and San Jose — and both Oakland and San Jose consistently rank among the least crowded airports in the United States, with Oakland operating at roughly 74% seat occupancy and San Jose at around 75%. Southern California presents an even richer picture of latent capacity, with LAX supplemented by Burbank, Ontario, Long Beach, John Wayne/Orange County, and San Diego — several of which operate well below their design limits. Hollywood Burbank Airport has the thinnest crowds of any airport in the contiguous United States. The air corridor between Northern and Southern California is not facing the capacity crisis that was used to justify this project’s urgency and scale.
Those who favor pressing forward will point to the legislature’s recent commitment of $1 billion annually through 2045 from the extended cap-and-invest program as proof that the project has a durable funding floor. But this framing overstates the lock-in. That allocation was established by Senate Bill 840 last fall as a statutory commitment, not a constitutional mandate — meaning the legislature retains full legal authority to redirect those funds at any time toward more viable regional transit projects, highway maintenance, water infrastructure, or any other pressing public need. The $20 billion is not gone; it is a political choice that can be unmade.
And that raises the most uncomfortable question of all. Policymakers should honestly ask whether California is aggressively continuing this project for legitimate cost-benefit reasons, or whether it has become, at least in part, a symbol of resistance to President Trump and his administration’s decision to pull federal funding. If the project is being sustained by partisan spite as much as sound public policy, then Californians are being asked to drive up their own cost of living — through cap-and-invest revenues that could reduce energy costs or fund other services — simply to make a political point against someone who will be long out of office before a single high-speed train ever runs.
The March 2 business plan deadline offers an off-ramp that state leaders should seriously consider taking. The 2026 Draft Business Plan should be the last. Rather than conjuring yet another funding scenario premised on private investors who have not materialized or a federal partner that has departed the field, the Authority should use the document to lay out a responsible wind-down — one that completes the civil structures already under construction where abandonment would waste prior expenditure, monetizes what assets can be sold or repurposed, and redirects ongoing cap-and-trade revenue toward infrastructure that can realistically be delivered in the lifetimes of the voters who approved it. The concrete pillars rising from the Central Valley floor are a testament to ambition — and a cautionary monument to what happens when ambition is not tethered to financial reality. California deserves better than another business plan that extends, yet again, a project that has broken every promise it ever made.
Marc Joffe is a Senior Fellow at California Policy Center.