States Shy From HSR Money

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The president’s stimulus package contained an $8 billion downpayment on a national system of high-speed rail. The money came with no state matching requirements, which generated state applications totaling $102 billion. When Congress added a 20 percent state matching requirement to an additional $2.3 billion for high-speed rails grants in this year’s budget, state applications only totaled $8.5 billion.

According the Wall Street Journal, federal officials blamed the drop in state interest in high-speed rail money on several factors. But state official confirmed to the Journal that the 20 percent match requirement was the primary reason. 

The states already have dedicated revenue sources for federal highway aid matching requirements (also 20 percent). With state tax revenues flat due to the recession, where would the money come from to pay for high-speed rail projects? Proposing new taxes to fund high-speed rail would probably be political suicide. And most state policymakers recognize that shifting money away from more popular programs to pay for high-speed rail won’t be any more politically rewarding.
 
The issue is even affecting elections in states that are in line to receive federal funding for high-speed rail. Scott Walker, a Republican candidate for governor in Wisconsin, recently said he’d send back the $810 million in stimulus funds the state has received for a rail line between Madison and Milwaukee. Walker appears to understand that his state has more pressing infrastructure needs and that high-speed rail could become a fiscal black hole.
 
California offers a cautionary tale. In 2008, California voters passed a measure allowing the state to issue nearly $10 billion in bonds to start constructing a high-speed rail line from San Francisco to Los Angeles. The state’s estimated cost for the entire system went from $25 billion in 2000 to $45 billion by 2008. A Reason Foundation analysis concluded that the rail line could cost up to $81 billion.
 
A Cato essay on high-speed rail takes a “sober” look at the costs and benefits of high-speed rail and concludes that the federal government should reverse course:
The reality is that high-speed rail systems are extraordinarily expensive and serve only a small and elite group of people even in those nations that have the longest experience with them.
High-speed rail is not a grand solution to America’s congestion and mobility problems, as it is often alleged to be. While high-speed trains in Europe and Japan are technologically impressive, nearly all the routes in those jurisdictions lose money and need large subsidies to stay afloat. America’s geography is even less suited for a successful high-speed rail system than Europe or Japan because our cities are less dense and spaced farther apart.
The federal government should withdraw its support for high-speed rail, and instead focus on major aviation and highway reforms to improve the nation’s mobility. America faces major transportation challenges, but throwing taxpayer funds down a high-speed rail money pit will not solve them.
If federal policymakers won’t reverse course, let’s hope state policymakers step up to squelch this budding boondoggle before it’s too late.         

Update: See Randal O’Toole’s blog for more on this story and the issue of high-speed rail.