California High Speed Rail - Governor's Veto may be Illegal

In his final days as Governor, Arnold Schwarzenegger bestowed a goodbye gift to the High Speed Rail Authority (HSRA), he used a line item veto to remove most performance requirements for the HSRA to obtain budget funding. Bottom line what Schwarzenegger is proposing is to skip the planning and go straight to doing.

The items now without financial holds, which amounted to $55 million out of the $221 million budget is a legal analysis of any revenue guarantee, a summary of contract expenditures for community outreach, a financial plan with alternative funding scenarios, a copy of the strategic plan, a report on the performance of the Program Management Contractor, and a report on how the Authority has addressed other recommendations of the Bureau of State Audits not otherwise covered by this provision.

he Governor’s veto message regarding High Speed Rail Provision in the 2010-2011 Budget was as follows:

“While the Administration supports these reporting requirements, making the appropriation contingent upon receipt and approval of this report by the Legislature could result in project delays, jeopardize the Authority's ability to meet already tight federal deadlines and result in increased state costs.”  A difficult statement to understand since the Authority was granted $166 million without reporting requirements.

The Governor did this despite criticisms by independent evaluators about the High Speed Rail (HSR) project from the Legislative Analyst’s Office, the State Auditor and UC, Berkeley, Institute of Transportation (ITS), and despite the latest critical evaluation of the HSRA’s business plan, reviewed by more than 70 prestigious business and academic leaders in the Bay Area.

But the multi-billion dollar question is, are the actions of the Governor legal?  Gary Patton, attorney and Executive Director for Community Coalition on High Speed Rail, doesn’t think so. Patton says, “The Governor has NO power to eliminate control language from the budget bill. He is restricted to actions in accordance with the Constitution.” Here’s what the Court says:

In the context of the constitutionally prescribed budget process, the power to appropriate public funds belongs exclusively to the Legislature. With respect to a bill containing appropriations, the Governor has three options: (1) to sign the bill, (2) to veto the measure in its entirety , or (3) to “reduce or eliminate one or more items of appropriation.

“The Court emphasizes that if the Governor doesn’t take option #1 or #2, he can ONLY do #3, and then spends a lot of time talking about what an “item of appropriation” means. It does NOT seem to mean budget control language.”   In Patton’s opinion, “What he did is a Constitutional overreach.”

What’s less clear is how to challenge this overreach.  Will a member of the legislature have the courage to challenge it? Is there a vote that can simply overturn the veto and what is the timing of that vote?  Or does the public once again have step in to file suit, making the Governor and the Legislature, “do the right thing?”

Effectively this removal of key performance standards leaves the voters of the State of California with even more limited oversight and leaves the Senate Budget Subcommittee on Transportation without teeth if the HSRA is not performing in accordance with the laws or inadequately answers the criticisms of the Legislative Analyst's Office and the State Auditor.

Senator Simitian said during his Palo Alto Town Hall Meeting, October 2^nd, they struggled to keep those requirements in the budget bill in order to demand higher performance standards from the High Speed Rail Authority before funding budget funds.

Simitian (D-Palo Alto) characterized Schwarzenegger’s veto as “regrettable.” He also noted that “the High Speed Rail Authority desperately needs to rebuild its credibility and public support. A failure to require accountability measures only makes that task more difficult.”  See also Simitian’s reaction on Voice of OC in which Simitian says: "It's not at all clear to me the [High Speed Rail officials] understand how fragile the relationship is with the Legislature at this point. I think the High Speed Rail Authority is perilously close to letting this opportunity [to build the train system] slip through its fingers."

In the past two years, the senators on the budget sub-committee have been thrust in the role of chief babysitter for the Rail Authority project.  Senator Simitian said at a budget hearing in the Spring, he never expected to be “hip deep” in high-speed rail issues during his entire term of office.  By law, the Peer Review group is the oversight arm of the High Speed Rail Authority and to date only 6 of 8 committee members has been appointed. The passage of this budget, or the first time allocates budget for travel and administrative expense for them.

The following items remain after the Governor’s Line Item Veto:

1.    $1M for ridership and revenue forecasting

§  Funds are available for expenditure after submitting a report to the joint Legislative Budget Committee, followed by a 60 day review period.

§  The report is due 30 days after the budget is enacted.

§  The report must address the Berkeley ITS model, and include proposed changes to the ridership and revenue models and how the authority is, or is not, incorporating the findings of the Institute of Transportation Studies into the revised models.   This hearing is scheduled for November 4^th in Sacramento.

2.    $100,000 to support the operation of the Independent Peer Review group

See details in the  May 11, 2009 Transportation Hearing.  See bottom of page 12 and page 13, for a very interesting transcript exchange about expectations for the Feb 1^st meeting.

The veto left unchallenged by either the legislature or court action, these important requirements are gone.  One wonders if the removal of financial consequences will result in less vigorous reporting by the High Speed Rail Authority as required by the Senate Sub-Committee on Finance early next year.