With a stroke of his line-veto pen, Gov. Arnold Schwarzenegger Monday killed a budget provision that would have forced the California High-Speed Rail Authority to improve its business plan and strengthen its outreach efforts by Feb. 1 or have about a quarter of its annual budget withheld.

Schwarzenegger's veto deals a blow to efforts by Sen. Joe Simitian, D-Palo Alto, and other state legislators to hold the rail authority accountable after a sequence of audits revealed a myriad of flaws in the agency's revenue and ridership plans.

"While the Administration supports these reporting requirements, making the (budget) 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," Schwarzenegger wrote in his veto message.

The penalty for missing the Feb. 1 deadline would have been $55.32 million in state funding.

The provision, which was inserted into the budget by the Senate Budget Subcommittee #2 on Resources, Environmental Protection, Energy and Transportation, gave the authority until Feb. 1 to update its business plan and provide an analysis demonstrating that the rail project would not require a public subsidy for operations.

The subcommittee, chaired by Simitian, also called for the authority to respond to a long list of management deficiencies uncovered by the Office of State Auditor. The auditor's office found that the authority's program manager, the firm Parsons Brinckerhoff, filed monthly reports filled with errors. The office reviewed 22 invoices and identified problems in 20.

In May, after hearing a presentation on the report from State Auditor Elaine Howle, members of Simitian's subcommittee said they were deeply concerned about the authority's mismanagement.

Sen. Alan Lowenthal, D-Long Beach, said he found the litany of poor management practices identified by the auditor "astounding." The authority "doesn't have at this point a coherent program," he said.

"Anybody who has read this audit report cannot help but be disheartened by the authority's mismanagement, or at least some folks' mismanagement of scarce public resources," Lowenthal said.

The auditor's report is one of several recent studies exposing flaws in the rail project. The state Legislative Analyst's Office found major flaws in authority's business plan. One analysis said the plan "superficially addresses many of the most significant risks of the project."

The Institute for Transportation Studies at University of California, Berkeley, reviewed the authority's ridership projections and found them "unreliable."

This week, three financial experts from the Peninsula released an analysis of the authority's financial data and concluded that the authority's "financial promises can't be kept." The report was reviewed and endorsed by 70 Silicon Valley economists and CEOs.

Simitian, whose Midpeninsula constituency includes some of the most vocal critics of the voter-approved project, called Schwarzenegger's veto of the accountability measures "regrettable."

On Oct. 2, Simitian hosted a Town Hall meeting in Palo Alto, where he lauded the budget provisions as an important step to holding the authority accountable. He alluded to the Feb. 1 deadline, and said "the clock is ticking" on the authority to get its house in order.

Simitian has persistently said he supports the rail project, but only "if it's done right." The authority, he told the crowd at the Town Hall meeting, has yet to make a successful transition from a small advocacy group to the builder of a mega-project currently estimated at $42.6 billion.

He said the agency has been doing "just barely enough" to retain legislative support and pointed to a series of critical audits as indications that the authority "has come up short in terms of its work to date."

The state Legislature as a whole approved the subcommittee's accountability provisions for high-speed rail before Schwarzenegger vetoed the section of the budget outlining these measures. Schwarzenegger said while he supports the reporting requirements he opposes tying them to funding because that could cause possible delays in the overall project.

Jeff Barker, deputy director for the rail authority, told the Weekly that even with the veto, the authority remains "committed to reporting to the Legislature and to the public about the progress of our state's high-speed rail project." He said meeting the deadlines would have been impossible given how long it took lawmakers to pass the state budget. Without a budget, the authority didn't have the resources to comply with the legislators' mandate, he said in an e-mail.

"We had already alerted the Legislature that because of the historically late budget and therefore our inability to hire any additional risk management, oversight, and financial staff as outlined in the budget, it would be impossible to meet the reporting deadlines that were originally outlined in the budget," Barker said.

But Simitian said the governor's veto will make it even more difficult for the agency to restore its credibility with the public.

"The High-Speed Rail Authority desperately needs to rebuild its credibility and public support," Simitian said. "A failure to require accountability measures only makes that task more difficult."