Newsom’s budget gimmicks ignore the core issue: expanding programs without safeguards, then begging for bailouts when the math implodes.
As a former California state assemblyman who spent four years on the Budget Committee, I had a front-row seat to Sacramento’s obsession with “pulling down” federal dollars, turning welfare programs into a free-for-all.
Then-state Auditor Elaine Howle ran a lean operation, issuing spot-on reports about waste and vulnerabilities — and getting ignored time and again. California maximized payments for SNAP, Medi-Cal, and unemployment insurance with little regard for fraud controls.
That same reckless mindset has fueled scandals across blue states, with Minnesota serving as the appetizer to California’s main course of fiscal disaster.
Minnesota’s Feeding Our Future fraud — where crooks were convicted last March of pocketing $250-300 million in federal child nutrition funds by claiming phantom meals for kids — was a mere fraction of what was to come.
Today, Minnesota’s likely fraud toll has ballooned, with nearly $9 billion in suspected Medicaid scams since 2018, involving fake providers, ghost services, and out-of-state hustlers. Despite 80 charged, 50-plus guilty pleas, and assets like luxury cars forfeited in the Feeding Our Future scam, recoveries are a drop in the bucket. State agencies have ignored red flags, paralyzed by fears of discrimination lawsuits — or even just being labeled “racists.” And that allowed fraudsters to run wild.
But if Minnesota’s the starter, California’s the feast.
The Golden State’s Covid-19 unemployment insurance debacle at the Employment Development Department (EDD) was a masterclass in negligence: $177 billion paid out, with fraud hitting $20 billion by official counts and up to $32.6 billion by independent estimates. Scammers exploited lax ID checks, using stolen Social Security numbers for bogus claims while the real workers who owned those SSNs labored for their daily bread.
The financial recoveries? Pathetic.
And now, in an effort to repay $20-23 billion in federal loans, businesses have been slapped with their fifth year of Federal Unemployment Tax Act (FUTA) surcharges — $84 per employee extra in 2025, rising yearly. In other words, Gavin Newsom’s California punishes job creators for his government’s failure. Interest could soon top $1 billion annually, with ongoing unemployment insurance shortfalls piling on.
Then there’s the expansion of Medi-Cal to cover illegal aliens, fully implemented in 2024. Promised costs: $3 billion or more a year. Actual costs: $9.5 billion, with $8.4 million coming from the General Fund in 2024-25, enrollment nearing 2 million, and per-person expenses soaring.
California isn’t legally allowed to spend federal money on covering illegal aliens. But through the magic of financial fungibility, California has figured out how to force taxpayers in Texas and Florida to pick up the tab. This must stop.
Facing a big budget blowout, Sacramento froze new adult enrollments from January 2026, axed dental benefits for this group, and slapped on $30 monthly premiums starting in 2027. All of this is projected to save roughly $80 million short-term but billions over time.
Yet it still drains resources from citizens, pulling in indirect federal funds while exposing taxpayers to runaway costs.
This extravagance hits amid California’s budget crisis. The Legislative Analyst’s Office forecasts a $18 billion deficit for 2026-27 — $5 billion worse than Gov. Gavin Newsom’s June spin — despite AI-fueled revenue spikes.
And those gaps could swell to $35 billion yearly by 2027-28, thanks to locked-in spending like Prop 98 for schools and Prop 2 reserves. Newsom patches holes with reserves, borrowing, and selective cuts. (Newsom is eyeing a 2028 White House run. Styling himself as the anti-Trump “beacon,” he’s hinted at deciding after the 2026 midterms.)
Ironically, the best thing for Newsom and California from a budget standpoint would be the Trump administration’s increased success at deporting illegal aliens — who cost state taxpayers billions while using welfare to boost their remittances back home.
But Newsom’s budget gimmicks ignore the core issue: expanding programs without safeguards, then begging for bailouts when the math implodes. A presidential bid built on California’s mess? Good luck selling that to swing states tired of blue-state bailouts.
Sadly, these scandals aren’t unique — New York and Illinois face parallel vulnerabilities in their federally matched welfare empires. But the scandals scream for federal intervention.
Enter the Trump administration’s timely move: On Jan. 8, 2026, Vice President J.D. Vance announced the creation of a new assistant attorney general position dedicated to combating fraud nationwide.
This position, housed in the Department of Justice, aims to root out waste and enforce accountability across states, with a focus on schemes like Minnesota’s welfare theft.
It’s a smart and necessary step, especially after Trump’s executive order last year signaling zero tolerance for fraud. With some suggesting the position might report directly to the White House team for aggressive oversight, this could finally start to claw back billions — and deter future scams.
Unchecked government generosity breeds corruption, eroding public faith and hammering taxpayers. Federal dollars have too easily financed slush funds, exploding deficits while empowering political machines and even terror groups — with states like California continuing to serve up fiscal indigestion.
The Trump team’s new fraud-buster is a long-overdue tool to fight back. But states must step up, too: overhaul oversight, prioritize citizens, and end the all-consuming drive to “pull down” federal dollars.
