Where Is California Going When No One Is Keeping Score?
- Citizens Coalition Admin
- Dec 24, 2025
- 10 min read
When the California State Auditor places an agency or program on the State’s High-Risk List, it is not symbolic. It means the Auditor has determined that internal controls have failed repeatedly, resulting in documented improper payments or questioned costs, or that those failures expose the State to specific, quantifiable financial losses. In multiple cases, the Auditor has already identified losses or risks measured in the billions of dollars, not hypothetical concerns.
Taken together, these findings reveal a deeper and more consequential failure: California routinely authorizes spending, commits resources, and tolerates parallel systems it cannot fully measure, audit, or reconcile.
California is often described as the world’s sixth- or seventh-largest economy, but that ranking increasingly hides a dangerous reality. For communities like Compton, the State’s failure to enforce basic checks and balances is already producing conditions more commonly associated with institutional decline:
unaffordable energy (rising gasoline and electricity prices),
persistent housing instability (fewer, yet unaffordable "affordable" housing),
unreliable public services (unrepaired street sufaces),
public safety issues, and
a widening gap between spending and results.
At the same time, two pillars of California’s global reputation are weakening or bypassing local communities altogether. Hollywood is bleeding jobs and productions out of the state, hollowing out a once-reliable middle-class employment engine, while the high-tech sector remains highly exclusive, generating enormous wealth that rarely translates into broad-based opportunity or neighborhood-level investment.
If California continues for another decade substituting narratives for accounting and enforcement, it risks devolving from a global economic leader into a high-cost, low-functioning system, where underprivileged communities like Compton absorb the breakdown first — long before the state’s balance sheets or rankings finally catch up.
This is not a problem of intent.
It is a problem of governance discipline.
The High-Risk List: Who Is On It — and Why
The State Auditor’s High-Risk designations are agency-specific, grounded in repeat audit findings that were not corrected over time. These are not isolated mistakes; they are structural control failures.
Employment Development Department (EDD) — Unemployment Insurance
EDD remains on the High-Risk List because it continues to pay benefits before identity and eligibility are reliably verified.
Auditors have documented:
Approximately $1.5 billion in improper unemployment insurance payments across 2023–2024
More than $500 million in fraud in 2024 alone
Persistent improper payment rates near 15%, well above acceptable federal thresholds
The issue is no longer the pandemic. The issue is that core payment controls still fail to stop improper payments before money leaves the system.
Department of Health Care Services (DHCS) — Medi-Cal Eligibility
DHCS is rated high-risk because eligibility determinations remain unreliable despite years of audit warnings.
Auditors have documented:
The same eligibility problems are still showing up at about the same rate as before. In the past, these problems were linked to more than $1.9 billion in payments that should not have gone out.
Earlier reviews showed that at least $4 billion in Medi-Cal payments were sent out because the state never fully verified who actually qualified.
The Auditor does not allege that all questionable payments were fraud. The finding is more fundamental: the State cannot reliably confirm eligibility for billions of dollars already paid.
Department of Social Services (CDSS) — CalFresh (SNAP)
CalFresh is rated high-risk because eligibility and payment errors have persisted long enough to create direct state financial liability.
Auditors have documented:
Error rates high enough to trigger new federal cost-sharing penalties
Up to $2.5 billion per year in future state costs by federal fiscal year 2028, including:
More than $1.8 billion in benefit costs
More than $600 million in administrative costs
Administrative failure now converts directly into budget exposure.
Put the Numbers on the Table
This is not rhetoric. It is arithmetic.
CalFresh: Up to $2.5 billion per year in added state costs by FFY 2028
EDD: About $1.5 billion in improper payments in 2023–2024, including ~$513 million in fraud in 2024
Medi-Cal: Eligibility discrepancies previously tied to $1.9 billion in questionable payments, with $4 billion+ documented historically
These figures come from audited reports, not advocacy estimates.
Administrative Failures That Create the Platform for Fraud
Not every High-Risk designation comes with a clean fraud total. Two statewide areas are rated high-risk because they enable losses at scale, even when the Auditor cannot yet attach a single dollar figure.
Statewide Information Security & IT Oversight
California’s information-security posture is rated high-risk because basic cyber controls are not consistently in place across agencies.
Auditors have documented:
A statewide cybersecurity maturity average of 1.6 out of 4.0, below the State’s own baseline
46% of non-reporting entities out of compliance with required security certifications or plans
Repeated failure to remediate prior audit findings
The Auditor cannot attach a dollar figure because cyber losses typically surface later — as breaches, downtime, or fraud — but the measured security posture is already below minimum standards.
Statewide Financial Reporting & Accountability
Financial reporting is rated high-risk because California still cannot reliably close its books on time.
Auditors have documented:
Chronic delays in issuing audited statewide financial statements
Weak reconciliation practices across agencies
Inconsistent statewide reporting
Two concrete dollar anchors matter:
California has spent $1 billion implementing the FI$Cal financial system
Late audited financial reporting can place billions of dollars in federal grant funding at risk
A government that spends nearly a billion dollars on a financial system and still cannot produce timely, accurate statewide financials cannot credibly claim fiscal stewardship.
When the Law Is Clear but Enforcement Is Optional: Household Employment
The same control failure appears outside benefit programs.
Under federal and California law, cash-paid caregivers, live-in companions, overnight sitters, and household helpers are household employees. Families who hire them are legally required to:
register as employers,
withhold and pay payroll taxes,
pay employer-side Social Security and Medicare,
carry workers’ compensation,
and issue W-2 forms.
There is no legal ambiguity here.
Yet enforcement is minimal. Compliance is largely complaint-driven, audits are rare, and widespread non-compliance is quietly tolerated. The result is a labor market that is legally taxable, economically relied upon, and functionally unenforced, leaving payroll and employment taxes uncollected.
This is not confusion. It is deliberate non-enforcement.
Energy (Electricity) Costs: Recurring Losses That Never Appear on an Audit
California also imposes massive, recurring costs that are rarely framed as losses.
Electricity rates in California are roughly double the U.S. average for residential customers and often more than double for businesses.
Energy Infrastructure — Stranded and Curtailed Assets
California has invested billions in energy infrastructure (electrical power) that has been:
shut down early (nuclear),
curtailed due to grid limitations (hydro),
or rendered idle by regulatory shifts (natural gas).
Compared with national averages:
households pay for electricity approximately $14 billion more per year
businesses pay for electricity $20 billion or more annually
In Plain Dollars
When we say residents and businesses are paying $34 billion every year in avoidable extra energy costs, here’s what that actually means:
$10–15 billion from higher electricity rates.
Californians pay about twice the national average for electricity. This isn’t because they use more power. It’s because the system costs far more to operate. Bills are higher to pay for an inefficient grid that must juggle unreliable power, maintain backup plants, absorb failed projects, and recover costs faster than normal.
$1–2 billion for electricity that’s paid for and thrown away.
California often produces solar and wind power when it can’t be used, stored or moved. That power is shut off, but producers are still paid. Residents fund electricity that is generated, billed, and then dumped unused.
$3–5 billion for natural-gas backup that can’t be shut down.
Because solar and wind can’t meet demand permanently on their own, gas plants must stay online and ready at all times. Residents pay for solar and wind and for gas plants that were supposed to be replaced but still have to be running at all times (almost idle) as back up.
$1–3 billion for emergency power bought from other states.
During heat waves, California buys electricity at emergency prices because it can’t meet demand internally. Those costs flow straight into utility bills.
$1–2 billion for electrification pushed before the grid is ready.
Electric cars, electric appliances, and building electrification are being forced faster than the grid can handle. Utilities upgrade infrastructure early, and residents pay now — even though the system still struggles to deliver reliable power.
Add it all up:
Californians are paying $34 billion every year just to keep an unreliable energy system from failing.
Californians Pay a Massive Gasoline Surcharge That Never Shows Up in Audits
Californians don’t pay higher gas prices because oil is scarce here — they pay more because of policy choices layered onto the fuel supply. Taken together, these choices cost drivers an estimated $15–25 billion more every year than residents of most other states.
First, California mandates a gasoline blend used nowhere else in the country. This special formula sharply limits who can supply fuel to the state. When a refinery goes down, there are few alternatives, and prices spike almost immediately. This requirement alone adds roughly $5–7 billion per year to what Californians pay at the pump.
Second, the state relies heavily on imported crude oil, even though domestic supplies are closer and often cheaper. Imported oil costs more to transport and is more vulnerable to global disruptions, adding an estimated $2–4 billion per year in extra fuel costs.
Third, refinery closures and shrinking capacity have reduced competition. California has lost multiple refineries, and new ones are effectively impossible to build. With less capacity, even routine maintenance or minor outages trigger sharp price increases. This reduced capacity costs Californians about $3–5 billion annually.
Finally, Californians pay the highest gas taxes and climate-related fees in the nation. State excise taxes, sales taxes, and carbon fees together add over $1 per gallon, translating to roughly $5–6 billion per year in additional costs.
The result is simple: higher commuting costs, higher delivery and service costs, and higher prices for everyday goods. Altogether, these California-specific fuel policies cost drivers an estimated $15–25 billion extra every year — a quiet but massive annual drain on household budgets and the broader economy.
Unaccounted Waste: Where the State Cannot—or Will Not—Produce a Ledger
Beyond audited losses and quantified exposure lies a more troubling category: billions of dollars spent without outcome accounting.
In these cases, the issue is not improper payment after the fact, but the absence of any credible system linking spending to results.
Homelessness Programs — Spending Without Outcomes
California has spent more than $24 billion on homelessness programs across multiple initiatives and departments. Yet the State has no unified system to track:
individuals served,
duration of assistance,
exits to permanent housing,
or long-term outcomes.
Oversight reviews consistently find fragmented data and inconsistent reporting. The result is a stark contradiction: record spending alongside record homelessness counts.
This is not an argument about compassion. It is an accounting fact: the State cannot produce a consolidated ledger showing what taxpayers received in return.
High-Speed Rail — Capital Spending Without Deliverables
California’s High-Speed Rail project has absorbed more than $20 billion in state and federal funds.
Yet:
no operational high-speed rail segment exists,
no completed intercity rail line is in service,
and projected costs continue to rise while scope contracts.
This is not merely cost overrun. It is capital spending without commensurate deliverables, making return on investment impossible to measure.
Disaster Response — Repeated Spending Without Risk Reduction
California spends tens of billions responding to wildfires and disasters. Yet audits continue to note:
incomplete vegetation management,
delayed infrastructure hardening,
and limited evidence that response spending reduces future exposure.
Recovery is funded. Prevention remains under-measured.
Undocumented Immigration: California’s Costs, Not the Rhetoric
California does not keep a single, consolidated ledger of spending on undocumented immigrants, but the costs are real and ongoing. People arrive, remain for years, and rely on public services—and the state and local governments pay for them, often immediately and long before immigration status is resolved.
Healthcare is the largest and fastest-growing expense. Through Medi-Cal expansions, emergency care, and county health systems, California funds routine and emergency medical services for undocumented residents. These costs are front-loaded, unavoidable, and only partially offset by delayed and conditional federal reimbursements.
Education is a permanent obligation. Undocumented children are entitled to K–12 public education, and California bears the full cost—classroom capacity, language services, transportation, meals, and special education—borne primarily by local school districts.
Housing, homelessness, and food assistance add further strain. While federal aid is limited or unavailable, California funds emergency housing, shelters, rental assistance, state-only nutrition programs, and universal school meals. Spending is fragmented and difficult to track by status, but its effects are visible at the local level.
Additional costs—courts, public safety, child welfare, language access, and administrative overhead—further accumulate.
Taken together, undocumented immigration represents a substantial, ongoing fiscal obligation for California, absorbed across state and local budgets without transparent, consolidated accounting. The costs accrue whether or not the system ever provides clarity.
The table below summarizes the estimated annual costs.
Aggregate Estimated Annual Cost (California)
Category | Estimated Annual Cost |
Healthcare | $8–12B |
K–12 Education | $4–6B |
Housing & Homelessness | $3–5B |
Food Assistance | $1.5–2.5B |
Other State & Local Costs | $1–2B |
Total (Annual) | ~$18–27 billion |
Ten-Year Exposure (Status Quo)
If current policies and enforcement practices remain unchanged:
$180–270 billion over a decade, excluding:
infrastructure strain,
secondary housing and wage impacts,
emergency response surges,
long-term service dependency.
This is not a growth projection. It is a continuation of existing obligations.
Accountability Requires Measurement
This is not a conspiracy.
It is an incentive failure.
Industries benefit from ambiguity.
Agencies benefit from insulation.
Politicians benefit from estimates instead of ledgers.
Taxpayers absorb the difference.
Until California insists on measuring what it permits and enforcing what it requires, fraud, waste, and unaccounted loss will remain features of the system — not bugs.
What “High-Risk” Actually Means
The California State Auditor designates an agency or program as high-risk when it:
has persistent control weaknesses,
has failed to correct prior audit findings, and
has already caused or is likely to cause significant financial loss if not fixed.
Agencies remain on the High-Risk List until auditors verify that corrective actions are working in practice, not merely promised.
High-Risk means money has already been mishandled — and large, preventable losses are foreseeable.
Expanded California Loss Ledger
What California Has Lost, Risked, or Failed to Measure
Category | Dollar Figure | Funding Exposure |
EDD improper UI payments (2023–24) | ~$1.5B | State liability after improper payment |
EDD fraud (2024 est.) | ~$513M | State liability |
Medi-Cal questionable payments (historical) | ~$4B | State + conditional federal reimbursement |
CalFresh exposure (annual by FFY 2028) | ~$2.5B/year | Conditional federal → state liability |
FI$Cal system cost | ~$1B | State-only |
Federal funds at risk (late financial reporting) | Billions | Conditional on compliance |
Gasoline Surcharge | ~$15–25B/year | State-regulated cost passed to residents |
Homelessness spending | $24B+ | State + local, outcomes untracked |
High-Speed Rail spending | $20B+ | State + federal, no operational asset |
Undocumented immigration (annual CA cost) | ~$18–27B/year | Primarily state & local; partial, conditional federal |
Extra energy (electricity) costs due to environmental policies | ~$34B/year | Avoidable extra energy cost |
Disaster response & rebuild | Tens of billions | Mixed; prevention outcomes unmeasured |
Key point: Where federal money exists, it is performance-conditioned, delayed, or reimbursement-based. When California fails on controls, timing, or reporting, the federal moneys are cut or delayed and the General Fund fills the gap. The General Fund is funded by Californians’ taxes, so when it fills funding gaps, residents pay — either through higher taxes or reduced public services.
Conclusion
California’s crisis is not a lack of money, compassion, or ambition. It is the quiet abandonment of measurement, enforcement, and consequence. Programs expand faster than controls. Billions are spent without ledgers. Federal funds arrive with conditions that the State routinely fails to meet — shifting risk back onto taxpayers and local communities.
In cities like Compton, this failure shows up as higher energy bills, overcrowded schools, housing pressure, unreliable services, and growing distrust.
The Pattern Is Structural, Not Accidental
Spend first. Measure later. Argue endlessly. Deliver little — enrich insiders.
Until California restores basic checks and balances, the cost will continue to go up, and the communities like Compton which are least able to absorb it will keep paying first.
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