Audit Warns California Can’t Track Billions — Leaders Push New Billionaires Tax Anyway
A recent nonpartisan audit has placed eight California state agencies on a high-risk list for potential waste, fraud, or mismanagement, intensifying debate as labor groups advance a proposed wealth tax aimed at the state’s richest residents.
In a December update, the California State Auditor warned that weaknesses across major programs could expose taxpayers to billions in losses if oversight is not improved. Newly flagged was the Department of Social Services, which administers CalFresh, California’s food assistance program. Federal rule changes could require the state to absorb as much as $2.5 billion annually due to persistent payment error rates.
The audit also reiterated ongoing concerns at the Employment Development Department, where pandemic-era unemployment fraud remains estimated between $20 billion and $32 billion, and at the Department of Health Care Services, which oversees Medi-Cal and reported roughly $4 billion in questionable payments linked to eligibility issues.
Another major focus was homelessness spending. While state and local governments have allocated between $24 billion and $37 billion since 2019, auditors found limited outcome tracking, making it difficult to assess whether investments reduced homelessness despite rising costs.
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The findings arrive as proponents gather signatures for the 2026 Billionaire Tax Act, a proposed ballot measure backed by SEIU-United Healthcare Workers West. The initiative would impose a one-time 5% tax on net worth exceeding $1 billion, with revenue earmarked largely for healthcare, education, and food assistance programs.
Supporters, including Rep. Ro Khanna, argue the measure would help stabilize funding amid potential federal cuts and address widening wealth inequality. Opponents counter that the audit underscores the need for stronger accountability before raising new taxes, warning the proposal could accelerate capital flight and reduce long-term investment.
Gov. Gavin Newsom has previously opposed state-level wealth taxes, citing enforcement challenges and economic risks. The initiative must still qualify for the November 2026 ballot, setting the stage for a high-stakes debate over whether California should reform spending practices first—or seek new revenue from its wealthiest residents.
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