This report, ‘CALIFRAUDIA’, is based on a preliminary review of fraud, waste, and abuse of taxpayer money across California’s sprawling welfare state and bloated government programs carried out by Steve Hilton and Herb Morgan, candidate for State Controller. It comes after major fraud scandals in other states and California’s own unresolved unemployment insurance failure, in which the state admitted losing more than $55 billion, including to fraudulent claims, with payments sent to criminal networks and ineligible recipients. The State Auditor’s High Risk Report found systemic problems in areas including CalFresh administration, unemployment insurance payments, Medi Cal eligibility, financial reporting, management of federal funds, and information systems. Despite the scale of these failures, California has never conducted a comprehensive, independent, top-to-bottom audit of its broader social services system.

The CALIFRAUDIA review is based on state program budgets, known error rates, prior fraud cases, and hundreds of public tips submitted through Califraud.com, the live intake platform that the Steve Hilton for Governor campaign launched on December 3rd 2025 to collect evidence from whistleblowers, citizens, contractors, and service providers. These submissions have highlighted recurring allegations of fraud, waste, and abuse across multiple areas of state government.

Based on this preliminary review, Hilton and Morgan estimate that California’s exposure to fraud, waste, and abuse across major state programs is likely to reach

$250 billion. This estimate is new, reflects their independent analysis, and underscores the urgent need for formal investigation and audit, as a matter of basic fiscal responsibility.

Examples brought to their attention as part of the CALIFRAUDIA review include:

• K –12 staffing and pay abuse, including allegations of job reclassifications triggering automatic salary increases while classroom staffing is reduced
• Other education spending, including Community College financial aid scams and Higher Education contracting abuse, including alleged misuse of education funds, procurement violations, and improper contracting
• Housing and Homelessness programs, including grant funded nonprofits and intermediary organizations receiving billions in public funds
• Health and Human Services, including Medi Cal, CalFresh, and other welfare programs with known eligibility, verification and payment control weaknesses
• Infrastructure and major contracting, including large capital projects and long term vendor relationships
• Public pension and retirement systems, as a potential area of long term fiscal risk and mismanagement, including public sector pension abuse through practices like “double-dipping” and “spiking” to generate excess payments

California’s exposure to all this fraud, corruption and abuse is driven by two main factors:

• The size and scope of California’s welfare state and bloated state government, which have contributed to California now having the nation’s highest unemployment and poverty rate and historically low labor force participation
• Sixteen years of one party rule that have bred a culture of corruption, complacency and tolerance for incompetence and mismanagement

OUR PLAN TO CLEAN UP THE MESS:

Steve Hilton and Herb Morgan have laid out their plan to root out fraud and save taxpayer money. Key elements include:

• A top-to-bottom, independent audit of Medi-Cal, CalFresh, CalWORKs, housing, homelessness, and other major taxpayer-funded programs
• Formal requests to the U.S. Department of Justice to deploy FBI Public Corruption and Complex Fraud units to investigate misuse of public funds
• Once elected as Governor and State Controller, coordination with the Inspectors General at HHS, USDA, and the Department of Labor to review the flow of federal funds through California agencies
• The creation of a joint federal–state task force with asset-recovery authority

This reform framework centers on transparency, performance accountability, and real-time public access to state spending data. Restoring trust and protecting

taxpayers requires both rigorous financial controls and executive leadership willing to enforce them.

California spends more on social programs than any state in the nation, yet oversight remains weak, fragmented, and ineffective, a breakdown that implicates both fiscal governance and executive accountability. Sunlight isn’t just a slogan; it’s a control system. Every state payment will be published in real time so that anomalies can be flagged before the money leaves the building.