California could be haemorrhaging a staggering $250 billion in taxpayer funds through rampant fraud, waste, and abuse, according to Republican-backed analysis of whistleblower tips that draws alarming parallels to Minnesota's multibillion-dollar COVID-era scandal that has already forced Governor Tim Walz to abandon his re-election bid.
Steve Hilton, who is running for California governor, and Herb Morgan, who is seeking the state controller position, unveiled findings from their CALIFRAUDIA tip-line investigation on Monday—a damning review of the Golden State's bloated welfare system that they allege has become a piggy bank for scammers and political hacks. Governor Gavin Newsom's office has dismissed the claims as 'MAGA made-up numbers'.
'Corruption, Fraud and Abuse on an Epic Scale'
'This is what you get from 16 years of one-party rule', Hilton is expected to declare at a Monday afternoon press conference in San Francisco. 'Corruption, fraud and abuse on an epic scale. Gavin Newsom and the corrupt Democrat machine have stolen our money and handed it out to corrupt cronies and political front groups.'
Minnesota's Cautionary Tale
The California allegations emerge as Minnesota grapples with what federal prosecutors describe as potentially the largest fraud scandal in American history. First Assistant US Attorney Joe Thompson told reporters in December that half or more of the roughly $18 billion in federal funds supporting 14 Minnesota-run programmes since 2018 may have been stolen.
The Minnesota case centred on the nonprofit Feeding Our Future, which prosecutors say fraudulently siphoned approximately $250 million from the Federal Child Nutrition Program by falsely claiming to distribute millions of meals during the pandemic. More than 75 people have been charged, with at least 56 pleading guilty and seven convicted, including the group's leader. Some defendants spent taxpayer money on lakefront property, luxury cars, jewellery, first-class plane tickets and a rented private villa in the Maldives, according to court documents.
The scandal proved politically fatal for Walz, who announced Monday he would not seek a third term amid heightened scrutiny of his administration's handling of the crisis. The 2024 Democratic vice presidential nominee cited 'the political gamesmanship we're seeing from Republicans' and said he needed to focus on combating fraud rather than his own political interests.
Newsom Fires Back at 'MAGA Made-Up Numbers'
Governor Gavin Newsom's spokesperson dismissed the California fraud allegations as fabricated. 'Who is Steve Hilton? We don't respond to MAGA made-up numbers', said Izzy Gardon in a statement. 'In the actual world where adults govern, Governor Newsom has been cleaning house. Since taking office, he's blocked over $125 billion in fraud, arrested criminal parasites leaching off of taxpayers, and protected taxpayers from the exact kind of scam artists Trump celebrates, excuses, and pardons.'
The Republican candidates fired off a formal letter to Attorney General Pam Bondi and federal inspectors general demanding that the FBI's Public Corruption and Complex Fraud units investigate. They're also demanding independent audits of Medi-Cal, CalFresh, CalWORKs, and housing programmes, and want real-time public tracking of every state payment.
A System Already at 'High Risk'
The California State Auditor's recent High Risk Report had already flagged systematic problems across CalFresh, unemployment insurance, Medi-Cal eligibility, and financial reporting. Hilton and Morgan allege widespread pay abuse within the state's K-12 education system and noted the known problem of fake community college applications designed to grift student aid funds. Prior reports from the California State Auditor have described a lack of accountability in homelessness and social welfare funding that raises the risk of fraud and waste.
The poster child for California's catastrophic incompetence remains the unemployment insurance disaster during COVID, when the state admitted losing more than $55 billion to fraudsters—including international crime syndicates. A 2024 report from Minnesota's Office of the Legislative Auditor found that the Feeding Our Future scandal was not merely the result of sophisticated criminals, but a systematic failure inside state agencies tasked with oversight. The report found that officials raised concerns and flagged irregularities early, yet continued approving payments.
Trump Administration Escalates Pressure
California watchdogs raised the alarm about waste and bloat in the state's budget after bombshell revelations in Minnesota found rampant theft of COVID-era social services funds. The widespread scam involved members of the Somali community creating fake nonprofits and billing the state for services that were never provided. The Trump administration announced in December it was freezing child care funds to Minnesota and demanding an audit of fraud schemes, with Deputy Secretary of Health and Human Services Jim O'Neill citing 'blatant fraud that appears to be rampant in Minnesota and across the country'.
Gavin Newsom now has 8 separate agencies officially designated as “high risk for waste, fraud, abuse, or mismanagement” in California
— Wall Street Apes (@WallStreetApes) January 2, 2026
Roughly $76 billion in fraud, improper payments and mismanagement was discovered by the auditor
Let me repeat that, $76 BILLION
“Representative… pic.twitter.com/2DC1tCGnqc
Why California's Fraud Crisis Matters
The scale of alleged fraud in both California and Minnesota represents a fundamental breakdown in government accountability that extends beyond partisan politics. When billions of taxpayer dollars meant to help vulnerable Americans instead enrich criminals, it undermines public trust in the social safety net and provides ammunition for those seeking to dismantle crucial programmes.
As California heads into a crowded 2026 gubernatorial race—with Hilton polling at 12% alongside other candidates—the fraud allegations threaten to reshape the political landscape in a state that hasn't elected a Republican governor since Arnold Schwarzenegger left office in 2011. Minnesota's cautionary tale, culminating in Walz's stunning decision to abandon his re-election campaign, demonstrates that even in solidly Democratic states, the political consequences of perceived mismanagement can prove devastating.
