{"id":3254,"date":"2026-07-19T13:11:50","date_gmt":"2026-07-19T13:11:50","guid":{"rendered":"https:\/\/interstatelogisticshubs.com\/?p=3254"},"modified":"2026-07-19T13:11:50","modified_gmt":"2026-07-19T13:11:50","slug":"whos-going-to-fix-californias-fiscal-apocalypse","status":"publish","type":"post","link":"https:\/\/interstatelogisticshubs.com\/?p=3254","title":{"rendered":"Who\u2019s going to fix California\u2019s fiscal apocalypse?"},"content":{"rendered":"
\n

Herb Morgan isn\u2019t a politician.\u00a0\u00a0He\u2019s a retired chief investment officer and financial services executive who oversaw billions in institutional assets.\u00a0\u00a0Now he\u2019s running for California state controller, arguing that California needs a financial professional in the job.\u00a0\u00a0His opponent, incumbent Marla Cohen, has no finance background.<\/p>

Read more Will We Have an Election This Year?<\/a><\/p>\n

Drawing on state audits and official state and federal data, Morgan estimates $312 billion to $425 billion in misplaced fiscal exposure over the past five years.\u00a0\u00a0The estimates include $55 billion in improper unemployment payments documented by the state auditor; an estimated $95\u2013115 billion in Medi-Cal improper payments using federal methodology; and $24\u201337 billion spent on homelessness programs, with auditors finding little accountability for results.\u00a0\u00a0His conclusion is blunt: California has one of the nation\u2019s worst records for improper payments and financial controls.<\/p>\n

\u201cAudits in California tend to happen after the money is already gone,\u201d he has said.\u00a0\u00a0\u201cThat is not accountability.\u201d\u00a0\u00a0Past waste is gone; better controls can save billions.<\/p>\n

The controller oversees state finances but does not set the spending agenda.\u00a0\u00a0Morgan\u2019s platform \u2014 real-time oversight, automated fraud detection, a public dashboard tracking every dollar \u2014 deserves attention.\u00a0\u00a0But he cannot solve the problem the next governor will inherit.<\/p>\n

According to the state\u2019s nonpartisan Legislative Analyst\u2019s Office, Sacramento faces a $35-billion annual structural deficit that will confront the next governor in the 2028\u201329 budget.\u00a0\u00a0That is the inheritance.\u00a0\u00a0And Sacramento\u2019s proposed response is what voters should fear.<\/p>\n

Over the past four years, California accumulated roughly $125 billion in deficits despite nearly 50 percent growth in personal income tax collections.\u00a0\u00a0The Legislative Analyst\u2019s Office says that running operating deficits during a revenue boom signals a structural \u2014 not cyclical \u2014 problem: Spending commitments have grown faster than recurring revenues can sustain.<\/p>\n

The budget\u2019s May Revision purports to achieve balance through 2028 largely by drawing down reserves, suspending rainy-day deposits, and relying on additional borrowing.\u00a0\u00a0The Assembly\u2019s own budget adviser projects an operating deficit continuing through the next governor\u2019s entire first term.\u00a0\u00a0The LAO warns that a market correction on the scale of the 2000 dot-com bust \u2014 which it considers the appropriate historical parallel given current conditions \u2014 could lead to a $100-billion revenue shortfall.\u00a0\u00a0But the reserves that could cushion that shock have already been spent.<\/p>\n

Most of the General Fund is effectively off limits for cuts.\u00a0\u00a0Debt service is automatic, pension obligations are protected, and Proposition 98 guarantees roughly 40 percent of revenues for K\u201314 education.\u00a0\u00a0The governor has direct leverage over only a relatively small share of spending.<\/p>\n

Here is where Sacramento\u2019s answer becomes something voters should regard with alarm.\u00a0\u00a0The May Revision proposed spending reductions of only $1.8 billion \u2014 less than one percent of the General Fund.\u00a0\u00a0Instead, it relied on roughly $10 billion in annual revenue measures against a $35-billion structural gap.<\/p>

Read more The Devil wears maternity clothes<\/a><\/p>\n

The electoral playbook is primarily spending-driven, and Xavier Becerra, candidate for governor, makes no secret of that.\u00a0\u00a0His platform proposes moving California toward universal single-payer health care, expanding childcare assistance, and strengthening Medi-Cal \u2014 every one of them a sizable spending increase.<\/p>\n

Becerra points to his experience leading the U.S. Department of Health and Human Services, but the federal government operates under fiscal rules that bear little resemblance to California\u2019s constitutional budget constraints.\u00a0\u00a0More notably, his tenure at HHS coincided with a historic surge in improper Medicaid payments and the continued enrollment of ineligible recipients, raising questions about his record of fiscal oversight.<\/p>\n

Becerra\u2019s opponent Steve Hilton correctly identifies the problem: a spending surge that pushed spending growth 50 percent above inflation over a decade, while delivering worsening outcomes on every metric that matters \u2014 housing, homelessness, public safety, education.\u00a0\u00a0His prescription \u2014 return spending to pre-pandemic levels, eliminate income taxes for households earning under $100,000, and pressure a Democrat supermajority into accepting cuts \u2014 is more a governing philosophy than a workable budget.\u00a0\u00a0Accounting for the tax cut raises the required savings to roughly $60 billion, a target unlikely to be achieved by a Republican governor facing a Democrat supermajority.\u00a0\u00a0Hilton\u2019s contribution is not a detailed fiscal blueprint, but a diagnosis: California has a spending problem rather than a revenue problem.<\/p>\n

A Republican governor facing a Democrat-supermajority Legislature will not close a $60-billion gap by nicely asking lawmakers to cut a third of state spending.\u00a0\u00a0What Hilton offers that Becerra does not is the correct framing of the problem, with a willingness to say so publicly.\u00a0\u00a0In a race where his opponent wants to expand programs he cannot afford while calling the expansion a fiscal plan, that counts for something.<\/p>\n

In January 2028, the next governor will inherit a $35-billion structural deficit, depleted reserves, counties already under fiscal pressure, and a Legislature accustomed to balancing budgets with temporary fixes.\u00a0\u00a0Most major spending categories will be legally or politically difficult to cut, while revenue will remain dependent on volatile capital gains.\u00a0\u00a0Political pressure to increase taxes and fees will be intense, even as higher-income taxpayers remain the state\u2019s most volatile revenue source.<\/p>\n

Herb Morgan wants to stop tomorrow\u2019s waste.\u00a0\u00a0The next governor must confront yesterday\u2019s promises.\u00a0\u00a0Gavin Newsom will depart Sacramento in January, leaving his successor the gift of a budget balanced only in his imagination.\u00a0\u00a0Whatever Becerra and Hilton are promising on the campaign trail, that fiction will be the next governor\u2019s inheritance.<\/p>\n

Garvin Walsh, retired from a career on Wall Street, is a resident of Cardiff-by-the-Sea, Calif.\u00a0\u00a0He is an elected member of the San Diego County Republican Central Committee.<\/em><\/strong><\/p>

Read more Trans Netherlands<\/a><\/p>\n

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\"<p><em>Image:<\/figure>\n<\/em><\/strong><\/p>\n

Image: Famartin via Wikimedia Commons, CC BY-SA 4.0 (cropped).<\/em><\/em><\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Herb Morgan isn\u2019t a politician.\u00a0\u00a0He\u2019s a retired chief investment officer and financial services executive who oversaw billions in institutional assets.\u00a0\u00a0Now he\u2019s running for California state controller, arguing that California needs a financial professional in the job.\u00a0\u00a0His opponent, incumbent Marla Cohen, has no finance background. Read more Will We Have an Election This Year? Drawing on […]<\/p>\n","protected":false},"author":1,"featured_media":195,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[151,2],"tags":[1324],"class_list":["post-3254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-california","category-politics","tag-related-topics-california-steve-hilton"],"yoast_head":"\nWho\u2019s going to fix California\u2019s fiscal apocalypse? - Interstate Logistics Hub<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/interstatelogisticshubs.com\/?p=3254\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Who\u2019s going to fix California\u2019s fiscal apocalypse? - Interstate Logistics Hub\" \/>\n<meta property=\"og:description\" content=\"Herb Morgan isn\u2019t a politician.\u00a0\u00a0He\u2019s a retired chief investment officer and financial services executive who oversaw billions in institutional assets.\u00a0\u00a0Now he\u2019s running for California state controller, arguing that California needs a financial professional in the job.\u00a0\u00a0His opponent, incumbent Marla Cohen, has no finance background. 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