California’s budget deficits are real. The Employment Development Department scandal cost taxpayers billions. The indictment of a former Newsom chief of staff is a serious matter working through the courts. These are legitimate criticisms of how Sacramento has managed public money over the past seven years.
They do not add up to an “empire of fraud.”
A recent article in City Journal, published by the conservative Manhattan Institute for Policy Research, attempts to build that case. The piece strings together fraud cases, management failures, and questionable math to arrive at a striking claim: that fraudsters, scammers, and organized crime rings have stolen at least $180 billion from California taxpayers on Newsom’s watch.
The number deserves scrutiny before anyone runs with it.
The EDD Scandal, in Context
The centerpiece of the City Journal piece is the EDD unemployment fraud that occurred during the COVID-19 pandemic. Federal benefit money moved quickly and, it turned out, without adequate verification. Fraudulent claims ran into the billions.
It was a serious failure. The state has acknowledged it. Investigations followed, prosecutions followed, and the EDD has since overhauled its identity verification systems.
But the EDD failure did not happen in isolation. Virtually every state that distributed federal pandemic unemployment funds experienced significant fraud. The pressure to move money fast came from the federal level, under the Biden administration’s directives to avoid leaving unemployed workers waiting. The EDD had also expanded its workforce rapidly to handle claim volume, bringing on staff who were not yet fully trained.
None of that excuses the outcome. Newsom’s administration bore responsibility for implementation, and the losses were substantial. But attributing the nationwide pandemic fraud surge primarily to a California-specific culture of corruption requires ignoring how it played out everywhere else.
The Williamson Case
City Journal also focuses on the indictment of Dana Williamson, Newsom’s former chief of staff. She faces charges of helping bogus payments from a campaign fund and falsifying documents to obtain pandemic relief funds for her own business.
The charges are serious. The case is active.
City Journal draws from the Williamson indictment a broader conclusion: that “the culture of fraud in California is so pervasive that it has allegedly reached the governor’s own office.” That framing deserves a close read. It starts by asserting a culture of fraud exists, then uses the Williamson case as evidence of that same culture. The logic is circular. A single individual’s alleged misconduct, however serious, does not demonstrate an institutional culture, and an indictment is not a conviction.
The Homelessness Accounting Problem
One of the shakier moments in the City Journal piece involves a 2024 state auditor report on homelessness spending. The auditor found that the Newsom administration had spent $24 billion on homelessness programs without adequately tracking whether those programs worked.
That report was a legitimate rebuke. The lack of outcome tracking has been a persistent and fair criticism of how California funds social services. Advocates, auditors, and legislators across the political spectrum have called for better accountability mechanisms.
But City Journal treats the $24 billion as if it were stolen. The auditor found poor tracking and accountability failures. That is different from fraud. The money was most likely spent on actual programs: shelters, services, housing placements, outreach workers. Spent poorly, perhaps. Spent without adequate measurement, certainly. Stolen is a different allegation entirely, and City Journal does not prove it.
What Newsom Actually Owns
Stripping away the inflated framing leaves a real record of management failures that Newsom will carry into whatever comes next politically.
This article draws on reporting from CalMatters.
The state’s structural budget deficit is not a fabrication. California lawmakers, with Newsom’s support, expanded spending during years when capital gains tax revenue ran high. When markets cooled, the revenues dropped and the commitments did not. The Legislative Analyst’s Office has documented this pattern through multiple budget cycles. The deficit could persist for years.
The EDD losses were real. The homelessness spending accountability gaps are real. The Williamson indictment is real.
These are the kinds of failures that tend to define a governor’s legacy in the eyes of voters and rivals. When Newsom moves toward a presidential campaign after leaving office in January 2027, Democratic primary opponents and eventual Republican challengers will have genuine material to work with. They will not need to invent an empire of fraud.
Journalism and the $180 Billion Figure
The $180 billion figure City Journal puts forward as a conservative estimate of fraud on Newsom’s watch does not hold up when you trace the sourcing. The piece aggregates disparate cases, applies assumptions the article does not defend rigorously, and counts spending accountability failures as equivalent to theft.
Sloppy accounting in a government program is a policy failure. Fraud is a crime. The distinction matters, both for accuracy and for assigning the right kind of accountability.
California has genuine problems with how it spends public money. A governor who presided over years of budget expansion on shaky revenue assumptions, who failed to put adequate oversight systems in place for major spending programs, deserves serious scrutiny on those terms.
Calling it an empire of fraud asks the evidence to carry more weight than it can bear.