California Awarded “F” Grade by Truth In Accounting
The non-partisan Truth in Accounting Think Tank rates states on their ability to pay their financial obligations as they come due. California just received an “F” grade and was rated as one of the ‘Bottom Five Sinkhole States’.
Truth in Accounting (TIA) nonprofit is dedicated to promoting transparency and accuracy in government financial reporting. Their aim is to make government financial statements more understandable, reliable, and accurate. TIA also advocates reducing in government spending and debt.
When states do not have enough money to pay their bills, TIA takes the money needed to pay bills and divides it by the estimated number of state taxpayers to quantify the state’s Taxpayer Burden™, as shown above.
The State of California made the Bottom Five list by having a Taxpayer Burden of $17,400 for every tax paying man, woman, and child in the state. But California also for the fifth year in a row, had not issued its fiscal year ending June 30, 2023 annual financial report as of August 31, 2024.
Based upon the state’s last audited financial report for the fiscal year ending in June 2022, California needed $260 billion to pay its bills. Not only is that the largest amount of any state, but it also includes unfunded retirement obligations where California has only set aside 73 cents for every dollar of promised pension benefits and three cents for every dollar of promised retiree health care benefits.
Under Government Accounting Officers Association standards, states must file audited financial statementswithin 180 days of the end of their fiscal year to be deemed “compliant.” Failure of a government entity to file an audited financial statements within 270 days is deemed an event of default.
California has been in a state of default for failure to file timely accounting statements since March 28, 2019. As a sovereign state, there is no entity that can force California to be compliant, but an event of accounting default by a state allows the President of the United States to reduce, suspend or cancel any grants approved by the U.S. Congress to the state.
California received $161.7 billion, the largest amount of federal grant funding of any state in 2022. That cash supports infrastructure, education, and healthcare for 39 million Californians.
President Trump’s Big Beautiful Budget Bill passed the U.S. House and has moved to the U.S. Senate. Gov. Gavin Newsome has been complaining that the legislation would reduce or eliminate grants for Californians including
❌ coverage subsidies for up to 3.4 million Californians under the Affordable Care Act expansionplan;
❌ $22 billion in federal Medicaid funding for low-income adults;
❌ $4 billion in for non-emergency benefits;
❌ billions of dollars for hospitals and providers payments across California;
❌ defunding billions of Medicaid dollars for nonprofit providers like Planned Parenthood;
❌ cut at least $2.3 to $4.9 billion annually of federal funding for SNAP payments to about 250,000 recipients.
No one believes California will change its ways and immediately file its defaulted 2023 and 2024 audited financial statements. Therefore, President Trump has the authority to slash over $300 billion of California federal funding.