Meg Whitman’s Claim of $7.5 Billion in State Fraud Assessed

On May 17, GOP gubernatorial candidate Meg Whitman told an audience of approximately 150 persons in Roseville that $7.5 billion a year in fraud occurs annually in three state programs: welfare, health care for the poor and in-home care for the elderly.

According to the Sacramento Bee’s Capitol Alert, Whitman called for the creation of a statewide grand jury to root out this alleged fraud.

Logic would suggest that if the volume of corruption Whitman claims happens annually were taking place, a grand jury would not be necessary to discover it.

Using the California Budget Project’s number, $6.2 billion total is spent on the state’s welfare program, CalWorks. Some $3.3 billion is given out in monthly checks, $1.1 billion in employment-related spending, $1.1 billion in childcare and $804 million in local county administration costs.

The federal government matches state spending on a more than $4 to $1 ratio.

In his May Revision, Gov. Arnold Schwarzenegger proposes elimination of the program October 1, 2010 for savings to the state of $1.1 billion.

Extrapolating from $1.1 billion for savings over three quarters of the fiscal year, a full year’s state costs would be $275 million more for a total of roughly $1.4 billion.

The In-Home Supportive Services program, offering care for the elderly poor, has annual spending of $5.5 billion, according to the Legislative Analyst in a recent report.

Of that total, the federal government shoulders 50 percent of the costs in caring for 99 percent of the program’s 430,000 participants. That’s $2.75 billion. Counties assume 17.5 percent of the costs,  $963 million. The remaining 32.5 percent is paid by the state. That’s $1.8 billion.

As proposed in the governor’s budget plan for the fiscal year beginning July 1, Medi-Cal expenditures are nearly $37 billion, of which $28 billion comes from the federal government and $9 billion from the state’s general fund. That’s a decrease of $2 billion from the current fiscal year’s state pay-out of $11 billion.

If, as Whitman says, the $7.5 billion in fraud is shorting the state – not the federal government – the universe of fraud would be contained within the total state spending in those three programs: $1.4 billion plus $1.8 billion plus $9 billion.

Total: $12.2 billion.

If $7.5 billion of that $12.2 billion is fraud that means more than 61 percent of spending in those three programs is bogus.

Logic suggests hospitals, case workers, emergency room physicians, state administrators, nurses, drug companies, employment training facilities, childcare providers, in-home care workers and the myriad other participants in the three programs would have to work serious overtime to do their jobs and bilk the state 61 cents on the dollar.

Nor does it seem plausible such a level of corruption would go unnoticed, even without creation of a statewide grand jury.

A telephone call to Whitman’s campaign seeking clarification of her $7.5 billion figure was not returned May 17.


Filed under: Politics


  1. Greg –
    You should be California’s Legislative Analyst. Get piece!
    Stan Statham

    Comment by Stan Statham — 5.18.2010 @ 5:17 am

  2. Great analysis —

    But it does not refute the Whitman campaign statement — . $7.5B of the total state and federal spending ( /-$54B) = 14%.

    From my own consulting experience in Sacramento, that amount of waste that accrues to bad data and “check the checker” processes could easily amount to 10%.

    If we can save %7.5B by introducing better business practices — do we really care if it is state or federal tax dollars — or a combination of both? It is still a significant saving!!

    That said, I think it is incumbent on the Whitman campaign to justify the statement —

    Comment by Joyce Stoer Cordi — 5.18.2010 @ 9:05 am

  3. The assumption underlying these calculations also would mean that 14,000 county employees, who are administering the CalWORKS, IHSS and Indigent Health Care programs are either criminally negligent or incompetent, neither of which is true. They are very dedicated staff that go to the nth degree to ensure appropriate levels of care, but not waste, fraud or abuse.

    Comment by Paul McIntosh — 5.18.2010 @ 1:09 pm

  4. When a Republican like Meg-o gets desperate, she turns to the old “demonize the poor” tactic, a staple of Republican campaigns since Nixon and Reagan.

    Arnold is also doing it. He claims that the fraud rate n the In Home Supportive Services is 25 percent. He wants to spend more than $41 million for so-called “anti-fraud” efforts in IHSS.

    And the justification for all this? A recent report by the Sacramento County District Attorney’s Office found fewer than 100 potential cases of IHSS fraud out of a universe of more than 20,000 IHSS consumers.
    Even if all of these allegations are proven true, that’s hardly the kind of fraud “epidemic” that justifies spending tens of millions of dollars and branding more than 400,000 elderly, blind and disabled Californians and those who care for them as fraud criminals.

    Comment by StevefromSacto — 5.19.2010 @ 9:15 am

  5. Wildly inflated numbers, claims with no facts to back them and blame strewn about like confetti on New Year’s Eve are the staples of American politics. Meg’s claims of fraud rates (who came up with them, where did they get their info) are as over blown as her claims of being pro small business. During her time at eBay she did more to harm the smallest of US businesses (those in bedrooms and garages across the country) than anyone before her. She made eBay a boot on the throat of micro-business, choking them with new fees and increased charges. Claiming now to be so supportive is laughable but typical of the revisionist hype spewed by political machines once they get set in motion.

    No worse than Fiorina and her revision of history. Only in politics can being fired morph into a successful career. But if you measure success by dollars those two women have “succeeded” alright but at what cost to their Cos and the economy? Getting paid to go away isn’t the best recommendation imo.

    Comment by DixieMay — 5.31.2010 @ 6:34 am

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