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California Gov. Gavin Newsom is suing the Trump administration for pulling back $4 billion in federal funding for high-speed rail. But President Donald Trump hasn’t actually derailed any trains. And all the lawsuit has really done is expose the trainwreck that is California’s fiscal situation.
For months, Newsom has bragged about California having the world’s fourth-largest economy and sending back more money to Washington than it takes in. He’s right, but he’s also conveniently ignoring that California also boasts the nation’s highest real poverty rate and a projected budget deficit as high as $20 billion.
That just scratches the surface of the fiscal mess Californians deal with every day – not just in Sacramento, but at every level of government.
California Gov. Gavin Newsom presents his revised 2025-2026 state budget during a news conference in Sacramento, May 14, 2025. (AP Photo/Rich Pedroncelli, File)
Let’s start with the high-speed rail project. Voters approved it in 2008 to run from San Francisco to Los Angeles at an approximate cost of $40 billion with a completion date of 2033. As of June of this year, the projected cost was as high as $128 billion with no track laid.
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Los Angeles residents know this kind of bureaucratic ineptitude all too well. Complex and sometimes conflicting county and state environmental regulations played an important role in the closure of the county’s second-largest landfill, Chiquita Canyon, at the end of 2024.
Residents now have to fund the added expense of hauling trash to a landfill farther away while local politicians obsess over “price-gouging” by those who haul and handle residents’ garbage. Taxpayers are burdened enough with the political junk Sacramento sends their way; local officials would be a lot more useful if they reduced, instead of added, to the heap.
Los Angeles, meanwhile, can’t seem to provide essential services at any price, gouged or otherwise. Check out all of the fire hydrants that didn’t work during the recent fires and the empty city-run reservoir nearby. Anyone who oversaw those failures and still has a job is gouging taxpayers with every paycheck.
Paying for incompetence is bad enough, but what about corruption? That’s what taxpayers across the state have funded for years as officials in state, county and city governments have colluded in a Medicaid reimbursement scheme by allowing government-owned providers to charge as much as 13 times more for certain services than the private sector is allowed to charge.
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Not only has this practice squeezed private providers, thereby limiting care options for non-Medicaid patients, but it has allowed California to paper over its unfunded pension obligations for government employees by pocketing the difference.
And those obligations will come due faster than policymakers prefer as the nation’s highest cost-of-living and top marginal tax rates continue to drive taxpayers and businesses out of the state.
“Businesses that want to grow and parents who want to provide for their families have been moving out of California for a decade, especially to states like Texas and Florida that have no or minimal income taxes,” said Vance Ginn, Ph.D., chief economist for the Office of Management and Budget during the first Trump administration. “And that trend isn’t likely to reverse itself because lawmakers and regulators up and down the state keep spending more and regulating and taxing themselves out of residents.”
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Cleaning up California’s fiscal mess will take a lot more than creative accounting tricks, piecemealing federal funding grants and soaking the taxpayers – like the one-time windfall of capital gains taxes that created the temporary surplus in 2022. It requires reining in out-of-control spending while also reducing the regulatory burden on residents and businesses.
That’s why Newsom’s lawsuit over the train funds isn’t about infrastructure. It’s about image. His flip on gender identity issues and sudden support for reducing California’s atrocious housing regulations were sops to “the middle,” but he also wants to make the Left happy by showing he can stand up to Trump. At federal taxpayer expense, of course, all the while claiming that he’s keeping California “innovative” while basic governance collapses underneath.
