In early 2025, California Governor Gavin Newsom requested a $6.2 billion emergency bailout for Medi-Cal, the state’s Medicaid program, to address a significant funding shortfall. This request was broken into two parts: a $3.4 billion loan from the general fund to cover costs through March 2025, followed by an additional $2.8 billion to sustain the program through June 2025. The shortfall stemmed from higher-than-expected costs, with total Medi-Cal spending projected to reach $188.1 billion for the 2025-26 fiscal year, an 84% increase over six years.
Several factors contributed to the overrun. Enrollment surged beyond projections, partly due to expanded eligibility for undocumented immigrants, which began in 2024 and cost an estimated $9.5 billion in 2024 alone, including $2.8 billion in unanticipated expenses. Other drivers included rising pharmacy costs and higher overall enrollment, partly due to pandemic-era policies that delayed eligibility reviews. About 15 million Californians, roughly half the state’s children, rely on Medi-Cal for healthcare.
The request sparked debate. Republicans, including Assembly Minority Leader James Gallagher and Senator Brian Jones, criticized the expansion to undocumented immigrants, arguing it strained the system and reduced access for legal residents. They called for an audit to investigate cost spikes, with some, like Assemblyman Bill Essayli, claiming the program was insolvent. Democrats, however, defended the expansion as a step toward universal healthcare, with Newsom himself stating it was “partially” responsible for the shortfall but aligning with his belief in universal coverage. He expressed openness to adjustments but ruled out reversing the expansion.
Bill Essayli is now currently serving as the interim United States attorney for the Central District of California, having been appointed to the position in April 2025. He previously served as a member of the California State Assembly from 2022–2025 until his appointment as interim U.S. attorney. On April 8, 2025, as United States Attorney, Essayli announced the formation of the Homelessness Fraud and Corruption Task Force, which will investigate fraud, waste, abuse, and corruption involving funds allocated toward the eradication of homelessness within the seven-county jurisdiction of the Central District of California. The Central District of California is comprised of approximately 20 million residents within the counties of Los Angeles, Orange, Riverside, San Bernardino, San Luis Obispo, Santa Barbara, and Ventura.
This task force will be comprised of federal prosecutors from the Major Frauds Section, the Public Corruption and Civil Rights Section, and the Civil Division’s Civil Fraud Section of the United States Attorney’s Office for the Central District of California. Assisting the U.S. Attorney’s Office will be the FBI, the United States Department of Housing and Urban Development Office of Inspector General (HUD-OIG), and IRS Criminal Investigation.
Despite voter-approved initiatives and billions of dollars spent on tackling this issue, homelessness remains a crisis, especially in Los Angeles County. Last month, a court-ordered audit found that homelessness services provided by the city and county of Los Angeles were “disjointed” and contained “poor data quality and integration” and lacked financial controls to monitor contracts for compliance and performance.
Newsom’s administration noted that tax revenues were holding up, with February 2025 collections $4.6 billion above projections, providing some fiscal cushion. However, the bailout adds pressure to California’s budget, already facing a proposed $7 billion reserve withdrawal for 2025-26. Critics worry about long-term sustainability, especially with potential federal Medicaid cuts looming under the Trump administration. Democrats, like Assemblymember Pilar Schiavo, argued the increased enrollment reflects successful coverage efforts, while Newsom’s team pledged to work with legislative leaders to curb long-term spending without gutting core services.