Some More Perspective

Whenever I hear about various aspects of California's $131 billion budget I think back to the California Budget Project's report bemoaning the almost $300 million "cost" of the Enterprise Zone. (I say "cost" with quotation marks because there is a fundamental distinction between money that the government takes from taxpayers and then spends versus money that the government merely leaves with the taxpayers.) Lately I've been recalling some stories from earlier this year about various forms of fraud involving government programs and wondering how some of those costs might stack up.

Back in January a reporter named Troy Anderson wrote in the Los Angeles Daily News (also republished in the Contra Costa Times and elsewhere) an article titled "Fraud eats away at funds earmarked for child care." Later, in March, Anderson followed up with an article detailing how the Los Angeles County Board of Supervisors created a task force in order to investigate fraud in a specific welfare child-care program. In January Anderson wrote:

Under reforms of the 1990s, welfare recipients qualify for government-paid child care -- usually $500 to $1,000 a month per child -- while they are looking for work or, after finding jobs, are making the transition into the work force. "For a person who has five children, somebody can be paid $5,000 a month to watch their children," Baker said. Officials estimate Los Angeles County loses 40 percent to 50 percent of its $600 million-a-year child-care allocation to fraud.

So just in Los Angeles County the equivalent cost of the entire Enterprise Zone program is being frittered away with fraudulent claims of just one piece of the welfare system. Anderson claims that statewide this single area of fraud is costing as much as $1.5 billion each year.

In another example, a 2002 Los Angeles Times article reported that:

Some experts estimate that up to 10% of health-care dollars are stolen. For Medi-Cal, that translates to about $2.5 billion a year, almost half from the state general fund.

This is not an issue taxpayer money being spent on programs with questionable benefit, rather this is taxpayer money that is being wasted due to the government's inability to effectively manage the vast sums associated with its entitlement program.

A search for the word "fraud" on the CBP website turns up plenty of results, but I was not able to find any reports dedicated to impact that various forms of fraud have on the fiscal health of the State. In my mind, it would be a far more cost-effective strategy to work toward correcting the billions of dollars of fraud the taxpayers are losing each year than to focus on a relatively small program that arguably generates more revenue to the state than it costs.