Fiscal monitor · primary sources · updated on budget events
On the All-In podcast in July 2026, David Friedberg argued California is in a fiscal death spiral: spending up two thirds since 2019, a shrinking tax base, and pension liabilities the budget never counts. This page checks each claim against primary sources and tracks the numbers that would prove or break the thesis.
Projected annual structural deficit, 2027-28 onward
The 2026-27 budget was signed as "balanced" on June 29, 2026, but only after reserve draws, fund shifts, and deferrals. The state's own analyst projects roughly $35B a year of structural deficit starting next year.
Friedberg's argument is mostly right on the big shapes and loose on some specifics. Every claim below was checked against the LAO, IRS, Fed, or the primary bill text in July 2026.
| Claim | What the sources say |
|---|---|
| Budget up ~65% since 2019 | Total budget went $214.8B (2019-20) to $351.7B (2026-27), up 63.7%. General Fund alone grew faster, up 70%. |
| "Balanced" via accounting maneuvers | Confirmed in direction. Reserve draws, fund shifts, and deferrals closed an $18B gap; LAO projects ~$35B annual structural deficits from 2027-28. |
| Top rate 14.4%; top 1% pays 50% | The 14.4% marginal rate is real (13.3% bracket plus 1.1% uncapped payroll). But "50%" was the 2012 peak; recent estimates put the top 1% share near 38-40%. |
| 2,100 companies and 15 Fortune 500s left | The direction is confirmed: Texas passed California in Fortune 500 HQs in 2026 (57 vs 56). The "2,100 companies" figure does not trace to any primary source found. |
| Wealth is leaving | IRS data confirms net AGI outflows: $20.2B (2021), $23.8B (2022), $13B (2023). Elevated versus pre-2020, though the latest year moderated rather than accelerated. |
| New SaaS and healthcare taxes | SB 122 (signed June 29, 2026) taxes software including SaaS from January 2027, roughly $2B a year combined state and local at full run-rate. SB 125 restructures the MCO tax, about $2.3B a year. |
| $1.4T public debt, huge unfunded pensions | Total public-sector debt about $1.37T including $664B unfunded pensions on the broad measure. CalPERS is 79% funded, CalSTRS 76.7%. At market-rate discounting the stress case runs far higher than his $1.5T. |
Confirmed Partly true Unverified
Net adjusted gross income leaving California, IRS migration data
Net AGI outflow by filing year, IRS Statistics of Income. 2023 is the latest available year; IRS releases run about two years behind.
Friedberg's conclusion goes beyond the numbers: out-of-control spending plus a shrinking tax base plus unaccounted liabilities ends in default. His three predictions, kept here so they can be scored honestly:
The honest counterweight: California still carries double-A credit ratings, pension funded ratios improved in 2024-25 on strong markets, and the latest migration year moderated. The death-spiral case requires the deficits to compound and the tax base to keep leaving. Neither is guaranteed; both are measurable.
| Signal | Baseline, July 2026 | Death spiral looks like |
|---|---|---|
| LAO structural deficit | $35B/yr projected | Growing despite new taxes |
| Credit ratings | Aa2 / AA- / AA | Downgrades, widening GO spreads |
| Net AGI outflow | $13B (2023) | Re-acceleration past $24B |
| Fortune 500 HQ count | CA 56, TX 57 | Gap widening year over year |
| CalPERS funded ratio | 79% | Falling through the 60s in a downturn |
| Top-bracket receipts | Top 1% pays ~38-40% of PIT | Volatile collapses in capital-gains years |