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Climate executive warns California ‘functionally bankrupt,’ $1T shortfall could shake nation

Published

2 months ago

March 27, 2026

California is “functionally bankrupt,” climate entrepreneur David Friedberg said in a recent interview with “Sourcery,” pointing to pension liabilities, legal constraints, and government spending as drivers of a potential long-term fiscal crisis.

Friedberg was asked to share an under-discussed “hot take” on politics and policy. He framed California’s financial outlook as a largely overlooked issue with implications that could extend beyond the state.

“People don’t realize how screwed California is, and I worry that if California falls, so does the union,” Friedberg said.

He argued that the scale of California’s fiscal exposure is tied directly to its public pension system, which guarantees retirement benefits to government employees and retirees. According to Friedburg, the gap between what has been contributed and what is owed has grown significantly over time.

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“The amount that they’re owed back out is somewhere between $250 billion to $1 trillion dollars more than has been paid in,” Friedberg said.

Friedburg contrasted California’s position with that of the federal government, emphasizing that states operate under stricter fiscal constraints and cannot rely on monetary policy tools to offset deficits or obligations.

“If it was the federal government, it would be like, OK, we’ll just print more money,” he said. “California doesn’t have the ability to print money, so California has to pay this out.”

He also pointed to legal precedents that, in his view, limit the state’s flexibility in addressing pension liabilities, even for current employees whose benefits have already been promised.

“There was a Supreme Court case in California that said that once an employee has been offered retirement benefits… you can never restructure their retirement benefits,” Friedberg said. “It has to stay forever.”

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In addition to benefit protections, Friedberg said California lacks a legal mechanism to declare bankruptcy, which further restricts options typically available to entities facing insolvency.

“The state cannot declare bankruptcy. There’s no way for the state to functionally declare bankruptcy. There’s no law to allow it,” he said. “No state has ever declared bankruptcy.”

Friedburg said that under current financial structures, pension obligations must be paid before other liabilities, including debt owed to investors who finance state operations.

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“The retirement benefits sit senior to the bonds in California,” Friedberg said. “So you have to pay out the retirement benefits before you pay out all the bondholders.”

Friedburg described the situation as a looming “fiscal cliff,” arguing that the scale and structure of the problem leave limited paths forward without broader economic or political consequences.

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“I asked… where did the $14 billion go that went into that high-speed rail project? There was… no rail,” he said. “Whose pocket is that money in?”

“Where the hell did the money go?… You can follow dollars. Where did they go? Who has all that money?” Friedberg asked.

He said California needs a structural changes to address the issue.

“California’s functional bankruptcy is a major risk to the country, and I think we need to figure out what we can change to fix it,” Friedberg said.

Newsom’s office did not immediately respond to Fox News Digital for comment.

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Reunification Of Stephen A. Smith, Skip Bayless Sees 24% Ratings Increase For ‘First Take’

Published

30 minutes ago

May 14, 2026

Addison Blake

Bring back Skip full-time

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Tech entrepreneur flees Washington due to companies being ‘villainized’

Published

1 hour ago

May 14, 2026

Addison Blake

A prominent Washington tech entrepreneur is joining the growing exodus of business leaders fleeing the Evergreen State, citing a “dramatic” shift in the state’s tax climate following the passage of a controversial new “millionaire tax.”

Jesse Proudman, the founder and CTO of the privacy-focused generative AI platform Venice.ai, told Fox News Digital on Tuesday that the state he once called a “startup sanctuary” has become increasingly hostile to the very people who fuel its economy.

“I started three companies here in the state. I have been an entrepreneur my whole life here,” Proudman said. “The business climate when I started my first company was very entrepreneurial-friendly, and the startup community was looked upon as a contributing member of the city. Over the last number of years, that has changed dramatically.”

Proudman, who previously founded the private cloud company Blue Box and the crypto-investing platform Makara, is now serving as a spokesperson for Let’s Go Washington. The political committee is currently spearheading a massive signature-gathering effort to repeal the tax measure before it can take root.

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The tax, pushed through by the Democratic-controlled legislature during the 2026 session and signed into law by Gov. Bob Ferguson in March, imposes a 9.9% levy on annual income exceeding $1 million. While it is set to take effect on Jan. 1, 2028—with the first payments due in 2029—the mere threat of its implementation is already shifting the state’s demographics.

“We have until July 2nd to gather about 325,000 signatures to put this on the November ballot,” said Hallie Herzberg, Director of Communications for Let’s Go Washington. “The people deserve the right to vote on this. It’s already driving businesses, employers, and families out of the state.”

The move marks a seismic shift for Washington, which has historically been one of only a handful of states with no personal income tax. However, the legal ground shifted in 2023 when the state’s Supreme Court upheld a 7% capital gains tax, effectively opening the door for broader income-based levies that critics argue violate the state constitution’s requirement that property (which includes income) be taxed at a uniform rate.

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State Sen. Jamie Pedersen (D-Seattle), the Senate Majority Leader and the bill’s primary sponsor, has dismissed concerns of “tax flight.”

“The reality is the millionaire tax is not likely to result in businesses leaving,” Pedersen told a local FOX affiliate following the bill’s signing. He later told Fox News Digital that there is “no evidence” that high earners will migrate to lower-tax jurisdictions like Florida or Texas.

Data from the Association of Washington Business (AWB) suggests otherwise. A recent survey reported by The Center Square found that 44% of business leaders in the state are considering moving their personal residences elsewhere. Furthermore, Washington businesses reported they are now more than twice as likely to expand outside the state than within it.

For Proudman, the decision has already been made. He plans to relocate his life and business interests to Austin, Texas.

“It’s no longer a friendly place to conduct business,” Proudman said. “Startup companies are being villainized. With the passing of this tax, we have looked at alternative places to move, and we’ll probably end up in Austin.”

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Proudman warned that while the tax is currently branded as a “millionaire’s tax” to gain public favor, the long-term economic consequences will eventually hit middle-class residents as the tax base shrinks.

“They are targeting a very highly mobile cohort of the population,” Proudman argued. “When those folks leave, this will become a tax on everybody. The voters are unwittingly creating an incredibly worse tax situation for themselves. Washington is already the 45th worst state from a tax point of view. This is a constitutionally illegal tax that ultimately will apply to everyone.”

Sen. Pedersen’s office did not respond to Fox News Digital’s latest request for comment.