California is facing a $12 billion budget deficit, with Governor Gavin Newsom blaming President Donald Trump. However, the real reason behind the fiscal issues is the state's high spending on social services, particularly for illegal immigrants. Unless California reforms its welfare programs, it will face ongoing financial problems similar to New York and New Jersey.

Newsom claimed that federal policies were causing California's fiscal shortfall, but the state's budget document indicates that revenue decline accounts for less than half of the deficit. The primary issue is the rise in spending, especially on Medi-Cal, the state's healthcare program for low-income individuals. More than a third of California's population is covered by Medi-Cal, compared to the national average of 20% for Medicaid programs.

Since 2016, California has expanded Medi-Cal coverage to include undocumented immigrants. This coverage includes dental, vision, and mental health services, as well as transportation to medical appointments and drug and alcohol rehab. The Newsom administration had to borrow an additional $2.7 billion due to higher-than-anticipated enrollment of illegal immigrants in the program. Increased Medi-Cal expenditures on individuals with certain statuses have contributed significantly to the budget shortfall.

California's homeless programs also face similar issues with unrestricted service spending. A recent state audit found that $24 billion was spent on homelessness in the past five years, during which the homeless population grew by 30,000. The migrant surge over the US-Mexico border has exacerbated the problem, with homeless migrants accessing the state's generous social services.

Despite the failure of the unrestricted homeless-funding model, California voted for more than $2 billion in bonds to build homeless housing, with no restrictions on immigration status. Although Newsom announced a slowdown in the increase of homelessness, it has not decreased overall. Since 2020, California has lost almost 1.5 million people to other states, with the influx of asylum-seekers and illegal immigrants preventing a larger population decline.

To remain fiscally stable, California needs to address the expansion of its illegal immigrant and homeless populations and reduce subsidies. Newsom's budget proposal seeks to control Medi-Cal growth by ending new illegal immigrant enrollments and charging users a small premium. He also announced efforts to dismantle homeless encampments. However, these changes may only be cosmetic and not address the long-term population shift away from taxpayers and toward welfare recipients.

Even before these announcements, the state projected significant deficits in future budgets. Other blue states, like New York and New Jersey, face similar issues. Over 40% of New York's population is on Medicaid, with growing illegal-immigrant enrollment. New York has expanded Medicaid access for illegal immigrants, and homelessness has increased significantly due to international migrants. New Jersey has also expanded Medicaid eligibility for illegal immigrants and is dealing with rising homelessness.

These states rely on budgets that use high-earning taxpayers to fund social services for growing numbers of illegal immigrants and homeless people, which is unsustainable. California and other blue states must find a way to change this model or face significant financial consequences.