“Califraudia” estimated at $250 billion of fraud, waste and abuse

By Jenny Rae Le Roux, Director, CAL DOGE

SACRAMENTO, CA — Today, CAL DOGE, the unofficial California Department of Government Efficiency, launched on Jan. 26th by candidates for governor, Steve Hilton and for state controller, Herb Morgan, announced it has untangled a web of funding from the Prop 64 (state marijuana legalization law) authorized California Cannabis Tax Fund (CCTF) – supposed to be used for substance abuse prevention – that instead is building the Democrat political machine in California.

An investigation into Elevate Youth California, which is one of the financial intermediaries that received $370M from the CCTF, found that Elevate Youth distributed 517 micro-grants, with an average grant size of $700K, to multiple organizations that do nothing related to substance abuse and instead build the Democrat voter base. These organizations explicitly fund “social justice youth development”, “civic engagement”, and “power building.”

According to Prop 64 and the supposed oversight group for Elevate Youth, The Center at Sierra Health Foundation, the tax is designated to support “funding and technical assistance for organizations that are developing or increasing community substance use disorder prevention, outreach and education focused on youth.” Instead, Elevate Youth is distributing funds to organizations – such as $1M for “civic engagement” to Young Invincibles, which has stated values of “Young Adult Power, Equity, Community, Collaboration, and Bold Ideas” but says and does nothing related to substance abuse prevention.

“After collecting $1 billion annually from the Cannabis Tax, that money should be spent on substance abuse prevention as stated in the law, not political organizing to keep Democrats in charge of California’s decline,” said Jenny Rae Le Roux, Director of CAL DOGE. “Funneling money through financial intermediaries to hundreds of non-profits that spend those funds on partisan Democrat political organizing must stop, and the age of accountability must begin.”

Other grantee organizations, such as the Jakara Movement Grant, which was provided $1M for Sikh youth empowerment and voter registration, and Asian Refugees United, which was granted $800K for LGBTQ+ Asian Storytelling, have no connection to substance abuse prevention.

Estimates $250 Billion of Fraud, Waste and Abuse

Based on a preliminary review by Hilton, and his running mate Morgan, entitled “Califraudia”, California’s exposure to fraud, waste, and abuse across major state programs is estimated at $250 billion. This estimate, based on independent analysis, underscores the urgent need for formal audits, investigations, and enforcement as a matter of basic fiscal responsibility.

Hilton added, “In seven days of work, CAL DOGE has already uncovered more fraud than Gavin Newsom and his regime have done in their seven years in power. And we’re not even elected yet! This is exactly why I set up CAL DOGE in the first place, to expose fraud and corruption in the system so we can act to stop it on day one. Democrats and their shadow network of leftist front organizations are stealing taxpayers’ money for their own partisan ends. We pay the highest taxes in the country yet get the worst results – and now we are finding out why, and where our money is really going. There is much more to come from CAL DOGE and its work will play a huge part in ending 16 years of Democrat one party rule this November.”

Following are additional details on the investigation and the team that connected the dots:

Californians Voted For the $370 Million in Cannabis Tax Dollars to Fund “Drug Prevention.” Instead, the Tax Bankrolls Leftwing Political Activism.

When California voters approved Proposition 64 in 2016, they were told cannabis tax revenue would fund youth substance abuse prevention. Six years and $370.25 million later, Rhetor’s AI-powered forensic audit — conducted in partnership with CalDOGE — reveals where that money actually went: into a sprawling network of 517 grants funding political organizing, voter registration drives and “social justice youth development,” all administered by a single nonprofit intermediary operating as a shadow agency of the state.

How the Money Moves

The California Department of Health Care Services does not distribute Proposition 64 cannabis tax funds directly to community organizations. Instead, they issue a master contract to The Center at Sierra Health Foundation, a 501(c)(3) that has become the de facto bank for the state’s equity, prevention and youth funding.

The Center at Sierra Health Foundation retains 15 to 20 percent in administrative fees then sub-grants the remaining funds to community-based organizations through its own application process.

The state does not pick who gets the grants. The intermediary does, bypassing the rigorous procurement processes mandated for direct government contracts under the Department of General Services and State Controller oversight.

The result is a three-stage pipeline — master contract to fiscal intermediary to sub-grants — that creates layers of separation between taxpayer dollars and their ultimate use.

Lining the Governor’s Pockets

The pipeline starts with the governor’s office, and the relationship between The Center at Sierra Health Foundation and the governor extends well beyond a standard contract. According to the California Fair Political Practices Commission’s Behested Payment Transparency Report (pg.19-20), in 2020 alone, Sierra Health Foundation was the third-largest payor of behested payments statewide at $14,747,724 and the single largest payee of behested payments statewide at $30,869,901 — payments Newsom solicited from private companies.

Newsom himself was the top behesting official in the state that year at $226.8 million total (pg. 20), and Sierra Health Foundation ranked among his top three financial partners in the system.

The financial trajectory of The Center at Sierra Health Foundation tracks accordingly. IRS Form 990 filings show The Center’s revenue exploded from $11.8 million in 2018 to $197 million in 2024 — with 96.5 percent of that revenue coming from government contracts. The Center’s CEO Chet Hewitt’s total compensation rose from $407,726 to $612,730 over the same period, a 50 percent increase that mirrors the growth in state contract volume almost perfectly. Behested payments are legal in California with no dollar limits, but the California Fair Political Practices Commission itself flagged the scale as concerning enough to implement new transparency regulations.

The Grants Say the Quiet Part Out Loud

The pipeline flows from the governor’s office to the The Center at Sierra Health Foundation, the fiscal intermediary, who determines grant recipients. Rather than awarding grants to recipients that qualify for Proposition 64’s original purpose — fighting substance abuse — The Center uses Prop. 64’s taxpayer dollars to fund leftwing activist organizations.

Elevate Youth, for example, the most significant vertical managed by The Center, is funded exclusively by Prop. 64 taxpayer dollars. Yet Elevate Youth’s grant application form explicitly names “social justice youth development” and “civic engagement” as criteria for grantees, terms that appear nowhere in the statutory language of Prop. 64’s Youth Education, Prevention, Early Intervention, and Treatment Account.

Similarly, grant recipients, like United Way of Santa Cruz County, which was awarded $834,075.00 from Elevate Youth, focuses on “activism” and “BILPOC (Black, Indigenous, Latino, and People of Color) and LGBTQ+ youth and families.”

Voters approved cannabis tax revenue for substance abuse prevention. DHCS redefined “prevention” to include political organizing — then buried it inside the grant criteria of a nonprofit intermediary most Californians have never heard of.

Political Activism at Clinical Prices

The math exposes the disconnect.

According to the DHCS YEPEITA report, the Elevate Youth program reached 89,727 participants. Divide $370.25 million by that figure and the cost per participant is $4,126.

Actual clinical substance abuse treatment costs between $2,000 and $5,000 per patient. Elevate Youth California is charging clinical-grade prices for non-clinical projects, including “civic engagement” workshops, leadership development seminars and “community mobilizing” training. These are not treatment programs. They are organizing programs priced like treatment programs.

The Receipts

Elevate Youth’s specific grant awards make the mislabeling undeniable.

Since 2020, the Jakara Movement has received $1.8 million for “Sikh youth empowerment and prevention.” Grant activities include voter registration drives. Under the program’s framework, registering voters is classified as substance abuse prevention.

Pacific Clinics received $1 million for its “Youth IMPACT Project” — designed to “strengthen the leadership skills” of immigrant youth and “mobilize people to achieve change.”

The Center does not hide its ideological aims. They are codified in its program descriptions. The San Joaquin Valley Health Fund lists “power building” and “civic engagement” as core pillars of its health equity strategy. The Center has funded partners to conduct door-to-door canvassing for the Census and voter registration — explicitly linking political capital to health outcomes.

Hidden in a Sea of Grants.

The $370.25 million was not distributed through a handful of large, auditable contracts. It was dispersed across 517 individual grants, averaging $716,150 each.

This fragmentation makes traditional auditing nearly impossible. No single grant is large enough to trigger intensive audit scrutiny. The dispersal prevents consolidated oversight of outcomes. And because The Center — not the state — manages the sub-granting process, no single state auditor has a comprehensive view of where the money lands or what it produces.

How Rhetor Found It

This is the kind of fraud pattern that manual auditors miss by design. When grants are deliberately fragmented across hundreds of recipients, the mislabeling only becomes visible at scale.

Rhetor’s AI analysis — deployed as part of its CAL DOGE partnership — cross-referenced RFA language, grant award descriptions, cost-per-participant calculations and program outcome reporting across the full portfolio of 517 grants. The pattern detection surfaced what no individual audit could: a systematic reclassification of political organizing as public health spending, replicated across hundreds of awards.

What This Means

Californians voted for youth drug prevention. They got a taxpayer-funded political organizing infrastructure — administered by an unelected nonprofit, shielded from procurement oversight and priced at clinical treatment rates for activities that have nothing to do with substance abuse.

The receipts are public. The grant guidelines are public. The cost-per-participant math is public. None of this was hidden. It was just fragmented enough that no one was supposed to connect the dots.

Rhetor and CAL DOGE connected them. The question now is whether Californians will act or wait until Sacramento sends the next $370 million into the same pipeline.

Note: The original figure cited for Elevate Youth’s funding for the Jakara Movement was $350,000. Our updated data found that Elevate Youth has granted $1.8 million to the Jakara Movement since 2020.

See CAL DOGE Elevate Youth report.

About CAL DOGE

The CAL DOGE team includes investigators, tech advisors and citizen journalists. If you have a tip, send it to Califraud.com, a secure whistleblower platform, paid for by the Steve Hilton for Governor 2026 campaign, that allows current and former state employees and members of the public to report fraud, waste, abuse and systemic mismanagement without fear of retaliation.

CAL DOGE, named after Elon Musk’s DOGE which was formed and worked to find wasteful spending, fraud and abuse in the federal government and disbanded last November, is not the same as California DOGE, started in Nov. 2024. The new effort publishes findings, tracks spending at the program level, and advances reform proposals to restore trust, lower costs, and make California government work again for the people who pay for it. For more information see https://caldoge.rhetor.ai.

Allen D. Payton contributed to this report.