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

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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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.

"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.