The Trump administration has frozen more than $10 billion in federal funding allocated for social services and child care in five Democratic-led states, escalating a political and legal standoff over allegations of fraud that state officials strongly dispute.
According to a senior official at the Department of Health and Human Services (HHS), the funding freeze affects California, Colorado, Illinois, Minnesota, and New York. The department claimed, without publicly presenting evidence, that the funds may have been misused or obtained through fraudulent practices.
The move halts disbursement of $7.4 billion from the Temporary Assistance for Needy Families (TANF) program, which provides direct cash assistance to low-income families. An additional $2.4 billion from the Child Care and Development Fund has also been suspended, along with roughly $870 million from the Social Services Block Grant.
State governors were formally notified on Tuesday by the Administration for Children and Families (ACF), an HHS agency, that access to the funds would be restricted pending further review. The affected states are now required to submit additional documentation and justifications before any payments can be released.
HHS said the action is part of an expanded rollout of its “spending protection” system, which now applies to all ACF payments nationwide. The department is also investigating whether benefits were improperly distributed to ineligible migrants.
The funding freeze follows a recent decision by the administration to suspend federal child care funding in Minnesota amid a broader investigation into alleged social services fraud. That probe intensified after unverified claims circulated online accusing certain child care centers of misappropriating funds.
HHS spokesperson Andrew Nixon defended the move, telling CNN that Democratic-led states had “allowed widespread fraud under their supervision,” adding that the Trump administration is committed to ensuring taxpayer dollars are used strictly for lawful purposes.
State officials responded sharply, accusing the administration of politicizing essential social programs.
California’s Department of Social Services said the funds are “critical to working families across the state” and emphasized its commitment to combating fraud. Colorado officials said they would continue supporting families regardless of federal funding disruptions, while Illinois’ Department of Human Services described the freeze as “another politically motivated action” that creates uncertainty for vulnerable households.
New York Governor Kathy Hochul warned the state would fight the decision aggressively. “Our children should not be political pawns in a battle Donald Trump appears to be waging against Democratic governors,” she said at a press conference.
Minnesota remains at the center of the controversy. Federal agencies are conducting multiple investigations into 14 Medicaid-related services that state officials themselves have flagged as particularly vulnerable to fraud. These programs account for an estimated $3.75 billion annually in combined federal and state funding.
Centers for Medicare & Medicaid Services (CMS) Administrator Mehmet Oz said federal payments tied to questionable claims would be delayed until their validity is confirmed. Additional payments could be withheld if further fraud is identified, he warned.
While Minnesota has acknowledged weaknesses in oversight and has already suspended at least one Medicaid service linked to fraud, no evidence has yet been presented indicating systemic fraud in the four other states affected by the funding freeze.
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