The Trump administration has frozen roughly $10 billion in federal funding for child care and social services in five Democratic-led states, escalating a fight over fraud claims that state officials say were never substantiated.
The freeze affects California, Colorado, Illinois, Minnesota, and New York, according to the Department of Health and Human Services. The money supports child care subsidies, cash assistance, and social service programs relied on by low-income families, CNN first reported.
The hold covers about $7.4 billion from the Temporary Assistance for Needy Families program, nearly $2.4 billion from the Child Care and Development Fund, and roughly $870 million from the Social Services Block Grant. Governors were notified Tuesday that their access to the funds would be restricted pending further review. HHS said states must submit documentation justifying past spending before payments resume.
The Trump administration is demanding answers from 5 states over how federal child care and social services funds are distributed—Illinois is one of them.
Illinois Democrats are being asked a very simple request—prove how taxpayer dollars are distributed.
Bring on the audits! pic.twitter.com/DLVBLjf5nI
— Midwest Millennial (@MillennialVerse) January 7, 2026
“For too long, Democrat-led states and Governors have been complicit in allowing massive amounts of fraud to occur under their watch,” HHS spokesperson Andrew Nixon said in a statement, per ABC News. He did not cite evidence of fraud in most of the affected states. Several states said they had not even received formal notice when reports of the freeze surfaced.
California’s Department of Social Services said the funds are “critical for working families” and that the state had received no information indicating any suspension. Colorado officials said the same. Illinois called the move “yet another politically-motivated action” that leaves families in limbo.
New York Gov. Kathy Hochul signaled a fight was coming. “This is a fight we’re going to have to take on if we get that notification,” she said. “Our kids should not be political pawns.”
“Donald Trump’s cutting off $10 billion in child care funding to states is an act of breathtaking cruelty — and it will do lasting damage to children, families, and our economy.” – @KristenCrowell1 https://t.co/yF1gku9Z2W
— Fair Share America (@FairShare_USA) January 7, 2026
The administration’s justification centers largely on Minnesota, where federal investigators have been probing fraud allegations tied to social service and child care programs. That scrutiny intensified after a viral YouTube video by conservative influencer Nick Shirley accused Somali-run child care centers of widespread abuse, claims made with little supporting evidence.
Federal and state investigations in Minnesota are ongoing. No comparable fraud findings have been presented for the other four states. Still, the fallout widened quickly.
Centers for Medicare & Medicaid Services Administrator Mehmet Oz announced Tuesday that CMS would audit Minnesota’s Medicaid billing and defer payments across 14 programs flagged as vulnerable to fraud. “Until we can verify what is legitimate, we are going to defer payments,” Oz said in a video posted to X. He suggested the withheld amounts could reach “hundreds of millions of dollars.”
🚨Minnesota Medicaid Fraud Update: pic.twitter.com/Dk0W07P1U8
— DrOzCMS (@DrOzCMS) January 7, 2026
According to the Associated Press, a federal prosecutor said last month that half or more of roughly $18 billion spent on certain Minnesota programs since 2018 may have been stolen. State officials dispute the scale and note that several programs have already been shut down.
There has been no evidence presented that California, Colorado, Illinois, or New York face similar systemic fraud. Yet the freeze applies evenly.
Illinois Gov. JB Pritzker called the move “wrong and cruel,” writing on X that President Donald Trump was “stripping away child care from those just trying to go to work.” Hochul described the freeze as “vindictive.”
Rather than making it more affordable for families, Trump is stripping away child care from those just trying to go to work.
Thousands depend on these programs, and now their livelihoods are at risk.
It’s wrong and cruel — we’ll take every step possible to defend Illinoisians. https://t.co/WT1zh1LlXb
— Governor JB Pritzker (@GovPritzker) January 7, 2026
At the federal level, Democrats framed it as punishment, not oversight. Sen. Kirsten Gillibrand accused the administration of “political retribution,” saying the freeze harms “the neediest Americans” under the guise of fraud enforcement.
HHS officials argue the move reflects a broader tightening of rules rolled back from the Biden era. The department said it is rescinding child care regulations that allowed states to pay providers before attendance was verified, a change it claims increased fraud risk.
For now, the money is still frozen. Families are waiting. States are bracing. And the administration has not said when — or if — the funds will be released.
