Trump administration freezes billions in social services funding to five Democratic states

(CNN) — The Trump administration is freezing $10 billion in funds for social services and child care in five Democratic-led states, according to a Department of Health and Human Services official, with the agency suggesting without evidence that the funding has been used fraudulently.

The freeze, first reported by the New York Post, will impact California, Colorado, Illinois, Minnesota and New York, according to HHS.

HHS will cut off $7.4 billion in funding for the Temporary Assistance for Needy Families program, which provides cash assistance to households, along with nearly $2.4 billion for the Child Care and Development Fund. The department will also hold around $870 million from the Social Services Block Grant.

The agency’s Administration for Children and Families sent the states’ governors letters on Tuesday informing them that their access to these funds is now restricted pending further review. The five states must submit justifications and documentation before payments are released, as part of HHS’ recent expansion of its Defend the Spend system to all ACF payments nationwide.

ACF is also looking at whether benefits were improperly provided to ineligible immigrants.

The news comes just days after the Trump administration paused federal funding of child care programs in Minnesota amid a deepening federal probe into allegations of fraud involving social services.

“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 told CNN. “Under the Trump Administration, we are ensuring that federal taxpayer dollars are being used for legitimate purposes. We will ensure these states are following the law and protecting hard-earned taxpayer money.”

States await notification

The Colorado Department of Human Services, Illinois Department of Human Services, and the California Department of Social Services told CNN earlier on Tuesday that they had not received a notification from the administration about the freeze.

“These funds are critical for working families across California,” the state’s Department of Social Services said in a statement. “We take fraud seriously, and CDSS has received no information from the federal government indicating any freeze, pause, or suspension of federal child care funding.”

“Should these funding sources change, we remain committed to supporting our families in Colorado and will continue to advocate for the programs and services that help them thrive,” the Colorado agency said.

In a statement to CNN, the Illinois Department of Human Services cast the move as “yet another politically-motivated action by the Trump Administration that confuses families and leaves states with more questions than answers.”

Asked about the reports at a news conference Tuesday, New York Gov. Kathy Hochul said, “This is a fight we’re going to have to take on if we get that notification.”

“We’ll fight this with every fiber of our being because our kids should not be political pawns in a fight that Donald Trump seems to have with blue-state governors,” she added.

The Minnesota allegations were made in a YouTube video by 23-year-old content creator Nick Shirley, who claimed, with little evidence, that Somali-run child care centers in the state were fraudulently taking funding meant to provide child care for low-income families.

In the wake of the viral video, the Trump administration froze federal funding for child care in the state and said it was deploying 2,000 federal agents as part of an immigration crackdown. Federal and state investigations into alleged wrongdoing are ongoing.

Medicaid audit in Minnesota

In the latest development, Centers for Medicare & Medicaid Services administrator Mehmet Oz said Tuesday evening that he has sent a letter to outgoing Minnesota Gov. Tim Walz notifying him that the federal agency will audit the state’s Medicaid billing and defer payments on claims based on waste, fraud and abuse.

“Until we can verify what is legitimate, we are going to defer payments for the 14 programs that the state itself identified as rife with fraud,” Oz said in a video posted on his official agency X account. “That figure could be in the hundreds of millions of dollars.”

Also, CMS will withhold additional payments if it finds more fraud “until the state cleans up its act,” Oz said, noting that Minnesota has a rainy day fund that could cover any shortfalls if CMS’ actions affect beneficiaries.

Multiple federal agencies have been investigating 14 high-risk Medicaid services that the state has identified as particularly vulnerable to fraud, according to the letter, which was also posted on X. These programs cost $3.75 billion annually in federal and state funding.

“Despite warning signs that have been evident for years, the State has not implemented sufficient safeguards to prevent ongoing improper payments,” Oz wrote, noting that several programs showed extraordinary growth in provider enrollment and payments.

According to the Associated Press, a federal prosecutor said last month that half or more of the roughly $18 billion in Medicaid funds that supported 14 Minnesota-run programs since 2018 may have been stolen due to fraud. The state shuttered at least one of those programs, which helped seniors and people with disabilities find and keep housing, at the end of October due to widespread fraud.

Oz previewed the action in an interview on Fox News earlier in the evening.

“Now this is a major problem for the state, because they’ve got to own the fact that they have been bilking the federal taxpayer for their sloppy behavior for years,” Oz said.

CNN has reached out to Walz’s office for comment.

There has been no evidence to suggest the other four Democratic states where social services funds are being withheld have suffered widespread fraud.

Sen. Kirsten Gillibrand, a Democrat from New York, condemned the funding freeze and accused the administration of “political retribution.”

“To use the power of the government to harm the neediest Americans is immoral and indefensible,” the senator said in statement posted on X. “This has nothing to do with fraud and everything to do with political retribution that punishes poor children in need of assistance.”

This story has been updated with additional information.

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CNN’s Kit Maher and Hanna Park contributed to this report.