Federal officials to halt more than $10B in funding to 5 states over non-citizen benefit concerns: report

The Trump administration is moving to freeze more than $10 billion in federal child care and social services funding to five Democrat-led states amid concerns taxpayer dollars were improperly diverted to non-citizens, according to a report.

Officials reportedly told The New York Post that the Department of Health and Human Services (HHS) will freeze funding from the Child Care Development Fund (CCDF), the Temporary Assistance for Needy Families (TANF) program, and the Social Services Block Grant, affecting California, Colorado, Illinois, Minnesota, and New York over concerns the benefits were fraudulently funneled to non-citizens.

More than $7.3 billion in TANF funding would be withheld from the five states, along with nearly $2.4 billion from the CCDF and another $869 million from the Social Services Block Grant.

The funding pauses were expected to be announced in letters sent to state officials Monday, citing concerns that benefits were improperly directed to non-U.S. citizens.

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A 2019 audit by the Department of Health and Human Services Office of Inspector General found that New York State improperly claimed $24.7 million in federal reimbursement for child care subsidies paid to New York City that did not comply with program rules.

The audit attributed the overbilling to system errors and oversight failures – not criminal fraud – and state officials agreed to refund the funds and implement corrective controls, according to the report.

Following the release of details surrounding the potential funding freeze, New York Democrats sharply criticized the Trump administration’s move, arguing it would harm families who rely on child care assistance.

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Sen. Kirsten Gillibrand, D-N.Y., accused the administration of using the issue for political retaliation and warned it would hurt children and low-income families across the state.

“Trump is threatening to freeze child care funding in New York and targeting our children for political retribution. It’s immoral and indefensible,” she wrote in a post on X. “I’m demanding the administration abandon any plans to freeze this funding and stop hurting New York families.”

Along with her post, Gillibrand also shared a public statement regarding the freezing of funds.

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“My faith guides my life and public service. It’s our job to serve the people most in need and most at risk – no matter what state they live in or what political party their family or elected representatives belong to,” she said. “To use the power of the government to harm the neediest Americans is immoral and indefensible.

“This has nothing to do with fraud and everything to do with political retribution that punishes poor children in need of assistance,” Gillibrand added. “I demand that President Trump unfreeze this funding and stop this brazen attack on our children.”

The NY Post first reported that in December, HHS sent letters to Walz and Minneapolis Mayor Jacob Frey seeking information on whether billions in taxpayer funds may have unlawfully helped “fuel illegal and mass migration.”

Those requests were followed by investigations launched by the Treasury Department and the House Oversight Committee into a growing fraud scandal involving several nonprofits tied to the Somali community in the Twin Cities.

An estimated 130,000 illegal migrants were living in Minnesota as of 2023 — about 40,000 more than in 2019 and roughly 2% of the state’s population — according to the Pew Research Center. The state’s Somali diaspora exceeds 100,000 people, with most concentrated in the Minneapolis–St. Paul area.

The news on Monday came the same day Minnesota Gov. Tim Walz announced he was dropping his bid for a third term as governor amid stinging criticism of his handling of the state’s massive welfare assistance fraud scandal.

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Walz launched his bid for a third four-year term as Minnesota governor in September, but in recent weeks has been facing a barrage of incoming political fire from President Donald Trump and Republicans, and some Democrats, over the large-scale theft in a state that has long prided itself on good governance.

More than 90 people — most from Minnesota’s large Somali community — have been charged since 2022 in what has been described as the nation’s largest COVID-era scheme.

How much money has been stolen through alleged money laundering operations involving fraudulent meal and housing programs, daycare centers and Medicaid services is still being tabulated. But the U.S. attorney in Minnesota said the scope of the fraud could exceed $1 billion and rise to as high as $9 billion.

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Prosecutors said that some of the dozens that have already pleaded guilty in the case used the money to buy luxury cars, real estate, jewelry and international vacations, with some of the funds also sent overseas and potentially into the hands of Islamic terrorists.

Trump addressed Walz’s announcement of leaving the race on Monday, in a post on Truth Social. “Minnesota’s Corrupt Governor will possibly leave office before his Term is up but, in any event, will not be running again because he was caught, REDHANDED, along with Ilhan Omar, and others of his Somali friends, stealing Tens of Billions of Taxpayer Dollars,” the president wrote. “I feel certain the facts will come out, and they will reveal a seriously unscrupulous, and rich, group of ‘SLIMEBALLS.’

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“Governor Walz has destroyed the State of Minnesota, but others, like Governor Gavin Newscum, JB Pritzker, and Kathy Hochul, have done, in my opinion, an even more dishonest and incompetent job,” Trump added. “NO ONE IS ABOVE THE LAW!”

Fox News Digital’s Paul Steinhauser and Andrew Mark Miller contributed to this report.