A mother in Illinois woke up this week to news she can’t fully grasp: the federal money that covers her daughter’s day care might vanish. She’s not alone. The Trump administration has just frozen $10.66 billion in welfare and social-service funding to five Democratic-led states: California, Colorado, Illinois, Minnesota, and New York.
Hundreds of thousands of low-income families suddenly have no idea how they’ll afford child care, keep food on the table, or pay rent.
Three Programs, One Freeze
The freeze hits hard across three major safety-net programs. Temporary Assistance for Needy Families loses $7.35 billion. Child Care subsidies lose $2.4 billion. Social Services Block Grants lose $869 million.
Together, they’ve kept millions of American families afloat. Now, states scramble to understand what happens next.
Illinois Bears Down
In Illinois, approximately 100,000 working families receive child care subsidies, which are funded partly by frozen federal dollars. Gov. Pritzker’s office says more than 150,000 children are at risk.
The SSBG alone supports 275 organizations across the state—serving seniors, people with disabilities, and families facing hunger. One billion dollars: gone, for now.
New York’s 123,000 Children
In New York City alone, about 123,000 children depend on federally backed child care programs now on hold. An economist at the New School warned: without these subsidies, working parents “won’t be able to get to work, get to school, get their kids to day care.”
Gov. Hochul called the move “vindictive” and promised to fight it in court.
California and Colorado Left Guessing
When California and Colorado officials learned their funding was frozen, they hadn’t received formal notice—only public statements from HHS about “rampant fraud” and “giving money to illegals.”
A Fresno County supervisor called it a “very politicized move,” noting that HHS presented no specific evidence of fraud for either state.
The Real Scandal—Minnesota
Minnesota is different. Federal prosecutors have documented massive fraud. The “Feeding Our Future” scheme alone resulted in 78 people being charged, with 57 convicted, for theft of roughly $250 million in federal child-nutrition dollars.
Separate investigations into welfare and Medicaid fraud pushed estimates as high as $1 billion or more. Minnesota’s scandal is real.
From One State To Five
Here’s the leap: Minnesota’s documented fraud became the stated reason for freezing funding in four other states with no comparable fraud cases.
The Trump administration had already halted $185 million in annual child care funding to Minnesota. Now it’s using that one state’s crisis to justify a five-state crackdown. Critics say it’s guilt by geography.
A 23-Year-Old YouTuber Changes Everything
In late December, a 23-year-old conservative YouTube creator named Nick Shirley posted a 40-plus-minute video alleging Somali-run day cares in Minnesota were “ghost” operations stealing federal child care dollars.
The video went viral, amplified by high-profile supporters. Later, state inspectors found children present at nearly all centers reviewed. But the damage—and federal attention—was already unleashed.
“Defend The Spend” Goes National
Before this freeze, HHS activated “Defend the Spend,” a new nationwide system requiring states to provide “justification and a receipt or photo evidence before we send money,” according to HHS Deputy Secretary Jim O’Neill.
Now the five targeted states face even steeper demands: detailed documentation on every recipient’s name, Social Security number, date of birth, and payment history.
The January 20 Deadline Looms
States have until January 20 to submit this paperwork or face further funding restrictions, according to letters from the HHS obtained by news outlets. That’s 14 days to compile years of recipient data across millions of transactions.
Miss the deadline, and the freeze tightens. Comply, and federal reviewers hunt for any reason to keep dollars on hold.
RFK Jr. Frames It As Integrity
HHS Secretary Robert F. Kennedy Jr. told CBS News he froze the $10 billion because the five states “refuse to cooperate with developing plans that would end the fraud.”
He argued families are helped, not hurt, by stopping fraud: “The best way to help poor families is to end the fraud.” He denied political targeting, saying states were punished for non-compliance, not ideology.
“Illegals” And The Undocumented Angle
Senior Trump officials told ABC News the programs were frozen due to “rampant fraud” and “giving money to illegals,” though ABC could not independently verify the alleged examples of funds reaching undocumented immigrants.
HHS suspects some states of “illicitly providing illegal aliens” with CCDF benefits. However, public documents indicate that only Minnesota has large, documented fraud cases.
States Fight Back With Lawsuits
All five states deny widespread fraud and insist they have robust anti-fraud systems. Gov. Hochul announced her intent to sue. Illinois and Colorado governors vowed to fight the freeze.
CNN and Reuters report that state officials say they’ve seen no federal evidence of large-scale abuse in their programs and that the move is retaliation against blue-state governors.
The Walz Earthquake
Minnesota Gov. Tim Walz announced he would not seek another term, citing the political fallout from the fraud scandal and federal crackdown.
Federal prosecutors described Minnesota’s pandemic-era public assistance fraud as “staggering in its scale,” with billions of dollars in suspect payments under investigation. The state now scrambles to rebuild trust and prove its systems work.
Child Care Providers On The Brink
Even a temporary halt in federal payments can push child care centers to the edge, especially small providers operating on thin margins. Minnesota experts warned that legitimate centers could see delayed payroll and rent payments if the freeze drags on.
In New York and Illinois, providers are already fielding panicked calls from parents asking: “Will my child care continue?”
TANF’s 30-Year Frozen Block Grant
TANF’s federal block grant has remained at $16.5 billion since 1996, losing roughly half its value due to inflation. Because states stretched static dollars across more families and services for decades, sudden federal holds leave almost no cushion.
Combine that with frozen child care subsidies and social-service cuts, and families and providers have nowhere left to hide.
The Somali Community Under Siege
Minnesota’s Somali community—at the center of Feeding Our Future prosecutions and now viral-video allegations—has reported harassment, vandalism, and threats in the wake of fraud rhetoric. State officials stress that while fraud must be investigated, most Somali-run centers are legitimate businesses serving families daily.
Advocates fear the federal crackdown is blurring the line between targeting crime and stigmatizing an entire immigrant community.
The Documentation Gamble
States now face an impossible task: compile detailed recipient data across millions of transactions in 14 days to prove they deserve federal money. HHS reviewers will hunt for discrepancies, missing paperwork, anyone ineligible—giving the agency reasons to withhold funds longer.
It’s a gamble where states almost can’t win, and families almost certainly lose.
The Multiplier Effect
Economic analysts warn that cutting these subsidies will ripple outward. Parents unable to afford care leave jobs or reduce hours. Child care providers close. Local economies lose spending.
Economists estimate that each dollar of direct assistance generates two to three dollars in local economic activity. A $10 billion freeze could disrupt $20 billion to $30 billion in annual economic output.
What Comes Next
Lawsuits are being filed. Governors are scrambling for workarounds. Families are bracing for the worst. HHS says funds remain frozen until states prove compliance and fraud doesn’t exist. Some programs face a January 20 deadline. Others may linger in limbo for weeks.
In the meantime, hundreds of thousands of American families—working parents, elderly people, vulnerable kids—are waiting for answers nobody can yet give them.
Sources:
CBS News – RFK Jr. says Democrat-run states at center of funding freeze “refuse to cooperate with developing plans that would end the fraud”
HHS Press Room – HHS Freezes Child Care and Family Assistance Grants in Five States
The New York Times – Health Dept. Freezes $10 Billion in Funding to 5 Democratic-Led States
NPR – Who is Nick Shirley, YouTuber alleging day care fraud
CNN – Trump administration freezes billions in social services funding to five Democratic-led states
ABC News – Trump administration cites “rampant fraud” and “giving money to illegals” in $10 billion child care funding freeze