The Trump administration has lifted its freeze on roughly $10 billion in federal childcare and social services funding for five Democrat-led states, prompting a legal fight over whether the lawsuit challenging the funding halt should continue.
Last week, the Department of Health and Human Services sent nearly identical letters to officials in California, Colorado, Illinois, Minnesota, and New York informing them that it was rescinding restrictions imposed earlier this year on access to federal childcare and social services funding, according to court filings. The department also withdrew requirements that the states submit additional eligibility data, which it had said were necessary to verify recipients qualified for benefits.
The funding dispute began in January after the administration froze childcare funding for Minnesota as part of a broader crackdown on rampant fraud in social service programs. HHS later expanded similar funding restrictions to California, New York, Illinois, and Colorado as the administration alleged widespread welfare fraud in Democrat-led states.
Days after the funding freeze, California and the other states sued the Trump administration, calling its decision “baseless and cruel.”
Lawyers for the Trump administration said the states’ lawsuit should be dismissed since HHS returned the funding. Attorneys representing the five states, however, opposed dismissal, arguing the administration could simply reinstate the restrictions if the case were thrown out.
“Having failed at their first gambit to convince Plaintiffs to consent to mootness, Defendants are now taking another tactic to avoid judicial review and the discovery to which they consented,” attorney for New York Rabia Muqaddam wrote.
She argued the administration abruptly withdrew its request for a permanent injunction “without any good faith effort” to address the states’ concerns and was attempting to end the case before producing documents the states had sought through discovery.
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“Defendants have been actively resisting Plaintiffs’ efforts to obtain discovery,” she continued. “Now, with limited options to avoid their obligation to turn over relevant and responsive documents, Defendants are attempting to unilaterally resolve the case. But Defendants cannot resolve this case through only a one-sided and self-serving stipulation, with no opportunity for Plaintiffs to respond.”
The funding dispute is part of the Trump administration’s broader campaign to root out “fraud, waste, and abuse” in federal benefit programs. Earlier this year, President Donald Trump appointed Vice President JD Vance to lead the White House Task Force to Eliminate Fraud, which has targeted alleged abuse in Medicare, Medicaid, and the H-1B visa program.