Federal child care funding is at the center of a dispute between the Trump administration and Minnesota officials after the U.S. Department of Health and Human Services said it is planning tighter rules for programs that subsidize care for lower-income families. The agency also said funding is on hold to all states while they provide more verification about their programs, and it said Minnesota will face additional requirements for centers suspected of fraud. The announcement came the same day that Gov. Tim Walz said he was ending his reelection campaign, and Walz accused Republicans of politicizing the issue.
The administration’s stated policy shift focuses on when and how providers get paid under the Child Care and Development Fund. Health and Human Services said it plans changes that would allow states to pay providers based on attendance instead of enrollment and to pay providers after care is delivered instead of in advance. Deputy Secretary Jim O’Neill said “Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” according to the statement referenced in the report.
HHS said it had previously required advance payments in a 2024 rule change, and the administration’s officials said the change was intended to make child care centers more likely to serve families using the subsidies. But the same report said many states received waivers to delay implementing parts of the 2024 rules and did not start advance payments immediately. The agency said the proposed changes would still require a public comment period and could take several months to implement.
HHS also said it is raising verification requirements before states receive more funding. An HHS spokesperson said all 50 states would have to provide additional levels of verification and administrative data, and Minnesota would have to provide even more verification for centers suspected of fraud, including attendance and licensing records plus past enforcement actions and inspection reports. The report also said O’Neill, in a social media post the previous week, described a nationwide approach in which Administration for Children and Families payments would require “justification and a receipt or photo evidence” before money is sent.
Officials in multiple states said Monday they had not received guidance on how to comply with the new requirements described by O’Neill. Cindy Lenhoff, director of the National Child Care Association, argued that pausing payments would not stop fraud and warned about collateral harm to families and providers. “Withholding funds from complaint providers will not fix fraud,” Lenhoff said, adding that it “will only destabilize an already fragile system.”
Walz, a Democrat and the 2024 Democratic vice presidential nominee, said the Trump administration’s decision to withhold child care funding from Minnesota showed what he described as political maneuvering. Walz said the administration’s move reflected willingness “to hurt our people to score cheap points,” according to the report, and he said “They and their allies have no intention of helping us solve this problem, and every intention of trying to profit off of it,” while announcing that he was ending his reelection campaign.
Inside Minnesota, child care centers and advocacy groups said families could feel the impact quickly because many providers depend on subsidized tuition. Maria Snider, director of the Rainbow Child Development Center and vice president of the Minnesota Child Care Association, said fear was rising among families and centers that rely on the federal funding and warned that centers could lay off teachers and shut down classrooms if they lose tuition funding.
The dispute traces in part to fraud allegations tied to a video posted by a right-wing influencer. The report said the video claimed the influencer had found that day care centers operated by Somali residents in Minneapolis committed up to $100 million in fraud. In response, Ahmed Hasan, director of the ABC Learning Center that was featured in the video, denied wrongdoing and told The Associated Press that “There’s no fraud happening here.” Hasan said the center has records showing it is open and described receiving harassing phone calls after the video circulated.
The report said the Administration for Children and Families provides $185 million in child care funds annually to Minnesota, citing Assistant Secretary Alex Adams. It also said Hasan described the center as being routinely subject to checks by state regulators to ensure compliance with its license.
This story was first published on Dec. 31, 2025. It was updated on Jan. 2, 2026 to make clear that the day care fraud schemes were alleged.