The Trump administration has done something dramatic and very simple. It has cut off all federal child care payments to Minnesota.
Deputy Health and Human Services Secretary Jim O’Neill put it bluntly in his statement on X. “We have turned off the money spigot,” he said, announcing that the Department of Health and Human Services is freezing federal child care funding to the state because of what he called “blatant fraud that appears to be rampant in Minnesota and across the country.”
The money at stake is not small change. The Administration for Children and Families, the HHS division that oversees child care and family support, sends Minnesota about 185 million dollars a year. According to HHS, that funding helps pay for care for roughly 19,000 children, including toddlers and infants.
For those families, the announcement means deep uncertainty. HHS officials did not outline any backup plan for the Minnesota parents who rely on that federal support. For Governor Tim Walz, who is already under fire over multiple fraud scandals, the freeze is more than a policy problem. It is a political emergency that threatens the core of his reelection hopes.
How Fraud Scandals Brought Minnesota to This Point
The funding freeze did not come out of nowhere. It rests on years of fraud investigations that have already embarrassed Minnesota and raised serious questions about oversight under Walz.
The current wave of attention began with a viral video from Nick Shirley, a conservative YouTube creator. In the video, he visits multiple child care and learning centers in Minnesota, many of them Somali run, and claims they are receiving government child care money even though they are not actually operating. Some doors are locked. Some sites appear empty. The implication is that fake or hollowed out centers are siphoning off taxpayer funds through Minnesota’s Child Care Assistance Program.
Shirley’s video was quickly picked up by conservative media and retweeted by powerful figures, including Vice President J.D. Vance and Elon Musk. It reinforced a narrative that Minnesota has become a soft target for fraud, especially involving social services and immigrant communities.
But the fraud story is much bigger than one viral clip. It connects to a massive scandal that started during the Covid pandemic. In 2022, federal prosecutors charged 47 defendants in a scheme to defraud a federally funded child nutrition program through a nonprofit called Feeding Our Future. Prosecutors said the group falsely claimed it was serving meals to needy children and stole about 250 million dollars instead.
Since then, authorities have convicted 57 people tied to the Feeding Our Future conspiracy. Even after all of that, they have recovered only about 60 million dollars out of the 250 million that was stolen.
The fraud problem does not stop there. In December, First Assistant U.S. Attorney Joe Thompson said that half or more of the roughly 18 billion dollars in Medicaid funds that supported 14 Minnesota programs since 2018 may have been stolen through fraud. That would mean up to 9 billion dollars gone. As Thompson put it, “The magnitude cannot be overstated. What we see in Minnesota is not a handful of bad actors committing crimes. It is staggering, industrial scale fraud.”
Walz has pushed back on that figure, accusing Thompson of pulling the 9 billion dollar estimate “out of thin air” and using it for sensational effect. But the fact that a senior federal prosecutor felt confident enough to use those words in public shows how badly Minnesota’s reputation has been damaged.
On top of this, the Small Business Administration has suspended its funding to Minnesota to investigate 430 million dollars in suspected Paycheck Protection Program fraud. The FBI has raided multiple businesses in the Twin Cities for alleged Medicaid housing fraud. In Minnesota, “fraud” is no longer a side story. It is becoming the main storyline.
What HHS Has Ordered and Why It Targets Walz
O’Neill’s announcement takes that storyline and turns it directly onto Tim Walz.
In his posts and video, O’Neill said that Minnesota has “funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.” He called the video evidence “shocking and credible” and stressed that HHS believes “scammers and fake daycares” have been allowed to siphon off money that should be serving real children.
HHS is doing three big things at once.
First, it has frozen all child care payments to Minnesota. No new federal child care money will go to the state until HHS is satisfied the system is clean.
Second, HHS is demanding that Walz deliver a detailed audit of the Minnesota centers featured in Shirley’s video. That audit must include attendance records, licenses, complaints, investigations, and inspection histories. HHS wants hard proof that centers are real, open, and serving children.
Third, HHS is tightening rules for every state. From now on, payments through the Administration for Children and Families will require justification and a receipt or photo evidence before money is sent. HHS has also launched a hotline and an email address to make it easier for people to report suspected fraud. As O’Neill put it, “Funds will be released only when states prove they are being spent legitimately.”
Minnesota is the first state to feel the full force of these new rules, and that is not an accident. The Trump administration has highlighted Minnesota as a symbol of what it claims is “rampant fraud” in social service programs and as a warning to other states.
Walz’s Defense: Cracking Down or Looking Away?
Walz has responded by accusing Trump of weaponizing fraud investigations for political gain. “We have spent years cracking down on fraudsters. It is a serious issue, but this has been his plan all along,” Walz wrote on X. “He is politicizing the issue to defund programs that help Minnesotans.”
His office echoed that message in statements to reporters. A spokesperson said the governor has been “combatting fraud for years” by referring cases to law enforcement, shutting down and auditing high risk programs, and asking the legislature for more authority to act aggressively.
Walz has also insisted that he is not dodging responsibility. At a December news conference, he said, “I am accountable for this, and more importantly, I am the one that will fix it.” He argued that an audit due by late January will give a clearer picture of the true scale of fraud.
Critics, however, say that Walz’s record tells a different story. Some Republicans argue that “there is no way” his administration could have been unaware of the problems, given years of audits and warnings. A raft of earlier state audits about oversight failures were reportedly brushed aside. Feeding Our Future itself managed to delay scrutiny by suing the state education department and claiming discrimination, even as the fraud continued.
Five Republican legislators have called for Walz to resign, saying that fraud is the number one issue their constituents raise and that “no one has been publicly disciplined in any way.” The state House speaker has noted that despite the massive scandals, “no one has lost their job.” To many voters, that looks like a culture of looking away until Washington forced the issue.
Real Families, Real Money, and a Political Time Bomb
The numbers behind the fraud allegations are shocking on their own. A 250 million dollar child nutrition scam. A claim that up to 9 billion dollars in Medicaid funds may have been stolen. Hundreds of millions more under investigation in PPP loans and housing assistance.
But the political danger for Walz comes from something more immediate. The federal child care dollars that are now frozen were supposed to support about 19,000 children. Those are real families who use those subsidies so they can work, study, or simply keep their lives functioning.
HHS has not offered any replacement funding. The Trump administration has focused on finding and stopping fraud, not on cushioning the short term blow for Minnesota parents. That leaves Walz in a brutal position.
If he cannot quickly replace the frozen federal funds with state money or some emergency workaround, thousands of parents will feel the pain directly. Daycare bills will spike. Some centers may close or cut back. Parents will be forced to quit jobs or juggle impossible schedules. Those families will know exactly who is in charge at the state level.
Even if Walz manages to cover part of the gap, the narrative writes itself. Years of fraud scandals under his watch. Federal prosecutors talking about “staggering, industrial scale fraud.” A governor who once dismissed some audits now pleading that he has been cracking down all along. And now, a complete freeze in federal child care money because the state cannot prove that taxpayer dollars are safe.
For a sitting governor running for reelection, that combination is toxic.
A Nail in the Coffin for Walz’s Election Hopes
On paper, Walz and his allies argue that he is the person best positioned to fix the system. He says his administration is working with federal partners to stop fraud and catch fraudsters. He says he has pushed for more tools and authority to crack down. He says the fraud is serious, but that Trump is exaggerating it to justify cutting aid.
The problem is that parents who lose child care support are not likely to care much about who wins the blame game in Washington. They will look at the governor who promised competence, who dismissed some early warnings, who is now scrambling to explain why hundreds of millions of dollars were stolen on his watch and why their own funds have been cut off.
Republicans already see an opening. They are calling for new investigations, tougher oversight, and in some cases Walz’s resignation. Trump himself has folded the Minnesota scandals into his broader attacks on immigration and Democratic leadership. The right wing media ecosystem is amplifying every allegation and every new raid.
Even if the final fraud numbers end up lower than the most explosive estimates, the political damage is real. The phrase “industrial scale fraud” is now attached to Minnesota. The image of “fake daycares” cashing checks is locked in many voters’ minds. And the federal government has taken the extraordinary step of shutting off child care money to an entire state.
Walz can argue that Trump is playing a long political game. He can insist that he has been cracking down for years. He can say the big dollar fraud estimates are inflated. But if thousands of Minnesota parents lose access to child care assistance, the story that will matter most on election day is simple.
Fraud flourished under his watch. Washington lost trust in his oversight. The child care money dried up. And for many voters, that may feel like the final nail in his political coffin.
