California Childcare Payments Suspended as Scandal Goes Viral

PAUL PRESTONxd
6 days ago
3 min read

AENN

Chriss W. Street

Jan 03, 2026

The U.S. Department of Health and Human Services announced a nationwide freeze on all federal childcare payments to statesciting metastasizing fraud allegations, initially attributed to Somali communities.

Total federal spending for child care in Fiscal Year (FY) 2025 was estimated $25.3 billion on programs solely focused on child care spending, plus an additional $1 billion for Child Care and Development Block Grants and another $12 billion for Head Start, for a total cost of $38.3 billion.

Deputy HHS Secretary Jim O’Neill posted on X that “You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.” The HHS Secretary outlined the Department’s response:

“1. I have activated our defend the spend system for all ACF payments. Starting today, all ACF payments across America will require a justify-cation and a receipt or photo evidence before we send money to a state.2. Alex Adams and I have identified the individuals in @nickshirleyy’s excellent work. I have demanded from @GovTimWalza comprehensive audit of these centers. This includes attendance records, licenses, complaints, investigations, and inspections.3. We have launched a dedicated fraud-reporting hotline and email address athttps://childcare.govWhether you are a parent, provider, or member of the general public, we want to hear from you.”

O’Neill said that due a decade of fraudulent Minnesota childcare payments, HHS “will require a justification and a receipt or photo evidence before we send money to a state.” He expanded the demand nationwide: “Funds will be released only when states prove they are being spent legitimately.”

U.S. Attorney Joe Thompson estimates his office has convicted dozens of individuals in Minnesota since 2018 for over $1 billion in fraud losses associated with Child Care, Head Start, Medicaid and 11 other federal program designated “high risk.” Thompson is warning that since 2018, about half of the $18 billion in total federal funds spent by Minnesota on the 14 high risk programs may have been stolen.

California has 7 times the population of Minnesota and leads the nation with about $91 billion a year in federal Child Care, Head Start and Medicaid funding to provide services to 15 million California residents.

U.S. prosecutors from the Biden administration only recovered about $250 million in fraudulent California Medicaid payments last year. Everyone knows that is a tiny fraction of the recoveries compared to Minnesota.

California Attorney General Robert Bonta has admitted that fraudsters “siphon away much-needed resources from vulnerable, deserving patients.” But his office has been notorious for not prosecuting the thousands of politically connected California nonprofits that deliver federal services.

The Trump administration has been actively investigating California since March regarding alleged Medicaid fraud after an audit by the Centers for Medicare & Medicaid Services identified that California improperly used federal Medicaid funds for illegal immigrant services.

“Every dollar misspent is a dollar taken away from an eligible, vulnerable individual in need of Medicaid,” CMS Administrator Mehmet Oz said in August statement. “This action underscores our unwavering commitment to program integrity, safeguarding taxpayer dollars, and ensuring benefits are strictly reserved for those eligible under the law.”

California officials already self-reported a federal billing error and are working to pay back at least $500 million of improperpayments. The HHS Office of Inspector General audit has also found that California improperly claimed another $52.7 millionand their audits are just getting started.

Trump’s “One Big Beautiful Bill” will slash healthcare public health reimbursements for illegal aliens services beginning in October 2026. The change will cut federal reimbursement for California “immigrants without legal status” from 90% to 50% for emergency services.

A rough estimate of California’s ongoing loss of federal funds for Child Care, Head Start, Medicaid and the other 11 “high risk” designated programs is about $18 billion a year. But the Golden State is at massive risk that audits will find tens of billions in illegal prior payments that must be repaid to the federal government.