Trump Administration Rolls Back Child Care Funding Rules, Freezes Billions Amid Fraud Allegations

By Charlie McCarthy
Monday, 05 January 2026 03:33 PM EST

The Department of Health and Human Services announced Monday it is rescinding a series of Biden-era child care rules that required states to pay providers before verifying any attendance and before care was delivered.

The move, announced through HHS’ Administration for Children and Families, rolls back provisions in the 2024 Child Care and Development Fund rule that the Trump administration says weakened oversight and increased the risk of waste, fraud, and abuse—a growing concern after allegations of widespread day care fraud in Minnesota.

“Congress appropriated this funding to support working families and ensure children have safe places to grow and learn,” HHS Secretary Robert F. Kennedy Jr. said in the department’s release. “Loopholes and fraud diverted that money to bad actors instead. Today, we are correcting that failure and returning these funds to the working families they were meant to serve.”

Under the Biden-era framework, states were pushed to base payments on enrollment rather than verified attendance, pay providers up front, and steer funding toward guaranteed contracts instead of parent-directed vouchers. HHS is now reversing that approach, restoring attendance-based billing, letting states pay after care is delivered, and returning flexibility to voucher programs—changes the administration says strengthen parental choice and reduce opportunities for manipulation.

“Paying providers up front based on paper enrollment instead of actual attendance invites abuse,” Deputy HHS Secretary Jim O’Neill said, pointing to “credible and widespread allegations” in Minnesota that day care operators were billing taxpayers while not caring for children.

The policy reversal comes as the administration also tightens enforcement nationwide. HHS said it activated a national “Defend the Spend” system, imposed additional verification requirements, and launched a fraud-reporting hotline and email address at childcare.gov. Since the tip line launched December 30, the agency says it has received more than 245 reports of potential fraud.

The issue gained national attention after allegations of “ghost day cares” operating in Minneapolis—claims Minnesota officials have disputed. The Trump administration paused child care funding to all states on December 31, stating funds would be released “only when states prove they are being spent legitimately.” Reports indicate the funding pause is tied to Minnesota allegations and could affect 1.4 million children nationwide.

The administration is also freezing more than $10 billion in broader social services and child care-related funding—including CCDF, Temporary Assistance for Needy Families, and the Social Services Block Grant—with several Democrat-led states most affected. Reports indicate at least $7.35 billion in TANF funds and nearly $2.4 billion in CCDF funding are being held back from states such as California, Colorado, Illinois, Minnesota, and New York, along with $869 million in social services block grant money.

Minnesota Democrat Gov. Tim Walz has criticized the crackdown as politically motivated, but conservatives argue that lax Biden-era rules effectively wrote checks first and asked questions later, creating ripe conditions for fraud. The Trump administration says its reforms are about restoring basic accountability by verifying the children are there, verifying the services are delivered, then paying—the same standard working Americans live by every day.