The Department of Health and Human Services (HHS) is intensifying its measures against Minnesota by halting all federal funding directed towards the state’s childcare providers.

This abrupt funding freeze has left daycare operators and advocates scrambling for answers, as they grapple with the potential impact on their communities. The restriction poses a significant threat, increasing the risk of closures among providers and making childcare unaffordable for low-income families.

In a recent announcement, federal health officials declared that they would suspend further payments under the Child Care Assistance Program (CCAP) to all states. However, Deputy HHS Secretary Jim O’Neill singled out Minnesota during an interview on Friday, drawing particular attention to the state.

The Department of Health and Human Services (HHS) is escalating the Trump administration’s attacks on Minnesota by freezing all federal funding to the state’s childcare providers. 

Day care operators and advocates have few answers about how the sudden stoppage will impact their communities. They said the restriction is putting providers at risk of closure and low-income families at risk of being unable to afford childcare.  

Federal health officials this week announced they were freezing any further allotments under the Child Care Assistance Program (CCAP) — to all states, though Deputy HHS Secretary Jim O’Neill specifically targeted Minnesota in an interview on Friday. 

“We are not going to spend money on Minnesota until we’re confident there is no fraud,” O’Neill said in an interview on Fox News, promising to hold Minnesota Gov. Tim Walz (D) accountable.   

The CCAP funding is used to subsidize services for about 23,000 children from low-income families in the state.

“The only families who are eligible to get this funding are already very low income and economically vulnerable families,” said Clare Sanford, government relations chair and board member for the Minnesota Child Care Association.  

If the funding gets cut off, “families lose access to childcare. Job loss follows pretty quickly after that, and then housing loss follows. I mean, it’s a real cascade of bad for these families,” Sanford said.  

Federal officials said their efforts are targeted specifically at bad actors to root out fraud and protect taxpayers and children.   

“We have turned off the money spigot, and we are finding the fraud,” O’Neill said in a social media post late Tuesday, adding that the agency was also tightening verification requirements for childcare funding to all states. 

President Trump has repeatedly criticized Walz, the 2024 Democratic vice presidential nominee, for failing to stop massive fraud schemes throughout the state. Trump has capitalized on the federal investigations to target the Somali population in the state 

The move to freeze the childcare funds was based on allegations stemming from a video posted by right-wing influencer Nick Shirley that haven’t been proven. 

In the video, Shirley visited specific federally subsidized daycare sites run by Somali Minnesotans in Minneapolis. He alleged that they were fraudulently billing the government for nonexistent children because he couldn’t see any. 

O’Neill said he’s demanding Walz conduct comprehensive audits of the childcare centers featured in Shirley’s video. 

In an email to childcare providers sent Friday morning seen by The Hill, officials from Minnesota’s Department of Children, Youth, and Families said they found out about the funding freeze “at the same time everyone else did on social media” and had no official communication from the federal government until late Tuesday night.  

According to the state, HHS set a deadline of Jan. 9 for the information, and said it may withhold larger child care block grants and impose other penalties “if satisfactory responses are not provided.” 

HHS said there will also be a “temporary restriction for Minnesota to draw down” Child Care and Development Fund (CCDF) federal reimbursement. The state said it does not yet have guidance about what type of restrictions may be in place. 

But for now, the state said providers, families, counties and tribes should continue with the CCAP requirements as usual.  

HHS wouldn’t confirm the specific daycare centers under investigation. Agency spokesman Andrew Nixon said there will be additional scrutiny on providers in Minnesota who “are suspected of being fraudulent.” 

HHS is demanding the state produce attendance records, inspection reports, as well as “any reports that they received from parents, internal state communications to the center for any internal state concerns that they had about the center.” 

For providers not suspected of fraud, Nixon said the administration is “simply asking for administrative data,” which the state had not been asked to provide previously. 

Day care operators said they are audited by state and county officials who regularly ask to see attendance records and do quality checks. 

Providers warned that if federal funding is withheld, many won’t be able to survive.  

“If we’re not getting paid for doing the work, then we either have to let go of those children and let go of staff, or eventually close our doors. Which is terrifying,” said Karen DeVos, who owns and operates an early childhood center with locations in an extremely rural part of the state.  

“It basically puts providers in a situation where you have to decide are you able to take the risk of not getting paid and allow families to keep coming, children to keep attending?” said Maria Snider, vice president of the Minnesota Child Care Association, who operates a center in St. Paul. 

Snider said childcare centers submit federal reimbursement retroactively, for either two or four weeks of service at a time. The reimbursement amount is based on attendance of CCAP families. 

“If there are bad actors in the system, they need to be held accountable for that. It’s not a reason to punish the thousands of kids that are accessing the system right now,” Snider said. “It’s really offensive to me … this paints all of us with a broad brush. That’s not true or fair.”