By Nick VivianiFOX 5June 17, 2026The U.S. government wants states to do more to combat fraud, waste, and abuse in their unemployment insurance programs and is threatening to withhold federal dollars until they do.Big picture view:Letters from the Labor Department were sent to the governors of every state warning that, if they do not crack down on their unemployment programs, administrative funds would be withheld. The move is the latest action by President Donald Trump’s administration to combat fraud and waste in state programs.What they're saying:"We are officially putting governors on notice," Acting Labor Secretary Keith Sonderling said in a statement Wednesday. "The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars — no state should allow it either. If states allow it, they will suffer the consequences."The backstory:The Labor Department blamed poor oversight, outdated technology, weak identity verification, and lax control for "allow[ing] unprecedented fraud to flourish." Its statement cited examples from California, Illinois, and New York to show how hundreds of millions of dollars have been reportedly lost to fraud, improper payments, and mismanagement.
Funny how they all Blue states named.
Back in April,
President Donald Trump on Friday said Vice President JD Vance will focus on investigating fraud in Democratic-run states in his new role as "fraud czar.""His focus will be 'EVERYWHERE,' but primarily in those Blue States," Trump said in a post on Truth Social, singling out California, Illinois, Minnesota, Maine and New York.
First it was ICE going after blue states, now it is unemployment insurance being framed as fraud in blue states. But as usual, they offer no data to back up their accusations.
Acting secretary Keith Sonderling threatens to withhold administrative funds from states for first time in historyThe GuardianMichael SainatoWed 17 Jun 2026Keith Sonderling sent letters to 53 states and US territories demanding action to “combat waste, fraud, and abuse” within the unemployment insurance program, threatening to withhold administrative funds from states for the first time in history.“We are officially putting governors on notice,” said the acting US secretary of labor. “The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars – no state should allow it either. If states allow it, they will suffer the consequences. This department is no longer afraid to use every lever available to ensure taxpayer money is protected.”The agency did not provide data on fraud or alleged fraud in unemployment systems, but highlighted three Democrat-led states – California, New York and Illinois – and made claims about each.
The article also noted that much of the so-called “fraud” is actually billing and payment error.
The Department of Labor also claimed that New York loses an estimated $2m a day in unemployment insurance fraud and improper payments, but did not differentiate between the two. They also cited that Illinois had improper payments of $320m, at a rate of 14%.Improper payments are not fraud, rather are most often cited as due to antiquated technology, with an estimated improper payment rate of 14.9% across the US.
This is the Trump administration’s typical MO: make broad, attention-grabbing accusations that dominate headlines, but are not supported by clear data.
Friendly news outlets like Fox News plaster it all over their headlines: “Massive Fraud Crackdown.” What they don’t mention is that much of it is billing error and that states are actively pursuing actual fraud cases. But they don’t mention that.
I also want to point out that states are going after fraud:
It is not as though the states are doing nothing. Much of the data the federal government is using comes from the states themselves. This is nothing more than grandstanding.
And you know darn well that if the feds do this the courts will overturn it like they did with the ICE and CBP fake claims. The courts blocked him in cutting funding to Sanctuary Cities. When he cut funding to states' Welfare & Social Services programs. When he tried to cut Public Health & Research. So if he goes through with these threats I foresee the court blocking him again.



