Acting Labor Secretary Keith Sonderling on Wednesday threatened to cut off federal funding to states that refuse to crack down on unemployment insurance fraud.
His warning comes amid increased concerns about the level of government welfare fraud occurring in states like California, Minnesota, and others.
During an appearance on Fox Business, Sonderling declared he would be “the first Secretary of Labor to cut off the state’s administrative funding.”
“Because of the leadership of the vice president and the task force and the president’s commitment to stopping fraud, I will essentially cut off the state’s administrative funds and then they won’t be able to administer this unemployment insurance due to the fraud,” he continued.
Sonderling further explained that the Trump administration wants “to make sure that people who are actually eligible for this, who need to get back in the workforce, are getting it” and that “this is going to be on the governors, and especially the Democrat governors, and that’s where the states will receive the highest fraud.”
🚨 HOLY SMOKES. For the first time in history, the Trump Labor Department could soon CUT OFF blue states' unemployment insurance funds if they refuse to comply on fraud
— Eric Daugherty (@EricLDaugh) June 17, 2026
He says a person with one Social Security number could get MULTIPLE benefits in multiple states 🤯
DO IT!… pic.twitter.com/59iSQqKb7E
The problem Sonderling and many others have discussed is rooted in a massive surge in fraud during the COVID-19 pandemic. Under the CARES Act, new programs were created that employed weak verification measures, which allowed criminals to steal billions in taxpayer funds.
The U.S. Department of Labor noted that a person could file claims in dozens of states using the same Social Security number. In fact, California now owes the federal government over $20 billion due to years of fraud and mismanagement. New York bleeds almost $2 million daily because of fraud and improper payments. Illinois has paid out over $320 million improperly at a rate over 14 percent.
“We are officially putting governors on notice,” Sonderling said in the Labor Department’s announcement. “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.”
Sonderling’s crackdown is part of President Donald Trump’s broader push to end waste, fraud, and abuse in federal benefit programs. He appointed Vice President JD Vance to head up the Task Force to Eliminate Fraud in March.
The Labor Department is teaming up with its inspector general to recover stolen money while pressuring states to tighten security measures. The Washington Examiner reported that the administration froze almost $1 billion in bank accounts tied to fraudulent pandemic claims.
A recent House Oversight Committee report revealed a disturbing pattern of failure in Minnesota. The report found that Gov. Tim Walz and state Attorney General Keith Ellison were aware of the rampant abuse and fraud with how federally funded social programs were operated. Instead of addressing the problem, they essentially ignored it.
Federal administrative funding for state unemployment programs runs between $2.4 billion and $4.6 billion a year. If these funds were cut, it would make it harder for states to process claims.
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