Administration Rescinds a $10 Billion Funding Freeze Aimed at Five Democratic States

According to court documents filed July 13, 2026, the Trump administration rescinded a roughly $10 billion freeze on child care subsidies and social services funding directed at five Democratic-led states — California, Illinois, Colorado, New York, and Minnesota. The Department of Health and Human Services told state officials it was withdrawing its January 5 and January 6 letters, along with the associated data requests and information demands. The freeze, announced in early January amid a fraud investigation tied to Minnesota social services, had been paused by a federal judge in New York days after it was imposed.

The reversal followed repeated setbacks in litigation challenging the funding pause. Reporting indicated the withdrawal also appeared aimed at limiting court-ordered discovery that could have required disclosure of internal Office of Management and Budget communications. The episode raises questions about the use of conditional federal funding as leverage against states led by the opposing party, and about whether litigation exposure, rather than the stated fraud rationale, drove the reversal.

With the letters rescinded, the affected funds are being released. The underlying court record remains, and the withdrawal itself was disclosed through the July 13 filing.