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by Jim Hᴏft
Jun. 18, 2026

The Trump administration is once again taking aim at government waste, fraud, and abuse, this time warning all 50 states that federal funding for unemployment insurance administration could be on the chopping block if governors fail to crack down on rampant fraud within their systems.

Acting Labor Secretary Keith Sonderling has sent formal letters on Wednesday to the governors of all 50 states and U.S. territories, warning that states that fail to aggressively combat fraud risk losing their federal administrative funding for the first time in American history.

“We are officially putting governors on notice,” said Acting Secretary Sonderling. “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.”

According to DOL:

California – More than $20 billion in debt to the federal government after years of fraud, improper payments, and mismanagement of its UI system.

New York – Losing an estimated $2 million every day to fraud and improper payments, while posting one of the highest improper payment rates in the nation, exceeding 20%.

Illinois – Improperly paying out more than $320 million in taxpayer funds at a rate of more than 14%, one of the highest improper payment rates in the nation.