On June 17, 2026, Acting Labor Secretary Keith Sonderling sent letters to the governors of 53 states and territories demanding “immediate action to combat fraud, waste, and abuse within the unemployment insurance program.” The department said it would use “every available enforcement tool,” including “withholding administrative funds from states for the first time in history,” to force compliance. Sonderling, a member of Trump's Task Force to Eliminate Fraud led by Vice President JD Vance, said, “We are officially putting governors on notice.”
The letters went to every governor, but the department's public announcement singled out three Democratic-led states, as the Associated Press noted. It said California owes about $20 billion, a federal loan taken during the pandemic; that New York loses an estimated $2 million a day to fraud and improper payments, without separating the two; and that Illinois made $320 million in improper payments. The Guardian reported that the department released no data on fraud itself, and that several Republican-led states, Florida among them, have improper-payment rates as high as or higher than California's. Improper payments are not the same as fraud: government audits of a sample of last year's cases suggested about $1 in $9 was an overpayment, mostly for reasons other than fraud, according to AP.
The Government Accountability Office estimated that fraud accounted for 11% to 15% of unemployment benefits paid from April 2020 through May 2023, a period that took in the last months of Trump's first term and more than half of Joe Biden's, when access to the money was eased. Gov. Gavin Newsom's office blamed “lax regulations and rushed distribution” of benefits by the first Trump administration, and Illinois Gov. JB Pritzker said the administration “continues to govern by press release.” In a Fox television appearance that morning, Sonderling said, according to The Guardian, “I will essentially cut off the states' administrative funds and then they won't be able to administer this unemployment insurance due to the fraud.” The letters threatened withholding; the department said further directives would follow in the coming weeks.
Correction (October 2, 2026): The entry said the letters singled out Democratic-led states, that New York's improper-payment rate is above 20%, and that rushed pandemic distribution drove most of the fraud. The letters went to all governors and it was the department's announcement that singled out three Democratic-led states; no source gives New York a 20% rate, so that figure was removed; and the GAO window covers parts of both the Trump and Biden administrations, which the entry now says instead of asserting what drove most of the fraud. The “first time in history” wording is the department's own statement, not the letter quoted directly.