Cruz targets federal childcare rules amid Minnesota fraud scandal

SPECIAL: Three Republican senators are moving to overhaul the way federal child care funds are distributed after what they call “mass fraud” in Minnesota exposed a system that pays providers before verifying that children have entered the room.

Sen. Ted Cruz, R-Texas, joined by Sens. Mike Lee, R-Utah, and Rick Scott, R-Fla., is introducing the Payment Integrity Act, a bill that would require states to distribute federally funded child care dollars based on verified attendance, not records requests.

“Outreach and child care programs in Minnesota were designed to direct resources to the protection of vulnerable children, but were treated like an open ATM by criminals,” Cruz told Fox News Digital.

“Mass fraud in Minnesota shows that American taxpayers can no longer rely on local and state politicians to prevent abuses, because those politicians often have electoral and partisan incentives to look the other way. My legislation reduces the risk of waste and fraud we see and ensures resources are available to children and families in need.”

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The bill would reverse a 2024 Biden administration rule that required states to pay child care providers before verifying attendance. Under Cruz’s proposal, providers would be paid only after services are approved; There will be a transition from registration-based payments to attendance-based billing.

Cruz’s bill comes as the outspoken Texan led a Senate Judiciary Subcommittee hearing last week on alleged Somali fraudsters. There MPs heard directly from journalist David Hoch, who was seen accompanying blogger Nick Shirley to addresses alleged to be Somali nurseries.

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“There are few crimes more morally repugnant than stealing from vulnerable children. Every stolen dollar is an uneaten meal, a missed doctor’s visit, and a diminished future,” Cruz said, adding that such scams “plunder the potential of our children.”

Pointing to a photo of the “Quality Education Center” in Minneapolis during the hearing and allegedly fraudulent child care provider, Cruz called the crisis “symbolic” and said the fraud occurred “not in some remote or lawless place, but in the heart of the American Midwest.”

Co-sponsor Lee said support for childcare should be “given to real children, not empty rooms.”

“Fake child care operations steal funds from those who truly care for America’s needy children. Our bill would address this massive fraud by providing funding based on actual attendance rather than reported enrollment and allowing states to pay retroactively rather than upfront,” Lee said, adding that such an “effort” should have been law from the beginning.

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The Payment Integrity Act also codifies Health and Human Services’ January rule establishing participation-based billing procedures

That rule was also spurred by what was happening in Minnesota, according to Jim O’Neill, an aide to Secretary Robert F. Kennedy.

“We have seen credible and widespread allegations of fraudulent daycare providers who do not care for children at all. The reforms we are introducing will make it harder for fraud to occur,” O’Neill said in a statement. he said.

Minnesota Attorney General Keith Ellison appears during a Senate hearing on Capitol Hill in Washington, Thursday, Feb. 12, 2026. (Tom Brenner/AP)

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The Payment Integrity Act formally amends the Child Care and Development Block Grant Act signed by President George Herbert Walker Bush to include this type of “attendance-based billing.”

“Nothing in this subsection shall be construed to require a lead agency to pay a child care provider prior to the provision of child care services,” Cruz said in the bill, which said a direct reversal of the prepayment system allows fraud to thrive. The statement is included.