California Attorney General filed a lawsuit Oct. 9, 2026, challenging the U.S. Department of Labor’s May 22, 2025 termination of more than $45 million in grants for unemployment insurance system improvements, the attorney general’s office said.
The attorney general’s office said Congress created the grants in the American Rescue Plan Act of 2021 and that the DOL awarded approximately $780 million to states to modernize unemployment systems and fight fraud.
The office said the program included six grant types; IT Modernization, Integrity, Navigator, Tiger Team, Equity, and Fraud Prevention; and that DOL reviewed and approved project plans with multi-year performance periods.
On May 22, 2025, the office said, DOL sent letters to state workforce agencies that abruptly rescinded unexpended funds and halted approved projects in mid-performance; the termination letters stated the agreements “no longer effectuate DOL’s priorities for its grant funding.”
The attorney general’s office said states have had to reallocate other funds, scale back project scopes, or cancel projects, and that the terminations wasted funds and interrupted work that DOL had approved and agreed to fund.
The lawsuit argues that DOL violated the terms of the grant agreements and breached the implied duty of good faith and fair dealing by imposing new terms, relying on an erroneous interpretation of regulations, and failing to provide formal notice and an opportunity to object; the coalition is seeking monetary damages.
The case was co-led by Wisconsin Attorney General Josh Kaul and Maryland Attorney General Anthony Brown and joined by Attorney General Bonta and the attorneys general of Colorado, Delaware, Illinois, Maine, Michigan, New Jersey, New Mexico, New York, and Oregon, as well as the governors of Kentucky and Pennsylvania.
“Unemployment insurance is a cornerstone of the American safety net. It is what stands between working families and financial collapse when an individual loses their job,” Attorney General Bonta said in the release. “Yet, the Trump Administration decided to yank away these approved funds that would help states improve fraud prevention, replace antiquated technology, enhance cybersecurity, and ensure that workers can access the benefits they need.”
State
Rob Bonta
Attorney General · Democrat
Named 4 times in this story.
Portrait: Official portrait
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