CALIFORNIA NEWSWIRE (OAKLAND, Calif.) — Today, California Attorney General Rob Bonta, alongside a coalition of 12 attorneys general and two governors, filed a lawsuit challenging the U.S. Department of Labor’s (DOL) unlawful decision in May 2025 to terminate more than $45 million in grant funding that was intended to assist the plaintiff states in modernizing unemployment insurance system technology and implementing measures to prevent fraud.
Congress created the grants as part of the American Rescue Plan Act of 2021, amid the pandemic-related surge in unemployment claims. The goal of the program is to improve the technology used to administer states’ unemployment insurance programs to better detect and prevent fraud, promote equitable access, and pay benefits in a timely fashion. In total, the DOL awarded approximately $780 million to states to modernize their unemployment insurance systems and fight fraud.
Six different grants were offered to states through the program:
— IT Modernization Grants, to develop resilient unemployment information technology systems that can continuously adapt to changing conditions and integrate evolving fraud prevention technologies.
— Integrity Grants, to strengthen unemployment insurance program integrity through ID verification.
— Navigator Grants, to help eligible workers learn about and apply for unemployment insurance benefits (i.e. navigate the unemployment insurance program) and support states in delivering timely benefits.
— Tiger Team Grants, to implement recommendations from multi-disciplinary experts in the areas of fraud prevention, equitable access to benefits, and payment timeliness.
— Equity Grants, to help eliminate barriers to access, improve timeliness of payments, and ensure equity in fraud prevention activities.
— Fraud Prevention Grants, to guard against improper payment reduction and assist overpayment recovery and other fraud prevention and detection efforts.
In the lawsuit, the coalition argues that the DOL’s grant terminations violated states’ grant agreements. The terms of the grant agreements do not allow the DOL to unilaterally terminate the grant projects prior to the end of the performance period simply because the administration has changed its priorities. The coalition also argues the DOL breached the implied duty of good faith and fair dealing by wrongfully imposing new terms and conditions, relying on an erroneous and bad faith interpretation of relevant regulations and of authorizing statutes, and failing to provide states with formal notice and an opportunity to object to their grant terminations. The coalition is seeking monetary damages as part of the lawsuit.
This lawsuit 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.
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This version of news appeared first on CaliforniaNewswire.com and is © 2026 Christopher Simmons – all rights reserved. News is based on an announcement issued by the office of AG Bonta.
