Three Republican senators want to padlock the open ATM. Sen. Ted Cruz, joined by Sens. Mike Lee and Rick Scott, has introduced the Payment Integrity Act — legislation that would force states to verify that children actually showed up to daycare before sending federal dollars out the door.
The bill takes direct aim at a 2024 Biden administration rule that required states to pay childcare providers before confirming attendance. Under that system, providers collected taxpayer money based on enrollment claims alone. Whether a single child ever walked through the door was, functionally, an afterthought.
Cruz put a finer point on the problem at a Senate Judiciary Subcommittee hearing last week:
"Programs in Minnesota for welfare and childcare were designed to channel resources into protecting vulnerable children but were treated like an open ATM by criminals."
According to Fox News, the Payment Integrity Act flips the payment structure. States would distribute federally funded childcare dollars based on verified attendance, not enrollment claims. Providers get paid after services are confirmed — not before. The bill amends the Child Care and Development Block Grant Act, originally signed by former President George H.W. Bush, and codifies a January HHS rule that already moved toward attendance-based billing.
The bill didn't emerge from a policy seminar. It emerged from Minneapolis.
At last week's hearing, Cruz pointed to a photo of the "Quality Learning Center" — yes, that's how it was spelled — a Minneapolis facility he called "emblematic" of the crisis. Alleged fraudulent daycare providers were collecting federal childcare funds while, according to widespread allegations, caring for no children at all.
Journalist David Hoch and blogger Nick Shirley visited sites claiming to be Somali daycare centers and appeared before Cruz's subcommittee to describe what they found. Cruz framed the scope of the problem in geographic terms that should unsettle anyone paying attention — this wasn't happening in some failed state abroad:
"There are few crimes more morally repugnant than stealing from vulnerable children. Every dollar stolen is a meal not eaten, a doctor's visit missed and a future diminished."
The fraud, he told the subcommittee, was occurring not in "some distant or lawless place, but in the heart of America's Midwest."
The 2024 Biden-era rule sits at the center of this. Requiring prepayment before attendance verification isn't just sloppy policy — it's an architectural invitation to fraud. You don't need sophisticated criminal networks to exploit a system that hands you money before checking whether you did the work. You just need a storefront and a list of names.
The bill's operative language strips out any ambiguity:
"Nothing in this subchapter shall be construed to require a lead agency to make a payment to a child care provider prior to the provision of child care services."
That's a direct reversal. No more fronting cash on the honor system.
HHS has already moved administratively. Jim O'Neill, deputy to Secretary Robert F. Kennedy, confirmed the January rule was spurred by what happened in Minnesota:
"We've seen credible and widespread allegations of fraudulent daycare providers who were not caring for children at all. The reforms we are enacting will make fraud harder to perpetrate."
Cruz's bill locks that administrative reform into statute — ensuring a future administration can't simply rewrite the rule and reopen the spigot.
Cruz didn't stop at the federal payment mechanism. He aimed squarely at the state and local officials who let this fester. When asked about the Minnesota situation, he identified a structural incentive problem that extends well beyond one state:
"The 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."
That's the uncomfortable truth underneath the policy fix. Federal programs that route money through state bureaucracies depend on those bureaucracies to police fraud. When state politicians benefit — electorally, politically, or simply through the path of least resistance — from maximizing enrollment numbers rather than scrutinizing them, oversight becomes performative. The money flows. The fraud compounds. And the children the program was designed to serve get nothing.
Co-sponsor Lee drove the point home with characteristic efficiency:
"Fake childcare operations are stealing funding from the ones who are actually taking care of America's children in need. Our bill will address this massive fraud by granting funding based on actual attendance rather than reported enrollment and allowing states to pay retroactively instead of in advance."
Lee added that such "diligence" should have been the law all along. He's right. The fact that it wasn't tells you everything about how Washington designs social programs — optimized for spending velocity, not results.
The Payment Integrity Act now heads into the legislative process with three co-sponsors and the administrative backing of HHS. The January rule gives the bill a running start — it's not proposing something untested, it's cementing something already in motion.
The deeper question is whether Congress will treat Minnesota as the wake-up call it should be, or whether the story fades into the background noise of Washington's endless policy queue. Fraudulent providers collected federal money meant for children. The system that enabled it was designed by the Biden administration. The senators proposing to fix it have named the problem plainly.
Every dollar stolen from a childcare program doesn't vanish into an abstraction. It disappears from a real child's life. The Payment Integrity Act doesn't solve every problem in federal social spending. But it closes a door that should never have been propped open in the first place.