DOJ warns US states could lose billions in welfare funds over immigration reporting

The US Justice Department warned states that they could risk losing billions of dollars in federal welfare funding if state agencies fail to report immigrants known to be in the country illegally, according to a legal opinion released on Wednesday.

The Justice Department's Office of Legal Counsel said states receiving funding through two major welfare programs must report people unlawfully present in the US to the Department of Homeland Security.

The new interpretation expands the reporting requirement beyond the state agencies directly responsible for administering the federal programs.

Other state bodies that may have information about immigrants without legal status, including universities and departments of motor vehicles, would now also be subject to the requirement.

"Failure to comply may lead to serious consequences, including loss of program funding," Deputy Assistant Attorney General Joshua Craddock, who signed the opinion, said in a statement.

Trump administration increases pressure on states over immigration

Since returning to office in January 2025, US President Donald Trump has pursued a broad immigration crackdown, including deploying immigration agents to cities across the country and expanding cooperation with state and local law enforcement.

The administration has also sought to penalize states that limit their cooperation with federal immigration authorities.

The Justice Department's new position could face challenges from Democratic-led states.

States have already sued to prevent DHS from accessing personal information belonging to recipients of Temporary Assistance for Needy Families, one of the programs affected by the opinion.

Courts have also restricted some Trump administration efforts to require the sharing of immigrants' information with DHS, while in other cases allowing immigration authorities to obtain certain data, including Medicaid information.

Billions in federal welfare funding at stake

All 50 states, Washington, DC, and numerous US territories receive funding through the two programs affected by the opinion, which include TANF and Supplemental Security Income.

Federal TANF grants total more than $16.5 billion annually, while federal SSI benefits exceed $60 billion each year. Immigrants without legal status are not eligible for either program.

Reuters contacted eight state attorneys general, who did not immediately respond to requests for comment on how they might react to the Justice Department's position.

The legal opinion is not itself law but is binding on federal agencies.

Craddock argued that a rule issued in 1998 incorrectly interpreted the 1996 Personal Responsibility and Work Opportunity Reconciliation Act by treating the word "State" as referring only to particular state agencies rather than state governments as a whole.

State agencies could hold information on millions of immigrants without legal status.

At least 19 states and Washington, DC, allow immigrants without lawful status to obtain driver's licenses, while many state universities also admit students without legal status.