Attorney General Josh Kaul is co-leading a multistate lawsuit against the federal government targeting what plaintiffs say was the unlawful termination of IT modernization grants.
The American Rescue Plan Act-funded grants were intended to help states modernize their unemployment insurance systems following a surge in unemployment claims stemming from the COVID-19 pandemic, per a complaint filed late last week in the U.S. Court of Federal Claims.
But the federal Department of Labor ended the program in May 2025, saying it “no longer effectuates” the agency’s priorities.
Wisconsin was awarded $11.25 million and hired a third-party vendor to build a new UI employer portal, per the complaint, but had to halt work on that portal when the DOL pulled funding. The scope of work included measures to prevent unemployment fraud.
Gov. Tony Evers, who wrote several letters to the Trump administration asking for the funding to be restored, said the administration’s action was “unacceptable.”
“The Trump Administration’s decision to obstruct millions of dollars that Wisconsin was promised to continue our efforts defies logic,” he said in a statement. “If the Trump Administration is serious about fighting fraud, they wouldn’t be withholding critical resources that should be helping states like Wisconsin do just that.”
The guv’s office notes Wisconsin’s UI system has been audited nine times over a three-year period since the modernization effort started and has had “zero identified instances of previously undiscovered fraud.”
Before last year’s funding cut, the state had intended to use the dollars to create a new web and mobile employer portal with security features to reduce fraud, while overhauling the communication platform for users and improving cybersecurity measures, according to a release. Other planned uses include setting up identity proofing tools as well as improving claim documentation and automation for case scheduling.
Kaul said the planned efforts represented “effective governance” and slammed the move to cut funding.
“The Trump administration shouldn’t have terminated these grants, and it certainly shouldn’t have done so in clear defiance of congressional intent,” he said in a statement.
Wisconsin had initially gotten funding from six different grant programs before remaining funding was cut for five of them, leading to some projects being cancelled.
The state Department of Workforce Development used an IT modernization grant to hire a company to upgrade its UI system, but its cancellation led to the agency stopping work on the project with nothing to show for it, according to the state Department of Justice.
To implement the project plan now, DWD would have to hire a new company and start from scratch, having spent $8.2 million on the initial scrapped effort, the DOJ says.
