IL Attorney General Sues Trump Administration Over Cutting Funding For Unemployment System Improvements

Illinois Attorney General Kwame Raoul is suing the Trump administration over its decision to cut more than $15 million in funding for improvements to the state's unemployment insurance systems, his office announced Friday.

Illinois joined 13 other states to challenge what it called the U.S. Department of Labor's "unlawful decision" in May 2025. The plaintiff states had about $45 million remaining in grant funding, Raoul said.

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The funding was part of a grant issued to plaintiff states to pay for modernizing unemployment insurance system technology and implementing anti-fraud measures. Congress approved the grants amid the COVID-19 pandemic as part of the American Rescue Plan Act of 2021. The Department of Labor issued more than $780 million to states over the years.

"Congress approved this funding for states to improve the administration of their unemployment insurance programs, so they can better detect and prevent fraud and make the unemployment claims process more accessible," Raoul said in a statement. "This administration claims to be focused on rooting out fraud, while simultaneously eliminating tools that help states do just that. I will continue to fight back against the Trump administration's unlawful attempts to cancel crucial funding to states."

The Illinois Department of Employment Security, which administers the state's unemployment insurance program, had planned to use the grant funding to establish an online portal, create a more user-friendly claims process, rewrite materials in "plain language," and implement fraud prevention tools.

Illinois received a letter on May 22, 2025, from the Department of Labor, terminating the grant agreement that "no longer furthered the agency's priorities," Raoul said in a news release.

"Raoul and the coalition argue that the Department of Labor breached the express terms of each grant agreement, failed to give the plaintiff states an opportunity to object to the terminations and acted in bad faith," the release reads.

California, Colorado, Delaware, Kentucky, Maine, Maryland, Michigan, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Wisconsin joined in filing the lawsuit.