Walz proposes $39 million anti-fraud plan that includes new centralized investigations unit

New hires, better use of AI and increased data sharing are ways Gov. Tim Walz has suggested the state use to go after people looking to commit fraud.

All are included in what Rep. Dave Pinto (DFL-St. Paul) calls, “A robust package that builds on what we’ve done in the past.”

Rep. Ginny Klevorn (DFL-Plymouth) said many provisions in the Pinto-sponsored HF2603 are moving through the legislative process on their own, and this bill is a combination of all those.

She co-chairs the House State Government Finance and Policy Committee which had an informational hearing on the total package Thursday.

“We’re coupling new tools, like AI, with old fashioned police work, to slam the door shut on theft,” Walz said when releasing his proposal Jan. 3.

“Minnesota is a state committed to helping people, and we’re committed to providing services to improve the lives of Minnesotans. Fraud against these public programs is unacceptable, it’s not a victimless crime and it harms the same people we would help with these services,” said Erin Campbell, commissioner of Minnesota Management and Budget.

The hearing came one day after the ringleaders of the $250 million Feeding Our Future scheme were found guilty of stealing money intended to help feed children during the pandemic. In December 2024 two Minnesota autism treatment centers were raided, accused of submitting fraudulent claims for services that were never provided.

Among the recommendations from the state’s top-elected official are:

• creating a centralized financial crimes and fraud investigations section at the Bureau of Criminal Apprehension to combat fraudulent activity impacting state programs (this began Feb. 7);
• give agencies expanded authority to stop payments to people and entities suspected, charged, or convicted of fraud or financial crimes;
• increase by 20% criminal penalties for theft;
• make providing kickbacks a state crime;
• requiring autism centers to be licensed; and
• increasing data sharing between agencies and then take action to pause payments if issues arise, something state statute now limits.

“For years our data has been very siloed in the state between agencies. And fraudsters are well aware that that is our Achilles' heel. They are using that inability to exploit the system,” said Rep. Kristin Bahner (DFL-Maple Grove). “If we do not act, we will continue to see bad actors exploiting state government and we will not be able to catch them.”

According to the governor’s announcement, his proposal has a $39 million price tag in the 2026-27 biennium and $15 million in the 2028-29 biennium.

Rep. Jon Koznick (R-Lakeville) and Rep. Jim Joy (R-Hawley) expressed concern about increasing the cost of government with darker financial times looming.

“We’re looking at (the Education Department) spending over a million dollars a biennium for more staff for compliance; children, youth and families wants two more FTE’s just for compliance; and finally in 2025 we’re asking for electronic attendance records to help prevent misuse. Then investing another $5 million and $2.8 (million) ongoing,” Koznick said.

What we’re being told is we can’t stop fraud without more money when we’re looking at a nearly $6 billion deficit, Joy said. “I would encourage us to try to find other avenues.”

Countered Campbell: “The reality is that agencies need capacity, additional resources to do this work and to do it well. We take it seriously and it would be disingenuous for us to tell you we could do that with the resources we have today.”