“New Normal” of Fraud Unacceptable, Rasmusson Says After Walz Ends Housing Program

Minnesota Governor Tim Walz recently announced plans to terminate the state’s Housing Stabilization Services (HSS) program after credible allegations of widespread fraud surfaced, drawing sharp criticism from state lawmakers.

Following the announcement, Senator Jordan Rasmusson of Fergus Falls said the decision reflects a deeper problem within state agencies tasked with overseeing taxpayer-funded programs.

“Gov. Walz’s cancellation of this program due to fraud concerns is an admission his agencies don’t have the ability to prevent fraud in human services programs,” Rasmusson said. “It’s time we have leaders with the willingness to follow through and use common sense when administering taxpayer-funded programs. Minnesotans shouldn’t be expected to tolerate fraud in government programs as the new normal.”

The HSS program, launched in 2020, was designed to use Medicaid funds to help individuals experiencing homelessness or housing instability maintain stable living arrangements. But according to KSTP 5 EYEWITNESS NEWS, court documents show the program rapidly expanded to more than $100 million in claims, with over 1,800 providers statewide. It remains unclear how many of those providers were actively delivering services.

Governor Walz told KSTP 5 EYEWITNESS NEWS that while the program concept was strong, its application process was “probably too broad” and lacked adequate verification measures. “We’re going to have to… do a better job,” Walz said, adding that the situation underscores the need for stronger safeguards in contracting with private providers.

Walz said fraud prevention measures were discussed during the most recent legislative session, and in January, he signed an executive order establishing a state fraud investigation unit. He also indicated he would seek additional authority from the Legislature to act against fraud and explore new tools, including artificial intelligence, to prevent it.

The governor noted that the Minnesota Department of Human Services identified the fraud by directly contacting providers, later alerting the FBI. He emphasized that those found guilty of exploiting the program could face prison time and acknowledged that the fraud has harmed “the most vulnerable communities – people trying to get out of homelessness.”

When asked by KSTP 5 EYEWITNESS NEWS why the program was being shut down entirely rather than reformed, Walz said the fraud appeared “widespread enough” that he lacked confidence it could be fixed under its current structure.

State officials say all Medicaid-related programs are now under review for potential fraud.