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Attorney General's Office warns cuts to federal grants would shrink Internet Crimes Against Children unit and Medicaid fraud work
Summary
Marcy Hodgson and Todd Dalos told the House Appropriations Committee that key federal funds sustain the Attorney General's Internet Crimes Against Children task force, the Medicaid Fraud Control Unit and contracted EEOC services; reductions would affect operating costs, mediators and investigative capacity.
Marcy Hodgson, fiscal director for the Attorney General's Office, and Todd Dalos, AAG director of policy and legislative affairs, briefed the House Appropriations Committee on April 15 about federal grants that fund investigative units and civil-rights work in the office.
Hodgson said the Internet Crimes Against Children (ICAC) task force relies heavily on federal funds for operating costs, overtime and the task force commander; she estimated roughly 75% of the unit's budget derives from federal sources. The ICAC task force includes 4 criminal investigators and about 4.5 FTE in total; Hodgson said the task force's operating budget is approximately $888,000.
The Medicaid Fraud Control Unit (MFCU) was described as a nine-person unit that performs criminal and civil work and investigates abuse. Hodgson said the MFCU grant carries a federal match arrangement in which federal funds cover 25% of the program costs and the state provides the remainder. "This program is necessary for Vermont to be able to continue to have a Medicaid program," Hodgson said, explaining that a state Medicaid program requires an anti-fraud mechanism.
On EEOC work, Hodgson said the state holds an annual contract with the federal Equal Employment Opportunity Commission that underwrites 25% of one assistant attorney general position and pays for three contracted mediators; the office has not received a signed contract for the current year and the most recent communication from the federal side said things were "on hold until further notice." The EEOC contract is roughly $78,000 when active.
Hodgson identified two subrecipient formula grants that flow through victim-service partners: the STOP grant from the Vermont Center for Crime Victim Services and another federal victim-services grant administered through the Vermont Network. Both grants currently fund about one-third of an assistant attorney general's time and Hodgson said the office was awaiting invitations to apply for fiscal year 2026 funding.
Committee members asked about staffing, case mixes and whether the Attorney General's Office was preparing legal responses if federal Medicaid funding were cut. Dalos said the office had begun informal planning with the administration and had reviewed prior challenges to Medicaid funding as context for potential responses.
"We've gotten the money for '25. We're working on our grant applications for '26," Hodgson told the committee, and she said the office expected some grants to return to prior funding levels while others remain uncertain. Todd Dalos said the office is coordinating with the administration "to understand systems" and preparing for possible federal funding changes.
Hodgson and Dalos provided the committee with follow-up offers to supply case counts, fraud data and additional staffing details on request. The committee did not take formal votes during the session.
