A coalition of 22 states, led by Oregon and New York, filed a federal lawsuit Wednesday against the U.S. Department of Agriculture (USDA) and Secretary Brooke Rollins, accusing the agency of illegally restricting food aid and setting states up for billions of dollars in “devastating” financial penalties.
The complaint, filed in the U.S. District Court for the District of Oregon, challenges how the USDA is implementing the “One Big Beautiful Bill Act” (H.R. 1), a massive legislative package passed by Congress in July 2025. While the act narrowed SNAP eligibility for non-citizens and stiffened penalties for state administrative errors, the states argue the USDA’s rollout has been “arbitrary,” “capricious,” and contrary to federal law.
At the center of the dispute is a bureaucratic maneuver the states describe as impossible to comply with.
According to the lawsuit, the USDA waited nearly four months after the law passed to issue guidance on how states should handle new immigrant restrictions. When that guidance finally arrived on October 31, 2025, the USDA declared that the mandatory 120-day “grace period”—a window where states aren’t penalized for clerical errors while adjusting to new rules—had already retroactively begun in July.
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The result? The grace period expired on November 1, the very next day.
“USDA announced that on the very next day, November 1, 2025 (a Saturday), the period during which State payment errors are waived… would end,” the complaint reads.
The financial stakes are massive. Under the new law, states with payment error rates above 6% face steep fines. For New York alone, a high error rate could trigger nearly $1.2 billion in penalties. The lawsuit argues that by denying the full 120-day adjustment period mandated by federal regulations, the USDA is effectively guaranteeing these penalties will be levied.
The coalition also targets the USDA’s interpretation of which non-citizens remain eligible for food stamps.
The states contend the USDA’s guidance creates a “false dichotomy” that blocks lawful permanent residents (LPRs), or green card holders, from accessing benefits they are entitled to by law. Specifically, the suit argues the USDA is improperly excluding refugees, asylum seekers, and humanitarian parolees who have adjusted their status to become legal residents.
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“The guidance in reality goes beyond the Act, arbitrarily excluding from SNAP many lawful permanent residents who remain eligible under the statutory scheme established by Congress,” the attorneys general wrote.
The plaintiffs paint a picture of administrative chaos, noting the guidance was issued during a federal government shutdown while USDA staff were furloughed, preventing state officials from asking questions. A letter sent by 21 states on November 19 asking the USDA to rescind the guidance allegedly went unanswered.
The coalition includes Oregon, New York, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Rhode Island, Vermont, Washington, and Wisconsin.
The states are asking the court for an emergency injunction to stop the penalties and force the USDA to rewrite the eligibility rules.
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