The ALCATRAZ Act creates a new federal grant program that would reimburse states and local governments for the costs they spend on detaining migrants. Under this program, any state or local government that has spent money on migrant detention facilities since January 20, 2025, can apply to the Department of Homeland Security to get those costs paid back. To fund this program, the bill would take unused money from a federal emergency shelter program (run by FEMA) and redirect it to pay for migrant detention instead.

The bill also requires the Department of Homeland Security to develop a plan for working with states to quickly build new migrant detention facilities and to identify federal or state properties that could be used for this construction. Additionally, the department must identify other federal spending programs that could be cut or reduced so that money can be redirected toward this detention reimbursement program instead.

In practical terms, this means states that have been paying out of their own budgets to hold migrants in detention facilities could potentially recover those expenses through federal grants. It also signals a shift in federal priorities toward expanding detention capacity for migrants, with the government actively planning to construct new facilities and consolidate funding from other programs to support this effort.