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Brian Morrissey, the department's general counsel, stepped down hours after the Trump administration announced the $1.8 billion fund.
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Children's Hospital Colorado had halted hormone therapy and puberty blockers for transgender youths amid threats from the Trump administration to withhold funding from institutions that provide it.
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The arrangement was denounced by critics as a slush fund for supporters of President Trump, possibly including Jan. 6 rioters.
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