The state of Illinois will no longer renew foster care and adoption contracts with Catholic Charities.
Illinois recently passed a civil unions law which gives homosexual couples most of the same rights as married couples, including the right to adopt and provide foster care.
Catholic Charities has said the law violates its religious beliefs. Since the civil unions law took effect June 1, Catholic adoption agencies have made it clear that they only want to place children with married couples or non-cohabitating individuals.
The organization has received state funds for placing children with families for years.
It is estimated about 2,000 children would be affected if the state doesn't renew contracts with the four dioceses.
Three of the four Illinois Catholic dioceses have sued the Illinois Department of Children and Family Services and the Illinois attorney general for threatening to enforce new policies that accommodate civil unions.
Peter Breen, an attorney with the Thomas More Society representing Catholic Charities, called the impact on children "catastrophic."
"We're not sure what the state is intending to do or how it's intending to do it," Breen told The Chicago Tribune. "It's a surprise. But it's also very disturbing."