Indiana will become the first state to block funding for Planned Parenthood following an announcement made late Friday by Gov. Mitch Daniels (R) that he will sign a bill to deny the group about $2 million in federal dollars.

Indiana legislators voted to approve the bill last week, which left speculation about whether or not Governor Daniels would sign it into law.

Apart from eliminating the group’s funding, the bill includes other requirements that would give Indiana some of the strictest abortion laws in the country. The restrictions include a ban on the procedure following the 20th week of pregnancy unless the woman’s life is in jeopardy and requiring abortion providers to tell women seeking abortions that life begins at conception, that the procedure is linked to infertility, and that fetuses can feel pain at 20 weeks or earlier.

In a statement, Daniels said he plans to sign the bill in “a week or so from now” when it reaches his desk.

But legal questions remain, primarily because the law would deny the use of Medicaid at Planned Parenthood. “Medicaid law is pretty clear: You cannot unplug a provider because they’re providing a constitutionally protected service,” says Betty Cockrum, executive director Planned Parenthood’s Indiana chapter.

She says the organization plans legal action and is even looking into the possibility of filing a lawsuit seeking an injunction against the bill before it is officially signed by Daniels. Ms. Cockrum says making the bill law will constitute an unlawful act.

The Indiana Family and Social Services Administration voiced similar concerns, since federal law prohibits states from picking and choosing which groups receive Medicaid dollars. The agency suggested that, by refusing the federal assistance, the state would be penalized with sanctions that could possibly cost family-planning or women’s health-care providers $4 million in Medicaid funding.

It is not yet known what sanctions Indiana might face, if any, from the federal government. Cockrum says she hopes the US Department of Health and Human Services “is paying attention” and that “Indiana hears from them soon.”

For his part, Daniels sought to allay fears that cuts to Planned Parenthood would harm health care for low-income residents. He said that after a “careful review” he was confident “that all non-abortion services … will remain readily available” across the state through other providers. He said the law would affect seven organizations in the state that provide abortions, the largest being Planned Parenthood.

He added that the providers could once again be eligible for the the withheld money by eliminating abortion services or by separating them from federal funds. Federal law, however, already bans the use of federal funds for abortions.

Before his announcement, there was speculation that Daniels was weighing his decision against how he might be perceived as a potential Republican presidential candidate. Last year, he said whoever was president needed to put social issues behind economic ones. But conservatives in his party have suggested that in order to receive their full support, he needed to show strength on core social issues that have been central to their party.

In 2010, abortions accounted for about 4 percent of procedures given to women, according to Planned Parenthood data. The group says it offers health-care services primarily to low-income women and teens.

Cockrum says 28 centers throughout the state serve a total of 9,300 Medicaid patients. The group’s annual budget is $15 million.