NEW YORK — New York has filed suit against the federal government after the U.S. Department of Transportation withheld $73.5 million in highway funding over the state’s failure to revoke what federal officials say were illegally issued non-domiciled commercial driver’s licenses and learner’s permits.
The lawsuit was filed Friday, April 24, by New York Attorney General Letitia James and Governor Kathy Hochul. State officials are seeking to reverse the funding decision, arguing the loss of money puts New Yorkers at risk and strips funding from important roadway safety projects.
Funding Pulled Over Non-Domiciled CDL Dispute
Transportation Secretary Sean Duffy announced on April 16 that the Federal Motor Carrier Safety Administration would withhold $73,502,543 in transportation funding from New York.
Federal officials said the action was taken because New York failed to revoke illegally issued non-domiciled commercial learner’s permits and commercial driver’s licenses. According to USDOT, a nationwide FMCSA audit found that the New York Department of Motor Vehicles had routinely issued CDLs to foreign drivers illegally.
Officials said 53% of the sampled non-domiciled CDLs reviewed in New York were issued illegally. USDOT also alleged that the DMV’s system defaulted to issuing eight-year licenses to foreign drivers receiving non-REAL ID licenses, regardless of when their legal status expired.
Federal authorities said FMCSA issued a formal statement to New York in March rejecting the state’s claims of compliance and repeating that New York had failed to complete required corrective actions, including immediately rescinding all noncompliant non-domiciled CLPs and CDLs.
State Says Funding Loss Threatens Safety and Key Services
New York officials said the lawsuit seeks to overturn the funding withdrawal and prevent further losses. According to the report, USDOT has also threatened to withhold an additional $147 million annually in future years.
Governor Hochul said the funding cut was political retaliation and said removing money intended for roadway safety upgrades was both reckless and illegal.
State officials also argued that revoking the licenses in question could disrupt industries that depend on commercial drivers and could lead to bus driver shortages affecting schools and families.
Federal Officials Defend Decision
Duffy said he had promised to hold state leaders accountable for failing to remove unvetted and unqualified foreign drivers from the road.
FMCSA Administrator Derek Barrs said the agency’s mission is safety and that every commercial driver must be properly vetted and qualified. He said New York’s refusal to correct the problem undermined that mission and that federal dollars would not support a system that falls short of the law.
The Owner-Operator Independent Drivers Association praised the federal action. OOIDA President Todd Spencer said loopholes in the non-domiciled CDL program had allowed unqualified drivers onto highways and that the enforcement action was an important step toward safer roads and greater accountability.
Broader Fight Over Transportation Funding
The legal challenge is part of a broader fight between states and the federal government over transportation funding decisions.
According to the report, California was also targeted earlier this year, when USDOT announced that FMCSA was withholding about $158 million in transportation funding over the state’s failure to cancel about 17,000 non-domiciled CDLs by the deadline.
The report also noted that New York, California, and other states have repeatedly sued the Trump administration over withheld transportation funds, arguing the actions were politically motivated.
In a separate case, a judge in March ordered USDOT to unfreeze about $3 billion in rail funding for Chicago after the department had canceled at least $9.5 million in reimbursements from previously approved grants.
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