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New York Sues USDOT Over $73.5M in Withdrawn Federal Funds
State Contends Funding Dispute Over CDLs Jeopardizes Road Safety
Key Takeaways:
- New York filed a federal court challenge seeking to overturn the U.S. Transportation Department’s decision to withhold $73.5 million in highway funds.
- The dispute stems from FMCSA findings that New York violated rules for non-domiciled CDLs, prompting a 4% funding cut that state leaders call unlawful.
- The Second Circuit is asked to review the decision as arbitrary while FMCSA threatens decertification and to withhold up to $147 million annually unless actions are taken.
The state of New York in a federal lawsuit says the U.S. Department of Transportation lacks the authority to withhold $73.5 million in federal highway funding over what DOT said were noncompliance issues with the state’s commercial driver licensing system.
“Ripping away money that goes towards critical safety upgrades on our roads is reckless and it is illegal,” New York Gov. Kathy Hochul declared April 24.
“Standing with Attorney General [Letitia] James, we will fight — and win — in court to restore this funding and ensure that our roads are safe for millions of New Yorkers who rely on them.”
U.S. Transportation Secretary Sean Duffy on April 16 said the funding was being withheld after the Federal Motor Carrier Safety Administration determined New York violated federal regulations with issuance of non-domiciled commercial driver licenses and learner’s permits. As part of a national audit of states that issue such driving credentials, FMCSA auditors said New York incurred a 50% failure rate across a sample of its 25,000 valid non-domiciled CDLs. The agency accused New York of failing to take appropriate corrective measures — including revoking illegally issued CDLs — and withdrew the federal dollars.
The funding represents 4% of what New York is allocated under the federal National Highway Performance Program and the Surface Transportation Block Grant Program.
New York has always followed federal rules when issuing CDLs. The Trump administration verified that, year after year.
Trump and Duffy are putting politics over public safety by illegally pulling these funds.@NewYorkStateAG and I are taking them to court. https://t.co/NNkaS7N6CC — Governor Kathy Hochul (@GovKathyHochul) April 24, 2026
Hochul and James contend the regulators acted unlawfully “based on a new, unsupported interpretation of its own long-standing regulations.” New York further contends FMCSA acted without following required procedure “in excess of FMCSA’s statutory jurisdiction, authority or limitations.”
In the court filing, the state and its Department of Motor Vehicles filed a petition for review against both Duffy and Federal Motor Carrier Safety Administrator Derek Barrs in their official roles. The U.S. Court of Appeals for the Second Circuit in New York City is being asked in the six-page petition to review FMCSA’s final decision on the grounds it is arbitrary, capricious, unlawful and “an abuse of discretion” lacking substantial evidence. The state said the funds were earmarked to support “safety, maintenance and reliability of New York’s entire transportation system,” and warned the legal dispute may “endanger the safety of motorists and pedestrians.”
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New York also objects to the FMCSA’s threat to decertify the DMV’s CDL program and withhold $147 million annually if DMV fails to take corrective actions that include canceling “thousands of previously issued CDLs” to immigrant truck drivers.
It asks the court to find the FMCSA’s final determination was unlawful and set it aside.
“Once again, New York is facing devastating federal cuts for nothing more than political payback. Here’s the truth: New York has always followed federal rules when issuing CDLs, something even the previous Trump administration verified year after year,” Hochul said.
RELATED: Year Ahead Will Test DOT Power to Withhold State Funds
When asked for a reaction to the legal challenge, Duffy’s office reiterated his previous stance.
“I promised the American people I would hold any state leader accountable for failing to keep them safe from unvetted, unqualified foreign drivers. I’m delivering on that promise today by refusing to fund Governor Hochul’s dangerous, anti-American policies. My message to New York’s far left leadership is clear: Families must be prioritized on American roads,” Duffy said April 16.
