The Highway Fund Started Enforcing Driver's License Law
Summary
Since January, the U.S. Department of Transportation has withheld $233.5 million in federal highway funds from California and New York over improperly issued non-domiciled commercial driver's licenses — after audits found more than half of New York's sampled licenses, and over a quarter of California's, violated federal rules. Twenty-five states are on the same list.
Three states, three audits, one lever
's nationwide review of state non-domiciled CDL programs has produced a running list of jurisdictions found in "preliminary determination of substantial noncompliance" — 25 of them, including the District of Columbia, as of 's own published list. Three states have gone further, into a formal funding fight:
- California. 's audit found "more than 25% of non-domiciled CDLs issued by California were issued unlawfully," including licenses valid years past a driver's lawful-presence expiration. California's DMV notified 17,299 drivers in November 2025 that their CDLs would be cancelled, missed the agreed January 5, 2026 deadline, and got a 60-day extension before the state cancelled approximately 13,000 effective March 6, 2026 — fewer than 17,299 because some drivers had already downgraded their licenses or let them expire. withheld $160 million anyway, in National Highway Performance Program and Surface Transportation Block Grant funds, on January 7, 2026.
- New York. sampled 200 of the state's non-domiciled CDL records and found 107 — over 53% — issued in violation of federal law, largely because the DMV's system defaulted to 8-year license terms regardless of a driver's actual authorized-presence expiration. withheld $73.5 million on April 16, 2026. New York disputes the finding: the state's attorney general sued in the Second Circuit on April 24, 2026, calling the action "arbitrary and capricious" and noting the state's practices had previously been confirmed compliant in 's own reviews. New York also faces up to $147 million a year in further withholdings if it doesn't comply.
- Illinois. 's audit found "nearly 1-in-5" of the state's non-domiciled CDLs issued illegally and gave the state 30 days, starting February 17, 2026, to revoke them or risk losing $128 million — a threat, not yet an actual withholding, as of this writing.
View data as table
| California | $160.0M | withheld, NHPP + STBG, Jan. 7 2026 |
|---|---|---|
| New York | $73.5M | withheld, Apr. 16 2026 |
| Illinois | $128.0M | threatened, Feb. 17 2026 |
The three amounts aren't announced as one program with a common formula — each is a separate finding against a separate state's audit — but they draw from the same two federal-aid highway accounts, and California's penalty is written to escalate: can raise it from 4% to 8% of the state's National Highway Performance Program and Surface Transportation Block Grant allocation in FY2028 if California still hasn't complied.
What "substantial noncompliance" measures
View data as table
| New York | 53.5% | 107 of 200 sampled records in violation |
|---|---|---|
| California | >25% | stated by FMCSA, exact count not published |
| Illinois | ~20% | "nearly 1-in-5," per FMCSA |
New York's number is the only one of the three that comes with an exact sample: 107 of 200 records pulled. California's and Illinois's are the floors itself put in writing — "more than 25%" and "nearly 1-in-5" — without a published exact count, which is also why New York is the one state formally contesting the underlying finding rather than just the dollar amount.
The people behind those percentages are a small but concentrated part of the trucking workforce. Non-domiciled CDL holders make up roughly 5% of all interstate CDL holders nationally — about 194,000 drivers with federal work authorization, per a June 12, 2026 letter from Sen. Adam Schiff and 21 Senate colleagues to . California alone accounts for an estimated 25% of the nation's port drayage capacity, and the same letter cites industry estimates that the new rule could cut the commercial driver workforce in states like California by 15% to 25%. Those figures come from the senators pressing to restore California's funding, not from — a reminder that the labor-market stakes, unlike the dollar figures, are contested by the people arguing on each side of this fight.
The takeaway
- The enforcement mechanism is new. Conditioning federal highway formula funds on a state's driver-licensing compliance, at this scale, had no real precedent before this audit cycle — $233.5 million is already withheld, and $275 million more (Illinois's threat plus New York's FY2028 exposure) sits behind a compliance clock. Twenty-five states, per 's own list, have been told they're out of compliance.
- The audits don't agree on precision. One state (New York) got an exact sample-based rate; two (California, Illinois) got a stated floor with no published exact count — a gap that matters because New York is the one state suing over the underlying finding, not just the penalty.
- The dispute is genuinely two-sided. States are not conceding the facts: New York calls the finding unsupported and has sued; California missed its own agreed deadline before the funds were pulled; senators supporting California cite a workforce-disruption estimate hasn't itself published.
This piece covers the three states where has taken a formal funding action as of this writing (California, New York, Illinois) out of the 25 jurisdictions on 's noncompliance list; other listed states may face similar actions later, and this piece will not be updated to reflect them.
Sources
- U.S. Department of Transportation — "Trump's Transportation Secretary Sean P. Duffy to Gavin Newsom on Illegal Trucking Licenses: Time's Up" (Jan. 7, 2026), the source for California's $160 million withholding, the "more than 25%" violation finding, and the over-17,000 illegally issued license count. transportation.gov
- U.S. Department of Transportation — "Trump's Transportation Secretary Sean P. Duffy's Audit of Illinois Non-Domiciled CDLs Finds Nearly 20% were Issued Illegally" (Feb. 17, 2026), the source for the $128 million threat and Illinois's 30-day compliance window. transportation.gov
- U.S. Department of Transportation — "Trump's Transportation Secretary Sean P. Duffy Withholds $73 Million from New York for Failure to Revoke Illegally Issued Trucking Licenses" (Apr. 16, 2026), the source for New York's withholding and its 200-record, 107-violation audit sample. transportation.gov
- Federal Motor Carrier Safety Administration — "Non-domiciled CDL Review," 's own running list of states found in preliminary substantial noncompliance (25 jurisdictions including D.C., as most recently available). fmcsa.dot.gov
- California Department of Motor Vehicles — "California DMV Extends Date of Nondomiciled CDL Action," the source for the initial 17,299-driver cancellation notice. dmv.ca.gov
- California Department of Motor Vehicles — "Federal Government Requires California DMV to Cancel Certain Nondomiciled Driver's Licenses," the source for the final approximately-13,000-license cancellation figure, effective March 6, 2026. dmv.ca.gov
- New York Attorney General — "Attorney General James and Governor Hochul Sue to Restore $73 Million in Federal Highway Funds for New York" (Apr. 24, 2026), confirming the $73.5 million figure, the $147 million/year future exposure, and the state's legal challenge. ag.ny.gov
- Sen. Adam Schiff, with 21 Senate colleagues — letter and press release urging to restore California's funding (June 12, 2026), the source for the 194,000 non-domiciled CDL holders nationally, the roughly 5% share of interstate CDLs, California's estimated 25% share of national drayage capacity, and the cited 15%-25% workforce-disruption estimate. schiff.senate.gov
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A commercial driver's license is normally a state matter: a state DMV verifies a driver's identity and lawful presence, issues the license, and answers to its own voters. Since late 2025 the Federal Motor Carrier Safety Administration () has been auditing how states issue one specific category — the non-domiciled CDL, given to drivers who are authorized to work in the U.S. but live outside it — and it has started answering noncompliance with a lever states can't ignore: the federal highway money that pays for their roads.