California Loses $160 Million in Federal Funds Over Trucker Licenses

The U.S. Department of Transportation has withheld approximately $160 million in federal funding from California after the state failed to revoke thousands of commercial driver’s licenses (CDLs) issued to foreign-born truckers that regulators deemed unlawful according to Bloomberg.

The decision was announced by Transportation Secretary Sean Duffy, who said the Federal Motor Carrier Safety Administration (FMCSA) would not allow California to meet its obligations under federal transportation law as reported. The state had agreed to revoke 17,000 illegally issued licenses by January 5, but extended the deadline by two months without federal approval according to the report.

California’s Department of Motor Vehicles (DMV) has acknowledged the issue but delayed action. Federal officials described the state’s licensing system for foreign-born drivers as having 'collapsed,' allowing the issuance of licenses to ineligible individuals or those exceeding their lawful presence in the U.S. as Bloomberg reported.

Why Did This Happen?

The FMCSA audit found that California had issued over 20,000 non-domiciled CDLs in violation of federal rules according to the audit. These licenses were issued to individuals who were not eligible under federal law or whose expiration dates extended beyond their lawful presence in the U.S. as detailed.

The issue has been a recurring problem for California. In October 2025, the agency withheld $40 million in funding for motor carrier enforcement after the state failed to enforce English language requirements for drivers according to reports.

What Are the Political and Regulatory Reactions?

Transportation Secretary Sean Duffy criticized California’s response, stating, 'Gavin Newsom has failed to do so — putting the needs of illegal immigrants over the safety of the American people' as reported.

Newsom’s office has not responded directly to the funding penalty but has agreed to work with federal officials to fix the licensing system according to the report.

The decision to withhold funding is part of a broader Trump administration crackdown on illegal immigrant truck drivers. This follows similar actions in other states, including Pennsylvania as Fox News reported.

What Are the Implications for California’s Transportation Sector?

The loss of $160 million could impact California’s ability to maintain and enforce transportation safety standards according to Bloomberg. The state will need to find alternative funding sources for programs affected by the penalty, which could include motor carrier enforcement and safety initiatives as reported.

The issue also raises concerns about the broader impact on the trucking industry in California, which plays a crucial role in the state’s economy. Delays in compliance with federal safety regulations could lead to further penalties and erode trust in the state’s ability to regulate commercial driving.

What Comes Next?

California’s DMV has agreed to revoke the 17,000 licenses but will need to complete the process within the original 60-day window according to the announcement. Federal officials have made it clear that any further delays or attempts to extend deadlines without approval will not be tolerated as stated.

If California fails to meet the corrected timeline, further funding cuts could be imposed according to reports. The FMCSA will also continue to monitor the state’s licensing system to ensure compliance with federal requirements as reported.

The situation remains under active review by federal regulators, and California will need to demonstrate a clear commitment to fixing its licensing program to avoid additional penalties according to Bloomberg.