DOT Withholds $160 Million From California After Newsom Administration Misses CDL Deadline

DOT Withholds $160 Million From California After Newsom Administration Misses CDL Deadline

A major regulatory dispute escalated this week after the U.S. Department of Transportation announced it will withhold approximately $160 million in federal safety funding from California.

Federal officials say the decision follows the failure of Governor Gavin Newsom’s administration to meet a January 5 deadline requiring the revocation of more than 17,000 non-domiciled commercial driver’s licenses (CDLs) that were allegedly issued in violation of federal regulations.

Why the DOT Pulled Federal Trucking Safety Funds

According to the Federal Motor Carrier Safety Administration, a nationwide audit conducted last summer revealed widespread issues in how several states handled non-domiciled CDLs, with California identified as the most significant outlier.

Federal regulators allege that California issued thousands of commercial driver’s licenses with expiration dates extending years beyond the drivers’ lawful presence in the United States, creating what FMCSA described as a serious breakdown in compliance and enforcement.

In late December, the California Department of Motor Vehicles announced it would delay canceling the licenses until March 6. FMCSA rejected the extension, stating the delay left thousands of non-compliant drivers legally operating commercial motor vehicles.

Federal Response to the Newsom Administration

Transportation Secretary Sean Duffy confirmed the funding freeze following California’s failure to comply with federally mandated corrective timelines.

FMCSA Administrator Derek Barrs stated that federal law requires states to correct safety violations on schedules agreed upon with regulators, noting California failed to meet those obligations.

If the state remains out of compliance, federal law allows the DOT to double the funding penalty in the second year, significantly increasing the financial impact.

California Disputes the DOT Decision

California officials pushed back against the funding cut, arguing that the DMV remains compliant with state and federal regulations. The state claims it was engaged in discussions with federal regulators regarding a revised timeline and warned that withholding safety funds could affect roadway improvements and enforcement programs.

Impact on the Trucking Industry and Freight Capacity

The enforcement action is expected to tighten trucking capacity, particularly in California and the broader West Coast freight market, where many non-domiciled CDL holders have historically operated in spot-market and short-haul lanes.

Industry groups such as the Owner-Operator Independent Drivers Association welcomed the move, stating that regulatory loopholes have allowed unqualified drivers to operate heavy commercial vehicles, increasing risks for professional drivers and the public.

What This Means for Carriers Operating in California

For trucking companies, owner-operators, and logistics providers, this development reinforces the importance of:

• Verifying CDL validity and lawful presence compliance

• Monitoring FMCSA enforcement actions

• Preparing for capacity shifts and rate volatility

• Ensuring driver documentation meets federal standards

As enforcement increases, carriers operating in or through California should expect greater scrutiny, especially involving licensing, safety audits, and driver eligibility.