A federal court rejected New York’s highway funding penalty over immigrant truck drivers’ licenses. California faces a similar dispute, with $31.2 million already withheld and a larger annual penalty at stake.
California has already lost access to more than $31 million in federal highway funding over its handling of commercial driver’s licenses issued to immigrants.
Now, a federal appeals court has overturned a similar penalty against New York, raising a consequential question: Could California challenge its own funding loss using the same legal reasoning?
On November 13, the U.S. Court of Appeals for the Second Circuit set aside a $73.5 million federal funding determination against New York.
The court found that federal transportation officials had attempted to enforce a licensing requirement that did not exist under the regulations governing the licenses they reviewed.
California faces a separate dispute involving an estimated $158.3 million in fiscal 2027 highway funding. But its case contains additional issues, and New York’s victory does not automatically reverse California’s penalty.
Has California already lost federal highway funding?
Yes.
An October 1 Federal Highway Administration funding notice shows that $31,229,953 was withheld from California under federal commercial-driver licensing penalties.
The notice covers the initial fiscal 2027 funding period, October 1 through December 11, 2026. It says the withheld funds lapse immediately.
The money comes from two federal programs supporting highways, bridges and transportation infrastructure.
The larger $158.3 million figure comes from a January federal determination estimating California’s full-year penalty. It does not mean that entire amount has already been withheld.
Whether the court ruling could lead to restoration of any funds remains unresolved.
Why did New York win its case?
The dispute involves nondomiciled commercial driver’s licenses, issued to certain foreign nationals who meet federal eligibility requirements.
New York issued licenses that remained valid beyond the expiration dates of applicants’ immigration documents.
Federal officials argued that the licenses should have expired when those documents did.
But the Second Circuit concluded that the earlier federal regulations required valid documentation when applying, without imposing the expiration-date restriction the government sought to enforce.
In its November 13 ruling, the court rejected the government’s interpretation and set aside New York’s funding determination.
The ruling did not invalidate newer federal licensing restrictions.
Why is California’s case different?
California’s dispute also involves licenses issued beyond the expiration dates of drivers’ immigration documents.
However, federal officials identified additional alleged problems involving eligibility, temporary licenses and reporting requirements.
The Federal Motor Carrier Safety Administration also accused California of failing to complete corrective actions on an agreed schedule.
According to the agency’s January 7 determination, California initially planned to cancel approximately 17,000 licenses by January 5 but extended the deadline to March 6 without federal approval.
California disputes the federal government’s interpretation of the rules and the basis for its enforcement action.
That means that; Even if New York’s reasoning helps California challenge the expiration-date issue, the state must still address the other findings and corrective-action dispute.
Could California use New York’s ruling?
Potentially.
The New York court’s conclusion supports the argument that federal officials cannot penalize states for violating requirements absent from the applicable regulations.
California has raised a similar objection.
But the cases are being heard in different federal appellate courts. The Second Circuit’s ruling does not automatically control California’s case before the D.C. Circuit.
California’s lawsuit, California Department of Motor Vehicles v. Department of Transportation, is docketed as No. 26-1027.
The case was scheduled for oral argument September 11, 2026. Parriva could not independently verify a final merits decision from the publicly accessible docket as of November 14.
What happened to California’s immigrant truck drivers?
The consequences extend beyond highway funding.
On March 6, the California DMV announced the cancellation of approximately 13,000 nondomiciled commercial licenses under federal requirements.
The DMV said the affected drivers were legally present and authorized to work when their licenses were issued.
In an earlier report, Parriva documented how California immigrant truck drivers remained in limbo after losing their commercial licenses despite a state court decision allowing affected drivers to reapply.
The federal licensing pause continues to prevent the DMV from issuing certain nondomiciled commercial licenses.
The New York ruling does not itself restore any canceled California licenses.
What could this mean for Los Angeles?
Commercial trucking is essential to the movement of goods through the ports of Los Angeles and Long Beach.
The licensing dispute raises questions about how immigrant drivers and freight businesses across Southern California are affected.
However, the reviewed records do not establish how many canceled licenses belonged to Los Angeles-area drivers or quantify any resulting disruption to port operations.
The funding penalty also concerns statewide federal transportation programs. It would be inaccurate to assign a specific amount of the $31.2 million withholding to Los Angeles projects without additional allocation records.
California’s legal challenge now carries two distinct consequences: federal funding already withheld and commercial drivers who remain unable to obtain certain licenses.
The federal government argues its enforcement protects road safety and compliance with licensing standards. California challenges the agency’s interpretation and enforcement actions.
The November 13 New York decision establishes a limit on how federal officials could apply earlier licensing rules.
Whether California can use that ruling to challenge its own penalty—and recover funding already withheld—remains unanswered.
