Colorado faces $24M hit as federal funds threatened over illegal CDL licenses

(COLORADO) — Transportation Secretary Sean Duffy threatened to withhold $24 million in federal funding from Colorado over what he called the state’s failure to address illegally issued commercial driver’s licenses.

Duffy accused Colorado of “slow walking” the required purge after a nationwide audit conducted in October found that approximately 22% of the commercial licenses issued by Colorado to immigrants were done so illegally, many to Mexican nationals, a practice prohibited under federal law.

He said Colorado has not completed a full audit, has not provided a complete accounting of affected drivers, and has not revoked the invalid credentials despite being notified of non-compliance.

Colorado Governor Jared Polis pushed back on the allegations, describing the situation as a case of “crossed-wires.”

“We have finished the investigation and we are conducting a final review of the findings, with letters likely going out this week to CDL holders whose credentials were improperly issued,” Polis said.

Polis said the state is working quickly to revoke the licenses.

Duffy’s warning put the spotlight on the state’s handling of term-limited non-domiciled credentials and the federal oversight that governs commercial driver qualification, with the Transportation Department framing the issue as both a compliance matter and a safety concern.

Beyond the $24 million funding threat, Duffy said the Transportation Department has the authority to decertify Colorado’s entire CDL program if the state does not act swiftly.

“Every day that goes by is another day unqualified, unvetted foreign truckers are jeopardizing the safety of you and your family,” Duffy said.

Colorado’s Division of Motor Vehicles has paused the issuance and renewal of term-limited non-domiciled CDLs and commercial learner’s permits indefinitely, pending an audit of all such licenses to ensure compliance with federal regulations.

Duffy’s criticism centered on the pace of state action after the October audit’s findings, as he argued that federal officials were still waiting for a full accounting of the scope of the problem and the steps taken to remove improperly issued credentials from circulation.

Polis, in his response, pointed to an investigation and final review process that he said was nearing completion, with letters expected to go out this week to affected CDL holders.

The dispute raised the stakes for Colorado drivers and employers who depend on commercial transportation, because the federal government can tie oversight of commercial driver’s licenses to broader questions of eligibility for transportation dollars.

Duffy also said the Transportation Department has threatened federal highway funding for other states as part of a broader effort to ensure truck drivers and bus drivers are properly qualified.

That wider pressure campaign, as described by Duffy, extends beyond Colorado, signaling that federal officials may use the leverage of federal funding to push state compliance with licensing rules.

In Colorado, the immediate operational effect has been the DMV’s decision to pause issuance and renewal of term-limited non-domiciled credentials indefinitely while an audit is carried out, a move that effectively freezes a portion of the pipeline for commercial driver credentialing until the compliance review is completed.

Duffy’s statements made clear that the federal government considers the underlying issue unresolved, with his office asserting that required steps have not yet been completed, including a full audit, a complete accounting of affected drivers, and revocation of invalid credentials.

Polis, by contrast, described a process that he said had advanced through an investigation and into final review, with the state preparing to notify CDL holders whose credentials were improperly issued and proceeding with revocations.

Duffy’s warning about possible decertification of the entire program added a further point of tension, because it would go beyond targeted revocations and touch the broader structure that allows a state to run a CDL program under federal standards.

The clash also framed the audit’s findings in sharply different tones, with Duffy emphasizing enforcement and public safety while Polis characterized the issue as a “crossed-wires” matter that the state was moving to close out through formal findings and written notice.

The Transportation Department’s threat to withhold $24 million in federal funding, combined with the possibility of decertification, set up a high-stakes deadline-driven confrontation in which both sides say they are acting to ensure compliance, but disagree on whether Colorado has moved quickly enough since the October audit.

For Colorado, the path forward described by Polis hinges on the completion of the final review and the issuance of letters to CDL holders whose credentials were improperly issued, with the state moving to revoke those licenses.

For Duffy, the test is whether Colorado produces the full audit and accounting and completes revocations promptly, as the administration presses the message that the federal government is prepared to use transportation funding and program authority to enforce commercial driver qualification rules.