Blue states win round one, but DOT takes funding fight to round two

After losing one battle, the federal government is not giving up its effort to strip transportation funding from states that do not comply with immigration enforcement.

One of President Donald Trump’s favorite tools for ensuring compliance with his policies is withholding funding from states that do not cooperate. That included freezing federal transportation dollars for a seemingly unrelated reason.

Last April, Transportation Secretary Sean Duffy warned states that if they did not comply with federal immigration enforcement, federal transportation funds would be at risk.

“DOT has noted reported instances where some recipients of Federal financial assistance have declined to cooperate with ICE investigations, have issued driver’s licenses to individuals present in the United States in violation of Federal immigration law, or have otherwise acted in a manner that impedes Federal law enforcement,” Duffy states in the letter. “Such actions undermine Federal sovereignty in the enforcement of immigration law, compromise the safety and security of the transportation systems supported by DOT financial assistance, and prioritize illegal aliens over the safety and welfare of the American people whose Federal taxes fund DOT’s financial assistance programs.”

That prompted 20 states with Democratic attorneys general to file a lawsuit against the U.S. Department of Transportation and Duffy. The states contend that Congress did not give the DOT the power to compel states to participate in federal immigration enforcement.

In June, Duffy doubled down, stating “rogue state actors” would not receive “a red cent from DOT.”

The @USDOT will NOT fund rogue state actors who refuse to cooperate with federal immigration enforcement.

And to cities that stand by while rioters destroy transportation infrastructure — don’t expect a red cent from DOT, either. Follow the law, or forfeit the funding. https://t.co/cCRi4ALT23

— Secretary Sean Duffy (@SecDuffy) June 16, 2025

Just a few days after Duffy issued the informal ultimatum on social media, Chief Judge John McConnell Jr. of the Rhode Island federal district court struck it down.

On June 19, McConnell granted a preliminary injunction to the 20 states involved in the lawsuit. The order barred the DOT from withholding funds tied to immigration while the case was pending.

“Defendants’ conduct violates (federal law) because they acted outside of their statutory authority when they issued the Duffy Directive and imposed the (immigration enforcement condition) categorically across all U.S. DOT grants when Congress appropriated those funds for transportation purposes, not immigration enforcement purposes,” McConnell stated in the order. “Congress did not authorize or grant authority to the secretary of transportation to impose immigration enforcement conditions on federal dollars specifically appropriated for transportation purposes.”

In November, McConnell officially ended the DOT’s bid to tie transportation to immigration policy. In his final order in favor of the states, McConnell said “the Constitution demands the court set aside this lawless behavior.”

“Essentially, Defendants’ argument is that the extremely broad objectives Congress outlined for DOT in its governing statute … coupled with scant explicit statutory restrictions on DOT’s discretion in setting terms and conditions for federal transportation funding, vest DOT with the inherent power to impose whatever conditions it wishes on grant agreements so long as DOT ‘reasonably determines’ those conditions to advance its impossibly broad understanding of its core mission,” McConnell states in the order. “This cannot be so. Congress does not ‘hide elephants in mouseholes.’”

However, the federal government is not backing down. Right after New Year’s Day, the DOT notified McConnell it will be appealing his decision.

The case will now be reviewed by the First Circuit. Of the 11 judges in that circuit, only two were appointed by a Republican president. That includes one Trump appointee. As of Jan. 7, the case has not been assigned to a panel.

At stake are billions of dollars in transportation funding for certain states. Since Duffy first warned the states last April, the DOT has tied transportation to immigration policies, particularly in trucking.

Last May, the DOT announced it would begin enforcing English-proficiency regulations that would take noncompliant drivers off the road. A few months later, the Federal Motor Carrier Safety Administration issued an interim final rule tightening restrictions on non-domiciled CDLs.

Those two actions alone have allowed the DOT to threaten federal funding in other ways. In August, Duffy said he would pull funding from any state that does not comply with English-proficiency regulations. That led to $33 million being withheld from California, which the state has taken to court.

In December, Duffy said he would withhold $24 million from Colorado if it does not address issues with non-domiciled CDLs. About eight other states have received similar threats from the DOT. All but South Dakota and Texas are blue states. LL