White House Freezes $18 Billion in NYC Funding Amid Shutdown

The White House has frozen $18 billion in infrastructure funding for New York, citing concerns over diversity and inclusion practices. The freeze affects two of the state’s largest transit projects—the Hudson Tunnel Project and the Second Avenue Subway—as the U.S. Department of Transportation (DOT) reviews whether previously awarded funds violated a newly issued rule.

Governor Kathy Hochul vowed to use “every tool available” to restore the funding, while critics argue the decision is another front in the administration’s culture wars that will cost jobs and damage the local economy.

Russell Vought, director of the U.S. Office of Management and Budget, announced the decision on Wednesday in a post on X, saying the funds were being halted over “unconstitutional DEI principles.”

“Specifically, the Hudson Tunnel Project and the Second Avenue Subway,” Vought wrote.

The move escalates tensions between President Donald Trump and Republicans on one side, and congressional Democrats—including Senate Minority Leader Chuck Schumer of New York—on the other, as both parties clash over funding priorities during the first days of a federal shutdown.

Hochul, who was holding a press conference near the Statue of Liberty to protest the shutdown when the news broke, sharply criticized the decision.

“As I stand here, the bad news just keeps coming,” she said. “This administration is using culture wars as a pretext—at the expense of tens of thousands of jobs and long-awaited projects that will finally modernize our infrastructure.”

Later in a statement, Hochul reaffirmed that she would fight to restore the funding.

The DOT confirmed that the two projects were under review to assess compliance with a new federal rule banning race- and sex-based contracting requirements. However, the department acknowledged that staff leading the review had been furloughed because of the shutdown, delaying the process. In a statement, the DOT placed blame on Schumer and House Democratic Leader Hakeem Jeffries for the impasse.

Schumer, in response, called the decision “counterproductive,” stressing that both the Second Avenue Subway and Hudson River Tunnel projects generate thousands of jobs and stimulate the regional economy.

The DOT also said it is revising its interpretation of the Disadvantaged Business Enterprise Program, which requires a portion of federal grants to be directed toward minority- and women-owned firms. A proposed rule would eliminate the presumption that these groups are automatically disadvantaged, fundamentally reshaping how federal funds are allocated.

New York, like many states, runs its own minority- and women-owned business enterprise (MWBE) program alongside federal requirements. In the 2024 fiscal year, one-third of eligible state contracts—worth $2.8 billion—were awarded to MWBEs, according to state data.

Transit Projects at Risk

New York has been making major investments in public transit to reduce congestion and modernize its aging infrastructure, with federal support playing a central role.

The Second Avenue Subway is a $7.7 billion Metropolitan Transportation Authority (MTA) project that will extend service from 96th Street to 125th Street, giving East Harlem long-awaited subway access. In 2023, the Federal Transit Administration approved $3.4 billion in funding for the project. Additional financing is expected to come from MTA debt repaid through revenue from Manhattan’s congestion pricing toll—an initiative currently tied up in legal disputes between the MTA and the Trump administration.

“The federal government wants to immediately ‘review’ our compliance with rules they only just announced,” said John J. McCarthy, the MTA’s chief of policy and external relations. “It looks like they’re simply trying to stall.”

Meanwhile, the Hudson Tunnel Project—a critical component of the Gateway Program—aims to build a new rail tunnel under the Hudson River while rehabilitating the existing century-old structure. Supporters argue that without federal backing, delays could cripple one of the nation’s most vital transportation corridors.

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