Would PASS ID Really Save States Money?

The proposed PASS ID Act is a national ID just like REAL ID, and it threatens privacy just as much. Some argue that a national ID under PASS ID should be palatable, though, because it reduces costs to states.

But savings to states under PASS ID are not at all clear. Let’s take a look at the costs of creating a U.S. national ID.

The REAL ID Act, passed in May 2005, required states to begin implementing a national ID system within three years. In regulations it proposed in March 2007, the Department of Homeland Security extended that draconian deadline. States would have five years, starting in May 2008, to move all driver’s license and ID card holders into REAL ID-compliant cards.

The Department of Homeland Security estimated the costs for this project at $17.2 billion dollars (net present value, 7% discount). Costs to individuals came it at nearly $6 billion – mostly in wasted time. Americans would spend more than 250 million hours filling out forms, finding birth certificates and Social Security cards, and waiting in line at the DMV.

The bulk of the costs fell on state governments, though: nearly $11 billion dollars. The top three expenditures were $5.25 billion for customer service at DMVs, $4 billion for card production, and $1.1 billion for data systems and IT. Getting hundreds of millions of people through DMVs and issuing them new cards in such a short time was the bulk of the cost.

To drive down the cost estimate, DHS pushed the implementation schedule way back. In its final rule of January 2008, it allowed states a deadline extension to December 31, 2009 just for the asking, and a second extension to May 2011 for meeting certain milestones. Then states would have until the end of 2017 to replace all cards with the national ID card. That’s just under ten years.

Then the DHS decided to assume that only 75% of people would actually get the national ID. (Never mind that whatever benefits from having a national ID drop to near zero if it is not actually “national.”)

The result was a total cost estimate of about $6.85 billion (net present value, 7% discount). Individual citizens would still spend $5.2 billion worth of their time (in undiscounted dollars) on paperwork and waiting at the DMV. But states would spend just $1.5 billion on data and interconnectivity systems; $970 million on customer service; and $953 million on card production and issuance—a total of about $2.4 billion. (All undiscounted—DHS didn’t publish estimates for the final rule the same way it published their estimates for the proposed rule.)

Maybe these cost estimates were still too high. Maybe they weren’t believable. Or maybe Americans’ love of privacy and hatred of a national ID explains it. But the lower cost estimate did not slow the “REAL ID Rebellion.” Given the costs, the complexity, the privacy consequences, and the dubious benefits, states rejected REAL ID.

Enter PASS ID, which supposedly alleviates the costs to states of REAL ID. But would it?

At a Senate hearing last week, not one, but two representatives of the National Governors Association testified in favor of PASS ID, citing their internal estimate that implementing PASS ID would cost states just $2 billion.

But there is reason to doubt that figure. PASS ID is a lot more like REAL ID – the original REAL ID – in the way that most affects costs: the implementation schedule.

Under PASS ID, the DHS would have to come up with regulations in just nine months. States would then have just one year to begin complying. All drivers’ licenses would have to be replaced in the five years after that. That’s a total of six years to review the documents of every driver and ID holder, and issue them new cards.

How did the NGA come up with $2 billion? Maybe they took the extended, watered-down, 75%-over-ten-years estimate and subtracted some for reduced IT costs. (The NGA is free to publish its methodology, of course.)

But the costs of implementing PASS ID to states are more likely to be closer to $11 billion than the $2 billion figure that the NGA puts forward. In just six years, PASS ID would send some 245 million people into DMV offices around the country demanding new cards. States will have to hire and train new employees to handle the workload. They will have to acquire new computer systems, documents scanners, data storage facilities, and so on.

There is another source for cost estimates that draws the $2 billion figure into question: the National Governors Association itself. In September 2006, it issued a report with the National Conference of State Legislatures and the American Association of Motor Vehicle Administrators finding that the costs to re-enroll drivers and ID holders over a 5-year period would cost states $8.45 billion (not discounted).

Just as with REAL ID, re-enrollment under PASS ID would undo the cost-savings and convenience that states have gained by allowing online re-issuance for good drivers and long-time residents. As the NGA said:

Efficiencies from alternative renewal processes such as Internet and mail will be lost during the re-enrollment period, and states will face increased costs from the need to hire more employees and expand business hours to meet the five year re-enrollment deadline.

Angry citizens will ask their representatives why they are being investigated like criminals just so they can exercise their right to drive.

PASS ID does reduce some of the information technology costs of REAL ID, such as requirements to use systems that still do not exist, and requirements to pay for driver background checks through the Systematic Alien Verification for Entitlements system and the Social Security Online Verification system.

But PASS ID still requires states to “[e]stablish an effective procedure to confirm that a person [applying] for a driver’s license or identification card is terminating or has terminated any driver’s license or identification card” issued under PASS ID by any other state. How do you do that? By sharing driver information. The language requiring states to provide all other states electronic access to their databases is gone, but the need to share that information is still there.

A last hope for states is that the federal government will come up with money to handle all this. But the federal government is in even tougher financial straights than many states. The federal deficit for this fiscal year is projected to reach $1.84 trillion.

Experienced state leaders recognize that the promise of federal money may not be fulfilled. The weakly funded PASS ID mandate will likely become a fully unfunded mandate.

So, does PASS ID really save states money? I wouldn’t put any money on it … .