Department of Homeland Security Radically Understates Cost to Taxpayers

A persistent criticism of the Real ID Act since its enactment in 2005 has been the charge that the law is a massive unfunded mandate.  The Department of Homeland Security (DHS) initially estimated that nationwide implementation would cost over $23 billion, roughly in line with estimates from independent groups like the National Governors Association and National Conference of State Legislators. 

In its final regulations for implementation, published January 11, 2008, DHS significantly scaled back its cost estimate, from $23 billion to $9.9 billion.  The new estimate is broken down roughly as follows:

$3.9 billion – costs to the states
$5.8 billion – costs to invididuals
$0.2 billion – costs to federal government and private sector
$9.9 billion – TOTAL

However, a close look at the cost table in the regulations (p. 221) compared with the Department’s dubious assumptions and the requirements of the statute make it clear that DHS is practicing fuzzy math and grossly underestimating the real costs.  Among the problems, the new cost estimate:

·         Defines away 25% of the problem.  The whole premise of Real ID is that US society will congeal around a uniform identity document, which will be used to authenticate eligibility for employment, voting, access to public benefits, and a host of other functions, and will become widespread throughout American life (p. 197).  But DHS drives down the estimated cost of Real ID by assuming that only 75% of eligible driver’s license and ID card holders will ever get a Real ID (p. 210) opting instead not to travel or use a passport. 

One incredible feature of this calculation is DHS would allow persons to substitute their foreign passport for a Real ID or other US issued document. By permitting the use of foreign passports as travel documents DHS completely undercuts the security rationale for Real ID.  All of the 9/11 hijackers held foreign passports, for example, which under DHS’s assumed Real ID security scheme, they could use to board a commercial airplane.

·         Ignores the National ID Database.  One of the potentially costly unknowns about Real ID has always been its state-to-state data exchange provisions, which would require the databases of all 56 different licensing jurisdictions to be harmonized and integrated.  Although DHS includes $1.5 billion for “Data Systems & IT” in their cost estimate, the regulations fail to state how the data exchange will actually be built and what will be required from the states in order to build it (pp. 17, 153).  All 56 licensing jurisdictions operate under unique information technology systems, thus requiring their integration and interoperability is an enormous IT problem. The regulations also waffle on how much personal information on drivers states must make accessible.  Without answers to these questions DHS cannot make a credible assessment of the cost to revamp state IT systems.     

·         Ignores Cost of Building Verification Systems.  Perhaps the most expensive undertaking contained in the Real ID Act is the challenge of verifying source documents with the “issuing agency.”  DHS acknowledges in the regulations that many of these verification systems are not fully operational and some, such as a nationwide system for verifying birth certificates, do not exist at all (p. 106).  The regulations also state that “DHS is committed to expediting and subsidizing the improvement, design, development, deployment and operation of verification systems” (p. 106), but do not include a line item for this in the cost table.  It is still unclear who will build these systems and how.

·          What the regulations do make clear is that whatever these systems end up looking like, states will have to pay fees to the Federal Government in order to use them (p. 106).

·         Ignores the Cost of Background Checks.  DHS estimates ignore the cost to DMVs of subjecting their entire workforce to criminal background checks – including the cost of continuing to pay employees that are unable to work while their clearance is pending, hiring new staff to replace these employees, and compensating workers whose union contracts may be violated.

·         Ignores Continuing Costs.  The regulations fail to fully capture how Real ID will affect renewals, which form the bulk of DMV transactions.  The regulations require that individuals renew their Real ID license whenever there is a “material change” to their identity information.  As a result, renewals may be more common than the current renewal cycle used by states.  But, the DHS cost estimates fail to account for this possibility.  In addition, the regulations fail to make it clear whether states will have to re-verify identity information for individuals renewing their Real ID licenses or moving from another Real ID-compliant state.  These transactions will all serve to drive up costs.  Finally, as noted above, states will be charged fees for their ongoing use of federal verification systems (p. 106).

Relies on Fuzzy Math.  DHS officials, including Secretary Chertoff, have said in numerous public statements that issuing a license will only cost an additional $8 because of Real ID (see, for example, Comments of Secretary Chertoff at the National Press Club, January 11, 2008).   That cost number is misleading because it only accounts for Real ID’s costs to the states.  But that is an arbitrary way to limit costs estimates; a correct assessment would divide the total number of license holders getting a Real ID (180 million drivers) by the total cost of the regulations ($9.9 billion).   That yields a cost of $55 per license/ID holder.

·         Is Still an Unfunded Mandate.  Even if DHS’s unlikely estimate of $9.9 billion proves to be correct, this cost is still an unfunded mandate levied upon the states and the American people.  So far, Congress has only appropriated $90 million in federal funds to pay for Real ID – less than 1% of the estimated cost according to DHS.  Proposals to increase federal funding failed to clear the Senate last summer.  Small states have been especially vocal in complaining that the burden of Real ID will fall disproportionately on their shoulders.  While DHS claims to have examined options to reduce the heavy impact on these smaller states, it states in the regulations that it has “not found a feasible alternative” to lower costs (p. 45).  States large and small are currently facing massive budget shortfalls, in many cases in the billions of dollars (“Governors Seek Remedies for Shortfalls,” Washington Post, January 13, 2008).  Real ID will add significantly to these financial crises, without providing any proven benefit to the states or the nation as a whole.