No real bucks for Real ID

The Real ID Act requiring U.S. citizens to carry federally approved identification cards has created a potentially huge, unfunded mandate that is sending shock waves through state governments.

State officials are just beginning to comprehend the enormous changes ahead for their motor vehicle departments, which must issue driver's licenses and store personal data in line with new standards developed by the Homeland Security Department.

"It's going to be a major challenge for any state to create a computer system that can grapple with this [legislation]," said Matthew Dunlap, Maine's secretary of state, who oversees the state's motor vehicles bureau. "A lot of states are taking a deep breath and asking, 'What are we up against?' "

For contractors, the Real ID Act could bring a host of new opportunities as state officials look to the private sector to help them comply with the law's complex requirements.

"We anticipate the Real ID Act to stimulate a lot of business in the state government arena," said Jim Sideris, managing director with the public services group at BearingPoint Inc., McLean, Va. "Many departments of transportation and public safety are going to take this opportunity to renovate their drivers' services."

The Real ID Act, which President Bush signed into law May 11 as part of the $82 billion emergency war-spending bill, is designed to strengthen homeland security by preventing illegal immigrants and would-be terrorists from obtaining driver's licenses or other fraudulent identification cards.

Over the next three years, states must tighten procedures for issuing driver's licenses so they can confirm the identity of applicants and verify the authenticity of the documents that applicants use to prove their identity. The law also requires states to issue personal identification cards to those without a driver's license.

The act gives DHS the authority to establish the standards and determine whether driver's licenses and other ID cards issued by states meet such standards. It does not require any new biometric features beyond a digital photo, but it does require that new cards be electronically readable. The law also provides for grants to the states but does not stipulate the amount.

DEBATE OVER DOLLARS

The Congressional Budget Office estimates that it will cost states more than $100 million to comply with the provisions. However, the National Conference of State Legislatures puts the cost to implement at between $500 million and $750 million over five years, as well as $50 million to $75 million in annual operating costs.

And those are only the direct costs. Indirect costs might include additional state employees to check the authenticity of breeder documents, such as birth certificates, that citizens will have to submit to motor vehicle departments to confirm their identities, said Cheye Calvo, transportation committee director for the Denver-based NCSL.

"It could cost into the billions to maintain current service levels," he said.

Some state officials question whether the federal government realizes the enormity of the task the states face and how much it will cost to comply with the provisions.

"This is a bold foray into an area traditionally controlled by states," Dunlap said. "It is an ambitious project with ambitious timelines, and very few resources attached to it."

The law will require significant changes at state motor vehicle departments, said Gregg Kreizman, a public-sector research director with consulting firm Gartner Inc., Stamford, Conn.

To start, states will have to link their motor vehicle databases with other states through memorandums of understanding. They also will have to revise procedures for validating documents that prove both the applicant's identity and citizenship status for driver's licenses and identification cards, as well as issue identification cards to those without driver's licenses.

The business opportunity for systems integrators and technology companies surrounding the Real ID Act won't begin to unfold until after the Homeland Security Department establishes standards and guidance on these matters, industry officials said. And federal grants to help states overhaul or modify motor vehicle databases won't begin to flow until that time, either.

"It won't happen overnight," said Bernard Bailey, president and chief executive officer of identification solutions provider Viisage Technology Inc., Billerica, Mass. "No one should expect anything to happen in the next six to 12 months."

VERIFIED BUSINESS

For companies such as Viisage, the biggest opportunity lies in the need to confirm applicants' identity and to verify the authenticity of the documents they present for the driver's licenses and identification cards, he said.

To strengthen its document authentication services, Viisage acquired Imaging and Automation Inc. of Bedford, N.H., in October 2004, Bailey said. The company's optical reader technology assesses the authenticity of driver's licenses by reading their security features, he said.

Viisage is working with several states on advanced security programs that will help them comply with the requirements set forth in the new law. For example, the company received a $1.1 million contract from the Florida Department of Highway Safety and Motor Vehicles in December to provide automatic document authentication technology to detect falsified documents and ensure that driver's licenses are issued to the correct persons.

In addition, Viisage is refining and taking to market its "proofing" solution, which retrieves information such as addresses and phone numbers from public databases to verify the identity of those getting driver's licenses and identification cards.

Maine's Dunlap said states need this kind of help to comply with the act. Contractors "can help us with the technological challenges," he said. "No state can reinvent this wheel on its own."

The requirement for states to link their motor vehicle databases is no mean feat, Dunlap said. His state has been planning a motor vehicle database upgrade for more than a decade. Adding on "significantly greater requirements" and mandating that states integrate their motor databases with each other makes the job that much harder, he said.

The act will generate systems integration opportunities at both the federal and state levels, said BearingPoint's Sideris. Integrators will find opportunities at the federal level to create data clearinghouses that support requirements for document validation, and they will find extensive systems re-engineering opportunities at the state level.

"Each state will have to go back and work on its driver's services system," he said. "Some states have delayed legacy system projects in anticipation of gathering up these new requirements, and doing it at one time."

Holli Ploog, vice president and general manager of public-sector services with Unisys Corp., Blue Bell, Pa., said the act likely would require states to add additional functionality to their motor vehicle databases containing driver's licensing information.

"A lot of systems are in need of upgrading or replacement," she said. Maybe the act "will make this happen sooner rather than later and, if that is the case, then it could mean increased business for us."

Unisys provides states with digital driver's licenses, motor vehicle databases and an array of electronic driver and vehicle services. The databases the company builds are turned over to state employees to operate when completed, Ploog said.

Unisys is finishing up a seven-year contract to install a vehicle and driver's licensing system for Indiana worth $28 million over seven years, she said. The company also will complete this year an $18 million project for Louisiana that involves re-engineering driver services and implementing new applications.

And in a project that closely mirrors the requirements of the Real ID, Unisys is integrating document scanning into the driver's licensing process in Florida to authenticate the source documents used to issue the license.

The company also is bidding on projects in three other states that she declined to name.

BearingPoint has worked with motor vehicle agencies in 10 states and is working on major projects in Texas and Montana, Sideris said. The company offers vehicle registration and titling systems, online registration and license renewal, identification security, document imaging and data warehousing.

As for driver's license pictures, states began digitizing photos more than a decade ago, and now every state uses them on driv-er's licenses, industry officials said. They expect the facial image to be the primary biometric feature on driver's licenses for the foreseeable future.

Some states, particularly border states, may decide to incorporate additional biometrics such as fingerprints on their driver's licenses as long as they are changing their procedures to meet the new requirements, Ploog said.

Bailey agreed, saying the law doesn't preclude states from adding other biometric features, and Congress can always add additional requirements as well. "What Congress wanted to do was put the legislation out there, and let it grow over time," he said.

Senior Writer William Welsh can be reached at wwelsh@postnewsweektech.com.
Title: Real ID Act of 2005. Part of the Emergency Supplemental Appropriations for Defense, the Global War on Terror and Tsunami Relief, for the fiscal year ending Sept. 30 and for other purposes.

Major sponsor: Rep. James Sensenbrenner (R-Wis.)

Date signed into law: May 11

What it is: Legislation to improve security for drivers' licenses and personal identification cards by establishing new regulations for security standards and issuance procedures.

Funding: The act authorizes the Homeland Security Department to distribute grants to states to help them conform to provisions of the act. Congress will appropriate such funds to the department to help cover their costs.

Congressional Budget Office cost estimate: $100 million

National Conference of State Legislatures cost estimate: $500 million to $750 million over five years, plus an annual ongoing cost of $50 million to $75 million to operate.

Major provisions: To meet minimum document requirements, states must include on each driver's license and ID card the person's legal name, date of birth, gender, driver's license or ID card number, digital photograph, address, signature, physical security features and a common-machine readable technology.

To meet minimum standards for issuing driv-er's license and ID cards, states must require the presentation and verification of a photo identity document, documentation of the person's place of birth, proof of the person's Social Security number or verification that the person is not eligible for a Social Security number and documentation showing the person's name and address of principal residence.

To meet verification of documentation requirements before issuing driver's license or ID card, states must verify with the issuing agency the validity of each document, not accept any foreign document other than an official passport and enter into a memorandum of understanding with the Homeland Security Department to routinely use the automated systems known as the Systematic Alien Verification of Entitlements to verify the legal status of noncitizens.

To meet database linking requirements and to receive grants, states must participate in the interstate compact regarding sharing of driver's license data to provide electronic access by a state to information contained in the motor vehicle database of all other states and state motor vehicle databases must include all data fields printed on driver's licenses and identification cards issued by the states and motor vehicle histories.

Deadline: States must comply with the act by May 11, 2008.
State officials agree with the fundamental goals of the Real ID Act but fear its implementation will be overly prescriptive and short sighted. One of the most pressing concerns is the proof of identity provisions that require people to show proof of their place of birth, citizenship and residence.

While state officials agree that there is significant value in creating a system to verify the authenticity of birth certificates presented to motor vehicle departments, the legislation requires them to validate a whole host of other documents.

"We see birth certificates as an area where we should be concentrating our efforts," said Cheye Calvo, transportation committee director for the Denver-based National Conference of State Legislatures. "But instead of taking the time to develop good database systems, state employees are going to spend their time on the phones, calling agencies to verify documents."

The implementation of standards by the Homeland Security Department also is likely to be a slow and arduous process, Calvo said.

"As the law is written, there is no office in DHS either able or qualified to do this. It could take a lot of time," Calvo said. "States can't do these things without guidance."

At this point, individual states are assessing how much work will have to be done for them to comply fully with the act, he said.

Other opponents of the legislation are more proactive. The American Civil Liberties Union is exploring possible legislative, regulatory and litigious action against the new law, said Tim Sparapani, the ACLU's legislative counsel.

The New York group objects strongly to several provisions in the act, particularly those pertaining to privacy, asylum, border protection and driver's licensing requirements for legal immigrants, he said.

"We have enormous concerns" with this law, Sparapani said. "Any one of those provisions alone would have been enough for us to oppose it. It's an abysmal piece of legislation."

Sparapani said he expects broad resistance to the legislation at the state level, and that states may try to opt out of the mandates.

"As we get closer to the deadline, and states don't have the funds or the technical capacity, then they will insist on extra years to implement it," he said.

If Congress eventually recognizes that there were unintended consequences of the legislation, then it might revise it, Calvo said.