SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 460 (Beall) - Vehicles: biennial registration

Bill Summary:

SB 460 would authorize the Director of the Department of Motor Vehicles (DMV) to establish a biennial vehicle registration period on or after January 1, 2020.

Fiscal Impact:

• DMV estimated one-time IT programming costs of approximately $850,000, and additional one-time costs of approximately $150,000 related to updating forms. (Motor Vehicle Account)
  
• Unknown, potentially significant costs associated with outreach and education to inform the public about the change in registration period, as well as costs related to expected increases in call center volume from customers requesting additional information. DMV anticipates contracting with a vendor for public education, in addition to providing printed vehicle registration inserts over multiple years. (Motor Vehicle Account)
  
• Unknown future long term savings to the extent the bill results in fewer field office visits, and reduced printing, postage, and contract costs. (Motor Vehicle Account)
  
• Unknown one-time acceleration or delay of vehicle registration fee revenue, depending upon how biennial registration is implemented. Staff assumes there would need to be a staggered implementation over several years to minimize the impacts to the Motor Vehicle Account.

Background:

Existing law authorizes the DMV director to establish a vehicle’s registration year, and generally establishes an annual vehicle registration period. Existing law imposes specified fees upon registration of a vehicle, including a $60 registration fee, a $26 California Highway Patrol Fee, a Transportation Improvement Fee of $25 to $175 (depending on a vehicle’s value), and a specified Vehicle License Fee. DMV currently registers over 35 million vehicles annually, and the current average of the total fees paid on each registration is $254 per vehicle.

In September of 2018, Governor Brown directed the Department of Finance (DOF) to conduct a performance audit of the DMV in response to lengthy and unacceptable customer wait times over the summer that often exceeded several hours. The primary causes of long wait times were related to federal REAL ID implementation challenges, which require an in-person field office visit and significant document verification, as well as IT outages. On March 27, 2019, DOF published the audit report, which was highly critical of virtually every aspect of the DMV it examined. The audit made 92 recommendations for corrective actions designed to improve field office customer service, some of which were directly related to REAL ID implementation, but others were intended to address overall governance and organizational deficiencies.

In addition to the DOF performance audit, Governor Newsom ordered the formation of a DMV Reinvention Strike Team within the Government Operations Agency in 2019 to lead a comprehensive modernization and reinvention effort, and make recommendations for reforms and new leadership. The Strike Team recently released an update of its activities, which are focused on reducing avoidable field office visits by improving customer education, and enhancing options for obtaining services through kiosks, online, and by phone, rather than through a field office.

Proposed Law:

SB 460 would authorize the DMV director to establish a biennial vehicle registration period on or after January 1, 2020, as a component of the department’s subsequent update to its vehicle registration system.

Staff Comments:

In response to DOF’s performance audit and the Strike Team’s assessment, DOF issued a Finance Letter on March 28, 2019 related to a DMV request for an augmentation of $162.2 million to fund 178.8 positions in the budget year to address a range of long-term operational improvements within DMV, while continuing to address short-term challenges. This proposal is in addition to two previous requests to augment DMV’s budget by $46.4 million in 2018-19 to address additional workload related to REAL ID implementation, and to keep its field office wait times at lower levels. The Legislature has yet to act upon these proposals.

This bill is intended to enhance ongoing efforts to reduce field office wait times by reducing the number of vehicle registration transactions. DOF’s performance audit made several recommendations to address DMV’s ongoing implementation of the REAL ID project and help ensure success of future significant projects, including a suggestion that the department evaluate policy changes to alleviate demand on field offices, such as adjusting the frequency customers are required to renew driver licenses, identification cards, or vehicle registrations. The report notes that field offices may see a reduction in the quantity of customers visiting a field office each year if customers are required to renew these activities less frequently. SB 460 would authorize DMV to implement one piece of this recommendation, but the full costs and benefits of this isolated change are unclear at this time. Staff notes that the bill does not require DMV to change to a biennial registration system, but authorizes the department to consider this change among other operational improvements that may be proposed in the near term.

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SENATE COMMITTEE ON TRANSPORTATION

Senator Jim Beall, Chair

2019 - 2020 Regular

Bill No: SB 460 Hearing Date: 4/9/2019

SUBJECT: Vehicles: biennial registration.

DIGEST: This bill authorizes the Department of Motor Vehicles (DMV) to establish a two-year vehicle registration.

ANALYSIS:

Existing law requires annual vehicle registration renewal.

This bill authorizes biennial vehicle registration beginning no earlier than January 1, 2020.

COMMENTS:

1. Author Statement. The author introduced this bill to deal with long customer wait times at the DMV. By doubling the period for which a vehicle registration is valid, the number of vehicle registration transactions should be reduced, thereby freeing up DMV resources to deal with the issuance of REAL ID licenses. The author intends that this bill contain any statutory changes needed by the DMV to improve its customer service and to provide any necessary legislative direction.
2. Every Other Year. A recent Department of Finance (DOF) audit (discussed below) notes that if customers were required to renew their vehicle registration less frequently, field offices may see a reduction in the quantity of customers visiting each year.^[1] Since about 40% of DMV office visits are for vehicle registration — the other 60% is for driver licenses and ID cards — a biannual vehicle registration has the potential to be impactful. Implementing biennial vehicle registration will entail some programming effort by the DMV, meaning that it is unlikely to have an impact before the REAL ID deadline. Workload savings will come in the second year of implementation.
3. Implementation of biennial vehicle registration should consider the following:
4. The vehicle registration bill also includes fees for some local government fees, so biennial registration will affect their cash flow.
5. Denial of vehicle registration is also an enforcement tool for smog check and failure to pay parking penalties.
6. Some customers may find it difficult to pay for two years of registration fees, though DMV partners may be able to help.

About a dozen states offer multi-year vehicle registration, including Arizona, Colorado and New York.

1. Summertime Blues. The unacceptable customer wait times at the DMV resulting from the implementation of the federal REAL ID requirements have been well documented in hearings by this committee, monthly reports from the DMV to the Joint Legislative Budget Committee, and the media. Since the summer of 2018, when wait times often exceeded several hours, the DMV has improved its performance and reduced those wait times to pre-REAL ID levels, facilitated by significant budget increases.
2. Not Out of the Woods, Not by a Long Shot. The federal REAL ID requirements greatly increase the DMV’s workload because these licenses require an in-person visit to the DMV as well as significant extra documentation. Beginning in October 2020 a REAL ID, or some other acceptable identification such as a passport, will be required to fly or to enter federal facilities. The volume of REAL ID applications is expected to double to 6 million annually, presenting a real challenge for a DMV that is struggling to meet current volumes.
3. Opportunities for Improvement. At the request of Governor Brown, in 2018 the DOF conducted a performance audit of the DMV. The audit objectives were to assess the efficiency and effectiveness of the DMV’s operations, make recommendations to improve its practices, and evaluate the DMV’s information technology system. In 2019, Governor Newsom appointed the Secretary of the Governmental Operations Agency to chair a strike team to lead a comprehensive modernization and reinvention of the DMV and make recommendations for new long-term leadership and reform.

The results of the DOF audit were released on March 27, 2019. It is highly critical of virtually every aspect of the DMV that it examined, from planning for REAL ID to educating customers to training employees to managing workload to its information technology systems. Notably, some of the new practices and procedures that were touted to this committee were poorly and spottily implemented. The audit recommends 92 corrective actions, some of which directly affect REAL ID issuance and others, which are longer term.

1. The DMV agreed with DOF’s findings. They will file a detailed Corrective Action Plan (CAP) within 60 days of the audit publication, including milestones and target dates to correct all deficiencies. The CAP will then be updated every six months until all planned actions have been implemented.
2. Strike Team Activity. The Strike Team recently released an update on their activities. Their key strategy is to reduce avoidable visits to DMV field offices by 1) creating more options for obtaining DMV services through kiosks, on-line, and by phone; and 2) better educate customers on the required documentation for a REAL ID. They are also assessing how the REAL ID process can be streamlined.
3. More Resources Requested. On March 29, 2019, the DOF submitted a request for $168 million to add 180 new employees, keep 900 temporary employees, improve training, upgrade some information technology and create a customer information program.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

POSITIONS: (Communicated to the committee before noon on Wednesday,

April 3, 2019.)

SUPPORT:

None received.

OPPOSITION:

None received.

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1. This observation also includes extending the validity of driver licenses and identification cards. California Department of Finance, Office of State Audits and Evaluations; California Department of Motor Vehicles Performance Audit; report No. 19-2740-032; March 2019; page 13. ↑