Unexplored costs from DPS surcharge harm safety, economy

I've been looking at some historical material related to the oxymoronically named "Driver Responsibility" surcharge, and in a January 2007 report from LBB (large pdf), I ran across a sentence that sums up (in LBB's patented, blame-free bureaucratese) the program's basic flaw:

The Driver Responsibility Program imposes surcharges as an incentive for drivers to comply with traffic laws, but does not offer any payment alternatives as a further incentive for drivers to comply with the law.

That's exactly it. The program was intended to encourage compliance with the law, but in practice it more often than not provides disincentives for compliance.

The theory was a straightforward one: Large financial penalties larded on top of criminal punishments would create disincentives to driving without a license or liability insurance. Instead, more than half the people on whom these fees are levied do not pay. So their driver's license is revoked, they cannot buy insurance, and all of a sudden the surcharge is contributing to the problem instead of encouraging compliance. Then everyone wonders and complains why 25% of Texas drivers have no liability insurance.

When Texas' surcharge was created in 2003, late in the session San Antonio state Sen. Jeff Wentworth offered an amendment on the Senate floor which would have required notice about surcharge provisions at the time defendants go to court or pay their traffic fines. The Senate's bad decision to table Wentworth's amendment haunts the program to this day, since most people on whom the surcharge is assessed inevitably think they've already cleared up the charges in question. Confusion reigns surrounding all aspects of the program, and tougher collection methods have been tried and failed.

In Texas, 6% of drivers owe the surcharge according to the vendor in charge of collections, and 1.2 million drivers have failed to pay, according to the Dallas Morning News.

Let's run through a thought experiment to estimate how much this surcharge is really costing Texans - it's a lot more than just the cost of the fee.

The 1.2 million Texas drivers who've lost their licenses over surcharges cannot buy insurance until their fees are paid, but large numbers (if not virtually all) of them continue to drive.

In 2007, there were 6,024,000 crashes in the United States and 205,741,845 licensed drivers, giving us a rate of 2.93%. (Possibly unlicensed drivers are even more likely to have crashes, which would make that number bigger and these projections even more compelling.)

Let's assume for the sake of argument that those 1.2 million surcharge debtors who lost their licenses (and therefore became ineligible to purchase insurance) continued to drive.

Assuming these people crash at the same rate as other drivers, by reducing the number of insured drivers, the DRP program increases the number of crashes involving uninsured motorists in Texas by approximately 35,160 additional incidents per year. (To be clear, the same number of accidents would occur, according to this analysis, but 35,160 more of them involve an uninsured driver.)

How much do those crashes cost Texans in uncompensated damages? It's possible to estimate.

In 2000, a federal study (pdf) analyzed costs from auto accidents including medical costs, property damage, etc., attributing $230.6 billion in costs to 16.4 million auto accidents nationwide, at an average cost of $14,061 per accident. Adjusting for inflation, that's $16,777 in 2007 dollars.

Multiplying that figure by the number of estimated crashes caused involving surcharge owing drivers, we get an $589,879,320.

Medical costs account for 14% of car crash costs, according to the same report, which means those 1.2 million drivers may have accounted for $82,583,105 in medical costs for which the driver did not have insurance (and could not because their license was stripped under the DRP program). Much of that cost is borne by Texas' major trauma center hospitals.

If just one-third of drivers owing the DRP surcharge took advantage of an amnesty/incentive program to become street legal, it could reduce losses from uninsured motorists in accidents by $196.6 million per year statewide, including $27.5 million per year in uncompensated healthcare costs. The other costs are borne by responsible, insured individuals and companies - an outcome which is both unfair to drivers who play by the rules and a needless drain on the economy.

There are many other costs from the program, of course: The surcharge has contributed to the number of outstanding arrest warrants surging to more than 10% of Texas drivers, while causing cases for driving with a suspended licenses to clog up misdemeanor courts and jails. Both from an economic and public safety perspective, detriments from the surcharge outweigh its revenue generating benefits, which is why the Legislature empowered the Public Safety Commission to fix the program.

As the LBB realized in 2007, this program has come to worsen the problems it was ostensibly created to solve, which is why I hope the PSC decides not just to pass the indigency rules they've recently proposed, but to expand them to re-include amnesty and incentive programs under consideration last summer.

The indigency rules published last week represent a significant hat tip to these larger problems, but don't come close to resolving them.

(Note: This post was edited/corrected from the original to reflect more conservative estimate of the number of drivers who lost their licenses.)