Inflation and long-delayed system updates will drive up funding requests for the Indiana Department of Transportation (INDOT) and Bureau of Motor Vehicles (BMV) in the upcoming budget session, as legislators learned Wednesday.
In its concluding meeting, the interim study committee on Roads and Transportation heard testimony about projected cost increases for agencies as lawmakers prepare to draft the state budget in January. The committee voted to approve a draft recommendation to the General Assembly that wasn’t yet available to the public, a document that also analyzed driving cards for undocumented immigrants in addition to department funding requests.
Republicans and Democrats have pushed for different approaches to the state’s billions in reserve funding, with the GOP supermajority warning of increased agency costs and potential economic downturns while the minority calls for strategic investments in Hoosiers’ quality of life.
INDOT survives inflated construction costs… for now
Chris Creighton, INDOT’s chief of staff, shared how the summer’s rising inflation impacted the agency’s projects, delaying some local projects and increasing construction costs. However, he said previous rounds of state funding, especially from the 2017 roads package, stabilized the agency’s monies.
“We are weathering the inflation storm because of investments made by the legislature. Additional formula funds from the federal infrastructure bill have … helped absorb some of the impact,” Creighton said. “There has been no cancellation of projects in our portfolio due to inflation.”
Chris Creighton, the chief of staff or the Indiana Department of Transportation, details inflation costs for the agency. (Screenshot from meeting livestream)
While overall inflation has slowed below a June-high of 9.1%, costs of producing certain goods, especially in the construction industry, haven’t fallen as quickly. INDOT’s construction projects have grown at a rate of 36% as prices climb for steel, asphalt, concrete, aluminum and diesel fuel.
Creighton explained that the department has exceeded project estimates by $158 million between July 2021 and September this year, though the number doesn’t fully reflect the impact of inflation, as some estimates adjusted mid-deployment to account for price increases.
But not every project has been able to withstand the pressure of inflation, including hyperlocal projects relying on funding from the Community Crossings Matching Grant Program. Creighton said roughly 15 communities had rescinded their awards when construction contracts came back higher than expected. Each had been encouraged to reapply with new requests in current rounds of funding.
Creighton said the greater challenges would be in the future, especially as Hoosier drivers transitioned from gas, whose taxes fund road construction, to electric vehicles (EV).
“Threats to the financial state and standing of the agency are more in the medium- and long-term, including EV adoption and the future of transportation funding model as it is heavily reliant on the continued use of gas-powered vehicles.”
Earlier this week, the federal government approved the state’s plan to build out charging infrastructure for EVs over the equity concerns of a group of Black Hoosiers.
“There’s other challenges with EV adoption,” Creighton warned. “Obviously the grid had to be able to withstand it… so we’re always tracking those numbers.”
Transition to REAL ID, costly operating system update
In order to attract staff for BMV branches, several of which have shuttered in recent years, salaries across locations increased to $15-per-hour, said Joe Hoage, the commissioner of the Indiana Bureau of Motor Vehicles.
“We are very much in the retail space so we’re competing with your Targets, your Walmarts and things of that nature,” Hoage said. “We realized 18 months ago that in order for us to continue to provide good customer service, we’re going to need to obviously make those investments into our employees.”
Hoage said that customer service was “at our heart” for the agency and millions of Hoosiers filled out customer satisfaction surveys indicating a 98% satisfaction rate.
“The goal is 100% … it’s not really an achievable goal but it’s what we strive for,” Hoage said.
Hoage also detailed a process to make the transferring and removing of liens on cars easier and said the electronic system would grow as more dealerships and Hoosiers joined it.
REAL ID, federal initiative started after 9/11 through the U.S. Department of Homeland Security, is a more secure form of identification that’s optional for Hoosier drivers and signified by a star in the top corner of the card.
“In May of 2023, if you don’t have a REAL ID or you don’t have a passport or a military ID, you will not be able to get on a domestic flight,” Hoage said. “You will also not be able to get into a federal building or on federal property.”
Hoosiers already driving will never be required to get the updated form of identification, Hoage said, but all new residents and drivers are required to get one. Combined with Hoosiers voluntarily getting the REAL ID, Hoage estimated that 75% of all Hoosiers will have the license by May of 2023 while other states, such as Kentucky, will only have 35% of their residents covered.
In anticipation of the change, the agency will make another marketing push to spread awareness. Hoosiers that decline to get the ID in the future must sign a form attesting their refusal.
Abbigail Raben, the legislative director of the BMV, shared the costs for modernizing the agency’s 16-year-old operating system known as STARS, or System Tracking and Record Support.
“BMV is kind of a unique agency in the sense that every Hoosier, at some point, has to deal with us. We really strive to ensure that no matter how they want to do business, there’s going to be a way out there for them to do it,” Raben said. “No matter what method is utilized, all of that information flows through STARS and we really need that ability to have accurate record keeping and hold all of these documents that we take in from individuals.
The price tag to update the system could cost between $70-80 million over the course of three to five years.
STARS handles 50,000 daily transactions, or 14 million transactions annually, across 185 different transaction types and processes 105,000 documents daily. The 6-terabyte, custom-built system costs $6.5 million annually to maintain.
Crash reports from the Indiana State Police and emissions testing requirements for the Indiana Department of Natural Resources as just part of the two dozen ongoing interagency exchanges STARS is responsible for maintaining outside of the BMV.
Whenever the legislature passes an update to code impacting the system, it costs hundreds of thousands of dollars and requires hiring a highly trained software engineer who can navigate it and repeatedly test it as one change can accidentally impact several other areas.
“Given the age and the system design, STARS is really just becoming extremely outdated so every change that we make is very complex and overall just very expensive,” Raben said. “We’re really in need of a major overhaul because we lack that modern architecture that’s common in many states across the country.”
Committee Chair Jim Pressel, R-Rolling Prairie, requested the presentation and said that in previous legislative changes, updating STARS seemed to be a barrier.
“It just seems very, very cumbersome. Every time there’s always an issue with STARS — STARS is always the holdup,” Pressel said. “Updating that system, I think, is important to all of us.”