A $290 million tax software upgrade unveiled last summer made it more difficult to file taxes online, prompting a major accounting firm to file by paper instead.
And, a $900 million accounting system the state has been working on for 14 years is now causing delays that threaten to impact the state’s credit rating.
Those are just a few examples of what has gone wrong when California state government has tried to improve its technology. They demonstrate the depth of Gov. Gavin Newsom’s challenge as he begins a new effort make the state’s cumbersome, outdated IT systems more responsive and effective for taxpayers.
He declared technology to be a priority, opening his budget with a $36 million proposal to create an Office of Digital Innovation that he says would foster a more flexible, creative approach to government technology.
“If you like the status quo, you’re not going to like these reforms,” he said at a news conference earlier this year.
Before becoming governor, Newsom wrote a book titled, “Citizenville: How to Take the Town Square Digital and Reinvent Government.” He announced initiatives shortly after taking office that target some of the state’s most notorious tech failures, such as an attempt to overhaul DMV systems that has floundered since a first attempt in 1987.
“We’re going to accept credit cards,” Newsom said during a budget address. “It’s a governor in 2019 in California saying that we’re going to accept credit cards in 2019 at the Department of Motor Vehicles. That is in the ‘you can’t make that up’ file.”
Some of his objectives with his new office resemble guidance from a task force created six years ago by former Gov. Jerry Brown and former Treasurer John Chiang. That task force, like at least one IT task force before it, suggested its recommendations could set the state on a better path.
“Previous task force reports and reviews ... have addressed some of the same issues,” the report read. “Despite this, the task force is optimistic that with the current leadership and institutional commitment to reform, California’s current and future IT projects can and will be more successful by implementing the recommendations of this report.”
Troubled Projects
Audits and at least one legislative review since then show mixed results.The state maintains an IT tracker that classifies current projects as green, yellow or red depending on their failure risks. Eight of 26 major projects under development are classified as yellow or red, indicating they are at risk of failing or requiring corrective action.
The task force found in 2013 that many of the delays started at the beginning of projects, with an approval process that was front-loaded with unnecessary analysis. It slowed down projects and set conditions for late operational changes.
“By the time this was awarded, what they had bid on didn’t even resemble what would be needed later on because things had changed or whatever,” said Rocío Alvarez, the Task Force’s chairwoman, who is now chief information officer for the Lawrence Berkeley National Laboratory.
The Department of Technology replaced the process with a new one in 2016. In January 2018, a state auditor’s report questioned whether the update was moving in the right direction.
The new process requires “even more robust planning and detailed analysis upfront ... the process will likely take longer for agencies to complete and will require more resources,” the audit said.
Procurement Sprints
Among the major projects that could test Newsom’s process is a payroll system that the state controller’s office first started trying to overhaul in 1999. The $250 million project was scrapped in 2013 after a disastrous trial run exposed major flaws with software designed by a contractor.Newsom put forward an alternative process called an “innovation procurement sprint” that aims to get projects up and running more quickly. Controller Betty Yee recently said she is hopeful the alternative process could speed up the payroll project.
Several systemic issues impede the state’s ability to complete the big, expensive and complex tasks involved in technology overhauls, the task force and audits found. Two key issues are a lack of accountability for contractors and project leaders and a culture that can discourage reporting of problems.
“If a project exceeds (its) budget, it is often viewed unfavorably by the Legislature and agencies alike, creating a disincentive to course-correct it,” the task force report stated.
A Fi$Cal Odyssey
Right now, a $918 million project to replace hundreds of old accounting systems in the state with a new one is scheduled for full implementation in July, despite a January warning from the state auditor that lingering inefficiencies could threaten federal funding and impede annual financial reporting, which affects the state’s credit rating.The full adoption of the Financial Information System for California, which the state calls Fi$Cal, has repeatedly been delayed since its 2005 launch. Its cost could be higher than has been reported — the Technology Department’s IT tracker says the project’s poor budgeting and accounting have created an “inaccurate determination of the FISCal Project’s continuing cost.”
As of the fall, 43 of 64 entities implementing the new system were also using legacy systems, duplicating work and delaying monthly reports, according to the auditor.
Significantly, the State Controller’s Office does not use it as a standalone program to create the state’s annual financial reports. Instead, Yee’s office runs its old system and Fi$Cal. It has added staff for the extra work.
Licensing Delays
A major challenge for departments getting new IT projects up and running is changing how employees do their jobs.“If you bring in new technologies and layer them on top of broken technologies, people are doing things badly, (and) they’re just going to do things badly faster,” said Alvarez, the task force chairwoman. “None of that (employee training) was part of the process from what we could tell when we looked at it.”
Struggles adapting to a new computer program contributed to the Department of Consumer Affairs’ implementation of a new computer program called BreEZe, whose cost grew to about $100 million from a $27 million estimate.
The Board of Registered Nursing, which the department oversees, blamed the program when the time it took to license new nurses jumped from six weeks to up to five months in recent years.
“Admittedly, the department failed miserably at change management,” former Consumer Affairs Director Awet Kidane told a Senate budget subcommittee in 2015.
In 2017, the department shifted from plans to use BreEZe at all 37 of the boards, bureaus and other entities it oversees to tailoring specific IT solutions for each one.
More Payroll Problems
Struggles adapting business processes have contributed to delays implementing UCPath, a University of California system project to unify and upgrade payroll systems across its 10 campuses, five medical centers and the office of the president.“It has been far more complex and complicated than we had ever envisioned,” UC Chief Financial Officer Nathan Brostrom told The Bee in 2015.
The project’s cost has reached at least $504 million, surpassing an initial estimate of $170 million. The system awarded a contract to develop the system to Oracle in 2011 but took over the project itself in 2013 after becoming dissatisfied with the corporation.
Last week, UC President Janet Napolitano approved delaying the program’s implementation at UC Davis, marking at least the fifth delay for the program. A new launch date has not been determined.
High Failure Rate
While California’s problems with technology have been well-publicized, they are not unusual.“These problems are by no means unique to California or the public sector,” the task force reported. “Large-scale commercial companies frequently experience failed IT projects and even the most respected systems integrators and developers have regular project failures.”
The task force cited analyses suggesting up to 60 percent of large-scale projects fail. According to another analysis cited in the report, projects over $10 million have just a 2 percent chance of staying on schedule and on budget.
Alvarez said Newsom was interested in the task force’s findings when she brought it up to him in casual conversation shortly after it had come out.
“It doesn’t surprise me he’s interested in this, because when we spoke he seemed very aware of it,” she said.
She said she discussed the task force’s findings with former Treasurer Chiang but never with Brown.
“I do think that this governor understands the importance of technology a little better,” she said.
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