1996-97 Budget Analysis: Statewide Administration
Crosscutting Issues

Performance Budgeting: Will It Change The Budget Process?


Current Project Status

Common Themes

Where Is Performance Budgeting Going?

Restructuring the Management Of Information Technology

In 1995, the Legislature enacted major legislation to reorganize and improve the state's information technology oversight responsibilities. In addition, the Governor initiated a number of actions intended to improve the state's implementation of information technology.

Aside from the reorganization, relatively little progress has been made toward resolving many of the major problems which three independent reports identified in 1994. (Portions of the following analysis were contained in our report entitled "State Information Technology: An Update," issued on January 23, 1996).

Major Project Failure and Three Reports Prompt Reform Legislation

The highly publicized failure of a major Department of Motor Vehicles information technology project, at a cost to the state of at least $49 million, and the publication of three independent reports in 1994 citing numerous problems with other projects, resulted in the Legislature enacting information technology reform legislation (Ch 508/95, [SB 1, Alquist]) in 1995. This legislation eliminated the Office of Information Technology in the Department of Finance (DOF) and established the new Department of Information Technology (DOIT). Figure 7 displays the major features of Chapter 508.

Figure 8 summarizes the major responsibilities assigned by Chapter 508 to the DOIT.

Figure 7
Major Features of Recent
Information Technology Reform Legislation
(Ch 508/95, SB 1, Alquist)

Eliminates the Office of Information Technology and creates the Department of Information Technology (DOIT), with expanded duties and authority. (See Figure 8 for details.)

Establishes two information technology advisory bodies to provide advice to the DOIT. One advisory entity is comprised of senior state information technology managers; the other is comprised of nonstate government individuals.

Establishes policy direction in key areas, including (1) public access to public information contained in state computer files, (2) development of a statewide strategy to facilitate computer-based information sharing among departments, and (3) improving the management of information technology projects.

Limits the role of the Department of Finance regarding information technology projects to the approval of the expenditure of funds.
Figure 8
Department of Information Technology
Major Responsibilities Under Ch 508/95 (SB 1, Alquist)

Oversee the management of information technology in state agencies, with authority to suspend or terminate projects.

Develop and implement a strategy to facilitate information sharing among state computing systems.

Determine which information technology applications should be statewide in scope, and ensure that such applications are not developed independently or duplicated by state agencies.

Develop and maintain a computer-based file, accessible to the Legislature, of all approved information technology projects.

Develop statewide policies and plans that recognize the interrelationships and impact of state activities on local governments, including local school systems, private companies that provide services to state agencies, and the federal government.

Requires the Department of Information Technology to submit the following reports (due date):
  • Progress toward compliance with the provisions of the measure (July 1, 1996).
  • A plan for implementing the recommendations of the Governor's Task Force on Government Technology Policy and Procurement (October 1, 1996).
  • A method whereby the public may electronically access nonconfidential information via state telecommunications networks (January 1, 1997).
  • A preliminary assessment of the feasibility of consolidating the state's information technology activities (July 1, 1997).

    Constructive Actions by the Administration

    Since the airing of the state's information technology issues in the first half of 1994, the Governor and his administration have taken a number of constructive steps to address both the state's information technology situation in general, as well as specific information technology issues. These steps include:

    Assessment of the Current Situation

    Much Remains to Be Accomplished

    Given the magnitude of the state's information technology problems, it is clearly going to take time to rectify this situation, and we believe that the administration has taken some constructive steps in this direction. However, given the amount of time that has transpired since the state's information technology problems were made known--18 months--there has been relatively little progress made across state government in resolving these issues. Continuation of these problems will inhibit the ability of state departments to achieve an appropriate return on their investment of over $1 billion in new information technology applications.

    Individual Departments Take the Initiative.Despite the lack of statewide progress in resolving many of the state's information technology problems, some departments are unilaterally implementing various recommendations made in the three information technology reports issued in 1994. These include the Department of Corrections and the Public Employees' Retirement System, which have, for example, employed quality assurance consultants to oversee implementation of major projects. In addition, the Franchise Tax Board (FTB) and the Department of Housing and Community Development (HCD) have utilized recent changes in state contracting policy to pay contractors out of either enhanced revenues (FTB) or reductions in program costs (HCD) resulting from a project. To the extent these individual departmental initiatives are successful, they may serve as useful models for information technology efforts in other departments. Clearly, the DOIT is the designated state agency to disseminate the lessons learned from these initiatives as it develops statewide policies in response to Chapter 508.

    Several Major Projects Still Need Close Review.In our January 1996 report, we identify several major information technology efforts which have experienced various implementation difficulties. These projects continue to warrant legislative oversight because they face uncertain futures as to when they will be completed, how much it will cost to complete them, and the extent to which anticipated benefits will be realized. Many of these projects, along with other issues involving the application of information technology are addressed in this Analysisas part of our review of individual departmental budgets, and are listed below.

    Additional Tasks and Challenges

    In addition to the unresolved issues cited in the 1994 reports, we have identified additional tasks and challenges which we believe the administration should address as it implements Chapter 508. We address these tasks and challenges in more depth in this chapter in our review of the DOIT, and summarize them in Figure 9 (see next page).

    What Can the Legislature Do to Ensure the Success of Reform Efforts?

    The Legislature can help ensure that its efforts to position the state effectively in the information technology arena are successful by:
    Figure 9
    Information Technology Tasks and
    Challenges Requiring Attention

    Clarification of Responsibilities. The respective information technology oversight roles of the Departments of Finance and Information Technology (DOIT) are not clear to many departments and need to be clarified.

    Method of Funding the Department of Information Technology Is Inequitable. The administration's funding of the department almost equally among two data centers and the General Fund is fundamentally flawed and should be replaced

    Year 2000 Program Conversion. The DOIT has taken positive steps to address the problem of converting the state's computer programs to accommodate the year "2000." Given the importance of this issue and the potential conversion costs (more than $50 million), it will be essential to move forward quickly in a well-planned, cost-effective manner.

    Use of the Internet. State use of the Internet is exploding, and while there are many benefits to be derived, cost and usage implications need to be addressed.

    Keeping the Legislature Informed. The flow of information from the administration to the Legislature relating to state information technology projects has been curtailed and needs to be restored.

    Assuring the Success of Information Technology Projects. In certain cases, the state should use independent experts to verify and validate proposed projects and work delivered by contractors in order to ensure project success.

    We believe that the Legislature's continued attention to the state's information technology situation is warranted not only because of the considerable attention which the Legislature has given this matter in recent years and the size of the administration's information technology program (exceeding $1 billion annually), but because of the growing dependence of state operations on an information technology infrastructure. Unless identified flaws in that infrastructure are repaired, the ability of many state departments to maintain levels of service in an era of constrained funding runs the risk of being seriously compromised.

    Significant Issues Noted in This Analysis

    In this Analysiswe discuss several specific departmental information technology programs and recommend actions to the Legislature regarding these programs. Figure 10 lists those departments and projects discussed elsewhere in this Analysis, where we have identified information technology issues.

    >Veterans Affairs
    Figure 10
    Budgets With Information Technology Issues
    Identified in the 1996-97 Analysis
    Departments Issue
    Board of EqualizationMigration of computer applications to Teale Data Center
    California Community CollegesTechnology planning guide
    California State LotteryNew gaming system
    CorrectionsCorrectional Management Information System (CMIS)
    EducationEducational Technology
    Franchise Tax BoardBank and Corporation Tax System
    General ServicesTelecommunications
    Health and Welfare Agency Data CenterVarious
    Information TechnologyStatewide planning and oversight
    Motor Vehicles New computer improvement project
    Office of Emergency ServicesStaffing level for new information technology unit
    Resources AgencyCalifornia Environmental Resources Evaluation System (CERES)
    Student Aid CommissionFinancial Aid Processing System (FAPS)
    Teale Data CenterVarious
    Barstow Veterans' Home management system

    Overview of Employee Compensation Issues

    A major portion of state government expenditures is for compensation of state employees. The Governor's Budget projects $12.2 billion for salary and wage expenditures for more than 276,000 authorized personnel-years in 1996-97 (including $3.8 billion and 87,000 personnel-years in higher education). Including benefits (such as contributions to retirement and health insurance), estimated employee compensation expenditures exceed $15 billion for the budget year.

    In this overview we discuss the following compensation issues:

    Pay/Benefit Increases in Higher Education and California Highway Patrol Only

    For salary/benefit increases, the budget proposes $156 million for higher education and $32 million for the California Highway Patrol. The budget does not propose funds for new pay or benefit increases for other state employees.

    Higher Education. The budget includes $156 million from the General Fund for salary and benefit increases at the University of California and the California State University, as shown in Figure 11.

    California Highway Patrol. The budget includes about $32 million in 1996-97 from various special funds in the California Highway Patrol's (CHP's) budget for the annualized costs of the highway patrol officer MOU approved by the Legislature in Ch 768/95 (SB 544, Dills). Figure 12 details these costs. (We discuss a fiscal issue related to this MOU in our analysis of the CHP's budget request.)

    Figure 11
    Higher Education
    Salary and Benefit Increases
    1996-97 Governor's Budget
    General Fund
    (In Millions)
    University of California (UC)
    5 percent faculty salary increase, effective 10/1/96 $28.4
    2 percent staff salary increase, effective 10/1/96 17.4
    Full-year cost of 1995-96 salary increases 9.7
    Merit salary adjustments 31.7
    Subtotal ($87.2)
    California State University (CSU)
    Salary and benefit increases to be negotiated $64.4
    Full-year cost of 1995-96 salary/benefit increases 4.2
    Subtotal ($68.6)
    Higher Education Total $155.8
    Figure 12

    California Highway Patrol Salary and Benefit Increases
    1996-97 Governor's Budget
    Motor Vehicle Account and Other Special Funds
    (In Millions)

    Pay for additional half hour per day (lunch) $19.5
    Education attainment/incentive pay 10.7
    Pay for 18 or more years of service 1.7
    Increased base for overtime payment purposesa 1.9
    Savings on health insurance premiums -1.9
    Total $31.9
    a 1996-97 Budget Change Proposal.

    The MOU also included several provisions that attempt to streamline the personnel rule-making process, the process for appeal of minor disciplinary actions, and the layoff process. These provisions apply only to the highway patrol officers covered by the MOU. The administration, however, has expressed an interest in extending the same or similar provisions to other state employees through collective bargaining currently underway with the other bargaining units.

    The patrol officer MOU expires June 30, 1997. The terms of the MOU, however, provide that the state and the employee representatives may reopen the agreement to bargain pay and benefit issues on or after March 1, 1996.

    Other State Employees. Other state employees last received a general pay increase (3 percent) on January 1, 1995. The budget does not propose funds for new pay or benefit increases for these employees.

    New Collective Bargaining Agreements

    The Department of Personnel Administration should report to the budget committees during budget hearings on the administration's collective bargaining proposals and the status of negotiations.

    The Department of Personnel Administration (DPA) began negotiations in 1995 with the 21 bargaining units representing rank-and-file state employees (other than higher education) for new MOUs governing compensation and other terms and conditions of employment. These MOUs are to replace MOUs that expired June 30, 1995. At the time this Analysiswas prepared, the DPA had concluded an MOU only with the bargaining unit for highway patrol officers (as discussed above). Under current law, the provisions of the 20 expired MOUs generally remain in effect pending adoption of replacement MOUs.

    In our analysis of the DPA's budget request, we recommend that the DPA report to the budget committees during budget hearings on the administration's collective bargaining proposals and the status of negotiations.

    Strengthen Legislature's Collective Bargaining Oversight

    We continue to recommend that the Legislature adopt policies to assure that the Legislature will have the opportunity to fully review proposed collective bargaining agreements.

    In our overview of employee compensation issues in the Analysis of the 1995-96 Budget Bill, we discussed at some length the need to strengthen the Legislature's oversight of proposed collective bargaining agreements. In order to assure the Legislature has the opportunity to appropriately review new MOUs, we continue to recommend that the Legislature adopt the following policies:

    Return to LAO Budget Analysis Table of Contents

    Return to LAO Home Page