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Analysis of the 2004-05 Budget BillLegislative Analyst's Office
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The Health and Human Services Agency Data Center (HHSDC) provides information technology (IT) services, including computer and communications network services, to the various departments within the Health and Human Services Agency. The center also provides services to other state entities and various local jurisdictions. The cost of the center's operations is fully reimbursed by its clients. The budget proposes $311 million for support of the data center in 2004-05, which is a decrease of $3 million, or 1 percent, below estimated current-year expenditures.
One of HHSDC's duties is supporting the Department of Social Services' (DSS) Child Welfare Services/Case Management System. In the DSS write-up of this Analysis, we discuss the recent federal funding reduction for the support and operation of this system (please see the "Health and Social Services" chapter).
The administration has not submitted the required report for the consolidation of the Stephen P. Teale Data Center and the Health and Human Services Agency Data Center (HHSDC). We withhold our recommendation on HHSDC's expenditure authority pending receipt and review of the report.
Administration Has Not Provided Data Center Consolidation Report. In order to increase the efficiency of the state's technology services, the 2003-04 budget began the process of consolidating Stephen P. Teale Data Center and HHSDC. (Please see the 2003-04 Analysis pages F-47 to F-52 for a discussion of the benefits of this approach.) As required by Chapter 225, Statutes of 2003 (AB 1752, Oropeza), the Department of Finance (DOF) was required by December 1, 2003 to submit a plan describing the consolidation of the two centers in 2004-05. Specifically, the plan was to include (1) the organizational structure of the consolidated data center, (2) identification of data center activities that would result in savings of $3.5 million General Fund in 2004-05 and additional savings to be potentially received in future years, and (3) examination of transferring department data servers to the consolidated data center. In October 2003, the new administration notified the Legislature that the required report would become a progress report—giving it more time to become familiar with the issues of consolidating the two data centers. The progress report has not been submitted to the Legislature.
Withhold Recommendation Pending Receipt and Review of Report. Since the Legislature has not received the progress report, we withhold recommendation on HHSDC's expenditure authority pending receipt and review of the administration's consolidation proposal.
The budget proposes to transfer the In-Home Supportive Services/Case Management Payrolling System to the Department of Health Services' Fiscal Intermediary contract. We withhold our recommendation on the proposal pending the outcome of the federal government's review.
The budget proposes to (1) maintain HHSDC's expenditure authority of $1.7 million and (2) extend six limited-term positions for the re-procurement of the In-Home Supportive Services/Case Management Payrolling System (IHSS/CMIPS). The IHSS/CMIPS system provides case management and payroll services for the IHSS program.
Project Background. The IHSS program was established in 1973 in DSS as a program to provide in-home supportive services to qualified, aged, blind, and disabled persons. In 1979, DSS contracted with Electronic Data Systems (EDS) for the development and operation of IHSS/CMIPS. In 1998, DSS was directed by state control agencies to conduct a competitive procurement for a new contract for the maintenance of the system. As with other DSS-related projects, HHSDC was assigned responsibility for the procurement activities.
Request Proposes New Procurement Strategy. Since September 2000, HHSDC has been conducting the analysis and planning for the IHSS/CMIPS competitive procurement. The budget proposes to pursue a new procurement strategy, which is intended to increase federal funding. Specifically, the administration proposes to abandon the competitive procurement approach and instead transfer the maintenance and enhancement of the IHSS/CMIPS system to the Department of Health Services' (DHS) Fiscal Intermediary (FI) contract (also with EDS). Because the DHS FI contract is funded at a higher federal funding ratio than the current IHSS/CMIPS contract, the state anticipates that its future sharing ratio of the IHSS/CMIPS costs will decrease by at least 25 percent.
DHS FI Contract Maintains Information on Medi-Cal Providers. The primary purpose of the DHS FI contract is to process both Medi-Cal and non-Medi-Cal claims submitted by entities which provide health care services. Since most IHSS providers are employed by Medi-Cal recipients, the administration believes the IHSS/CMIPS system can be included in the DHS FI contract for federal funding purposes.
Administration Requesting Approval by Federal Government. In order to transfer the IHSS/CMIPS system to the DHS FI contract, the state must first receive federal approval. In January 2004, the state submitted its request and anticipates that the federal government will complete its review before the May Revision. It is unknown if the federal government will approve the state's request. We, therefore, withhold our recommendation pending the outcome of the federal government's review.
The budget proposes to increase the Health and Human Services Agency Data Center's (HHSDC) expenditure authority to contract for support and enhancement of the Statewide Fingerprint Imaging System. Since the proposed consultant activities are similar to activities performed by state staff on other state information technology projects, we recommend that the Legislature reduce the request by $536,000 and direct HHSDC to examine the use of state staff in lieu of consultants. (Reduce Item 4130-001-0632 by $536,000.)
Implemented in 2002, the Statewide Fingerprint Imaging System (SFIS) automates the collection, interpretation, and storage of fingerprints for persons applying for public benefits. The purpose of the system is to deter welfare and food stamp fraud. The SFIS project is the only DSS county-based project funded entirely from the General Fund. The 2003-04 Budget Act provides $10.7 million to support and maintain SFIS. Of this amount, $453,500 is for eight state staff to manage the project. The remaining amount is for the current contractor to maintain and support the system.
Costs Were Reduced in 2003-04 but Proposed to Increase for 2004-05. The HHSDC reports that SFIS current-year costs were reduced by $2.2 million due to the implementation of technical efficiencies in the SFIS telecommunications network. For the budget year, HHSDC requests to increase its ongoing expenditure authority by (1) $536,000 to hire consultants to support the project and (2) $175,000 for future changes to the SFIS system.
Additional Consulting Activities Could Be Provided With State Staff. As noted above, state staff manages and provides technical expertise to the project. The request proposes to hire consultants to perform (1) analysis of the reprocurement for the maintenance and operation of the system, (2) analysis and testing changes to the system, and (3) project management activities. Most of these activities are similar to activities performed by state staff on other IT projects. State IT staff often cost less than consultants. For this reason, we recommend that the Legislature reduce the proposal by $536,000 and direct the administration to resubmit a request after it has examined the use of state staff. Legislative approval of a state staff proposal would require a subsequent increase in HHSDC's expenditure authority.