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Analysis of the 2006-07 Budget BillLegislative Analyst's Office
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The 2005-06 Budget Act and the 2005 Governor’s Reorganization Plan #3 created the Department of Technology Services (DTS) as the state’s general-purpose information technology (IT) department. The DTS consolidated the state’s two largest data centers-Stephen P. Teale Data Center and the Health and Human Services Agency Data Center (HHSDC)-and a portion of the Department of General Services related to telecommunications. The DTS provides IT and telecommunication services to most state agencies and various local jurisdictions. The HHSDC management of several large IT projects was transferred to the Health and Human Services Agency in the Office of Systems Integration.
The DTS resides within the State and Consumer Services Agency and its operational costs are reimbursed by its client agencies. The Governor’s budget proposes $235 million in expenditures from the DTS Revolving Fund, roughly the same amount as in 2005-06. Several proposals to expand services are offset by a decrease due to one-time spending in 2005-06.
The Governor’s budget includes no savings associated with the consolidation of the state’s major data centers. We withhold recommendation on the department’s budget pending receipt and review of a plan to implement efficiencies.
Consolidation Should Lead to Savings. The Legislature began the process of consolidating the state’s data centers in 2003-04 as a way to make the state’s IT operations more efficient. For instance, a consolidated data center can use its purchasing power to negotiate better prices on hardware and software. In addition, many administrative functions can be merged to reduce staff demands.
Budget Includes No Savings. The Governor’s budget includes no savings associated with the creation of DTS. The department reports that it is currently reviewing its operations to identify efficiencies in five areas:
IT contracts for hardware and software.
Other types of contracts, such as security.
Facilities.
Personnel and resources.
Telecommunications and networks.
The DTS has identified potential savings of $4 million annually related to facilities. At the time this analysis was prepared, however, it had not completed estimates for the other areas.
Department Should Integrate Savings Into Its Budget. The department should continue its efficiencies planning and report to the Legislature during budget hearings on expected savings. While some savings may require long-term efforts, we would expect other efficiencies to be implemented in the near term. Any savings for 2006-07 should be integrated into the department’s budget proposal during the spring budget process. These savings would then be reflected in reduced rates for DTS’ customer departments. Pending the receipt and review of such a proposal, we withhold recommendation on the department’s budget.