Dan Walters: High-tech California struggles to use technology managing state government

California may be the global capital of high technology, but its government is chronically unable to utilize that technology effectively.

That woeful reality is evident in State Auditor Grant Parks’ annual update of state programs and agencies that he considers to be “high risk” due to their deficiencies.

The report, issued late last month, identifies some aspects of government previously designated as highly risky that are now functioning satisfactorily, such as transportation infrastructure, prison inmate health care and the teachers’ pension system.

However, the list of poorly performing functions contains some long-term occupants, such as the implementation of technology.

The state’s technology failings, moreover, are an aspect of the Employment Development Department’s chronic problem with managing unemployment insurance benefits, another high risk activity, and contribute to the state’s equally chronic inability to produce timely financial reports.

The tardiness and incomplete nature of the state’s financial reporting processes are deemed high risk issues unto themselves, and are directly connected to technological shortcomings.

Although the state created the California Department of Technology, or CDT, and instituted new procedures in response to previous criticism about its lagging ability to design and build cost-effective information technology systems, Parks’ new report continues to question how projects are managed.

“CDT’s oversight of IT projects has yet to demonstrate significant improvement and will therefore remain on the state high-risk list,” Parks says, pointing out that earlier this year “we noted that CDT’s oversight of IT projects has been ineffective at addressing risks on complex projects. During that audit, we reviewed CDT’s oversight of four IT projects and found that although CDT identified deficiencies in three which required immediate corrective action, it had not used its authority to ensure that the problems were resolved.”

Parks zeroes in on what has become a poster child for IT failings, the Financial Information System for California. That awkward name was adopted to justify a catchy acronym: FI$Cal. But state officials are apparently more adept at naming the program than in making it work.

“The scope, schedule, and budget of this nearly $1 billion information technology project has undergone numerous revisions since it began in 2005,” Parks notes. “However, despite nearly two decades of continued effort, many state entities have historically struggled to use the system to submit timely data for the ACFR.”

ACFR is an acronym for the Annual Comprehensive Financial Report and is supposed to give officialdom, entities that do business with the state, and the larger public a reliable guide to the hundreds of billions of dollars that the state collects, spends and invests each year.

The ACFR, Parks points out, “provides an important resource for stakeholders, such as the state’s creditors, to use when making decisions about the state’s ability to borrow money affordably. Further, billions of dollars in federal grants are contingent on the state’s timely filing of the ACFR for federal review.”

The 2020-21 report was 12 months late, Parks notes, and the 2021-22 reporting “is already past due.”

“The state’s late financial reporting could also negatively affect its credit rating, which could increase the cost associated with borrowing,” Parks says. “According to the state treasurer, the state borrowed $5.6 billion in general obligation bonds in fiscal years 2021–22. Thus, even a small increase in the interest rate, as might happen with a downgraded bond rating, could cost the State millions annually in increased borrowing costs.”

The chronic shortcomings of FI$Cal and other expensive IT programs aren’t politically sexy, so they don’t get the attention that culture conflicts and other headline-grabbing issues garner. But they have real world impacts and, thankfully, the state auditor isn’t letting them slide into obscurity.

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. His commentary comes via CalMatters.org, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more, go to calmatters.org/commentary.