Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
The Stephen P. Teale Data Center (TDC) is one of the state's two general-purpose data centers. The other is the Health and Human Services Agency Data Center. The TDC provides a variety of information technology (IT) services to numerous state agencies which reimburse the data center for its operational costs.
The budget proposes $93 million from the TDC Revolving Fund for support of the department in the budget year. This is an increase of $2.9 million, or 3 percent, above estimated current-year expenditures. The budget includes a number of increases for workload—the largest of which is a request for $4.3 million to upgrade mainframe computer systems.
The Stephen P. Teale Data Center (TDC) requests an expenditure authority increase of $8.1 million to upgrade or purchase additional computer and network equipment. We recommend the Legislature reduce the proposal by $6.9 million since the method used to develop the proposal is based on past workload growth trends that are not reflective of 2003-04 demand for services. We further recommend that the data center report at budget hearings on actions that it could take which would lower both costs and rates charged to departments in the budget year. (Reduce Item 2780-001-0683 by $6.9 million.)
The budget proposes an increase in expenditure authority of $8.1 million to upgrade or purchase additional computer and network equipment.
Most of Request Based on Past Workload Growth Trends. The TDC states the increases are needed based on workload growth and new state IT projects. Of the $8.1 million being requested, we found that only $1.2 million was directly related to new projects (those being implemented by the Board of Equalization and the Department of Motor Vehicles). The remaining $6.9 million reflects the data center's growth projections based on historical patterns. In the late 1990s, workload growth trends were an adequate measure to estimate data center funding needs because government services and spending were consistently increasing. With the severe budget problem, however, departments are experiencing reduced budgets and service levels. This means that departments' computing needs are also likely to be declining. As a result, the data center's use of historical workload growth measures appears to seriously overstate budget-year demand for its services. Accordingly, we recommend the Legislature reduce TDC's augmentation proposal by $6.9 million.
TDC to Report on Efforts to Lower Costs and Rates. With significant budget reductions expected in 2002-03 and 2003-04, departments will have limited budget flexibility and capability to pay for services. Consequently, it is important for service entities such as TDC—whose budget is based on reimbursements from other departments—to be holding the line or even decreasing its expenditures and rates. For example, the Department of General Services (DGS)—another entity whose budget is based on reimbursements—proposes to decrease its expenditure authority by almost $17 million and 23 positions to reflect proposed fee reductions. The DGS will pursue internal efficiencies to reduce its service fees and help departments reduce their costs.
The TDC has not followed the approach of DGS. With the exception of current-year reductions related to the statewide elimination of vacant positions and its annual budget adjustment for completed projects, TDC does not propose to reduce its expenditure authority. The TDC also does not propose to reduce the rates that it charges departments. We believe the data center should follow DGS' lead in pursing internal efficiencies to lower costs charged to departments. Accordingly, we recommend that TDC report at budget hearings on actions it has taken or will take to reduce its costs and lower its rates. This approach would lower departments' expenditures for TDC services and allow them to better adapt to their own reduced budgets.
The Stephen P. Teale Data Center (TDC) requests an expenditure authority increase of $2.1 million and ten positions for the continued support and maintenance of the California Home Page and the Governor's E-mail system. We recommend the Legislature reduce the proposal by $453,000 and five positions since TDC is unable to provide data supporting the need for the additional positions.
The budget proposes an increase in expenditure authority of $2.1 million and ten positions for the continued support and maintenance of the California Home Page and the Governor's E-mail system. The 2002-03 Budget Act provided DGS with the primary responsibility for the ongoing support of the Home Page. In September 2002, the Department of Finance (DOF) notified the Legislature of the administration's intent to transfer the Home Page from DGS to TDC. In addition, DOF requested additional funding and positions to support the Home Page. To fund the increase, the request proposed to charge departments, depending on their size, a subscription rate to reflect their share of the cost to operate the Home Page.
In November 2002, the Legislature approved a modified plan to transfer the Home Page from DGS to TDC. To cover the ongoing costs of the Home Page at its existing service level, the plan involved transferring funds and positions to TDC and authorizing a reduced subscription rate. The Governor's budget request includes funding for the 2003-04 costs of that plan and an additional $453,000 for five new positions.
Additional Positions Not Justified. The data center did not provide workload data supporting the need for additional positions. Consequently, we recommend the Legislature reduce the request by $453,000 and five positions. This action would maintain the plan approved by the Legislature in November 2002.