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IT Funding, Cuts in Governor’s Proposed Budget

Gov. Gavin Newsom’s proposed 2023-2024 Fiscal Year state budget offers a variety of strategies for combating an anticipated $22.5 billion shortfall.

The California Capitol building.
Shutterstock/Brandon Bourdages
Driving government efficiency with IT and innovation is part of Gov. Gavin Newsom’s strategy for confronting an estimated $22.5 billion shortfall in his proposed $297 billion 2023-2024 fiscal year state budget — but it’s not all good news for technology.

In sheer numbers, the governor’s proposed budget, which he debuted at 9:15 a.m. Tuesday, is nearly 3.6 percent smaller than the $308 billion state budget approved by lawmakers and the governor in June 2022. But it’s far from a final document; after much more work with lawmakers, Newsom will present the May revision of his proposed budget this spring. The Legislature will have until June 15 to approve the state budget, in accordance with the California Constitution. (Industry Insider — California will have additional coverage of the new state budget as more detail becomes available.)

Newsom’s plan to deal with the anticipated shortfall, generally, includes $7.4 billion in funding delays, $5.7 billion in reductions, and $4.3 billion in fund shifts, per a slide presentation that accompanied his nearly hourlong remarks. But it also includes what another slide termed “government efficiency,” such as a continued reliance on telework and on tech-focused initiatives from the new Office of Data and Innovation, from the California Department of Motor Vehicles (DMV) and from the Employment Development Department (EDD) via its EDDNext modernization, already underway.

“I’m really excited as we turn the page from, hopefully, pandemic and plague and wildfires, drought, past floods, we’ll get under the hood on some of these big IT projects,” said Newsom, who was tieless ahead of a trip to the Central Coast as storms continue to batter the state. Among the takeaways:

  • There’s good news and bad news for IT in this budget. Declining General Fund revenues are resulting in significant cuts to IT modernization funding, albeit trims that appear to be coming over several years. The governor’s proposed budget would cut $21 million from the $50 million in General Fund monies provided through multiple years to the California Department of Technology (CDT), for modernization. This money was provided in the 2021 and 2022 state budgets. Doing the subtraction, the new number is $29 million. The 2022-2023 FY budget provided CDT $30 million over multiple years “to stabilize critical digital services” but the proposed budget cuts this amount by $17.5 million, to $12.5 million.
  • There’s $17.3 million in ongoing monies from the state General Fund to establish the California Office of Data and Innovation in Newsom’s proposed budget, along with 65 positions to cement it as a standalone department under the California Government Operations Agency. Per Newsom’s budget summary, “ODI partners with state agencies to improve the efficiency and effectiveness of services delivered to Californians by providing process improvement and data solutions that are easy to use across government.” As you’ll recall, it merges the state Office of Data and Innovation, the Government Excellence and Transformation Center (GET Center) and the CalData program into one entity.
  • A digital wallet may be close. His administration continues, per Newsom’s budget summary, to invest in technology to modernize how residents connect with government. At DMV, “prior year investments have allowed the DMV to shift how the public conducts business with many workload transactions now processed online” and it is moving toward modern systems that enable electronic transactions. Within “just a matter of months,” Newsom said Tuesday, technology will be available “where you can get your driver’s license into a digital wallet.”
  • There’s $198 million in one-time monies in the budget, $99 million of that from the General Fund, for “planning and development of EDDNext,” and what is the second year of a five-year plan to modernize the EDD. This includes, per the summary, “enhancements to EDD’s benefits system — improving call centers, simplifying forms and notices, including user testing and engagement, developing data analysis tools to continue curbing fraudulent benefit claims, and training.”
  • Also at EDD, there’s $85 million in one-time funding in this proposed budget, $71 million of that from the General Fund, to enable a “multiyear investment” that started with last year’s budget to target fraud. This includes “front-end technology to block foreign and suspicious Internet Protocol addresses, improvements to applicant identity verification, and services to screen and validate claim integrity.”
    EDD’s transformation continues, Newsom said, adding: “I am not going to allow whoever is up here in four years to have this system that we’ve been struggling with in the last few years. We’ve got to modernize. We’ve got to fix that.”
Theo Douglas is Assistant Managing Editor of Industry Insider — California.