The project, which has moved in fits and starts for more than 20 years, will replace the state’s current payroll system, which is a conglomeration of 12 aging systems, some of which are nearly 50 years old. The new system is expected to take about six years and $1.2 billion to complete.
“Initial funding for the primary vendor costs was requested shortly after the project was approved through the state’s IT project approval process in January 2025, but a larger budget change proposal is expected at May Revision,” LAO says in its report, which was published March 7.
CSPS is one of the most complex and most expensive among the state’s pending tech projects and will affect “nearly every state department as well as upcoming state collective bargaining efforts,” the report says.
The old system and the new one both pose risks, LAO cautions. Failing to replace the current system could result in future litigation, it warns, and developing and implementing a new system could result in cost increases as well as delays.
Because of those and other risks, LAO says, the state should exercise “continued and possibly heightened legislative oversight of the project.” LAO advises that before the May Revision budget hearings, lawmakers should consider the following factors:
- Whether sufficient measures are being taken to ensure that change management is adequately preparing state government departments for the shift
- The additional costs to departments to implement CSPS that are not included in the approved baseline project cost
- The mechanics and timing of how departments are included in the project, especially in the last half of its six-year range
- The effects that state workers’ collective bargaining may have on the project’s activities budget
This approval by CDT allows the project to begin development and implementation after the contract award to the primary vendor. That approval, however, includes conditions such as the submission of revised cost documents, a detailed project schedule, and updated project plans to CDT within a certain time frame.
WHERE IT STANDS NOW
As of January, “the CSPS IT project had spent $88.3 million of the $128.7 million budgeted for the project through June 2025,” the LAO report notes. “The $40.4 million balance is expected to be used in 2024-25 for any remaining planning activities and to start development and implementation of the project.”
Budget bill language in the Fiscal Year 2024-25 Budget Act allots an additional $10.4 million for development and implementation costs in 2024-25 once the project is approved by CDT through the PAL process, the report notes.
“In addition to its departmental change management efforts, the CSPS IT project will communicate with 21 state bargaining units about the business and process changes associated with the new payroll system,” the report says. “Some of these changes also may go through the collective bargaining process, such as changes in pay frequency. For CSPS to be successful, CalHR … and the unions representing bargaining units will need to agree on any major changes from the new payroll system that impact most of the state workforce.”
LAO concludes its report by cautioning that “legislative oversight of complex, costly IT projects is critical,” and it closes with a question: “What information will the CSPS IT project provide through the budget process to the Legislature to support annual requests for development and implementation funding?”
