After a String of Bungled Tech Upgrades, California Tries a New Approach

California may be home to some of the biggest tech companies in the world, but as the pandemic unemployment payment scandal has shown, proximity to greatness doesn’t seem to have helped the state’s IT messes, much.

Throughout 2020, millions of Californians waited helplessly for delayed unemployment checks while the Employment Development Department mistakenly paid out billions of dollars to fraudsters.

That wasn’t the half of it: EDD was also overwhelmed by the sheer number of people filing for unemployment after losing their jobs during the pandemic. That’s partly because some of California’s largest agencies rely on a 60-year-old computer programming language called COBOL for some of their operations. That includes EDD, the DMV and Medi-Cal’s fee-for-service program.

It’s too late to prevent the unemployment disarray at EDD, but the state is hoping a new way of procuring and updating technology will help prevent similar computer meltdowns in the future. Some of these improvements are already underway, but reforms on some of the legacy systems may not bear fruit for at least three to five years.

Gov. Gavin Newsom has made improving the state’s technology and increasing innovation a big focus: In 2019, he created the Office of Digital Innovation and signed an executive order implementing a new method for choosing which vendors and programs to upgrade the state’s aging technology infrastructure. Amy Tong, California’s chief information officer and director of the Department of Technology, said the state used to have their priorities backward — they’d tell vendors what their department needed, and how they should get there.

Now, California is telling vendors what problem it needs solved and asking vendors to not only provide solutions, but show proof that their solution is the best one.

“Tell me what idea you can bring forward in solving that and demonstrate to me how you would solve that,” Tong said. “So that’s a two-step process that we have implemented.”

The change is needed according to Assemblymember David Chiu, D-San Francisco. He said the state generally does a poor job managing IT modernization projects. Chiu has served on the Assembly Budget Committee for six years. He said efforts to modernize these systems tend to go off the rails.

“As legislators, we are often asked to approve tens of millions of dollars, if not hundreds of millions of dollars on top of budgets that have been blown, projects that are years behind in being completed,” he said.

There are plenty of examples to point to, but perhaps one of the largest is the implementation of FI$Cal, a financial management system that is supposed to integrate the state’s accounting, budgeting, cash management and procurement processes. That effort started in 2005 with a six-year timeline and a $138 million budget. The cost has since ballooned to around $1 billion and the deadline has been pushed to 2022 as the scope of the project has gradually increased.

Chiu said lawmakers are often put in tough positions when dealing with half-done projects.

“From my perspective, the Legislature generally acquiesces to the incremental budget requests where we continue to throw good money after bad,” he said.

The state’s long history of bungling IT projects means a lot of legislators remain skeptical about whether the state can get these projects right. Tong knows that’s what she’s up against and said the state has become a lot more transparent about its challenges.

“We’re out front,” Tong said. “We’re not saying, ‘Oh, not our problem.’ We own it, we fix it, we keep moving. That is a culture shift.”

Tong said the cost of recent IT projects has been smaller compared with projects in the past. The California Department of Technology’s project tracker page shows a number of IT efforts coming in at under $20 million, though there are also several costing hundreds of millions.

The department has laid out its goals in its Vision 2023 strategic plan, which includes delivering fast and secure public services and making common technology easy to use across government.

The state is also trying to shift how it approaches massive system upgrades. Some of its largest agencies are running on technology that’s decades old and specifically tailored to the agency that’s using it. Tong said that makes overhauling an entire system all at once impractical. So the state is taking a different approach.

“No more big rip and replace of a big system, because when you do that, imagine the retraining, the reprocessing, it’s just awful,” she said. “So rather than do that, let’s take a look at the big things you need to do, but do it in a more modular manner. And then you can do a lot quicker.”

Brian Metzker, senior fiscal and policy analyst with the nonpartisan Legislative Analyst’s Office, said the new method of asking for input from vendors and requiring them to demonstrate how their ideas work could help the state understand what its needs are and how different vendors could meet them.

“But I don’t think that there has been, necessarily, a good example of a legacy system being modernized that really is transformative yet,” he said.

The state could have a case study in how to fix an ailing department computer system soon from the Department of Motor Vehicles. The DMV has been plagued by long wait times and system outages, caused in part by outdated technology. DMV Director Steve Gordon said the agency has just begun the process of updating its computer system using the new proof-of-concept method.

“We’re just starting on the road, but it’s going to be a three- to five-year journey,” Gordon said. “We’re doing our first module, hopefully this calendar year, and then we’re going to be doing successive modules. And then at the end of it, hopefully, all the DMV will be on a new platform.”

It’s a project a lot of people will likely be watching closely to see whether this latest approach helps bring California into the future, or ends in another expensive IT mess.