California, home of high-tech, has tough time upgrading own computers

Steps taken to upgrade the state controller’s payroll computer system have stumbled in recent months.

The need to revamp critical technology is common throughout government, but making it happen for the controller’s office has been especially difficult. Authorities are grappling with decades-old technology as they have struggled to make a transition toward a new payroll management system in an effort dubbed the 21^st Century Project. The project, originally estimated at $373 million, already has cost $262 million, is years overdue and is not near completion.

The controller is the state’s check writer and keeper of the books and the office’s computer system is at the heart of state government. Among other things, it handles hundreds of thousands of employee paychecks each month.  And technology woes are nothing new: The state has had similar issues involving the state’s court system, the statewide welfare system, the Department of Motor Vehicles and the secretary of state’s office.

Gov. Jerry Brown’s rewritten budget for the 2013-14 fiscal year beginning July 1 calls for $14.5 million to wind down the operation and cover potential litigation between the controller’s office and SAP Public Services Inc., the system vendor that the state terminated in February as the problems mounted, said Jacob Roper, a spokesman for state Controller John Chiang.  SAP, hired in 2010, was the second vendor to be cashiered. The year before, the state jettisoned an earlier vendor.

Brown’s proposal is needed to ensure continuity in the state’s payroll system, allowing the state to operate without interruption while a better system is put together. Roper also said the controller’s office intends to put together an internal assessment on the project to determine whether the software could still work with the state’s business process.

The 21^st Century Project was intended to improve the state’s mammoth management process involving payroll, benefits administration, and timekeeping, among other functions.   The goal reflected the state’s efforts to learn  from its earlier miscues to develop a workable system.

But difficulties quickly arose.

A 21^st Century Project test group comprised of a small fraction of state workers’ paychecks experienced problems — including under- and over-payments — throughout an eight-month trial run, according to a recent report by the Legislative Analyst’s Office.

Although the controller’s office was able to fix some of those problems, the state may still face litigation by those who were affected, the LAO noted.

The new and currently suspended system, called MyCalPAYS, was proposed back in 2004. Its initial estimated cost was $130 million and had originally been scheduled for full implementation by July 2009.

According to the LAO, these figures ballooned to an estimated project cost of $373 million and the implementation date was pushed back to September 2013. At the time of its termination, the state had spent $262 million of its total estimated project cost.

The estimated total contract cost for project vendors, such as SAP, has also increased since 2004 from an estimated $59 million to $193 million.

“The state has had an abysmal track record with implementing these new systems. This latest one cost taxpayers millions of dollars for nothing in return,” Assemblymember Kristin Olsen of Modesto said. Olsen, a Republican, is a member of the Assembly Select Committee on Government Efficiency, Technology and Innovation.

“At the committee, I think we need to start looking over these kinds of issues and determining why the state keeps having these kinds of issues,” said Olsen. “There needs to be controls at every single step along the way, to ensure the state isn’t wasting money.”

This recent incident with the controller’s office is part of a history of failures, but it involves the checks of state workers – which gives it an especially high profile.  Chiang has indicated that his office will shift the test group of employees paid under the SAP system back to the original legacy system, which for years has been reliably paying the other 240,000 state workers.

The controller’s office also said that employees and vendors affected in this process will receive the amount of money due them.

Mediation between the controller’s office and its former vendor is scheduled to begin in June, with additional legal proceedings likely if contractual objections are not resolved.

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Ed’s Note: Samantha Gallegos is a Capitol Weekly intern from Sacramento State University’s government journalism program.