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Our office will publish shorter, more focused budget analyses over the next few months. In most cases, rather than sending out an announcement for each publication, we will provide periodic updates with the key takeaways from recent pieces. All of our 2023-24 budget analyses to date can be found here.
The 2023-24 Budget: Broadband Infrastructure
- Significant Changes to Original 2021 Broadband Infrastructure Spending Plan. Since July 2021, the administration and the Legislature have made substantive changes in the amounts and sources of funding for the original broadband infrastructure spending plan—a $6 billion multiyear plan enacted in 2021. While the total amount of the spending plan has increased only by $550 million, the source of funding for the majority of the spending plan is now General Fund, rather than federal American Rescue Plan (ARP) fiscal relief funds as in the original plan.
- Governor’s Proposed Spending Delays Help Address Immediate Budget Problem, Although Proposed Future Spending Likely Unaffordable. The Governor’s 2023-24 budget proposes to delay $1.125 billion in General Fund appropriations—$575 million for the Broadband Loan Loss Reserve Fund and $550 million for last-mile projects—to address the projected budget problem in 2023-24. We find the proposed delays to be prudent and worthy of legislative consideration. However, as we anticipate the budget problem to be about $7 billion larger at May Revision, we find that the state likely will be unable to afford the overall spending levels in 2024-25 through 2026-27 proposed in the Governor’s 2023-24 budget, including the resumption of delayed one-time spending for broadband infrastructure. As a result, the delayed broadband infrastructure spending likely will not be affordable in future years without reductions in other areas.
- Recommend Spending Federal ARP Fiscal Relief Funds First, Evaluating Remaining General Fund Spending. We recommend the Legislature direct the administration through trailer bill language to spend federal ARP fiscal relief funds first. We also recommend including increased encumbrance and expenditure reporting. We also recommend the Legislature evaluate the updated spending plan to consider (1) how anticipated additional federal funds could supplement existing and/or planned appropriations; (2) how General Fund spending might be prioritized among existing programs and projects to achieve statutory goals; and, (3) how, based on this prioritization, spending delays and/or reductions could be made with the least adverse impact on meeting these statutory goals.
The 2023-24 Budget: Overview of Information Technology Project Proposals
- Governor’s Budget Includes 40 Information Technology (IT) Project Proposals Totaling $641 Million ($432 Million General Fund). Of the 40 total proposals, the Governor’s 2023-24 budget includes several large IT project proposals that mostly continue and expand on existing IT projects such as the Employment Development Department’s EDDNext Modernization ($198 million [$99 million General Fund]) and the Franchise Tax Board’s Enterprise Data to Revenue Project 2 ($135 million General Fund).
- Recent Changes to IT Project Procurement and Oversight Warrant Attention. IT projects are using more challenge-based procurements to allow more bidders to offer solutions to state’s complex problems without pre-defining solutions with detailed requirements-based solicitations. Some of these procurements, however, require up-front funding for demonstrations, proofs of concept, and prototypes. Also, large enterprise modernization efforts that manage concurrent and often related IT efforts and projects to modernize programs and/or services are becoming more common. At the same time, more projects are using combined agile and traditional approaches to development and implementation to accommodate the realities of the budget process and continued programmatic responsibilities. Current oversight tools for these efforts and projects, however, are insufficient for the Legislature to monitor the changes to projects’ cost, schedule, and scope.
- Recommend Evaluation of Changes and Improvements to Legislative Oversight. We recommend the Legislature direct the California Department of Technology and the Department of Finance to (1) lead an evaluation of challenge-based procurements and (2) work with the Legislature on improvements to oversight of enterprise modernization efforts and projects using the agile approach (or some combination of agile and traditional approaches) to development and implementation by April 1, 2024.
