House committee hears JFO briefing on how Vermont pays for state IT, flags CIT fund shortfalls and tech‑modernization choices

Montpelier — The House Energy Digital Infrastructure Committee on April 2 heard a Joint Fiscal Office briefing on how Vermont pays for state information technology and the choices the Legislature faces to fund large IT modernization projects.

JFO staff told the committee that most executive‑branch IT operations are paid through an internal service pool called the Communications and Information Technology Fund (CIT Fund), which creates duplicated appropriations on the budget and has produced recurring shortfalls that the administration and the Legislature have been addressing. Emily Byrne, deputy fiscal officer at the Joint Fiscal Office, said, “The House just passed the ’26 FY 26 budget. That was $9,060,000,000 of unduplicated funds,” and JFO noted a larger duplicated total of $11,620,000,000 appears in some budget tables because of how internal service funding flows.

Why it matters: State IT underpins core services — from taxes and unemployment benefits to courts and parks reservations — and the committee was told that decisions about how to pay for both routine IT operations and one‑time modernization projects affect program budgets across agencies.

Key points from the briefing

• Internal service fund model and duplicate appropriations: JFO explained that many executive‑branch agencies receive appropriations for program work and then pay ADS (Agency of Digital Services) out of the CIT Fund for shared IT services. That structure means the same dollars are reflected in agency appropriations and again in ADS’s CIT Fund appropriation, which JFO characterized as a frequent source of confusion for budget watchers.

• Operating costs vs. modernization costs: JFO summarized a working distinction used in the briefing: operating costs are recurring services (office software, email, network connections, basic cybersecurity) typically covered through annual budgeting; modernization costs are large, one‑time projects to replace or update legacy systems (for example, unemployment insurance, DMV, or financial ERP systems).

• Tech Modernization Special Fund and recent projects: JFO described the Technology Modernization Special Fund (created in 2022 and administered by ADS) as the primary state vehicle for major IT replacements. JFO cited recent appropriations from the fund for high‑profile projects, including roughly $30 million for unemployment system modernization and about $20.25 million for DMV modernization; the fund has also supported ERP work. Byrne and other JFO staff said the fund is driven by one‑time appropriations when money is available.

• Role of federal funds and ARPA: Committee members and JFO staff discussed COVID‑era federal funding and other federal programs (including the Infrastructure Investment and Jobs Act) that increased federal dollars available to states and, in Vermont’s case, created general‑fund capacity that was in some instances re‑directed into technology modernization. JFO warned the committee not to assume federal infusions are a sustainable recurring revenue source for long‑term IT needs.

• CIT Fund shortfalls and billing timing: JFO identified two recurring drivers of CIT Fund deficits: (1) the timing of payments and billing in arrears, which can create a mismatch between budgeted estimates set many months earlier and final billed cost; and (2) outdated ADS hourly rates for demand‑driven services that no longer reflect current costs. JFO said the governor’s recommended transfer for the current year asked for $15 million to address arrears but that amount was reduced in the House to $10 million.

• How ADS bills agencies: JFO described multiple allocation methods: “core enterprise solutions,” billed on broad metrics such as headcount or per‑desk cost for widely shared services; and “demand” billing, where agencies are charged for hours of specialist time or per‑service usage. JFO emphasized that large modernization projects paid through the CIT Fund typically appear as a distinct demand arrangement or a one‑time appropriation into the fund.

• Alternatives and oversight: JFO staff said other states use a mix of approaches — some incorporate IT projects into capital budgeting when public entities choose to bond IT projects, others experiment with governance or priority frameworks for deciding which projects receive limited modernization dollars. NASCIO (the National Association of State Chief Information Officers) was cited as a national reference point; JFO said no single state solution appears to be a silver bullet.

Committee requests and next steps

Committee members asked JFO and ADS for (1) an appropriation history for the Technology Modernization Special Fund since its 2022 creation; (2) clarification of the split between federal and state (general or special fund) contributions to past modernization investments; and (3) a catalog or five‑year inventory of known critical applications and replacement risk so the Legislature can better prioritize future appropriations. JFO said it can follow up with those materials and recommended hearings with ADS and national witnesses such as NASCIO.

Context and examples

JFO noted that some agencies maintain their own modernization funds or carveouts (the Tax Computer Modernization Special Fund was cited as a department‑specific example with its own revenue base) and that the judiciary uses a Court Technology Fund and judiciary appropriations for court IT. JFO stressed that every agency’s funding mix (general fund, federal, special funds, enterprise funds) affects both what IT can be done and who pays for it.

What the committee heard about legacy systems and cloud migration

JFO described many state systems as “legacy” in the sense that they remain functional but are brittle, expensive to modify and often hard to staff or integrate with newer systems. JFO said moving to cloud‑based, subscription models can reduce vendor lock‑in and the need for future disruptive, large‑scale replacements in some cases, but cloud migration itself is not cost‑free, and migration choices come with governance and procurement implications that ADS will need to explain in detail.

Bottom line

JFO presented IT funding as a largely well‑established operating model for routine work but an unsettled problem for large modernization investments. The committee left with several concrete follow‑ups: historical appropriations to the Technology Modernization Special Fund, a clearer accounting of federal vs. state shares of past modernization projects, and a catalog of at‑risk legacy applications. JFO and ADS were asked to return with more detailed numbers and documentation to help the Legislature weigh whether to adopt a recurring mechanism, continue one‑time appropriations, or pursue alternative governance or capital‑style approaches for major IT projects.

Sources and attribution

The facts in this article are drawn from the Joint Fiscal Office presentation and the committee discussion at the April 2, 2025 meeting of the House Energy Digital Infrastructure Committee. Direct quotations are attributed to JFO staff who presented to the committee.