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Agency of Digital Services requests funding shift to reduce chargeback deficit; committee asks for details
Summary
Agency of Digital Services officials briefed the House Energy and Digital Infrastructure Committee on a plan to change the state's IT funding model, seek a $15 million transfer to buy down an accruing SLA deficit, and relevel enterprise vs. project chargebacks; the agency said the internal-service fund deficit is about $12 million and asked the c
Agency of Digital Services (ADS) officials on Feb. 9 asked the House Energy and Digital Infrastructure Committee to approve a funding shift intended to reduce recurring deficit spending in the agency's internal-service fund and to standardize how foundational IT services are charged to state agencies.
Kate Slocum, chief financial officer for ADS, and Stacy Gibson Granfield, EPMO director, described a two-part problem: (1) foundational enterprise services are unevenly recovered through a mixture of allocation and chargeback methodologies; and (2) a large portion of ADS work is charged to agencies after the fact under a service-level-agreement (SLA) / "credit card" model that leaves ADS carrying receivables and a growing deficit.
What ADS requested and why
ADS officials said they will seek new budget authority for FY26 and relevel recovery for core foundational services. They described a $15 million transfer proposed as a temporary buydown of the SLA liability so agencies are not double-billed while the new recovery model is implemented. ADS staff described a broader plan to reclassify core foundation services (network, identity, basic productivity tools and security operations) into a uniform appropriation/recovery model and to move project-specific demand back into chargebacks for individual agencies.
Budget figures and fiscal posture
ADS described the agency's spending authority request and current financial position. CFO Kate Slocum told the committee the agency seeks a roughly $138 million internal-service spending allowance for the coming year (this number represents the agency's internal-service spending authority request rather than a single new general-fund appropriation). ADS staff said the fund's deficit has grown to about $12 million in the current year. Committee members pressed for a breakdown of the proposed $15 million transfer and asked what would happen if the transfer were smaller or larger.
Committee scrutiny and technical questions
Lawmakers asked how the change would affect agencies'budgets, the timing of invoices and the risk ADS faces if federal funding tied to particular projects is reduced or withdrawn. ADS staff said the requested changes are intended to reduce the practice of "backwards spending" in which agencies are billed in arrears for services consumed the prior year. ADS staff said the shift would not eliminate all chargebacks for project-specific work but would move predictable, foundational services onto a stable, uniform recovery basis.
Other financial details provided on the record
- ADS staff said historically about $11 million supported an "allocation" line used for shared foundations and that allocation has remained roughly constant for several years. - ADS staff said approximately 92% of ADS work is charged back to agencies, with the remaining 8% supported by appropriations/special funds used for specific items. - ADS staff said current hourly time-sheet billing rates (time-and-materials) are in the mid-$80s per hour range, which ADS staff said exceeds practical billable capacity for some classifications and contributes to a structural mismatch between rates and recoverable hours.
Committee next steps and related actions
Committee members asked ADS for a clear line-item breakdown of the $15 million proposal and an explanation of alternatives (e.g., $10M or $20M). ADS leaders said they are meeting with the Joint Fiscal Office after the hearing and will provide additional technical detail to the committee. The committee will prepare a committee memo for Appropriations; that memo is due Feb. 26, and members signaled they want ADS to rejoin the committee discussion while the memo is drafted.
Ending
Lawmakers expressed support for a model that reduces surprise billing and creates clearer, equitable funding for foundational IT services; they pressed for detailed cost breakdowns, a timeline for implementation, and contingency planning if federal funding supporting particular agency projects is reduced.
