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Agency of Digital Services seeks $15 million one-time transfer to smooth FY26 IT chargebacks
Summary
Secretary Riley Hughes told the Senate Appropriations Committee ADS plans to move to a core enterprise services model and requests a $15 million one-time transfer to buy down invoiced SLA charges so agencies are not double-billed in FY26; broader reform to billing and asset management is planned for FY27.
Riley Hughes, secretary of the Agency of Digital Services and Vermont’s chief information officer, told the Senate Appropriations Committee on Feb. 18 that ADS is requesting a $15 million one-time transfer to cover fiscal-year 2026 core enterprise services and reduce service-level agreement (SLA) chargebacks that otherwise would be invoiced to agencies in the next fiscal year.
Hughes said ADS is proposing to move to a “core enterprise services” model that separates foundational IT services (a baseline allocation) from demand-driven services that agencies request beyond the baseline. “We would like to actually do the baseline, the foundations as allocation,” Hughes said, arguing that defining a shared set of services will allow ADS to scrutinize and reduce demand spending in future budgets.
Hughes said the agency maps about 12,000 users and currently treats most costs as demand. The requested $15 million transfer, she said, would buy down SLA charges that are effectively being consumed in FY26 but invoiced in FY27, and would prevent agencies from being charged twice for the same work. Hughes characterized the $15 million as a one-time transfer; she also described a larger $42 million figure shown in presentation materials as an accounting depiction of overall costs but emphasized the transfer being requested to avoid duplicative invoicing.
ADS told the committee that demand-driven SLA spending accounts for the majority of ADS’ FY26 budget picture and that the agency wants to establish clearer foundations — network access, identity and security, email and productivity tools (OneDrive, SharePoint), help desk and device support, data security, and data-center essentials — so those baseline services are consistently available across agencies.
Committee members questioned how demand is assessed and how ADS will manage IT asset inventory and license usage. Hughes acknowledged current limitations: ADS uses spreadsheets for much of its recovery and billing work and lacks a full asset-management mechanism to reclaim unused licenses or verify ongoing need. She said the ERP system the state is planning will help but will take about four years and that ADS wants tools sooner.
Additional clarifying details given in testimony include: ADS currently uses two standard chargeback rates referenced in the presentation ($88 and $84), it estimates roughly 92% of the budget is demand-driven, and ADS plans to spread some technical staff into ADS so their time is treated as shared services rather than agency-specific chargebacks. Hughes said the requested structural change will reduce future SLA lines in agency budgets once the FY27 planning cycle accounts for the new model.
No formal committee action or vote on the transfer request was recorded at the hearing. Hughes said ADS and the Joint Fiscal Office will meet to review detailed numbers; she asked the committee to consider the one-time transfer to avoid placing duplicative costs on agency business offices.
