House committee probes midyear IT billings after Agency of Digital Services charges surface

Members of the House Energy and Digital Infrastructure Committee spent much of their Jan. 17 afternoon meeting examining midyear information‑technology billings tied to the FY2025 Budget Adjustment Act, focusing on charges from the Agency of Digital Services (ADS) that are showing up as unanticipated adjustments in several departments.

The committee heard from Representative Jim Harrison of the House Appropriations Committee, who explained the billing model ADS uses and why post‑fiscal‑year invoicing can create midyear budget surprises. "They're like a law firm. They track billable hours and they charge those," Harrison said, describing ADS's practice of estimating and later reconciling actual hours and costs after the fiscal year ends. He added that charges appear concentrated in the Agency of Human Services and cautioned that AHS is a large part of state spending: "AHS is basically half of our state general fund budget."

Why it matters: midyear adjustments in the Budget Adjustment Act (BAA) must be covered from existing appropriations and can force midyear cuts or other reallocations if agencies lack reserves. Committee members said better estimates or billing cadence changes could reduce surprise reconciliations and asked ADS and Finance and Management to propose improvements.

Key details and committee reaction

Committee members noted three drivers for the midyear adjustments: (1) ADS invoices after the fiscal year ends, which can make prior estimates stale; (2) ADS uses historic billable‑hour rates that may not reflect current salaries; and (3) annual licensing or subscription billing timing (for example, a department may pay for an annual Microsoft subscription even if the service is used only part of a year). Harrison told the committee that ADS treats core connectivity, cybersecurity and baseline services as a central chargebacks to agencies while additional programming and projects are billed separately.

Committee discussion pointed to a small set of budget lines with ADS‑driven changes in the BAA; members identified lines 205, 206, 208, 300, 306, 311 and 314 as examples and noted a roughly $786,000 printing/typographical discrepancy in one ADS line (b105) that the Appropriations Committee wants corrected in the BAA. Harrison said the agency's reported timesheet billing was about $25,200,000 for fiscal year 2024 and projected about $29,200,000 in fiscal year 2025. Committee members also observed that ADS‑related activity is primarily reflected in internal service funds; one member cited an internal service funds total in the BAA on the order of $144 million to $145 million as the scale of those internal charges.

Next steps and oversight

The committee agreed to request a fuller briefing from ADS (an "ADS 101") and to extend ADS's scheduled time so members can ask detailed questions about billing practices, service‑level agreements (SLAs) and the spreadsheet of BAA adjustments. The committee also said it will draft a short memo for the Appropriations Committee with advisory comments on the ADS items; staff indicated they expect a committee memo by Friday. Representative Harrison and committee staff said they will share the appropriations materials and the presentation used in the Appropriations Committee meeting to aid the review.

What was not decided

There were no votes taken on the ADS items during the Jan. 17 meeting. Members asked questions and requested additional documentation and testimony from ADS and Finance and Management; they did not adopt formal policy changes at this session.

Context

Speakers referenced prior large IT projects (unemployment system modernization, Department of Motor Vehicles upgrades) and pandemic-era demands that highlighted the need for modernized systems and ongoing maintenance budgets. The committee noted reliance on a mix of funding sources for major IT projects, including federal relief (ARPA) and special technology funds. The committee also named Lisa Calvino, a consultant to the Joint Fiscal Office, as a planned independent reviewer who will ask detailed questions in future briefings.

Ending

The committee scheduled ADS to appear for an extended briefing, directed staff to prepare a memo for Appropriations by Friday and signaled it will continue oversight of ADS billing cadence, SLA practices and project estimates as the BAA and the FY2026 budget cycle proceed.