DOIT warns legislators subscription software, cloud shifts and carry‑forwards are driving costs higher

The New Hampshire Department of Information Technology told House Finance Division I members that ongoing transitions in how government software is sold and supported — from capital‑purchase licenses to subscription (cloud) models — are raising recurring costs and complicating budgeting.

Commissioner Dennis Goulet said DOIT is managing a broad transformation from on‑premises licensed systems to cloud subscription services, noting the subscription model “is the gift that keeps on giving,” in that vendors shorten life cycles and shift revenue streams so that operating expenses rise over time. He told lawmakers the operating model typically increases recurring costs compared with older capital‑purchase models.

Goulet highlighted the department’s recent financial figures: FY24 expenditures of roughly $121.8 million plus a carry‑forward encumbrance of about $14.8 million. He said carry‑forward encumbrances reflect large multi‑year contracts that were placed but not fully expended during the fiscal year. The department also said it had already unfunded 39 full‑time positions (37 classified, two unclassified) to meet biennial budget targets and described stopping routine backfills of vacancies in late fall to reduce personnel spending.

DOIT presented several recurring challenges for state IT budgeting: cybersecurity and privacy obligations from new technologies (including AI), higher indirect cost rates now approved by DOIT’s cognizant agency, and a continuing shift to subscription pricing for core systems that drives steady year‑over‑year increases. Goulet said central DOIT services run “very close to the edge,” with little headroom for unplanned events and few nonessential line items to cut.

Lawmakers asked about specific agency increases that are scheduled in HB 1 — including Lottery, DRA and others — and Goulet said some large increases reflect capital implementations moving into operating budgets (for example, a major DRA RIM replacement transitioning from capital procurement into ongoing operating and consultant costs). Committee members asked for agency‑level explanations and the department agreed to provide detail on high‑variance line items.

What’s next: DOIT agreed to supply further line‑by‑line explanations for notable agency increases and to follow up on requested capital‑to‑operating transitions. The department also said it would provide a corrective‑action plan for recent audit findings and had hired a new finance director to support the effort.

Ending: The DOIT presentation framed a central tension for the budget: long‑term modernization reduces some operational friction but often raises recurring costs that must be built into operating budgets rather than capital accounts.