House committee hears plan to restructure Agency of Digital Services budget to shore up CIT fund
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Summary
Finance commissioner told the House Energy and Digital Infrastructure committee that the Agency of Digital Services' pooled internal-service (CIT) fund showed multi-year deficits and the FY27 budget would break the pool into separate funds, add a roughly $9 million direct appropriation for nonrecoverable statewide functions and shift many project spending authorities back to sponsoring agencies to improve transparency and control.
The House Energy and Digital Infrastructure committee heard testimony from Adam Gresham, commissioner of Finance and Management, on a proposed restructuring of the Agency of Digital Services’ (ADS) FY27 budget intended to address a growing deficit in ADS’ internal-service “CIT” fund and to improve financial transparency.
Gresham told members the CIT fund moved from a small positive balance about $1,000,000 to a series of deficits—about $5,000,000, then $13,000,000—and that the most recent annual financial report for fiscal 2025 showed a roughly $25,000,000 negative balance. He said the agency aggregates four recovery streams—allocation (a statewide overhead allocation), service-level agreements (SLA), timesheet (embedded staff billing) and bespoke (project) spending—into a single pooled CIT fund that has become difficult to track from a control perspective.
“The problem was the pool got too big,” Gresham said, arguing that blending those recovery streams made it hard to isolate where unrecovered costs were originating and that some ADS work is not recoverable under current billing rules. He singled out data governance, artificial intelligence work and certain domain services as examples of functions ADS performs that sponsoring agencies cannot always bill to federal grants or other restricted funding sources.
To address the shortfall and make flows easier to trace, Gresham described a reorganization that breaks the $133,000,000 CIT pool into smaller, separately tracked funds. Under the FY27 proposal he outlined, the CIT allocation that will be billed statewide is roughly $35,700,000, ADS would receive a direct general-fund appropriation of about $9,000,000 to cover predominantly nonrecoverable statewide functions, and a new “core enterprise services” line would account for the primary cost of running statewide IT, with the overall core-enterprise total presented by staff at approximately $45,000,000.
Gresham also explained that bespoke/project authority—previously large in ADS’ spending authority—would be reduced in ADS’ direct spending authority (the FY26 bespoke authority was described in testimony at about $47.5 million) and that sponsoring agencies would retain the project spending authority for those initiatives. “We’re removing duplicate spending authority,” he said, noting the change does not alter ADS’ oversight role: ADS would still review IT project intake forms, help scope projects, solicit vendors and manage implementation; the principal change is who holds the spending authority used to pay vendors when invoices are due.
Members repeatedly pressed the commissioner on how the change would affect oversight and the EPMO dashboard that the committee uses to track major IT projects. Several lawmakers warned that moving project spending authority to sponsoring agencies could erode ADS’ strategic visibility. Gresham said the budget office will use chart fields and the statewide Vision accounting system to ensure projects remain identifiable and that ADS will continue to update dashboards and provide the same project-status reporting the committee currently receives.
One committee member cited a prior one-time appropriation of $15,000,000 that was intended to offset a double-billing effect when SLA charges were billed in arrears; Gresham said that infusion helped and was intended to ease the transition. He committed to provide “apples-to-apples” comparisons between FY26 and FY27 line items and to work with ADS and legislative fiscal staff on any reporting changes the committee requires.
Lisa Galvin, an IT consultant with the Joint Fiscal Office, told the panel that project-management standards include business and technical sign-offs on deliverables, which provides a cross-check between agencies and ADS and helps preserve oversight even if payment authority resides at the sponsoring agency.
The committee did not take formal action in the hearing. Gresham said finance and management and ADS staff will follow up with more detailed line-item comparisons and that the committee planned additional testimony from JFO before finalizing its FY27 budget recommendation.
