JFO: FY27 changes to Agency of Digital Services split CIT fund, add $9.08M recurring general fund to cover non‑billable IT work

The Joint Fiscal Office told the House Energy & Digital Infrastructure Committee on Feb. 12 that proposed FY27 changes to the Agency of Digital Services’ funding and billing structure are "credible" and should help bring deficits in the Communications and Information Technology (CIT) internal service fund under control.

"The changes that are being proposed for fiscal year 27 are credible to joint fiscal and make sense to us," James Duffy, director of the Joint Fiscal Office, said during the committee’s hearing.

The administration’s package includes three primary elements, JFO described: (1) splitting the single CIT internal service fund into four separate internal service funds aligned with existing bill‑back mechanisms (core enterprise services/CES, service‑level agreements/enterprise offerings, timesheet/professional resourcing, and a customized/bespoke services fund); (2) changing CES billing from a simple headcount basis to a tiered user‑count methodology intended to reflect differing intensity of use across employees; and (3) a new recurring general‑fund appropriation of $9,080,000 to cover ADS work that is not easily allocated to sponsoring agencies — cybersecurity, data governance and other central functions.

JFO said the split will improve visibility. Under the current structure, multiple bill‑back mechanisms route money into one CIT fund, making it hard to tell which streams are creating cash‑flow problems. "When we have separate internal service funds...now that's a new level of visibility," Duffy said, explaining that JFO and legislators could better isolate which billing stream (for example, timesheet versus bespoke projects) is driving deficits.

The office also described a significant budgetary shift in how large, customized IT projects will appear in state budgets: much of the spending authority associated with bespoke projects will move from ADS’ budget into the sponsoring agencies’ budgets. JFO said that shift will reduce ADS’ reported budget by roughly $47,000,000 in FY27 while not changing the total dollars spent across state government.

JFO cautioned that the new $9,080,000 recurring general‑fund appropriation is genuinely new base spending, not a one‑time transfer. "It does represent a new pressure on the general fund going into future fiscal years," Duffy said. He added that the change is intended to pay for central functions that ADS performs that are not easily charged directly to other agencies.

On CES, JFO said the administration will move from a headcount basis to a two‑tier user count so agencies with higher intensity users pay more. JFO also said some SLA costs will be moved into CES, and the resulting changes are not a one‑for‑one shift: CES may increase by more than SLA declines because of methodology adjustments and improved capture of previously unbilled services.

JFO and a JFO contractor, Lisa Gabin, emphasized that project management standards — signoffs by business and technical leads for deliverables — should remain intact even if spending authority moves to sponsoring agencies. Gabin noted, however, that the EPMO project dashboard tracks initial estimates and current cost estimates, not invoice‑level expenditure payments; she recommended clarifying chart‑of‑accounts reporting so business‑side direct costs associated with projects are easier for legislators to track.

The committee requested written testimony and follow‑up infographics from JFO to help draft a budget memo and Appropriations letter. JFO agreed to provide additional, detailed written materials.

What happens next: JFO will supply written testimony and follow‑up materials to the committee to support the House Appropriations letter and help members assess FY27 budget decisions.