Senate Institutions hears plan to restructure Agency of Digital Services budgeting
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Summary
Commissioner Adam Gresham told the Senate Institutions Committee the state will shift many IT project spending authorities back to sponsoring agencies, create discrete enterprise funds to increase transparency, and add a modest direct general-fund appropriation for services that cannot be billed to client agencies.
The Senate Institutions Committee on Feb. 17 heard from Commissioner Adam Gresham of the Department of Finance and Management about a restructuring of how the Agency of Digital Services (ADS) is budgeted and how the state recovers IT costs. Gresham said the changes aim to align budgeting with how ADS delivers services and to address a deteriorated internal service fund balance.
Gresham told the committee the communications and information technology (CIT) internal service fund had ‘‘about a $25,000,000 debt’’ in 2025 and that the administration reworked the budget to reduce the risk of further deterioration. "The secretary of digital services...said the way we carry out our vision doesn't really match how we budget for our mission," he said, describing the effort as both a structural and accounting correction.
The presentation outlined four cost-recovery methods ADS has used: allocation (a per-user charge that Gresham said was about $13,000,000 in fiscal 26), demand-based billing through service-level agreements (SLA), time-sheet/professional resourcing charges, and bespoke project funding. Under the proposed structure, many bespoke project spending authorities that were previously duplicated at ADS and the sponsoring agencies will rest solely with the sponsoring agencies going forward. "We're leaving that spending authority with the agencies and departments," Gresham said, explaining that ADS will continue to design projects, hire vendors and oversee delivery while the sponsoring agency pays vendors at the time of invoicing.
Committee members and staff described the change as a shift from a single pooled model to multiple, smaller funds. ADS officials said they moved from one appropriation and four funds to two appropriations and eight funds to increase transparency and predictability. Gresham said the state will establish a core enterprise services fund (about $45,000,000) to cover universally provided services—examples include email productivity software and basic cybersecurity—so those items are billed consistently across agencies.
For services that do not lend themselves to billing other agencies—often because federal funding sources impose restrictions—ADS will receive a direct general-fund appropriation. Gresham cited roughly $9,300,000 in new general-fund authority for those functions. "For certain functions with ADS, we are directly appropriating general fund," he said, noting that this step aims to avoid audit risk when federal funding would complicate cost recovery.
Gresham said the administration's goal is to end the year in balance and to retire outstanding deficits over time. He acknowledged the committee record included multiple large figures for total spending authority and pool sizes—committee members referenced a prior "pool" of about $133,000,000—while the testimony included inconsistent totals for overall spending authority. The record shows conflicting numbers were cited during discussion; the exact consolidated total for ADS spending authority in the current budget was not presented consistently at the hearing.
Project-tracking and oversight will remain in place. The Enterprise Project Management Office (EPMO) will continue to manage project standards and reporting; the chair noted that payments will require multiple sign-offs from the sponsoring department, the ADS project manager, the technical lead and the funding sponsor. The committee also discussed the project's dashboard and the chair said she will advocate to include total actual expenditures in that reporting so the committee can see cumulative spending as projects progress.
Members recommended follow-up briefings and third-party mapping to reconcile the old and new accounting categories. Lisa Gavon, a Joint Fiscal Office IT consultant who attended the session, suggested inviting JFO analyst James Duffy for additional review. Gresham said ADS and Finance and Management will work with departments in the months before the new fiscal year to operationalize the payment and tracking changes and to provide the information requested by the committee.
The committee adjourned after the discussion; no formal motions or votes were recorded during the continuation session.
