Taxpayers Pay for Another Government Computer Fiasco

State Controller John Chiang announced February 7 that he has fired SAP Public Services, the company responsible for a costly computer project that was supposed to improve the state’s payroll system, because tests found the system to be riddled with errors.

The total cost to taxpayers is not yet known, as the controller indicated he will seek a refund of the approximately $50 million that already has been paid to SAP Public Services, while the company indicated that it intends to fight to keep the money, based on a claim that it has fulfilled its contract.

“At least $254 million has been spent on the project since 2005, and the state government has little to show for it,” the San Diego Union-Tribune wrote in an editorial.

The Sacramento Bee described the history of the payroll system debacle: “It’s the second time in four years that the state split with a tech contractor working on the $250 million system, already several years late and triple its initial cost estimate. This time the controller axed the entire project. Chiang inherited it seven years ago from Steve Westly, who picked it up from his predecessor, Kathleen Connell. Back then, the ‘21st Century Project’ sounded visionary. Delays turned it into a punch line. The rechristened ‘MyCalPays’ kept aiming and missing to update the state’s vast, Nixon-era payroll system.”

Less than a week after the payroll system was scrapped, the Department of Motor Vehicles announced that it has stopped work on a $208 million technology overhaul that is only half done. “The project was intended to revamp the process for registering vehicles and issuing driver's licenses, with the entire overhaul scheduled to be finished this year,” the Los Angeles Times reported. “But state officials said they were canceling the vehicle registration component because little progress was being made.”

The state has spent $135 million on the DMV overhaul so far.

The DMV is not only the latest state agency to scrap a costly computer project – it also holds the distinction of being one of the first. “The state spent $50 million on a faulty project before it was scrapped by Gov. Pete Wilson in 1994, sparking outrage and calls for better oversight,” the Times noted.

Other notable state computer flops include:

  • The Administrative Office of the Court’s attempt to unify the computers used by the state courts – a plan that was scrapped last year after $500 million had been spent.

  • The California Public Employees’ Retirement System overhaul, which managed to get running last year, but only after the cost had grown from an estimated $279 million in 2006, to a final cost of more than $500 million when it was complete.

  • An automated child-support system that was completed in 2008 at a cost of $1.3 billion – years behind schedule, and after the state had spent $111 million on a system that did not work.

With both state tax agencies working on massive computer projects – the Centralized Revenue Opportunity System (CROS) at the Board of Equalization and the Enterprise Data to Revenue Project (EDR) at the Franchise Tax Board – taxpayers have their fingers crossed that the series of government computer boondoggles will come to an end.

(Sources: San Diego Union-Tribune, February 11; The Sacramento Bee, February 14; Los Angeles Times, February 14; and Riverside Press-Enterprise, February 12.)

California Tax Foundation   |   1215 K Street, Sacramento, CA 95814   |   916.441.0490   |