What States Can Learn From California’s Expensive Financial Information System Failures
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Commentary

What States Can Learn From California’s Expensive Financial Information System Failures

States possess vast amounts of financial and non-financial data, and the best way forward to manage all types of data would be to implement an Open, Public, Electronic, and Necessary (OPEN) data policy. 

Before Apple even released its first iPhone, California’s state government leaders set out a vision for a digital, modern, and statewide budgeting, procurement, and cash management system called the “Financial Information System for California” (Fi$Cal).  

Fourteen years, and 11 iPhones later, the state government’s project is years overdue, hundreds of millions of dollars over budget, and lacks key features. The project will likely cost California taxpayers over $1 billion before all is said and done. And at best, the state will end up capable of doing many things the private sector has already been doing for years.

While California is no stranger to poor project management, the Fi$Cal mess was arguably doomed from the start, given the suboptimal nature of state technology and data policies—not only in California but across the country.

Unfortunately, taxpayers may well see more technology fails like Fi$Cal if state governments do not implement Open, Public, Electronic, and Necessary (OPEN) data policies, which ensure data are published online in electronic, machine-readable for and address the data fragmentation problem across all of state government.   

Software integration problems often occur because each state government agency builds its own custom software, which in turn creates a new database for the information it generates. Over time these databases multiply and fragment, meaning the information is all reported differently, leaving no reliable way to combine databases and mine them for information. This eventually builds a fragmented labyrinth of digital information that is often impossible to navigate and analyze for value. 

In today’s world, states possess vast amounts of financial and non-financial data, and the best way forward to manage all types of data would be to implement an Open, Public, Electronic, and Necessary (OPEN) data policy.  So how would that be implemented?

First, it could mean creating a permanent software and data management council to set data definitions and software development protocols for state agencies. State agencies would be required to follow these protocols as they develop software in order to ensure that all state databases can be combined and reported similarly, thus avoiding the fragmentation problem.  

Second, for financial data specifically, this could mean requiring standardized data exchange through technology such as XRBL, something Florida is currently trying to implement for its local governments. XBRL could be used as a way for state agencies to share data with a central state repository. An alternative might be a regulation requiring all government agencies to standardize on one or two database platforms, ideally ones that are open source.

Another feature of OPEN data legislation is funding for each agency to hire a chief data officer (CDO), whose main job requirement is typically ensuring compliance with software development and data standards. In 2015, California State Senator Richard Pan proposed SB 573, which would have required California to hire a CDO, but that legislation stalled in the assembly. A goal of having these types of positions is to create a culture of data sharing among state agencies.  

Finally, the OPEN policy changes the default status of data in two important ways. First, it requires data to be truly ”open,” which in practice means that any data that could be subject to a Public Records Act request should already be posted online for access.  All private information is withheld or redacted, but anything that falls in the public domain is by default to be posted publicly. 

Second, it requires data to be machine-readable. Machine-readable is a term used by data analysts which signifies that the data is formatted in such a way that it can be fed directly into a data analysis software, such as Excel. Data reported in .pdf, probably the most common form of data publishing by the state right now, is not machine-readable and is thus hard to consume.

An OPEN data policy is also consistent with the idea of a single sign-on, which creates one login portal for citizens to conduct all government business. “Regardless of the agency they are doing business with, citizens will have a unified credential they can use across multiple applications,” explained Erik Avakian, chief information security officer of Pennsylvania.

The single sign-on also allows for more thorough program evaluation, elimination of redundant functions, and can unlock important efficiencies. 

In conclusion, the original idea behind Fi$Cal was right but the implementation could have been greatly improved if it had been facilitated through an OPEN data environment under a software and data management council. The digital world has blossomed in such a way that investing in good technology and data organization can save the state substantial amounts in the long run as more and more agencies look to share and publish data.

Every state government should be looking to implement OPEN data policies.

Spence Purnell is a policy analyst at the Reason Foundation, where he works on pension reform, Florida policy issues and economic development.