OMB, state CIO tell Senate Finance Committee aging IT systems require sustained funding and planning

Officials from the Office of Management and Budget (OMB) and the Office of Information Technology (OIT) told the Alaska Senate Finance Committee on March 11 that the state faces a wave of IT modernization needs that will require sustained planning and likely significant funding.

Lacey Sanders, OMB director, summarized the administration’s view of near-term priorities and the budget implications, warning that ‘‘departments would come to the Office of Management and Budget with system replacement needs that quite frankly are very large dollar value costs’’ and that the list before the committee is not all-inclusive. Sanders told the committee the Department of Labor and Workforce Development has estimated an unemployment insurance mainframe modernization at about $58,000,000 and that the Department of Family and Community Services’ ORCA system is ‘‘incredibly antiquated’’ and faces federal compliance risks.

State Chief Information Officer Bill Smith framed the technical challenge. ‘‘It’s not cosmetic work. It’s deep foundational work,’’ he said, describing core business applications, user interfaces and infrastructure that must be modernized while keeping legacy systems running. He told senators major projects can be long and risky because systems are data-heavy, frequently have undocumented business rules and must often be modernized without extended downtime.

Smith described governance and risk-control steps the administration is using: the investment review board (IRB), which reviews IT expenditures over $25,000 at procurement and contract stages; a newly formed IT application modernization council to prioritize enterprise needs and feed a rating matrix into the budget process; and a deliberate cloud-migration strategy. He said the state now uses a hybrid environment with Microsoft Azure and Oracle plus reduced on‑prem data centers, and follows a ‘‘cloud‑smart’’ policy that favors cloud where appropriate.

Sanders and Smith pointed to recent progress: a rapid cloud migration project that shifted infrastructure off premise, modernization of cybersecurity platforms that reduced critical incidents in the executive branch, and the recent Criminal Justice Information System modernization that removed elements from mainframe technology. Smith said those examples show modernization can succeed but often requires specialized project management and private-sector partners.

Committee members pressed on funding mechanisms. Sanders said OMB is analyzing options including receipt-funded projects, federal advocacy to obtain federal receipt authority, and, as a last resort, bonds. Chair Stedman signaled caution about bonding for software projects, noting the committee typically reserves bond-funded capital projects for hard assets with lives that clearly outlast the bond amortization period. Sanders said OMB will evaluate each project’s expected lifespan and prioritize requests in the budget process.

The committee did not vote on funding at the hearing. Chair Stedman said members had been put on notice and that formal capital requests would have to come from the administration before the committee would consider significant appropriations.