California’s troubled payroll system would get $574 million upgrade under new plan

A longstanding project to modernize California state government’s decades-old payroll system has a new timeline and cost estimate in Gov. Gavin Newsom’s budget proposal.

The California State Payroll System Project would be completed in 2028 and would cost about $574 million, according to estimates in the budget proposal Newsom released this week for the fiscal year starting in July.

The current payroll system for state employees dates to the Vietnam War era, when California employed 40% fewer people and didn’t engage in collective bargaining. The system often contributes to delays in payroll changes and sometimes leads to pay mistakes. One state union filed a grievance over delays in 2017.

State controllers have envisioned a complete overhaul of the system since at least 1999, when the Legislature dedicated $1 million to the project. A previous attempt was scrapped by former Controller John Chiang after a failed rollout to a small number of employees in 2013.

The latest attempt started in 2016. Since then, the state has approved spending about $21 million on the project, budget documents show. State Controller Betty Yee said in 2019 that she would make the massive project a priority of her second term.

New budget documents call for the state to spend about $98 million on the project next year and more than $90 million per year for four years after that.

Most of the money would go to contractors, but the plan calls for the State Controller’s Office to hire 32 permanent employees for the project in the fiscal year that starts July 1, at a cost of about $5.4 million, and to add seven more employees the following year.

The project has been delayed, budget documents say, as planners have decided to add new capabilities, including enrollment functions for state worker benefits such as long term disability insurance, medical reimbursement plans, a dependent care reimbursement plan and a flexible spending plan for pre-tax parking that are now handled by a benefits vendor.

Another expansion would add travel and expense functions now managed by the California Automated Travel and Expense Reimbursement System, often called CalATERS.

In 2021, planners added a new project director from CalHR to help make sure the system can meet requirements of state laws, regulations and bargaining agreements, according to the budget documents.

The project is expected to “lead to more accurate, effective, and efficient processes for statewide payroll and leave accounting,”, and will also help with hiring and training, according to a budget proposal.

“The California State Payroll System is a massive undertaking to modernize the state’s legacy human resource management and payroll system, taking into account all of the complexities that have developed over more than four decades,” Yee said in a statement provided in an email by spokeswoman Jennifer Hanson. “CSPS will provide employees and managers user-friendly, self-service functions that allow for enhanced efficiency.”

This story was originally published January 14, 2022 at 5:25 AM with the headline "California’s troubled payroll system would get $574 million upgrade under new plan."