The Joint Budget Committee rejected a proposal Thursday from departing Arkansas Gov. Mike Beebe that would have cut 49 positions -- and millions of dollars -- from the Department of Information Systems.
Department of Finance and Administration officials, who are conducting an audit of the department's operations at the governor's request, helped develop the budget plan and the proposed staffing cuts. They warned the committee Thursday that during the audit investigation, they found billing issues that could open the state up to a federal lawsuit if the agency was not trimmed.
Several legislators challenged the two on how they were able to determine the exact amount of agency funding or staff positions that would need to be cut when they had not received any new warnings or notices from the federal government. Sen. Linda Chesterfield, D-Little Rock, called the cuts "draconian."
The changes would cut 49 positions -- 21 of which are currently vacant and 28 that are staffed -- as well as transferring 25 other employees to jobs in other state agencies. The plan also calls for creating 13 new, mostly lower-paying positions to handle the changing responsibilities of the agency.
The total cost for salaries and benefits for the 49 positions targeted for elimination is $3.6 million, according to state records.
Rep. Lane Jean, R-Magnolia, the chairman of the Personnel Subcommittee of the Joint Budget Committee, said the members voted against cutting the 49 positions during their meeting Wednesday and did not recommend the cuts to the full committee Thursday.
"They're in the middle of an audit and, as the testimony just indicated, the audit will be done within 30 days," Jean said. "This budget does not go into effect until July 1. We have ample time to correct it. We may go with the executive recommendations, but we feel it was prudent to have that audit finished before we made action on this."
Officials for some other state agencies have complained about the Department of Information Systems' bills for providing services to them over the years, saying they're excessive. Tim Leathers, deputy director of the Department of Finance and Administration, explained how the staffing cuts related to the billing issues during his testimony Thursday.
"It's a matter of making sure we weren't budgeting and paying for things that were not necessary to perform those specific services and billing them back to those federal programs," he said. "The computer industry has changed over a period of time. You've gone from these big systems to small servers. Part of it is that we've been supporting these big server systems over the years and now we're having to migrate away from that and having to catch up. You don't need the same people or as many people to do those kinds of things you've done in the past because that's not the efficient, economical way to do things."
Leathers said the Department of Information Systems had gotten in trouble for the billing issues in 2006, and the state eventually had to return $44 million to the federal government.
"The federal regulations here say that if you are a cash agency ... you can't bill that federally funded agency disproportionately from the way you bill those state agencies and shift your cost, and there are formulas you use to do that," Leathers said. "We see ourselves on that road now... That's an overly simplified version of that, but that is where we are now."
The federal government contended that the department's method of billing some state agencies that used federal funds for computing and telephone services was improper because those agencies were billed more than the actual cost of service. The federal government determined in a lawsuit that the state should repay $18.2 million, but the state initially resisted and defended its billing methods, saying it didn't owe any refunds to the federal government.
The original lawsuit dealt with the billing years from 1997-2000, but because the agency did not change its billing methods until the lawsuit was settled, the amount owed and interest on those refunds grew to $44 million.
Paul Louthian, the administrator for the Office of Accounting at the Finance Department, said he had received incorrect information from the Department of Information Systems when reviewing its billing methods.
"Over the past five years I've tried to work with them to make some changes in the billings," Louthian said. "Each year we were told by the director that what they were giving us would take care of the problem and adjust the rates to where they needed to be. For five years running that did not occur."
Former Department of Information Systems Director Claire Bailey resigned last month citing her health. Since then, at least two key staff members also have left including the former chief financial officer and at least one employee who had helped design the agency's rate structure.
The committee asked to speak to representatives of the Department of Information Systems, including acting Director Herschel Cleveland, during the hearing but did not ask any questions about the federal billing issues.
Louthian was asked to perform an audit of the agency by Beebe this spring after an education broadband nonprofit group determined that the Department of Information Systems was using antiquated, slow and expensive copper wire infrastructure to provide Internet services.
Louthian said he asked for an organizational chart for the agency to determine whether there were other areas in which the agency had not modernized its service and that was how he and Finance Department staff members had determined which positions were no longer needed.
"We've provided the suggested findings we had to DIS," he said. "They are in the process of going through those and determining any information we might need to update that finding, correct that finding or agree with that finding. That is the process that the Legislative Audit uses. ... We are toward the end of the process, and hopefully the audit will be available soon."
Metro on 11/21/2014