January 11, 2011 
When the Texas Legislature convenes today, it will be facing a two-year budget shortfall estimated to be $26.8 billion. The leaders of the state have said that they intend to close this gap by reducing services.
But before lawmakers make cuts that will cause more mentally ill Texans to get warehoused in jails and prisons instead of getting treatment, or that will reduce services to people with disabilities, or that will increase elementary class sizes, or that will make it harder for working class students to go to college, or that will reduce countless other essential state services big and small, they should take a hard look at projects and programs that haven’t proven their value.
A good place to start is the Texas Department of information Resources (DIR) and the giant money trap that it oversees–the data center consolidation project.
A recent report by the Texas Sunset Commission, which conducts periodic reviews of state agencies, says that DIR siphons money away from state agencies by overcharging them for IT and telecommunication services. The report also says that the data center consolidation has generated none of the savings expected of it, has incurred significant cost overruns, and has caused state agency IT systems to deteriorate.
The report caused Rep. Byron Cook, a Republican lawmaker from East Texas, to call for abolishing DIR, and replacing it with a smaller more focused agency.
“I wasn’t able to find any positive in this report,” Cook said. ”Every agency we talked to, everyone without exception has issues. I couldn’t find any advocates for this agency.”
DIR provides state agencies with telecommunication and IT procurement services. It also oversees the data center consolidation project, a massive consolidation of the hardware, print/mail, and server functions for 27 state agencies and one university. It charges agencies fees that the report says are opaque and difficult to understand. These fees account for 97 percent DIR’s 2010-2011 budget.
These fees often exceed DIR’s costs of providing these services, which has resulted in DIR running budget surpluses. In 2009, DIR had a budget surplus of $29 million. The surplus dwindled to nearly $10 in 2010 after DIR came under the scrutiny of the Sunset Commission.
According to the report, DIR has continued to charge agencies the same internet service rate since 2004, a period in which commercial internet rates have dropped considerably.
The report also says that DIR negotiated lower fees for the state’s telecommunication services with AT&T, but kept the savings for itself instead of passing them along to state agencies.
All state agencies must go through DIR to purchase computer hardware and software, for which DIR charges them fees. Some agencies complained to Sunset staff that they could have gotten better prices and saved the fees if they hadn’t gone through DIR.
But perhaps the biggest drain on state agency resources has been the data center consolidation project. So far the agencies participating in this project have paid $182 million in fees, $176 million to IBM, the former main contractor of the project, and $6 million to DIR.
Data center consolidation was supposed to have been completed by April 2009, but completion is not in sight. DIR recently fired IBM is re-bidding the project.
The estimated cost of the project’s seven-year contract is $863 million, but three years into the contract, the state has already spent $486 million, or 57 percent of total projected costs. If spending continues at this rate, the cost of the project will balloon to $1.13 billion.
To make matters worse, data center consolidation has created more expenses of agencies. For example, the Texas Workforce Commission spends 1,150 staff hours a month to monitor the project so it doesn’t interfere with TWC’s operations. Twenty-two of the 27 agencies participating in data center consolidation are still doing IT work that IBM was supposed to do.
The Austin American Statesman called data center consolidation “an expensive disaster.” With so many state services on the line now, it’s hard to justify any more funding for this ”expensive disaster” or for an agency that siphons resources away from real public services.
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