California’s tech history has lessons for Elon Musk’s federal government overhaul
One of the ways Elon Musk said he is trying to make the federal government more efficient is by pushing new technologies, including artificial intelligence, to figure out government spending cuts and how federal workers might be replaced with machines.
California state government’s troubled history with tech suggests Musk’s effort to use new technologies to improve government efficiency may face hurdles.
Former California officials who witnessed disruptions and delays as the state tried to adopt new systems, say introducing technology to government is a tricky business and should come with guardrails and transparency.
“In the public domain, to engage in upgrading or replacing a legacy system with a new system … that’s politically volatile and a massive challenge,” said John Chiang, California’s former treasurer and state controller.
One big reason is that while a private company can end a service when it no longer becomes profitable, state and federal governments can’t simply stop delivering healthcare benefits to veterans or Social Security payments to retirees, said Carlos Ramos, California’s chief information officer between 2011 and 2016.
Ramos said Musk’s Department of Government Efficiency could use AI to make the federal government more efficient, but “it’s like any new tool, you have to approach it with caution.”
Troubles with tech
Over the years, California has dealt with a number of technology missteps.
In 2012, the state terminated the Court Case Management System after it spent half a billion dollars on the IT project. The state auditor reported in 2022 that the accounting software known as Fi$Cal was still not meeting expectations and had been missing the target completion date for years. Even rolling out new systems resulted in delays to government services that Californians rely on.
Chiang understands these challenges well. While serving as the state controller, Chiang attempted to upgrade the state’s antiquated payroll system. The complexity of California’s payroll, with so many different employee classifications and schedules, means the system needed to be tailored to the state’s unique needs. It was a complex IT project, Chiang said.
California contracted with SAP Public Services Inc. to launch a new payroll system. But by 2013, Chiang sued the company, arguing it had failed to adequately test the system, concealed problems, and when bidding on the project, “overstated its track record and the talent, abilities and experience of its team on the ground to deliver a functioning system.”
Three years later California settled the lawsuit, receiving a refund of $59 million. The state launched a new update to the payroll system in 2016.
With AI, the latest technology to be introduced to state government, California has taken a conservative approach, said Russ Nichols, who retired from state service after serving as the acting director of the California Department of Technology in 2022.
In California, Nichols sought to use AI not as a way to replace workers, but to help employees work more effectively. One example of a potentially effective use of AI, he said, was replacing phone trees, “Press one to talk to billing…,” with more effective answering services that can direct the public to employees who can address their question.
Nichols sees President Donald Trump’s actions over the last month as trying to challenge the normal behavior of the government in how it provides services to Americans.
He said AI could play a role in that, with the aim of making the government more efficient, but there are limitations to the technology. One of which is the quality of data AI systems are analyzing and making decisions based on.
In California, Nichols said it would be difficult to incorporate AI into departments across the board given the quality of the state’s data.
“What I found in working with a lot of folks across the state, in general their data is not ready for prime time yet,” Nichols said. “So AI, while it has a lot of promise, it takes a lot of work to actually build your data set to make it useful.”
‘America Incorporated’
Speaking to an audience at the World Governments Summit in Dubai last week, Musk said the U.S. should be spending less money and achieving better results, like educational outcomes for American students. He sees reducing the number of federal workers and improving the government’s technology as a way to achieve that.
Much like the downsizing efforts he undertook at the social media company X, which involved reducing the size of staff by roughly 80%, Musk said the changes he is imposing are like a corporate turnaround, on a much larger scale.
“In a way, it’s like a big company,” Musk said. “America Incorporated.”
Government IT experts say there are key differences between the private and public sectors, and how each uses technology.
“Once a government system is built, the expectation of the people that consume that system, the residents of California, for example, is that service continues over time,” said Nichols.
Another challenge of making changes to public IT systems is that people don’t have another option to seek service outside of the government, said Ramos.
Californians can’t just choose to pay taxes in New York or apply for a passport from the United Kingdom. Ramos said the public needs government systems to continue functioning every day. The government can’t go out of business.
Ramos said while governments could benefit from thinking of constituents as customers — through the lens of providing the most efficient and effective services possible — businesses run with a different motive: profits.
Given the sensitive nature of government data, it’s crucial that there are guardrails around whatever systems AI has access to and to prevent bad actors from exploiting that infrastructure, he added.
Additionally, Chiang said the intention of improving government operations is a good one, but the process needs to be accompanied with transparency.
The firing of inspector generals and potential conflicts of interests Musk poses are concerning, he said.
“Where’s the public deliberation?” Chiang asked.
