House Finance Chairwoman Sylvia Luke is demanding that state financial and
computer experts investigate a massive
$59 million project to replace the computer systems in the state Tax Department, saying components of the new system don’t work properly.
Luke even speculated Thursday that problems with the new system might be to blame for lagging state tax collections because people have been unable to pay their state excise taxes online using the new system.
State tax collections have been nearly flat during the past six months despite a booming state economy, and tax experts and economists have been unable to explain why.
State Tax Director Maria Zielinski denied that her department’s Tax System Modernization, or TSM, project could possibly be to blame for the sluggish tax collections this year.
She said that when her department realized tax collections did not seem to be tracking the larger economy, “we went back and we looked at every single process and reconciled everything, not once, twice, but three times, and everything
reconciled to the penny,” she said in an interview.
“We’ve checked with every single process, there is no way,” she said.
Robert Su, chief information officer for the Tax Department, said the new tax system can’t be the cause of sluggish tax collections because only about 30 percent of Hawaii excise taxpayers use the system to pay their taxes. Most small businesses in the state still file their excise taxes by mail, he said.
Zielinski said the first phases of the new tax system are functioning properly, and told lawmakers the computer modernization effort is “on time and on budget.”
Luke rejected that claim in a series of testy exchanges at a Finance Committee hearing Thursday, saying the system has “major problems” and didn’t operate properly when she tried to file her own excise taxes earlier this month.
She said she had a difficult time registering on the new system, that a security code that was supposed to be sent to her phone never arrived, and that she struggled to make the new system work.
“That was by far the most frustrating experience I have ever had because I can tell you … I just wanted to pay you guys, I was tempted to bring you a check today,” she told Zielinski. “That process was truly frustrating.”
Luke said she was tempted several times to call the Tax Department, but decided instead to “go through the painstaking experience to pay the taxes so I can come here and tell you how bad it is.”
“It really doesn’t matter if it’s on time and on budget if it’s not what we expected and it’s failing,” Luke said.
Luke also cited reports by another contractor, AdvanTech LLC, that was hired to independently verify that the new system works as it should, and to make suggestions for improvement.
AdvanTech noted a number of concerns, including that taxpayers were having problems registering under the new system, and said the problem mostly stems from security controls on the new system.
Zielinski said she was aware of text messages from the new system being sent to taxpayers who use a certain cellphone provider, but said she thought the problem had been fixed. “We have to look into that,” she said.
Addressing Luke, she said, “what I think is important to understand is that with any large software project … there’s always going to be issues,” she said.
There were some other “very unusual” problems raised by taxpayers, but most of the complaints were “just people learning how to use the system, that’s really what it comes down to,” she said in an interview.
Even so, state Director of Finance Wesley Machida and Chief Information Officer Todd Nacapuy agreed to review the project and the progress that the Tax Department is making.
“We need to take a look at what is going on, given the issues,” Machida said.
Nacapuy told Luke his office is monitoring the project and “this week alone we’ve gone in to provide additional support to see what is going on because obviously all of us are concerned about the revenue.”
Finance Chairwoman Luke has a great deal of influence over state spending, and Gov. David Ige’s administration is asking lawmakers this year for authorization to spend another $18 million on the tax modernization for new phases of the project.
The Tax Department is rolling out the new system in phases, and has spent about $14 million on the project so far, and Luke said she thinks the Tax Department needs to slow down implementation until the problems are resolved.
The Tax Department has struggled to implement computer projects in the past.
It launched a system modernization effort in 1999, and eventually paid CGI Group Inc. $87.5 million to install what state officials later described as an already-outdated computerized tax collection system.
The department then launched a new effort to modernize and improve tax collections, and tax officials last year began to roll out the first phases of the entirely new modernization effort under a $59 million contact with Fast Enterprises.
Gov. David Ige has said that newest tax modernization contract was used as a pilot project to test out the new system of increased oversight for information technology projects.