The Kansas Department of Revenue began laying off dozens of employees in 2018 under a $53 million no-bid contract to outsource information technology work.
Now it wants them back.
The department responsible for collecting taxes in Kansas must rebuild its ranks after Democratic Gov. Laura Kelly’s administration canceled two contracts between the department and Canada-based CGI Technologies collectively worth more than $110 million.
The agency is looking to fill about 56 jobs that were eliminated when the agency offloaded its technology work onto CGI, Revenue Secretary Mark Burghart said in an interview.
“A number of them want to return, which we would encourage because they are experienced professionals and they know the system,” Burghart said. “It would be very beneficial to the state to have them back.”
KDOR announced in May 2018 that it would eliminate 56 positions as part of a contract with CGI to provide professional services to operate, maintain, enhance and support the Department of Revenue’s tax systems.
CGI hired some of the workers, though it’s not clear how many. Others took different jobs in state government or retired.
The ex-state employees who used to handle tax processing are experienced, Burghart said, adding that they want those employees back to the extent possible. Several job openings have already been posted online.
Sarah LaFrenz, president of the Kansas Organization of State Employees, called canceling the contracts the right move. She said she had heard from former and current employees about how outsourcing had deprived the agency of workers with institutional knowledge.
“It took more than a month to ruin all this, so it’s going to take more than a month to fix it. But it’s an excellent step in the right direction,” LaFrenz said.
Kansas has paid CGI about $28 million so far under the contracts. Burghart wasn’t able to say how much more the company may still be owed. He said the state will own certain “deliverables” produced by CGI and reiterated that taxpayers won’t experience any disruptions.
Neil Gordon, an investigator with the Washington, D.C.-based Project on Government Oversight, said canceling contracts can lead to costly litigation when the government tries to settle up payment claims.
“CGI, being a relatively large company, could probably tie this matter up in the courts for years, if it wants to, which will unfortunately inflict further damage on Kansas taxpayers,” Gordon said.
CGI didn’t answer questions about how much money it believes it is still owed or what will happen to its Kansas-based employees.
In a statement, the company said it was proud of the benefits it had generated for Kansas, including recovering $46.4 million in new revenue in less than two years. The company also said it is currently providing between $2 million and $3.5 million in revenue each month that would not be collected otherwise.
“We are committed to working in close collaboration with the State of Kansas toward a smooth and orderly transition consistent with the terms of our contracts,” the company said.
In 2016 and 2017, Gov. Sam Brownback and Gov. Jeff Colyer’s administrations pursued contracts with CGI aimed at improving the revenue department and bringing in additional money. Tax collections regularly fell below expectations and officials were desperate to boost them.
The two contracts CGI secured bypassed competitive bidding — the largest to do so in years.
Kelly’s administration now says CGI’s work wasn’t adequate. CGI didn’t meet a key deadline last year, prompting state officials to turn to an old system to process returns this year.
Burghart said that if the state hadn’t returned to the old system, about 94,000 tax returns would still be unprocessed.
Kansas has no plans to again outsource information technology jobs related to its tax systems, Burghart said. But he added that some limited functions at the agency could be put out for bid at some point. One example he cited is creating a system to improve the selection of people whose taxes are audited.
CGI wouldn’t be prohibited from bidding. But any future contracts won’t be nearly as sweeping and would go through competitive bidding, he indicated.
“They would be much, much smaller,” Burghart said.
Steve Vockrodt contributed to this story