Tech Alert

Overview:

The California Department of Technology (CDT) is implementing approved Fiscal Year (FY) 2026–27 rate adjustments for statewide technology services. Approved by the Department of Finance (DOF) on July 1, 2026, these changes include updates to service rates and allocation methodologies to more accurately recover the costs of delivering shared and customer-specific IT services.

Rate Changes:

Effective August 1, 2026, the following service rate adjustments will take effect:

Office of Technology Services – Targeted Cost Recovery Increase (TCRI)
The Office of Technology Services (OTech) is experiencing a structural imbalance between revenue and operating costs across several core infrastructure services due to customer migrations, declining legacy service consumption, fixed operating costs, and increasing vendor expenses.

To improve cost recovery while maintaining equitable and predictable rates, CDT is proposing a targeted 10 percent rate adjustment for the following under-recovering services in FY 2026–27:

• Mainframe CPU
• Virtual Desktop Interface
• Dedicated Internet Hosting Service
• Shared Internet Hosting
• SMTP Relay
• Windows Server
• Oracle Database
• SQL Server
• Midrange Db2
• Linux Server
• eCommerce
• Unmanaged Cloud Services
• Site-to-Site VPN
• Shared Firewall Extranet
• Server Load Balancing

Shared Statewide Services Distributions
Statewide service distributions recover the costs of shared enterprise infrastructure, statewide technology services, and operational capabilities that provide broad benefit to participating departments.

These shared costs are allocated based on each department’s budgeted Full-Time Equivalent (FTE) employee positions, providing an equitable distribution of statewide investments relative to department size.

• Statewide Innovation and Web Portal
  The California Statewide Innovation and Web Portal (SWIWP) supports the development, operation, and continuous improvement of shared digital services, enterprise web capabilities, and technology innovation initiatives that improve the delivery of government services across the State.
  The SWIWP allocation has also been expanded to include statewide DNS Hosting services, aligning recovery of these shared enterprise network and security capabilities under a single statewide allocation. As these capabilities provide broad statewide benefit, program costs shall be recovered through the FTE methodology, replacing the previous mailbox count metric.

• Statewide Services Distribution
  The Statewide Services Distribution recovers the costs of enterprise technology offerings that provide broad benefit across state government, including statewide policy development, strategic planning, technology governance, workforce development, innovation, and enterprise project oversight.

• Statewide Network Distribution
   The Statewide Network Distribution recovers the costs of shared statewide network infrastructure and foundational connectivity       capabilities that support secure, resilient, and reliable enterprise communications across state government.

As these shared network costs are driven by both customer demand and fixed statewide infrastructure, costs are allocated using an 80 percent network consumption and 20 percent FTE methodology. This approach aligns most costs with actual network utilization while equitably distributing shared infrastructure and operational capabilities that support state departments.

This methodology replaces the previous per-circuit chargeback structure for applicable shared network services, simplifying cost recovery while more accurately reflecting the shared nature of the statewide network.

Impacted:

All statewide departments and CDT customers subscribing to the above services.

Next Steps:

Customer-specific billing impacts will be provided by your Account Lead beginning July 13, 2026. Comprehensive information on the full FY 2026–27 rate package will be published in the Customer Rates Memo on or about July 10, 2026.