Lawmakers are upset because so many services and programs suffered budget cuts over the last few years.
"It is very painful for me to sit here today and for me to acknowledge that one-quarter of a billion dollars might have been wasted," State Sen. Norma Torres, D-Pomona, said.
A Senate budget sub-committee is investigating how this could happen.
The State Controller's Office, in charge of the project, blames the contractor, SAP, which took over after the first company was fired.
"I think SAP underestimated the size and complexity of California's payroll with 160 agencies and 21 bargaining units," State Controller's Office spokesperson Jim Lombard said.
SAP did not participate in the hearing, but it has blamed the state for the project's failure and the company has the backing of a Senate investigation, which concluded issues could have been detected earlier but the State Controller's Office withheld evidence from lawmakers.
The Senate Report found quarterly updates to the state that sugar-coated some problems while ignoring others, which compromised Legislative oversight.
"The state isn't blameless when these projects go down," California Director Of Technology Carlos Ramos said. "It's safe to say if we were to take a project like this today, many of the things that were done, the decisions taken back then, we would not take today."
Similar technological failures occurred when the court system tried to modernize and the DMV wanted to upgrade the processing of drivers licenses and car registrations.
Lawmakers will take the lessons learned from this hearing and make improvements so that future tech projects don't end up wasting so much time and money.