State IT budgets get crunched

National Association of State Chief Information Officers

It will be a "steep climb" for state government managers to get funding for new information technology projects in the poor budget climate, according to a former Pennsylvania budget director.

"We've gone from one set of record-breaking situations to another set of record-breaking circumstances," said Bob Bittenbender, the state's former budget secretary. In the 1990s, states were able to invest in IT, cut taxes and build reserves, but that robust economy probably masked the deterioration of the states' fiscal picture, he said.

A majority of state governments are facing one of their worst fiscal crises in decades. Many governments are cutting spending across the board, some are calling for tax increases, others are imposing hiring freezes or laying off workers, and some are dipping into their rainy day funds. Across the country technology budgets have been cut, some officials said, and major projects have been put on hold.

The National Association of State Chief Information Officers (NASCIO) held an expert panel discussion on the matter during its midyear conference in Pittsburgh April 7.

Joe May, a member of the Virginia House of Delegates who also heads its science and technology committee, said $900 million, or 4 percent, of the state's $24 billion budget is spent on technology, according to an enterprisewide survey conducted by technology secretary George Newstrom. That showed how IT was organized in the state and what should be done to avoid duplicate costs, May said.

He added that it also showed that the state's procurement system was not well organized and that business cases must be made for any IT project to proceed. The survey's results also got the attention of his colleagues, he said, who never thought IT was a big item in the state.

"It's one of the brighter parts of Virginia's financial landscape," he said referring to the survey and its results.

Utah's new CIO Val Oveson said the enterprise architecture trend is providing a good opportunity during budget woes. Documenting a return on investment analysis will be even more critical than in the past, he said, as well as re-establishing trust with the executive branch, which may have been turned off by past failed technology projects.

Creative financing can help and re-engineering business processes can squeeze out some efficiency, but Bittenbender said the real problem is fixing the revenue structures — such as the use of sales and capital gains taxes and corporate profit taxes — and spending streams.

Raising taxes and borrowing money may fly in some areas, but it's next to impossible in Virginia, May said. Another issue mentioned about implementing convenience or user fees on online government applications, he said, would defeat the purpose of trying to promote electronic services, which are much cheaper than conducting business face-to-face with a state employee.

But he said the budget problems may make it easier to implement and even force change. "There is no other choice," May said.

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