Air of uncertainty

State budget deficits, growing worse by the day, could force state and local information technology departments to cut staff and services and, in some cases, to consolidate IT operations across agencies.

Many jurisdictions that have already cut spending once, twice or even three times this year are being asked by their legislatures to dig even deeper as they put together their fiscal plans for next year.

States continue to be hit hard by loss of tax revenue, as the economic downturn stretches on. But cities and counties are feeling the pinch as well, because cash-strapped states are cutting back on local government aid, which can be used to fund basic services.

Des Moines, Iowa, officials had already balanced the city's budget for fiscal 2004 when, three weeks ago, the state announced a $5 million drop in local government aid. Up until then, the IT department, which already runs lean, had fared well during budget negotiations, thanks to strong support from the city.

"What's going to happen now, I don't know," said chief information officer Michael Armstrong. "I will not get off so easily this time."

During that same week, Sunnyvale, Calif., officials were told to reduce their budget by 10 percent. Marilyn Crane, manager of the IT department, has lost four of her group's 28 positions, although she has three years to phase out those positions.

It's not just a matter of reducing staff, but of reducing the levels of service that city departments can expect, she said.

Although recent fiscal problems have affected local governments, state agencies continue to reel from two years of progressively worse financial news.

State courts across the country have seen their budgets fall 30 percent to 50 percent below what they were two years ago, said Henry Townsend, technology operations manager for the National Center for State Courts, a nonprofit organization that serves as an information clearinghouse for technology, court administration and other topics.

The timing is unfortunate. Many courts were just beginning to realize the value of investing in such technologies as electronic filing and records management. "The courts have made tremendous strides in these last few years," Townsend said.

Plan B?

Long-term thinking, of course, is a frequent casualty during a budget crisis. But many CIOs are convinced they can find ways to reduce their operating costs and move forward with critical projects.

"Just because we are having hard times doesn't mean we stop progress," said Val Asbedian, CIO for the Massachusetts House of Representatives and former director of the Strategic Planning Group within Massachusetts' Information Technology Division.

Sunnyvale's Crane knows that the loss of staff — including a manager, one of two desktop technicians, a computer operator and an IT trainer — means city employees will have to wait longer for technical support and computer upgrades.

But management software is available that enables tech support to fix many common computer problems over a network, and e-learning software can deliver some training materials right to an employee's desktop.

"So we are not looking to eliminate those services, but to deliver them different," Crane said.

Many IT departments believe the key to riding out this downturn is to maintain investments in basic technology, including desktop computers, servers, networks and storage.

Right now, Kentucky is not doing any major upgrades, but CIO Aldona Valicenti does not plan to let the computer environment degrade.

"We are trying to figure out how to keep everything running, how to keep it stable," Valicenti said.

A sound infrastructure is a key to another strategy for cutting costs — consolidation. In many states, individual departments maintain their own systems for e-mail, printing and other functions. Consolidating those operations in the IT department enables a state to buy fewer, larger systems and to maintain a smaller central management staff.

Massachusetts, which funds most development projects through bonds administered by the executive branch, is pushing agencies to buy into an enterprise approach to IT management, Asbedian said.

For example, when a number of agencies needed to replace their messaging systems, the IT department offered to pick up the conversion costs if those agencies would agree to give up management of those systems. Among the takers were both houses of the legislature.

Kentucky has taken the idea one step further, setting up a fee-for-service deal to manage e-mail systems for Kentucky community and technical colleges, serving 60 schools and 100,000 e-mail accounts.

The arrangement reduces management costs for all parties involved.

Other savings within the executive branch could come from consolidating servers and printing — anything that improves cost and reliability, Valicenti said.

Consolidation is also tempting to many courts, Townsend said.

"There have been significant discussions about whether the courts should get rid of their infrastructure," he said.

Of the 18,000 courts across the country, 1,500 of them handle more than 80 percent of the caseload, according to Townsend. The larger courts have both the funds and the incentive to invest in technology, and the staff to manage it.

These courts could arrange, for a fee, to manage the servers for smaller courts, which would access their applications and files via secure networks.

Banking on Clout

But consolidation is possible only if the IT departments have the money needed to maintain or upgrade their infrastructures, and with budgets so tight, that money could be hard to come by.

Many CIOs, though, believe they have the necessary political support.

"We have a city manager who believes in technology," said Sunnyvale's Crane, who recently submitted a plan to upgrade her office's infrastructure. The city council also is generally supportive, recognizing that the network delivers city services.

Des Moines also hopes to invest in new technology, such as network technology that delivers both voice and data.

"Des Moines supports IT very, very well," Armstrong said. Despite the recent loss of some state funds, "I have been more fortunate than most of my peers."

The political waters, though, can be difficult to navigate.

Minneapolis CIO Karl Kaiser is seeking support for several initiatives, including e-government applications and a 311 call center. The call center would provide residents with a single phone number they could call to request services or information, while customer relationship management (CRM) software would enable the city to better track those requests.

But in March, after Minnesota announced reductions in local government aid, the city council had to cut $20.6 million from its fiscal 2003 budget.

In such an environment, the seemingly intangible value of a CRM system can be a tough sell. "I spend a lot of my time with the politicians and say, 'Look what we can do here,'" Kaiser said.

Also, there's no escaping the difficulty created by the recent cuts endured by many IT departments. Kaiser has had to lay off 20 people. "It has forced me into barely being able to keep the lights burning," he said.

And CIOs cannot be sure the budget battles are behind them.

Plano, Texas, recently suffered through a third round of cuts. The IT department absorbed it by freezing or eliminating various vacant positions and reducing funds for travel and training.

Training, though a common target during tough times, is a sore loss. "We've tried to minimize it, because training is so important to our world," said Chip Collins, Plano's director of information services.

***

No shortage of red ink

More budget cuts loom for the majority of states, according to a report released last month by the National Conference of State Legislatures.

Here's the breakdown for fiscal 2003: And not much will change for 2004:

* In 37 states, revenues have failed to meet projections for fiscal 2003, which began July 1, 2002, for most states.

* In three states, revenues have exceeded budget.

* 45 states have revised their forecasts, in nearly every instance downward.

* 41 states together face a budget gap of $78.4 billion.

* 37 states report a gap in excess of 5 percent of their general fund. For 19 states, the gap exceeds 10 percent.

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