is looking at an additional $50 million in reductions over the next 20 months. Still the Department of Information Technology has avoided layoffs. However, Murphy had to give up five vacant full-time positions he had been husbanding for future use. "We're working cuts around the edges, getting rid of what's nonessential," he said.

Ample Labor Pool

Employees who can work with state-of-the-art technology tools -- including enterprise software programs, such as SAP and PeopleSoft -- are considered essential. "Those people are hard to get," Murphy said.

Ironically, if Murphy could hire now, he would have the pick of the crop. CIOs report they are receiving resumes and job applications from skilled IT workers who can't find jobs in the private sector. "I've had a plethora of excellent applicants," said Carolyn Purcell, executive director of the Texas Department of Information Resources.

Purcell hasn't done any wholesale hiring, given the across-the-board 7 percent cut Texas agencies incurred this year on programs paid for by general revenues. But she noticed an increase in competitiveness among private-sector IT firms as they lower their prices in pursuit of service and consulting contracts. That's good news for a state like Texas, which relies heavily on outsourcing. Murphy reported a similar trend in Phoenix, resulting in his department negotiating better pricing deals from private-sector contractors and consultants.

Where state and local governments offered early retirement incentives as a means to reduce labor costs, most of the impact has occurred at senior-level management ranks, which are filled with older workers. Gerety reported that New Mexico currently is trying to fill three agency CIO positions left vacant by executives that retired or resigned.

Layoffs in the Future?

How long IT departments can stave off layoffs remains to be seen. Should the economy slip back into a recession, state governments could see income, sales and capital gains tax revenue shrink further. That could force additional reductions in fiscal budgets and could curtail the amount of aid available to cities and counties. Already, Texas faces another 12.5 percent budget reduction in its 2004-2005 biennial budget.

At the same time, government executives recognize that technology and the work forces that operate and maintain systems are essential to government productivity and service delivery. "My city manager values IT for its productivity," Murphy said. "That's why IT budgets have been spared large cuts."

Other CIOs continue to keep a close eye on investments and spending in hopes they can weather one of the worst fiscal storms of the century. "The key is to manage smartly," Moore said. "You have to hire wisely and watch dollars closely.

Tod Newcombe  |  Features Editor