Finding and Funding IT Projects

In some cases, financial and other complexities may require government to create new organizations charged with multi-agency responsibilities -- as might be the case with geographic information systems, automated fingerprint identification or electronic benefit distribution systems. However, the creation of new organizations adds complexity that may be too much for some to handle.

THE MOST OVERLOOKED SOLUTIONS

"Non-traditional" funding, especially performance contracting and user charges -- in addition to the capital funding options mentioned above -- are greatly underutilized and will be important options for many jurisdictions over the next five years.

Performance contracting is perhaps the most immediately constructive non-traditional IT funding mechanism. It represents an exceedingly attractive opportunity, especially for those aiming to improve revenue collection or in settings where the unit costs of service delivery are readily measurable. The experience of California's Franchise Tax Board (FTB) provides an excellent example. FTB contracted not merely for IT systems but for specific organizational results -- in this case, documented improvements in revenue collection.

Performance contracting allows government and vendors to share the organizational risks of implementing an IT project -- the largest category of risks, by far. FTB formed strategic partnerships to share the risks and also share returns with vendors; this created strong motivation for success on both sides, eliminating the adversarial relationship that too often characterizes dealings with vendors. Governments and vendors who have experimented with performance contracting call it a "win-win" for all, including citizens seeking more efficient services.

User charges represent another important non-traditional option for IT funding. Though federal policy opposes user charges that exceed marginal cost, major opportunities exist in states and localities for charges that offset significant portions of the underlying costs of collecting and maintaining the data involved. Undeniably, user charges have been controversial and, in many settings, will require serious analysis and debate before they can be implemented. Still, user charges will undoubtedly allow some governments to offer new services while at the same time avoiding the need to charge the general taxpayer for services that benefit direct users rather than the larger society.

Case in point: The Information Network of Kansas (INK) is a Web site that allows citizens to find information about schools and other government information, to contact elected officials and much more. Businesses use INK to access information and to file government forms electronically. Because it's fast and easy to use, nearly every bank in the state now uses INK rather than the traditional, paper-based way of filing documents.

The important distinction between citizen and business use of INK is that, while the information of interest to citizens is free, businesses pay an annual subscription fee that allows use of a handful of "premium" services -- typically, industry-specific applications. INK provides these applications efficiently and without draining state resources that could otherwise benefit the broader society. The state benefits further by being freed from paperwork that INK handles electronically. By charging enough to maintain the entire network, INK provides one-stop information to the state's citizens -- whether at their home or work computer or at computers located at libraries.

December Table of Contents