State budgets across the country are being cut at an alarming rate. From Alaska to Florida, funding shortages threaten to cripple government agencies that provide the services people depend on. "Crisis" is the unspoken word of the day, especially in IT shops where diminished resources may be insufficient to cope with the looming onslaught of work as agencies beg for technology to save them from a fiscal nightmare.

Does that sound about right? Or does that sound less like reality and more like sensational reporting? Everywhere you look, it's supposedly doom and gloom - the economy is headed toward recession, and states' only hope for prosperity is an Indian casino on every street corner.

There are so many stories about budget crises that it becomes easy to just assume it's all true.

But is it? What is the financial reality for state IT? What strategies are being investigated and deployed? And most importantly, is the sky really about to fall - or is it just another storm that must be weathered?

Silver Lining

It's hard for anyone to claim the economy is doing well, but that doesn't mean it's time to declare DEFCON 1. Most people would agree the economy has taken a downward turn due to the weakened U.S. dollar and the housing market collapse. Not surprisingly, the way that carries over to state budgets differs from state to state.

Last year wasn't so bad for state budgets, according to The Fiscal Survey of the States, a December 2007 report by the National Association of State Budget Officers and the National Governors Association: "State fiscal conditions remained strong for most states in fiscal 2007, but overall growth slowed slightly from the robust conditions of fiscal 2006. Revenues were generally stable, and only one state was forced to make midyear budget cuts."

That description does not jibe with the supposed budget calamity that states are bracing for. Some states, such as Missouri, actually are in good shape going forward.

"In Missouri, for the current fiscal year and the next, the consensus revenue estimate is that barring a crisis, the revenues will be aligned with the budget," Missouri CIO Dan Ross said. "So we're not seeing [shortfalls] on the immediate horizon, anyway."

His account is jarringly pedestrian. It turns out that while things aren't great, the budget picture is OK. For CIOs like Ross, that's the way it usually is - small budget reductions come annually, sometimes 10 percent and sometimes less. Each cycle forces his IT shop to be more agile to compensate.

Ross is a big advocate of IT consolidation. It has helped his agency through the lean times, he said, and also generated tangible savings that were reinvested in service delivery. That reinvestment in technology is a critical part of his strategy for Missouri.

"IT consolidation has really helped Missouri, and I would highly recommend it as a way to stave off those kinds of reductions in resources. There are so many opportunities to achieve cost savings, efficiencies or cost avoidances," he said. "It's imperative that funds be invested in [technology], because if we fail to do that, we'll face service interruptions and speed and capacity issues. So while technology has stood in the gap these last several years, there's a great need to reinvest to keep that technology current."

Ross also points to other techniques that he uses to keep his agency above water: Developing common architecture standards and instituting bulk buying saved money for Missouri. Establishing service-level agreements and building good relationships with vendors also helped take the sting out of diminished resources.

One area that is often targeted for cuts, especially in IT, is employee training. Ross is adamant that these cuts are self-defeating, particularly with a massive loss

Chad Vander Veen  |  Editor, FutureStructure

Chad Vander Veen is the editor of FutureStructure.com