Funding Schemes, in the Nicest Sense of the Word

Alternative financing offers options for IT modernization in tough times.

by / July 29, 2008

We've gone off in the tall grass, insisted Ian Liddell-Grainger, visiting conservative British parliamentarian, on the UK's government modernization.

His complaints were familiar to an American audience -- projects were overdue, over budget and never worked as well as the old systems they replaced. It was a "disaster," he said.

A comparative report on tax filing systems in the UK and United States brought Grainger to San Francisco, Washington, D.C., and Ottawa, Canada. He's chair of the UK's All-Party Parliamentary Tax Group that released the report after two years of study.

But during a conversation it was clear that Grainger's concerns extended beyond taxes to a chronic inability to realize public value from a continuous stream of treasury-robbing IT projects.

"What's worse," he said, "we have been paying for them through off-budget schemes."

The phrase "off-budget scheme" sounds harsher to Americans because in the British vernacular, schemes often are good things. But not so for going off budget, protested Grainger, because the British experience with off-budget funding has been characterized by "an utter lack of accountability for how much money is involved and who gets it."

I'm the author of a white paper, Be IT Resolved, (free download at the Center for Digital Government) on what our guest called off-budget schemes, so I decided to press a little further into the tall grass.

It turns out that was a good thing. On Grainger's central concern -- accountability -- the U.S. separation of powers provides structural advantages that are largely absent in the UK. Moreover, states and localities have quietly and effectively developed a track record of what policymakers have called "alternative funding mechanisms" - though "alternative" may be as misleading as "schemes" in describing them. Strategies like gain sharing and self-funding speak for themselves in terms of how many jurisdictions use them, how much they've used them and the amount of public value produced.

Of course, these schemes have an important element of self-correction -- no taxpayer funds are risked, and IT integrators only get paid if the systems work and increase public revenue.

Our commute-length, cross-cultural conversation was instructive.

The word "scheme" is regarded as benign in the UK, but pejorative in the U.S. The reverse is true where "off budget" is concerned. The phrase raises the hackles of British parliamentarians because of a dismal track record as used by Her Majesty's government and a suspicion that its proponents have something to hide.

Going off budget carries some baggage in America too, but it can be used to exploit IT's unique ability to help pay for itself if properly conceived, executed and audited. As such, it can and has provided much needed fiscal relief for political subdivisions when revenues tank.

To be clear, reducing pressure on the general fund isn't the same as sneaking around it. Finding ways to fund modernization in tough budgetary times is consistent with the finest tradition of another Englishman. During vexing fiscal times a century ago, Lord Ernest Rutherford said, "We have no money, so we must think."

In thinking about the current tough times, it's fair to conclude the tall grass sometimes hides the unknown and untried.

Paul W. Taylor Contributing Writer

Paul W. Taylor, Ph.D., is the editor-at-large of Governing magazine. He also serves as the chief content officer of e.Republic, Governing’s parent organization, as well as senior advisor to the Governing Institute. Prior to joining e.Republic, Taylor served as deputy Washington state CIO and chief of staff of the state Information Services Board (ISB). Dr. Taylor came to public service following decades of work in media, Internet start-ups and academia. He is also among a number of affiliated experts with the non-profit, non-partisan Information Technology and Innovation Foundation (ITIF) in Washington, D.C.

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