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Dollars & Sense

Several States Are attempting to overhaul funding for enterprise IT projects.

by / January 15, 2001
Dollars & Sense

Several States Are attempting to overhaul funding for enterprise IT projects.

By Steve Towns, Features Editor

With electronic government spurring demand for enterprise-wide IT systems, CIOs are beginning to take control of a larger share of state technology funding.
Rather than splitting dollars among participating departments, some states are paying for new multi-agency technology projects from a single pot of money, which is often overseen by the top technology officer. Whats more, several states are attempting to round up IT dollars already scattered among individual agency budgets and herd them into the coffers of central technology organizations to foster development of systems that operate across departmental lines. Arguing that the current patchwork approach to IT budgeting encourages stand-alone applications, state technology officials contend centralized funding, along with strong interoperability standards and far-sighted planning, forms the foundation for effective enterprisewide e-government.

"Youre never going to be good at managing IT integration if you dont give somebody broad budget authority to pull this stuff together, because [funds] are in so many pieces in so many budgets," said Thom Rubel, director of state information technology programs for the National Governors Association (NGA). "I dont know how you can do enterprise-wide IT if you have fragmented authority because people can just thumb their noses at you."

A new NGA survey indicates 17 states have taken steps to gain a firmer grip on IT dollars that traditionally have resided in multiple agency budgets, said Rubel. The data comes from NGAs semiannual Fiscal Survey of the States, which was scheduled for release in November.

"The fact that roughly a third of states could give us total figures for IT spending was encouraging," he said. "That indicates that some sort of activity has taken place where they have consolidated these budgets, and they know what total state IT spending is."

Pennsylvania Progress

Pennsylvania began funding enterprise-wide IT projects through its Office for Information Technology (OIT) several years ago, said Deputy Secretary of Technology Charles Gerhards, who has seen his offices annual budget swell from $15 million to $135 million over the past five years.

"Thats money that was in individual agency budgets that has been rounded up and put into one location, or it is money for new programs that, in the past, each agency would have asked for a sliver of, and it would have been put into their budgets," said Gerhards. "Putting all of that money in my budget means that Im responsible for it."

Gerhards said centralized funding is vital to the success of inter-agency projects, such as Pennsylvanias statewide radio system and integrated criminal justice computer network (JNET). The $200 million statewide radio initiative is replacing independent radio systems operated by more than 20 state agencies with a single digital network carrying both voice and data messages. Similarly, JNET connects state police, courts, prisons, the probation and parole board and the Department of Transportation through an integrated telecommunications infrastructure.

Under Pennsylvanias Investment Review Program, OIT evaluates agency IT proposals costing more than $100,000 as part of the states normal budget process. Gerhards said his staff watches for similarities among the proposals and seeks to promote inter-agency cooperation on those initiatives whenever possible.

"We look for opportunity, then we go to the budget office and say, Why dont we put all the money in my budget and tell them if they want to do it, then they have to sit at the table." he said.

Gerhards credits the technique with forcing diverse agencies to work together on common IT systems. "Ive seen people working with similar programs for years and years who had never talked. What this is doing is forcing them to talk. The money gets them to the table," he said. "What theyre finding is there arent as many differences as they thought."

Holding the purse strings on enterprise-wide projects not only allows OIT to demand inter-agency cooperation, it also gives the office leverage to set aggressive production schedules. For instance, the initial release of the states PA Open for Business Web site -- an eight-agency effort providing one-stop access to all forms needed to open a business in Pennsylvania -- was completed in one month, according to Gerhards.

"We told folks what we wanted to do, and they said, Maybe in nine months we could get a Web site up. We said, Were putting it up in 30 days. Our job is to keep pushing it. We want to keep raising the bar."

Evolving Model

The need to build e-government systems is pushing other states in the same direction. For instance, Illinois Chief Technology Officer Mary Reynolds expects a gradual shift toward centralized IT funding in her state. And legislation may be introduced this year in South Dakota to consolidate money for statewide IT systems and services within the state Bureau of Information and Telecommunications budget, according to CIO Otto Doll.

Reynolds said her state planted seeds for an enterprise funding model several years ago with the Illinois Century Network, an ambitious effort to create an integrated voice, video and data network stretching throughout the state. Money for the network still flows from several individual agency budgets, but a multi-agency policy committee headed by Reynolds governs the project.

She said the arrangement nudges agencies closer to consolidated funding for enterprise-wide IT projects.

"Its forced cooperation, but its done in a way that agencies are comfortable with because its still the old way of doing business," she said. "I think you are seeing a transitional period. I dont think it will be this way in a couple of years. Instead, youll see a lot more enterprise-wide projects -- both centrally funded and organized."

Illinois already relies on centralized funding for several new projects, including an enterprise-wide digital signature system. (At press time, this was scheduled to become widely available to state and local agencies in late 2000.) Money for the project is being allocated to the Illinois Department of Management Services, which traditionally has been responsible for statewide telecommunications services and mainframe computing.
In South Dakota, Doll said theres a fair chance state lawmakers will consider moving more IT dollars into his agencys budget this year. "Ive been talking with our finance and management agency, and Ive got them convinced this is the right thing to do. We just havent nailed down the details of how we want to propose it," he said. "Right now theres probably a 50-50 shot at doing something this session."

Dolls Bureau of Information and Telecommunications (BIT) already serves as the primary source of IT equipment and services for South Dakota agencies. However, money for those resources is still appropriated to separate agency budgets. Agencies then spend their budget money with BIT.

Altering the funding model would route state IT dollars directly to BIT instead of passing them through individual agencies first. The change, he said, would allow enterprise-wide IT projects to be considered their own programs, instead of tools used by other programs.

That shift would eliminate duplication, according to Doll. "For instance, when were dealing with permitting and licensing, why dont I do that for the state? Understanding that a drivers license is different than a hunting license, its still the same process, in general," he said. "Whats happened to date is that [government] creates a license system for each program. So you build all of these stovepipe solutions."

BIT already centrally manages some IT assets, such as servers and communication lines, added Doll. In the case of servers, BIT charges each state agency a fee and, in turn, provides them with a standard computing platform.

Getting Real

Although Illinois Reynolds intends to propose more centrally funded projects this year, she expects a mixed bag of IT funding models to linger for the foreseeable future. She said new undertakings, such as the states PKI effort and other e-government initiatives, are easy targets for centralized funding, but altering financing methods for entrenched programs presents a more difficult task. Furthermore, some applications -- multi-agency or not -- are so intertwined with one departments core mission that funding changes are unlikely.

"Anybody who thinks they can reengineer government based on the tools of IT is dreaming. It takes time and hard work," said Reynolds. "You have to be realistic about the structures and the history involved in terms of the agencies."

And while funding represents a key issue, much of e-governments success rests on the use of strong interoperability standards and long-term planning, according to Kentucky CIO Aldona Valicenti.

"I think there has to be an understanding that whenever we fund something, it obviously is going to have to interact with another system, another agency, another department," she said. "In our state, we drive standards very hard. We do ongoing surveys on an annual basis to see how standardized we are in our hardware and software."

Valicentis office reviews IT projects for compliance with state standards as part of the purchasing process, she said. "Any state that wants to provide long-term investment to the citizen is going to have to do something about the variety of implementations that do not communicate well or send data back and forth well."

Well-established organizations -- both public and private -- face the task of re-examining IT policies to see if they fit the Internet environment, she added. Ultimately, changing the funding model for enterprise-wide projects and adopting standards to ensure these systems interact with others demands significant commitment from state decision-makers.

"If you have a long-term company that has done business a certain way, you tend to take a process and embellish it with 20 years of tradition," Valicenti said. "I think leadership has to continuously challenge why were doing something the way were doing it, how does it benefit us and how does it benefit the citizen."


Nearly half of the states have financed IT projects through special funds created to pay for innovative technology, according to a study conducted earlier this year by the Center for Digital Government.

Results of the national Digital State survey, released in July, indicate that so-called innovation funds have become a significant source of money for unconventional and multi-agency technology initiatives. In all, 23 states had IT projects under way as a result of innovation funds. Another five states had approved such funds and expected to begin using them in 2000 or 2001.

In Illinois, innovation funds provide an incentive for agencies to both try something new and work together, said state Chief Technology Officer Mary Barber Reynolds. Illinois sets aside special funds to promote workforce development, foster technology research and help communities link to the statewide Illinois Century Network.

In general, these funds require cooperation from multiple agencies or government jurisdictions, said Reynolds. "They have brought people together who werent used to working together because they are a centralized [funding] source."

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Steve Towns

Steve Towns is the former editor of Government Technology, and former executive editor for e.Republic Inc., publisher of GOVERNING, Government TechnologyPublic CIO and Emergency Management magazines. He has more than 20 years of writing and editing experience at newspapers and magazines, including more than 15 years of covering technology in the state and local government market. Steve now serves as the Deputy Chief Content Officer for e.Republic. 

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