Federal Reserve Chairman Ben Bernanke just testified that one of the challenges to sustained economic recovery are the precarious finances of state and local governments. They can’t print their own money, and are struggling with budget shortfalls. California is the most visible example, attempting to manage a $6 billion shortfall between revenue and expenditures that could rise to more than $14 billion.
California State Capitol: State faces a $14-billion mess.
Bernanke urged state governments to maintain their funding levels for education, as this represents an investment in future economic growth. Overall, state and local governments cut their spending in the first three months of this year at a 3.8 percent pace, the biggest cutback since the second quarter of 1981. Spending rose in the second quarter.
The money isn’t there to advance new initiatives, but state governments may have other tools at their disposal to drive new innovations — information technology. Along these lines, a new study released by the National Association of State Chief Information Officers (NASCIO), TechAmerica and Grant Thornton, says well-managed and focused IT initiatives may help pick up the slack where spending is being cut back. (PDF Executive Summary available from NASCIO.)
Researchers spoke with the CIOs of 40 states and territories. Two-thirds predict their IT budgets will decrease over the next three years, but many are optimistic they can find new ways of working to some out of the crisis with more efficient and productive services. What state governments need to do, they say, is concentrate on upgrading IT governance and strengthening central IT organizations to meet the new challenges of tight state budgets, the report concludes.
Facing the expectation of lower IT budgets and increased demands for new IT-enabled services, CIOs are “consolidating applications and data centers, rolling out shared services and managed services models, and embracing emerging technologies, such as cloud computing and social media,” the report also observes.
Key challenges facing the CIOs are IT governance, in which they often find an imbalance between accountability and authority, IT portfolio management, and procurement processes. In the 60 percent of states which have an active portfolio management methodology in place, CIOs gave those processes a middling “C” grade. Likewise, procurement processes were found wanting, as most State CIOs see the need for reforms that will align state IT procurement with commercially-oriented contracting practices.
Some additional highlights of the study:
- In the next three years, three out of four of the CIOs surveyed plan to expand IT shared services and managed services. “New customers most likely to participate in IT shared services include state executive branch agencies and public educational institutions at all levels.”
- “Many CIOs say that cloud computing is nothing new, but half are investigating it and one-third are running active or pilot cloud projects. Two-thirds report that state agencies use social media (e.g., YouTube, Twitter, Facebook) and almost half use it themselves. Three out of five CIOs say their states are preparing social media policies for state agencies.”
The report notes a “silver lining” to the cutbacks that state agencies must endure, and that is impetus to look at managing state programs and services in new and innovative ways. As one CIO put it:
“We are doing things better, like using shared services, renegotiating contracts and exploiting the state government’s economies of scale when purchasing. We are making better decisions by looking at total cost of ownership. We are now looking at having agencies share applications across boundaries, instead of building them multiple times.”
Sometimes, it takes tough times to bring out the best and most innovative thinking.
