Government IT spending on rise

Despite dwindling financial surpluses and increasing economic pressures,

a national market research and consulting firm forecasts moderate growth

in technology spending by the state and local government market over the

next three years.

By 2004, Federal Sources Inc. predicts that the market will grow to

$45.3 billion, a 5.3 percent compounded annual growth rate increase. This

year, it predicted that state and local governments will spend $38.8 billion,

a growth of 5.4 percent from 2000.

"If we were a brokerage firm rather than a market and research firm,

we would certainly say the outlook is favorable," Jim Kane, FSI president

and chief executive officer, said during the company's annual State of the

States Briefing in Falls Church, Va., March 19.

Despite a possible economic downturn, he said government officials could

make effective arguments to their state legislatures that continued and

consistent IT spending would result in productivity gains.

Kentucky's chief information officer, Aldona Valicenti, echoed that

outlook. She said that half the states are dealing with economic pressures

as revenues slow and Medicaid funding shortfalls grow. But with so many

states heavily invested in IT, she said technology projects deemed critical

would continue, while other projects would be slowed or tabled temporarily.

Kane said governments would be helped by partnerships between private

companies and different levels of governments. Partnerships with companies

would provide the "breadth of skills and capabilities" for comprehensive

solutions, and public/private partnerships would pose lower risks on projects,

he said.

Kane added that 10 states account for 55 percent of the IT spending.

Among them are California, New York, Texas, Michigan and Pennsylvania. They

have also been the most consistent IT spenders over the past several years.

But he said variations in per capita spending show that the market potential

is untapped.

According to an analysis of state government contract awards, Kane said

health and human services is the top sector that governments will continue

to focus on, followed by justice and public safety, and finance and administration

services.