Technology Is Tough Sell for State Budget Surpluses

Colorado's Andre Pettigrew calls 1997 a year of lost opportunities for state information technology investments. As executive director of the state's Personnel and General Support Services Department, Pettigrew watched in dismay as the state government returned $139 million in excess state funds to its citizens rather than use the surplus to bolster Colorado's physical and technology infrastructure.

"It is an easy decision to give people their money back," he said. "That way everyone is a hero. But this is a critical time in the country, an important time to apply technology and decide how to make investments." Pettigrew's boss, Colorado Gov. Roy Romer (D), went out on a limb last year to oppose the legislature's call for the popular tax refund. "Our governor disagreed and tried to generate some support for allowing the state government to keep the money and use it for a combination of things," Pettigrew said.

But even having IT programs considered as an investment area should be viewed as a success, given the low political profile of IT, Pettigrew said. "When we talk about infrastructure in society and government, we traditionally talk about roads, utilities and water systems, things of that nature. Technology has to begin being spoken of on those same levels. With the budget surplus, we were able to begin talking in those terms."

Except for two states that declared zero balances, every state in the country reported a budget surplus in 1997, according to the National Conference of State Legislatures (NCSL), which has polled states on how they would use their surpluses. While several states said they wanted to use some of the money for new or ongoing technology initiatives, in many cases IT programs lost to tax cuts, roadway investments, teacher salary raises and other more popular programs.

"The competition for general revenues is substantial," Colorado comptroller Cliff Hall said. "When you talk about education or when you talk about highways, you can directly relate those to the needs of people very easily. It is a little bit harder for IT. Anytime you are talking about infrastructure of that kind, you are talking about hidden assets, and those are a bit harder to sell than fixing potholes."

Nevertheless, two areas of IT infrastructure investment did get earmarked: education programs, where IT is often linked, and money to repair Year 2000 software problems.

North Carolina, which had one of the nation's largest 1997 surpluses (see chart), wants to use some of the funds for educational technology improvements called for by the state's Excellent Schools Act. "From our budget projections, revenues are running ahead of projections, and that is good news," said Richard Thompson, assistant superintendent for the Information and Technology Services Division of the state's Public Instruction Department.

Past Obligations

But even so, the state may use the surplus to pay for past obligations rather than new programs. "We have a technology plan here in North Carolina that has been underfunded for three years now," Thompson said. "So we don't get excited until it's all over."

"In the whole K-12 arena, states have been making investments in higher technology over the recent years, and given the favorable financial position states are now in, that is likely to continue," said Arturo Perez, an NCSL policy specialist. "But whether that comes from states' existing budgets or whether states are making those investments out of budget surpluses is unclear."

While educational technology funding appeals to voters and state government officials, the Year 2000 problem also has the political clout necessary to compete for excess funds. "Any time there is additional money, [Year 2000] will have to be thought of first," said John Thomas Flynn, California's chief information officer who, working with Gov. Pete Wilson (R), recently imposed a moratorium on IT spending until Year 2000 plans are on track.

"We just finished our budget for next year," Flynn said. "My office turned down $260 million in new projects because some key [Year 2000] work is not yet done." Otherwise, Flynn said that in the IT area, budget surpluses should be spent on basic, critical initiatives such as disaster-recovery resources.

But while education programs and the Year 2000 crisis appear to have edged out general-purpose IT investments in the budget surplus sweepstakes, officials said the healthy economy in general is good news for public-sector IT projects. "There is obviously a better reception for these kinds of proj-ects when there is additional money available," said Steve Dooley, commissioner for Kentucky's Department of Information Systems. The state plans to use any available funds to continue its investment in "Empower Kentucky," a $100 million program to re-engineer the state government's business processes. In one phase of the project, the state wants to integrate its accounting and materials management processes, while a second phase is aimed at improving its tax processing system. "There are several other projects still out there that we are hoping to get funded this session, and the fact that there are additional funds available will help," Dooley said.

Even Colorado's Pettigrew, who was disappointed by his state's decision to refund the state's surplus, considers 1997 a partial success because officials were able to raise the profile of IT proj-ects in the public's mind. That's a good sign, especially because NCSL reported last month that states were claiming to be in "good to excellent fiscal condition at the beginning of 1998."

"I would definitely say that these are lost opportunities," Pettigrew said. "But technology is not a silver bullet, and part of the reason I believe our legislature made the decision not to invest the surplus is because we had not established enough credibility behind technology. I am optimistic that that will change. It will just take some time."

Jennifer Jones is a staff writer for civic.com. She can be reached at jjones@fcw.com.