White House: Y2K needs $3B+

Armed with a recent report showing that costs for fixing the Year 2000 computer problem continue to increase, the Clinton administration last week sent Congress a request for $3.25 billion in emergency funding for agencies to fix their computers before the millennium.

In his request for more Year 2000 funds, President Clinton has asked Congress to consider the $3.25 billion request as an emergency request to the fiscal 1998 budget, which ends Sept. 30. The money would not need to be spent over the next few weeks but would be available until Sept. 30, 2001.

"As we learn more about how to address the critical Y2K problem, ensuring governmentwide compliance will require flexibility to respond to unanticipated requirements," wrote Office of Management Budget director Jacob Lew in a Sept. 2 letter to the president. "To the extent such unanticipated requirements are identified, it will be essential to make that funding available quickly. Accordingly, this proposal for a contingent emergency funding mechanism would provide the resources and the flexibility necessary to respond quickly to unanticipated Y2K conversion requirements."

The request was made just before OMB released its quarterly report on agencies' progress in reprogramming and replacing computers that are not Year 2000-compliant. According to the report, the cost to fix or replace noncompliant government computers increased to $5.4 billion, up from an estimate of $5 billion in May (see Stats, Page 78).

OMB added the State Department to a list of agencies that are critically behind schedule in fixing systems. Also on the list are the departments of Defense, Education, Energy, Health and Human Services, Transportation and the Agency for International Development.

Fernando Burbano, the chief information officer at State, said that although he has been working at State for only three months, the department has made progress in the management of the Year 2000 problem. For example, State has appointed David Ames as deputy CIO in charge of the agency's Year 2000 effort, increased the role of State's Year 2000 consultant and contractor, KPMG Peat Marwick, and created a Year 2000 steering committee, which includes senior managers and assistant secretaries.

"We are being hit hard because we are using a parallel development process to address fixes in all our systems at the same time instead of pushing to get one or two systems finished so that we can post a number in the completed column," Burbano said.

However, John Koskinen, chairman of the President's Council on Year 2000 Conversion, said he had some concern that State's progress would not be sufficient to meet the March 1999 deadline because the agency has not installed a system that has been fixed and is barely meeting its internal testing schedule.

DOD also has ramped up operations to try to make the March 1999 deadline. Marv Langston, DOD's deputy CIO and its Year 2000 czar, said he is increasing his Year 2000 office from 15 to 50 people and will be assigning people to leadership positions within the next three weeks. He said the primary function of the office will be to coordinate information on the Year 2000 problem. Because DOD is so large and complex, gathering the information the agency needs has been a major challenge, he said.

Overall, of the government's 7,343 mission-critical systems, 50 percent are Year 2000-compliant, up from 40 percent in May. More than 70 percent of all government systems have completed renovation, according to the OMB report.

Shirley Malia, deputy CIO of the Labor Department and co-chairwoman of the CIO Council's Year 2000 committee, said the OMB report was the most comprehensive one yet, but "I was disappointed, however, in the number of system completions. It is not as high as we had hoped."

Malia said OMB's next Year 2000 progress report, due in November, "is the key one. Our systems are to complete renovation by the end of September. The November report will show if we have accomplished that phase and are well into testing. If we haven't, then the government needs to increase both its efforts and its resources."

The government's Year 2000 cost also is expected to rise. Estimates do not include outreach programs such as the White House's Year 2000 awareness campaign and working with industry to ensure that systems are fixed. "OMB made a decision that outreach isn't work that [requires remediating] internal systems," Koskinen said.

Koskinen added that the Health Care Financing Administration's estimate of some $550 million for Year 2000 fixes is still being reviewed. "[HCFA] feels they will be compliant by the end of next year,'' Koskinen said. "They clearly have a major challenge.''

According to the OMB report, many HCFA systems, both internal and external, "will fail to meet" the March 1999 deadline. "OMB is concerned that at least some Medicare contractors will fail to meet the March 1999 govern-mentwide deadline for completing implementation," according to the report.

Clinton's $3.25 billion request may run into roadblocks in Congress. Republican budget hard-liners have balked at emergency Year 2000 funding. Designating Year 2000 funds as emergency would allow agencies to seek Year 2000 money from the U.S. Treasury, adding to the U.S. debt or digging into a federal surplus expected to be $80 billion in fiscal 1999. The House has removed emergency Year 2000 spending from fiscal 1999 appropriations bills, planning instead to create a separate bill that would pay for repairs through budget offsets in other appropriations bills. But Elizabeth Morra, spokeswoman for the House Appropriations Committee, said, "We would have a lot of trouble finding...offsets. As you know, our bills are already tight as they go." Morra said the House will decide how to handle the offsets by Oct. 1.

The Senate has set aside $2.25 billion in Year 2000 spending for civilian agencies and $1.6 billion for Defense agencies in "emergency" Year 2000 funding for fiscal 1999.