Forecast grim for state budgets

National Governors' Association

New budget forecasts showing a decline in fiscal health for state governments

could force them to rein in ambitious spending plans for information technology

and e-government projects.

A moderate slowdown in revenue and escalating health care costs are the

prime forces behind the budget tightening, according to a report released

Monday by the National Governors' Association and the National Association

of State Budget Officers. The impact will be most visible in fiscal 2002

and 2003 budgets, the report states.

"This is a warning sign that some clouds are out there we haven't seen in

awhile," said Stacey Mazer, NASBO's acting director. Her organization will

have a better fix on current-year conditions when it issues its next report

in June.

The report, "The Fiscal Survey of States," has been published twice a year

since 1977 and for the first time includes data on IT spending. Thirty states

provided figures indicating average IT expenditures of $185 million annually.

Texas, which is set to spend $679 million this year, leads the nation by

a wide margin in IT funding each year.

The fiscal downturn may not halt the overall momentum toward automation

and online services, "but if it is a large capital investment, it is conceivable

it will be delayed somewhat," NGA executive director Ray Scheppach said.

He predicted that states will cut more spending rather than raise taxes

to cope with the changed fiscal environment.