TMF at the tipping point

The Technology Modernization Fund has committed the $1 billion it received from the American Rescue Plan Act. The fund has about $170 million left to invest, according to the General Services Administration, which administers the fund. That number fluctuates as the TMF makes new investments and gets repayments from projects. 

GSA leaders and other TMF backers say it needs more money to meet demand, but congressional appropriators have often hesitated to invest large sums in the fund, which could dry up without a boost from Congress. So what's next?

The revolving fund was designed to give agencies access to funding for multiyear tech projects outside the annual appropriations process. Agencies that received TMF awards were originally supposed to pay the money back — replenishing the pot of money for future applicants. But repayment rules were relaxed by the Biden administration.

“TMF stands at a critical juncture in its mission to revolutionize federal IT infrastructure,” a GSA spokesperson said. “As a revolving fund with a minimum 50% repayment rate, facing an increasingly complex digital landscape, additional funding is required to meet the demand for wide-spread modernization.”

Right now, congressional leaders appear poised to pass a continuing resolution to fund the government from the start of fiscal year 2025 through December 20. 

The Republican-controlled House of Representatives zeroed out the fund for fiscal 2025 in their appropriation legislation while Senate Democrats offered a $25 million boost to the fund. While it's not known what Congress will do in the lame duck session, it seems almost certain that any new funding for TMF will be far short of the administration's $75 million request. 

Last year, lawmakers also didn’t put any new funding into TMF, opting instead to claw back $100 million of the $1 billion from the American Rescue Plan Act allocation. 

“The problem is Congress,” Rep. Gerry Connolly, D-Va., — a longtime TMF advocate and cosponsor of the law that created the fund — told Nextgov/FCW.

Asked if the future of the TMF is in danger, he responded, “I think it could be, and again, entirely laid at the doorstep of Congress.”

The upcoming election could change the fate of the TMF, a former Capitol Hill staffer with extensive knowledge of the fund told Nextgov/FCW. They asked not to be named because they’re not authorized to speak on the record in their current job.

Connolly is looking to a Democratic victory in the presidential election to keep TMF on track.

“Hopefully, President Harris will come in with renewed vigor and build on the Biden legacy and reinforce with members of Congress and the goodwill she comes in with how really critical these investments are [and] that we need to make them sooner rather than later,” Connolly said.

Part of TMF’s problem under the annual budget processes is jurisdictional, said Sonny Hashmi, former commissioner of the GSA Federal Acquisition Services and former TMF board member.

The Financial Services and General Government subcommittees of Appropriations have “to foot the bill, essentially, to a large extent for value that’s generated in other committees.” 

TMF essentially takes money away from other agencies or items under FSGG jurisdiction, he pointed out.

While that is “in play,” said Connolly, the problem is “more fundamental.”

“A lot of my colleagues just don’t get it,” he said. “I just think a lot of decision-makers in Capitol Hill simply do not grasp the criticality of this investment.”

Reworking the promise of repayment

If the TMF doesn’t get new money, then repayments, meant to replenish the fund, will be put to the test. 

“The problem with the TMF is that, without appropriation, it becomes insolvent because ultimately, you need to have money to invest in new things,” said Hashmi. 

All TMF projects repay at least something back into the fund, per GSA, but the amount has changed over the years. 

Though it was initially pitched as a self-sustaining initiative where agencies would pay back the total value of what they had been granted, the TMF actually lowered reimbursement requirements in 2021 to account for projects that may not yield cost savings.

For example, while a shift to cloud email might lower costs over a previous on-premise solution, cybersecurity improvements don't provide the same cost savings. The new requirements offered a “partial” repayment option, which was as low as 25%, as well as an even lower “minimal” option.

“When we came in, there was so much need — and there still is today — that we did whatever we could, whatever was in the executive branch’s control … and one of those levers we had was repayment,” said Hashmi. 

“If the impact is always going to be measured around ‘Does it lead to cost savings?’ then it’s a very limited view of the world,” said Hashmi. “Because the government’s job is not to save money, the government’s job is to spend money wisely to achieve the outcomes that the American people wanted to achieve.”

He added: “We needed to make it easier for agencies to get that money. But as expected, that became a really big, contentious point with Appropriations,” leading the TMF to up payback requirements again. 

In February 2024, the TMF Board settled on 50% minimum repayment, which “strikes a balance between ensuring the fund's long-term sustainability and offering agencies the flexibility to undertake high-impact projects,” the GSA spokesperson said. 

Without new appropriations, “available funds for new projects may become more limited,” given repayment schedules and payback cycles, Suzette Kent, former federal CIO during the latter half of the Trump administration and former TMF board chair, told Nextgov/FCW via email, although she pushed back on skepticism about repayments.

Reimbursements for projects are expected by their five-year mark, an anniversary that the TMF’s first investments only passed last year, she said. About 40 projects of the 60-plus list have paid at least some money back into the fund at this point, per the TMF website.

The question of repayment has also been on the mind of lawmakers working to reauthorize the fund past its scheduled 2025 sunset date. 

“I think we need to be realistic about [reimbursements],” said Connolly. “We cannot approach this with a one-size-fits-all mentality, nor can we be rigid in requirements. I think we have to differentiate among investments.”

Connolly is a cosponsor on the reauthorization bill, which nails down certain reimbursement requirements meant to keep TMF operational.

A cost-benefit analysis

The TMF has funded some success stories, in addition to projects that turned out to be controversial.

Customs and Border Protection announced last month that it fully retired its mainframe and moved to the cloud, a project that received $15 million from TMF in 2020. CBP’s mainframe had been one of the largest in the federal government, built on COBOL, and the agency is now saving over $30 million annually in legacy operations and maintenance costs, per the TMF. CBP has paid back 10% of its award so far.

“The American Rescue Plan's support of the TMF has been instrumental in its mission to modernize technology and deliver seamless digital experiences for all,” GSA Administrator Robin Carnahan told Nextgov/FCW in a statement. “The infusion of funds has enabled the TMF, and the agencies they partner with, to tackle modernization efforts that might otherwise be unfeasible, and reduce the financial barriers to adopting modern technologies.”

The track record of the TMF is impressive given that the fund is “operating with one hand behind its back” with the repayment requirements not normally applied to government IT projects, the former Hill staffer said. 

TMF also tends to fund certain kinds of projects. Agencies apply to the fund, meaning that they’re often asking for help with projects not getting money from Congress or not in the budget request to begin with, they said.

Completed TMF investments have an 80% success rate versus the 13% success rate of large government projects with traditional methods of IT modernization, an OMB spokesperson told Nextgov/FCW. 

Clare Martorana, the current federal CIO and chair of the TMF board, told Nextgov/FCW that the fund is “the ideal way” for Congress to finance government modernization, pointing to how the TMF has built out its capabilities to help agencies deliver on their investments. 

“We are top-tier technologists that are interrogating every proposal. We meet quarterly to do project reviews and updates. We keep our eyes on these programs, and we also swoop in when we need to to help them,” she said. 

“We do have a really fast, evolving technology ecosystem, and the U.S. government has used TMF to be that incredibly responsive fund,” she said. 

But Mike Hettinger, a former senior congressional staffer who lobbies on behalf of technology companies, wonders if there is another way to accomplish the fund’s objectives. At this point, he thinks that “the cost recovery piece of it is just generally too hard to come by.”

“I do think there’s probably a need to take a step back and say, ‘Well we’ve done this for what amounts to the last seven years and I think it’s been successful by some measure, but again — still haven’t really convinced Congress,’” he said.

Connolly and Kent both pointed to the potential for IT working capital funds at agencies to help address the need for multi-year funding for IT modernization. Those funds also stem from the law that established TMF.

“This pathway could address some of the same challenges if agencies were to fully embrace and use them,” said Kent.

GSA itself noted in its 2025 budget request that it’s working with the Office of Management and Budget “to explore alternative funding mechanisms for the TMF to increase the amount of funding available in the TMF to make continued investments while simultaneously alleviating the burden on the Financial Services and General Government Appropriations Subcommittee.”

A report accompanying the Senate FSGG appropriations bill noted its support for that effort, asking for options for a “pass-the-hat” authority for TMF as well as information about what agencies have working capital funds. 

Whatever the answer, “it’s not going to happen for free,” said Hashmi. “Long term, the administration — whichever administration is in the White House — and OMB needs to work with the appropriating body in Congress to come up with a model that works across the board.”

Despite any challenges, Martorana is optimistic about the future of the TMF. 

“What we have to do is share out all of those stories of success, of how we took an agency that had no path forward to a path forward that was completed in a short timeline at a level of excellence,” she said. 

“I think TMF is going to become a vehicle of choice for Congress,” she said. “You can tell them I said that.”