Analyst: Sluggish economy hampering growth in state and local IT spending

In FedSources’ “13th Annual State of the States Briefing: A Glass Half-full or Half-empty?”, the long-term forecast is fairly positive. However, government IT administrators need to overcome a few speed bumps before state and local IT spending hits its stride, according to Ray Bjorklund, who is FedSources’ senior vice president and chief knowledge officer. Bjorklund’s background includes 28 years of experience in the public sector in technology, applications of technology, systems development and purchasing.

During a media briefing, Bjorklund noted that the sluggish national economy is dampening growth in state and local IT spending. Among the signs that the economy is having an impact:

• State and local governments are under stress.
• State lawmakers worry they may have to slash programs.
• Cities are tightening their belts due to the home foreclosure crisis.

Rising commodity prices and future liabilities that states face in their employee pension plans are other economic factors that may affect IT spending, Bjorklund added.

Bjorklund estimated that total state-government spending will increase by 2 to 5 percent annually. Growth will be slower in planned expenditures, however, with 13 states expecting their growth in expenditures to be less than the rate of inflation, or 3 percent.

In an interview with GovPro.com after his presentation, Bjorklund summed up the budget limits facing governments in the near future.

“Revenues for state and local governments are heavily dependent upon taxes, and among the 50 states and the District of Columbia, the forecast of their budgeting organization, the National Association of State Budget Officers, is suggesting that they’re not going to see more than 3 percent growth in 26 of those states,” Bjorklund said.

A key driver for future purchases of technology and related services, according to Bjorklund, is work force size. In his presentation, Bjorklund noted that work force expansion among local governments has been greater than work force expansion at the state level. Among all state and local governments, work forces are growing at a 2.3 percent average annual growth rate, according to Bjorklund.

According to information from the State of the States briefing:

• Higher education work forces at the state level are growing about 1.2 percent annually.
• Other state-government work forces are growing about 1 percent annually.
• Growth in local-government education work forces is less than 1 percent.
• Growth in other local-government work forces is rising faster than education, at about a 1.6 percent annual rate.

The FedSources briefing touched on some of the issues on the minds of state-government chief information officers, and discussed some of the management issues facing those executives. Challenges, such as difficulties in cross-boundary collaboration, offer the potential for innovative solutions, Bjorklund asserted in his briefing.

The briefing also discussed cooperative purchasing characteristics in governments, described the Western States Contracting Alliance and similar co-op entities and noted that up to $10 billion of state- and local-government IT purchasing power could be served by cooperative purchasing programs.

The briefing featured a ranking of major systems integrators that serve state and local government agencies. The three integrators listed in the “More than $1 Billion” category were Affiliated Computer Services Inc., EDS Corp. and IBM.

For more information, visit the FedSources Web site.