States and localities got $350 billion. Here's how they're spending it on IT

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Five months after President Joe Biden signed the $1.9 trillion American Rescue Plan Act into law, state and local governments’ plans for how to use $350 billion in relief funding are starting to take shape. And inside IT agencies, many officials are finding themselves newly flush with cash.

That sensation is a turnaround from the outlook in the COVID-19 pandemic’s early days, when forecasts of bottomed-out budgets fueled fears that the health crisis would stymie innovation and slow down modernization projects. And while the March 2020 CARES Act sent states $150 billion to help them pay for their coronavirus responses — including equipping remote workers and scaling up unemployment systems — chief information officers still entered 2021 bracing for reduced spending.

But better-than-expected tax revenues coupled with a fresh round of federal aid that can be used more freely shifted CIOs’ outlooks. Instead of just maintaining existing systems, many state and local IT agencies are developing long-term plans for major upgrades.

“It’s pretty exciting, actually,” New Hampshire CIO Denis Goulet said of his department’s $30 million slice of the roughly $1 billion the state is eligible to receive under the American Rescue Plan.

Goulet, who is also president of the National Association of State Chief Information Officers, called the American Rescue Plan a “unique opportunity” for states after Biden signed it. Governments, he wrote in a column for StateScoop, should use their incoming funds to “modernize legacy and outdated IT systems, improve our cybersecurity posture and invest in technologies to enhance how our citizens interact with their governments.”

Funding the ‘mundane stuff’

With Washington giving states broad flexibility, the American Rescue Plan money so far has been spent on a range of activities, including pay raises for law enforcement, housing funds, highway repairs, college scholarships and million-dollar vaccine lotteries, according to the National Conference of State Legislatures, which has tracked spending across the country.

Even amid a flurry of appropriations aimed at replenishing fisheries (Alaska, $2.1 million), repairing sewer lines (Tennessee, $1.35 billion) or boosting tourism (California, $95 million), new state-government tech initiatives have proliferated in recent months. Virginia plans to spend $20 million on digitizing health records; Colorado put $35 million toward digital inclusion programs; and Indiana will pour $1 million into an “internet of things” laboratory.

In New Hampshire, Goulet said that much of that $30 million will go to overhauling state technology assets, improving citizen services that’ve been under strain for the past 18 months. For the New Hampshire’s technology department, that means investing in software-defined networking — making it easier to change application configurations and manage big data flows — and replacing about 85% of the executive branch’s computing equipment.

“A lot of times in these kinds of grant situations, the politically cool stuff gets all the money, and the mundane stuff like actually running our business and providing citizen services doesn’t,” he said. “But I think what helped us in New Hampshire, and I think elsewhere, is folks now understand that having that infrastructure in place is critical for delivering citizen services.”

A similar effort is underway in Missouri, where state CIO Jeffrey Wann recently told lawmakers that he could use a chunk of $2.8 billion in Rescue Plan funding to make state services as convenient as those offered by the Domino’s pizza chain, which has been touted as a model for digital service delivery. The Missouri Office of Administration is eyeing $83.5 million for IT, which Wann said could equip state agencies with new productivity software and a new service portal, nudging the state toward new technologies like digital IDs.

‘Spending sugar high’

Still, a sudden windfall does not mean governments should go on spending bonanzas, especially as states begin the process of distributing their Rescue Plan funds to localities, warned Alan Shark, the executive director of CompTIA’s Public Technology Institute.

“When people have money at the end of a fiscal year what do they do? They go buy more computer boxes,” Shark said in an interview. “They buy physical things because they will lose the money and there are political penalties for not spending what you have.”

And buying more gadgets will incur maintenance and replacement costs years down the road when there isn’t a tranche of federal relief to tap, he said.

“My fear is that government, state, local, we’re going to be on this spending sugar high,” he said. “And if they don’t plan, they could be committing themselves to things that can not be sustainable.”

Rather, he said, local governments should use their relief funds on long-term IT projects, like migrating to cloud-based services, enhancing cybersecurity and investing in last-mile broadband. (States have committed billions in Rescue Plan funding to broadband.)

Yet Shark worried his advice won’t be followed outside his group’s members, whom he called the “best and brightest” of local-government IT.

“I would say a majority of local governments across the country are looking at this short-term, but I’ll add that in some cases, it’s not the fault of the technology professional,” he said. “It’s a political Ouija board out there. And my fear is that’s leading to some short-term solutions, not the longer term solutions that I think we need.”

‘Some really special things’

For his part, New Hampshire’s Goulet said his state’s management of the American Rescue Plan money is far from a free-for-all.

“I have much more accounting discipline to deal with on that than I would from say a capital appropriation,” he said. “But it’s worth it because it’s there, and I can do some really special things. So what we’re trying to do is be careful and smart, not to have it be one of these situations where you say, ‘I’ve got the money, so I’m going to use it without driving strategic advantage.'”

Goulet also told StateScoop that about 90% of New Hampshire’s local governments have applied for broadband grants, going through a “Byzantine process” for which he helped developed a series of online trainings to navigate the funding steps.

Yet even as Goulet and his fellow CIOs work through their American Rescue Plan funds, they’re also starting to anticipate the impact of a federal infrastructure spending package. The $1.2 trillion legislation the U.S. Senate passed last week includes another $65 billion for broadband and $1 billion to establish a long-sought cybersecurity grant program. Assuming it becomes law, Goulet said it’ll be another opportunity, but one that’ll require smart and measured handling.

“The primary principle, both nationally and in New Hampshire, is let’s be strategic about this,” he said. “We’re extremely excited about it, and we are now are in the mode of preparing for smartly managing that money as it flows down.”

This piece is part of StateScoop & EdScoop’s special report on relief funding.

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Alan Shark, American Rescue Plan, Denis Goulet, NASCIO, relief funding
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