Innovative Funding ApproachesforInformationTechnologyInitiativesFederal, State, and LocalGovernment Experiences

Intergovernmental Advisory BoardFederation of Government Information Processing Councils

in cooperation with theOffice of Intergovernmental SolutionsOffice of Governmentwide PolicyU.S. General Services Administration

January 1998

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FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Purpose of the Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

INNOVATIVE FUNDING APPROACHES. . . . . . . . . . . . . . . . . . . 4

Category #1: Partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Pro Bono Research Partnerships - State of Georgia . . . . . . . . . . . . . . . . . . . . . 5

Wireless Communications Network - City of Austin,Texas . . . . . . . . . . . . . . . 5

Texas Orthoimagery Program - State of Texas . . . . . . . . . . . . . . . . . . . . . . . . . 6

Info/Texas - State of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Billing and Accounts Receivable Program - State of Massachusetts . . . . . . . . . . 7

Center for Technology in Government - State of New York . . . . . . . . . . . . . . . 7

Cable Franchise Agreement - Anne Arundel County, Maryland . . . . . . . . . . . . . 7

Cable Franchise Agreement - City of Atlanta, Georgia . . . . . . . . . . . . . . . . . . . 8

Easement Program - Anne Arundel County, Maryland . . . . . . . . . . . . . . . . . . . . 8

Cellular and PCS Partnerships - City of Greensboro, North Carolina. . . . . . . . . 8

Interagency Agreements - U.S. Federal Government . . . . . . . . . . . . . . . . . . . . 9

Administration of Justice Fund - Fairfax County,Virginia . . . . . . . . . . . . . . . . . 9

Category #2: Combination Funding . . . . . . . . . . . . . . . . . . . 10

Electronic Benefits Project - State of Massachusetts . . . . . . . . . . . . . . . . . . . . 10

Technology Investment Fund - State of Maryland . . . . . . . . . . . . . . . . . . . . . 10

Information Technology Fund - U.S. Federal Government . . . . . . . . . . . . . . . 11

Table ofContents

This document is available on-line at http://policyworks.gov/intergov under the Intergovernmental Advisory Board section

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Category #3: Use of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Immigration User Fee Account - U.S. Department of Justice . . . . . . . . . . . . . . 12

Immigration Examination Fee Account - - U.S. Department of Justice . . . . . . 13

Information Network - State of Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Cellular Phone Surcharge - State of West Virginia . . . . . . . . . . . . . . . . . . . . . 14

Contingent Fee Revenue Optimization Concept - State of Massachusetts . . . . 15

Contingent Fee Cost Savings - State of Massachusetts . . . . . . . . . . . . . . . . . . 15

Category #4: Use of Taxes and Bonds . . . . . . . . . . . . . . . . . . 16

Taxes and Bonds - State of Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Cigarette Tax - State of Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Productivity Bank - City of Philadelphia, Pennsylvania . . . . . . . . . . . . . . . . . . 17

Information Technology Bonds - State of Massachusetts . . . . . . . . . . . . . . . . . 18

Category #5: Sale of Public Assets. . . . . . . . . . . . . . . . . . . . . 19

Sale of Used Computers - City of Pittsburgh, Pennsylvania . . . . . . . . . . . . . . 19

GeorgiaNet - State of Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Category #6: Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Appalachian Regional Commission Grant - State of Kentucky . . . . . . . . . . . . 20

Edward Byrne Memorial Discretionary Fund Grant - State of Kentucky . . . . . 20

Telecommunications and Information Infrastructure Assistance Program - U.S. Department of Commerce. . . . . . . . 21

Universal Service Fund - State Governments . . . . . . . . . . . . . . . . . . . . . . . . . 21

Category #7: Seized Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Asset Seizure and Forfeiture Program - U.S. Department of Justice . . . . . . . . . . . 22

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Foreword

THIS DOCUMENT WASDEVELOPED by theIntergovernmental Advisory

Board (IAB) of the Federation ofGovernment Information ProcessingCouncils (FGIPC).

The IAB appreciates the time andeffort of the many informationtechnology (IT) professionals atvarious levels of government whocontributed examples of innovativefunding approaches for this report,especially Mike Hale from the State ofGeorgia and William Kilmartin fromthe State of Massachusetts, whoprovided significant input for thisdocument.

The participation of the IAB memberswas instrumental in the compilationof the information presented in thisdocument. The IAB enjoysparticipation from all levels ofgovernment. In addition to FrankMcDonough, Chairman of the IAB andDeputy Associate Administrator forIntergovernmental Solutions, Office ofGovernmentwide Policy, U.S. GeneralServices Administration (GSA), thereare nine members — three thatrepresent each level of government.

The Federal government isrepresented by:

• Ronald Collison, AssociateCommissioner for InformationResources Management,Immigration and NaturalizationService, U.S. Department of Justice;

• Allan Doris, Director of InformationManagement, Financial ManagementService, U.S. Department of theTreasury; and

• Gregory Rothwell, AssistantCommissioner of Procurement,Internal Revenue Service,U.S. Department of the Treasury.

The State governments arerepresented by:

• Tom Davies,Vice President,Federal Sources, Inc.

• Michael Hale, Chief InformationOfficer, State of Georgia; and

• Carolyn Purcell, Director,Department of InformationResources, State of Texas.

The local governments arerepresented by:

• F. Russell Doupnik, InformationSystems Administrator,Howard County, Maryland.

• Winifred Lyday, Director,Department of InformationTechnology, National Association ofCounties (NACo); and

• George November, Director for theOffice of Technology andInformation Services,Arlington County,Virginia.

For more information about thisreport, please contact Martha Dorris,GSA, at 202-501-0225 or via e-mail atmartha.dorris@gsa.gov or Vivian Ronen, GSA, at 202-501-1133 orvia e-mail at vivian.ronen@gsa.gov.

Copies of this report are availablefrom Ms. Renee Hughes, GSA, at 202-501-0291 or via e-mail atrenee.hughes@gsa.gov. Copies alsoare available on the Office ofIntergovernmental Solutionshomepage athttp://policyworks.gov/intergov underthe “Intergovernmental AdvisoryBoard” section.

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ExecutiveSummary

THE INTER-GOVERNMENT-ALADVISORY BOARD (IAB),

chartered as an advisory board underthe Federation of GovernmentInformation Processing Councils(FGIPC) in May 1997, was establishedin recognition of the need forincreased intergovernmental collab-oration and education. The IAB wasestablished to bridge the gap betweenFederal, State and local governmentsand to educate IT professionalsnationwide on finding solutions tointergovernmental challenges.

At its initial planning meeting, afterlengthy discussions on the challengesthat face government managers at alllevels, the members of the IAB agreedthat State and local governments needto exchange information on innovativeand alternative approaches for fundinginformation technology (IT) initiatives.To date, restrictions on fundingapproaches have impeded Federal,State and local governments fromsuccessfully implementingintergovernmental informationsystems and have restricted workingcollaboratively with othergovernments. As budgets continue toshrink and responsibilities aredevolved to lower levels ofgovernment, funding strategies haveassumed utmost importance,particularly cross-government fundingstrategies. These approaches providenew opportunities for use andflexibility to all levels of government.The Board members believe thatinnovative IT funding is a significantnew trend that will enablegovernments to leverage theirdwindling IT resources.

Funding IT projects that are notdependent on appropriated funds willcontinue to challenge government IT

officials. However, when funding isscarce, government officials aremotivated to come up with some verycreative ways to generate resources tostart and maintain their projects.New forms of partnerships, revolvingfunds, capital funds, contingency fees,and performance-based contracts arejust a few of the more commonlyknown, but less used, fundinginnovations for IT projects.

Today’s IT managers must take abroader approach to fundinginformation technology requirements.Knowledge of an agency’s enablinglegislation is the first step. ITmanagers must work closely withtheir budget/financial organizationsand legal staffs to develop new waysof generating revenue and fundingprojects within the laws andregulations of their agencies.

Based on the experiences of Federal,State and local governments, the IABrecommends that IT managers worktoward creating a flexibleenvironment that allows the use ofthe seven alternative fundingapproaches described in thisdocument when traditional funding isnot available. To accomplish this,legislative and regulatory barriers thatimpede the use of alternative fundingsources should be identified andmodified. IT managers should have aworking knowledge of applicablefinancial and budgetary rules andregulations, understand the Federalgrant administration programs, andeducate elected officials and thepublic about the importance oftechnology and the benefits that canbe gained from IT investments.

Seven broad approaches for fundingIT initiatives have been identified,including the use of:

• Partnerships

• Fees

• Taxes and Bonds

• Sale of Public Assets

• Grants

• Seized Assets

• Combination Funding

Each of these methods as well as somenoteworthy examples is described inthis report. Appendix A contains eachcase study in its entirety.

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THE INTER-GOVERNMENTALADVISORY BOARD (IAB),

chartered as an advisory board underthe Federation of GovernmentInformation Processing Councils(FGIPC) in May 1997, was establishedin recognition of the need forincreased intergovernmental collab-oration and education. The IAB wasestablished to bridge the gap betweenFederal, State and local governmentsand to educate information technology(IT) professionals nationwide onfinding solutions to intergovernmentalchallenges. FGIPC has served as aleader in the information technologyarena since 1979. FGIPC promotescommunications among IT managers atall levels of government and industry.

Through its diverse membership,representing Federal, State and localgovernment information technologyinterests, the IAB identifies intergov-ernmental priorities for the FGIPC andits Councils. Identification of theseintergovernmental priorities potentiallycan provide improved service to U.S.citizens through intergovernmentalcooperation and awareness.

The IAB has selected innovativefunding approaches as the firstinitiative on which to focus itsattention because funding ITinvestments, especially in State andlocal governments, has become achallenge as governments are facedwith shrinking IT budgets. Manygovernment organizations areexperimenting with creativeapproaches for funding IT initiatives.Some of those initiatives are includedin this report and will benefit all levelsof government facing critical fundingproblems if they are shared andconsidered for implementation.

Purpose of the Document

The purpose of this document,Innovative Funding Approaches forInformation Technology (IT)Initiatives: Federal, State and LocalGovernment Experiences, is todescribe the various innovative waysthat governments have funded their ITinitiatives. Through this document, ITmanagers will become aware thatinnovative approaches exist whennormal budgetary channels impedefunding an IT project. This documentprovides the groundwork forbroadening the funding alternativesavailable to managers by encouragingthem to think about legislative orregulatory barriers to the use ofalternative funding techniques and forencouraging managers to viewinformation technology as a capitalexpense. Governments shouldexplore these examples in the hopethat each government may benefitfrom the experiences of othergovernments. Finding alternativesources of funding could be thedetermining factor in implementing avaluable IT initiative.

Approach

At the IAB’s initial meeting, discussionswere held on potential priority areasfor a diverse group representingFederal, State and local governments.After much discussion, the IABidentified innovative funding strategiesas its first priority. GSA’s Office ofIntergovernmental Solutions conductedthe initial research. IAB members wererequested to provide innovativefunding strategies used within theirgovernments. The examples werecollected and categorized, and thisreport was developed.

Assumptions

In some cases, an innovative fundingapproach may be used to financegovernment initiatives other thaninformation technology. Some of theseapproaches have been documented inthe belief that the same approachesmay be used to fund informationtechnology initiatives.

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1. Introduction

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subscription fees or surcharges aremore appropriate when a governmentorganization is providing a specificservice or when data can be providedat a cost to the customer. These fundsmay be used for any types of ITinitiatives; however, they are usuallyused to improve the specificautomated system that supports thedelivery of the service.

Funds generated from taxes andbonds, the sale of public assets, andgrants can be used for all types of ITresources. However, other issues, suchas the ones identified in thisdocument, may determine whichapproach is most appropriate.

In most cases, the funds generatedfrom the sale of seized assets are usedfor all types of IT that supportcriminal justice applications or thedelivery of law enforcement.

Descriptions of each category andsome examples are described herein.Appendix A contains each case studyin its entirety. While many othernoteworthy examples exist, theseprovide a broad perspective forconsideration.

THE IAB COLLECTED 32EXAMPLES in whichgovernments have funded IT

initiatives through alternative fundingsources. These examples range fromadministration of court activities to IThardware and software infrastructuresand were categorized into sevenbroad areas. Many of theseapproaches would be appropriate touse in funding any type of ITinitiative. However, in some cases, aspecific approach may be moresuitable for a different environment.

When determining the mostappropriate funding strategy,government IT officials shouldconsider the citizen’s perception ofthe initiative. Consideration shouldalso be given to the number of yearsfunding would be required (i.e., multi-year funding). Other governmentagencies, private companies orcolleges might be interested in takingadvantage of improvements in thefunctional areas. The resources beingacquired and the benefits of theexpenditure, the level of supportwithin a government for the initiative,the life expectancy of the ITresources, and regulations andlegislation that restrict the use ofspecific strategies should all be takeninto consideration.

For example, partnering approacheswould be more suitable when thebenefits to be achieved result in costsavings that can be shared among thepartners. These benefits can rangefrom tangible dollar savings tointangibles such as recognition forbeing a part of an innovative systemor technology. Partnerships are usedprimarily in major systemsdevelopment efforts.

The use of fees, whether user fees,

2. Innovative Funding Approaches

Anyone wishing to contribute additional examples ofinnovative funding initiatives can do so by contactingVivian Ronen, Office of Intergovernmental Solutions,U.S. General Services Adminsitration, at 202-501-1133or via e-mail at vivian.ronen@gsa.gov.

The online version of this document will be updatedeach time a new submission is received.

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Partnerships

ONE OF THE MOST WIDELY USED innovative funding approaches isentering into partnerships. Partnerships may be formed amonggovernment entities (e.g., State and local, State and State, State and

Federal), between governments and universities and between public and privateenterprises. Interagency agreements are commonly used between and amongFederal agencies. In addition, franchising at the State and local levels is alsobecoming popular as a form of partnering with the public. In some cases,coalitions of parties with similar issues are being formed to learn from each other,share resources and find common solutions to IT problems.

BASED ON INPUT FROM EACH OF ITS STATE AGENCIES, the Stateof Georgia has designated electronic signature and network security as

major policy issues. Georgia, in conjunction with the National Association of StateInformation Resources Executives (NASIRE) and other national associations isworking to establish accreditation standards for certification authorities with thegoal of having common standards among the States.

To establish research partnerships in these areas, Georgia issued solicitations toprivate industry and academia for pilot projects as proof-of-concept forapplications and technologies on a pro bono basis. Six projects are beingestablished using these partnerships. Projects will be completed over the comingyear, with in-process briefings presented to Georgia’s Electronic CommerceSteering Committee.

Reactions thus far from elected officials and agency managers have been verypositive. The one over-arching conclusion is that private industry has the interestand the resources to invest in research with government in order to give marketvisibility to the more advanced technologies being considered by Stategovernments. The research partners provide the necessary funds to support thepilot projects they have proposed.

THE CITY OF AUSTIN,TEXAS, IS PARTNERING with countygovernments, schools, universities, legislative bodies and state government

entities to construct a wireless communication network.This network willemploy voice radio, computer-aided dispatch, mobile data communications,geographic information system data, microwave, intelligent transportationsystems, and transit systems, all of which can be operated from a fully integratedcommunications center. An integrated regional wireless communications systemwould improve public safety and public service agencies’ communications witheach other and allow direct access and exchange of data, thereby promotingpublic health, safety and welfare.

Savings will be realized through the reductions in land use, voice frequencies,computer equipment, and infrastructure costs for systems. Increased voice anddata sharing among agencies will result in improved staff effectiveness andemergency service delivery to citizens.

Abstracts

State of Georgia Partnerswith Industry on ElectronicSignature and NetworkSecurity

Point of Contact:Mike Hale, State of Georgia(404) 657-1350

City of Austin, TexasPartners with CountyGovernments, Schools andUniversities to Construct aWireless CommunicationNetwork

Point of Contact:Danny Hobby, City of Austin,Texas(512) 499-6570hobby@infosys.ci.austin.tx.us

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TO REDUCE RELIANCE ON THE USE of large-scale paper State mapsproduced by the U.S. Geological Survey (USGS), the State of Texas has

partnered with three Federal agencies, county and local governments to digitizeoutdated State maps. In 1995, the Department of Information Resources, State ofTexas, entered into an innovative partnership with USGS to produce digitalorthophotos through the Texas Orthoimagery Program (TOP). Orthophotos arescanned aerial photographs that combine geometric qualities of a map with theimage of a recent photograph.

Funding for TOP was provided by Federal government agencies, the State, andlocal and regional groups. Three Federal agencies - the USGS, the NaturalResources Conservation Service (NRCS), and the Farm Service Agency (FSA) -contributed a combined 55% of the funds. The Texas Match Pool provided 23%from a fund designed to attract matching Federal funds. The reminder (about22%) was provided by local and regional entities.

In all cases, local funding for TOP has come from those with the greatest ties tothe land (i.e., people who own, manage, study and work on the land beingmapped). This has produced viable partnerships between the funding andplanning groups (State and Federal government) and the people who own anduse the land. The success of TOP is providing the citizens of Texas a publicresource that will meet statewide mapping needs for years to come.

THE STATE OF TEXAS AND INFO/TEXAS have entered into apartnership to implement a statewide network of multimedia kiosks to

provide Texas Workforce Commission information and services outside of regularbusiness hours and in locations the agency does not normally serve. In return,Info/Texas was able to establish a kiosk presence in one of the nation’s largestmarkets, supported by a long-term commitment from the State. Between 50 and100 multimedia kiosks are being installed.

This approach has offered advantages to both partners. TWC was able to improvethe delivery of services and information to its customers without any upfrontinvestment, without securing in-house multimedia expertise and for a lower costthan independently purchasing, installing and maintaining its own kiosk network.TWC paid for Info/Texas’ services out of its general operating budget.

In addition to gaining a kiosk presence in one of the nation’s largest markets,Info/Texas was supported by a long-term commitment from a major customer.The fees generated by the TWC contract alone were not sufficient to coverInfo/Texas’ total costs. However, the ability to sell kiosk advertising services onthe same kiosks to other entities offered the potential for significant profits.

State of Texas Partners withThree Federal Agencies,County and LocalGovernments to DigitizeOutdated Paper State Maps

Point of Contact:Drew Decker, State of Texas (512) 475-7314

State of Texas Partners withInfo/Texas to Implement aStatewide Network ofMultimedia Kiosks

Point of Contact:Mark Fenner, State of Texas(512) 463-8263

State of Massachusetts UsesMany Alternative Sources to Fund IT Projects

Point of contact:William KilmartinState of Massachusetts(617) 727-5000

State of New York’s Center for Technology inGovernment Solves ITProblems through StrategicPartnerships

Point of contact:Center for Technology in Government(518) 442-3892http://www.ctg.albany.edu

Anne Arundel County,Maryland, ProvidesEnhanced Communicationsthrough Partnership withCable TV Companies

Point of contact:Jerry KlasmeierAnne Arundel County Government(410) 222-7644

THE STATE OF MASSACHUSETTS IS USING multiple sources offunding for information technology projects by venturing into partnerships

with stakeholders and using private funds, money from bonds and funds from theFederal government.

The State created a revenue management system (the billing and accountsreceivable system) for State government using alternative funding sources. Todevelop the system, the Comptroller’s Office contributed $3.3 million (from theInformation Technology Bond I) and the Massachusetts Highway Departmentcontributed $900,000 from their operating budget to be able to bill the U.S.Department of Transportation for Federal reimbursement. The systems integrationfirm that developed the system,American Management Systems (AMS), gaveMassachusetts a royalty of $150,000 from the subsequent sale of the system toother clients. In this example, Massachusetts used $3.3 million to leverage $4.5million in information technology development.

THE CENTER FOR TECHNOLOGY IN GOVERNMENT (CTG) at theUniversity of Albany forms strategic partnerships with government agencies,

technology corporations and university faculty and students. The Center wasfunded by $750,000 in State funds along with in-kind donations from more than40 private companies and the State University of New York at Albany. Threedozen high-tech companies, more than 30 government agencies, and a dozenacademic researchers have participated in Center projects since the Center’sinception in 1993. Its mission is to solve problems related to public servicesthrough the use of information technology in State and local governments. TheCenter has been honored with awards of national significance and pursues grantsthat allow it to expand its work beyond New York State. One of its most recentefforts was a guide detailing how best practices and fundamental principles canshape the way State and local governments share information systems. The bestpractices and principles are the cornerstone of the guide,“Tying a Sensible Knot:A Practical Guide to State-Local Information Systems”.

NEGOTIATED FRANCHISE AGREEMENTS with cable televisionproviders allow Anne Arundel County, Maryland, to transport public safety

data and video communications on shared fiber-optic cable and transmit othergovernment data. In addition, they provide for the transmission of public,educational and government programs to be broadcast on the cable systems.Currently, 27 miles of fiber are installed, with a total buildout of 70 milesprojected. Cable TV companies provided funding through franchise fees andprovided head-end interconnections. The county government providedcontracting for construction, cable plant management, communicationsmanagement and program content management. No added government staff wasrequired.

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City of Atlanta, Georgia, and MediaOne Enter into aFranchise Agreement

Point of contact:Rita Bloom, City of Atlanta(404) 330-6004

Anne Arundel County,Maryland, Grants EasementRights for Fiber OpticCabling

Point of contact:Jerry KlasmeierAnne Arundel County Government(410) 222-7644

City of Greensboro, North Carolina, Partnerswith Cellular Phone andPersonal CommunicationsSystem Providers

Point of contact:Eric CombsCity of Greensboro, North Carolina(910) 373-2526

THE CITY OF ATLANTA AND ITS CABLE OPERATOR, MediaOne,have entered into a franchise agreement to construct a fiber-rich

communications network and will sell the city fiber optic capacity withoutincurring fixed costs for construction. MediaOne has agreed to provide $1.2million in initial funding for the development of the network and an additional$1.3 million upon authorization from the city council (these expenditures wouldbe passed through to subscribers). To take advantage of this offer, the city mustconvey its fiber requirements to the company at the time of design of the cablesystem.

ANNE ARUNDEL COUNTY, MARYLAND, has granted easements for fibercable installation in highway and recreational rail-trail rights of way. These

easements permit corporations to place long runs of fiber for use by thegovernment and for use of conventional private telecommunications companies.Other States have granted similar easements.

THE CITY OF GREENSBORO, NORTH CAROLINA, is partnering withcellular phone (analog) and Personal Communications System (PCS) (digital)

providers. The city is selling new tower space on city property or offering co-location of PCS or cellular antennas on city-built towers. This initiative requires asmall payment from private industry to hold a space for a co-location on anexisting facility or for a company to build a tower on city property. Once a leaseis in place for that site, the city requires an advance rental payment of three yearsfor co-locations on existing sites. The lease is for a 5-year term with the option torenew for 4 more 5-year terms. Price increases are based on the Consumer PriceIndex.

Funds are collected before the lease is in place; then, beginning the fourth year,the company is billed annually. Since the first lease in 1995, over $1 million hasbeen collected. The only impediments are zoning problems and structural loadingproblems that are significantly outweighed by the revenue being produced forfuture technology. The city of Greensboro expects to continue leasing as requestsand availability permit.

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Four U.S. FederalGovernment AgenciesPartner to Define Public Key Infrastructure

Points of contact:Calvin KiddU.S. Department of TreasuryFinancial Management Service(202) 874-7611

Jerry AdegardU.S. Department of Energy(301) 903-5860

Fairfax County, Virginia,Government Funds CourtActivities throughContributions from Jurors

Point of contact:John FreyFairfax County Government703-246-2770.

THE DEPARTMENT OF THE TREASURY’S Financial ManagementService, the Department of Energy, the Environmental Protection Agency and

the Bureau of the Census have entered into an interagency agreement to definePublic Key Infrastructure (PKI) and associated client services to support anelectronic signature utility. Each agency will contribute matching funds fromagency appropriations to pay for this project.

IN 1993,THE BOARD OF SUPERVISORS in Fairfax County,Virginia,passed an ordinance to establish the Administration of Justice Fund. This

ordinance permits each juror to direct all or part of the compensation due forjury service to the Circuit Court for expenditures related to the administration ofcourt activities, especially the advancement of computer technology within thecourt system. Jurors are provided a form on which to designate the amount theywish to donate. This amount is automatically deducted from the total amountthey would have received. Donations range from $1 to $30 per day per juror. TheClerk of the Courts provides the Board of Supervisors with an annual reportshowing the revenues received, all disbursements, any ending balance andimprovements made with Fund disbursements.

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State of Massachusetts Funds Electronic BenefitsTransfer Project throughMultiple Sources of Funding

Point of contact:William KilmartinState of Massachusetts(617) 727-5000

State of MarylandEstablishes MarylandTechnology InvestmentFund

Point of contact:Mr. Lou Laricci, State of Maryland(410) 767-4202

2Combination Funding

COMBINATION FUNDING UTILIZES a variety of funding sources.Combinations can include funds from appropriations, bonds, grants,contingency fees based on revenue, and contingency fees based on

services. There is no reason for governments to limit themselves to one particularfunding method when combinations can be utilized effectively and produce thedesired results in a creative fashion.

THE USE OF COMBINATION FUNDING is a popular funding strategy inMassachusetts. The State’s electronic benefits transfer (EBT) project is a good

illustration of using multiple sources to fund a project. This project replacespaper food stamps and welfare checks with debit cards. The Comptroller’s officeinvested approximately $2.5 million (using Information Technology Bond II) andthe U.S. Department of Agriculture contributed $2.5 million for systemdevelopment and implementation.

The cost per case per month for the old paper delivery system wasapproximately $3.90, with operational expenses funded 50% by the State and 50%by the U.S. Department of Agriculture. With EBT, the cost per case per month isabout $1.40 and the recipient gets four transactions per month. The State funds50%, and the U.S. Department of Agriculture funds 50%. If recipients wantadditional transactions, they fund the cost entirely for 85 cents per transaction.

THE MARYLAND TECHNOLOGY INVESTMENT FUND wasestablished by the 1996 General Assembly to provide resources for

technology projects to improve efficiencies, expand services and increaseeducational opportunities. The fund receives a share of revenues from technologyleases and sales, savings from technology contracts and general fundappropriations. In FY 1997, the Department of Management and Budgetestablished kiosk locations to bring services closer to citizens (in conjunctionwith the U.S. Postal Service); and the Department of Labor, Licensing andRegulation provided Internet access for the State’s occupational and professionallicensing processes.

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U.S. Federal GovernmentFunds Innovative IT Projectsthrough the TechnologyInnovation Fund

Point of contact:Gayle GordonU.S. Department of the InteriorGITSB Member(202) 208-7701 or (303) 236-4565

Yvonne KinneyU.S. Department of the Interior (202) 452-5008

THE GOVERNMENT INFORMATION TECHNOLOGY SERVICESBOARD (GITSB) created a Technology Innovation Fund using funds from

the General Services Administration’s Federal Technology Service’s FTS2000 longdistance telecommunications program. Funding has been at or about 1% of theprojected FTS2000 annual income.

The Fund provides “seed” money for innovative Federal agency IT projects thatprovide more efficient and effective delivery of services to the public. Projectsinvolving multiple agencies and single-agency projects that can be easily portedor implemented by other agencies are particularly encouraged. These projects areexpected to be self-sustaining within two years and provide futurereimbursements to the Fund where feasible. The projects fall within the scope ofInformation Technology Fund uses as established in 40 U.S.C. 757(b)(2). Projectsare selected for funding by the Innovation Fund Committee comprised ofrepresentatives of the GITSB.

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U.S. Department of Justice Funds ImmigrationInspection Activitiesthrough User Fees

Point of contact:Kendall LottU.S. Immigration and Naturalization Service(202) 307-5872 kendall.lott@usdoj.gov

3Use of Fees

THE ASSESSMENT AND COLLECTION OF FEES for data or servicesis a method widely used at all levels of government to generate revenues.In some instances, there are political ramifications to the assessment of

fees for public information. However, fees imposed on private companies orvendors are gaining popularity and are not as politically charged as fees to thepublic. In some cases, the imposition of fees requires legislative action. Some ofthe more commonly used fees are surcharges, subscription fees, user fees andcontingency fees. Contingency fees can be based on revenue production duringthe course of a project or contingency fees based on cost savings resulting from acommercial contract.

THE IMMIGRATION USER FEE ACCOUNT began in 1987 with theDepartment of Justice Appropriation Act. Virtually all individuals entering the

United States by air or by sea are assessed a $6 fee to offset the cost ofimmigration inspections (current exemptions include sea vessel passengers fromMexico and Canada). The fee is collected by entities that issue tickets, such asticket agents and air or sea carriers. These entities are responsible for remittingthe accumulated fees to the Immigration and Naturalization Service (INS) on aquarterly basis.

The funds are used for inspection activities such as the detention and deportationof inadmissible aliens, the operation and maintenance of information systems fornon-immigrant control and the detection of fraudulent immigrationdocumentation. The fund can also be used to provide for training, administrationand management, records, facilities and legal services required for the support ofthese activities. Numerous information systems related to the identification andverification of aliens and to the sharing of information are supported by this fund.These systems represent the core information management systems for the INS,covering border crossings for citizens, immigrants, and non-immigrants. The fundssupport overseas pre-inspection services.

INS allocates funds to various program offices based on anticipated revenues andappropriated funds. In FY 1997, approximately $29 million to support IT systemswas received. The FY 98 allocation from this account is expected to beapproximately the same.

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U.S. Department of JusticeFunds ImmigrationAdjudication andNaturalization Servicesthrough User Fees

Point of contact:Kendall LottU.S. Immigration and Naturalization Service(202) 307-5872 kendall.lott@usdoj.gov

IN 1989,THE U. S. DEPARTMENT OF JUSTICE established theImmigration Examination Fee Account. It authorizes the Immigration and

Naturalization Service (INS) to establish and collect fees to recover the cost ofproviding certain immigration adjudication and naturalization services. Aspects ofthe collection and applicability of the fees were expanded in law in 1994 and1995. At the discretion of the Attorney General, the revenues are collected to“reimburse any appropriation the amount paid out of such appropriation forexpenses in providing immigration adjudication and naturalization services andthe collection, safeguarding, and accounting for fees…” This is the largest feeaccount in the INS.

In total, there are over 40 different applications fees that may be used for thisaccount. The key applications are for Naturalization, Permanent Residence,AlienPetitions, and Applications for Employment Authorization. The fees can be usedfor a wide variety of activities concerning the processing and adjudication ofpetitions for benefits under the Immigration and Nationality Act, includingadministrative support, facilities, records, and legal services. From an ITperspective, this account may provide resources for support functions necessaryin the processing and adjudication of applicants and petitions. This can includefunctions related to files transactions, including creating, transferring and verifyingrecords and information systems technology for INS employees performingapplication processing.

In FY 1997, approximately $47 million to support IT systems was received. TheFY 98 allocation from this account is expected to be approximately the same.

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State of Kansas FundsInformation Network ofKansas through User Fees

Point of contact:Jeff Fraser, State of Kansas(785) 296-5154

State of West VirginiaCharges Surcharge onCellular Phones to Establish 911 EmergencyCommunications

Point of contact:Stephen ZoellerKanawha County CommissionState of West Virginia(304) 357-0101

THE INFORMATION NETWORK OF KANSAS (INK) is a uniquemodel for public/private cooperation based on user fees. It is a government

service administered for the good of the public, while benefiting from theentrepreneurial models found in private business. In 1990, the Kansas Legislaturepassed the Information Network of Kansas into law. INK provides electronicaccess for citizens to public information of agencies via a gateway service. Inaddition, it provides a dial-in gateway or electronic network for access to publicinformation. It explores technological ways and means of improving citizen andbusiness access to public information. Where appropriate, INK implements suchtechnological improvements.

Although the vast majority of services available on the Information Network ofKansas are accessible free of charge by anyone on the Internet, INK receives noState funding. It is entirely funded by the fees generated under the premiumservice described below. It is managed by a private network manager chosenthrough an extensive competitive evaluation and bidding process. The KansasInformation Consortium was selected as the network manager and receives aregulated return while remitting the majority of the revenues generated by thenetwork to the State of Kansas.

The premium fee service contains legal, banking and other industry specificbusiness applications that have a fee associated with access. There is a $75subscription fee to access the INK’s premium services. The annual renewal fee is$60. In addition to the annual subscription fee, certain applications havestatutory and/or transaction fees.

DURING THE 1997 LEGISLATIVE SESSION, the West VirginiaLegislature passed a statute allowing collection of a surcharge on cellular

phones by the State of West Virginia. Roughly, two-thirds of the funds will bedistributed back to counties based on population. One-sixth of the funds will beput in escrow for counties that currently do not have 911 centers. Becauseestablishing 911 centers is voluntary, this escrow funding is an incentive for thosecounties to establish 911 centers. If the counties do not establish 911 centerswithin five years, the funds that have been escrowed for them will go back intothe pool and be distributed to other counties. Another one-sixth goes to countiesthat have recently formed 911 centers.

The fee on the cellular phones will be 75 cents per month. It is estimated thatthis surcharge will generate approximately $1.5 million. These funds can be usedfor the purposes articulated in State statutes for the operations of 911 centers.The decision regarding how these funds would be distributed was debated in theLegislature with input from counties, 911 centers and the cellular phone industry.The funds are to be collected from the cellular phone industry. Whether or notthe industry can charge a fee for the collection service has not been determined.Further, legislation requires that 911 centers acquire the necessary equipment todetermine the origin of a cellular phone call.

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State of Massachusetts Funds IT Projects throughContingency Fees

Point of contact:William KilmartinState of Massachusetts(617) 727-5000

State of Massachusetts Uses Contingency FeeSavings to Fund IT Projects

Point of contact:William KilmartinState of Massachusetts(617) 727-5000

THE STATE OF MASSACHUSETTS IS USING VENDORS to provideservices on a contingent fee basis agreement to develop and implement

information technology projects within the State. Under the contingent feerevenue optimization concept, the State of Massachusetts has completed 30 to 35such engagements since FY 90. A small percentage pertain to informationtechnology.

In FY 91 through FY 93, sophisticated double-iteration step-down cost accountingsoftware programs were developed to produce fringe benefit and indirect costrecovery rates for programs funded by non-State resources (i.e., Federal grants orassessments). A major consulting firm was engaged on a contingent basis todevelop the software, load the initial data, produce the set of new recovery rates,and then turn the system over to the State. The system was developed by thevendor without government funds. Recoveries increased by approximately $17million annually. The vendor was paid a one-time fee of approximately $3 million.

CONTINGENT FEE COST SAVINGS is a very new legal authorization, andthe State’s first project is underway. The project is not entirely information

technology. A private company has been engaged to identify (via computersearches) the existence of health insurance for clients requesting Medicaideligibility and direct those clients into insurance programs (away from State-funded Medicaid), thus avoiding costs to the Medicaid program. In the first sixmonths, approximately $9 million in costs have been avoided, and the vendor hasbeen paid $300,000.

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State of Georgia ConsidersBuilding IT Infrastructuresthrough Separate Funding

Point of contact:Mike Hale, State of Georgia(404) 657-1350

4Use of Taxes and Bonds

IT IS BECOMING INCREASINGLY IMPORTANT that agencies thinkof IT projects as investments. With the emphasis on outcome-orientedperformance measures, the contribution of IT to achieving business goals

and objectives is increasingly being emphasized and recognized. In anenvironment of cutting costs and downsizing, IT projects must clearlycommunicate their payoffs to justify the investments in them.

Taxes and bonds used to generate revenue require statutory or legislative actionand strong public support through voter referendums. Increasing taxes orpurchasing bonds are popular ways of raising funds for schools, public safety andhealth. However, the use of taxes and bonds for information technology isgaining support.

THE STATE OF GEORGIA IS FOCUSING on the challenges ofestablishing and maintaining modern statewide IT infrastructures. The State

is looking at how funds are appropriated, lack of awareness of the need to fundinfrastructure as a unique corporate investment and competing against otherannual funding requirements.

States wishing to invest in infrastructure have two choices. They can competethese investments against other annual requirements such as teacher salaries,prison beds and the like, or they can establish a separate funding category such asthe current capital budgets for fixed assets (buildings, etc.) and manage ITinfrastructure along these lines. The latter is the essence of this innovativefunding approach.

This approach could require bond financing in the manner that currentlysupports other fixed capital projects. State governments would be required toidentify categories of IT that bond underwriters would find acceptable and bewilling to support. State laws may need to be modified and revenue sourcesidentified to support the bond payment. Certainly, the issue of State standardswould have to be addressed to ensure that the State infrastructure would beshared to the maximum extent possible.

At this point, a national report is needed to shed light on an important problemand begin to encourage debate within State and local governments. Obviously,details must be sorted out and options studied. However, the first step is to makeofficials aware of the dilemma that States face trying to compete infrastructure ina line item against other pressing social needs.

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State of Nebraska’s Cigarette Tax Diverted toInformation TechnologyInfrastructure Fund

Point of contact:Steve Henderson, State of Nebraska(402) 471-2065.

City of Philadelphia,Pennsylvania, Funds ITInitiatives through aProductivity Bank

Point of contact:Linda Berkowitz, City of Philadelphia(215) 686-7508

THE NEBRASKA LEGISLATURE and Governor Ben Nelson signedLB1190 into law during the 1996 legislative session. In that bill, two cents

from the State’s existing Cigarette Tax were diverted into the newly createdInformation Technology Infrastructure Fund (ITIF). This amount, estimated to beabout $2.6 million per year, will help fund Nebraska’s Century Data Changeproject over the next few years. An additional $1.4 million of Cigarette Tax wastransferred to the ITIF upon its creation, so a total of $11.8 million is expectedover the full four- year period.

The significant benefit of this funding strategy is that General Fund tax dollarswill not need to be spent to address the Century Date Change problem. Whileother fund types may be used (Federal, cash, revolving, etc.), the Cigarette Taxdollars are intended to offset funding requirements that normally come from theGeneral Fund.

Incoming tax dollars are currently transferred into the ITIF on a monthly basis.The State’s Budget Director authorizes disbursements, with general oversightprovided by the Information Resources Cabinet (IRC). The IRC, created byExecutive Order in 1996, is charged with general oversight of the State’sinformation technology investments.

THE CITY OF PHILADELPHIA’S PRODUCTIVITY BANK has acapital base of $20 million derived from a bond issue to fund productivity

improvement projects. The Bank, which was created in 1992, has a mission to:

• Stimulate project-specific investments to achieve cost savings, revenue gainsand service improvements;

• Provide strategic development of productivity improvement initiatives acrosscity government, and

• Change the way city government conducts its business by encouraginginnovation, accountability and entrepreneurial efforts in service to the public.

With its $20 million capital base derived from a June 1992 bond issue, the Bankhas achieved significant success as a strategic tool to reform the operations of thegovernment and has aided the city in creating a foundation for cultural changeand for improving departmental performance. As of January 1997, the Bank hadfunded 14 projects for a total of $20.2 million in loans. These projects areforecast to provide financial benefits to the city of almost $60 million over fiveyears. In addition, the projects are generating substantial and long-lastinginnovations that will generate service benefits well beyond their significantquantifiable financial impacts.

Eligible projects are those that cannot otherwise be funded from the city’s capitalbudget or from a department’s operating budget without endangering its normalservice levels. Cost savings and revenue enhancements achieved through Bankprojects are reflected in adjusted operating budgets, as are loan repayments to theBank so that the lending capability can continue.

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Bonds Issued inMassachusetts Fund ManyState Government ITOperations

Point of contact:William KilmartinState of Massachusetts(617) 727-5000

THE STATE OF MASSACHUSETTS has issued two bonds to fundinformation technology. The IT Bond Capital appropriations acts, passed

September 1992 and August 1996, are driven by the philosophy that informationtechnology is one of the State’s most effective tools for re-engineering,streamlining and improving government services while facilitating citizen accessto State services and information resources. These acts provide funds to automatemany State government operations. Projects range from automating the officeoperations of the District Attorneys and State Police to a complete re-design ofthe Commonwealth’s electronic ledger, human resource, payroll and accountingsystems.

Future project benefits will focus on public safety improvements, educationenhancements, and better government service. Projects designed to reduce riskand improve the reliability of government services are intended to save money byavoiding future cost.

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City of Pittsburgh,Pennsylvania, Uses Proceeds from Sale of Used Computers to AcquireNew IT Equipment

Point of contact:Howard A. Stern, City of Pittsburgh(412) 255-2152Howard.a.stern@city.pittsburgh.pa.us

State of Georgia Sells StateInformation on GeorgiaNet

Point of contact:Tom Bostic, State of Georgia(644) 561-8690

5Sale of Public Assets

THE DISPOSITION OF PUBLIC ASSETS and data often focuses onthe donation of assets to schools or other government entities, and oftenprovides data to the public at no charge. In the times of financial

constraints, governments are re-examining the value of public assets and data.While citizens continue to want free information from their government, publiccompanies and vendors are more often assessed a fee for information. The sale ofused equipment and other public assets is a popular and easy way to generaterevenue.

THE CITY OF PITTSBURGH USES THE PROCEEDS from the sale ofold computer equipment to buy new equipment. This program will be

expanded to include the sale of used telephone systems, cabling andcommunications equipment, mainframe computers, etc. Since 1995, the profitsfrom this initiative have helped the city purchase new computer equipmentwithout impacting its current operating budget. The city takes the proceeds fromold computer equipment and recycles them into new computer equipmentthrough a special trust fund. This initiative has been very successful, and cityofficials are looking forward to generating even more money next year.

The only barriers are that a contract must be in place to competitively bid usedequipment and the city council must approve it. The benefit is a way ofpurchasing new equipment without allocating appropriated funds.

UNDER THE AUSPICES of the GeorgiaNet Authority, the State of Georgia isselling State information in its GeorgiaNet system, developing added-value

web applications that generate revenues, and charging fees for tailored specialapplications. The GeorgiaNet Authority is the only Georgia State agencyauthorized to sell State data. An example of a specialized application is the“Lobbyist in a Box.” While there are numerous databases within GeorgiaNetallowing bill searches for the general public, the GeorgiaNet Authority tailored aspecial application for lobbyists that directly meets their needs. Lobbyists arecharged $50 per year for this service. Other applications generating revenueinvolve the tailoring of data already available to the public in its general form forassociations and other interest groups. Since it began over five years ago, theGeorgiaNet Authority has received an average of $15 million annually. Being aseparate authority, with a highly placed Board of Directors appointed by theGovernor, it can produce web products very rapidly, ensure they respond to theState’s highest priorities and begin to address the enormous demands in the areaof public access.

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State of Kentucky DevelopsCommunity Networks

Point of contact:Doug Robinson, Kentucky InformationResources Management Commission(502) 573-5476

State of Kentucky FundsInformation Technologythrough a Federal Grant toControl the Use andAvailability of Illegal Drugs

Point of contact:Deborah McGovernState of Kentucky(502) 564-7554

6Grants

THERE ARE MANY FORMS OF GRANTS which Federal, State andlocal governments can use. The Federal Government has a number ofgrant programs available to State and local governments that are

administered by organizations such as the Department of Education, theDepartment of Health and Human Services, and the National Science Foundation,to name a few. The Catalog of Federal Domestic Assistance, prepared by the U.S.General Services Administration, describes financial and non-financial assistanceprograms administered by departments and agencies of the Federal government.As a basic reference source of Federal programs, the primary purpose of theCatalog is to assist users in identifying programs that meet their specificobjectives as well as to obtain general information on Federal assistanceprograms. The Catalog also improves coordination and communication betweenthe Federal government and State and local governments.

THE APPALACHIAN REGIONAL COMMISSION (ARC) granted$250,000 to the Kentucky Information Resources Management (KIRM)

Commission to promote the benefits of information infrastructure through thedevelopment of community networks. KIRM and other partners helpcommunities develop a common vision and implementation plan for thedevelopment of a virtual community of people, businesses, government agencies,schools, libraries, health care providers and others linked throughtelecommunications and information services.

THE STATE OF KENTUCKY RECEIVED A GRANT from theDepartment of Justice to provide leadership and direction in controlling the

use and availability of illegal drugs. In July 1997, the State of Kentucky received$7.4 million from the U.S. Department of Justice’s Edward Byrne MemorialDiscretionary Grant Program. This grant program is aimed at providing leadershipand direction in controlling the use and availability of illegal drugs and toimprove the functioning of the criminal justice system, with emphasis on violentcrimes and serious offenders. This three-year grant also mandates that a minimumof 5% of the total fund be used for information technology. Kentucky plans tomodernize technology supporting the State’s criminal records system.

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U.S. Department ofCommerce Grants Funds toState and Local Govern-ments to Improve Access toCommunity Based Services

Point of contact: Stephen DownsNational Telecommunications and Information AdministrationDepartment of Commerce(202) 482-2048

FCC’s Universal Service Fund Ensures AffordableQuality TelecommunicationsServices

Point of contact:Mike Hale, State of Georgia(404) 657-1350

THE DEPARTMENT OF COMMERCE’S Telecommunications andInformation Infrastructure Assistance Program (TIIAP) provides matching

grants to non-profit organizations such as schools, libraries, hospitals, public safetyentities and State and local governments. Grants are used to fund projects thatimprove the quality of, and the public’s access to, education, health care, publicsafety, and other community based services. The grants are used to purchaseequipment for connection to networks, including computers, videoconferencingsystems, network routers and telephones and to buy software for organizing andprocessing all kinds of information.

In September 1997,TIIAP awarded 55 grants in 38 states and the District ofColumbia, totaling $20.9 million and was matched by $25 million in non-Federalfunds.

THE FEDERAL COMMUNICATIONS COMMISSION’S (FCC’S)Universal Service Fund ensures affordable quality telecommunications

services to all consumers, including low-income consumers, in all regions of thenation.The Telecommunications Act of 1996 requires the FCC and the States toensure that the goals of affordable service and access to advancedtelecommunications services are met by means that enhance rather than distortcompetition. In addition, for the first time in history, the Act requires that alleligible schools, libraries, and rural health care providers receivetelecommunications services at a discount.

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U.S. Department of JusticeFunds IT Initiatives throughthe Sale of Seized Assets

Point of contact:Katherine DeoudesU.S. Department of Justice(202) 307-9009

7Seized Assets

THE USE OF PROFITS from seized or forfeited assets has been apopular source of funding in the U.S. Department of the Treasury. Whilethis is a lucrative funding source, there are substantial administrative costs

in storing and disposing of seized assets.

THE U.S. MARSHALS SERVICE, U.S. Department of Justice, is responsiblefor the management and disposition of seized and forfeited assets from drug

trafficking and organized crime. The Asset Seizure and Forfeiture Program hasbecome a key part of the Federal government’s efforts to combat major criminalactivities. The Marshals Service currently manages more than $1.6 billion worthof property seized from criminals.

Under the Equitable Sharing Program, money from the Justice Assets ForfeitureFund is shared with the State and local law enforcement agencies thatparticipated in the investigations that led to the forfeiture. The amount of moneythe State and local agencies receive is based on the contributions they made tothe investigations. Since 1986, more than $1 billion in forfeited cash, proceedsand property has been provided to State and local agencies. A portion of thefunds allocated to State and local governments is being used to fund technologythat supports law enforcement efforts.

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IDENTIFYING ANDSELECTING the mostappropriate approach for funding

an information technology initiativecan make the difference in whether ornot the initiative is a success. Asidentified in this report, there aremany alternative approaches that canbe used. IT managers at all levels ofgovernment must take particular careto understand these approaches andwork toward creating an environmentthat allows them to implementinnovative approaches. The followingrecommendations should beconsidered at all levels of government.

1. Government managers should worktoward creating a flexibleenvironment that allows ITmanagers to use alternative fundingapproaches when traditionalfunding is not available.

2. Government IT managers shouldidentify legislative and regulatorybarriers to the use of alternativefunding techniques.

3. IT managers should have a workingknowledge of applicable financialand budgetary rules and regulationsto understand when variousfunding approaches would beapplicable.

4. The Department of Health andHuman Services and other agenciesthat administer Federal grantsshould consider allowing matureassociations that represent ITinitiatives crossing governmentboundaries to apply for grants.

5. Governments at all levels shouldconsider ways to educate electedofficials and the public about theimportance of technology and thebenefits that can be gained frominvesting in technology to increasethe chances of legislation beingenacted to increase taxes or to buybonds.

6. Government IT managers shouldconsider the following types ofalternative sources to fund ITinitiatives:

• Entering into partnerships,interagency agreements, franchisingagreements, and coalitions andaccepting pro bono services.

• Assessing fees, surcharges, andsubscription fees when providinggovernment information or serviceswith the establishment of a specialfund for specific expenditures.

• Selling space for advertising onkiosks or other governmentproperty.

• Selling used or obsolete computerand telecommunicationsequipment rather than donating orexcessing it.

• Entering into contingency feecontracts with vendors based onthe revenue they generate or thecost savings or cost avoidanceincurred.

• Ensuring State participation in theFederal government’s AssetForfeiture Program.

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3. Recommendations

Category #1:

PartnershipsState of Georgia

Recently, the Information TechnologyPolicy Council, State of Georgia,received the 1997-98 round ofstrategic IT plans from all Stateagencies. These plans include all themajor technology projects needed tomeet their program goals. To say thereis an interest in Internet and Intranetapplications would be a grossunderstatement. It is more accurate tosay that the desire for this capability isoverwhelming. Beginning withaffording greater access to legacyinformation, but then quickly jumpingto actual service delivery andtransaction processing, theopportunities appear endless.However, network security will be amajor hurdle to overcome.

The State of Georgia has set electronicsignature and network security asmajor policy issues. Georgia isworking with the National Associationof State Information ResourceExecutives (NASIRE) and othernational associations to establishaccreditation standards forCertification Authorities, with the goalof having common standards amongStates. In pursuit of this policy,Georgia issued an RFP to solicitresearch partnerships on a pro bonobasis from private industry anduniversities to establish pilot projectsas proof-of-concept for the possibleapplications and technologiesavailable.

Twelve proposals were received fromvendors; they covered applicationsranging from electronic lientransmissions to electronic invoice

payments. Six projects were selectedwherein vendors will come in at nocost, develop an application, and, insome cases, bring it up intoimplementation. In addition, someprojects included white paperscovering vendors’ experiences indeveloping products and services. Ifthe State were to attempt to establishthese same pilots totally through atraditional appropriation and bidprocess, it would have taken years ofeffort and the response wouldprobably have been “too little, toolate.”

The projects chosen to date include:

1. An electronic lien application foruse with automobile titles to bedesigned by First Union Bank.

2. An electronic invoicing applicationfor the Department of HumanServices to be designed andimplemented by UnisysCorporation.

3. A court filing application to bedesigned by Georgia StateUniversity.

4. A filing system for mortgagebrokers to be designed andimplemented by GeorgiaNetAuthority in conjunction with FirstUnion Bank.

5. A web-based application to obtainhunting and fishing licenses to bedesigned by IXL Corporation.

6. Two white papers from First UnionBank on public key certificates andpublic key infrastructures.

Awards are in the process of beingmade to each company. Projects willbe completed over the coming year,with in-process briefings presented toGeorgia’s Electronic CommerceSteering Committee.

Reactions thus far from both electedofficials and agency managers havebeen very positive. The oneoverarching conclusion is that privateindustry has the interest and theresources to invest in research withgovernment in order to give marketvisibility to the more advancedtechnologies being considered byState governments. The researchpartners provide the necessary fundsto support the pilot projects theyhave proposed. The State determinesthose projects it wishes to includeamong the research projects. Inaddition, the State evaluates eachproposal in light of the resources andlevel of work being proposed. Theresearch partner selected will makethe actual investment decisions.

The only barriers to this innovativefunding approach have beenexplaining the approach to industrypartners and producing widespreadpublicity of the requests for proposals(RFPs).

This arrangement benefits both Stategovernment and the participatingcompanies. In particular, there aremany nontraditional companiesinterested in becoming involved inthis project. Small developmentcompanies see this as a means ofobtaining statewide recognition.

As far as risks are concerned, thisprogram was intentionally designed tobe research in nature. Stategovernments, like other large complexorganizations, need opportunities totest new concepts prior toimplementation. However, most Stategovernments have no formal researchand development programs. Havingthese pilots actually reduces risks ofmoving too quickly intoimplementation without first having

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Appendix CaseA Studies

opportunities to test and evaluate newtechnology.

Plans are to continue working withpilot participants over the comingyear. If and when pilots provethemselves, Georgia will have a muchbetter chance for State funding.

For further information, contact MikeHale of the State of Georgia on (404) 657-1350.

City of Austin, Texas

The city of Austin,Texas, partneredwith local entities to form a coalitionof Government and educationalmembers to construct a wirelesscommunication network throughoutAustin/Travis County. This networkwill employ voice radio, computer-aided dispatch, mobile datacommunications, geographicinformation system data, microwave,intelligent transportation systems andtransit systems, all of which can beoperated from a fully integratedcommunications center. An integratedregional wireless communicationssystem would improve public safetyand public service agencies’communications with each other andallow direct access and exchange ofdata, thereby promoting public health,safety and welfare.

Key participants of the partnershipwere the city of Austin,Travis County,Austin Community College, CapitalMetro,Austin Independent SchoolDistrict, University of Texas, city ofWest Lake Hills,Texas LegislativeCouncil, House of Representatives, andthe Texas Department ofTransportation.

All initiatives have funding for theinitial phases of work. The radioinitiative is beginning Phase II work,which will involve licensure, detailed

design, specification, evaluation andselection of a vendor. The city ofAustin recently received voterapproval to provide funding for thefinal phase in the radio initiative in theamount of $38 million. The computer-aided display/mobile data terminal(CAD/MDT) initiative received $8.2million and began Phase II work inSeptember 1997. The TexasDepartment of Transportation received$8 million for its portion of theintegrated communications center.Phase I needs assessment work beganwith an RFQ advertised in August1997.

Savings will be realized through thereduced use of land, voicefrequencies, computer equipment andinfrastructure costs for systems.Increased voice and data sharingamong agencies will result inimproved staff effectiveness and emer-gency service delivery to citizens.

For further information, contactDanny Hobby of the City of Austin,Texas, on (512) 499-6570 or via e-mailat hobby@infosys.ci.austin.tx.us

State of Texas

The Texas Orthoimagery Program(TOP) provides a new set of statewidedigital maps. For many years, peoplehave relied on large-scale paper mapsdeveloped by the U.S. GeologicalSurvey (USGS). Over 4,000 suchmaps, divided into quadrangles, orquads, cover Texas. Many of thesemaps are outdated because they werecreated 15 to 35 years ago. Mappinginformation is now being produced indigital form, away from the traditionalpaper maps.

In 1995, the Department ofInformation Resources, State of Texas,entered into an innovative partnership

with USGS to produce digitalorthophotos through the TexasOrthoimagery Program (TOP).Orthophotos are scanned aerialphotographs that combine geometricqualities of a map with the image of arecent photograph. Funding for TOPwas provided throughout the Federalgovernment, the State, and local andregional groups. Three Federalagencies - the USGS, the NaturalResources Conservation Service(NRCS) and the Farm Service Agency(FSA) - contributed a combined 55%of the funds. The Texas Match Poolprovided 23% from a fund designed toattract matching Federal funds. Thereminder (about 22%) was providedby local and regional entities.

Working with the local and regionalgroups has provided a unique avenuefor funds generation while developinglocal involvement and partnership.With the Federal and State moneyalready in place, orthophotos areproduced where a local interestprovides funding. This allows localgroups to work in concert with Texasand the Federal government asfacilitators of these new digital maps.Local groups work as partners ingenerating interest, organizing fundingand distributing orthophoto products.The 22% of the funds needed fromlocal groups for orthophotos breaksdown to $900 per quad, or about $3.5million.

Texas has a diverse group of local andregional government entities thatservice their populace.Representatives of all of these groups,along with the private sector, haveparticipated in TOP by providing theirresources while still addressing localneeds. All portions of the State fallunder one of two regional groups.Councils of Government (COGs) are

25

multi-county bodies designed forregional planning and informationexchange. There are 24 COGs inTexas. River Authorities manage waterresources for 22 principal river basins.Multi-county groups such as COGsand river authorities provide acentralized point of contact for aregion while accurately representingthat region’s needs.

In some cases, county levelgovernment came forward instead of aregional government. Groups within acounty, such as municipalities,emergency 911 districts, drainagedistricts and county governments haveorganized on a smaller scale to solicitlocal funds, spread information aboutthe project and distribute the finalproduct. This approach works well inareas where the COGS and riverauthorities do not have sufficientfunds for TOP.

The private sector has contributedfunds as landowners and operators inother areas. Ranch owners, timbercompanies and oil service companieshave assisted local and regionalgovernment where needed.

In all cases, local funding for TOP hascome from those with the greatest tiesto the land (i.e., people who own,manage, study and work on the landbeing mapped). This has producedvariable partnerships between thefunding and planning groups (Stateand Federal government) and thepeople who own and use the land.The success of TOP is providing thecitizens of Texas a public resource thatwill meet statewide mapping needsfor years to come.

For further information, contact DrewDecker of the State of Texas on (512) 475-7314.

State of Texas

The Texas Workforce Commission(TWC) and Info/Texas, serving as thevendor, agreed to implement astatewide network of 50 to 100multimedia kiosks providing TWCinformation and services. The TWCagreed to remain a participant in thenetwork and pay Info/Texas monthlyfees based on each kiosk’s use for aperiod of at least 2 1/2 years, subjectto an early cap on fees. Info/Texascould sell paid advertising to TWC-approved entities, both public andprivate, on the same multimediakiosks.

In return, Info/Texas agreed to thefollowing:

1. To provide and install up front allof the hardware and softwarerequired for the kiosks without anyadvance fees or compensation;

2. To provide all hardware andsoftware maintenance for thekiosks without additional charge;

3. To negotiate and manage all leasesfor kiosk locations; and

4. To seek prior approval from TWCbefore implementing new, non-government advertising on thekiosks.

This approach has offered advantagesto both partners. The TWC was able toprovide agency information andservices in locations the agency doesnot normally serve and outside ofregular business hours. TWC did thiswithout any up front investment,without securing in-house multimediaexpertise and for a lower cost thanindependently purchasing, installingand maintaining its own kiosk network.TWC paid for Info/Texas’ services outof its general operating budget.

Info/Texas was able to establish akiosk presence in one of the nation’slargest markets, supported by a long-term commitment from a majorcustomer. The fees generated by theTWC contract alone were notsufficient to cover Info/Texas’ totalcosts, but the ability to sell kioskadvertising services on the samekiosks to other entities offered thepotential for significant profits.

The TWC and Info/Texas are currentlyconverting the kiosk network fromInfo/Texas’ proprietary multimediainterface to a World Wide Web-basedinterface. This new approach willoffer TWC more speed and flexibilitywhen making changes to the kiosks’content and allow Info/Texas tomarket advertising to customers thatalready have World Wide Web sites.

For further information, contact MarkFenner of the State of Texas on (512) 463-8263.

State of Massachusetts

Partnering is a very popular strategy,and the State has done dozens ofprojects using combination fundingfrom multiple stakeholder entities. Anexample is the creation of a revenuemanagement system (the billing andaccounts receivable system) for Stategovernment. To develop the system,the Comptroller’s Office contributed$3.3 million (from the InformationTechnology Bond I), the MassachusettsHighway Department contributed$900,000 (from its operating budget)and the U.S. Department ofTransportation was billed for Federalreimbursement. The systemsintegration firm,AmericanManagement Systems (AMS), gaveMassachusetts a royalty of $150,000from the subsequent sale of the

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system to other clients. In thisexample, Massachusetts used $3.3million to leverage $4.5 million ininformation technology development.

For further information, contactWilliam Kilmartin of the State ofMassachusetts on (617) 727-5000.

State of New York

The Center for Technology inGovernment (CTG) at the Universityof Albany forms strategicpartnerships with Governmentagencies, technology corporationsand university faculty and students.The Center was funded by Statefunds along with in-kind donationsfrom more than 40 private companiesand from the State University of NewYork at Albany. Three dozen high-tech companies, more than 30government agencies, and a dozenacademic researchers haveparticipated in Center projects sincethe Center’s inception in 1993. Itsmission is to solve problems relatedto public services through the use ofinformation technology in State andlocal governments. The Center hasbeen honored with awards ofnational significance and pursuesgrants that allow it to expand itswork beyond New York State. Oneof its most recent efforts was a guidedetailing how best practices andfundamental principles can shape theway State and local governmentsshare information systems. The bestpractices and principles are thecornerstone of the guide,“Tying aSensible Knot:A Practical Guide toState-Local Information Systems.”

For further information, contact theCenter for Technology in Governmentat (518) 442-3892 or through its website at http://www.ctg.albany.edu

Anne Arundel County,Maryland

Negotiated franchise agreements withcable television providers allow AnneArundel County, Maryland, to transportpublic safety data and videocommunications on shared fiber opticcable and transmit other governmentdata. In addition, they provide for thetransmission of public, educationaland government programs to bebroadcast on the cable systems.Currently, 27 miles of fiber areinstalled, with a total build-out of 70miles projected. Cable TV companiesprovide funding through franchisefees and provide head-endinterconnections. The countygovernment provides contracting forconstruction, cable plant management,communications management andprogram content management. Noadded government staff is required.

For further information, contact JerryKlasmeier of the Anne Arundel CountyGovernment on (410) 222-7644.

City of Atlanta, Georgia

The city of Atlanta and its cableoperator, MediaOne, have entered intoa franchise agreement to construct afiber-rich communications networkand will sell the city fiber-opticcapacity without incurring fixed costsfor construction. MediaOne hasagreed to provide $1.2 million ininitial funding for the development ofthe network and an additional $1.3million upon authorization from thecity council (these expenditureswould be passed through tosubscribers). To take advantage ofthis offer, the city must convey itsfiber requirements to the company atthe time of design of the cable system.

For further information, contact Rita

Bloom of the City of Atlanta on (404) 330-6004.

Anne Arundel County,Maryland

Anne Arundel County, Maryland, hasgranted easements for fiber cableinstallation in highway andrecreational rail-trail rights of way.These easements permit corporationsto place long runs of fiber for use bygovernment and for use byconventional private telecommunica-tions companies. Other States havegranted similar easements.

For further information, contact JerryKlasmeier of the Anne Arundel CountyGovernment on (410) 222-7644.

City of Greensboro, North Carolina

The city of Greensboro, NorthCarolina, is partnering with cellularphone (analog) and PersonalCommunications System (PCS)(digital) providers. The city is sellingnew tower space on city property oroffering co-location of PCS or cellularantennas on city-built towers. Thisinitiative requires a small paymentfrom private industry to hold a spacefor a co-location on an existing facilityor for a company to build a tower oncity property. Once a lease is in placefor that site, the city requires anadvance rental payment of three yearsfor co-locations on existing sites. Thelease is for a 5-year term with theoption to renew for 4 more 5-yearterms; price increases are based onthe Consumer Price Index.

Funds are collected before the lease isin place; then, beginning the fourthyear, the company is billed annually.Since the first lease in 1995, over $1million has been collected. The onlyimpediments are zoning problems and

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structural loading problems, which aresignificantly outweighed by therevenue being produced for futuretechnology. The city of Greensboroexpects to continue leasing asrequests and availability permit.

For further information, contact EricCombs of Greensboro, North Carolinaon (910) 373-2526.

U.S. Federal Government

The Department of the Treasury’sFinancial Management Service, theDepartment of Energy, theEnvironmental Protection Service andthe Bureau of the Census have enteredinto an interagency agreement todefine Public Key Infrastructure (PKI)and associated client services tosupport an electronic signature utility.Each agency will contribute matchingfunds from appropriations to pay forthis project.

For further information, contact CalvinKidd of the U.S. Department ofTreasury’s Financial ManagementService on (202) 874-7611 or JerryAdegard of the U.S. Department ofEnergy on (301) 903-5860.

Fairfax County, Virginia

In 1993, the Board of Supervisors inFairfax County,Virginia, passed anordinance to establish theAdministration of Justice Fund. Thisordinance permits each juror to directall or part of the compensation duefor jury service to the Circuit Courtfor expenditures related to theadministration of court activities,especially the advancement ofcomputer technology within the courtsystem. Jurors are provided a form onwhich to designate the amount theywish to donate. This amount isautomatically deducted from the totalamount they would have received.

Donations range from $1 to $30 perday per juror. The Clerk of the Courtsprovides the Board of Supervisorswith an annual report showing therevenues received, all disbursements,any ending balance and improvementsmade with Fund disbursements.

For further information contact JohnFrey, Fairfax County Government, at703-246-2770.

Category #2:

CombinationFundingState of Massachusetts

The use of combination funding is apopular funding strategy inMassachusetts. The State’s electronicbenefits transfer (EBT) project is agood illustration of using multiplesources to fund a project. This projectreplaces paper food stamps andwelfare checks with debit cards. TheComptroller’s office investedapproximately $2.5 million (usingInformation Technology Bond II) andthe U.S. Department of Agriculturecontributed $2.5 million for systemdevelopment and implementation.

The cost per case per month for theold paper delivery system wasapproximately $3.90, with operationalexpenses funded 50% by the State and50% by the U.S. Department ofAgriculture. With EBT, the cost percase per month is about $1.40 and therecipient gets four transactions permonth. The State funds 50%, and theU.S. Department of Agriculture funds50%. If the recipient desiresadditional transactions, it costs 85cents per transaction.

For further information, contactWilliam Kilmartin of the State ofMassachusetts on (617) 727-5000.

State of Maryland

The Maryland Technology InvestmentFund was established by the 1996General Assembly to provide resourcesfor technology projects to improveefficiencies, expand services andincrease educational opportunities.The fund receives a share of revenuesfrom technology leases and sales,

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savings from technology contracts andgeneral fund appropriations. In FY1997, the Department of Managementand Budget established kiosk locationsto bring services closer to citizens (inconjunction with the U.S. PostalService); and the Department of Labor,Licensing and Regulation providedInternet access for the State’soccupational and professionallicensing processes.

For further information, contact Mr. Lou Laricci, State of Maryland on (410) 767-4202.

U.S. Federal Government

The Government InformationTechnology Services Board (GITSB)created a Technology Innovation Fundusing funds from the U.S. GeneralServices Administration’s FederalTechnology Service’s FTS2000 longdistance telecommunicationsprogram. Funding has been at orabout 1% of the projected FTS2000annual income.

The Fund is to provide “seed” moneyfor innovative IT Federal agencyprojects that provide more efficientand effective delivery of services tothe public. Projects involving multipleagencies and single agency projectsthat can be easily ported orimplemented by other agencies areparticularly encouraged. Theseprojects are expected to be self-sustaining within two years andprovide future reimbursements to theFund where feasible. The projects fallwithin the scope of InformationTechnology Fund uses as establishedin 40 U.S.C. 757(b)(2).

Projects are selected for funding bythe Innovation Fund Committee,which includes representatives of theGovernment Information Technology

Services Board (GITSB). Selection ismade from proposals submitted inresponse to a call for proposals. In FY1995, there was one call for proposalsin October 1994, and the Committeeselected 13 projects for funding at atotal of $5,015,000. In FY 1996, therewere two calls for proposals inOctober 1995 and March 1996 andthe Committee selected 11 projectsfor funding at a total of $6,215,000. InFY 1997, there were two calls forproposals in October 1996 and March1997, and the Committee selected 13projects for funding at a total of$6,943,000.

For further information, contact GayleGordon, U.S. Department of theInterior, GITSB Member on (202) 208-7701 or (303) 236-4565, orYvonne Kinney, U.S. Department ofthe Interior, (202) 452-5008.

Category #3:

Use of FeesU.S. Department of Justice

The Immigration User Fee Accountbegan in 1987 with the Department ofJustice Appropriation Act. Virtually allindividuals entering the United Statesby air or by sea are assessed a $6 feeto offset the cost of immigrationinspections (current exemptionsinclude sea vessel passengers fromMexico and Canada). The fee is alsoused to support overseas pre-inspection services.

The funds are used for inspectionactivities such as detention anddeportation of inadmissible aliens,operation and maintenance ofinformation systems for non-immigrantcontrol, and the detection offraudulent immigration documenta-tion. The fund can also be used toprovide for training, administrationand management, records, facilitiesand legal services required for thesupport of these activities. Numerousinformation systems related to theidentification and verification of aliensand to the sharing of information aresupported by this fund. These systemsrepresent the core informationmanagement systems for the INS,covering border crossings for citizens,immigrants, and non-immigrants.

The INS budget staff performs trendanalyses annually to determine likelylevels of revenue collection. OnceCongress has appropriated the“anticipated” funds to INS, the budgetstaff allocates the funds to variousprogram staff and functional areas,including the Office of InformationResources Management (OIRM).Typically, with the exception of

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enhancements required by Congress,the INS budget staff bases its alloca-tions on the previous year’s allocation.

The user fees are not collected fromindividual travelers. Entities that issuetickets, such as ticket agents and air orsea carriers, collect the fee. Theseentities are responsible for remittingthe accumulated fees to the INS on aquarterly basis.

In FY 1997, OIRM receivedapproximately $29 million to supportIT systems. The FY 98 allocation fromthis account is expected to beapproximately the same.

The most important risk is that theactual funding level is not knownfrom year to year. There are threepoints in the process that put fundingat risk. User fees are tied to the actualuse of the service, in this case, thenumber of travelers entering the U.S.in a manner covered by the account.Although this is a user fee, Congressestablishes the revenues as part of theauthorization of the Department ofJustice. Further, the INS budget staffdoes not forward all collections to anyone project; the final amount allocatedto IT support is, therefore, unclearfrom year to year.

In the future, it is hoped that this feewill be linked more directly to thecosts of providing the immigrationservices at the border. Although thefee is established at $6 per traveler,the amount that flows to IT projectsin support of the services is no longercommensurate with the costs of thoseIT services.The INS budget staff is re-examining the fee structure todetermine the appropriateness of ahigher rate. OIRM is expected to haveinput into the new allocationproportions (in hopes of increasing

them to cover actual costs) once thefee structure is reviewed.

For further information, contactKendall Lott, U.S. Immigration andNaturalization Service at (202) 307-5872 or via e-mail atkendall.lott@usdoj.gov

U.S. Department of Justice

In 1989, the U. S. Department ofJustice established the ImmigrationExamination Fee Account. Itauthorizes the INS to establish andcollect fees to recover the cost ofproviding certain immigrationadjudication and naturalizationservices. Aspects of the collection andapplicability of the fees wereexpanded in law in 1994 and 1995. Atthe discretion of the Attorney General,the revenues are collected to“reimburse any appropriation theamount paid out of suchappropriation for expenses inproviding immigration adjudicationand naturalization services and thecollection, safeguarding, andaccounting for fees…” This is thelargest fee account in the INS.

In total, there are over 40 differentapplications fees that may be used forthis account. The key applications arefor Naturalization, PermanentResidence,Alien Petitions, andApplications for EmploymentAuthorization. The fees can be usedfor a wide variety of activitiesconcerning the processing andadjudication of petitions for benefitsunder the Immigration and NationalityAct, including administrative support,facilities, records and legal services.From an IT perspective, this accountmay provide resources for supportfunctions necessary in the processingand adjudication of applications andpetitions. This can include functions

related to files transactions, includingcreating, transferring and verifyingrecords and information systemstechnology for INS employeesperforming application processing.

A study was completed recentlyindicating that the current feestructure is inadequate in recoupingthe costs of benefits processing andadjudication. The Exams Fee accountapplication fees are revised throughthe regulatory process consistent withthe User Fee Statute, the ChiefFinancial Officer Act, theAdministrative Procedures Act, andother guidance and statutes. Aproposed Rule that will revise the feeschedule will be published soon.

The INS budget staff performs trendanalyses annually to determine likelylevels of revenue collection. OnceCongress has appropriated the“anticipated” funds to INS, the budgetstaff allocates the funds to variousprogram staff and functional areas,including the Office of InformationResources Management (OIRM).Typically, with the exception ofenhancements required by Congress,the INS budget staff bases itsallocations on the previous year’sallocation. The fees are deposited intothe Exams Fee account and areavailable, subject to congressionalapproved budget/reprogramming,until expended.

Fees for applications for immigration,nationality and citizenship benefits arereceived in field offices locatedthroughout the country and by directmail in four service centers located inCalifornia,Texas,Vermont andNebraska. The INS also receives feesfrom Department of State consularaffairs offices and the Executive Officeof Immigration Review.

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Similarly, the fees for services at landborder ports-of-entry are collected atthese points and deposited in theExams Fee Account, but trackedseparately and referred to as the “Feesfor Services at Land Border” portion ofthe account.

In FY 1997, OIRM receivedapproximately $47 million to supportIT systems. The FY 98 allocation fromthis account is expected to beapproximately the same.

This account is extremely importantas a funding source for the INS as awhole, as well as for the OIRM, toprovide for the continueddevelopment, enhancement anddelivery of benefits services toqualified applicants. Its high visibility,large volume and importanceincreases the risk of negative impactson IT projects in the event ofdecreases in collections fromapplicants and allocations from theINS budget.

It is hoped that, consistent with theconclusions of the recently completedstudy, the fee structure for thisaccount (which has been unchangedfor over 5 years) will be altered toincrease fees for certain applications.The proposed fee increases areconsistent with increased costsincurred to process and adjudicate theapplications.

For further information, contactKendall Lott, U.S. Immigration andNaturalization Service on (202) 307-5872 or via e-mail atkendall.lott@usdoj.gov

State of Kansas

The Information Network of Kansas(INK) is a unique model forpublic/private cooperation based onuser fees. It is a government service

administered for the good of thepublic, while benefiting from theentrepreneurial models found inprivate business. In 1990, the KansasLegislature passed the InformationNetwork of Kansas into law. INKprovides electronic access for citizensto public information of agencies via agateway service. In addition, itprovides a dial-in gateway orelectronic network for access topublic information. It explorestechnological ways and means ofimproving citizen and business accessto public information. Whereappropriate, INK implements suchtechnological improvements.

Although the vast majority of servicesavailable on the Information Networkof Kansas are accessible free of chargeby anyone on the Internet, INKreceives no State funding. It is entirelyfunded by the fees generated underthe premium service described below.It is managed by a private networkmanager chosen through an extensivecompetitive evaluation and biddingprocess. The Kansas InformationConsortium was selected as thenetwork manager and receives aregulated return while remitting themajority of the revenues generated bythe network to the State of Kansas.

The premium fee service containslegal, banking and other industryspecific business applications thathave a fee associated with access.There is a $75 subscription fee toaccess the INK’s premium services.The annual renewal fee is $60. Inaddition to the annual subscriptionfee, certain applications have statutoryand/or transaction fees.

For further information, contact Jeff Fraser, State of Kansas on (785) 296-5154.

State of West Virginia

During the 1997 legislative session,the West Virginia Legislature passed astatute allowing collection of asurcharge on cellular phones by theState of West Virginia. Roughly, two-thirds of the funds will be distributedback to counties based on population.One-sixth of the funds will be put inescrow for counties that currently donot have 911 centers. Becauseestablishing 911 centers is voluntary,this escrow funding is an incentive forthose counties to establish 911centers. If the counties do notestablish 911 centers within fiveyears, the funds that have beenescrowed for them will go back intothe pool and be distributed to othercounties. Another one-sixth goes tocounties that have recently formed911 centers.

The fee on the cellular phones will be75 cents per month. It is estimatedthat this surcharge will generateapproximately $1.5 million. Thesefunds can be used for the purposesarticulated in State statutes for theoperations of 911 centers. Thedecision regarding how these fundswould be distributed was debated inthe Legislature with input fromcounties, 911 centers and the cellularphone industry. The funds are to becollected from the cellular phoneindustry. Whether or not the industrycan charge a fee for the collectionservice has not been determined.Further, legislation requires that 911centers acquire the necessaryequipment to determine the origin ofa cellular phone call.

For further information, contactStephen Zoeller, Kanawha CountyCommission, State of West Virginia on(304) 357-0101.

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State of Massachusetts

The State of Massachusetts is usingvendors to provide services on acontingent fee basis to develop andimplement information technologyprojects within the State. Under thecontingent fee revenue optimizationconcept, the State of Massachusettshas completed 30 to 35 suchengagements since FY 90. A smallpercentage pertain to informationtechnology.

In FY 91 through FY 93, sophisticateddouble-iteration step-down cost-accounting software programs weredeveloped to produce fringe benefitand indirect cost recovery rates forprograms funded by non-Stateresources (i.e., Federal grants orassessments). A major consulting firmwas engaged on a contingent basis todevelop the software, load the initialdata, produce the set of new recoveryrates, and then turn the system over tothe State. The system was developedby the vendor, without governmentfunds. Recoveries increased byapproximately $17 million annually.The vendor was paid a one-time fee ofapproximately $3 million.

For further information, contactWilliam Kilmartin, State ofMassachusetts on (617) 727-5000.

State of Massachusetts

Contingent fee cost savings is a verynew legal authorization, and theState’s first project is underway. Theproject is not entirely informationtechnology. A private company hasbeen engaged to identify (viacomputer searches) the existence ofhealth insurance for clients requestingMedicaid eligibility and direct thoseclients into insurance programs (awayfrom State-funded Medicaid), thus

avoiding costs to the Medicaidprogram. In the first six months,approximately $9 million in costs havebeen avoided, and the vendor hasbeen paid $300,000.

For further information, contactWilliam Kilmartin, State ofMassachusetts on (617) 727-5000.

Category #4:

Use of Taxes and BondsState of Georgia

State governments are facing majorchallenges establishing andmaintaining modern statewide ITinfrastructures. As a result, most stateslack the kind of advanced technology,training and tools to enable the rapiddevelopment that managers need inGovernment agencies.

One cause of this situation is themanner in which funds areappropriated. State budgets arenormally agency-oriented whereininvestment decisions are to fundagency applications and not Stateinfrastructure. State infrastructureinitiatives must “piggy back” on top ofthese separate agency investments.Examples are large processorupgrades, dedicated developmenttools and networks.

A second cause affecting technologyinvestments is lack of awareness ofthe need to fund infrastructure as aunique corporate investment.Statewide e-mail, advanced desktopworkstations, systems version control,modern development tools and stafftraining are difficult to fund outsidethe justification of an agencyapplication. However, the reality isthat without a modern infrastructure,the full value of IT cannot be realized.Once again, this raises the question ofIT being viewed as an investment vs. acost. Most corporations that realizethe benefits of IT as an investmentalso have taken steps to invest inmodern infrastructures apart fromindividual applications.

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A third cause of the situation is thelarge investments required forupgrading State infrastructures. Notunlike State capital expenditures forbuildings, sewer systems and roads,the infrastructure for informationtechnology is not cheap. Estimates forYear 2000 remediation begin to givesome insights into the size of theseinfrastructure costs.

States wishing to invest ininfrastructure have two choices.Theycan compete these investmentsagainst other annual requirementssuch as teacher salaries, prison bedsand the like, or they can establish aseparate funding category such as thecurrent capital budgets for fixed assets(buildings, etc.) and manage ITinfrastructure along these lines. Thelatter is the essence of this innovativefunding approach.

This approach could require bondfinancing in the manner that currentlysupports other fixed capital projects.State governments would be requiredto identify categories of IT that bondunderwriters would find acceptableand be willing to support. State lawsmay need to be modified and revenuesources identified to support the bondpayment. Certainly, the issue of Statestandards would have to be addressedto ensure that the State infrastructurewould be shared to the maximumextent possible.

At this point, a national report isneeded to shed light on this importantproblem and begin to encouragedebate within State and localgovernments. Obviously details mustbe sorted out and options studied.However, the first step is to makeofficials aware of the dilemma thatstates face trying to compete

infrastructure in a line item againstother pressing social needs.

For further information, contact Mike Hale, State of Georgia on (404) 657-1350.

State of Nebraska

The Nebraska Legislature andGovernor Ben Nelson signed LB1190into law during the 1996 legislativesession. In that bill, two cents fromthe State’s existing Cigarette Tax werediverted into the newly createdInformation Technology InfrastructureFund (ITIF). This amount, estimated tobe about $2.6 million per year, willhelp fund Nebraska’s Century DataChange project over the next fewyears. An additional $1.4 million ofCigarette Tax had transferred to theITIF upon its creation, so a total of$11.8 million is expected over the fullfour-year period.

The significant benefit of this fundingstrategy is that General Fund taxdollars will not need to be spent toaddress the Century Date Changeproblem. While other fund types maybe used (Federal, cash, revolving, etc.),the Cigarette Tax dollars are intendedto offset funding requirements thatcame from the General Fund.

Incoming tax dollars are currentlytransferred into the ITIF on a monthlybasis. The State’s Budget Directorauthorizes disbursements, withgeneral oversight provided by theInformation Resources Cabinet (IRC).The IRC, created by Executive Orderin 1996, is charged with generaloversight of the State’s informationtechnology investments.

For further information, contact SteveHenderson, State of Nebraska on (402) 471-2065.

City of Philadelphia

The city of Philadelphia’s ProductivityBank was created in 1992 to fundproductivity improvement projectswithin the City government. TheBank’s mission is to:

• Stimulate project-specificinvestments to achieve costsavings, revenue gains and serviceimprovements;

• Provide strategic development ofproductivity improvementinitiatives across city government,and

• Change the way city governmentconducts its business byencouraging innovation,accountability and entrepreneurialefforts in service to the public.

With a capital base of $20 millionderived from a June 1992 bond issue,the Bank has achieved significantsuccess as a strategic tool to reformthe operations of the government andhas aided the city in creating afoundation for cultural change and forimproving departmental performance.As of January 1997, the Bank hadfunded 14 projects for a total of $20.2million in loans. These projects areforecast to provide financial benefitsto the city of almost $60 million overfive years. In addition, the projects aregenerating substantial and long-lastinginnovations that will generate servicebenefits well beyond their significantquantifiable financial impacts.

Eligible projects are those that cannototherwise be funded from the city’scapital budget or from a department’soperating budget without endangeringits normal service levels. Cost savingsand revenue enhancements achievedthrough Bank projects are reflected in

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adjusted operating budgets, as are loanrepayments to the Bank so that thelending capability can continue.

Before 1995, the Productivity Banklimited its funding to projects thatwould cut costs or enhance revenues.Projects also had to achieve a two-for-one return on investment within fiveyears, requiring that the cost savingsor additional revenues generated froma project within five years to be atleast twice the amount of the Bankloan. Because many departmentsperceived this requirement as tooonerous, the Bank’s loan criteria wererestructured in early 1995 to allowgreater flexibility to include projectsthat generate cost savings oradditional revenues or projects thatlead to substantial improvements inservice levels, even if financialpaybacks are not readily quantifiable.

For further information, contact LindaBerkowitz, City of Philadelphia on(215) 686-7508.

State of Massachusetts

The State of Massachusetts has issuedtwo bonds to fund informationtechnology. The IT Bond Capitalappropriations acts, passed September1992 and August 1996, are driven bythe philosophy that informationtechnology is one of the State’s mosteffective tools for re-engineering,streamlining and improvinggovernment services while facilitatingcitizen access to State services andinformation resources. These actsprovide funds to automate many Stategovernment operations. Projectsrange from automating the officeoperations of the District Attorneysand State Police to a complete re-design of the Commonwealth’selectronic ledger, human resource,payroll and accounting systems.

Future project benefits will focus onpublic safety improvements, educationenhancements, and better governmentservice. Projects designed to reducerisk and improve the reliability ofgovernment services are intended tosave money by avoiding future costs.

For further information, contactWilliam Kilmartin, State ofMassachusetts, on (617) 727-5000.

Category #5:

Sale of Public AssetsCity of Pittsburgh,Pennsylvania

The city of Pittsburgh uses theproceeds from the sale of oldcomputer equipment to buy newequipment. This program will beexpanded to include the sale of usedtelephone systems, cabling andcommunications equipment, mainframecomputers, etc.

Since 1995, the profits from thisinitiative have helped the city ofPittsburgh purchase new computerequipment without impacting itscurrent operating budget. The city ofPittsburgh takes the proceeds from oldcomputer equipment and recyclesthem into new computer equipmentthrough a special trust fund. Thisinitiative has been very successful andcity officials are looking forward togenerating even more money next year.

Pittsburgh’s City Information SystemsOffice obtained its city councilapproval to disburse these funds. Theargument was made that any dollarsobtained from the sale of used orobsolete equipment should bereinvested in new computerequipment, and once the dollars werededicated for IT equipment, it shouldalways be used for that purpose.

The only barriers are that a contractmust be in place to competitively bidused equipment and that the citycouncil must approve. The benefit is away of purchasing new equipmentwithout allocating appropriated funds.Future plans include expanding thisprogram to include the sale of used

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telephone systems, cabling andcommunications equipment,mainframe computers, etc.

For further information, contactHoward A. Stern of the City ofPittsburgh on (412) 255-2152 or via e-mail atHoward.a.stern@city.pittsburgh.pa.us

State of Georgia

The GeorgiaNet Authority is the onlyGeorgia State agency authorized tosell State data. Five years ago, thisorganization began selling driverhistory records to large corporationssuch as insurance companies.Beginning with this major fundingsource, this organization was able toinvest in a modern architecture, a verycompetent web-based developmentstaff, and respond very quickly topublic access demands. While mostdevelopment results in freeinformation to the public, such as databases attached to a newly designedhome page for all of Stategovernment, a portion of theresources of GeorgiaNet are devotedto developing added-value webapplications wherein revenues can begenerated. An example is anapplication called “Lobbyist in a Box.”While there are numerous databaseswithin GeorgiaNet allowing billsearches by the general public, theGeorgiaNet Authority tailored a specialapplication for lobbyists that directlymeets their needs. For this specialservice, they are charged $50 per year.Other applications generating revenueinvolve the tailoring of data alreadyavailable to the public in general formfor associations and other interestgroups.

GeorgiaNet has been one of the mosteffective programs in State govern-ment. Being a separate authority, with

a highly placed Board of Directorsappointed by the Governor, it canproduce web products very rapidly,ensure they respond to the State’shighest priorities, and begin to addressthe enormous demands in the area ofpublic access.

All revenues generated by GeorgiaNetAuthority are required to go into theState treasury. However, costs ofgenerating that revenue are permittedto come out of the revenue receipts.Costs include technologyinfrastructure and staff for theAuthority as well as equipmentrequired by State agencies to furnishdata resources for the applicationsbeing developed. Funds are collecteddirectly from customers. Networksubscription charges are billed directlyto the customer. Since it began overfive years ago, on the average, theGeorgiaNet Authority receives about$15 million annually.

There are currently no major barriersto this funding approach. Theimportant step was the passage of theenabling legislation. Beyond this, theInformation Technology PolicyCouncil has tried to provide supportand assistance to promote thisconcept and position the organizationto be a central resource to overallpublic access capability.

The major benefit of this fundingapproach is having an organizationthat can serve as a foundation for pro-viding necessary public access to Statedata through the World Wide Web.

The risk is ensuring that the balancebetween fee-based applications andfree access to State databases isproperly maintained. Thus far, theonly revenue sources have beenprivate associations and companiesthat have requested these services and

where the same general databases arealready provided to the public forfree.

For further information, contact TomBostic of the GeorgiaNet Authority on(644) 561-8690.

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Category #6:

GrantsState of Kentucky

The Kentucky Information ResourcesManagement Commission (KIRM) hasa $250,000 Appalachian RegionalCommission (ARC) grant to promotethe benefits of the emerginginformation infrastructure in Kentuckythrough the development of commu-nity networks. For several years theARC has examined the emergence ofadvanced telecommunications and therole it can play in regionaldevelopment. Of special importanceto Appalachia is how networks, suchas the Kentucky Information Highway,can remove the barriers to growthposed by distance and spread thebenefits of publicly funded resourcesto rural communities.

KIRM and various partners helpcommunities develop a commonvision and implementation plan forthe development of a virtual commu-nity of people, businesses, governmentagencies, schools, libraries, health careproviders and others linked throughtelecommunications and informationresources.

KIRM provides up to 15 communitieswith ARC planning grant funds.Several communities receive grantsranging from $10,000 to $30,000 toengage in the planning process for thedevelopment of a community networkand strategic plan for informationtechnology resources.

For further information, contact DougRobinson on (502) 573-5476 or via e-mail at drobinson@mail.state.ky.us

State of Kentucky

The State of Kentucky received a grant

from the Department of Justice toprovide leadership and direction incontrolling the use and availability ofillegal drugs. In July 1997, the State ofKentucky received $7.4 million fromthe U.S. Department of Justice’sEdward Byrne Memorial DiscretionaryGrant Program. This grant program isaimed at providing leadership anddirection in controlling the use andavailability of illegal drugs and toimprove the functioning of thecriminal justice system, with emphasison violent crimes and seriousoffenders. This three-year grant alsomandates that a minimum of 5% of thetotal fund be used for informationtechnology. Kentucky plans tomodernize technology supporting theState’s criminal records system.

For further information, contactDeborah McGovern of the State ofKentucky on (502) 564-7554.

U.S. Department of Commerce

The Department of Commerce’sTelecommunications and InformationInfrastructure Assistance Program(TIIAP) provides matching grants tonon-profit organizations such asschools, libraries, hospitals, publicsafety entities and State and localgovernments. Grants are used to fundprojects that improve the quality of,and the public’s access to, education,health care, public safety, and othercommunity based services. The grantsare used to purchase equipment forconnection to networks, includingcomputers, videoconferencing systems,network routers and telephones and tobuy software for organizing andprocessing all kinds of information.

In September 1997,TIIAP awarded 55grants in 38 states and the District ofColumbia, totaling $20.9 million and

matched by $25 million in non-Federalfunds.

For further information, contactStephen Downs of the NationalTelecommunications and InformationAdministration, Department ofCommerce on (202) 482-2048.

Federal CommunicationsCommission

The Federal CommunicationsCommission’s (FCC’s) UniversalService Fund ensures affordablequality telecommunications servicesto all consumers, including low-income consumers, in all regions ofthe nation. The TelecommunicationsAct of 1996 requires the FCC and theStates to ensure that the goals ofaffordable service and access toadvanced telecommunicationsservices are met by means thatenhance rather than distortcompetition. In addition, for the firsttime in history, the Act requires that alleligible schools, libraries, and ruralhealth care providers receivetelecommunications services at adiscount.

Money from the Universal ServiceFund, if spent wisely, will go a longway in meeting State objectives. SomeStates have attempted to createcomprehensive state plans and haveseparate agency requests follow thoseplans. This would also respond insome fashion to the issue of Stateinfrastructure modernization if thatinfrastructure supported educationand health care applications intelecommunications.

One concern of the Universal ServiceFund is the “gold rush” mentality thatsurrounds the current program (firstcome, first served) and the damagingeffect this has on promoting good

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planning and integration of resourcesfrom a State perspective. States wouldbenefit from having a national reportshed light on the need for good Stateplanning for Universal Service Fundutilization.

For further information, contact Mike Hale of the State of Georgia on(404) 657-1350.

Category #7:

Seized AssetsU.S. Department of Justice

The U.S. Marshals Service, U.S.Department of Justice, is responsiblefor the management and disposition ofseized and forfeited assets from drugtrafficking and organized crime. TheAsset Seizure and Forfeiture Programhas become a key part of the Federalgovernment’s efforts to combat majorcriminal activities. The MarshalsService currently manages more than$1.6 billion worth of property seizedfrom criminals.

Under the Equitable Sharing Program,money from the Justice AssetsForfeiture Fund is shared with theState and local law enforcementagencies that participated in theinvestigations that led to theforfeiture. The amount of money theState and local agencies receive isbased on the contribution they madeto the investigation. Since 1986, morethan $1 billion in forfeited cash,proceeds and property has beenprovided to State and local agencies.A portion of the funds allocated toState and local governments is beingused to fund technology that supportslaw enforcement efforts.

For further information, call Katherine Deoudes, U.S. Departmentof Justice, 202-307-9009.

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Notes

Notes

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