B2G Blog - Budget

A Wisconsin turnaround: Reality v. Rhetoric

Wed, 22 May 2013 09:24:00 -0400

Written by: Joanna Salini, Stephen Moss and Alexandra Howden

In his 2013 budget address, Wisconsin Governor Scott Walker outlined a clear and concise vision for the coming biennium: more prosperity, better performance and true independence. Based on Deltek’s cross-vertical analysis (below), it is clear that Walker’s vision is on display, though perhaps not as ideally as his budget address reads.

The economic condition in Wisconsin has improved exponentially since its $4 billion deficit and unemployment rate of nearly 8 percent in 2011. Now, America’s Dairyland has mounted a comeback toward a budget surplus, and unemployment is almost a point less than the national average. In these favorable conditions, the governor has focused his attention on maintaining and improving core government functions – most notably, corrections, K-12 education, and Medicaid.

From FY 2013 to FY 2014, the governor’s recommended budget increased by 8 percent, while the budget for corrections and education only increased by 0.2 percent and 3.4 percent, respectively. Medicaid outpaced overall budget growth with a 14 percent year-over-year increase.

In line with a focus on better performance, Governor Walker’s budgetary priority of investing in correctional infrastructure sounds promising, but the reality might be quite different. In efforts to reaffirm the state’s commitment to public safety, Walker highlighted plans to improve and expand the state’s criminal justice system, which includes ensuring that all resources are used effectively to provide oversight of correctional facilities and its operations, as well as ensuring that all IT systems are up to date with the latest enhancements. Current systems in place within the Department of Corrections are antiquated and could potentially compromise the safety of those imprisoned as well as those released on electronic monitoring devices.

The Department of Corrections (DOC) manages 18 correctional institutions, 16 correctional centers for adults, two holds facilities, and two correctional institutions for juveniles. Wisconsin’s prison population is expected to grow by the end of 2015 by roughly 3 percent; therefore, per-capital annual inmate costs are also expected to increase. Rise in prison populations are also coupled with an increase in the number of offenders subject to GPS monitoring through community corrections programs. The number of tracked offenders is expected to grow by approximately 37.5 percent by the end of 2015.

The DOC has been plagued with insufficient funding and FTE positions available to accommodate these projected increases; therefore, new commitments have been made to fund positions and provide solutions to upgrade department-wide integrated justice information systems. While Governor Walker projects departmental budget increases for IT purposes, the overall budget does not accurately reflect this projection. Instead, the budget for DOC remains relatively stagnant with a slight decrease (less than 1 percent) in departmental expenditures, which indicates the DOC is more focused on maintaining current operations.

Other notable justice/public safety and homeland security projects in the state of Wisconsin include a Department of Corrections livescan fingerprint system and driver’s license identification card issuance and production for the Department of Transportation.

Governor Walker started off the year making some lofty promises. In his 2013 budget address, he repeatedly expressed the importance of education in the upcoming fiscal year and the need to provide all children a better and more equal education, as well as more affordable options for higher education. Walker directly related education to the developing workforce: “Our educational institutions need to be focused on, and held accountable to, the education of the next generation’s workforce.”

The governor continued to stress the direct correlation between an educated youth and a successful workforce. With an “ever-changing labor market for manufacturing, technology, and health care” as the landscape, Walker insists investing in higher education today will result in a stronger workforce and economy tomorrow.

“Beyond traditional educational investments, we will make smart, targeted, performance-based investments in our University of Wisconsin System, the Wisconsin Technical College System and traditional K-12 education to ensure our citizens have the skills needed for the jobs of today and tomorrow,” he said in his budget address.

In the Budget in Brief, Governor Walker laid out a 17-step plan for transforming education, which includes providing funding for academic and career planning software, promoting a new educator effectiveness system, and parental input systems for lower-performing schools.

All of these initiatives seem well and good, correct? Well, as the old parable goes, actions speak louder than words. While Governor Walker did increase the K-12 education budget from FY 13, he decreased spending from the agency’s request. In the Wisconsin FY 2014-2015 Educational Communications Board budget, the General Purpose Revenue Fund agency request increased by $151,700 for FY 2014, yet the governor’s recommendation decreased by $105,900. This not only denies the agency request for an increase necessary for the projected year, but falls $257,600 below the requested amount. All the while, the federal revenue remains constant, so there is no aid to new projects.

Governor Walker did stick to his promises by increasing the program revenue budget. While an increase of $562,400 was requested, the governor increased it by $567,900. This will allow a little extra room to grow projects or even add a few new measures. Additionally, Walker added a performance-based funding incentive to encourage schools to perform better and potentially earn $30,000 a year.

Total spending for education increased by 3.4 percent, which leaves room for some of these lofty goals to be accomplished. It may not be feasible to accomplish all of them in the fiscal year, but it will lead Wisconsin in the direction of more prosperity.

Critical to attaining the goal of true independence is the governor’s plan for state-administered entitlements. This independence rests on his budgetary pronouncements regarding the optional expansion of Medicaid contained within the pages of the Affordable Care Act (ACA). Walker, like many governors across the United States, chose not to opt-in to the ACA Medicaid expansion requirements. That expansion to eligibility for individuals at 138 percent of the federal-poverty level would affect the state’s bottom line to varying degrees in the near term.

According to sources including the Legislative Fiscal Bureau, expansion of Medicaid eligibility would actually save the state $65 million; however, the Kaiser Family Foundation fixes the bill at $725 million over the next nine years. With such varying information and the logically inconsistent position that adding millions to an entitlement program would save the state money, Walker opted for a middle-ground position.

Citing the unreliability of a federal government saddled with a $16.5 trillion debt that grows daily, and the virtue of an independent and free populace unencumbered by dependence on government, the governor opted for a slight expansion of Medicaid to include all impoverished Wisconsinites by lifting the enrollment cap for childless adults. This plan would make 82,000 more individuals eligible. However, the governor also places emphasis on the health insurance exchange as critical to reducing the number of uninsured individuals in the state. With the exchange, 87,000 people currently on Medicaid would be eligible for subsidized insurance through the exchange or a private plan. The net effect would be a reduction of the total number of Medicaid enrollees by 5,000, with a simultaneous reduction in the number of insured by 224,580.

As with all political statements, the Medicaid priorities espoused by Governor Walker must be examined within the context of the actual numbers proposed in his budget draft. As part of Deltek’s analysis of the Wisconsin budget, Medicaid spending was collected from FY 2006 through FY 2015. That data shows a 72 percent increase in proposed Medicaid spending – an increase from the FY 2011-2013 biennium of 14 percent per year. As with many other states, Medicaid spending is a main driver in funding growth and far outpaces the 8 percent increase from the FY 11-12 biennium to the FY 14-15 biennium.

Also on par with other states, Medicaid accounts for nearly a fourth of the entire state budget. For the past two biennia, that number (approximately 21 percent) has been holding steady, but is expected to rise to 22 percent of the total budget through FY 13-15. The governor’s decision to reduce the overall enrollment in Medicaid while covering more citizens through the use of insurance exchanges seems to be a responsible budgetary move that will allow the state more freedom and flexibility. For the purposes of analysis, it is too early to evaluate the governor’s cost-saving claims.

The economic position of Wisconsin has undoubtedly improved over the last few years; however, it has been described by some as still treading water. The budget proposal submitted by Governor Walker for the 2014-15 biennium reflects this reality, which bodes well for vendors conducting future business with the state.

Wisconsin has outlined an extensive list of opportunities that will most likely come to fruition in the coming years. The preceding vertical analysis of the corrections, education and health care markets provides an excellent in-depth backdrop by which vendors may position themselves toward achieving the Walker administration’s goals: more prosperity, better performance and true independence.

Vendor Takeaways:

There is a focus on corrections, education, and Medicaid in the upcoming fiscal year.
Detailed projects (as outlined above) have been forecasted for the year.
The governor's increase in budget will allow for bountiful procurement in the state.

Not a Deltek subscriber? Click here to learn more about Deltek’s GovWin IQ database and take advantage of a free trial. Also, click here for an in-depth analysis on State Correction Market Trends for 2013.

Lessening the Blow of Sequestration

Tue, 14 May 2013 09:01:00 -0400

OMB may have found a way to bring $5 billion of the $85 billion sequestration price tag, back into play. The recalculations would free up $4 billion from the Pentagon and $1 billion from other agencies such as NASA and DHS.

When Congress moved money around among various accounts in the Continuing Resolution which took effect in March, it restored $5 billion of the sequestration cuts due to accounting rules that govern the different accounts. According to a quote from a government official in a recent Government Executive article, “Under the law, if [lawmakers] cut those accounts below their post –sequester level, there is a provision that credits back some of the funds.” A 1985 budget law prescribes that funds be restored to accounts that had been deeply cut via sequestration.

Much of the specific calculations and data behind the restoration of funds is still hush hush. According to Associated Press article that broke the story, the process is ongoing and public officials they contacted spoke under the guise of anonymity.

Although much of the dire consequences of sequestration are yet to be felt by most American citizens, public pressure is mounting to decrease the impact of sequestration cuts. Agency budget officials have been working with Congress to permit the transfer of funds between accounts to lessen the blow of the cuts. Some agencies have been able to avoid or shorten furloughs due to this process, such as Department of State, Department of Justice, and Department of Homeland Security. Department of Defense will benefit the most from the new calculations by being able to avoid $4 billion cuts.

FY 2014 Federal Budget Request: Challenges and Opportunities

Tue, 07 May 2013 08:53:00 -0400

Although two months late in delivery, the president’s FY2014 Budget Request continues promotion of administrative priorities while proposing cuts and savings to trim the deficit. Deltek's newly released report, FY 2014 Federal Budget Request: Challenges and Opportunities, analyzes the spending priorities, policy plans and information technology trends and initiatives in the FY2014 budget request.

The Obama Administration is requesting $3.8 trillion for FY2014. The budget focuses on jobs creation and economic growth to strengthen the American middle class. Deltek’s report examines patterns in the $1.2 trillion discretionary budget, as well as the $82 billion information technology budget, including market trends, drivers, and contractor-addressable spending.

Using a well-honed methodology for gleaning the contractor-addressable portion of federal spending, Deltek calculates projected expenditures for FY2014 for ten different federal product/services market segments.

The chart above shows the contractor-addressable portion of funding across federal agencies, as well as compound annual growth rate for each from FY2012 to FY2014. Nearly all of GSA's budget authority is under "Spending Authority from Offsetting Collections, Discretionary" to provide GSA the authority to fund its operations using funds collected from sources other than appropriations, primarily service fees.

Should the budget pass as written, Deltek estimates the contractor-addressable portion of IT spending for FY2014 to be $106 billion, which includes traditional IT spending captured in the Exhibit 53, as well as IT spending not typically captured in Exhibit 53 reporting, such as in embedded weapons systems.

Additionally, Deltek predicts contractor-addressable federal spending on architecture, engineering, and construction services will reach $27.7 billion in FY2014. Aerospace and defense spending will reach $149 billion. And operations and maintenance spending will reach $80.6 billion.

The budget request and Deltek’s research reveals the following in regards to the different market segments:

Information Technology: IT priorities are largely the same as the past 2 years, including shifting from an asset to a service mindset, infrastructure and data center consolidation, and continued transition to cloud computing.
Architecture, Engineering & Construction: Expect a continued shift in funding from major to minor construction, including deferred maintenance, especially in civilian agencies.
Aerospace & Defense: Despite budget constraints, DoD is focused on protecting investments that support the new defense strategy, and the war drawdown continues to impact spending on ground systems and mission support equipment.

As the federal government strives to reduce the deficit and decrease spending, finding contracting areas of opportunity becomes increasingly difficult. The request provides insight into the administration’s priorities, however the eventual enacted budget is somewhat of a wildcard. Don’t expect appropriations to conclude prior to Oct. 1, continuing resolutions are likely to prevail.

For more information on Deltek’s report FY 2014 Federal Budget Request: Challenges and Opportunities see the GovWin IQ website at www.govwin.com.

Florida's FY 2014 Budget

Mon, 06 May 2013 10:30:00 -0400

What a difference a fiscal year makes! For the past two budget cycles (FY 2012 and FY 2013), Florida Governor Rick Scott has been requesting deep cuts to health care, education and public safety to curtail the state’s declining tax revenues and multibillion-dollar deficit. Now, Governor Scott is touting a $4 billion surplus, and the fiscal year 2014 budget recommendations Scott released on February 6 actually add funds to state programs for the first time in six years. Also, in a reversal from years passed, Scott’s top budget priorities for FY 2014 include health care and education, both of which were once on the chopping block.

The governor’s FY 2014 state budget recommendation, also called the Florida Families First budget, asks for a pay raise for K-12 teachers and state workers, an increase in funding for state universities, and, surprisingly, accepts federal funds to support the Affordable Care Act’s (ACA). If adopted, the Republican governor’s FY 2014 budget would be the largest in state history, at $74 billion.

This economic upswing has allowed Scott to tailor his budget around job creation by cutting business taxes, investing in workforce training programs, and calling for $8.3 billion in transportation projects. Scott has also added $3 billion to higher education, essentially restoring funds to pre-recession levels. Additionally, Florida’s unemployment rate dropped to 7.7 percent, signifying an increase in revenue from income taxes. The combination of less spending and larger revenues has resulted in this unexpected surplus.

Now that the state is seeing a fruitful recovery, there is more push from department heads to restore services and programs and take on new projects. Despite cries for relief, Scott’s budget largely resists large-scale funding restorations; instead, he has smartly decided to split the difference by recommending a smaller increase in spending while opting to replenish the state’s once-dry emergency fund.

The top vertical increases in Scott’s FY 2014 budget recommendations (compared to FY 2013) focus on higher education (66.2 percent), transportation (33.7 percent), and public finance (24.3 percent) verticals. The Highway Safety and Motor Vehicle Department within the transportation vertical received a $20.6 million increase compared to FY 2013. This increase includes a $4.9 million funding request to procure a new motorist service system that is expected to be implemented over multiple years.

The top vertical decreases in the FY 2014 budget recommendations are for natural resources (-5.8 percent), K-12 education (-7.3 percent) and social services (-9.6 percent) verticals. The bulk of losses for social services are represented by a $575 million decrease from the Elder Affairs and Children and Family Services departments, stemming from reduced public services and pending layoffs. However, the IT expenditures under the social services vertical actually see a 7.9 percent increase from FY 2013, due in large part to projects such as the state’s public assistance eligibility system and the child dependency information management system.

One of the bigger gaffes Florida faced during the 2013 fiscal year was the defunding and decommissioning of the Agency of Enterprise Information Technology (AEIT). Last year, Scott vetoed legislation that would have replaced AEIT with a new central information technology agency that would have focused more on the state’s data center consolidation effort. Scott justified the veto by stating he believed the new agency’s scope was too narrow. Even though both Scott and the legislature promised to work together for fiscal year 2014 to avoid another misstep, it seems the House and Senate have each introduced competing legislation – though each is requesting a new agency, the agencies would have differing scopes and oversight schemes. An aide in Senator Jeremy Ring’s office confirmed that, despite political maneuvering, the hope is to create a central agency to manage the state’s IT efforts and oversee nearly $51 billion in IT contracts, rather than have 19 different state agencies inefficiently managing their own.

There are two major differences in oversight and scope between the House and Senate bills. Senate Bill 1762 calls for the head of the new agency to report to the governor alone, while House Bill 5009 calls for the head of the new agency to report to the governor as well as the cabinet. There’s also a difference in scope, as the House bill would pare down the new agency’s ability to influence IT purchasing decisions, while the Senate bill would create a department with robust authority including oversight of all IT purchases that involved multiple state agencies. Ultimately, HB 5009 would really only allow the new agency to track and analyze IT purchases and draft IT strategic plans in more of an advisory role. Since Governor Scott has yet to throw his support behind either bill, this battle will likely continue into the summer.

For an extended version of this article, please go here.

For more information on Florida FY 2014 budget, visit the state profile here.

Not a Deltek subscriber? Click here to learn more about Deltek’s GovWin IQ database and take advantage of a free trial.

Hawaii's FY 2013-2015 Biennium Budget

Thu, 02 May 2013 09:29:00 -0400

In his FY 2013-2015 Executive Biennium Budget, Hawaii Governor Neil Abercrombie highlighted the daunting challenges that faced his administration during the last biennium, including a $1.3 billion potential budget shortfall that threatened deep programmatic cuts to department operations statewide. The governor utilized a fiscal strategy to only address pressing needs while investing in the state’s future, with goals to improve government efficiency and transparency. For this biennium, Hawaii’s gross domestic product (GDP) is expected to increase by 2.4 percent in 2013, while unemployment rates continue to decrease.

The new biennium budget (seen above in Figure 1) has several areas of investment, including:

Early learning and early childhood health
Education IT and digital curriculums
Increased resources for Hawaii’s aging population
Environmental sustainability and protection

The biggest gains by department from FY 2013-2014 include the Department of Human Services ($309 million), Department of Budget and Finance ($251 million), and Department of Transportation ($52 million). The Department of Hawaiian Home Lands saw a budget decrease of $140 million. Investments for FY 2014-2015 include $151 million for the Department of Human Services and $91 million for the Department of Budget and Finance.

Although the numbers in Figure 2 look as if Hawaii has invested millions in information technology, the numbers actually represent more transparency into Hawaii’s IT reporting. Deltek was able to gather more data on the total value of IT projects in the state for the biennium budget. Health IT was a major investment, including $2 million for its health information exchange (HIE), $45 million for Medicaid IT initiatives, and $15 million for an electronic medical record (EMR) system. The Department of Taxation is also investing nearly $32 million into its tax system modernization project for FY 2013-2015.

Despite tough times that followed the economic recession, Hawaii has laid the groundwork for a stable foundation and is continuing to increase both its GDP and IT spending. Vendors working in the education, health, and environmental space should check out Deltek’s analysis on Hawaii’s budget here, and brush up on the Aloha State in our state profile application. For a free trial, please click here.

Georgia's FY 2014 Budget

Tue, 30 Apr 2013 08:53:00 -0400

Despite a financially cautious approach, Georgia Governor Nathan Deal proposed an additional $2.1 billion to the FY 2014 budget compared to FY 2013, bringing total spending to $40.8 billion for the coming fiscal year.

The governor wants the FY 2014 budget to focus on eliminating waste, streamlining government operations, stimulating economic growth, and preparing for economic uncertainties. While most agencies’ base spending is reduced in FY 2014, investments will continue in key areas of health care and education. Governor Deal has defined health care as the largest cost driver in Georgia’s recent budgets, and that increased Medicaid expenses will require an additional $246 million in both FY 2013 and FY 2014 over current funding levels.

True to his word, the governor increased the Georgia Department of Community Health’s budget by $888 million, and the Department of Education saw an increase of $812 million. The University System of the Georgia Board of Regents also received a healthy increase of $220 million. The average reduced funding for departments was pretty minimal – the highest being a $23 million decrease for the Technical College System, and an $8 million decrease for the Office of the Governor.

Unlike states that report proposed IT budgets alongside new fiscal budgets, Georgia only reports actual IT expenditures from the year prior. The data collected for FY 2012 also reflects a change in IT reporting methodology. In previous years, project portfolio amounts were included, but those amounts are no longer included in an effort to ensure more consistent reporting and to better compare IT spending with other states.

It is also important to note that some state entities with large IT expenditures expected, like the University System of Georgia, are not required to report. Only 80 percent of required agencies reported in FY 2012, with just 41 agencies having a commissioner signature on their proposals. Due to the reporting style of Georgia’s IT spending, FY 2013 and FY 2014 are projected by Deltek.

Despite a cautious outlook on state and national futures, Georgia maintains a steady spending rate in its total fiscal budgets. The Georgia Technology Authority (GTA) has made several new investments in recent years, and its current momentum is self-described as the nation’s largest state IT modernization. GTA officials said the primary focus in FY 2012 was building strong partnerships with the state’s strategic IT service delivery partners in support of collaboration; this is expected to continue in the years ahead.

For more information on Georgia FY 2014 budget, visit the state profile here.

Deltek releases annual state-of-the-states analysis: Webinar to be held this Thursday

Mon, 29 Apr 2013 15:06:00 -0400

Every year, Deltek analysts carefully comb through all 50 governors’ state-of-the-state and budget addresses to identity crucial trends in rising and falling priorities. Understandably, the past few years haven’t been so fruitful, with states cutting key programs, canceling major projects and shifting efforts to stay afloat amid recession’s strapped-budget undertow.

Fortunately, states are successfully weathering the storm, and this year’s report contains a bevy of potential vendor opportunities as governors’ agendas increased project items for the first time since 2008. Overall, the total number of governor agenda items rose a sharp 11.6 percent from 2012.

In addition to the report, Deltek is presenting a free webinar this Thursday at 2 p.m. EST so vendors can learn how to align technologies with current and emerging policy trends. Go here to register for the free event.

Major take-aways from “State of the States, 2013,” include:

Governors’ renewed interest in performance-based management, particularly in education
More effort to cut corrections and incarceration costs by investing in probation, parole and electronic monitoring programs
Heavy focus on Medicaid expansion (both for and against), and how to reduce its costs
Increased dedication to developing a strong future workforce by establishing a wealth of present educational opportunities, led by digital learning platforms
Amplified justice and public safety initiatives due to natural disasters (Hurricane Sandy) and national tragedies (the Newtown shootings)
Continued plans to streamline and consolidate government operations through technology

The report also breaks down governors’ 2013 goals per vertical market, with several charts detailing the number of agenda items mentioned year to year and technology-specific projects.

The full list of report graphs include:

2013 by vertical
2011-2013 comparison by vertical
2008-2013 average by vertical
2013 Agenda Item Popularity vs. 2011-2013 average by vertical
Top 25 cross-over agenda items
Agenda items with mention of technology, 2013
Agenda items mentioned by state, 2013
Community development, economic development/regulation, natural resources/environment, and transportation agenda items, 2013
Education agenda items, 2013
General government services and public finance agenda items, 2013
Health care and social services agenda items, 2013
Justice/public safety agenda items, 2013

To read the full, 33-page report, please go here. Deltek clients that subscribe to State & Local Industry Analysis (SLIA) may also request (via their Deltek Client Advisor) the Excel workbook containing all of the agenda data compiled for the report.

Lastly, please register for our free webinar this Thursday to learn more about the initiatives and implications of 2013’s state-of-the-state addresses.

Michigan's FY 2014-2015 Budget

Wed, 24 Apr 2013 09:06:00 -0400

Michigan Governor Rick Snyder is utilizing his fiscal year 2014-2015 budget to highlight Michigan as the nation’s “comeback state,” calling for both fiscally responsible and innovative spending to ensure a bright future. With no big surprises, education, health care reform, and transportation are among the state’s top investment priorities. More than 75 percent of the budget is dedicated to education and health and human services, and state spending will go hand in hand with outcome measures and performance metrics.

The FY 2014 budget totals $51.8 billion, a 7 percent increase from FY 2013. The FY 2015 proposed budget tops $53 billion. Table 1 below represents the total budget starting in FY 2010.

Michigan’s FY2014-2015 budget is spot on with Governor Snyder’s goals to increase better health outcomes, education, and transportation for Michigan citizens. Touted as the “comeback state,” Michigan is turning a corner as employment rates and personal income rise. The unemployment rate is decreasing faster than the national average, and the housing market is starting to gain momentum. Further, the governor has called for a focus on long-term solutions and assistance for struggling local entities. For a deeper dive into the state’s budget, please click here for an Analyst Perspective (log-in required).

Deltek is currently tracking more than 30 core-IT opportunities in the state of Michigan, valued at an estimated $3.3 billion. Vendors interested in forming a partnership with the “comeback state” should visit our Michigan state profile to access procurement information, budget documents, and key contacts.

OMB Report Charts Growth in Discretionary Spending

Tue, 23 Apr 2013 09:15:00 -0400

The Office of Management and Budget’s (OMB) submitted its reports on discretionary spending cuts to the President and Congress just ahead of the release of the President’s Budget Request. Along with a the review of spending caps, OMB also released a preview of sequestration in the spending plans for fiscal year (FY) 2014, which looks at discretionary spending out to 2023.

The Final 2013 Sequestration Report provides estimates of discretionary spending limits for each category in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), OMB’s scoring of the enacted 2013 discretionary appropriations bill, and comparisons with estimates from the Congressional Budget Office (CBO) in its Final Sequestration Report for Fiscal Year 2013. Examining appropriations legislations enacted through April 4, 2013, OMB found that the enacted appropriations are within the discretionary spending limits for 2013 and a sequestration of discretionary budget authority is not required. (Note: The assessment by OMB is distinct from the Joint Committee sequestration.) The chart below shows the caps after various re-categorization adjustments.

BBEDCA provides caps for discretionary program spending each year through 2021. Originally, discretionary programs were separated into “security” and “non-security” categories, which are shown above in the funding levels for fiscal years 2012 and 2013.

· The security category included budget accounts for the Departments of Defense, Homeland Security, Veterans Affairs, the National Nuclear Security Administration (NNSA), the Intelligence Community Management Account, and all accounts in the international affairs budget function.

· The nonsecurity category covered everything else. After 2013, BBEDCA provided a single category for all discretionary spending.

The Budget Control Act (BCA) allowed for revision of the spending caps if the Joint Select Committee on Deficit Reduction proposed legislation to reduce the deficit by $1.2 trillion was not enacted by January 15, 2012. Since legislation was neither proposed nor enacted, the caps were revised in OMB’s Final Sequestration Report of Fiscal Year 2012, which was issued January 18, 2012.

· The revised security (“defense”) category included only funding for discretionary programs in the national defense budget function: Department of Defense, portions of Department of Energy (including NNSA), and the Federal Bureau of Investigation.

· The revised nonsecurity (“non-defense”) category covered all other discretionary programs.

· The discretionary category for 2014 to 2021 was replaced by caps for the defense and non-defense categories. While the budget caps were adjusted to reflect the redefined categories, the overall discretionary spending limits were not changed.

The spending caps were changed again, under the American Taxpayer Relief Act of 2012 (ATRA), which reinstated the security and non-security categories for 2013 and reduced the limits by $4 billion, split evenly across the two categories. The limits for defense and non-defense spending were left in place for 2014 to 2021. However, the 2014 levels were lowered by $8 billion, split evenly across the defense and non-defense categories.

The preview report sheds light on several proposed revisions to the spending caps in the President’s Budget. The 2014 Budget includes savings in the mandatory and revenue categories, reducing the discretionary limits, restoring the 2013 sequestration amount, cancelling the 2014 mandatory sequestration order, and increasing the 2014 discretionary levels to those agreed to by Congress in ATRA. The Budget Request also proposes extending the spending caps through 2023. The reductions continue to be split between defense and nondefense categories and are set to take effect in 2017.

While discretionary spending at the budget proposal levels shows less growth, the levels are higher overall. According to the FY2014 Budget Proposal figures in OMB’s Sequestration Preview Report for FY 2014, the discretionary funding levels from 2013 to 2012 average $25.9 billion above those in the Final Sequestration Report for FY 2013.

The gap between the two plans for FY 2014 leaps out as a notable difference in the two series. The $97 billion increase from the Final 2013 Sequestration report is comprised of several changes. In the budget proposal, both the discretionary categories see an increase from restoring limits from ATRA. The revised security category receives an additional $54 billion, and the revised nonsecurity category receives $37 billion. While the proposed budget shows less of a drop than the Final Sequestration figures, spending rebounds a year later. If the proposed budget is accepted (though, there's ample reason to doubt that it will be), spending would approach 2013 spending levels in 2019.

Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin IQ. Follow me on twitter @FIAGovWin.

Claims Processing is a High Budget Priority for VA

Tue, 23 Apr 2013 09:02:00 -0400

The Department of Veterans Affairs’ FY2014 budget request allots $2.5 billion for more efficient benefits processing through technology enhancements, improved business processes, and intensive staff training. This is a $294 million increase over 2013 enacted levels.

The VA budget request proposes to invest in the Veterans Claims Intake program (VCIP) that will allow for the conversion of paper to digital images into the Veterans Benefit Management System (VBMS); supports the completion of 1.3 million disability compensation and pension claims; and provides funding to complete 4.3 million education claims.

VA’s huge backlog of disability claims has received much negative press in recent months, coming under fire from Congress and veterans groups. The backlog of disability claims crossed the 900,000 mark in March. VA’s FY2014 budget request seeks to cure the backlog through investment in people, processes and technology.

VA plans to invest $136 million in a Veterans Claims Intake Program that will allow VA to directly receive and convert paper evidence, such as medical records, into a digital format for increased efficiency in claims processing. Additionally, the budget also supports the continued development of a digital, near-paperless environment that allows for greater exchange of information and increased transparency for veterans, providing $155 million for the VBMS. These overall efforts support VA’s pursuit of eliminating the claims backlog and achieving VA’s goal of processing all claims within 125 days with 98 percent accuracy in 2015.

VA hired the Space and Naval Warfare (SPAWAR) Systems Center Atlantic out of Charleston, SC to manage the strategic, tactical, business and technical components of the program execution back in 2009. This SPAWAR office also worked on VA’s post 9/11 GI Bill education benefit program. L3 is the prime contractor supporting SPAWAR on the VBMS program. VA’s IG criticized SPAWAR for its 10-13% program management fees in a 2009 report regarding an interagency agreement with VA.

VA endured another unfortunate incident with VBMS last week, when VA experienced a series of outages due to troubleshooting of the VBMS rating module. At the time, technicians were not able to provide an estimated time of resolution.

Tracing VBMS IT dollars back to FY2014 budget documents for more funding details is no easy task. The Exhibit 53, the detailed IT budget document specifying IT investment by program name and line item, does not show an investment line item for VBMS. However, it does show the Benefits 21^st Century Paperless Delivery of Veterans Benefits which is described in its Exhibit 300 description as the primary software component of VBMS. The Exhibit 53 and 300 both show an IT budget request of $108 million for FY2014. The Exhibit 300 shows that $491 million has been spent to date on this program.

VA plans to finish the rollout of VBMS to its remaining regional offices in 2013.

Federal FY 2014 IT Budget to Grow, but there?s Winners and Losers

Thu, 11 Apr 2013 09:30:00 -0400

Steven VanRoekel, U.S. Chief Information Officer at the Office of Management and Budget (OMB) released a presentation yesterday outlining the Obama Administration’s FY 2014 Information Technology priorities and budget numbers. The bottom line is that they are seeking 2% growth in the overall IT budget year-over-year, but individual department budget changes vary widely, meaning that there are “winners” and “losers.”

Preceding the public release of his presentation, VanRoekel posted a series of tweets on Twitter under the theme: All you need to know about the IT budget in 10 tweets. You can find the series under #FedITx10, but here they are in the descending order in which they appeared:

10-Flat or declining. IT=$82B in the 2014 Budget 2.1% increase from FY12, flat, 0.78% CAGR since 09, negative adjusted for inflation

9-Cut & Reinvest: Now more than ever we must use IT to drive savings to fund innovations that change how govt works

8-Priorities: IT priorities in 2014Budget: Innovate. Deliver. Protect. Evidence

7-Innovate: 2014 Budget enables the Digital Gov Strategy to build a 21st century govt, increase mobile services and Open Data

6-Deliver: PortfolioStat = +$2.5B in savings through IT consolidations and upgrades (over 3yrs)

5-Protect: Over $15B of the IT 2014 Budget is going to enhance our Nation’s cybersecurity

4-Evidence: 2014 Budget NEW evidence-based innovation initiative in my office to strengthen evaluations & drive results, beyond IT

3-Innovate with Less: Since 09 we flattened IT $ while FY01-FY09 IT increased ~2x At that rate, we’d be at +$110B on IT today

2-Dogfood: For geeks (like me!) interested in an Open Data 2014 Budget, key tables in XML here:

1-Progress: 2014 Budget enables strategic IT investment for a 21st century govt, drives innovation & protects our national assets

IT Budget “Winners” and “Losers”

The budget submission information included in VanRoekel’s presentation contains some top-line budget numbers which allows for some initial analysis. The IT budget summary table in the presentation calculates the amount and percentage change for FY 2014 based on FY 2012 budgets, even though he provides FY 2013 Continuing Resolution (CR) budget estimates that are different. To provide a more detailed perspective I ran the numbers comparing the dollar and percentage change for all scenarios.

The tables below are grouped by the “Winners” and “Losers” based on the percentage change from FY 2012 to FY 2014. The third table provides a comparison between Defense and Civilian segments, along with total federal IT.

Conclusion

While we are still waiting for the release of detailed IT budget information from OMB the proposed $1.4 or $1.7 billion increase for FY 2014, depending on which baseline year you use, is sure to surprise many who watch this market. Certainly, a 2% yearly growth rate is anemic compared to the growth rates we have seen over the last decade or so. (OMB reports a 7.09% compound annual growth rate (CAGR) between FY 2001 and FY 2009 and they are projecting a 0.78% CAGR between FY 2009 and FY 2014) Yet, many expected lower growth – if not an outright decline – in the federal IT budget for this coming fiscal year.

Now the budget is in the hands of Congress, which has historically appropriated more for IT than what the President requests. With fiscal priorities clashing and sequestration impacts now being felt across the market, federal IT could weather the current fiscal storm in relatively good shape.

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Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin FIA. Follow me on Twitter @GovWinSlye.

Highlights of the President?s FY2014 Budget Request

Wed, 10 Apr 2013 13:34:00 -0400

Today President Obama delivered a $3.8 trillion spending plan to Congress which includes a $1.2 trillion request in discretionary funding levels and nearly $82 billion for information technology for FY2014. The budget focuses on jobs creation, economic growth and to strengthen the American middle class.

The budget proposal also includes $1.8 trillion in additional deficit reduction measures over 10 years to reach a total deficit reduction of $4.3 trillion. The proposed deficit actions would reduce the deficit to 2.8%of GDP by 2016.

Additionally, the budget proposes $400 billion in cuts to health programs including Medicare. Savings and cuts would come from negotiating better prescription drug prices, fighting waste and fraud, and requiring the wealthiest seniors to pay more.

The table below shows the FY2013 enacted budget levels and the proposed FY2014 levels.

Other budget highlights:

Includes $50 billion for upfront infrastructure investments to invest in repairs to highways, bridges, airports, transit systems, and to encourage innovative infrastructure projects
Invests in in education reforms and training with a commitment to early childhood education
Simplifies the tax code and raises $580 billion for deficit reduction by limiting tax benefits, but not raising tax rates
Creates new “ladders of opportunity” to ensure that hard work leads to a decent living by developing pathways to jobs and partnering with communities to rebuild after the recession
Includes $200 billion in savings from other mandatory programs, such as reductions to farm subsidies and reforms to retirement benefits
Proposes $200 billion in discretionary savings from both defense and non-defense programs
Offers $230 billion in savings from changes in the way the government calculates inflation for annual cost-of-living adjustments for benefits programs

Information Technology

The president’s budget proposes nearly $82 billion in IT funding, a 1.8% increase from the FY 2013 CR and a 2.1% increase over FY 2012 estimated level.

IT-related budget highlights:

$575 million in savings is anticipated from DoD Data Center Closures.
$324 million is being cut from the DoD’s Global Hawk UAV program.
$22 million is being cut from Computer and Information Science and Engineering Research Programs at the National Science Foundation; CISE is the organization responsible for promoting R&D on big data. NSF’s budget takes big hits for its small size, which will affect grant spending on technology R&D.
$81 million is being cut from the DoD’s Precision Tracking and Space System, which is part of Ballistic Missile Defense at the Missile Defense Agency.
$38 million in savings related to the Joint Polar Satellite System is anticipated at the Department of Commerce.
$29 million in savings is anticipated from IRS Business Systems Modernization at the Treasury.

All told, the president’s budget request includes 215 cuts, consolidations, and savings proposals, which according to the administration, are projected to save more than $25 billion in FY2014. The budget proposal outlines the administration’s priorities and proposed methods for generating more revenue, cutting costs, and reducing the deficit. However, it joins competing budget plans in the House and Senate. Serious Capitol Hill budget negotiations are not likely to take place until this summer.

Surviving Sequestration: The 2nd Half of FY 2013 Could See $300 Billion in Federal Contract Dollars

Fri, 05 Apr 2013 09:49:00 -0400

Increasingly, we hear from companies in the federal marketplace that they struggle to plan and forecast their business prospects. There have been so many delays, false starts, and misaligned priorities that it is sometimes hard to know what opportunities are real and how to position your firm to compete. Now, the impacts of sequestration are beginning to ripple through an already skittish market, adding to the uncertainty. Yet, there are some things to consider that might indicate the contracting potential for the rest of fiscal 2013 and beyond.

Whenever things get unbearably uncertain it is important to have access to good data and information, plus a little creative thinking. It is the only way I know how to keep from making reactionary decisions and to get into proactive mode. So when it comes to thinking about the business prospects for the remainder of fiscal year (FY) 2013 it helps to build some historical context.

To get a sense of the historical pace and relative magnitude of federal spending for the remaining two fiscal quarters of 2013 I looked at the reported quarterly contract obligations across the federal government for the last five years. As I have noted in the past, we have seen a shift in federal spending to later and later in the fiscal year. Spending in Q1 and Q2 (in varying degrees) has shifted to Q3 and Q4. Even with some yearly fluctuation, the trend has been fairly stable. (See chart below.)

These shifts have occurred during a period where we have seen increasing use of continuing resolutions (CR), omnibus appropriations and other delays to funding federal agencies. FY 2013 is not particularly unique in this respect, so it does not seem unreasonable to conclude that the trend will hold this year as well.

Projected Spending for the Rest of FY 2013 – a Possible Scenario

Now that we have received data for the first two quarters of FY 2013 it becomes possible to perform some rough projections of what might be still on the table for Q3 and Q4. I used FY 2012 data as a basis to make these projections. For FY 2012, adding together Q1 and Q2 departmental obligations and then dividing that sum by the department’s total obligations gave me the relative percentage of total obligations that occurred in Q1 and Q2. (See the table below for the top 20 federal departments and agencies.)

Assuming that agency contracted spending in FY 2013 will be at least 90% of what it was in FY 2012 (sequestration may represent about a 7% cut, so this 10% difference seemed reasonable to me) I followed a similar approach to calculate estimates for Q1 and Q2 percentages and potential remaining obligations for the remainder of FY 2013.

For example, in the table below the Army had combined FY 2012 Q1 and Q2 obligations of $41.6 billion, which was 38% of their total FY 2012 obligations. The Army had a total of $17.8 billion in contract obligations for Q1 and Q2 of FY 2013, which represents 18% of the projected potential total FY 2013 spend, using my 90% of FY’12 assumption. Applying the percentage left over (i.e. 82%) to my total FY 2013 estimate results in a potential remaining obligation balance for Q3 and Q4 of $79.6 billion for the Army.

Granted, performing estimates at this macro level has its limitations and it requires certain broad assumptions for consistency, like a comparable year-over-year obligation rate and that, to some degree, these expenditures are for recurring needs. Some departments have a measure of cyclicality that is underrepresented in a chart covering just a few years. For example, Energy tends to run cyclically between 40% and 68% for Q1 and Q2 every other year or so like a pendulum. Further analysis into the specific contracts is needed to understand why.

Implications

Comparing the 2012 and 2013 percentages reveals that nearly all of the top 20 departments are behind in obligating funds, even with an assumed 10% reduction in spending from FY 2012. While the one-two punch of delayed budgets and sequestration might explain much of this it still remains that these agencies will need to obligate their remaining budgets by the end of the fiscal year. Even (or especially) in this uncertain budgetary environment, agencies will not likely leave money unspent. It is still a “use it or lose it” world out there. So there may likely be some significant pent-up demand that we could see play out in the remaining two quarters.

If this simple analysis holds even close to reality the potential remaining total contract obligations across all federal departments and agencies could be over $300 billion in Q3 and Q4, or 70% of total FY 2013 contract obligations. The second half of fiscal 2013 could potentially see federal contract dollars really flow.

Surviving Sequestration: Is a Flood of Federal Contract Dollars Coming?

Fri, 05 Apr 2013 09:39:00 -0400

At a luncheon I attended recently, Ms. Kathy Cutler, Director and Chief Information Officer at the Defense Logistics Agency (DLA) mentioned that her agency’s sales to DoD customers had been slow in the first half of fiscal 2013 due to the uncertainty surrounding Sequestration. Ms. Cutler did not say what her expectations are for the remainder of FY 2013, but her comment made me wonder if the trend at DLA is visible in the contract spending at other federal agencies. To analyze the question I used data from the Federal Procurement Data System (FPDS) showing federal obligations reported as of March 31, the end of Q2 FY 2013, under the top 10 Product Service Codes (PSCs). I chose to look at spending under the PSCs because of the visibility it provides into both the rate of federal spending in fiscal 2013 and the kinds of things agencies are buying. Finally, I took the fiscal 2013 numbers and compared them with data from fiscal 2011 and fiscal 2012 to gauge the rate of spending to date versus recent historical norms.

Due to the funding bottleneck we like to call Sequestration, agencies still have a large percentage of their average contracting dollars to spend in the last 6 months of FY 2013. Add to this the fact that agencies have obligated far fewer contract dollars to date than is typical and the outlook for vendors in the federal market over the next 6 months is rosy.

Federal Spending by Top 10 PSCs – Civilian Market Segment

Taking a look at the Civilian agencies first, the dark blue columns in this chart show the 10 PSCs under which Civilian agencies spent the highest dollar amounts in FYs 2011 and 2012. The totals for both years have been averaged to provide a single number for comparison. The light blue columns show the total number of dollars obligated under these PSCs as of March 31. This analysis yields several insights:

FY 2013 dollars obligated under PSC M181 Operation of Government-Owned/Contractor Operated Facilities is equal to 42% of the total average dollars obligated in FYs 2011 and 2012.
The lowest percentage of FY 2013 dollars obligated so far is under PSC R499 Other Professional Services. This is equal to 23.5% of the total average dollars obligated in FYs 2011 and 2012.
The highest percentage of FY 2013 dollars obligated so far is under PSC 9660 Precious Metals Primary Forms. This is equal to 57% of the total average dollars obligated in FYs 2011 and 2012.
The percentage of dollars obligated to date under technology PSCs D399 Other ADP & Telecommunications Services, R425 Engineering & Technical Services, and 7030 ADP Software equal 31%, 25%, and 50% respectively, suggesting that spending on technology solutions will remain robust.

Federal Spending by Top 10 PSCs – Defense Market Segment

Analysis of PSC data over the same timespan at Defense agencies shows similar trends. Readers should note that the totals in the red columns are underestimates given that the DoD is typically weeks, if not months late in reporting obligated contract dollars. Also note that some of the Product Service Codes are different from those in the Civilian segment. A few of the trends worth highlighting include:

The DoD has obligated only 15% of the contract dollars that it historically spends under PSC R425 Engineering & Technical Services.
Defense agencies have obligated only 13% of the contract dollars that they historically spend under PSC D399 Other ADP & Telecommunications Services.
Defense agencies have obligated only 31% of the contract dollars that they historically spend under PSC R499 Other Professional Services.
Defense agencies have obligated only 19% of the contract dollars that they historically spend under PSC R706 Logistics Support Services.

Deltek’s Take

The media has been saturated with stories of budget cuts and falling federal spending, but the reality is that agencies were hesitant to spend contract dollars during the first half of FY 2013 due to policy uncertainty from Congress and the White House. Now that agencies have budgets for the remaining six months of FY 2013, we expect agency spending will be significantly higher through the end of September. Agencies are likely to be very aggressive in trying to obligate as many dollars as possible before the end of the fiscal year. With the exception of some multi-year appropriations and funding authorized for reprogramming, agencies must expend their funding within the fiscal year or risk losing it. The challenge will be speed. Overworked contracting shops catching up on stalled procurements and getting a late start on coming acquisitions will struggle, but the fact remains that the federal Government has tens of billions of dollars to spend on vendor-provided goods and services. Is your company ready to capture some of this business?

Surviving Sequestration: Over $116 Billion in Contracting Opportunities on the Horizon

Fri, 05 Apr 2013 09:30:00 -0400

Despite the emphasis the tighter budgets agencies face under sequestration, major contract opportunities are continuing to move forward. The sum total for 28 upcoming contracts is $116.142 billion. Of course, small businesses won’t be left out in the cold. Of that total, close to some $17 billion will for be small businesses awards.

Contract Status Key
?	Moving Forward
?	On Hold
X	Cancelled
?	Contracting Office Not Commenting
*	Small Business Opportunity

Note: GovWin IQ login is required to view the reports at the Opportunity ID hyperlinks below.

Agency	Program/Account	Value	Opportunity ID	Status
Air Force	Training System Acquisition Program (TSA III)	$20.9 B	37291	?
Air Force	* Engineering Professional Administrative Support Services (EPASS)	$5.0 B	93515	?
Air Force	*Network-Centric Solutions (NETCENTS II A&AS)	$710 M	48254	?
Air Force	* Technical Data Support Services (TDSS(e))	$467 M	78427	?
Air Force	*Follow On Third Party Logistics Services for Support Equipment Commodity Council (3PL SECC)	$288 M	92288	?
Army	Train Educate and Coach (TEACH)	$8.0 B	69254	?
Army	Space and Missile Defense Technology Design Development Demonstration and Integration (D3I)	$4.9 B	54159	?
Army	Strategic Service Solutions (S3)	$4.0 B	86280	?
Army	Utility Monitoring and Control Systems for Heating Venting and Air Conditioning (UMCS IV) (HVAC)	$2.5 B	80441	?
Army	Technical Information Engineering Services (TIES)	$995 M	69356	?
Army	Energy Savings Performance Contracts (ESPC III)	$1.5 B	78525	?
Army	*Information Management Communications Services (IMCS 3)	$500 M	72006	?
Commerce	* Patent Office Support Services (PTOSS IV)	$252 M	32547	?
Education	Common Services for Borrowers (CSB)	$2.3 B	33550	X
GSA	One Acquisition Solution for Integrated Services (OASIS)	$12.0 B	90928	?
HHS	Health Marketing Communications Services (HMCS)	$870 M	67831	?
HHS	Chief Information Officer Commodity Solutions (CIO-CS)	$10.0 B	47886	?
NASA	Solutions for Enterprisewide Procurement (SEWP V)	$20.0 B	82396	?
NASA	Center Maintenance Operations and Engineering (CMOE)	$971 M	53636	?
NASA	* Marshall Engineering Technicians and Trade Support Services (METTS)	$151 M	53603	?
State	Passport Support Services (PSP)	$570 M	64443	?
State	* Hybrid Information Technology Services for State (HITSS II)	$2.1 B	49544	?
USAID	Encouraging Global Anticorruption and Good Governance Efforts (ENGAGE)	$750 M	83090	?
Defense	Global Network Services (GNS)	---	86970	?
Defense	Defense Systems Technical Area Tasks (DS) (TATs)	$3.0 B	48780	?
Defense	Homeland Defense and Security Technical Area Tasks (HD TATs)	$900 M	48776	?
Defense	* Special Operational Equipment Tailored Vendor Logistics Support Program	$5.7 B	70506	?
DHS	BiowatchGen 3	$3.1 B	68486	?
Navy	Rapid Response Irregular Warfare (RR/IW)	$5.0 B	67883	?
Navy	Consolidated Afloat Network and Enterprise Services Full Deployment Production Units (CANES)	$1.0 B	50287	?

Source: Deltek

Many of Deltek’s opportunity analysts have reported that contracting offices have been unable to comment on the precise impact of sequestration their programs. Contractors will want to monitor changes in requirements and scheduling as the precise impact of sequestration becomes clearer.

In some cases, agency officials indicated that sequestration is not expected to have an immediate impact on their contract. Future delays in funding, however, could be a possibility. Certainly, agencies are prioritizing programs, complying with mandates and, in some cases, restructuring their efforts. Program cancellations, however, seem to be in the minority.