This year, North Carolina Governor Pat McCrory made it clear that the state’s reliance on quick fixes is over and that his goal is to begin focusing on long-term reparations to ensure the state’s ability to provide for its citizens.

The below graph provides a visual representation of North Carolina’s budget from FY 2010 through FY 2015.

Governor McCrory’s major focus areas include increasing the State Repair and Renovation Fund to launch a 25-year plan to replace and upgrade aging infrastructure. He is also looking to increase the Information Technology Systems Reserve in an effort to fund high-priority IT projects taking place throughout government agencies. These are quite ambitious projects given the state is only increasing the overall budget by 3.6 percent in the first year, and while the governor has indeed asked for a significant increase in the IT Systems Reserve, it comes at the cost of the Office of Information Technology. While the IT Initiative Reserve is set to increase by nearly $35 million between FY 2013 and FY 2014, the Office of Information Technology is losing more than $39 million. Therefore, technology dollars are more so reshuffling existing resources, and there will actually be less money available in the next few years for IT projects.

Overall, the structure of the state’s departments has remained unchanged over the past few years. The one significant exception is the dissolution of the states’ Departments of Correction and Crime Control and Public Safety, and the advent of the new Department of Public Safety. Funding for the new department remained consistent with the funding levels of its predecessors, and no major initiatives, IT or otherwise, are planned for the next two years.

Unfortunately, not all budget changes involved a simple reshuffling; some departments lost significant amounts of money. The biggest loser was the state’s Department of Commerce, which lost more than $3 billion, followed by the Department of Transportation’s $1.5 billion loss, though it is likely that at least some of that loss was transferred to the Repair and Renovation Fund. 

Analyst’s Take

The small increase in the state’s overall budget means that most departments will maintain the status quo for the next two years. Few costly initiatives are planned, and as the governor stated, the next few years will be used to set the stage for long-term growth.

While the overall budget remains fairly steady over the next two years, the IT budget has dropped significantly, which will likely have an impact on spending for the next few years at least, especially for those interested in the community development, general government and natural resources verticals. As expected, health care continues to be a growth area as well as economic development and regulation, which will likely be heavily focused on regulation and compliance.

Vendors interested in finding out more about North Carolina should check out Deltek’s state profile application.

Governor “Butch” Otter introduced the 2014 Idaho budget earlier this year, which will see a nearly $300 million increase from FY 2013. Of the $162 million in increased state revenues, nearly half will be transferred to the Budget Stabilization Fund, which will rebid the state’s savings accounts depleted during the recession. Figure 1 below shows total state spending starting in FY 2010.

Medical Assistance Services saw an increase of $77 million to a total FY 2014 budget of $2 billion. Health and human services spending for the state comprises 39.3 percent of the total state budget, with education spending following at 35.2 percent. The Department of Labor saw a $66 million increase, and Public School Support rounded out the top three with an increase of $57 million. Very few departments saw decreases in spending from FY 2013-2014, with the highest drop of $37 million in the Idaho Transportation Department.

The total IT spending for the state decreased by approximately $9 million in FY 2014, bringing total spending to $72.9 million. Some notable projects in the budget included $1.6 million for a benefit and tax system upgrade in the Department of Labor; $5.2 million for a GenTax upgrade for the Department of Revenue and Taxation; $1.7 million for Phase III interoperable communications for the Idaho State Police; and nearly $21 million for the Electronic Health Record (EHR) Incentive Program.

Despite tough times that followed the economic recession, Idaho has rebounded with increased revenues that are being used to restart its savings program for the long haul. Vendors working in the education and health and human services space should check out Deltek’s analysis on Idaho’s budget here, and brush up on the Deltek’s state profile application. For a free trial, please click here.

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.

• 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.

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.

 

• Deliverables Based Information Technology Services (DBITS)
• TEX AN Next Generation Communications Technology Services
• Data Center Outsourcing (Services and Integration)
• Statewide Information Technology Staff Augmentation
• Statewide Cloud Services
• Statewide Wireless Voice and Data Services and Equipment
• Statewide Seat Management Services
• Statewide Software Products

• Inadvertent or deliberate misuse of federal assets,
• Unauthorized modification or destruction of financial information,
• Inappropriate disclosure of sensitive information, and
• Disruption of critical operations.

• Security management,
• Access to computer resources (data, equipment, and facilities),
• Changes to information system resources,
• Segregation of incompatible duties, and
• Contingency planning.

Much has been said about the national security concerns over the information security preparedness of public- and private-sector critical infrastructure, including energy, financial, transportation, health, communications, and others. While some legislative and policy initiatives seek to increase federal regulatory authority over these areas it seems that such moves may be premature until federal agencies can get their own information security house in order. As GAO recognized, until agencies identify and resolve these and other information security deficiencies and more effectively manage information security risks going forward, federal data and systems will remain at risk of disruption, destruction and unauthorized disclosure. This ongoing challenge is why, even in an atmosphere of budget scrutiny where no area or program seems safe from the budget axe, information security remains a priority and will likely seen increased resource allocation – in internal staffing, outside contractor support, and technological tools and infrastructure.

After a protracted pre- and post-election battle, President Obama and Congress have reached an agreement to avoid what is probably the most telegraphed punch in history: the “fiscal cliff.” But before we get too excited (whether it be because they were able to accomplish much of anything in this session of Congress or because we could possibly be retiring the annoyingly overused phrase “fiscal cliff), let’s take stock of what’s actually happened and what it means for federal contractors.

The most significant outcome of this legislation (aka the American Taxpayer Relief Act of 2012), for citizens is that there will be tax increases for households with taxable income over $450,000, tax stability through extended tax relief programs for everyone else, and an extension of unemployment benefits. The most significant outcome for government contractors: you have to wait another 2 months to know if and how sequestration will occur. While most are glad to see the players reach any kind of agreement, the general consensus is that this bill avoids the cliff but puts the government on a roller coaster. February and March will see agencies heading up yet another steep hill as Congress and the Administration work through yet another debt ceiling debate, sequestration rears its head again on March 1, and the current FY 2013 Continuing Resolution expires on March 27. March 27 is also the date that the spending reductions must be evaluated and implemented unless other legislation is enacted.

• Which budget accounts fund their contracts.
• Potential percentage cuts to the relevant budget accounts.
• The priority placed on the contract and/or contract options and modifications to learn if they will likely be funded even under sequestration.
• The possibility of moving options, modifications, task orders, etc. to be funded in the second quarter of FY 2013 to avoid the sequestration ax.

Vendors considering moving into the K-12 IT market should know that this market has its own needs, demands, budget cycles, and procurement approach, all separate from the general state and local market. With 13,600 K-12 school districts in the U.S., including private and charter schools, there is no shortage of customers. K-12 public schools spend, on average, $580 billion a year, $70 billion of which is spent on non-instruction expenditures. The task at hand is finding your footing in the market and finding customers who are seeking your services and/or goods. Before that step, vendors should learn the terrain to determine if demand for their goods and/or services is congruent in the K-12 market, and worth the venture now or in the future.

The Obama administration has placed strong emphasis on incentivizing education reform to raise student and teacher performance, with the hopes to meet future workforce needs of a globalized U.S. economy. Federal funding such as Race to the Top and statewide longitudinal data system grants help fuel many states’ focus on education performance initiatives. Due in part to increased federal funding, many governors’ priorities have piggybacked on federal initiatives to improve classroom performance.

Another driver stems from the apparent collapse of No Child Left Behind (NCLB), as states are being allowed to pursue a wide range of uncoordinated reform strategies. Still, in the wake of NCLB, nationally accepted and verifiable criteria of best practices and cost-savings models are still a long way off. State-level response has come in the form of the National Governors’ Association Common Core State Standards, which is a set of curriculum standards to ensure college and career-ready students. This is currently the closest thing to a nationwide education standard. 

Nationwide school enrollment is at 54 million, and student population is expected to increase by nearly three million more students by 2019 (CAGR: 0.7 percent). More than half of that total (1.7 million) will come during the next five years. Spending in public schools continues to increase year over year, and is averaging around $12,700 per pupil. The need for public school teachers is also expected to rise. With roughly three million classroom teachers today, approximately 225,000 more teachers will be in classrooms within five years (CAGR: 1.4 percent).

Landscape

Contracted goods and services in the K-12 market are expected to enjoy a compound annual growth rate (CAGR) of 2.9 percent over the next five years, down from 3.1 percent in the 2010-2015 forecast period. This decrease is due primarily to the fact that by the end of 2010, most IT projects funded by federal stimulus dollars had worked their way through the system.

Lifecycle PC consumption is a continual concern for many school districts. In the average school district, most PCs are more than five years old, with many being closer to 10 years old. Unfortunately, few districts can afford to adhere to a five-year PC lifecycle turnover, even in the best of times. Procuring maintenance and support services to keep computer equipment operational is the next best thing. Most school districts participate in statewide or regional cooperative contracts to satisfy general IT maintenance needs.

Emerging classroom and administrative technologies are naturally seeing an increase in demand, while much of market capacity remains primed for growth. The low market capacity for classroom technologies, ranging from 4 to 16 percent, has more to do with specific technology availability and usage rates during classroom instruction. As demand increases, so will opportunities for interactive whiteboards, classroom response systems, handheld/mobile devices, computer/Web-based assessments software and classroom learning software. Because many of these mentioned technologies are viewed as “extras” rather than essentials to increasing student performance, there is a lot of head room for potential demand in the long term. Once K-12 budgets get back on track, more funds will free up for these emerging classroom technologies.

The market capacity for administrative technologies is relatively open, with an average range of 65 to 75 percent still available. This is where federal and state policies, mandates, and grants really drive the growth of technologies, including student information systems, business intelligence/analytics solutions, assessment management systems, and special education management systems. These technologies are quickly becoming the go-to tools for increased efficiency and performance on both the state and local K-12 education levels.

For the full report on the Primary/Secondary Education IT Market, 2011-2015, please go here.