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New York State: Federal fiscal relief could mean $18 billion

Details are beginning to come out about the federal fiscal relief for states and localities that will be included in President-elect Barack Obama's economic stimulus package. (Here's an interesting sidebar on potential conflicts of interest re: the infrastructure spending aspect.) Sen. Chuck Schumer (D-NY) is already crowing about a likely $18 billion for the Empire State and the Big Apple. This is a pretty good chunk of change since the state itself is only looking at around a $15 billion budget gap for the upcoming fiscal year. (Trust me, it won't be the last one.)

The state will benefit most from $5 billion per year for two years in increases Medicaid reimbursements from the federal government. New York City could see $4 billion for mass transit next year. But, don't strike up the band just yet!

While relief such as this will not solve the states' and localities' fiscal troubles, it will buy them time to break the cycle of reactive nickel-and-dime budget cutting and revenue raising as they try to get ahead of deteriorating budget forecasts. Housing prices will continue to decline for some time and consumer spending is not going to rebound as though nothing has happened anytime soon. It will take years for the correction to work its way through the economy and be fully reflected in public revenue streams.

The New York Times' Paul Krugman has some interesting commentary on the impact of the states on the economic crisis. His voice is worth hearing because it will be heard within the walls of the next White House. However, I think everyone should understand that balanced budgets aren't the only reason states (and what about localities?) are forced to cut services to the bone when revenues decline. Part of the problem is that federal, state, and local spending have all grown to become a significant percentage of the nation's GDP, doubling and tripling since the Second World War.

You don't have to be a "supply-sider" to figure that the nation's tax load is at or near its maximum. All we can do now is shift the burden around amongst the tax brackets, and that's always politically painful. We could have more respect for federalism, by which I mean the federal government could reduce the taxes it collects and allow the states and localities to collect them for more localized purposes. Or, the states and localities could surrender their collection in favor of Washington and get pro rated returns from the Treasury. All of which seems unlikely.

So, therein lies the rub. We're facing what potentially could be the "next great depression," but--even if there were no balaned-budget requirements--neither Obama nor state and local leaders will enjoy anything near the same level of "revenue maneuverability" (a term I just made up) that was had in FDR's day. That's why I remain bearish on the prospects for any sort of major rebound for state and local revenues. This time, there's no way through it but to conduct an orderly revenue/spending retreat back to levels that pre-date the home-mortgage lending rush.

Fortunately, IT is part of the long-term solution. That's the best that can be said right now. GovWin will be watching every step of the way.

Want more on this topic? GovWin's latest Industry Insight report takes a look at the recession's impact on state and local revenues, the implications of federal fiscal relief, and the likely impact on state and local government IT spending over the next five years.

CIOSP 3 and Interview with Federal News Radio

I was recently interviewed by the folks at Federal News Radio on the upcoming CIOSP 3 procurement out of the National Institutes of Health. I thought I'd share some of the insights from the interview and from GovWin's Opportunity Report on the program. To listen to the interview, visit Federal News Radio's Web site.

For background, NIH operates two major government wide acquisition contracts (GWACs), CIOSP 2i and ImageWorld 2. The contracts were awarded back in 2000 to dozens of companies to provide IT services and imaging equipment to federal agencies with a special focus on issues impacting health IT related activities in the federal government.

The government released an RFI for the recompete back in the Spring and is currently awaiting approval on its business case in order to move forward with the acquisition. The current contracts expire in 2010 so NIH still has some time. The existing contracts had ceiling values in the billions ($19.5 billion for the CIOSP 2i) program, however actual spending on the two GWACs has been less than $4 billion (still a significant amount of money!).

For more information on the CIOSP 3 (or CIOSP NEW as it has sometimes been called) program check out and bookmark GovWin Opportunity ID# 42093. The NIH site where you can find more information is

Social Services: Looking ahead to 2009

As the economy takes a downturn and the demand for human services goes up, states are experiencing larger volumes of paperwork with tighter deadlines, fewer staff, and decreasing budgets. Thus, the modernization of human services will continue to be front and centered in 2009 as states are going to continue to look at increased efficiencies and cost savings with staff reductions in the upcoming year. Yet, the current fiscal conditions appear to be deteriorating the objective to improve human services by cutting millions, in some cases billions, from state-funded programs, which include reductions in social services programs.

Earlier this month, the Treasury Department reported an additional $164.4 billion to the federal budget deficit, bringing the total deficit to $401.6 billion for the first two months of the fiscal year, which began October 1st. Furthermore, it is projected that our nation will be faced with a record budget deficit of $1 trillion or more for the 2009 fiscal year. As a result of what is said to be the worst recession in history, most states are unable to cover expenses and it can take years for them to recover from the current financial crisis. As indicated by the Center on Budget and Policy Priorities, 43 states are facing budget shortfalls for this year and/or next year with virtually all states' deficits anticipated to end up totaling over $100 billion in fiscal year 2010. In fact, some states are facing their biggest deficits in history. The state of California for example, is facing an additional $11 billion shortfall and may be unable to pay its bills come spring 2009. The District of Columbia's Chief Financial Officer is anticipating nearly half a billion budget shortfall for FY 2010 and double-digit unemployment. According to a recent survey conducted by the National Association of State Budget Officers (NASBO), since budget enactment, economic conditions have further deteriorated with more than half of the states reporting budget gaps of $29.7 billion as of December 2008. Additionally, states will experience the first spending decrease since 1983 with a projected 0.1 percent decrease in Fiscal 2009.

Sadly, the biggest cuts are being made to social services programs. On December 1st, the Kansas Department of Social and Rehabilitation Services (DSRS) announced that it was immediately freezing access to a program that provides home- and community-based services for low-income Kansans with disabilities, which could affect hundreds of people. The freeze will be in effect through July 1, 2009. Additionally, the Association of Community Mental Health Centers of Kansas is looking at a $1.8 million cut in grants from DSRS. In a two-year budget proposed by Oregon Governor Ted Kulongoski at the beginning of the month, "children and education were the apparent winners, and human services the loser," with cuts affecting virtually all human-services programs, including in-home care for 6,500 older and disabled people, cash and job assistance for 2,745 low-income households with children, and child-care subsidies for 3,500 low-income families with employed adults. As indicated by Senate President Peter Courtney, "We need to explore every option and we absolutely must protect those who can't protect themselves - our children, our elderly and those with multiple disabilities." Several other states are also facing similar cuts to their human services programs.

In the upcoming year, the legislative leaders who are championing these efforts will be faced with some tough decisions revolving around resource allocations and prioritization, while state agencies' program and IT staff will have to build a strong business case to justify their IT projects. Moreover, the magnitude of the economic downturn is pushing governors to make decisions between cutting services or raising taxes. Some governors are demanding hiring freezes and some states have already implemented hiring and spending freezes resulting in project delays. Based on conversations with several states' human services program and IT staff, some projects are getting cancelled as departments have decided to build their own solutions in-house, while other projects are put on hold or further delayed due to a lack of funding. Lately, GovWin has been hearing the same comments from human services program offices, such as "this project was frozen due to an expected deficit" or "everyone in the state is scrambling to hold on to what they currently have, let alone ask for additional funds for future initiatives." Looking ahead to 2009, GovWin expects this trend in project "freezes" to continue with greater frequency, especially with governors in several states asking departments to slash their budgets.

Also, with the upswing in unemployment, some states are finding their unemployment insurance funds running dry. In Ohio for example, where the unemployment rate is more than seven percent, the state may need a federal loan for the first time in 26 years to cover unemployment costs. As per GovWin's recent communication with the Chief Information Officer (CIO) from the Virginia Department of Social Services (VDSS), Division of Information Systems (DIS), the state is likely to face a shortfall of $3 billion in the upcoming year and the drastic spending cuts will affect IT projects. According to the CIO, VDSS has already reduced their IT staff by 35 people and had to let go of 32 contractors. Although the CIO is currently pushing to hire more state FTEs since they are cheaper than contractors, he is fully anticipating more budget cuts in 2009 as well as cuts in program spending or even getting rid of some social services programs altogether.

Yet, despite the fiscal conditions, major child support and child welfare IT system projects, whether it's a replacement or an enhancement, are still in the pipeline, but just being prolonged. As these systems are becoming obsolete, their faulty design and architecture make them difficult to maintain and enhance. Additionally, maintenance complexities inhibit the ability to be responsive to changing requirements. Thus, many states have been planning their modernization efforts for over a year and although some ongoing budget commitments have already been secured to protect projects currently underway, some projects initially planned for 2008 are getting pushed to 2009 or even 2010 and beyond as states are taking their time, utilizing a step-by-step planning approach. Consequently, projects are being phased out into multiple solicitations versus the initial plan for one large Request for Proposal (RFP), which is a trend that GovWin expects to be continued in 2009 and beyond. While a part of the multi-faceted/multi-phased planning approach has to do with budget uncertainties, a major part of it has to do with assuring that risks are manageable and to also avoid project failures or system glitches.

A lot is going to happen in 2009 as the new administration will have to make a lot of momentous decisions. Not only will President-elect Barack Obama inherit the huge state budget deficits faced by our nation, but the tax cuts for example, will be a huge issue that is going to shape the rest of the landscape as his plan for the highly anticipated economic stimulus package, that is yet to be determined, will rely on tax cuts. Even though IT funding has always been an issue for large and risky IT modernization projects, with a new administration in 2009, states have high hopes of replacing their legacy systems and can only remain hopeful for federal dollars to be pushed down to these programs to support IT. The commonwealth of Pennsylvania currently has two feasibility studies underway, one with Symbiosys Solutions, Inc., (GovWin Opp ID 45820) to determine the future technology approach for their child support system, and the other with Public Consulting Group (GovWin Opp ID 46234) to determine how to best move forward with an automated child welfare solution that will meet federal, state and county business needs. Both Symbiosys and PCG will also be responsible for drafting the RFPs for the design and implementation phases (GovWin Opp ID 46191 and GovWin Opp ID 46206). Beyond their high dollar values, both projects represent good opportunities to demonstrate competence in modernizing the legacy systems. For more details on similar opportunities coming down the pipeline, keep an eye for the upcoming GovWin/Output report on the Top 10 Social Services Opportunities of 2009.

New Economic Stimulus Package Could Mean Big Dollars in Your Agency

As President-Elect Obama begins the long task of locating and appointing the sub-Cabinet level leadership for the federal agencies, he is clearly focused on the impact these individuals will have in spending our money. The Bush Administration chooses to deliver an economic stimulus package in the form of rebate checks from the U.S. Treasury to most of our mailboxes. Transition officials and the President-elect himself have implied that federal agencies may see a large portion of the funding in an effort to kick-start the economy. One topic of interest that we've debated around our water cooler is whether President-elect Obama's plan for job creation involves expansion of Government positions and hiring more federal employees or promoting policies which stimulate private sector jobs, or both.

But, I digress.

In a December 19, 2008, GovernmentExecutive article , a mid-level transition official is quoted as saying that President-elect Obama would prefer that his appointees be in place on or around January 20 in order to oversee the spending of federal money. In fact, they will be "supervising the spending of the economic stimulus package" which could "mean a massive infusion of money" in some departments. GovWin is already tracking much of the transition agenda but it will be interesting to see how this financial infusion could affect current programs versus new projects. See this GovWin Blog from last week for more information on transition activities.

We already know that the economy, energy and healthcare top the list of priorities in the new administration. In addition, a greater reliance on technology, fiscal management and overall efficiency are likely to be strong messages for all agency leadership. Agencies that can show tangible results and track the benefits a funding increase could mean to the agency, the economy and the country will make a strong case to get the money. Since the jockeying for the Fiscal Year 2010 budget has already begun, you can bet agency leadership are putting together plans to get immediate stimulus funding as well as sustained long-term budget funding. So, there's still hope or at least blurry dollar signs at the end of the tunnel.

Lastly, one thing to note. Many senior leadership positions will not be confirmed until after the Cabinet-level leaders have completed the process, which means even though the President-elect's team is moving quickly with these names, lower level appointees may be running the show until their supervisors are confirmed.

Calif.: Governator vs. assembly in deficit showdown; New payroll system needed

The Los Angeles Times had some good coverage over the weekend of the high-stakes game of chicken being played by Gov. Arnold Schwarzenegger (R) and the Democratic-controlled state legislature. It's gotten so bad that state controller John Chiang is threatening to pay the state's contractors with IOUs. They simply can't agree on how best to address the state's budget deficit, which could grow to $42 billion by mid-2010 (only if left completely unchecked). As bad as that sounds, you can still make the case California is more solvent and far better managed than the average investment bank!

On Friday, Gov. Schwarzenegger introduced a new furlough program and workforce reductions to save payroll money since, apparently, the state's payroll system is not capable of implementing across the board pay cuts. How would you like to get laid off because IT couldn't process a temporary pay cut? And, to think, sometime we talk about government IT as though all the great achievements are behind us!

Here's some additional context...

According to the Center for Budget and Policy Priorities (CBPP) a total of 37 states plus the District of Columbia are facing a collective mid-FY 2009 shortfall of $31.2 billion. However, the 10 states with deficits of approximately $1.0 billion or more each will likely account for $22.5 billion (72%) of that total. California alone will likely be responsible for more than one-quarter of the national total.

I remember reading years ago that the only globally competitive industries in America are those related to information technology and entertainment. (That prompted a career change.) Of course, both of those industries are headquartered in California. So, like it or not, the Golden State is the economic engine of the nation. Let's hope the spirit of compromise and forgiveness finds its way into the hearts of leaders Sacramento this week. If California fails, America will suffer.

Want more on this topic? GovWin's latest Industry Insight report takes a look at the recession's impact on state and local revenues, the implications of federal fiscal relief, and the likely impact on state and local government IT spending over the next five years.

Economic Stimulus Will Drive Billions to Government Contractors

GovWin expects President-elect Obama's economic stimulus package to provide billions of dollars in contract opportunities to government contractors over the next several years. The package, which is likely to approach $1 trillion in spending over the next two years, is expected to have significant funding for infrastructure, health IT and green initiatives to generate jobs, all of which rely heavily on government contractors to implement.

According to The Washington Post, the preliminary plan has three buckets of money:

  • Funds to States for Health Care – at least $100 billion
  • Tax Cuts – at least $140 billion
  • Infrastructure, eHealth and Green Initiatives – $350 billion
The area presenting the most significant opportunities for contractors is the final bucket. What form could these investments take?
  • Dramatic increase in spending with the Army Corps of Engineers to accelerate construction projects
  • Grants to state and local governments to support infrastructure improvements, funds to increase technology and modernization of schools
  • Funding for GSA and agencies managing their own buildings to implement green initiatives
  • Funding to health care providers to accelerate adoption of electronic medical records
The success of the economic stimulus package depends upon the government's ability to spend this money quickly. To accomplish that, the government will have to rely extensively on contractors.

GovWin will provide additional research and insight on the economic stimulus plan as it gets formalized in legislation, but contractors should be thinking now about how they position themselves for these opportunities when they emerge.

Pacific University adds New Twist to Emergency Notification System

Pacific University, a private university with an enrollment of 3,100 located in Forest Grove, Oregon recently installed an emergency notification system that incorporates applications that are not typically included in campus emergency notification systems. In an emergency situation the Boxer Alert System sends messages to all Facebook and Twitter accounts that are part of the school's network as well as the traditional email and text message alerts.

This feature serves to capture the attention of students by engaging with them on platform with which they are very familiar. The addition of Facebook and Twitter to the list of tools (including text messages, phone calls, siren and speaker systems) that universities have utilized to ensure that as many students and faculty as possible are made aware of dangerous situations on campus. Given the advancements in notification technology it is conceivable that a student with an iPhone or Blackberry could receive a phone call, text message, email and Facebook alert at the same time on the same device to warn them of a dangerous situation.

The Next Secretary of Education: Arne Duncan

On Tuesday, December 16, 2008, President-elect Barack Obama announced that Arne Duncan, Chicago Public Schools CEO, will be the next Secretary of Education. Duncan has headed the third-largest school district in the nation since 2001. Under Duncan's leadership the schools have seen an increase in state test scores and attendance, graduation rates have risen by 6% and 53 schools have been opened.

Most of Duncan's popularity can be attributed to his reputation as a reformer. During his watch, Arne Duncan has established a strong relationship with the teachers union and closed down failing schools. Duncan has also instituted merit pay incentives for teachers and students. Duncan has proven that he is able to gather information from all sides objectively and execute the necessary actions.

For many Americans, these acts of innovation and non-partisanship are just glimpses of the approaching transformation of the No Child Left Behind (NCLB) Act. Duncan has made it clear that he's appalled that children who live in wealthier communities get a better education than those who live in poor communities. He has also supported NCLB, accountability concepts, and teacher quality.

So, what should we expect from the new Secretary of Education? GovWin anticipates that the future Secretary of Education will continue to bring stakeholders together and eliminate the political gridlock. As a strong supporter of accountability and additional funding for NCLB, Duncan will seek to improve accountability systems and increase funding for this law. Furthermore, Duncan will shut down and reconstruct any portion of No Child Left Behind that is not rendering desired results. Duncan will not be limited to one ideology, instead he will experiment and create a solution that is best for the educating the children of the United States.

Getting Ready for Change: the Transition and the Implications

With just a little over a month to go to the changing of the guard from the Bush to the Obama administration, what are the major objectives and changes that we should be expecting? Most of President-Elect Obama's high level policy objectives have been highlighted repeatedly during the long presidential campaign and more so since early November as the transition framework begins to take shape.

For a more in-depth look in these policies, the Office of the President-Elect (setup with assistance from GSA) has been very active in publicizing the incoming Administration's core objectives. The website for the Office of the President-Elect, provides a more detailed view of these policies.

Since these policies will guide the framework of the Federal Agencies in the future, GovWin is currently following the development of these policy agendas, to understand how they will affect business opportunities for the Federal Vendor community. With the ongoing economic crisis, many of the programs may be delayed, but they should be implemented on some level in the near future after January 20, 2009.

The overall development of the Presidential Transition is being tracked through GovWin's 2009 Presidential Transition Opportunity Report, in addition to that overarching program, GovWin is following the following policy areas in anticipation of them guiding future procurement for the Government.

  • Foreign Policy Agenda: GovWin Opportunity 52563
  • Energy Agenda: GovWin Opportunity 52569
  • Education Agenda: GovWin Opportunity 52573
  • Health Care Agenda: GovWin Opportunity 52576
  • Homeland Security Agenda: GovWin Opportunity 52578
  • Immigration Agenda: GovWin Opportunity 52581
  • Rural Agenda: GovWin Opportunity 52588
  • Seniors and Social Security Agenda: GovWin Opportunity 52590
  • Veterans Affairs Agenda: GovWin Opportunity 52591
  • Fiscal Agenda: GovWin Opportunity 52592
  • Defense Agenda: GovWin Opportunity 52594

Rising Momentum on Health IT: Overview of the 5th Nationwide Health Information Network Forum

Background to the Government's E-Health Initiatives:

During the past 5 years, the Bush Administration laid the ground work to expand the use of Health IT across the Federal Government. One of the first major acts to push this initiative forward occurred during 2005, when President Bush set a goal for most Americans to have access to secure, interoperable Electronic Health Records (EHR) by 2014. President Bush created the Office of the National Coordinator for Health Information Technology (ONC), a central office at the Department of Health and Human Services (HHS) to oversee this effort. Another important act for this initiative occurred during August, 2006, when President Bush signed an executive order requiring the Department of Health and Human Services, the Department of Defense, the Department of Veterans Affairs, and the Office of Personnel Management to adopt interoperable health information-technology standards, and adopt quality-improvement measures.

The Forum:

On December 15-16, the ONC sponsored the 5th Nationwide Health Information Network Forum in the Grand Hyatt Hotel, in Washington DC. The Nationwide Health Information Network (NHIN) is being developed to provide a secure, nationwide, interoperable health information infrastructure that will connect providers, consumers, and others involved in supporting health and healthcare.

The forum focused on the Trial Implementations which were conducted by the NHIN participants and their limited production partners. Organizations that participated in the trial implementations discussed specifications to facilitate interoperability, and lessons about preparing for production-based data exchange. The higher profile discussions centered on developing trust agreements among the participants. The Privacy of Electronic Medical Records was also a key issue, and was raised repeatedly.

In a keynote address Secretary Mike Leavitt announced key privacy principles, and a toolkit to guide efforts to connect the potential of new technology and more effective data analysis, while protecting privacy. Secretary Leavitt stated, "Finding the balance between increased access to information and privacy is very important. If we don't have it, we won't succeed. Consumers shouldn't be in a position to have to accept privacy risks they don't want. Each consumer should be able to choose products and services that best fit their health needs and privacy preferences."

The Incoming Administration:

Several speakers mentioned that it is highly expected that President-Elect Obama will sign a new stimulus package as soon as he takes the Office. In a recent speech, President-Elect Obama stated that he plans to upgrade health care by introducing new technology and electronic medical records.

The additional Health IT focus and funding may create a potential for new business opportunities for Federal Vendors involved in the Health, and Health IT Space. Examples of potential opportunities include the development of standardized electronic medical records software that increase the efficiency and productivity of physician charting, billing and e-prescribing. If the stated focus in Health IT continues with the next Administration, many more opportunities to develop this field should emerge.

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