‘Shark Tank’ for state agency IT modernization

Inspired by the success of the federal Technology Modernization Fund (TMF), states are taking tentative steps toward a similar setup.

The TMF, established by Congress in the Modernizing Government Technology Act, is a central fund administered by the General Services Administration that allows agencies to underwrite multiyear modernization projects without dipping into their annual appropriations. The statute also allows agencies to establish their own multiyear funding mechanisms for IT modernization. Under the law, agencies are supposed to pay back TMF awards out of savings realized from IT upgrades in order to maintain the solvency of the fund.

The California Department of Technology (CDT) is seeing the fruits of the $25 million TMF it set up in 2021: The state Department of Food and Agriculture’s Registered Service Agency (RSA) used $1.2 million from TMF for an online system that replaces a paper-based registration process for licensed agencies and agents who sell, rent, install, service or repair the state’s 1.85 million commercial weighing and measuring devices. Those include electric meters and gas pumps, for example.

“The portal offers a full suite of self-serve functions to update agency registrations and contact information, view and print licenses, submit calibration reports and standards certifications, and make required payments,” according to a June 2022 announcement. “The RSA portal is a valuable resource for agencies and agents in all 58 counties to help assure Californians are getting their money’s worth.”

Although it’s too soon to gather statistics about performance, “what I’ve heard anecdotally is that it’s really streamlined that process and shortened the time frame to make the updates that [users] need to make,” said Jared Johnson, deputy state chief information officer and chief deputy director of CDT.

In fact, using TMF to launch the project was faster than CDT’s traditional processes. A typical budget cycle can take 18 to 24 months, but RSA applied to TMF in November 2021, got approved a month later and implemented a minimum viable product on May 31, 2022. The portal went live in November 2022. 

“It’s meant to try to hit those quick wins,” Johnson said of the TMF. “We don’t want to miss an opportunity because we have to send a department through a normal budget cycle.”

Like the federal TMF, California’s program follows a similar application-review-approval processes: A department submits a proposal via an online portal on CDT’s website, and a multidisciplinary advisory team reviews it to ensure there is a clear business case. 

“We have some folks that work with the departments to conduct market research, evaluate opinions and alternatives, and we prepare them for what we call Pitch Day,” Johnson said. “Think about ‘Shark Tank’: You get your chance to come in front of that advisory group, pitch your idea and then at that point, the advisory group determines if it will be funded.”

Even if a project gets TMF funding, there is no guarantee that CDT will approve it for use later, however. So far, CDT has gone through two rounds of funding and approved 14 projects.

At the end of last year, Washington Technology Solutions Director and state CIO Bill Kehoe announced that WaTech would request legislation to develop a legacy modernization fund that agencies could use to apply for grants on small to midsize projects to upgrade legacy tech. “This fund would be governed by a multidiscipline leadership group that would review grant applications, make a determination on funding and allow agencies to receive funding quickly to address their legacy issues,” Kehoe wrote.

John Thomas Flynn, senior adviser of government programs at MeriTalk and former CIO for California and Massachusetts, points to the use of IT bonds as a basis for states to create TMFs. Massachusetts became the first state to create an IT bond in the early 1990s, during his tenure as CIO. Originally totaling about $200 million, it reached $600 million in 2020, Flynn wrote in a 2021 article.

Last year, the Massachusetts Legislature passed the Court Information Technology Bond Bill, which provides $164 million for investments that would modernize state court IT systems and capabilities.

These earmarked funds are not a silver bullet, Flynn noted. For the most part, state TMFs are “financed through regular, annual general fund dollars [and] are by definition one-shot, pay-as-you-go investments,” he wrote. “Like with the federal funds, these state IT dollars are again in competition with scores of other spending demands. As a result, modernization targets have been limited in scope, and even if determined to be worthwhile for one year, will face similar rounds of competition in subsequent annual budget negotiations.”

Even the federal TMF is not foolproof six years after it was authorized. It has received $225 million through the annual budget process and $1 billion through the American Rescue Plan and so far has invested in 35 projects across 19 agencies. Since the ARP was enacted, TMF has received over 130 proposals from more than 60 federal agencies and components requesting more than $2.5 billion in funding.

Still, California’s TMF looks promising, Johnson said, calling it an important program for the state. “We believe that this will allow us to find these quick wins and smaller implementations that have a large impact,” he said. “We think that this is the right way to do those small process improvements that deliver a lot of value back.”

Stephanie Kanowitz is a freelance writer based in northern Virginia.