Revenue spikes raise hope for IT

Most state governments are reacting cautiously to the revenue uptick, Missouri CIO Gerry Wethington says.

Steven Brooks

Budget boosts mostly for homeland security, e-gov

State tax revenue has begun to increase after the sharp declines of the past two years, but the new money is unevenly distributed and has not affected IT spending much.

The Nelson A. Rockefeller Institute of Government in Albany, N.Y., reported recently that state tax revenue from April though June 2004 increased by 11.4 percent compared with the same period last year. 'When adjusted for the effects of legislation and inflation, this increase was 6.7 percent,' the independent center for state budget analysis said.

All but four states ended their fiscal year in June, so the increased tax revenue helped many of them meet or exceed their revenue targets, the institute said.

'While state tax revenue growth is healthy again, real state revenue levels still have a way to go before they have fully recovered from the recession, even though it ended over two years ago,' the institute said.

Most state governments are reacting cautiously to the revenue uptick, according to Missouri CIO Gerry Wethington, president of the National Association of State CIOs.

'I haven't seen it [in Missouri],' he said of the revenue boost. 'That's not to say there aren't others.'

Speaking of state CIOs as a group, Wethington said, 'We are still climbing out of where we came from. We may ultimately get some additional relief, but on the other hand, it takes time.'

He said some state agencies will push any funding increases they receive to homeland security needs while others will pay for more electronic government projects. 'I don't get the sense that everyone is rushing to do the same thing.'

In Virginia, CIO Lemuel Stewart said many states have high-priority funding areas that will take precedence over IT needs. Areas such as public safety, homeland security, health and education will compete for any new funds.

'Part of the public safety mission is IT-related,' Stewart said. 'If there is any priority for IT dollars, presumably that will be the top one.'

Meanwhile, some states have benefited from high energy prices. West Virginia is seeing increased collections via the severance tax on coal. Coal prices and demand have been strong in recent months, according to market sources.

Mark Muchow, West Virginia's chief administrator for revenue operations in the state's Tax Department, said tax revenues have been rising for the better part of six months.

'For the state in the last fiscal year in the general revenue fund, [collections] were up 5.7 percent,' Muchow said. West Virginia experienced a $40 million surplus out of a total state budget of about $3 billion.

'If we see this growth continue, we are likely to see a greater level of IT spending,' Muchow said. 'We have a few IT projects in progress.'

The West Virginia Tax Department's IT budget likely will double this year, to exceed $1 million, Muchow said. Some of the funds will be used to replace the department's remittance processing system and overhaul its system for tracking interstate truck fuel tax collections.

In South Dakota, CIO Otto Doll noted that the effects of any revenue increase will be seen after the current fiscal year. 'I am now working on the budget for fiscal 2006,' he said.

South Dakota's IT budget has been subject to significant swings over the years, such as those caused by Year 2000 preparations and compliance with the Health Insurance Portability and Accountability Act of 1996.

States in the West experienced the highest increase in year-on-year tax collections last quarter'10.6 percent according to the Rockefeller Institute'while preliminary figures show an increase of only 1.3 percent for the Great Lakes states.

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