A Report to the National Association of State Budget Officers October 2010

Delivering Savings and Efficiencies Through Self-Funded eGovernment Summary

Fiscal challenges and the desire to foster enterprise-wide growth of online government services have led 23 states to partner with the private sector to deliver eGovernment applications through a self-funding mechanism. The self-funded solution eliminates government reliance on appropriations to expand the availability of electronic service delivery and is paid for by modest fees applied primarily to a limited number of business-to-government transactions. This funding approach encourages the private sector provider to build and market a breadth of eGovernment offerings while simultaneously allowing every state agency, regardless of resource level, to better serve the public through online applications.

Self-Funded eGovernment Overview

Electronic government allows states to improve service levels to businesses and citizens while delivering higher internal efficiencies by reducing the need for costly data entry, filing, and clerical tasks. For constituents, eGovernment delivers hard and soft dollar savings by replacing time-intensive offline processes with faster online services. The self-funded model allows state government and the constituents it serves to benefit from eGovernment without drawing on tax appropriations that are customary in time-and-materials IT development projects.

In a self-funded eGovernment environment, the private sector covers the costs to build, maintain, enhance, and market online services on behalf of state government. Small fees applied primarily to high-value services for the business community cover the private sector partner’s costs and are also reinvested in the state’s online services. Since the private sector partner is paid only when services are used, there is a strong incentive to deploy sound marketing and communication programs to promote the availability of online services to end users.

Accountability, Flexibility, and Transparency

In most states, self-funded eGovernment services are overseen by a governance authority with public and private sector representation that determines the strategy and policies for online services, set transaction fees, and prioritize the development of new services for the private sector provider. Unlike traditional IT contracts, the self-funded model is free of change orders, ongoing maintenance costs, and other management structures that limit the private sector provider’s ability to adapt to the changing needs of state government. And the self-funded approach is grounded in transparency – regular reports to the governance authority include performance metrics and full financials for the private sector partner.

Case Study: Delivering Measurable Value in Montana

“Doing more with less” is a common reason why states choose to outsource their eGovernment portal operations with a self-sustaining funding approach. In Montana, the decision to self-fund eGovernment services boiled down to two issues: money and geography. When the state began building its eGovernment plan in 1999, taxpayer funds were not available to fund the initiative. At the same time, state leaders were well aware of the largest benefit of putting eGovernment services online: More than 80 percent of the state’s population lives at least 100 miles from the state capitol.

“It is essential that a geographically dispersed state like Montana embrace eGovernment because we have to reach our citizens where they live and work instead of expecting them to travel to Helena,”

said Governor Brian Schweitzer. “With self-funded eGovernment, we are changing how citizens interact with government and holding agencies accountable for the services they provide. We have been able to put more than 140 government services online at www.mt.gov, which has made state government far more accessible to citizens across Montana without spending tax dollars unnecessarily.” Since 2000, the state has eliminated more than $7.3 million in IT expenses across 20 agencies by leveraging the technical development, project management, and marketing expertise embedded in the self-funded eGovernment solution.

States Deploying Self-Funded Digital Government Services

Twenty-three states currently use the self-funded solution to deliver eGovernment services:

Case Study: Developing World-Class eGovernment Services in Maine

The state of Maine began its eGovernment program out of necessity – the Secretary of State’s Corporations Bureau did not have the budget, technology, or staffing level required to meet the demands of the businesses community. Working in cooperation with the Legislature and a group of representatives from several state departments, the Secretary of State’s office helped launch Maine’s self-funded eGovernment portal in August 1999. Since then, www.Maine.gov has added more than 300 interactive services and processes more than two million transactions per year.

Rebecca Wyke, former Commissioner of the Department of Administrative and Financial Services, was Maine’s Deputy Secretary of State for the Corporations Bureau when the self-funded solution was chosen and has been involved with the state’s portal ever since. “The self-funded solution appealed to us because it did not require a general fund appropriation and could grow without being subject to the annual budgeting process,” said Wyke. After working with the self-funded portal for six years, she has identified several reasons why Maine’s eGovernment services have been successful. “Set your goals high, find a few champions to help promote the self-funded concept, be patient, work with people who want to work with you, and don’t view every challenge as an insurmountable barrier. Maine’s portal is a success

because the right people always believed in it, and we’ve had a very positive experience with the self-funded solution.”

Case Study: A Flexible eGovernment Solution for Oklahoma

The state of Oklahoma outsourced its eGovernment portal in 2001 and chose a funding approach that met its needs at the time. The state earmarked taxpayer dollars to subsidize its technology infrastructure and chose to self-fund several of its online services. Three years later, Oklahoma modified its funding solution by ending the annual eGovernment subsidy and making a complete transition to self-funded eGovernment. The move allowed Oklahoma’s eGovernment platform to grow aggressively. The state’s self-sustaining eGovernment platform now offers more than 150 online services and the Oklahoma portal (www.OK.gov) provides eGovernment solutions for 70 state and local agencies.

Brandy Manek, Budget Director for the state of Oklahoma, recognizes the enterprise value of self-funded eGovernment. “Our job is to drive cost savings and improve efficiencies across state government, and our office is always looking for the best way to free up existing resources to focus on other high-priority programs,” said Manek. “The self-funded solution allows Oklahoma to redeploy employees and taxpayer resources to address important needs without sacrificing the quality or transparency of the online government services the state provides.” Manek also appreciates how the state’s eGovernment program focuses on results. “There is always a better way to do something, and we found the right solution with self-funded eGovernment. Oklahoma’s online services are more cost-effective and user-friendly as a result.”

Case Study: More Than A Decade of eGovernment Success in Nebraska

Nebraska’s self-funded official state portal celebrated its 15th anniversary earlier this year. Similar to Maine, the state chose the self-funded approach when the private sector’s demands for more efficient government services outpaced Nebraska’s ability to deliver consistent technology through the budget appropriation process. A decade later, www.Nebraska.gov offers more than 340 online services and processes more than 5.8 million eGovernment transactions per year. State Budget Director Gerry Oligmueller came into office as Nebraska’s self-funded portal was being launched in early 1995 and says the funding solution has delivered several benefits to the state. “Self-funding has given Nebraska the opportunity to function entrepreneurially,” said Oligmueller. “This model provides an incentive for agencies to participate by building online services and engaging the public with effective marketing. The enterprise component is very important to Nebraska because it permits agencies to offer services and information that might not otherwise be possible due to fiscal pressures.” Oligmueller also views the success of Nebraska’s self-funded services from a practical standpoint. “Businesses and citizens expect government to offer services on the Web, and the self-funded model allows us to do this without being encumbered by the budget process. It also lets the portal become one less issue for me to deal with during each budget cycle.” About NIC NIC developed the first self-funded eGovernment solution for Kansas in 1992 and currently manages self-funded portals and government services in 23 states. Based in suburban Kansas City, the company employs more than 600 people across the United States.

For More Information

Robert Chandler Vice President 501-240-6271 robert@nicusa.com www.nicusa.com