What's up with e-government? Digital government isn't a silver bullet, but as part of a long-term plan, it may provide a means to reduce state spending.

An estimated 143 million Americans-more than half the nation-- are now online, and 2 million new users are logging on every month. Many of them use government Web sites, according to a recent Pew Internet and America Life study. In fact, 68 million Americans have logged on to a government agency Web site-up from 40 million two years ago.

With e-government, citizens can renew drivers' licenses, file income taxes, obtain hunting or fishing licenses or apply for benefits-all without stepping into a government office. And Web users can tap information about job openings, unclaimed property and consumer, health and safety tips, as well as track legislation. Making government services and information available on a 24/7 basis is a real boon to the public. Customers don't have to leave home or the office, fight traffic or stand in long lines. And they aren't limited to conducting business only during "normal" office hours.

"The most important benefit to electronic government is that is opens the doors of government to every citizen, making it easier for people to obtain information and receive services," says Wisconsin Senator Bob Jauch, co-chair of Wisconsin's Joint Information Policy and Technology Committee.

E-government is fast becoming an expectation, says Aldona Valicenti, Kentucky's chief information officer (CIO). She predicts that future government will need to provide many channels of service--via computers, phones, kiosks, wireless devices--to keep pace with citizen demand.

CAN IT SAVE MONEY?

Virginia, the first state to offer driver's license renewals online, is finding it's cheaper to provide on-line renewals than to require people to come into government offices. "E-government promises to be the most effective tool presently available for reducing government spending," says Delegate Joe T. May, chair of the House Committee on Science and Technology and the Joint Commission on Technology and Science.

"Properly done, e-government has the ability to cost less and provide more," he says. "In Virginia we are moving ahead at flank speed on implementing e-government and IT improvements."

Arkansas also has found cost efficiencies for on-line transactions, such as license renewals, which are basically self-service.

And the public prefers on-line renewal: The Arkansas Office of Motor Vehicles reports that about 75 percent of vehicle registration renewals now are performed online.

In Michigan, which centralized all information technology operations under a cabinet-level CIO and opened a state Web portal in 2001, officials are finding e-government a key to operating under tightened budgets.

State CIO Jacque Passino says delivering services electronically has become vital in today's economy. On-line transactions, which cost a few cents each, provide significant savings over the tens of dollars it costs for clerks at government offices to provide the services.

Budget problems in Arizona, which in 2002 won the Digital State award for excellence in e-government, led the state to create a statewide technology infrastructure. Officials consolidated equipment and improved data sharing among agencies, which is crucial to operating more efficiently, according to CIO Craig Stender.

"Sharing data is the real golden nugget because that's where true efficiencies come in," he says. "When you talk about really saving money, it's going to come from business re-engineering because of data sharing."

On-line government applications provide savings in cost, time and labor, according to Harry Herington, chief executive officer of NIC, a firm that manages e-government operations in 17 states. For example, the Virginia Department of Health Professionals database saved the state more than $1.1 million in equipment and labor costs during its first 18 months of service. An Arkansas Department of Education online memorandum service eliminated paper distribution and has saved more than $300,000 a year in materials, postage and labor. The Indiana Department of Corrections on-line offender search system significantly reduced daily call volume, saving more than $257,000 per year.

And Tennessee's TennCare system, which verifies health eligibility, eliminated more than 700,000 phone calls, saving more than 11,000 labor hours. Another example of time savings is Oklahoma's on-line nursing license renewal system that cut processing time for renewals from three weeks to seven minutes.

In 2001, Wisconsin created a Department of Electronic Government and established a chief information officer to oversee electronic government decisions and be accountable for them. The state consolidated technology services to coordinate the purchase and delivery of the services for most state agencies.

"For 2003, we have identified $12 million in savings through contract renegotiations, increasing leverage on software purchases, insourcing of services and process efficiencies," says Jauch. Many of these savings will continue long-term and improve efficiency, he says.

In addition to counting the dollar savings to government operations, legislators should not forget the savings for constituents getting services online, says Minnesota Senator Steve Kelley, chair of NCSL's Committee on Communications, Technology and Interstate Commerce. If people don't have to wait in line for a license or travel to a state office to get their business done, they benefit even if it is hard to quantify the money saved.

SPENDING MONEY TO SAVE MONEY

"E is the tool to make government better, faster and cheaper," says Richard Vain, former Iowa chief information officer. Vain says strategic investments in technology can provide savings for states. "If government aligned its business processes as many private sector firms have done, we could see significant reductions in the money we spend."

But government can realize savings, he explains, only if it develops a strategic plan and reorganizes to eliminate waste, duplication and redundancy. And then it must make substantial investments in technology up-front to automate a streamlined government operation, he says.

"We cannot cast digital government as a silver bullet," says Chris Dixon at the National Association of State Chief Information Officers (NASCIO). "But severe budget problems may be the impetus states need to retool our industrial era governments for the information age."

The biggest struggle, according to Cathilea Robinett, executive director of the Center for Digital Government, is that there is a substantial up-front investment. Redesigning the process can result in savings, but they don't occur right away, she says.

But putting more money into technology may be the only way states can do more with less, says Janet Caldow, director of IBM's Institute of Electronic Government. She is working with the Harvard Policy Group at the John F. Kennedy School of Government on a new report that advises policymakers to make technology a part of plans to streamline government. She cautions decision makers not to automatically cut information technology (IT) "in lock step" with everything else. "Corporations under market pressure use IT as a strategic investment to help fix fundamental problems and change the way the organization operates. Governments can do the same," she says.

Jerry Mechling, director of the Harvard project, advises policymakers to put IT on a "short list." "Technology is not only the defining issue of our age, but also a powerful tool for almost everything we want to do," he says. He explains that technology is not a 'tech' issue; it's an issue about how we organize the work of government. Technology is a tool to rethink the way services are designed and delivered. And using technology to cut costs and achieve greater productivity requires immediate attention and long-term bipartisan support from legislatures, he says.

RECOMMENDATIONS FROM HARVARD

The Harvard report makes several key recommendations:

* Reduce the cost of information technology by consolidating data centers, upgrading infrastructures to cut costs for the long haul and charging fees for selected services.

* Use information technology to increase other revenues. Electronic billing and revenue collection can reduce fraud and bring in money by identifying missing collections. For example, it can help ensure that one agency won't be processing a tax refund for a citizen who owes money to another government entity.

* Use technology to analyze the worth of IT projects. Investments should focus on value for the public overall, not just value for specific agencies trying to achieve their own objectives and balance their individual budgets.

* Look for innovative ways to deliver services. You can streamline government operations and provide greater productivity and efficiency if you develop systems that can deliver state, federal and local services from one access point.

Kelley suggests legislators think about creating incentives for state and local agencies. It is hard to accelerate the use of e-services through mandates. "We cannot successfully micromanage schools, counties and cities from the state. If we create financial and other incentives to change, internal and market pressures will help push things along."

Jauch says that legislators will be more willing to increase investment in technology if they can see that the "benefits will improve services to citizens, improve efficiency and hopefully save costs in the long run."

MEASURING VALUE

Iowa identifies the requirements and benefits of state IT projects by considering three main factors. First, the dollar benefit to state government--which represents estimated cost savings achieved in personnel, support and equipment after implementing the IT project. Second, the financial benefit to citizens--or money saved in reducing citizen time spent doing business with the state. And third, the monetary benefit of the lost or gained opportunities. For example: Will the project help the state qualify for additional funds or will it help avoid the consequences of not complying with state and federal laws. These so-called return-on-investment plans provide important information about a project's benefits in relation to the resources invested in it, says Mary Gay Whitmer at NASCIO. One of the key benefits of these plans is that they help eliminate unnecessary duplication and keep projects on target financially. Iowa has been using the process for four years and is a model many others states are starting to follow, according to Cathilea Robinett.

"Legislators need to establish oversight committees and conduct periodic audits to assure that the promised technology improvements are delivered on time, within costs and that the benefits achieve the promises made," says Jauch.

Senator Kelley stresses the importance of good project management to control costs and obtain the desired results. "Be clear up front what results you want to buy, and be sure agencies are clear on the goals. Look for opportunities to work together (Could all cities use the same licensing system without losing their control over the process?) to achieve economies of scale. And watch out for duplication of on-line services where cooperation could yield savings."

A TOOL FOR THE TIMES

Electronic government has been touted as a means to make government more convenient, accessible and efficient. And with about two-thirds of the states facing budget shortfalls in 2003, policymakers now are taking a hard look at e-government services as a tool to cut spending. Governments will be scrutinizing their service delivery and administrative operations in order to save money. Information technology can be the infrastructure that supports redesigned, streamlined operations and helps deliver services more efficiently and effectively.

COST PER UNIT OF SERVICE: CONVENTIONAL VS. INTERNET

PUBLIC SECTOR

Service                                       Conventional  Internet

Licensee Lookup and Verification/Utah            $20.00      $5.00
Vehicle Registration/Maine                         3.50       1.75
Driver License Renewal/Tennessee                   8.48       3.01
Uniform Commercial Code (UCC) Filings/Kansas      15.00       5.00
Income Tax Filings/Tennessee                       3.41       3.16
Health Licensing Renewal/Tennessee                 8.17       7.94

Service                                       % Savings

Licensee Lookup and Verification/Utah            75%
Vehicle Registration/Maine                       50
Driver License Renewal/Tennessee                 36
Uniform Commercial Code (UCC) Filings/Kansas     66
Income Tax Filings/Tennessee                      7
Health Licensing Renewal/Tennessee                3

Source: Center for Digital Government, 2002

RELATED ARTICLE: ON-LINE GOVERNMENT SERVICES

48 states - Students can file college admissions

47 states - Citizens can track legislation

44 states - Citizens can pay taxes

34 states - Businesses can file taxes

31 states - Hunting and fishing licenses are sold

25 states - Citizens can reserve state park campsites

19 states - Citizens can apply renew auto registrations

13 states - Businesses can submit uniform commercial code filings

Source: Center for Digital Government, 2002

Jo Anne Bourquard directs NCSL's Legislative Information Services.