Management

NASCIO 2023 Midyear: Michigan CIO Highlights IT Funding Strategies

While the state’s general fund provides for the bulk of Michigan’s tech portfolio, some services receive capitalization from different sources.

Mickey McCarter

Mickey McCarter is the senior editor of StateTech Magazine.

It’s a universal truth: State IT agencies could always use more money.

Speaking Monday at the midyear conference of the National Association of State Chief Information Officers, Michigan CIO Laura Clark shared the three primary ways that her state funds IT projects.

As CIO, Clark works as a government official in the Michigan Department of Technology, Management and Budget. The department depends on three different IT funding models to finance its portfolio, Clark said at NASCIO 2023 Midyear, which is being held at Maryland’s National Harbor outside Washington, D.C.

First and foremost, Michigan DTMB depends on general funds. Clark estimated that 70 to 75 percent of the state’s IT portfolio is funded through the general fund. Michigan DTMB dedicates a great deal of that funding to cybersecurity.

“That model is really great for stability and opportunities to talk about cybersecurity,” Clark said. “With the general fund, we have to talk directly about that as a line item in our budget. We have opportunities to speak to the legislature about IT funding, and cybersecurity is always at the forefront of those conversations.”

Building on a strong rapport with the Michigan state legislature, Clark’s department won funding for an additional 19 cybersecurity positions last year. “We are in the process this year of hiring for those. That was a pretty big investment,” she said.

While Michigan DTMB enjoys the opportunity to make the case for general funding, it does have its downside.

“That funding model is subject to revenue and economic pressures,” Clark said. “So, if there is any economic downturn or any kind of funding shortfall, and we are not bringing in money from taxes, then we often have to cut general funds. And it’s a slash across the board.”

Michigan DTMB can occasionally carve out a special forgiveness from across-the-board cuts, but not always.

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Some Agencies Fund Discretionary or Shared Services

The second source of funding for the state IT portfolio is through service models. Michigan DTMB funds much of the state’s technology backbone, including networks, data centers, servers, hosting and shared services, through service model funding, Clark said.

Shared services include discretionary IT services, IT services that are not necessarily used by every agency, such as geospatial information services.

With this funding model, Michigan DTMB occasionally faces challenges smoothing over the use of specific services, as a customer may want to go outside of the state environment for a service. To head off any confrontations, Michigan DTMB is building more transparency into its shared services environment, Clark said.

As part of that process, the department invites IT business partners to assess and rate state services to identify areas for improvement.

Application Development Team Charges for Time and Materials

The third primary funding model for Michigan’s IT portfolio, which Clark suspects is unique among states, is a basic time and materials costs charge.

This funding mechanism is used by business units such as application development teams and customer service centers for agency services, Clark said. They primarily exist in an “interdepartmental branch,” where they receive a percentage of funding from each state agency budget.

READ: StateTech's exclusive interview with Michigan CIO Laura Clark, who discusses zero trust.

Each agency is required to place a minimum percentage of its budget into funding these services for IT and application development and support. “This is an interesting model, because there are checks and balances here,” Clark said.

Agencies may choose to add extra funding to achieve their goals. “They may choose to prioritize IT work over some of their own business to reap the benefits of innovation or efficiencies from IT services,” Clark said.

Again, the model offers its own set of challenges. “It can be a challenge to work with individual agencies to ensure we set aside enough money for their operations and maintenance each year,” Clark said. “We need to keep the lights on and apply patches to the applications. But they may want to spend more on innovation.”

IT Investment Fund Awards Money to Special Projects

In addition to those there regular funding sources, Michigan state IT projects also receive a boost from a special IT investment fund.

The fund generally receives about $35 million each year to help innovate and modernize the state government application portfolio or infrastructure. The special fund can bring life to projects outside the regular scope of appropriations.

“We do a call for projects where each department can make a recommendation on either legacy modernization or transformational projects,” Clark said.

Agencies pitch their projects to a Michigan IT investment board, chaired by Clark. The multiagency board evaluates and scores the pitches and prioritizes them based on urgency. The IT investment board forwards proposals to the Michigan governor’s office, which examines them according to the governor’s IT goals and the legislature’s priorities.

Based on demand and availability, the IT investment fund may receive additional money. For the upcoming 2024 fiscal year, for example, it received its base $35 million and an additional $42 million to fulfill the administration’s goals, Clark said.

Keep this page bookmarked for our coverage of the NASCIO 2023 Midyear conference. Follow us on Twitter at @StateTech and the official conference Twitter account, @NASCIO. Join the conversation using the hashtag #NASCIO23.

Getty Images/ ReDunnLev