Debt For Vermont's State IT Projects Outlasts The Technology

Dec 14, 2015

Vermont's state government has a long, backlogged list of information technology projects — potentially totaling more than $1 billion in the next five years. That much spending is hard to budget for — and harder still with the way Vermont now pays for many of these projects.

The first thing to know is the difference between general funding and capital funding in the state budget. General funds are mostly made of revenue from taxes and fees. Capital funds consist of money the state makes when it sells bonds — which, essentially, are IOUs.

Aside from federal funding or special grants, it’s pretty much either general or capital funds that pay for the state’s IT projects. And capital funding, as explained by Rep. Alice Emmons, who chairs the House Committee on Corrections and Institutions, is not ideal.

“When you bond, you bond for 20 years. So, if it’s bricks and mortar — a building, or land — you know that infrastructure will be there 20 years down the road, when you’ve finished paying it off," Emmons says. "With IT, after three to five years, it’s outdated. If you’re bonding for those dollars to pay for that project —10, 20 years out, you’re still paying for that project. And it’s long gone.”

Yet, capital funding is exactly how the state of Vermont pays for IT projects right now. For fiscal years 2016 and 2017, $23.7 million in capital funding was authorized for IT — that’s about 15 percent of just over $157 million in bonded money.

"Ten, 20 years out, you're still paying for that project. And it's long gone." - Rep. Alice Emmons, House Committee on Corrections and Institutions chairwoman

Justin Johnson, the Secretary of Administration, acknowledges the flaw in this strategy.

“I don’t think the asset you buy should be gone before you finish paying for the money," Johnson says. 

But lawmakers and administration officials have compared the options. If there’s not enough General Fund money — which there hasn’t been — they’ve determined capital funding is the least bad alternative for now.

Emmons says lawmakers have considered a type of revolving loan fund to pay for continual IT upgrades that the state historically has delayed. It would work similar to the way the Agency of Transportation plans for its own equipment upgrades and maintenance. The problem, she says, is finding the seed money to start that fund.

“It’s like the dog chasing its tail, that’s how it feels," she says. 

Johnson says once the state modernizes its major IT systems, keeping them current will get easier: "I think the progression then is to reduce the number of systems, try and reduce the cost of maintaining these things, but then also actually maintain them in a way we haven’t done in the past.”

Until then, or until the General Fund can support a cash infusion for IT modernization, the state is stuck with long-term financing for short-term technology.

This is the second in a two-part series on the challenges facing Vermont's IT systems. Read the first installment here.