The COVID-19 pandemic radically changed 2020 for state and local governments (SLGs) and while the end of the pandemic on the horizon, SLGs will face ongoing challenges juggling funding and modernization imperatives.

Despite the pandemic adding significant challenges for SLGs, the public health crisis also gave them a chance to modernize their technology infrastructure practically overnight. With the momentum for modernization underway, 89 percent of state and local IT and program managers say “now is the time to invest in technology modernization,” according to a new report from MeriTalk, underwritten by Apptio, AWS, Google Cloud, and Pure Storage.

However, that desire to modernize is tempered by 80 percent saying they are experiencing a funding gap resulting from unbudgeted expenses related to the pandemic and declining tax revenue. The vast majority – 84 percent – said they are having to make tradeoffs to help bridge funding gaps. Luckily for SLGs looking to modernize, there was an influx of Federal funding as part of COVID-19 relief legislation.

Thirty-one percent of respondents said they have increased their reliance on pandemic-related grant funding to bridge the funding gaps. Roughly a third – 37 percent – of respondents said their teams are shifting budgetary resources from operations and maintenance (O&M) to development, modernization, and enhancement (DME). Some teams – 29 percent – are also delaying modernization efforts to enable employees to have the resources need to telework.

As with many organizations struggling with budget constraints, some SLGs are having to cut corners to balance the books. A quarter of respondents – 27 percent – reported reducing service quality to balance revenue constraints. A similar number of respondents also reported reducing personalization to increase scalability.

Most concerningly, 35 percent of IT managers say their organization is reducing security measures to expedite timelines – a concerning finding given the rise of SLG cyberattacks.

While IT and program managers report they’ve had to reduce service quality and cybersecurity measures, many are looking for their 2021 technology investments to deliver better citizen services and greater cybersecurity protections. Nearly half – 44 percent – of respondents say they need their 2021 tech investment to deliver improved quality of citizen services, 43 percent are looking for increased cyber resilience, and 53 percent want increased efficiency.

When asked what they needed to balance technology requirements with budget constraints, respondents identified three key needs:

  • Innovation-focused groups like digital service teams;
  • Flexible buying options and solutions from vendors;
  • Better cases by IT leaders on the need for/benefits of technology modernization.

With funding limited, IT and program managers want to make sure they are getting the best bang for their buck when it comes to IT investments. In terms of which technology investments will deliver the greatest return on investment (ROI) over the next two years, 43 percent said remote work devices, 38 percent said cloud computing, and 33 percent said data management/analytics.

Despite budgetary concerns, IT and program managers remain optimistic. The overwhelming majority – 88 percent – of respondents believe SLGs will make more technology modernization progress in the year following COVID-19 than in the 10 years prior. To make that modernization happen, 75 percent plan to use pandemic-related funding for tech expenses.

Read the full report and view the infographic to learn more.

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Kate Polit
Kate Polit
Kate Polit is MeriTalk SLG's Assistant Copy & Production Editor, covering Cybersecurity, Education, Homeland Security, Veterans Affairs