Study Finds IT Budget Increases Lead to Dramatic Cost Reductions for State Governments

For every one dollar increase in state IT budgets, state government expenditures were reduced by $3.50. This was the finding of an academic paper titled “Do CIO IT Budgets Explain Bigger or Smaller Governments — Theory and Evidence from U.S. State Governments.” The study was conducted by researchers at Temple University, University of Illinois at Chicago and the University of Michigan. The academic study will soon be published in the Management Science journal.

The paper’s authors considered IT’s impact on overall state budgets. With the help of data from the National Association of State CIOs, the researchers quantified the results and concluded IT investments lead to massive cost decreases.

This conclusion may seem counter-intuitive to the common impression that government is too big and wasteful. However, even with investments in new technologies that expand government’s role, the end result is a reduction in state government expenditures. The findings are especially significant since new technologies often lead to expanding government services, which can also lead to bigger government.

What is making these investments pay off? According to the study’s researchers, investing in emerging technologies helps governments operate more efficiently, productively and transparently – which lead to lower costs. For example, investments in data, voice, data center and managed IT services can greatly improve a wide range of governmental processes, including communications.

Although IT managers regularly tout the financial benefits of adopting advanced technologies, this study provides an objective confirmation. The researchers used a large dataset to analyze state government budgets over several years. They also accounted for a wide range of political factors.

This is the first study to offer non-anecdotal evidence of the financial benefits of government technology investments. Government decision makers who are not part of IT departments typically look at large IT budgets for potential cost cutting, especially during tough economic times. However, IT managers can now point to academic findings to help make their case for not only maintaining current spending levels, but increasing them.

For more information on how advanced technology services can help Gov/Ed organizations, download FairPoint Communications’ new white paper. This informative resource discusses how your organization can use IT investments to overcome challenges and accomplish goals. Titled, “Using Next Generation Technology Services to Solve IT Budget Challenges,” this new white paper outlines how investments in data, voice, data center and managed IT services can actually improve your organization’s financial situation.

To arrange a free, no-obligation consultation from an experienced Gov/Ed sales representative, contact FairPoint Communications at 1-866-984-3001. For more information on FairPoint’s technology services, visit our website.

Vice President Karen Romano is Vice President, Government and Education at FairPoint Communications, a leading provider of advanced communications technology in northern New England and 14 other states across the U.S.