Report: States must use new funding models

SCOTTSDALE, Ariz. ? States must make greater use of nontraditional funding models to keep pace with technology changes during the fiscal crisis, according to a report released Tuesday.

The Corporate Leadership Council of the National Association of State Chief Information Officers bases the draft report, "Trends and New Approaches in Funding Technology," on a survey of the states.

Because of the ongoing budget crisis, states continue to cast around for alternate funding sources, such as public-private partnerships and bonds, the report stated. They also continue to pursue grants, although grants are generally considered a limited funding source.

The 23 states that responded to the survey used a variety of different nontraditional funding mechanisms to supplement the usual funding mechanisms. The most popular of these are leasing and financing, outsourcing and managed services, purchasing and procurement strategies, and budgeting and appropriation strategies, such as cross-boundary funding.

Bonds, certificates of participation, performance-based contracting, investment funds and benefits funding are used less frequently by the states but are still significant.

The report also includes case studies of alternative funding models in five states: Massachusetts (general obligation bonds), Texas (performance-based contracting), Minnesota (shared services), Tennessee (investment funds) and Ohio (certificates of participation).