Great expectations in hard times

Steve LeSueur

"It was the best of times, it was the worst of times."

Charles Dickens could have been describing today's state and local government market when he wrote those words kicking off his novel, "A Tale of Two Cities."

State governments are wracked with budget shortfalls that will hit $30 billion this year, and may nearly triple to $85 billion next year. Rainy day funds are drying up. States are putting many new programs on hold.

But because of the budget crunch, states also are turning to systems integrators to help them save money, operate more efficiently and modernize services. Opportunities abound for companies well-positioned to take advantage of these needs.

Many of the top contractors ranked in this year's Washington Technology "Who's Who in the State and Local Market" are talking about growth in the marketplace, despite the financial hard times.

Business process outsourcing is a hot growth area as states look to increase the outsourcing of services that one executive called "sacred cows," such as human resources, payroll and child support services.

However, one much anticipated opportunity -- homeland security -- still

hasn't materialized in the state and local market. The states want more money but complain that the feds are cutting funding. President Bush points the finger at Congress, but the governors say the president shares the blame.

Staff Writer William Welsh examines these and other topics in this issue's cover story, our annual look at the leaders in the state and local marketplace.

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