• Introduction
• Summary Analysis
  • Historical Trends
  • The Near Term, 1996-1998
  • Highlights of Increases
  • Agency Highlights

Introduction
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The President's budget for the Federal government for FY 1998 was the first budget prepared since the passage of the Information Technology Management Reform Act of 1997 (ITMRA), Public Law 104­106 (the Clinger­Cohen Act). The budget reflected the extensive information technology⁽¹⁾ (IT) activities of the Federal agencies since the Act's passage, and included a discussion of specific ways in which Federal agencies are adopting the best private sector practices in using technology. In particular, six of these practices were highlighted: reengineering before automating; acquiring systems in phases; buying off the shelf technology; consolidating and outsourcing; monitoring progress with performance-based management systems; and integrating information across agencies. Also included was a listing of the program performance benefits from proposed major information technology investments.⁽²⁾ This chapter supplements that report by analyzing in detail the components of the Federal government's $27 billion information technology budget.

The analysis consolidates data supplied by Executive Branch agencies in response to OMB Circular No. A­11, Preparation and Submission of Budget Estimates, Section 43, Data on Acquisition, Operation, and Use of Information Technology. The agency responses reported spending and personnel resources allocated to IT activities for FY 1996 through FY 1998.⁽³⁾ Agencies that obligated more than $50 million in any of the years PY, CY, or BY (past year, current year, or budget year, respectively) for IT activities are required to submit a report on obligations for information technology for the agency as a whole.

Summary Analysis
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Historical Trends
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Information technology expenditures make up a small but meaningful portion of the Federal⁽⁴⁾ budget. The IT portion of the budget rose from 1.2% in FY 1982 to 1.77% in 1993. After a drop to 1.61% in FY 1994, the percentage peaked at 1.81% of the Federal budget in FY 96. From 1.81% in FY 96, the percentage is expected to fall to 1.76% in FY 97 and 1.71% in FY 98.

Obligations for IT activities grew in nominal dollars from $14.3 billion in FY 1986 to $24.97 billion in FY 1993. After a downturn in 1994 to $23.50 billion, IT obligations rose in FY 95 to $26.16 billion and again in FY 96 to $28.27 billion. Projected levels for 1997 and 1998 show a leveling in nominal dollars at $28.70 and $28.97 billion, respectively. In constant dollars there recently has been a downward trend in IT obligations, and the 1998 level is expected to be the lowest since 1992. The FY 1998 numbers represent the President's request and are subject to the enactment of appropriations by Congress.

In real terms, total IT obligations grew an average of 2.47% annually between FY 1988 and 1998. Exhibit 1 displays the Federal IT obligations from Fiscal Years 1982 through 1998 in nominal dollars and constant (1992) dollars. Appendix 3 provides a summary of the changes in reporting basis between this year's and previous years' data.

As shown in Exhibit 2, IT obligations as a proportion of total Federal budget outlays have fluctuated between 1.6% and 1.7% since 1991. The total Federal Budget includes all discretionary spending, mandatory programs (e.g., deposit insurance, Social Security, and Medicaid/Medicare), and net interest payments on Federal debt.

Similarly, as shown in Exhibit 2, IT expenditures, as a percentage of the Federal operating budget,⁽⁵⁾ have grown from 4.37% in FY 1988 to 6.2% in FY 1996. It is projected to grow slightly to 6.42% in FY 1998. The operating budget estimates are based on total expenditures for purchases of goods and services by the Federal sector, as published in the Federal Transactions in the National Income and Product Accounts (NIPA) or as promulgated by OMB's Budget Analysis and Systems Division.⁽⁶⁾

Exhibit 3 presents the relationship of the Department of Defense (DoD) portion to the non­DoD portion of the Federal IT spending. The relatively constant DoD spending since FY 1989 is attributable to several factors, including controlled spending under the Corporate Information Management (CIM) initiative and streamlining and downsizing by the DoD. On the other hand, the growth in non­Defense spending has been a result of civilian agencies incorporating new technologies into their business processes.

The Near Term, 1996­1998
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Detailed tables showing the agencies' IT obligations in each of the Fiscal Years 1996­1998 appear at the end of this chapter. Table 1 summarizes the total Federal IT budget for these three years.

Highlights of Increases
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This section highlights the seven agencies which comprised the bulk of the increases in IT spending from FY 1997 to FY 1998 (see Table 2).⁽⁹⁾ The Joint Logistics System Center and the Department of Energy are the only new organizations on the list; the other five were on the Top 6 Net Gainers list in FY 96. The total IT budget growth for agencies experiencing funding increases in this period is just over $646 million, down from the $2.02 billion increase in the previous year. A total of 16 agencies anticipate gains, while 11 agencies expected to see reductions in their IT expenditures totaling $320.8 million, resulting in a net increase (total agency increases minus total agency decreases) in Government­wide funding of $325.6 million. Together, the total IT budgets of the seven agencies with the largest increases account for approximately 32% of the Government-wide IT budget in FY 1998. Collectively, these agencies received $500.3 million in increases, representing 77.4% of the $646.4 million total increase for all agencies experiencing funding growth between FY 1997 and FY 1998.

Agency Highlights
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Department of Defense: Joint Logistics System Center. The $85 million FY 1998 increase in the Joint Logistics Systems Center IT budget primarily funds currently operational Military Service and Defense Logistics Agency legacy logistics automated information systems (AISs) that support the depot maintenance and supply management business areas. The FY 1998 funding will be used to begin modernization of these systems with the ultimate goal of converting them to a seamless logistics system in a shared data environment as directed by the Deputy Under Secretary of Defense for Logistics (DUSD/L). The DUSD/L corporate strategy is to enable interoperability by bringing existing legacy systems into a shared data environment based on the DoD Joint Technical Architecture. This is a one year increase -- after FY 1998, the responsibility to fund the legacy systems will transition to the Services.

Department of Transportation. DOT is requesting an increase of $83 million in FY 1998 to a total of $1,801 million compared to FY 1997 which had a total of $1,718 million. Key increases are for planned purchases of equipment ($41 million) and software ($24 million), services ($7 million), and commercial support services ($7 million).

In order to maintain and enhance transportation safety, budget increases will fund purchases of hardware and software. Most of the increases will support the Federal Aviation Administration's National Airspace System (NAS) initiatives -- e.g., the transition to a satellite­based communication, navigation, and surveillance system and implementation of free flight concepts of operation. These initiatives are designed to meet the domestic aviation industry's demands for more responsive and cost effective operation of NAS.

Department of Defense: Air Force. The Air Force is targeting future readiness by implementing revolutionary long­range IT planning that addresses process improvement and systematic modernization. This modernization directly leads to capabilities necessary to support all mission requirements and ensures that Air Force IT systems will be secure, interoperable, reliable, and available. Although IT funding in the FY 1998 budget increases only 3.14% over FY 1997 (less than 1% over expected inflation), there are notable increases in a few specific areas. The Air Force will dedicate increased resources to supporting and enhancing their core communications and computing information infrastructure. Spending in this area will increase about $54 million between FY 1997 and FY 1998. In addition, funding for procurement and contract administration systems will grow by nearly $22 million, as the Air Force begins to field the Standard Procurement System and continues upgrades for base contracting systems.

Department of Commerce. The increase in the Department of Commerce's IT obligations from 1997 to 1998 is attributed to major systems initiatives within the National Oceanic and Atmospheric Administration (NOAA) and the Bureau of the Census. NOAA will be making additional investments associated with the national deployment of the Advanced Weather Interactive Processing System that is central to the modernization of the National Weather Service, and will be acquiring equipment and related support services for the ground systems for new geostationary satellites. The Bureau of the Census will be acquiring increased IT resources in preparation for the 2000 Decennial Census.

Department of Energy. At $1.53 billion, the Department of Energy's FY 1997 estimate for IT remained roughly constant over the prior year's submission, with an increase of less than 5% ($67 million). It is approximately 9% of the Department's total budget. The increase is mostly attributable to planned equipment purchases. These purchases are for major scientific programs, namely, the Accelerated Strategic Computing Initiative (ASCI) and High Performance Computing and Communications. In addition, some of the increase is for servers to support Internet and client­server computing activities.

Department of Agriculture. The increase in IT related spending of 5.25% over FY 1997 for USDA reflects the increased reliance on IT to facilitate program delivery, even as USDA continues to downsize. New and integrated systems, to support field service activities in three major agencies, are being designed in response to programmatic changes contained in the 1996 Field Automation's Information Management Initiative Act. The Department also plans to address the new millennium problem. Some of the major IT efforts going forward in the 1998 budget are: The Rural Developments Dedicated Loan Origination and Servicing System, the Food Safety Inspection Service's FAIM initiative, the National Agricultural Statistics Service's National Census of Agriculture, the Food and Consumer Services Food Stamp Program modernization through electronic transfer, the Forest Service's upgrade of its technology infrastructure, and the upgrade of the USDA's core financial system.

Department of Education. In the President's budget request for the Department of Education, total obligations for IT projects show a net increase of $50 million over the current fiscal year. Of that total increase, $42.9 billion is in support services, primarily for student financial aid management. Increased loan servicing costs for Federal Direct Student Loans account for an overwhelmingly large part of the increase in ADP support services. The Direct Loan program has grown steadily over the past several years; large numbers of loans are now beginning to enter repayment, resulting in increased servicing costs. Additionally, a small portion of the increase in the IT budget is attributable to the Department's Year 2000 and ledger account reconciliation initiatives.

1. The term "information technology" as used here is defined in ITMRA, Division E, Section 5002. It means any equipment or interconnected system or subsystem of equipment, that is used in the automatic acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information by an executive agency. This includes computers, ancillary equipment, software, firmware and similar procedures, services (including support services), and related resources.

2. Budget of the United States Government, Fiscal Year 1998, pages 41­46.

3. For definitions of cost categories reported under Section 43 of OMB Circular No. A­11, Preparation and Submission of Budget Estimates (1996), see Appendix 1.

4. Appendix 2 provides a glossary of reporting Federal agencies, their abbreviations and common names as used in this report.

5. The operating budget is the total Federal Budget excluding transfer payments, mandatory spending programs and debt service.

6. National Income and Product Account Presentation, table 14.1, pages 254­256, Budget of the United States Government: Fiscal Year 1998 -- Historical Tables.

7. See Appendix 1 for definition of support services.

8. Government­wide totals do not include intra­governmental transfers (payments and collections), which in theory should net to zero. In practice, many agencies currently have difficulty properly accounting for and reporting on intra­governmental transfers. These difficulties, along with differences in how agencies classify IT costs, result in a gap between reporting intra­governmental IT payments and intra­governmental IT collections. In FY 1997, reported intra­governmental IT collections were $2,042,084 in excess of $5,641,716 in reported intra­governmental IT payments.

9. The increases in Table 2 use the agency IT obligation levels including intra­governmental transfers. Intra­governmental transfers are included in these individual agency totals because each individual agency may have intra­governmental transfers not netting to zero within that agency.

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