States Should Utilize American Rescue Plan Funds to Serve Citizens Efficiently

The COVID-19 pandemic exposed serious flaws in the states’ ability to meet their citizens’ needs in the distribution of essential services. Across the country, Americans faced long unemployment lines, frequently crashing state websites, and widespread fraud as they tried to navigate an unprecedented public health and economic catastrophe. Congress responded to these problems with a huge infusion of funds, and the Department of Treasury allowed these funds to be used to upgrade states’ legacy information technology systems. These federal funds, along with state tax revenues, have put the states in a unique position to finally resolve decades-old IT challenges for their citizens. States should seize the moment and use these massive surpluses and infusions of federal funds to make critical, long-overdue upgrades to their information technology.

Like almost every American during the pandemic, states have also increased their reliance on technology to meet their daily obligations to their citizens. The challenges posed to the states have been well-documented. After the first year of the pandemic and -many reports of massive lines and unprecedented fraud, a U.S. Department of Labor audit found that states “struggled” to meet their citizens’ unemployment needs. The audit identified antiquated information technology as the primary cause of the problems.

Some states were still using COBOL—a 60-year-old computer programming language— to confront a novel virus devastating the economy and leaving some states desperately scrambling for graying programmers.  Others, like Vermont, faced overwhelming fraud with 90% of incoming claims suspected fraudulent. Now, almost two years into the pandemic, the state of California has announced that the head of its unemployment division is resigning and that the state will soon welcome its third director in two years.  This turnover comes amid a crushing backlog of unemployment cases and billions of dollars’ worth of fraudulent unemployment and disability claims.  These problems in California’s unemployment division are only buttressed by continued problems with the state’s FISCAL budgeting platform.

Congress responded to the economic effects of the pandemic by providing the states with additional American Rescue Plan (ARP) funding in March 2021.  In total, the states were provided $350 billion dollars by ARP to address pandemic needs and received explicit instructions from the Department of the Treasury that the funds could be used for upgrading state information technology.  This infusion of federal funds, along with surprisingly strong state tax revenues, have combined to produce historic state budget surpluses.  State tax revenues rose 17% in August 2021 compared to August 2020, according to the Urban Institute. Strong revenues combined with unprecedented federal aid meant many states ended their fiscal years with the largest surpluses in their history.  The state surplus numbers are not defined by geography or population, ranging from California ($76 billion) to Illinois ($1.7 billion) to Maryland ($4.6 billion).

One of the enduring realities exposed by the pandemic is the fragility of the states’ information technology systems and its cascading effect on state services. The danger of these failures is not solely limited to eliminating lines and system crashes. Legacy IT systems present serious cybersecurity risks that ultimately fall to homeland security and law enforcement. Congress has taken some steps to better the situation for the states with an infusion of American Rescue Plan dollars and a new IT modernization caucus headed by Rep. Gerry Connolly (D-Va) and Rep. Darrell Issa (R-CA). Businesses group such as the U.S. Chamber of Commerce have also been leading the charge.

The U.S. Chamber Technology Engagement Center is actively engaging by creating a new Digital Transformation working group, bringing together industry leaders to address this ongoing lack of investment and procurement hurdles. The U.S. Chamber’s new State and Local Initiative has brought together state and local chambers and their Corporate Working Group to galvanize state efforts.  The states need to act on this momentum and take the ball and run with it on IT modernization.

States have been granted a truly generational opportunity with massive budget surpluses and an unprecedented infusion of federal funds. States should use this opportunity responsibly to make overdue investments in IT modernization as called for by Congress. States should specifically target funds to meet the digital challenge presented by the pandemic and retire inefficient legacy systems.  Their citizens are counting on them to replace the long lines and frustrating service with efficient systems that deliver results.