2010 Fiscal Outlook – Turning the Corner (TechData Webinar version)

1. 2010 Fiscal Outlook – Turning the Corner (TechData Webinar version) Chris Dixon Manager, State & Local Industry Analysis INPUT March 9, 2010

2. Overview

3. 2008-14 State & Local Revenue Scenarios Sources: INPUT

4. Year-over-Year S&L Revenues Sources: U.S. Census Bureau and Rockefeller Institute of Government (as of 11/23/09)

5. State Unemployment Rates, 12/2009 Source: U.S. Bureau of Labor Statistics (as of 01/22/10)

6. Housing Foreclosures (Q1 2008) Source: U.S. OFHEO Source: RealtyTrac (as of 10/28/09)

7. Housing Foreclosures (Q3 2009) Source: U.S. OFHEO Source: RealtyTrac (as of 04/29/08)

8. State General Fund Deficits, Mid-FY 2010 Source: Center for Budget and Policy Priorities (as of 11/19/09)

9. States Face More Deficits for FY 2011 Source: Center for Budget and Policy Priorities (as of 12/23/09)

10. Addressable S&L IT Market, 2009-2014 Source: INPUT

11. State actions for FY 2011 budgets Sources: See notes.

12. When Times Get Tough…Consolidate! Sources: See notes.

13. Election Year

14. Gubernatorial Election Cycle Source: National Governors Association (NGA)

15. Governors races in 2010 • Open and undecided seats: • Open (19): AL, CA*, FL*, GA, HI*, KS*, ME, MI*, MN*, NM*, OK, OR*, PA*, RI*, SC, SD, TN*, VT*, WI* • Undecided (2): NH, WY* • Those running for re-election: • Democrat (8): AR*, CO*, IL*, IA*, MD, MA, NY*, OH* • Republican (8): AK, AZ, CT*, ID, NE, NV*, TX, UT • UT is holding a special mid-term election. • An “*” indicates high potential for partisan switch. Source: Univ. of Virginia Center for Politics

16. Conclusions & Recommendations

17. INPUT’s Take • The Good News: • Governors and legislators know exactly how bad it is • Mid-FY10 deficits are “manageable”… • …compared to recent history anyway. • Citizens are aware of the need for new cuts/revenue • The Bad News: • It’s an election year in many states. • Budgets will be deadlocked in competitive states. • Long-term revenue adjustments will be put off. • States will “stick it” to universities and local governments • They will raise various taxes, fees, and tuition

18. INPUT’s Take • Top 5 trends to keep an eye out for: • Good: Slowing employment declines • Bad: A wave of commercial real-estate bankruptcies • Good: More federal stimulus to S&L governments • Most likely in new jobs bill and grant programs • Don’t expect a big new “stimulus” bill • U.S. House raised debt ceiling by $290B to $12.4T • Bad: More federal purchasing of residential mortgages • Good: Any year-over-year increase in holiday retail

19. Recommendations • IT spending has no where to go but up • CIO.com report (Sept. 2009): • 37% of CIOs anticipate increased spending • Up from low of 14% in May 2009 • Down from high of 49% in July 2008 • Good indicator that we’re at the O&M “bottom” • S&L layoffs will lead to IT-driven efficiency • Furloughs and IT consolidation are small fry savings • Remaining workers will be more burdened than ever • BI is needed for performance management • First wave of real business-process re-engineering

20. Q & A

21. INPUTThe Authority on Government Businesswww.input.com