Skinny Budget from Skinny Sinai

(and why we should loosen TMF repayment requirements)

I have gone full cliché during pandemic: color-coordinated books in new bookcases, Peloton almost every day, and dropping 45 pounds.

To answer the most common question, I lost weight by mostly sticking to a prepared diet — though regular exercise (when the bike finally showed up), has been good for the mental health too.

After appearing on Government Matters last Thursday evening, a friend of mine texted me “Skinny Budget from Skinny Sinai.”

What is a skinny budget? The Office of Management and Budget (OMB) releases a budget every year — but at the beginning of a Presidency, they release a much less voluminous budget, knowns as a “skinny budget”, with the full budget coming later that spring. Given new Presidential priorities and the onboarding of new political appointees, there just is not enough time after Inauguration to write a full budget in time for Congress to consider as they begin the appropriations process. (The full budget comes out in May.)

So, I was pleased to see $500M for the Technology Modernization Fund in President Biden’s recently released skinny budget. That is in addition to $1B that Congress appropriated for the TMF via the American Rescue Plan (the recent covid stimulus bill).

According to the TMF website, the Technology Modernization Fund is an “innovative vehicle the gives agencies additional ways to deliver services to the American public more quickly, better secure sensitive systems and data and use taxpayers dollars more efficiently”. Authorized in 2017, as of April 2021, the TMF board has approved $89 million to fund 11 modernization projects across seven agencies (HUD, DOE, USDA, DOL, GSA, EEOC, and CBP).

But some agencies have held back from applying to the fund due to the need to pay back OMB for those modernization investments. I’ve talked with federal executives who had ruled out applying for TMF funds because of the requirement for the agency to pay the funds back.

As Rebecca Williams, a fellow at the Belfer Center at Harvard Kennedy School and formerly with OMB OFCIO, tweeted:

“the [TMF] payback requirement absolutely limits the usefulness of this $ (it deters application, optimizes for projects that generate savings to achieve that payback rather than priority, & takes from future budgets)”

A group of former Obama Administration officials (Todd Park, Jen Pahlka, Cecilia Munoz, Cori Zarek, Nicole Wong, Ryan Panchadsaram, Tom Kalil, Kumar Garg, Alex MacGillivray, Tara McGuiness) and Code For America CEO Amanda Renteria recently urged the Biden administration to relax requirements for agencies to pay back money received through the TMF. We wrote:

“The American Rescue Plan includes a historic investment in the modernization of the federal technology systems, through a $1 billion investment in the Technology Modernization Fund (TMF). As you recently heard from a growing community of experts, successful implementation of the TMF has the potential to accelerate our COVID recovery efforts and build back government capacity.

In addition to their recommendations, we want to urge an additional update in the TMF that we believe will be critical to its short and long-term success: that these American Rescue Plan funds are provided to agencies on a non-reimbursable basis. Congress intended these funds to be deployed to accelerate America’s recovery from COVID, and the existing TMF structure is not consistent with Congress’s intent in providing these funds.

TMF reimbursability has made federal agencies reluctant to use the fund for its intended purpose, which is to boldly transform our government’s IT infrastructure in ways that meet the needs of the American public. The requirement that agencies reimburse the fund has historically made agencies hesitant to use it for the projects that matter most, and resulted in the TMF funding projects that do not sufficiently impact the agenda of much-needed digital transformation and security.”

I can appreciate the original legislative intent that generated the remimbursability requirement. Some IT Modernization projects can have a strong ROI, and the political calculation to make it a loan fund can be appealing. Some modernization projects can generate real savings (moving to the cloud, moving to simpler commercial products over custom-built solutions, etc.).

But when you have major cabinet agencies refusing to apply to the fund, we must try something different — especially in the context of a pandemic. We need to be agile about our policymaking, not just our software development.

Moreover, there are important modernization investments that will not generate sufficient costs savings (e.g. paying down technical debt, investing in workforce, etc.) to pay back OMB. As Kevin Walsh, GAO Director for IT and Cybersecurity, testified in the Senate this week: “IT Modernization is not just about cost savings; it’s also about better service to citizens, privacy, and security.” Walsh gave the example of OPM not encrypting data at rest prior to its 2014 breach and pointed out that investing in encryption solutions would have minimized the damage, but wouldn’t have offered clear cost savings. His testimony (and GAO report) about the need for IT modernization is definitely worth reading, as is the testimony of the former federal CIOs who urged to relax the TMF reimbursement requirements.

From my vantage point, we also need to broaden the type of investments that TMF invests in. The TMF website suggests the user-facing projects (i.e. digital services) and cybersecurity are the primary types of projects it will consider, both of which are critically important and should remain a key focus of the TMF.

But IT modernization is also about investing in the ability of government to deliver, not just the delivery itself.

A group of industry associations and other experts are arguing for TMF to consider a broader set of projects, including federal operations, collaboration tools, cybersecurity shared services, and secure cloud adoption. Former GSA CIO and SVP Salesforce Casy Coleman, in her testimony this week, argues forcefully for including cloud and SaaS adoption, and why it helps government more nimbly respond to the needs of citizens.

I’d also argue that IT workforce investments should be in scope. Modernizing IT should also be about the people that buy, build, and manage government’s infrastructure and digital services. Federal employees are making those important buy, build, and product management decisions, and we need to continue to invest in their technical savvy.

As I mentioned on Government Matters, imagine if we funded something like the Digital Corps (a promising idea for an early-career tech fellowship in federal government) from the TMF.

But, as host Francis Rose asked me, if we completely relax the reimbursablity requirements, how does the TMF become different from a centralized appropriation then, like Information Technology Oversight and Reform (ITOR)?

For one thing, TMF has a high-profile interagency board, chaired by U.S. CIO Clare Martorana, that provides strong and regular oversight, including a public website that explains each project. Also, applying for the TMF is rigorous (but straightforward). The application process includes questions and templates about the problem being addressed, the solution being proposed, the prototype, the team, the public-facing impact, the risks, and the milestones. Former DOE CIO Max Everett expressed enthusiasm in this week’s Senate testimony for having his team use the TMF application templates when considering an IT modernization project, regardless of whether they were formally applying to the TMF.

The ITOR appropriation, while in theory could be used for modernization projects in the agencies, tends to be used for OMB staffing (e.g. funding the U.S. Digital Service and cybersecurity oversight program management). has a nice breakout of ITOR, which has the authority to spend $53M this fiscal year. Congress ought to also consider fully funding OMB and using ITOR for direct projects.

But why have centralized appropriated funds for IT Modernization at all? As Rebecca Williams asked me on Twitter, why not focus instead on directly appropriating funds to agencies and programs (e.g. IRS and Medicare), that definitely need to invest in IT modernization?

I’d argue that, yes, we should fund those important investments directly, but there are three reasons a centralized fund like TMF also makes a lot of sense:

  1. A centralized fund gives the President — our elected chief executive — the capability to pursue Presidential priorities (with proper Congressional oversight and within Congressional authorization).
  2. A centralized fund can better invest in cross-agency initiatives. The social safety net, immigration/refugee services, workforce training, and many other important government functions are provided by several federal agencies.
  3. A centralized fund can invest in common platforms and shared solutions.

If TMF moves away from reimbursement, then it’s important that the Biden Admin commits to seeking annual appropriations for the TMF — in the billions.

Congress clearly wants progress on IT Modernization, as does the Biden Administration. The government’s ability to deliver — dependent on technology, people, and process — is why this discussion matters to veterans, students, immigrants, unemployed Americans, retirees, and just about every single American.

It will be interesting to see what projects agencies submit to the Technology Modernization Fund this year, and which ones are selected.

On a personal note, I’m determined to stay skinny — but stay tuned to see what happens!


UPDATE (5/4/21): The Biden Administration announced it will relax TMF reimbursement requirements.

According to a joint release by GSA and OMB:

“The Technology Modernization Fund (TMF) Board, whose members provide funding recommendations and monitor progress and performance of approved modernization projects, will focus on projects that cut across agencies, address immediate security gaps, and improve the public’s ability to access government services. The board will give top priority to these four proposal categories:

=> Modernizing high-priority systems

=> Cybersecurity

=> Public-facing digital services

=> Cross-government services and infrastructure

In order to be able to respond with urgency to the current crisis, repayment will shift from the full repayment model for all projects to a model allowing more flexibility. Repayment will now fall into three categories to optimize for project success and to deliver the highest value to the public:

=> Full repayment: For projects that yield direct financial savings that can be used to fully repay the TMF.

=> Partial repayment: For projects with strong positive impact and which will yield some financial savings, but where the proposing agency doesn’t expect to reach full cost recovery.

=> Minimal repayment: For projects aimed at tackling the most urgent IT issues facing our government, including critical cybersecurity improvements and initiatives that help agencies meet the demands of the COVID-19 pandemic, but which are unlikely to create direct cost savings.

The TMF Board encourages agencies to submit project proposals by June 2, 2021 for prioritized consideration. Applications will be considered on a rolling basis.”

Senior Advisor at Insight Partners; Adjunct Faculty at Harvard; former US Deputy CTO at White House