Our former Brookings colleague Rebecca Blank, now at the Commerce Department, is today leading the first meeting of the Obama Administration’s Innovation Advisory Board, looking at the innovative capacity and economic competitiveness of the United States.

I applaud the effort.  Nothing is more important to America’s longterm competitiveness than emphasizing innovation.  As the council looks to the private sector and global markets, I urge it to examine how the U.S. government can lead innovation and contribute to economic growth.  The best place to look is new and emerging digital technologies that can make government more accessible, accountable, responsive and efficient for the people who use government services every day.

Here are some of the recommendations I made in a recent paper I wrote with colleagues here at Brookings as part of our “Growth Through Innovation” initiative:

• Save money and gain efficiency by moving federal IT functions “to the cloud,” i.e., using advances in cloud computing to put software, hardware, services and data storage through remote file servers.

• Continue to prioritize the Obama administration’s existing efforts to put unparalleled amounts of data online at Data.gov and other federal sites, making it easier and cheaper for citizens and businesses to access the information they need.

• Use social media networks to deliver information to the public and to solicit feedback to improve government performance.

• Integrate ideas and operations with state and local organizations, where much of government innovation is taking place today. 

• Apply the methods of private-sector business planning to the public sector to produce region-specific business plans that are low cost and high impact.

These improvements in government services innovations in the digital age can help spur innovation and support a robust business climate.  And, as a sorely needed side benefit, they can also serve to eliminate some of the current distrust and even contempt for government that has brought public approval of the performance of the federal government to near historic lows.  

The appointment of new federal chief information officer Steven VanRoekel comes at a challenging time for President Barack Obama. The national economy continues to be weak. Congress plans to cut trillions from the federal budget. And in the time leading up to the 2012 election, American voters remain cynical about the ability of the government to address important policy problems in an effective manner.

In an era of deficit reduction and public cynicism, the tasks facing federal officials are to determine how to do more with less and persuade voters the government can become smarter and more effective. There are going to be fewer dollars for virtually every federal program so it is important to figure how ways to innovate and perform more efficiently.

Former CIO Vivek Kundra sought to do this through encouraging agencies to move software applications to the cloud, consolidating federal data centers, improving transparency, and improving the information technology procurement process. It is important to continue this progress even as agencies are forced to downsize their operations.

As shown in the private sector, government administrators should use technology to cut costs, improve worker productivity, and streamline operations. This is not just a matter of using technology in more innovative ways, but changing the operations and culture of the public sector. Public officials must improve its data mining activities to identify fraud and abuse in Medicare, Medicaid, the Defense Department, and other domestic programs.

New software gives managers better tools to evaluate how money is being spent and whether it is fulfilling intended goals. If it is not, programs need to be modified or eliminated. The most important weapon in Mr. VanRoekel’s arsenal may be the scalpel as he goes through the federal government’s $80 billion IT budget.

Since 2009 the federal government started the process of replacing local computers with cloud platforms. A recent report from the Congressional Research Service (CRS) provides an interesting view into the progress of these investments. It reveals the benefits that public agencies gain when using cloud services and the barriers they face when making the transition.

Advantages of Cloud Computing

Cloud computers are superior to locally-run data centers for a variety of reasons. The CRS report identifies six specific cloud benefits:

• Cost- Cloud computer platforms use resources more efficiently than local servers. An organization that uses local Information Technology (IT) must invest in the infrastructure to support computer systems at times of peak demand. However, most times companies or government agencies require only a fraction of that computing power. Cloud computing allows organizations to pay for all of the resources they need and avoid costly investments in rarely used local IT systems.
• Energy Efficiency- Cloud computing data centers benefit from economies of scale to run more efficiently than local servers. In some cases this can result in huge energy savings. For a large cloud computing center it also makes economic sense to invest in green energy sources like wind or solar for power.
• Availability- Cloud computing systems make it easy for any device with an Internet connection to access files or software. However, if a facility temporarily loses Internet access the files on cloud system are inaccessible. Alternatively, a locally administered IT system could function without Internet connectivity.
• Agility- Cloud systems can make it easier to upgrade operating systems and applications. The available computing power also means that memory intensive software packages are cost effective.
• Security- Cloud providing companies also have the financial resources to purchase the tools necessary to ensure that networks remain safe.
• Reliability- Cloud systems can save data onto multiple servers. If a single server goes down due to a cyberattack or another issue, the data is available on another server.

Government Investments in the Cloud

Determining the exact size of government cloud computing expenditures is difficult. Government spending on IT has increased every year from 2001 to 2013 when it reached a peak of $81 billion. In the three subsequent years it has decreased. Cloud computing expenditures likely represent a tiny fraction of that total. Market research firms have estimated that the federal government spends between $1.4 billion and $7 billion on cloud computers annually.

Trends in Total Federal Investment in Information Technology

Source: Congressional Research Service

Challenges for Migrating to the Cloud

The federal government has encountered several barriers in its plan to shift more functions to cloud platforms:

• High Federal Security Requirements- The government faces new advanced persistent threats routinely. System-wide security updates are necessary more often than for private sector organizations. The short update cycle provides a unique challenge to cloud providers.
• Adopting New Technologies- Government agencies have ingrained cultures that are slow to change. This shift from locally-based servers to the cloud can be slow and tedious for this reason.
• Ancillary Technologies- Cloud technologies are known for their flexibility. However, government agencies may lack the necessary IT infrastructure or speedy Internet connections that leverage the maximum potential of the cloud.
• Technical Know How- Cloud platforms require specialized knowledge to administer. Many government agencies lack the necessary experts to oversee a migration to the cloud.
• IT Expenditure- Migration to the cloud can involve expensive initial costs. Additional funding is necessary to facilitate the shift to the cloud.

The Future of the Government Cloud

An analysis of the costs and benefits of cloud migration uncover a few specific barriers that the federal government must overcome to earn the full value from new technologies. First, lawmakers must be willing to spend more now to save money later. Cloud systems are cheaper to run than local administered servers but the initial transition costs are high. Current funding levels, which are trending down, are too low to finance such a change. Privacy and security are also major challenges. Government servers host troves of data that Americans expect to remain private. Converting these systems to the cloud will require the government’s full confidence that cloud systems are at least as secure. New legislation is likely necessary to achieve the complimentary goals of privacy and security.

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In many policy-related situations, the states can be useful laboratories to determine the most appropriate federal actions. Variations across states in health care programs, earned income credit rules, minimum wages, and other policies have helped inform debates about federal interventions.

In this paper, we reverse that approach. Many state and local governments currently face difficulties financing future pension obligations for their workers. The federal government, however, faced similar circumstances in the 1980s and successfully implemented a substantial reform. We examine the situation the federal government faced and how it responded to the funding challenge. We present key aspects of the situation facing state governments currently and draw comparisons between them and the federal situation in the 1980s. Our overarching conclusion is that states experiencing distress today about the cost and funding of its pension plans could benefit from following an approach similar to the federal government’s resolution of its pension problems in the 1980s.

The federal government retained the existing Civil Service Retirement System (CSRS) for existing employees and created a new Federal Employees’ Retirement System (FERS) for new employees. FERS combined a less generous defined benefit plan than CSRS, mandatory enrollment in Social Security, and a new defined contribution plan with extensive employer matching. Although we do not wish to imply that a “one size fits all” solution applies to the very diverse situations that different states face, we nonetheless conclude that the elements of durable, effective, and just reforms for state pension plans will likely include the major elements of the federal reform listed above.

Section II discusses the federal experience with pension reform. Section III discusses the status and recent developments regarding state and local pensions. Section IV discusses the similarities in the two situations and how policy changes structured along the lines of the federal reform could help state and local governments and their employees.

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