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Pre-RFP Toolkit 2nd Edition - 3. Evaluating & Developing Funding

3. Evaluating & Developing Funding

3.1 Introduction

Obtaining funding to support integrated justice systems may be one of the most significant obstacles to overcome, especially in tight fiscal times. According to a recently released National Governors’ Association (NGA) and National Association of State Budget Officers (NASBO) report, Fiscal 2005 rebounded notably for the majority of the nation's governors. The document, Fiscal Survey of the States, reports that revenues improved markedly, only six states made mid-year budget cuts, states were able to begin to restore funding to programs they were forced to cut during the downturn, and balances returned to normal.
However, remembering how quickly revenue declined in 2001, states are cautious. While revenue increased strongly in fiscal 2005, the 2006 budget estimates predict more modest growth. Expenditure pressure is high: the pent-up demand of programs that were cut, the budgetary strain of Medicaid, and looming issues such as pensions, demographic shifts and infrastructure all are competing for a piece of the state budget pie. Although balances grew in fiscal 2004 and fiscal 2005 roughly to levels considered adequate to deal with another fiscal downturn, they decreased in fiscal 2006, based on enacted budgets.
Now, more than ever, state and local justice agencies need to be innovative in garnering financial support for integrated justice efforts. This section of the toolkit explores traditional funding methods, such as federal grants and earmarks, as well as alternative funding mechanisms that may be useful in supporting integrated justice at the state and local level. This section also includes examples of funding for integrated justice efforts from Minnesota and New Mexico. Finally, a tool highlighting where to go for support and information about funding for justice information sharing is included as well.

Presenting the Case for Funding

Integrated justice systems are complex in a variety of ways and often less visible than other capital investments. Separate state and local governance creates barriers to more effective, efficient, and often less costly shared systems (See Section 2.3 for more information regarding governance).
Public officials know the difficulties in obtaining funding for more visible equipment such as patrol cars, fire trucks, or ambulances. Obtaining funding for an integrated justice system is even more difficult. To present the case for funding integrated justice information systems, you could:
  • Provide examples of other entities that have implemented a similar system and saved money over the cost of developing a stand-alone system
  • Bring in outside experts to confirm that your position and the benefits are real
  • Provide cost figures, if possible, as well as the assumptions used to develop the estimate. From there, demonstrate how the increased efficiencies of an integrated justice system will help save money for the jurisdiction in the future
  • Indicate cost-saving measures that have been taken to demonstrate fiscal responsibility
  • Engage outside experts to bolster your position and confirm the projected benefits
  • If possible, provide cost figures and the assumptions used to develop the estimate. From there, demonstrate how the increased efficiencies of an integrated justice system will help save money in the future
Another mechanism to garner support is to engage the media’s interest (therefore the public’s interest) early in the planning process. By allowing the media and key decision-makers to view the problems associated with the inability to share information first-hand, a powerful message can be generated and sent to key decision-makers. However, media involvement is a two-edged sword. Once issues or problems are identified, agency heads may be exposed to criticisms concerning how they could let these conditions develop and/or persist. Then, as the project develops the media are likely to closely monitor progress or lack of and report this as well.
More information about creating a business case for integrated justice is found in Section 1.6 of the toolkit.
Subsections 3.2 and 3.3 cover both traditional and alternative means of developing funding that can be used for an IJIS project.
3.2 Traditional Approaches include federal funding, grants, and earmarks.
3.3 Alternative Funding Approaches include a discussion of user fees, leveraging investments, and other innovative funding options to support justice information sharing.

3.2 Traditional Approaches

In addition to state and local budget appropriations, IJIS projects are often supported by federal funding. This section of the toolkit examines integrated justice funding available from various U.S. Government sources.

Federal Funding

The Federal Government distributes billions of dollars each year to state and local agencies to support a broad array of crime control and prevention initiatives. Many of these funding networks can be used to support record management and justice information sharing systems.

Grants

Each year, the U.S. Department of Justice (DOJ) and U.S. Department of Homeland Security (DHS) administer sizeable budgets aimed at funding state and local governments. In fiscal year 2005 alone, the combined available funds from these agencies totaled over $4 billion. Some of these funds can be used to support technology for justice agencies. The following is a short list of grant programs active as of the last update of this document. The grants are from Office of Justice Programs (OJP), the Community Oriented Policing Services (COPS) office, and the DHS Office for State and Local Government Coordination and Preparedness (OSLGCP) which may be suitable for agencies looking for grants to support justice information sharing initiatives:
  • Justice Assistance Grant (JAG) In FY05, the Justice Assistance Grant Program replaced the Byrne Formula Grant Program and the Local Law Enforcement Block Grant Program. The new JAG program is a partnership among federal, state and local governments to create safer communities. The Bureau of Justice Assistance (BJA) awards grants to states and local government to improve the criminal justice system. The program places an emphasis on breaking the cycle of substance abuse and crime, combating violence, holding offenders accountable, enhancing law enforcement initiatives, and supporting advancements in adjudication. In FY05, the JAG program appropriation was $634M and in FY06, the appropriation is $416M. See www.ojp.usdoj.gov/BJA/grant/jag.html
  • National Criminal History Improvement Program (NCHIP). The NCHIP continues the U.S. Department of Justice efforts to build an accurate and useful national system of criminal records. Availability of complete computerized criminal records is vital for criminal investigations, prosecutorial charging, sentencing decisions, correctional supervision and release, and background checks for licensing, purchasing of handguns, and applying for child-care positions or other responsibilities involving children, the elderly and the disabled. The NCHIP is administered by the Bureau of Justice Statistics, Office of Justice Programs, within the U.S. Department of Justice and implements a number of national programs. In FY05, the NCHIP appropriation was $25M and in FY06, the appropriation is $10M. See www.ojp.usdoj.gov/bjs/nchip.htm
  • Department of Homeland Security (DHS). The DHS Office for State and Local Government Coordination and Planning (OSLGCP) manages a number of programs that provide funding to enhance the capacity of state and local jurisdictions to respond to, and mitigate the consequences of, incidents of domestic terrorism involving the use of weapons of mass destruction. The most applicable programs are 1) State Homeland Security Grant Program (SHSGP), 2) Law Enforcement Terrorism Prevention Program (LETPP), and 3) Urban Area Security Initiative Program (UASI). Projects that support information sharing and exchange are eligible under these programs. In FY05, the appropriation for these three programs was $2.385B and in FY06, the appropriation is $1.715M. More information about the OSLGCP funding may be found on its website, www.ojp.usdoj.gov/odp/.

Federal Earmarks

Each year, through many of the grant programs listed previously, the U.S. Congress provides billions of dollars of support to state and local agencies. Most of these grant opportunities are passed down from the federal government to state and local applicants via a method defined by statute. For example, the Byrne Formula Grant Program is distributed to state agencies designated by the governors through a formula that is based on population and crime rate, among other variables.
Congress has also created funding opportunities that are discretionary in nature, meaning that the federal agency distributing the funds has the authority (subject to federal rulemaking provisions) to administer grant funding competitively in program areas that the agency deems timely or important to the field. Examples of these funding streams in an integrated justice environment include the National Criminal History Improvement Program.
However, in recent years, congressional appropriators have reduced the amount of discretionary dollars available to federal agencies by earmarking, or setting aside an allocation of funds for a particular person or cause. Earmarking allows the U.S. Congress to direct and control how the discretionary elements of the federal budget are being spent, but limits the ability of the agencies to support field-based initiatives.
An example from FY 2006 appropriations is relevant here. Three discretionary grant programs are 100% earmarked, meaning that Congress has identified in the appropriations legislation the specific projects to which this funding will be allocated. These programs are:
  • COPS Law Enforcement Technology Program. The COPS LETP program provides funding for a wide variety of law enforcement technology programs. In FY05, the LETP appropriation was $138.6M and in FY06, the appropriation is $139.9M. Examples of programs funded in FY06 are:
    • Integrated Criminal Justice Information System for the State of Virginia - $2,100,000
    • Kalamazoo, Michigan for the Justice Integrated Information Management System - $150,000
  • Edward Byrne Discretionary Grant Program. The Byrne Discretionary Grant Program provides funding for a wide variety of law enforcement programs. In FY05, the Byrne Discretionary Grant appropriation was $170M and in FY06, the appropriation is $191M. Examples of programs funded in FY06 are:
    • National Sheriff’s Association Pegasus Program - $1,000,000
    • J-ONE Information Sharing System in New Hampshire - $3,000,000
  • Crime Identification Technology Act (CITA). CITA offers assistance in improving and implementing effective state, local, and tribal justice information systems. Information regarding the history of CITA, eligibility criteria, and the distribution of funds is available online. Additional resource links to similar technology efforts and contact information may also be helpful to those who have specific inquiries about CITA. In FY05, the CITA program appropriation was $28.4M and in FY06, the appropriation is $28.6M. Examples of programs funded in FY06 are:
    • Jefferson County, AL Sheriff’s Office for an Integrated Law Enforcement Records Management System - $1,500,000
    • Arkansas State Police for the Automated Fingerprint Identification System - $750,000
CITA resources are available at DOJ’s Office of Justice Programs website at http://it.ojp.gov/fund/files/cita.html. Additional information and the latest earmarked programs and projects are available from the National Criminal Justice Reference Service (NCJRS) at www.ncjrs.gov/.

3.3 Alternative Funding Approaches

In restrictive budget environments, innovative financing options are important to consider. Developing new relationships, leveraging resources, and developing new user fees are just a few ways to form new funding approaches to support justice information sharing. Creating these new avenues of support can be as simple as signing a memorandum of understanding (MOU) with a partner organization, and can be as complex as encouraging a state legislature to adopt a new fine or fee associated with the criminal justice process. This subsection explores some of these alternative funding approaches — leveraging investments, financing options, and other user fees — that may provide additional support for a justice information sharing effort.

Leveraging Investments

Current budgeted funds for integrated justice systems may not be sufficient to fund long-term efforts to achieve the ultimate integration vision. Budgeted funds can help address the cost factor when combined with reallocated sources of funds and new funding resources (including federal and private grants, leasing of infrastructure, and fees). The first step, however, is to look at innovative ways to cut the costs of implementing integrated justice systems.
  • Shared Systems. Many public safety agencies use shared systems and resources instead of building independent systems. Technologies such as Web Services, extensible markup language (XML), and middleware make the sharing of information from disparate systems more affordable and easier to implement. Not only do shared systems support integration, but jurisdictions can save money by leveraging economies of scale in making expenditures. This is one of the reasons that Service Oriented Architecture or SOA is becoming more popular since one of its goals is to acquire and implement a service and then have more than one agency utilize it. Shared systems can be vertical, supporting information sharing between different levels of government, such as between cities, counties, tribes, states, and federal agencies. Alternatively, shared systems can be horizontal, where several agencies of the same type or at the same level of government share information such as when multiple law enforcement agencies share investigative information. When multiple agencies, jurisdictions, or governmental levels share a system, costs of the new system can be reduced for each agency to the degree that the cost of infrastructure, fixed equipment, maintenance, and applications are shared.
  • Volume Pricing. Lower pricing, especially for equipment and software packages, can be a byproduct of the higher volumes generated by a shared system or by group purchasing agreements. Smaller agencies can enjoy the benefits of having purchases combined with those of larger agencies to obtain volume discounts. Developing purchasing alliances or compacts is another method of lessening costs. In order to avoid agencies with similar needs duplicating each other’s purchases, agencies and jurisdictions should investigate group purchasing arrangements currently available through their respective state agencies, the federal government, and public interest groups such as the National Association of Counties (NACo).
  • Use of Existing Infrastructure. If a governmental entity owns infrastructure that can be used for the new system or if commercially available infrastructure can be found, significant cost reductions can be realized. The conversion of up-front capital costs to long-term leasing costs can be of great benefit. Depending on the leasing rate and how long the leased item is used, the cost of leasing can equal or even exceed the cost of purchase or development. A specific fiscal analysis must be conducted to determine which method makes sense.
  • Shared Information. Contacting other governmental units that have already contracted with prospective vendors can provide valuable information on the prices that a vendor has charged to others.
The best results maximize economies of scale, but balance the size and effort against diminishing return. Economies of scale can be realized by sharing resources among agencies and jurisdictions. However, depending on the leasing rate and other factors, leveraging these economies of scale through the participation of other agencies and jurisdictions may increase the difficulty of implementing solutions, and outweigh the benefits. One trend that would alleviate this problem is the establishment of centralized procurement agencies particularly at the state level. These agencies, with differing levels of authority, can be responsible for reviewing current IT infrastructure, defining goals for future capabilities and technologies, establishing standards, and assisting with the procurement process across a jurisdiction. In this way the establishment of an enterprise or services oriented architecture can be more easily and efficiently achieved.
Some useful references for centralized oversight and procurement agencies include:

Financing Options

Financing methods for integrated justice systems include lease purchase agreements, capital appropriations, and bond proceeds. A government entity can use more than one financing method to achieve full funding. It is important to remember that financing methods used to fund assets generally must match the life of the asset.
  • Lease Purchase Agreements, or Fee for Service. With most jurisdictions facing shrinking budgets, the search for alternative financing methods that do not require large capital investments has led to fee-for-service, or lease purchase, agreements. A private company or source can build and own the system, leasing it back to a government entity for a charge that usually includes a maintenance agreement. Care must be given to ensure that appropriate levels of management control are exercised to meet law enforcement and judicial regulations.
  • Capital Appropriation. Compared to long-term financing, capital appropriation is in the pay-as-you-go category. The funding comes from revenues that are collected from current year taxes and fees. The government entity sets aside the funds for capital projects that usually take less than 10 years to repay. Capital appropriations also are used to reduce dependency on long-term financing.
  • Bond Proceeds. This long-term financing method can be used for purchases that average 20 years to repay. For instance, a government entity needing $5 million for infrastructure could prepare a public bond issue. The government entity obtains the money right away and makes payments through a debt service.
  • Revenue Enhancement. Some state and local governments have adopted specific fees, increased existing fees, or diverted some of the revenues from existing fees to fund new IT initiatives.
  • Special Fees. Funding for integrated justice can come from revenue collected from special fees, such as the enhanced 911 fee for both landline and wireless communications, or from additional fees charged to offenders through court proceedings.
  • User Fees. Many agencies charge user fees based on the number of individuals within the participating agency who use the integrated justice system. This approach is particularly effective in funding long-term costs; however, charging user fees can present fiscal and psychological barriers for agencies considering joining the system.
  • Motor Vehicle Fees. Some states have used either existing fees or increased fees on motor vehicle and boat transactions. Due to the large number of transactions, these fees can generate significant funds.
  • Gaming Fees. Several states have gaming operations that generate significant sums of revenue. Dividing the existing revenue collected or increasing the amount of revenue collected can provide a significant source of funds, both in the short and long term.
  • Revolving Funds. Revolving funds offer another way of raising funds for IT projects that do not rely solely on the traditional tax levy. Revolving funds allow agencies to establish a revolving fund from which agencies could borrow for IT proposals. Agencies then repay the fund from cost savings or new revenues generated as a result of the project. Fund managers decide which projects merit the risk of a loan. The revolving fund thus functions as internal venture capital, supporting risky and longer-term projects that may be much harder to fund through the traditional budget process. Because agencies repay when projects bear fruit, the fund is perpetuated for future IT investments. A surcharge in the fees often used to fund IT services could also be used to support revolving funds.
  • Public/Private Partnerships. Look for opportunities to partner among government agencies (public/public partnerships) as well as private sector organizations (public/private partnerships). Partnering builds ownership and greatly assists in project planning and implementation.
  • Public Transaction Fees. Another source of funding could be public access or public transaction fees. These fees are paid by individuals processing transactions remotely such as paying fines, tickets, obtaining arrest reports, warrant and bonding information, traffic accident reports, etc.
According to guidance published by the U.S. Department of Transportation on building public/ public and public/ private partnerships, partners don’t necessarily have to contribute funding. Knowledge, services, equipment, and public relations support are examples of contributions that other partners can make. Chambers of commerce, for example, may become formal project partners because they want to improve public safety and reduce traffic congestion to promote tourism and economic development.
Furthermore, some industry groups may be interested in assisting a jurisdiction with an IT project in order to test or further develop a new technology. While there is some risk to the agency in taking this approach, in many cases the firm offers its services to the jurisdiction at a significantly reduced or no cost.
It is important that partnering agreements are formalized in writing so that all parties are clear about project responsibilities, as well as the benefits of participation. Sometimes, when partners are not contributing financially to a project, the project responsibilities can be taken too casually. Drafting a partnership agreement in the form of a Memorandum of Understanding can help create the team discipline necessary to get things done.

3.4 Additional Information

Referenced Works

The following reference information is available on the toolkit CD:
Work ID # Description
RW 3-1 Additional References & Funding Information
Other information sources not available on the toolkit CD include:
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