CIO: Teri Takai (4 months on the job)Budget Deficit: $1.7 billion for 2004.What That Means for IT Budget: $10 million reduction in 2003; $25 million cut in 2004. IT budget for 2003 is $424 million.Priorities: Consolidation, e-government.Cuts: The state avoided eliminating critical IT projects by consolidating systems and requiring contractors to reduce their compensation rates.Methodology: High touch\u2014Takai works one-on-one with agency heads to identify where reductions can be made.The Problem: In 2002, Michigan began centralizing IT services to get an enterprisewide view of technology initiatives throughout the state and to save money by coordinating IT efforts across agencies. To facilitate this centralization, then-Gov. John Engler created a department of information technology whose mission was to provide the executive office agencies with all their IT needs including hardware, software, telecommunications, application development, maintenance and support. (Up until that point, each agency had its own IT group and picked which IT projects to fund.) So in addition to dealing with the budget crunch, Michigan\u2019s newly appointed CIO also has to overcome agencies\u2019 anxiety about losing control of IT purchasing power.The Process: Because many agency employees remain resistant to the idea of centralized IT operations, Takai sits down with either the deputy director, chief of staff or COO of each agency. Together, they prioritize IT projects by first evaluating the agency\u2019s different sources of funding. For example, if the Michigan Transportation Department was requesting money for a project from the state\u2019s general fund (revenue from sales and income taxes), examining funding sources could unveil that the agency was due to receive federal money for the project, freeing up state funds for other uses. After reviewing funding, Takai and the agency deputy director allocate money for maintenance costs. They also look at the projects the agency already has in its pipeline with the view to finishing those projects that have already been started\u2014but only if it makes economic sense. For example, a project spiraling out of control would be shuttered. With the remaining funds, they look at the agencies\u2019 wish lists and prioritize projects based on their ROI and their alignment with Gov. Jennifer Granholm\u2019s policy goals. Takai says the process of figuring out which projects to fund and which to leave on the table "was pretty traumatic" this year because it was a new process and because she still had to confront push-back from agencies that didn\u2019t like the idea of IT controlling the purse strings. The process is made more difficult by virtue of the fact that Takai has to work backward when establishing her budget. She gets an idea of how much money she has to cut, then she has to estimate the costs of various projects and prioritize from there. "It\u2019s not a smooth process by any stretch," says Takai. "It\u2019s a lot of to-ing and fro-ing. Obviously, when you\u2019re trying to do it in a short time frame, that makes it even tougher." An Expert\u2019s View: Stuart Bretschneider, professor of public administration and director of the Center for Technology and Information Policy at Syracuse University, says new state CIOs such as Takai should recognize that with greater centralization comes the chance for greater efficiency. Michigan officials "have opportunities to think about coordination and standard setting that can also result in cost savings and efficiency gains," Bretschneider says. "I don\u2019t necessarily mean technical standard setting, though that can be a part of it, but what is the appropriate role of private-sector contractors in providing service so that individual agencies aren\u2019t making contravening decisions?"Another mechanism for program coordination and cost savings is to create an advisory board chaired by a CIO that pulls representatives from various agencies to help in that coordination and cost sharing, he adds.