For too long, this has been the norm. While Silicon Valley thrives on venture capital and fast-moving financing, government innovation is often stuck in a labyrinth of approvals, budget cycles and red tape. Good ideas languish because there’s no mechanism to bridge the gap between vision and execution.
Enter the Technology Modernization Fund (TMF). Both the federal government and California state government have embraced this inventive funding model to replace inertia with action, helping agencies modernize IT systems and deliver better services for the public.
THE BOLD SOLUTION: TECH MODERNIZATION FUNDS
The TMF flips the traditional funding model on its head. Instead of waiting years for funding tied to rigid budget cycles, agencies can now access resources quickly — but with strings attached. These funds aren’t handouts, they’re investments tied to accountability and results. Here’s how they work:
- Federal TMF: The federal TMF invites agencies to compete for funding by pitching proposals that promise measurable benefits — whether it’s boosting cybersecurity, cutting costs or streamlining services. A board of senior IT executives vets these proposals, funding only the most impactful and feasible ideas. Funds are released incrementally, tied to project milestones, and agencies are required to repay at least 50 percent of the funding through savings or other means.
- California TMF: The state’s TMF, with a $25 million budget, has a similarly bold approach. The California Department of Technology invites state agencies to pitch short-term projects — think proofs of concept that deliver results within a year — to a group comprising state tech and finance leaders. The goal is to fund nimble, high-impact solutions that can be scaled later. No repayment is required, but accountability is just as rigorous. It’s like venture capital, but the return on investment is measured in public value, not profits.
WHY IT WORKS
The success stories make a compelling case. The federal TMF has invested more than $1 billion in 63 projects across 34 agencies. These aren’t just abstract efforts — they’re real-world improvements with measurable outcomes. For instance, the U.S. Department of Education’s shift to a zero-trust cybersecurity model saved millions by preventing potential breaches while securing sensitive data for millions of Americans.
California’s TMF is proving that even small-scale investments can pack a punch. Take the Department of Food and Agriculture’s Registered Service Agency Portal. With TMF support, the department replaced a clunky, paper-based system with a sleek digital platform, delivering better services in record time — just five months to reach a minimum viable product. It’s the kind of efficiency we’re not used to seeing in government.
FEDERAL VS. STATE: SAME MISSION, DIFFERENT PLAYBOOKS
Both funds share a common goal: modernize government and improve public services. But they take different routes to get there:
- Repayment models: The federal TMF emphasizes sustainability, requiring agencies to repay at least 50 percent of the funds, often through cost savings. California’s TMF, by contrast, operates more like a grant, focusing on quick wins with no repayment.
- Scale: Federal TMF projects often address large, systemic issues — like AI adoption or legacy system overhauls — requiring multiyear efforts. California’s TMF zeroes in on shorter-term, lower-risk projects that deliver immediate results.
SCALING THE TMF MODEL NATIONWIDE
The TMF isn’t just a good idea — it’s a game-changer. It’s time for more states and local governments to adopt similar models. Here’s how they can do it:
- Start small: Like California, create funds for fast, low-risk projects to build momentum and confidence in the process.
- Learn from success: Borrow the federal TMF’s milestone-based funding model to keep projects on track and measurable.
- Think big on impact: Prioritize projects that can scale across agencies or jurisdictions, maximizing return on investment.
- Hold teams accountable: Tie funding to clear milestones and outcomes, ensuring every dollar delivers results.
- Invest in expertise: Assemble boards of seasoned tech and finance experts to evaluate proposals and provide guidance.
A NEW ERA FOR PUBLIC-SECTOR INNOVATION
For decades, governments have been stuck in a cycle of reactive maintenance, managing crises instead of solving problems at their root. The TMF represents a break from that cycle. It’s not just a funding mechanism — it’s a platform for bold ideas, empowering public servants to deliver meaningful change.
As more states embrace this model, we’re seeing the dawn of a new era in government innovation. No longer must agencies let great ideas wither for lack of funding. With TMFs, they have the tools to turn vision into reality — and in doing so, to deliver a government that works better for everyone.
