The Great Recession has technically been over for three years now, but organizations of all types are still in recovery mode. Among the hardest hit are state governments, whose tax coffers are languishing.

State governments are struggling to provide more services with fewer resources.

According to the Center on Budget and Policy Priorities, “the Great Recession that started in 2007 caused the largest collapse in state revenues on record.” As of the start of 2012, on average state revenues are down 5.5 percent below pre-recession levels and “are not growing fast enough to recover fully soon.” States have responded by laying off hundreds of thousands of government workers.

Ironically, or perhaps not surprisingly, however, as state budgets and payroll fall, demand for state services increases, thanks largely to accompanying high unemployment. All this leaves state governments under significant pressure to deliver more services with fewer resources.

Daniel Lohrmann, CTO for the State of Michigan’s technology and budget division, summed up the situation this way:

“Our constant challenge is doing more with less … We thought that as budgets were slashed, user demand would drop, but the exact opposite happened. Now we have to deliver enhanced capabilities and services at the lowest possible chargeback rates to the agencies—all while improving efficiencies and reducing our own budget.”

One way states can cope with the ‘Do More with Less” paradox is to invest what funds are available on technologies that reduce the burden on state workers by enabling web-based self-service capabilities for citizens and/or streamlining internal IT operations so as to require fewer FTEs such as database administrators and storage managers, who are then free to focus more time and energy on serving citizens.

An example of such an approach launched last summer in North Las Vegas. There, the Nevada Department of Motor Vehicles began deploying self-service kiosks at local grocery stores and other retail shopping outlets. The kiosks allow shoppers to quickly renew their drivers’ license registration, request copies of important documents and perform other DMV-related tasks electronically. The grocery store kiosks are an extension of a program launched in 2006 to deploy kiosks in DMV centers themselves to reduce the burden on overtaxed staff. Currently, kiosks offload registration renewals of over 2 million vehicles annually in the state, according to the DMV.

To support initiatives like the one in Nevada requires internal IT systems that likewise improve operational efficiencies. The state of Michigan, for one, has turned to storage virtualization to improve data center efficiency at a time when, due in part to growing demand for state services, its IT infrastructure was actually growing by 25% per year.

Working with EMC’s Global Services Division, the state also created what it calls a Virtual Center of Excellence, or VOE. The VOE’s mandate is to help over a dozen state agencies deploy and support web-based self-service portals that in turn let citizens do everything from apply for unemployment insurance to access child support services.

The results speak for themselves. Since moving to a virtualized infrastructure and IT-as-a-Service model, the state saves over $1 million annually on storage maintenance costs and another $340,000 annually on energy costs.

“Since adopting virtualization and automation, we don’t need as many server administrators, so we’re shifting those individuals into more service-oriented, customer-focused roles,” said Vern Klassen, Michigan’s Director of Technical Services. “We’re becoming better marketers of our services and operating more like a business, which is essential to competing with external service providers.”

Source: The Center on Budget and Policy Priorities, 2012

The challenge, of course, is justifying spending limited state government dollars on new technologies such as these rather than on retaining more state workers or on funding critical state services in the immediate short-term. But the current fiscal situation is not a short-term problem. Again according to the Center on Budget and Policy Priorities, states won’t return to pre-recession revenue levels until 2019. That means states must make fundamental changes to the way they deliver and support services to the citizenry.

This shouldn’t be a partisan issue either, as there’s a little something in it for both sides of the aisle in this strategy. For conservatives concerned about the (justified or not) growth of Big Government, virtualizing internal infrastructures and delivering self-services capabilities to citizens reduces the number of FTEs state governments must have on hand. But these technologies also improve the user experience and make it easier for citizens to access critical services during difficult economic times by cutting through the bureaucratic red-tape and reducing the number of personal but often frustrating interactions with state workers, which should lend it appeal to centrists and liberals.

Ultimately, states need to muster the political will to spend what little financial resources they currently have on self-service technologies and virtualization in order to achieve medium and long-term stability. Otherwise, struggling to fill budget gaps while underserving the neediest citizens will become the norm.