Technology Modernization Fund Faces the December 11 Cliff After GAO Finds $13.5 Million in Realised Savings on $1 Billion

The Technology Modernization Fund was created in 2017 to lend agencies money to replace old IT systems, with the loans repaid from savings. GAO reported in July that the fund had invested about $1.03 billion in 68 projects by June 2025. The projects expected about $1.06 billion in savings, but 98% of that isn’t expected until fiscal 2027 or later. Realised savings so far: about $13.5 million, from 11 projects. Thirty-seven projects expect no savings at all, and seven were cancelled.

The fund’s legal authority is now running on the stopgap spending law signed on 2 September, which extends it to 11 December.

A fund on short extensions

The fund’s authority lapsed in December 2025 for the first time, freezing nearly $200 million. An attempt to reauthorise it in the defence bill failed. The fiscal 2026 spending deal in January gave it $5 million and extended it to the end of September. The Senate’s stopgap carried it forward to December alongside two cyber laws. The House’s original version had left it out.

The fiscal 2027 budget asks for no new money. Instead it would let GSA, with OMB approval, move up to $100 million of agencies’ unused funds into the TMF, assuming Congress reauthorises it. Senators Jerry Moran and Gary Peters have reintroduced a bill to reauthorise and reform the fund.

The bigger IT budget

The TMF is small next to what agencies spend on IT. The fiscal 2027 request for civilian agency IT is $75.7 billion, up from $67.9 billion in 2026. Defense IT adds roughly $66 billion more. The largest civilian IT budgets are at Veterans Affairs, $12.2 billion, much of it for the new health record, Homeland Security at $11.7 billion and HHS at $9.5 billion. Civilian cybersecurity spending would fall slightly, with a $707 million cut at CISA.

Most of that money keeps existing systems running. GAO has said for years that operations and maintenance take about 80% of federal IT budgets, which is why a fund for replacement was created in the first place. Our legacy IT post covers the systems still waiting.

The AI turn

Federal CIO Greg Barbaccia, a former Palantir executive, is also the federal chief AI officer and acting head of GSA’s Technology Transformation Services. Agencies reported 3,611 AI use cases in their 2025 inventories, more than double the year before. GSA’s USAi platform gives agencies access to commercial models, and GSA’s chief AI officer has said the big open question is how to calculate return on investment.

Why it matters

The TMF was meant to solve a budgeting problem: Congress funds IT a year at a time, while replacing a system takes several. The fund’s weak savings record gives critics a reason to let it lapse. Its supporters argue savings were never the main point, and that modernisation is about security and service. On 11 December Congress decides whether the fund continues, in what form, and with what money.