Experts Outline 2026 State and Local IT Priorities Amid AI Growth and Fiscal Uncertainty

AI Moves From Experimentation to Production in State Government

AI now tops the list of priorities for state CIOs, Robinson said, as agencies move beyond pilots and begin deploying generative and agentic AI tools in production environments.

“We’re seeing a major surge in moving from the pilot and testing phase into production,” Robinson said, noting that multiple states were recognized in late 2025 for AI applications already delivering measurable outcomes.

Common use cases include AI-supported chatbots, virtual agents and internal productivity tools such as document analysis and data retrieval. Robinson said early deployments have largely focused on improving internal operations, but citizen-facing AI services are expected to expand in 2026.

At the same time, Robinson cautioned against inflated expectations. “There’s a general anxiety around the entire focus on AI and the fact that it is not a magic bullet for all of the woes within the state tech stack,” he said.

States are responding by formalizing governance structures. Robinson said more than 90% of states have adopted responsible-use policies and established AI inventories, while many have created advisory boards or task forces to oversee deployment.

Cybersecurity Remains a Persistent and Underfunded Priority

Cybersecurity continues to rank near the top of state CIO priorities, driven by increasing threat sophistication and inadequate funding relative to risk, Robinson said.

“China, Russia and North Korea are attacking the states on a massive and regular basis,” he said, adding that AI has become a double-edged sword by strengthening defensive tools while enabling more advanced phishing and social engineering attacks.

Legacy systems remain a major concern. “Technical debt is embedded in the environment,” Robinson said, creating challenges for CISOs tasked with defending sprawling infrastructures.

Robinson also pointed to workforce shortages as a long-standing issue. Recruiting and retaining cybersecurity talent continues to strain agencies already contending with limited budgets.

READ MORE: States should prioritize services with cybersecurity grants.

Budget Pressures Shape State Technology Decisions

Fiscal management remains a central concern for state CIOs, Robinson said, particularly as agencies navigate uncertainty around federal funding and the potential devolution of programs previously supported at the federal level.

“We’re seeing continued pressure from federal funding instability,” he said, citing cybersecurity programs that have been extended without new appropriations.

As a result, AI and other emerging technologies are increasingly funded through existing operating budgets rather than new appropriations. “This is going to be business as usual,” Robinson said, with agencies funding technology investments from general revenue.

Local Governments Prioritize Cybersecurity and AI

For local governments, cybersecurity ranks as the top technology priority, Polk said, reflecting the immediate operational risks counties and cities face from ransomware and other attacks.

“Local governments are under relentless attack,” Polk said. “They often have no choice but to pay the ransom because it’s a disruption to services they can’t absorb.”

AI follows closely behind as a priority for local government CIOs. Polk said AI is reshaping both cybersecurity threats and defenses while influencing how employees and residents evaluate trust and authenticity in digital interactions.

“It creates a huge challenge for local government, especially when you have such a disparity in resources and maturity,” he said.

DIVE DEEPER: AI is a top management priority for state and local governments.

Budget Uncertainty Dominates Local Government Conversations

Budget concerns ranked third overall among local government priorities, but Polk said they dominate discussions with IT leaders.

“It’s the first thing that is talked about when I’m engaging with local government IT officials,” he said, citing uncertainty around federal funding, economic conditions and revenue sources such as sales taxes.

Polk said cybersecurity investments are often constrained by fiscal realities, making budgeting inseparable from risk management.

Modernization, Identity and Digital Services Remain Core Focus Areas

Modernization and identity and access management continue to rank highly for local governments as agencies migrate applications to the cloud and support hybrid work environments.

“Identity and access management goes hand in hand with modernization,” Polk said, pointing to the growing need for secure access across distributed systems.

Digital government and accessibility also feature prominently, particularly as local governments prepare for the Justice Department’s April 2026 compliance deadline. Polk said many organizations are still sorting through fragmented guidance and outdated content management practices.

GAIN INSIGHTS: Weigh 2026 tech trends for state and local governments.

AI as a Workforce Multiplier, Not a Replacement

Both speakers emphasized that AI is being deployed primarily to augment government workforces rather than replace employees.

“The most valued use of AI that I’m seeing is augmenting human services,” Polk said. “It creates capacity for more human-to-human interaction.”

Robinson echoed that sentiment, noting that states are using AI to support case management, analytics and internal efficiency while maintaining human oversight.

Looking ahead, Robinson and Polk said, uncertainty will continue to define technology decision-making across state and local governments.

At the state level, Robinson pointed out, pending AI regulation debates, upcoming gubernatorial elections and federal funding pressures are key variables. At the local level, Polk highlighted procurement challenges, workforce transitions and the rapid pace of AI innovation.

“Right now, uncertainty is going to be the biggest driver in the local government landscape,” Polk said.

Despite those challenges, both speakers said governments are pressing forward with pragmatic deployments focused on security, service delivery and responsible innovation.