What Will State and Local Government Spend on IT in 2026?

WASHINGTON — A packed house full of industry watchers gathered outside of Washington, D.C., on Thursday for e.Republic’s* Beyond the Beltway conference, a one-day event that featured public-sector IT leaders from around the country. Officials including California Chief Information Officer Liana Bailey-Crimmins, Seattle Chief Technology Officer (CTO) Rob Lloyd, Boston Chief Innovation Officer Santiago Garces and Massachusetts Chief Information Security Officer Tony O’Neill discussed their most daunting challenges in serving their residents against a backdrop of uncertain budgets, escalating threats and ever-growing expectations.

e.Republic Chief Innovation Officer Joe Morris characterized the present moment in gov tech as having significant fiscal, workforce and modernization challenges. “It’s a market that’s much more complex than at any time in recent history,” he said. Morris delivered a 2026 budget forecast for state and local government information technology alongside e.Republic Director of Market Intelligence Rachel Eckert.

Overall spending in state and local government IT is expected to reach “moderate growth” levels of 4 to 6 percent over spending in 2025, with estimated total spending of $160.2 billion. This figure was broken down into seven verticals, with projected spending as follows:

• Health and Human Services: $44.4 billion
• Education (K-12 and Higher Ed): $41 billion
• Transportation and Infrastructure: $19.2 billion
• Finance and Administration: $16.7 billion
• Justice and Public Safety: $15 billion
• Utilities (Electric, Water, Gas): $13.5 billion
• Environment and Housing: $10.4 billion

Some key drivers of that spending include a changing regulatory landscape, with more responsibility being shifted from the federal government to states. Layered on top, adding both challenge and opportunity, is the rapid development of artificial intelligence technologies. “AI has driven a lot more pressure to move quicker on modernization,” Morris said.

He and Eckert both noted a shift revealed by RFP data on what governments bought last year: They bought more services — things like consulting, managed services and systems integration support — rather than pure software and hardware. “They’re not looking for vendors to sell them another piece of technology,” Eckert said. “They’re looking for partners.”

Subsequent sessions comprised IT and security leaders in cities, counties and states, and drilled into their realities going into 2026. Across the board, budget constraints are top of mind. “The biggest challenge that Mesa [Arizona] is facing is delivering improved and better technology after a 2 percent budget cut,” said CIO Scott Conn of what he’s confronting in Arizona’s third largest city, with a population of just over 500,000.

Seattle CTO Rob Lloyd noted a significant change in priorities and leadership, with progressive Mayor Katie Wilson shifting focus to issues like affordability and housing. Their budget challenges are also significant, with reduction targets of 6 to 8 percent. Lloyd expects IT to play a major role in helping departments achieve their missions to serve residents within those constraints.

Long Beach, Calif., has a savings goal of 3 percent in 2026, explained CIO Lea Eriksen, but a budget shortfall of between $60 and $80 million means that percentage could reach as high as 10 percent. “The demands have never been higher, but the resources that we have available to support that is really tenuous,” Eriksen said, adding that AI has potential to help them achieve their cost control targets.

Gail Roper, CIO of Montgomery County, Md., defined the CIO’s role as being responsible for marketing technology to decision-makers. Further, they have to do so in an environment where priorities are many, including top-of-mind issues like public safety and homelessness. ”If you can’t show the business value of that technology,” she said, “it’s going to lose to potholes.”

*e.Republic is Government Technology’s parent company.