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How to Leverage a Growing Universe of Federal Aid to Build AI-Ready Government


The recent influx of federal aid has offered a tremendous opportunity for state and local governments to advance IT and accelerate technology modernization.

The recent influx of federal aid has offered a tremendous opportunity for state and local governments to advance IT and accelerate technology modernization. Many agencies have deployed federal funding to enable remote and hybrid work within their organizations; transition mission-critical systems and workloads to the cloud to improve system performance, reliability and resilience; and bolster security in the face of persistent cyber threats.

However, a recent national survey of state and local government leaders conducted by the Center for Digital Government (CDG) indicates some states and localities still face challenges maximizing available federal funding for technology improvements.1

As governments transition to a new way of doing business in the wake of the pandemic, they will need to figure out how to maintain the technologies they’ve implemented and continually modernize their infrastructure as their business needs evolve. As new federal funding streams begin to be deployed — like the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) — state and local governments will also need to develop a framework for applying federal funding and putting it to highest and best use. Doing so will allow them to adopt emerging technologies that will dramatically improve operational efficiency, mobility, equity, sustainability, and physical and digital infrastructure resiliency.


The CDG survey highlights several funding challenges and opportunities for state and local governments.

Among the state and local officials surveyed, around half said their organizations expect their budgets will increase in the next 12 months, and nearly one-quarter (24 percent) of respondents anticipate an increase of more than 5 percent.

Interestingly, while state and local governments face a positive budget outlook, it may not be because of federal funding: Only 25 percent of respondents report using any federal stimulus funding for technology improvements in the past two years. Among those who did, the money primarily was used for new devices (57 percent), followed by cybersecurity (36 percent) and network modernization (36 percent).

That slow adoption rate may be due to a broad lack of understanding about what funds are available. Survey respondents said education and knowledge about available money were their top challenges when trying to leverage funds for emerging technologies.

“There are a lot of funding programs that are hitting state and local agencies, and it’s difficult to juggle,” said Samir Saini, industry director for U.S. critical infrastructure for Microsoft. “It’s difficult to understand what’s hitting when and how to track those funding streams. And even within them, it can be challenging to identify what IT investments across data/AI, infrastructure, applications, security solutions or devices qualify.”

Other key barriers identified by respondents included competing with other jurisdictions for limited funding, difficulty applying for grants and developing proposals, and problems identifying use cases for emerging technologies.


To make the most of available funding opportunities, state and local governments need to identify the outcomes they seek to achieve, projects they need to launch to deliver on them and the funding sources required to fund them, particularly through federal funding opportunities. Saini said focusing on five key pillars can help them develop a framework to determine their core technology investment areas, particularly as it relates to maximizing $1.2 trillion in IIJA funding.

1. Secure

State and local governments will need to focus on both IT and operational technology (OT) security going forward. Adopting a zero-trust framework and investing in cybersecurity solutions can help mitigate the risk of cyber attacks. Zero trust is now the de facto standard approach to strengthening an organization’s cybersecurity posture that focuses on the principle of least privileged access and continuous verification of trust. It allows organizations to design their architecture in a way that assumes every device and user requesting access to their network, systems and applications is a potential threat.

Zero trust requires several enabling technologies — from endpoint threat detection tools to security, orchestration, automation and response (SOAR) solutions. State and local governments should consider applying federal funding aligned to this zero-trust framework to secure all components of their digital estate, including identity, devices, apps, infrastructure, networks and data — and their OT systems and devices.

2. Recover

Fortifying IT and OT disaster recovery and business continuity will be another critical investment area for states and localities.

Saini said many government organizations currently have mission-critical IT and OT systems in their on-premises data centers without effective backup and recovery controls. In the event of a cyber attack, data center equipment failure, connectivity issues or a natural disaster, delays in recovering these systems may have detrimental impacts to their operations and services to the public. Leveraging the cloud for reliable backup and recovery addresses this problem and significantly improves the resilience of these systems.

3. Maintain

IIJA funding will lead to the most significant investment in infrastructure modernization in a generation. When considering the volume and complexity of maintenance and modernization work state and local agencies are seeking to complete, digital asset and field service management tools are critical to ensuring these assets are brought back to a state of good repair and maintained over time. Applicable use cases include AI-powered asset condition assessments, remote inspections using digital twins, real-time asset condition monitoring and predictive/preventive maintenance.

4. Plan/Design/Build

With an influx of funds from both IIJA and from existing capital budgets, states and localities are growing their construction project portfolios. As such, there is an increasing need to better manage project intake, prioritize projects, accurately estimate cost and ROI, and track and share progress with stakeholders. This need is driving increased demand to adopt cloud-based project management information systems (PMIS) to easily share project documents, automate workflows and enable real-time collaboration for all stakeholders.

From an engineering design and build standpoint, there is growing adoption of a digital-as-built (DAB) approach, which enables stakeholders to work collaboratively in a shared model and effectively creates a single source of truth of a construction project. This increases data transparency and drives efficiencies throughout the project life cycle. Ultimately, these digital planning, design and construction tools ensure the right projects are approved, managed and delivered as efficiently as possible — on schedule and within budget.

5. Operate

IIJA funds aren’t just being applied to modernize infrastructure. They are also being used to optimize state and local agency operations, specifically to address challenges around mobility, safety, equity, sustainability and resiliency. The key to this is effective use of data. Agencies will need to dissolve their data silos and establish modern data platforms to gain holistic and intelligent insights around how to reduce congestion, improve road safety, reduce CO2 emissions and more.

To achieve these and other long-term goals, agencies can leverage modern cloud-based business applications to streamline their end-to-end operations and help turn data insights into actions. For example, a modern data platform can inform transportation planners about which road segments or intersections have the highest road safety risks. But a modern advanced traffic management system (ATMS) is required to optimize traffic signals in those locations to reduce the risk of a collision or automate the detection and response to a vehicle crash.

Saini says even low-code/no-code technologies can also help agencies quickly and easily streamline manual business processes and workflows. With these tools, organizations won’t be hindered by legacy systems that make it more difficult to achieve key strategic objectives — whether it’s improving infrastructure monitoring and performance, enhancing safety or deploying more digital self-service applications for constituents.

Though this framework can help agencies pinpoint their technology priorities, they should also develop a clear understanding of where their organization’s technology priorities and goals align to allowable uses for federal funding, such as IIJA and any remaining funding from the 2021 American Rescue Plan Act. This may involve deputizing specific stakeholders within the organization to monitor when guidelines are released for different funding streams, especially competitive grants, and ensure the organization begins the application process for these grants as early as possible.

Agencies can also lean on their technology partners for help identifying use cases for AI and other emerging technologies, and to learn what technology investments qualify for various federal funding programs.

With the right funding framework in place, state and local governments have an opportunity to deploy federal funding in a more strategic, long-term way. They can leverage funds for emerging technologies, like AI, that strengthen cybersecurity, automate processes and build resilience. In doing so, they will develop future-ready digital and physical infrastructure that better meets constituents’ needs.

1 CDG/Microsoft national survey of 248 state and local government leaders on funding, February 2022