‘Uncertainty’ swirls around federal funding cuts’ state and local impact
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By
Chris Teale
State and local tech leaders said during a webinar the impacts may not be truly felt until the end of this year. They said governments cannot just “hunker down,” but must prioritize where to spend.
Worries about the impact of federal spending cuts on state and local tech budgets are unlikely to go away soon, leaders warned this week. But they cautioned that governments should not just “hunker down,” but try to spend where they can.
Federal cutbacks through the Department of Government Efficiency’s efforts and the ending of various grants have clobbered state and local initiatives around modernization of unemployment systems, digital equity and others. More cuts could follow, and it’s left state and local governments worried about future budget shortfalls.
“The word of the year so far for 2025 is uncertainty for state and local IT,” said Doug Robinson, executive director of the National Association of State Chief Information Officers, during a webinar this week. “A lot of the federal funding has either already been cut or is at risk.”
One federal program likely to not return any time soon is the State and Local Cybersecurity Grant Program, known as SLCGP. Funding for the $1 billion program expires in September, and despite the pleas of state leaders, Robinson said reauthorization looks “unlikely.” He did say that the final tranche of funding, much of which is passed to local governments as cash or shared services, looks to have survived the rescissions package making its way through Congress.
Despite the uncertainty, Robinson and Adam Frumkin, the CIO of Franklin County, Ohio, and president of the Public Technology Institute, said governments cannot just “hunker down” and hope to ride out the uncertainty without any investment of their own.
“The next six months to a year, for all of us as IT leaders in the state and local government area, is adaptability in our technology adoption, collaboration across jurisdictions, and resilience in the face of our new challenge that we're facing from a funding perspective and political climate and what we need to deal with and how we're going to get there,” Frumkin said. “We can come about it together, and we can rise above it, and part of that is revisiting our strategy and our flexibility to meet the needs of not only our entities, but first and foremost our residents and who we serve.”
Prioritization will be key, Frumkin said, echoing a previous survey from EY that found that budgetary worries weigh on IT leaders as they try to modernize their systems. That survey also found state and local officials are concerned about the future of federal funding.
“What we all agreed is we don't want to hunker down,” Frumkin said. “That's not the process that we all need to go through. That's the wrong direction we need to go in. What we need to do is be very communicative. Talk about, collaborate up the chain to the electeds at the local level, and communicate with the state level as well. We need to be talking about, what can we get done? Let's communicate very clearly with the budgets we have. What should be prioritized, and what are the things that are going to have to wait. We're not going to hunker down, but we need to keep moving forward.”
Beyond budgets, there are plenty of other issues to worry state and local tech leaders. One is the now-abandoned federal moratorium on the enforcement of state and local artificial intelligence regulations, which Robinson warned could return either as a standalone bill or as part of a larger package. It comes as at least 25 states have now enacted laws related to AI, according to the National Conference of State Legislatures.
“This would have had a significant impact on the work the states have already done and the work they would do in the future, to block this for 10 years,” Robinson said.
And the clock is ticking on compliance with the Department of Justice’s final rule on ensuring website accessibility, with previous research suggesting that much work lies ahead. Governments with populations of 50,000 or more people must comply by June 2026, while those with less than 50,000 people have an extra year.
Robinson shared preliminary data from NASCIO’s 2025 State CIO Survey that showed that more than half of those surveyed are implementing their compliance plan, while just over a third are still developing their compliance plan. Robinson said it is a “fairly heavy lift,” both from a technical and financial standpoint.