How state CIOs are impacting the data center conversation

States are embroiled in a data center debate, navigating the push and pull between residents skeptical of the facilities and developers eager to expand. For many states, the state chief information officer plays an important role in meeting government, resident and developer needs as data centers proliferate across the U.S, speakers said during a breakout session at the National Association of State Chief Information Officers’ annual conference in San Diego last week. 

Data centers “have been an area of priority for decades,” according to the NASCIO annual survey released last week. But the proliferation of AI in the public sector has catapulted the centers into mainstream conversations about state government innovation.

But as state governments increasingly look to artificial intelligence to modernize their infrastructure, operations and services, and because data centers play a critical role in providing the processing power needed to leverage AI, “we need to find a way to make this work with our communities,” Timothy Galluzi, state chief information officer for Nevada, said during the panel. 

The centers have sparked controversy in communities across the U.S., as residents fear their impact on local environments, water supplies and electricity usage. In fact, just 26% of Americans said they would support a new data center built in their community, according to a recent survey. 

As the data center industry grapples with such concerns, a separate report earlier this year found that data centers helped create more than 600,000 jobs and contributed $3.5 trillion to the U.S. gross domestic product.

Balancing resident and developer demands

For Tennessee officials, “we always try to look at everything in a bifocal manner, where we’re looking internal to …  optimize state government delivery of services and the constituents we serve,” said Kristin Darby, the state’s chief information officer, adding that, “the other part is … how do we position Tennessee to be attractive for organizations to operate and invest in Tennessee.” 

As an example, she pointed to the Tennessee Artificial Intelligence Advisory Council, which is “heavily focused on how we demystify what data centers are, what’s required to serve them in our communities and create frameworks that that allow local communities to be able to mediate between data center developers and the community in ways that position those investments to be successful for all of those involved.” 

Data centers present certain benefits to communities, like workforce expansion and development opportunities, Darby said. The facilities will require construction and ongoing maintenance, creating the chance “to regenerate the economy” and make “investments in workforce transformations” as companies relocate to new areas, she explained.

For developers looking to build or expand in communities, however, “you need to address water and … power consumption, and what that tends to do to ratepayers,” Galluzi added. 

Nevada’s electricity and gas provider, NV Energy, which is overseen by the Nevada Public Utilities Commission, has signaled that large customers, such as data centers, could be subject to minimum charges for the power they use. Such charges are aimed at reducing the cost burden that could otherwise shift to residents’ utility bills. 

A ‘nimble’ and hybrid approach to data center infrastructure

On data center infrastructure, a hybrid strategy is one approach gaining traction among state tech leaders, Darby said. The NASCIO report, for instance, showed that 55% of respondents are considering a “combination of state-owned and cloud/third-party” infrastructure as their data center strategy. 

State CIOs are trying to determine ideal locations for their computing workloads, particularly as the cost of operations and the infrastructure components necessary to support data centers have become “much more critical” considerations, Darby said. “A hybrid strategy allows you to have multiple levers to be able to balance that,” she explained. 

Indeed, Nevada is “leaning heavily into the hybrid cloud infrastructure,” Galluzi said. The state, for instance, leverages cloud technology “when cloud makes sense,” but, with AI’s larger presence in state government operations, Nevada is putting more emphasis on on-premise solutions as leaders consider increasing subscription costs for cloud services, he explained. 

State CIOs and other tech leaders should also take a “nimble” approach to infrastructure development, Darby said. Having cloud and on-premise environments for various types of AI and other computing activities can help officials determine cost predictability of different models in the future, she explained. 

AI’s role in data center conversations

Data centers have long been a part of communities’ infrastructure, but now “I think AI is sort of funding resistance to data centers … I think data centers get pulled into the rift by no fault of their own,” Dean Scontras, vice president of SLED at platform provider Island, told Route Fifty in an interview in between conference sessions. “I think political leadership needs to get out in front and say, ‘Hey, it’s truly transformative for government,” he explained. 

Data centers can, for instance, help power more efficient AI-enabled government services, like faster permitting systems or quicker call center services, Galluzi explained during the breakout session. 

“I think state government has a really interesting role that we can play in this conversation because it’s easier to accept new technology when there is a perceived direct benefit to everyone,” Galluzi said.