As Budgets Tighten, States Double Down on Efficiency and Tech Innovation
State fiscal debates to watch in 2026
This is one in a series of five articles examining key debates that will unfold in the nation’s statehouses in the year ahead.
Throughout the country, states are racing to improve efficiency and modernize government—streamlining services, digitizing operations, and rethinking how employees do their work. These efforts are accelerating as tightening budgets collide with rapid advances in technology, including generative artificial intelligence (AI), that make efficiency goals that once were out of reach now seem attainable.
The shape of this work varies widely. States such as Florida, Iowa, New Hampshire, North Carolina, Oklahoma, and Texas have emphasized controlling costs and improving accountability—sometimes echoing themes raised by the federal Department of Government Efficiency—by targeting waste, fraud, and abuse or cutting red tape, for example. Others, including California, Colorado, New Jersey, Pennsylvania, Utah, and Washington, have centered their efforts around digital service delivery and improving residents’ experiences accessing services as part of a broader push to rebuild public trust in government, which has fallen to near-record lows.
But although the focus differs from state to state, the common thread is a deliberate push to retool key systems and processes, improving service delivery while trimming costs.
“When city and state officials fulfill people’s expectations, they create small increments of trust which aggregate to more total trust in the way government operates,” said Stephen Goldsmith, professor of urban policy at Harvard’s Bloomberg Center for Cities. “Government needs to prove that it can do its basic and core work better, faster, and more responsively.”
Blending people, processes, and technology
Improving efficiency often hinges on behavior change and the successful integration of analog and digital reforms.
For instance, Maryland’s modernization initiative focuses on improving statewide coordination and leveraging the state’s purchasing power to bring down costs on everything from vehicle fleets to technology assets and office supplies. The state expects just one seemingly simple change—making employees across agencies aware of and providing easier access to an underutilized, low-cost statewide shipping contract—to save $800,000 a year.
“It’s behavior change, but it starts with conversations in the field, understanding the blockers, working through them and then creating new protocols and policies,” said Asma Mirza, Maryland’s chief performance officer.
Colorado, meanwhile, has been tackling efficiency under the banner of the Governor’s Operational Agenda, which is organized around simplifying interactions through digital government, reducing the state’s leased and owned space, and improving contact center operations. By testing different strategies, tracking the results, and refining the approach over time, the state is producing measurable results.
For example, in January 2025, residents faced average call wait times of nearly 37 minutes for help with unemployment insurance, but by October, a mix of strategies had brought waits down to about 15 minutes. One big piece was understanding customer needs: More than half of the roughly 30,000 monthly callers just wanted to know the status of their claims, so the state introduced an AI-powered virtual agent to provide that information. Adding 18 bilingual agents and online features to help people find what they needed without calling also helped to reduce wait times.
“Good government is what Coloradans expect from their leaders and in Colorado we continue working to maximize efficiency and better provide services to Coloradans across the state,” Governor Jared Polis (D) said via email. “This includes reducing our office space footprint, breaking down barriers, and using innovative technology to help Coloradans access permits and licenses more easily, creating publicly accessible dashboards to ensure accountability for our bold goals, and much more.”
The state’s effort has gained momentum through the Colorado Digital Service (CDS), a collaboration between the governor’s office and the state chief information officer. Staffed by a team of product managers, designers, engineers, and procurement and contracting specialists, CDS works with agency staff to solve high-priority problems and facilitate continual cross-agency learning. Bringing these technical experts in house is enabling Colorado to shift from one-off projects to ongoing collaboration and to reduce its dependence on external vendors, said Emily Miller, deputy director of operations in the governor’s office. “We’ve been very intentional about bringing in these product leaders that really can own the destiny of all of our technology products,” she said.
More than a dozen states now have digital service teams in place, according to the Beeck Center for Social Impact + Innovation at Georgetown University, and national investments, such as the $120 million Recoding America Fund, are likely to further expand state capacity to upgrade technology and digital services. Arizona, Maryland, and Pennsylvania launched teams in the past three years, and the model is spreading quickly.
“Just having a small number of skilled in-house technologists who have the support of political executives would do a lot to modernize tech services in government,” said Don Moynihan, a professor at the University of Michigan’s Gerald R. Ford School of Public Policy.
Generative AI’s expanding role
Technology—and especially generative AI—has become a recurring feature of these modernization efforts.
In the earliest days of generative AI in state government, states often started by deploying general-purpose tools across agencies and encouraging broad experimentation. As agencies have grown more familiar with AI technology, it has increasingly emerged as part of the normal work of fixing day-to-day problems in government operations, from managing workloads to analyzing data, rather than as standalone initiatives.
In some cases, AI functions touch resident-facing services; in others, they focus squarely on internal efficiency. Many AI efforts tied specifically to resident services are still in the early stages, often limited to pilots or internal use, according to a report from the National Association of State Chief Information Officers and Accenture. Only 6% of state chief information officers reported mature, scaled AI capabilities, though nearly all expect some level of deployment within a year. Beyond service delivery, states are using AI in less visible ways—for example, to analyze data and flag potential waste or fraud in Florida and Oklahoma or to support broader efforts to redesign how agencies do their work.
State leaders emphasize that AI tools are meant to assist rather than replace state workers, even as the scale of their AI ambitions expands. An October report from Iowa, for example, estimated that tasks suitable for AI automation could free up 6.3 million hours for the state’s approximately 19,000 employees “to focus on higher-value tasks.”
But experts advise moving slowly and carefully with AI. “The thoughtful folks are piloting first—taking time to figure this out,” said Amanda Renteria, CEO of Code for America. “What I worry about are the states that feel squeezed and grab the first tool they see. Then they’re stuck digging out of a hole later.”
Modernizing state government from the inside out
Tightening budgets and shifts in the state-federal fiscal relationship have pushed many states to give employees more tools and flexibility to work efficiently.
For instance, Utah’s Government Reform, Innovation & Transparency (GRIT) initiative, which Governor Spencer J. Cox (R) launched in May via executive order, combines ongoing and new reform efforts under one umbrella. Reforms underway include widespread AI deployment and aggressive soliciting of resident feedback, via QR codes and website widgets, about the “effort, reliability, satisfaction, and compassion” they experience when interacting with state services—data the state uses to continually improve.
Under the GRIT initiative, Utah’s agencies are required to identify and pursue efficiency projects and to regularly report on cost, time, and service improvements metrics. Additionally, some projects undergo efficiency evaluations, jointly conducted by the governor’s budget office and the Office of the Legislative Fiscal Analyst. Agencies that implement recommendations from these evaluations can, in some cases, redirect a portion of the money saved toward retaining and rewarding key staff.
Utah’s population has grown by 45% since 2004, while the state workforce has increased by only about 7%, so GRIT focuses on empowering employees to solve problems, not reducing their numbers. Recognizing the need to do more with only a modestly larger staff, Utah has doubled down on rewarding strong performance and using feedback to guide improvement efforts, recruitment, and retention.
“We value the workforce and believe that if you move the needle as a team, you’re going to be much more effective,” said Sophia DiCaro, executive director of the Governor’s Office of Planning and Budget and a senior adviser to Cox. “They’re the ones doing the work on the front lines. They know what the issues are and have good ideas about ways we can do things better. We want to lean in on that.”
The governor’s office estimates that the GRIT initiative has already saved more than 12,000 hours of staff time and $7.7 million while making $9.8 million worth of service enhancements without adding costs.
Other states are also using data from residents to refine services. New Jersey’s Office of Innovation uses AI to quickly distill thousands of comments submitted through a feedback widget embedded in state websites so that staff can identify and quickly respond to usability issues. California is soliciting input from state employees about how to operate more efficiently and effectively via Engaged California, an interactive digital democracy platform modeled after an effort in Taiwan.
Through a September 2025 executive order, Washington rebranded Results Washington, its well-respected performance management office, as Your Washington to underscore a focus on “bridging people and government to deliver timely, fair, and tailored services that exceed customer expectations.”
“The executive order is the world’s largest permission slip, which gives us all kinds of tools to be able to measure customer experience at every level and bust silos,” said Jesse Jones, executive director of Your Washington.
Breaking bottlenecks
The same focus on integration and continual improvement is also driving states to rework core administrative processes, particularly those that have historically had backlogs and delays.
During periods of fiscal and administrative strain, routine activities can take longer and backlogs can pile up. “If you’re one of the sheets in that pile, it means everything to you,” said Code for America’s Renteria. States are taking action to address bottlenecks across program areas and reduce administrative burdens more generally for residents and state employees.
Through the use of AI tools, Arizona’s Department of Child Safety has saved caseworkers—who juggle intensive administrative requirements alongside emotionally taxing work helping families—an estimated 17 minutes per reporting activity, equaling 2,800 staff hours a year, according to the department’s chief information officer, Frank Sweeney. The department also uses AI to help employees navigate complex policies, organize their work, and securely manage sensitive information through automated redaction.
“We want to take as much off of them as we possibly can so that they can focus on having those real, meaningful interactions with children and families,” Sweeney said.
In October, the Pennsylvania Department of Environmental Protection (DEP) cleared its backlog of permit applications for the first time in 15 years, a feat that required not only keeping pace with 30,000 new applications so far this year but also processing more than 2,400 older applications.
Simple changes to the permitting process can have a big impact on businesses. “Before, a clean application had a dedicated deadline, but if a permit had any errors, it was sent to the back of the line,” said David Wade, chief of staff for Pennsylvania’s Office of Transformation and Opportunity. Now, anyone seeking a permit benefits from a transparent tracking system with a money-back guarantee for licenses, permits, and certifications that take longer than the advertised timelines.
The guarantee has also helped to reinforce a broader culture shift across agencies, especially around meeting timelines and reducing bottlenecks, with hiring as a major focus. The commonwealth has streamlined requirements, sped up hiring by 40%, reduced its vacancy rate from 14% to 5%, and filled 225 positions at DEP alone since 2023—a key step toward eliminating bottlenecks. The recently enacted state budget adds funding for new positions, and the governor’s office is pushing for legislation to make further changes to the state’s civil service system, such as eliminating the requirement that all job postings stay open for at least 14 days.
Nationally, interest has been growing in modernizing the complex policies and processes that govern state workforces, and the new Recoding America Fund includes a focus on ensuring that governments at all levels have “the right people, doing the right work.” North Carolina made changes aimed at increasing flexibility in its human resources system in 2025 and will debate additional changes this year. And California simplified hiring processes, including collapsing job classifications, making transfers easier, and reducing the number of exams that many applicants need to take.
The impulse to look under the hood of state government and fix what’s broken is not new. But what is new this time are the tools, structures, and sense of urgency shaped by fiscal and administrative pressures as well as by shifting public expectations.
Melissa Maynard oversees The Pew Charitable Trusts’ Fiscal 50 project.
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