Tech Trends Shaping State and Local Government in 2025

In a recent episode of the Tyler Tech Podcast, I sat down with Dustin Haisler, president of e.Republic, to discuss how state and local governments are navigating the accelerating pace of change in technology, policy, and resident expectations. Drawing on insights from the Center for Digital Government’s Beyond the Beltway conference, Dustin shared a forward-looking view of artificial intelligence (AI), governance, spending priorities, and the cultural mindset agencies need to thrive.

Here’s a summary of the most critical government technology trends shaping the second half of 2025 and what agency leaders across the U.S. should be watching closely.

Two Winds of Change Have Converged

Dustin noted that two powerful forces are reshaping the public sector. First, the federal administration is shifting more responsibilities to state and local governments. In response, government technology leaders must innovate in new and novel ways — not only to drive greater savings and efficiencies, but also to make more informed decisions (while democratizing access to the knowledge that underpins those choices).

Second, AI has moved from being a buzzword to having a real-world impact. It is changing how residents and agency staff work and interact, including how residents interface with the government. AI’s emergence is fueling an exponential acceleration of technology.

As Dustin described it, this is a “perfect storm of change.”

Get Insights on Tech Trends in State and Local Government

Explore how technology, strategy, and innovation are reshaping state and local government operations in this episode of the Tyler Tech Podcast. Bob Ragsdale, director of analyst relations at Tyler, interviews Dustin Haisler, president of e.Republic.

AI: The Future Is Now

Gone are the days when an AI task force had plenty of time to study and consider its potential impact. AI is now available to everyone, including government agencies.

Dustin emphasized that much of this adoption is happening quietly as AI becomes embedded in applications, many of which are in use by government today. The result is significant AI adoption is happening, whether agencies or staff know it’s in their systems or not. There is also widespread shadow AI adoption as staff look to publicly available tools that help with everything from email drafting to basic data processing.

The key question is how to move to effective, intentional enterprise-wide adoption without disrupting operations or public trust.

Governance Is Still the Foundation

The fragmented appearance of AI in government systems today underscores the essential role of governance. A strong governance framework provides the foundation for everything that follows.

When AI tools operate in silos, it becomes difficult to manage records, ensure model explainability, and enforce policies. Governance must address these challenges by promoting integration and standardization across systems.

Equally important is the connection between AI and data. Too often, data is scattered across disconnected systems. Good governance ensures that data is structured and accessible to support meaningful, organization-wide insights. Dustin pointed out that agencies may have significant technical and innovation debt to contend with as they adopt AI. State agencies that are more highly regulated, such as those overseeing health and human services, may have to move more slowly as they develop governance and, eventually, enterprise rollouts of new technology.

Cities, however, are often nimbler, especially if they have minimal technical debt. They also tend to have departments already exploring AI use cases outside traditional administrative tasks.

Spending and Continuous Improvement Fuel Innovation

According to the Center for Digital Government, more than half of states will increase technology spending this year despite relatively flat budgets and concerns about recessionary indicators. Economic uncertainty often leads to agencies leaning into technology because of the gains in efficiency it delivers.

Forecasts predict an increased technology spend of more than $150 billion, split almost evenly between state and local governments. According to Dustin, this is shaping up to be “a rocket of a year for technology and innovation in government.” However, successful innovation takes more than budget. Dustin stressed that agencies must embed continuous improvement into their culture. That means listening to residents and staff, empowering people to explore better ways of working, and making experimentation part of daily operations.

An Unmatched Opportunity

Government technology agencies have a tremendous opportunity to innovate as they grapple with the ever-increasing pace of change. They can rethink how agencies engage with residents by maintaining a solid governance foundation, fostering a culture of continuous improvement, and embracing the possibilities that AI and other technologies offer.

“What an amazing time to be a public servant,” Dustin said. “You can completely reimagine what it means to deliver services.”

At Tyler, we’re committed to partnering with agencies to build the foundations, culture, and strategy needed to seize this moment.

About the Author

Bob Ragsdale is director of analyst relations at Tyler Technologies. He connects industry analysts with Tyler’s vision, helping them understand how technology supports better outcomes for government agencies and the communities they serve.