The Future of State and Local Government: 5 Essential Focus Areas

No one knows for sure what the future holds. But some people have a pretty good idea. We asked experts, government leaders, and big-picture thinkers what trends and issues will shape state and local governments over the next few years—and what you can do today to prepare.

There’s a scene in the 1980s comedy “Beetlejuice” with an “afterlife waiting room” that functions as a sort of bureaucratic DMV, with case workers, century-long waits, and nightmarish paperwork. The joke was that we’ll never escape the painstakingly slow processes of government—even in the afterlife.

But state and local governments have become more nimble—especially in recent years. The COVID-19 pandemic spurred many governments to quickly change, match the urgency of the moment, and align their disparate efforts for the common good. They raced to provide essential services and information in new ways, often building vital resources that kept communities healthy, safe, working, and connected. 

Still, the crisis also revealed a critical challenge for many governments: The technology and operations that underpin their work can hinder the need for a fast, coordinated response to an unprecedented crisis. And while public sector leaders have addressed some of those tech issues, there are signs that the momentum for positive change has slowed.

“The main risk of deferring digital transformation is it requires governments to spend their resources on overhead activities rather than on citizen services,” says Rowan Miranda, senior managing partner for government strategy at Workday. 

Reinventing government is no easy task, especially in a world where accelerated change seems to be the only constant and global trends pose thorny challenges.

To get a sense of what that future might mean for state and local governments, we asked industry thought leaders, including public officials and tech experts, for their predictions on the trends that will have the greatest impact on the public sector. What follows are fresh perspectives on where organizations should focus, from the people who live and breathe government every day.

1. Creating a Connected Data Landscape

We are creating more data than ever before. By 2025 global data creation is expected to grow more than 180 zettabytes—twice what was created in 2022. For government agencies, their legacy systems and data silos are already limiting the insights they can use to better serve their citizens. They’re struggling to harness data’s potential as a result.

Workday’s digital acceleration survey found that 59% of government leaders say their inability to connect operational, people, and financial data to business outcomes harms the organization’s agility. The survey also discovered that 80% of government leaders believe the ability to integrate data between disparate systems is the most important factor in improving their ability to make real-time decisions. 

What’s needed is a connected data landscape. By 2024, at least 60% of government artificial intelligence and data and analytics investments will directly impact real-time operational decisions, according to Gartner. Data is and will be the core of strong decision-making and organizational resilience, and governments can be working toward that vision now. 

“Governments at all levels have sought to improve performance measurement of agency activities, outputs, and outcomes,” says Miranda. And here’s the good news: “We are finally at a point where combining finance, human resources, and operational data is within reach.” 

Yet, the survey found that only 2% of government leaders say their organization’s data is fully accessible, while 61% say it’s either somewhat or completely siloed. 

Emailing spreadsheets will no longer cut it. To scale with a data-driven future, organizations will need to embrace technology that integrates disparate systems and organizational roadblocks—giving them a single source of truth within these oceans of data. 

59% of government leaders say their inability to connect operational, people, and financial data to business outcomes harms the organization’s agility, according to Workday’s digital acceleration survey.

Artificial intelligence (AI) and machine learning (ML) will deliver new kinds of insights, predicts Pete Schlampp, Workday chief marketing and strategy officer. Specifically, they’ll help organizations find answers to critical questions in an ever-growing volume of data, which some are finding is like searching for a needle in a haystack. “That’s where we have to rely on machines to help us find the trends that we need to look at,” he says.

Making those insights accessible to users across an organization is what will provide a better citizen experience, make government more efficient, and really help drive change no matter what the future holds. 

Greater data accessibility has been a big win for Oklahoma’s Tulsa County. “Most of our issues were around reporting,” says Michael Willis, county clerk of Tulsa County, at Workday Rising. “Having all the data accessible at our fingertips at any given time has made a major difference.”

2. Building a Future-Ready Workforce

Many government agencies are already seeing an exodus of retirees, the so-called “silver tsunami.” The pandemic accelerated that trend and it will continue for the foreseeable future, as 52% of public sector workers say they are considering leaving their jobs and 33% are considering retiring. 

“Then there’s the difficulty retaining government staff who are accustomed to modern technology tools in their everyday lives and will seek out alternative employers that use them, given the competitive nature of the labor market today,” says Miranda.

A worker shortage in state and local government, which employs approximately 13% of the U.S. labor force, can profoundly impact the communities and missions they serve, such as operating buses and trains, teaching and caring for children, public safety, and delivering essential services such as health care, and housing. 

Government leaders understand the urgency of this issue—41% list faster acquisition and deployment of new skills and teams as a top opportunity for digital growth in the next 12 to 18 months. That’s because employees, particularly in the public sector, indicate that they deeply value nonmonetary benefits, which include career growth and upskilling.

But the opportunities for employees to develop skills—whether that’s career growth or upskilling—depends on how companies manage the skills of their employees. 

“One of the biggest reasons employees leave a company is a lack of career and capability growth,” says David Somers, Workday group general manager, office of the CHRO. “That’s why we’re seeing a massive shift in how organizations approach talent with a growing focus on skills. A skills-based people strategy is becoming critical to understanding how your organization can deliver its business strategy and help guide career growth and talent development.”

And to help prepare for the jobs of tomorrow, organizations should adopt a skills-based mindset driven by the power of AI and ML. 

“Fundamental to delivering on this shift to a skills-based approach are technologies, such as AI and ML, which can understand key attributes to help drive automation and provide insights and predictions that help to identify and align skills with jobs, quickly turning employee data into a strategic advantage, while helping businesses adapt to change,” says Workday co-founder, co-CEO, and chair Aneel Bhusri in a recent article.

41% of government leaders listed faster acquisition and deployment of new skills and teams as a top opportunity for digital growth in the next 12 to 18 months, reports a Workday global study.

Many governments are tackling recruitment and retainment challenges by offering remote and flexible work schedules, as well as enhancing employee experience and wellbeing and building a culture of belonging. 

Employees who feel they belong display a 56% spike in job performance and a 75% reduction in sick days. As such, public sector agencies interested in transformation should seek a better understanding of the employee experience across their organizations. Particularly because the majority of state and local government workers are women, and nearly half of all Black women (48%) and more than one-fifth (21%) of Black men in the workforce are employed in education, health services, or public administration.

“Our research shows the importance of creating a culture that supports human potential,” says Ryan Gaetz, global education and government lead, Accenture managing director. “Public sector employers need to build trust, enhance the work experience, and help people thrive to successfully navigate change and become more flexible, future-ready organizations.”

Having full visibility into workforce data will help ensure that organizational goals are being met and employees have what they need to thrive.

“Most importantly, it’s all about the people,” says Phil Bertolini, co-director of the Center for Digital Government and a former CIO for Oakland County, Michigan. “People need to embrace using the technology, and they need to be trained appropriately. Only when this happens will you get the results that help move your government forward.”

3. Prioritizing Digital Transformation 

Workday’s global survey found that 55% of government leaders say the pace of digital transformation has slowed from where it was a year ago, or they expect it to slow down in the future. 

One explanation? Miranda says, “Governments are taking the seemingly easier route of investing lesser amounts by upgrading and patching legacy systems just to get by for now.” 

But taking this “easier route” may come back to bite agencies later on. Focusing on keeping the lights on with maintenance and upkeep means not enough time is left for strategic projects or improving ways to serve communities. 

IDC predicts that because of ongoing staff shortages, 60% of regional and local governments will realign budgets and job categories by 2024 to increase investments in cloud and managed services. 

“Software as a service is the direction cities and governments are going,” says Nole Walkingshaw, chief innovation officer at Salt Lake City. “What you’re seeing here in Salt Lake City is not going to be unique in a few years.” 

Karen Niparko, Accenture executive advisor and former CHRO, City and County of Denver, agrees that the way forward for governments is embracing modern tech and processes. “Governments must innovate and adapt to new ways of thinking and approach their work to provide the best and most valuable service to their communities,” says Niparko. “Maintaining the status quo without innovation will not cut it in this new economy.”

4. Tracking and Reporting the Influx of Federal Funds

In the years ahead, as the federal government’s $1 trillion infrastructure legislation sends funds flowing into state and local budgets, government agencies can address long-needed upgrades and repairs, such as to facilities, roadways, broadband expansion, and community spaces. 

The challenge is these funds usually come with stringent spending requirements that must be tracked, and smaller government agencies will face new reporting obligations and accountability standards.

We are finally at a point where combining finance, human resources, and operational data is within reach.”

Rowan Miranda Senior Managing Partner, Government Strategy Workday

As the recipients seek to allocate this funding, track results, and improve their ability to respond to future crises, the need for improved automation, efficiency, and data will only increase.

“Everyone is going to be interested in how governments use the money they receive from that plan, and so it will be even more necessary that they have a solid backbone of technology infrastructure that allows them to track people and results, and turn on a dime when necessary,” says Will Greer, vice president of government practice, Workday.

Another challenge with capital projects of this size and complexity is managing contractor performance, compliance, and the diversity of the external workforce. And collecting quality data on contract workers is difficult. According to Accenture, only 38% of public infrastructure leaders indicate that they collected good-quality data on contractor performance and compliance while digitally executing their most recent infrastructure projects. 

“Looking to the future: We’ll see a lot more collaboration across levels of government,” says Shelby Kerns, executive director, National Association of State Budget Officers, at Workday Rising. “A lot of that has to do with all the money flowing through. We can’t help but collaborate. But it also comes with some friction. You’ll see a lot more of that friction as audits come out as we have battles over restrictions.”

5. Embracing AI/ML and Other Emerging Technologies to Further Augment the Government Workforce

Many government leaders believe AI/ML and automation will play a significant role in the public sector over the next 3 to 5 years. 

“Eighty-six percent of public sector leaders are indicating that not only is AI important to the accomplishment in their services and their strategic mission, but it’s already a core component to their current daily operations,” says Accenture’s Ryan Gaetz at Workday Rising. “We see a vast uptick in interest in RPA [robotic process automation] and automation services, not in the focus of displacement of the workforce but rather the augmentation of the workforce.” 

Yet, according to Workday’s digital acceleration report, only 1 in 5 government leaders say they’ve made progress deploying technologies to streamline or automate workflows and augment the capacity of the existing workforce, compared to 1 in 3 of all leaders across industries. 

This shows there’s still a gap between the technology that public sector leaders believe will benefit their organization and the infrastructure needed to deploy that technology. Cloud-based technology infrastructure can adapt along with an organization’s needs and stay current on the latest innovations. 

But along with this opportunity, there needs to be ethical, societal, and people-driven considerations. 

“AI has the potential to empower people to work smarter and more efficiently, and even change the nature of work itself,” says Kelly Trindel, head of machine learning trust at Workday. “We care about the impact of our AI solutions and work to maximize their potential to do good.“

To learn more about how Workday helps governments drive digital transformation, visit our website.

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