State CIOs rethink IT investment as AI, modernization reshape governance, report finds

State chief information officers are increasingly being asked to manage technology as an enterprise business investment, forcing them to balance agency priorities, budget constraints and emerging technologies rather than simply oversee state IT operations, according to a new report from the National Association of Chief Information Officers and Forrester Research. 

The report, released Wednesday, builds on NASCIO’s 2026 survey of 51 state and territory CIOs and interviews with 19 CIOs representing different funding and governance models. Researchers found that modernization success did not necessarily depend on whether a state’s IT organization was centralized, decentralized or somewhere in between. 

Instead, the report found that successful state CIOs were those who build relationships with agencies, connect technology spending to mission outcomes and establish governance structures for competing priorities. 

“State CIOs are expected to modernize technology, strengthen cybersecurity and prepare for emerging technologies while operating within structures designed for stability and accountability,” Eric Sweden, director of enterprise strategy, architecture and governance at NASCIO, said in a statement about the report  Wednesday. “This research demonstrates that success often comes not from finding the perfect funding model, but from balancing competing priorities and creating sustainable pathways for change.”

NASCIO has increasingly emphasized the expanding role of CIOs in state government in recent months. A separate 2026 report published in April described CIOs as “change leaders” responsible for both running existing technology operations and driving “continuous modernization” to prepare for future workforce, policy and service needs. The organization also updated its strategic plan this year highlighting CIOs as strategic business leaders who drive government innovation and transformation. 

This new report also found that 61% of state CIOs said IT spending decisions are largely aligned with statewide priorities, outcomes and mandates. Fifty-three percent reported using an enterprise governance review board or similar body, while another 53% have formal IT investment governance policies. 

“Running an IT organization at the state level is fundamentally a business operation,” Delaware CIO Robert Osmund said in the report.

Managing competing pressures

State CIOs face several competing pressures. 

The report identifies a “First Mover Penalty,” in which an agency that adopts a technology first may bear costs that ultimately benefit the broader state IT enterprise. Another, referred to as a “Planning Trap,” can occur when long-term state budget cycles make it difficult to respond quickly to emerging technologies like artificial intelligence. Temporary federal or state funding can also create a “Funding Cliff” when money expires before states have determined how to sustain new capabilities. 

“A lot of the traditional ways to manage procurements and budgets in this current technology age are very challenging,” Stephanie Hedgepeth, chief strategy officer for the State of Mississippi, noted in the report.  

Those challenges are particularly relevant as AI tools become a bigger part of state IT planning.

NASCIO’s 2026 priorities put artificial intelligence at the top of its annual list for the first time, ahead of cybersecurity. 

The report found that state CIOs are moving toward more deliberate AI governance, workforce preparation and infrastructure planning rather than treating AI as a standalone technology initiative. To achieve this, researchers are urging CIOs to link major technology proposals to specific mission outcomes by creating dedicated innovation funding and embedding agency relationship managers within state IT organizations.

The approach reflects a broader shift in state IT governance, in which CIOs are being asked not only to explain what technology costs, but to demonstrate how investments in these tools can strengthen agency operations and improve service delivery for residents.  

“We’re here for our citizens and making sure we’re focused on the outcomes that bring them better services more efficiently,” Shawnzia Thomas, CIO for the State of Georgia, said in the report.