Driven by initiatives such as the AI Action Plan, Department of Energy Genesis Mission and the National Security Strategy, there has been exponential adoption and investment for AI in the last year. As AI expansion is expected to move from experimentation to enterprise deployments, demand for the infrastructure that powers AI is anticipated to continue rapidly accelerating. 

Over the last few years, AI has been the hot topic of conversation in SLED IT. We’ve seen AI move from theoretical to actual implementation. SLED agencies are now deploying AI across a wide range of use cases including citizen services, workforce productivity, document processing, case management, fraud detection, and analytics and decision support, among others.

This year, the DOW has made official its priority to advance its AI dominance across all branch services by “becoming an AI-First warfighting force.” AI technologies such as machine learning, natural language processing, and computer AI-vision are being integrated into military operations to improve decision-making, enhance efficiency, and increase autonomous capabilities. Most revealing, however, are the DoW’s budget requests for AI investment, setting the trend for implementation.

As we approach Sled Fiscal Year End (SFYE), SLED agencies are balancing budgets in a constrained environment, addressing rising constituent expectations, tackling growing cybersecurity challenges and supporting accelerated AI adoption.

For industry, this confluence of factors creates both complexity and opportunity. In today’s environment, success in SLED comes down to connecting IT investments to clear and measurable ROI in operational efficiency, modernization, resilience and cost savings.

In June 2025, Texas signed the Responsible Artificial Intelligence Governance Act into law, outlining statutory requirements for the state’s use of AI. In response to this, the Texas Department of Transportation (TxDOT) released an updated Artificial Intelligence Strategic Plan in January 2026.

In 2023, California Governor Gavin Newsom signed Executive Order N-12-23, directing state government institutions to utilize AI. These state entities are now beginning to move from the theoretical planning phase into the deployment phase with concrete plans.

This year’s Beyond the Beltway conference highlighted key strategic findings from IT leaders that signal where 2026 technology investments will be made and where to focus efforts for success. In 2026, state and local governments are at an inflection point: with rising expectations evolving alongside tightening budgets, staffing and timelines, success will depend on alignment of solutions to modernization requirements, workforce challenges and measurable ROI-driven outcomes.

Over the last year, the Army has been undergoing significant transformation under the Army Transformation Initiative and the larger Pentagon reorganization efforts. This includes the more recent decision to change from Program Executive Offices (PEO) to Portfolio Acquisition Executives (PAEs) to have tighter alignment across missions, the Chief Information Office (CIO), contracting and functional owners. This reorganization will help reduce siloed IT modernization, speed up decision-making and better align acquisition with operational outcomes.

The 2026 FETC Conference took place in Orlando, Florida this year, where K-12 education leaders highlighted how budgets, technology trends, requirements and opportunities are intersecting and how alignment is key to success.

This week, the National Association of State Chief Information Officers (NASCIO) released it annual State CIO Top Ten Policy and Technology Priorities list for 2026, signaling where state technology leaders are focusing their efforts, and limited resources, in the new year. This year’s list is reflective of the current policy, priority, and funding shifts that have affected SLED agencies most, coupled with the apparent drive towards innovation and modernization.