Local governments are starting to lean on artificial intelligence to increase efficiency, however, they've been slower to adopt the technology than states, according to a panel at the Brookings Municipal Finance Conference.
States are embracing AI implementation, but not necessarily city governments, Northeastern University professor Neil Kleiman said. "States are all in on this, and cities are almost nowhere."
More than 20 states have created job categories for AI officers; engaged with the National Governors Association (NGA), which supports states capitalizing on AI technology; and, in some cases, trained workforces devoted to AI, he said.
"Historically, governments have been rewarded primarily for prudence. Increasingly, I think they'll also be rewarded for intelligent innovation," BKC Group co-founder Megan Kilgore said. "Communities that leverage technology to improve productivity while maintaining strong governance could strengthen their long-term credit profiles. Those that simply layer new technology onto old processes may spend more without accomplishing much."
Local governments will see a rise in AI usage at both the state and city level, however, "states are at an advantage because they control the funding, " Nomura head of U.S. fixed income Gregory Gizzi said in a separate interview.
Cities are investing time and capital developing initiatives that embrace AI usage; however, strong caution has led to slower adoption and integration.
New York City incorporates firm sanctions against the tool.
Last November it enacted the Guard Act, which requires the city to create an independent Office of Algorithmic Accountability and establish standards for fairness and transparency in agency AI usage. Mayor Zohran Mamdani cut funding for the city's chatbot, MyCity Chatbot, after finding out it gave unreliable and legally questionable information.
San Jose hosts one of the leading AI regulatory groups: the GovAI Coalition — a nationwide network of local, state, and federal government agencies dedicated to promoting responsible AI use, standardizing vendor procurement and sharing best practices.
Regardless of hesitancy, panelists agreed AI's adoption answers a lot of problems for states and cities.
"[Local] governments are being squeezed at all levels. We're seeing that in real ways, especially around staff and Medicaid," Code for America CEO Amanda Renteria said. "But it's also happening at a time where it's unclear what federal guidelines are, and implementation needs to happen in a faster timeline than we've ever seen before, and so AI feels like it is the answer for a lot of states and counties."
City governments' circumspect approach to AI could be attributed to varying public perception.
"People are worried ... there's very few things that are bipartisan these days. This is one of them," Renteria said.
Citizens' main concerns are how AI will impact their livelihood, environment and privacy, the panelists explained, and local government must address that.
Local governments shouldn't just try and convince people to embrace AI; they need to make sure AI addresses societal issues, Renteria said.
"We just need to be more proactive and get out and engage communities," Northeastern's Kleiman said. "This doesn't mean maybe as a mayor coming out and saying here's the AI agenda, which will freak everyone out, but it means starting to again shift the position of local government so that communities have these tools as well."
In the coming years, AI will dramatically change how everyday people can interact with governments and eventually assuage some fear surrounding it, panelists said.
Kleinman said, AI will "level the playing field" for those who want to better engage with their local governments. The tool will distill and simplify complex government documentation that would otherwise be inaccessible to the general public.
"A lot of cities opened up their data, but did citizens understand what was going on in government? 'Heck, no," he said. "Right now, I'm working with communities like that. They can start interrogating budgets and financial records in a way they never could before."
"I think in 24 months, we're going to be able to answer any question that you have," Federation Tax Administrators COO Ryan Minnick said. "The complexity that has potentially created barriers to entry for certain communities are going to be largely removed because the inherent complexity is extracted down to something understandable."
AI can revolutionize tax filing, help people find and understand whatever economic programs and aid exist to help them, and "it's customized exactly for them to basically walk their own path set in their language and dialect" regardless of where they live, Renteria said.
"Transparency is extremely important to investors," Normura's Gizzi said. "I think there has been a level of opacity on many of these factors in the past, and this is a way to very quickly be able to access information like that and make it readily available to everybody."
