Part Two: Creative Solutions, Implementation, and Building Long-Term Resilience

When funding disappears, local governments must find creative alternatives to sustain essential programs. Fractional experts, drawing from experience across sectors, can identify opportunities for public-private partnerships, alternative funding models, and new service delivery mechanisms that maintain program quality while reducing costs. Resource reallocation is critical, and fractional CFOs can help redirect savings from operational efficiencies to protect high-impact programs like emergency management, healthcare or school nutrition. Their expertise in financial modeling and strategic planning enables agencies to make data-driven decisions about which programs to sustain, modify, or eliminate, ensuring that cuts are made strategically rather than indiscriminately.

Part One: Navigating the Looming Budget Crisis

State and local governments are facing a pivotal moment as they prepare for the largest federal funding cuts in decades. With more than $207 billion in proposed reductions affecting programs like emergency management, fire training, Medicaid, education, and infrastructure, officials are under pressure to maintain essential services while managing shrinking budgets. In this challenging environment, fractional expertise is emerging as a vital resource. These professionals deliver specialized leadership and proven strategies for cost optimization, change management, and innovative program delivery, all without the expense of permanent hires.

This week, I had the opportunity to sit down with my friend Kevin Sofen for a podcast conversation that cut through a lot of the noise around technology in the fire service. Kevin’s path is anything but conventional. He started at Darley, a 117-year-old Midwest manufacturing powerhouse that’s a household name in the fire service, but from day one, it was clear he wasn’t going to fit any mold. If you’d met him back then, you’d have seen what I did: someone who would approach the job and the industry a little differently.

As state and local governments face mounting pressures around budgets, staffing shortages, and the difficulties involved with finding specialized expertise, many are turning to the fractional executive model for leadership solutions. We’ve talked about this here frequently, and the more people I engage on the subject, I find myself having to dispel a couple common myths.

Artificial intelligence is rapidly transforming state and local government, moving from pilot projects to operational deployments that are reshaping how agencies serve their communities. In 2024, a survey by the National Association of State Chief Information Officers found that more than half of state CIOs reported their employees were using generative AI tools in their daily work, underscoring how quickly these technologies are becoming part of government operations. A separate June 2024 survey of 355 state and local government professionals found that 51% were using AI daily, most commonly for tasks like summarizing information and brainstorming, with nearly three-quarters reporting improved efficiency and time savings as a result. Are you embracing AI and empowering your teams to use it today?

This will sound obvious: Long-term strategy is the backbone of effective state and local governance, providing a clear vision that aligns resources, guides decision-making, and ensures communities are prepared for both challenges and opportunities. When governments look beyond immediate pressures and daily operations, they can build resilient and fiscally responsible organizations that serve citizens better over time.

In the coming months, many state and local government leaders will face the difficult task of finding new revenue sources to fund programs and services that were traditionally subsidized by the federal government. The most conventional solution, raising taxes, is also the least satisfying, both politically and economically. At every level of government, the question isn’t “if” we’ll need to raise taxes, but “when”, and ultimately, “who” will bear the burden? This is a topic we’ve been discussing at Fractional Source for months.

State and local governments are under constant pressure to deliver better services, often with limited budgets and increasing expectations from the public. One of the most effective ways to meet these challenges is by simply improving an organization’s internal processes. As with most things in government, that sounds easier than it is. Even when process reviews are prioritized, agencies still struggle to find the right expertise or resources to lead these improvements, especially when hiring full-time executives is not feasible. This is where the concept of a fractional source becomes a game-changer.

State and local governments face mounting pressure to deliver modern, efficient, and secure public services. Yet, despite the rapid evolution of technology in the private sector, government procurement and budgeting processes often remain stuck in the past. This disconnect makes it increasingly difficult for public sector organizations to keep pace with the marketplace they operate in and to meet the expectations of their communities.

Imagine the following… In early 2025, a mid-sized city found itself at a crossroads. The city manager was under increasing pressure from residents and council members to modernize municipal services-faster permit approvals, smarter infrastructure management, and more responsive communication with constituents. Yet, like many local governments, the city faced persistent staffing shortages and a limited budget. The search for a full-time Chief Technology Officer (CTO) with the right blend of technical expertise and public sector experience had come up empty, and the clock was ticking.

Today, we find ourselves navigating one of the most significant periods of change in our lifetime. The rapid evolution of technology shifts in government, and the transformation of how we work are reshaping every aspect of organizational life. Artificial intelligence, automation, and advanced analytics are not just buzzwords—they are fundamentally altering the way we operate, demanding a new set of management and leadership skills. As remote and hybrid work become standard, organizations are also learning to leverage talent through tools and capabilities that didn’t exist a decade ago.

We are at a very unique time in local government where more and more can be accomplished by leveraging technology than ever.  Local government has lived through years of the pandemic and team members maintain all government services through these difficult times. Now technology is capable of enabling every aspect of local government operations. The ability to provide live audio and video participation of every public meeting as well as closed captioning and transcripts with AI summaries withing minutes of every meeting is now the expectation.

President Trump’s March 20 Executive Order titled “Achieving Efficiency Through State and Local Preparedness," is aimed at enhancing national security and infrastructure resilience through state and local preparedness. This is an incredible shift in emergency management doctrine and presents a once-in-a-lifetime opportunity to redesign how we prepare for our greatest disasters.

The public sector job market stands on the brink of its most significant transition since 1968. For federal workers transitioning to the private sector, the competitive experience can be jarring. Alternatively, those pursuing roles in state or local government may face significantly reduced salaries. Enter Fractional Source.

Strong, effective government starts with good people. For state and local agencies, the individuals who serve in key roles are more than just employees—they are the stewards of public trust, the problem-solvers for communities, and the driving force behind meaningful change.

For state and local governments, cybersecurity threats are no longer hypothetical—they’re inevitable. The reality is that cyberattacks are happening more frequently, and no city, county, or agency is immune. Whether it’s ransomware locking up critical systems or phishing scams targeting employees, the risks are growing, and the stakes couldn’t be higher.

In the normal course of business, even a well-planned staffing requirement takes time to fill. After all, hiring the right person is one of the most important thing leaders will do during their career. In the public sector, when we think of hiring the right person, that path can be especially difficult.