Key Takeaways:

State governments are heading into 2026 planning to expand AI use just as the rules of the game get murkier. After taking office, President Trump rescinded a prior federal AI risk-management order, issued his own AI Action Plan, and then signed a December executive order that tries to limit state AI regulation by threatening to withhold some congressionally allocated broadband deployment funds from states that pass what it calls onerous AI laws. The move turns AI governance into a tug-of-war between state experimentation and federal preemption.

The impact wonʼt be uniform. Idaho CIO Alberto Gonzalez says the stateʼs guidance over governance approach keeps it aligned with the new order, so he doesnʼt expect much disruption. Colorado, by contrast, is named in the EO for supposedly requiring the alteration of truthful AI outputs as a language that doesnʼt appear in any Colorado statute. What the state does have is the Colorado AI Act (SB 24-205), a law aimed at managing algorithmic discrimination risk, now under review by a governorʼs working group that includes CIO David Edinger.

Legal and political pushback has been swift. Colorado Rep. Brianna Titone calls the EOʼs attempt to limit state policymaking illegal and predicts it will be challenged in court. U.S. Rep. Ted Lieu and Florida Gov. Ron DeSantis are normally on opposite sides, but both argue that an executive order cannot block states from setting their own AI rules, and DeSantis is moving ahead with an AI Bill of Rights proposal. Civil liberties and tech-policy groups like the ACLU and the Center for Democracy and Technology are urging states to keep legislating as they see fit, and New Yorkʼs governor has already signed a new AI safety and oversight law.

At the same time, market forecasts suggest an AI correction ahead. Forrester predicts a 2026 AI bubble pop that will push governments and vendors to prioritize projects with tangible returns instead of experimental hype. Some states are already leaning that way. Georgia and North Dakota are focusing on pragmatic deployments that improve service delivery and measurable outcomes rather than chasing every new tool.

A big part of that future is agentic AI systems that can take autonomous actions rather than just generate text. Alaska is exploring agentic AI for its digital government portal, Indiana for notary licensing, and Virginia for regulatory review workflows. Utah CIO Alan Fuller says he is very bullish on these tools as a way to boost employee productivity, even as groups like the NewDEAL Forum urge states to model people-first AI governance amid unpredictable federal moves.

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