Building Resilience in Local Government
Municipalities are heading into the year with both challenges and opportunities ahead. Changing regulations, shifting federal funding, and workforce shortages are putting pressure on local governments, all while communities expect more efficient and responsive services. But there are also reasons for optimism.
New technology, smarter financial planning, and fresh approaches to hiring and retention are creating opportunities to build resilience and improve operations. By staying adaptable and looking for innovative solutions, municipalities can navigate uncertainty, maintain stability, and continue delivering for their communities.
Cybersecurity and Digital Infrastructure
Cyber threats continue to target municipalities of all sizes, and the potential financial and operational fallout is substantial. Recent figures show that 75% of local government organizations experienced at least one phishing attempt in the past year, and the average data breach cost for these agencies hovers around $3.5 million. Beyond the financial costs, a single cyber incident can erode public trust and disrupt the delivery of critical services.
To address these risks, many cities and counties are investing in modernizing their digital infrastructure. This may involve upgrading threat detection tools and ensuring that employees understand how to spot suspicious emails and malicious links. Cybersecurity education programs that incorporate practical simulations and regular, real-world style tests have gained traction as an effective way to increase security awareness among staff.
Over the long term, resilience is the goal. This means establishing regular audits of digital systems, designing clear protocols for incident response, and planning for continuous growth. Many jurisdictions are looking beyond traditional firewalls and antivirus software to incorporate advanced data governance structures, multi-factor authentication, and encryption standards.
Workforce Pressures and Opportunities
Attracting and retaining skilled professionals remains a challenge for local governments. While compensation for state and local employees has seen modest growth, it is still generally lower than in the private sector. State and local government employees earn, on average, 17.6% less than similarly educated private-sector employees, compared with a pre-pandemic pay gap of 13.9%. Even when factoring in more robust public-sector benefits, total compensation is still approximately 14.5% lower than in the private sector.
This wage gap, coupled with a wave of approaching retirements, means many municipalities are grappling with how to maintain critical services and institutional knowledge. Succession planning has become a growing priority, prompting some local governments to close the gap through targeted salary adjustments, leadership development programs, and more flexible employment structures. Moreover, as some federal agencies undergo workforce reductions, a displaced segment of federal employees may look for opportunities at the municipal level. This potential pool of talent could help local governments find experienced professionals who are looking for long-term career stability.
Technology is also reshaping how municipalities handle workforce constraints. Automated solutions can help free staff from repetitive paperwork, allowing them to focus on higher-value tasks that improve public services.
Compliance and Federal Oversight
Regulatory requirements for municipalities remain in flux. One noteworthy development is the increase in the Single Audit threshold from $750,000 to $1 million for fiscal years beginning after October 1, 2024. This change can free smaller governments from some of the administrative burdens associated with federal funding.
Many federal funding sources and grants also now come with greater scrutiny. A recent example from Asheville, NC demonstrates the importance of staying informed about shifting criteria for grant acceptance. When the city’s initial proposal to secure funds was rejected due to updated guidelines, municipal leaders had to revise and adapt their approach. Looking ahead, municipalities that closely track changes in federal grant conditions will be better prepared to respond.
Financial and Policy Considerations
State and local government budgets remain highly sensitive to federal tax policies. For example, the debate over the $10,000 State and Local Tax (SALT) deduction cap remains a significant concern for many municipalities. While the cap is set to expire in 2025, there is ongoing uncertainty about whether lawmakers will extend, modify, or eliminate it. According to the National Association of Counties (NACo), changes to the SALT deduction could impact local governments’ ability to generate revenue, affecting everything from infrastructure investments to public safety and social services.
Sector-Specific Updates
Across municipal operations, digital engagement and contingency planning are helping to shape the future.
State & Local Governments: Many states and municipalities are refining their budgeting priorities to emphasize infrastructure improvements, community development, and basic services. Virtual town halls, comprehensive online service portals, and new data analytics techniques are increasingly common tools to engage residents. These approaches not only facilitate easier access to local government but also create opportunities for data-driven decisions that more accurately reflect resident needs.
Public Utilities & Waste Management: Meanwhile, public utilities are adopting smart meters, GPS tracking on equipment, and a range of automated solutions that reduce operational costs and bolster environmental stewardship. Recycling programs have grown more specialized, aiming to minimize landfill reliance and promote a circular economy. By leveraging technology to track usage patterns and waste volume, municipal utilities are better positioned to make informed infrastructure investments and achieve sustainability goals.
Public Safety & Social Services: In areas of public safety, some law enforcement agencies and emergency services are experimenting with AI-driven analytics to identify crime patterns and more effectively deploy resources. Meanwhile, social service agencies are facing rising demand for essentials like food, housing, and eldercare. This is especially challenging with unpredictable resources and funding. Some municipalities are finding success by partnering with the private sector to address service gaps.
Managing Uncertainty
With federal funding criteria shifting and key regulatory thresholds changing, municipalities are confronting a new level of unpredictability. The potential for unexpected cuts or increased oversight means state and local leaders will want to proactively identify which programs are most at risk. By cataloging grants and critical services according to their vulnerability, local governments can prioritize compliance checks and develop backup financing strategies in advance.
Planning for uncertainty also extends to technology. As digital platforms become the backbone of local services, ensuring these systems are both robust and flexible is essential. Automated permitting, online bill pay, and digital workflows allow agencies to handle rising requests efficiently while reducing the likelihood of errors. Moreover, these tools contribute to a richer pool of data for forward-thinking officials to analyze and use in shaping policy decisions.
Ultimately, building agility into municipal operations means dedicating time to scenario planning, training staff to adapt quickly when regulations shift, and looking for ways to diversify funding sources. For instance, public-private partnerships may help offset funding gaps and share risk. Instead of simply reacting to changes, municipalities that maintain a strong focus on risk management and advanced planning will be better positioned to handle both routine and unexpected challenges.
Looking Ahead
It’s clear that municipal governments are navigating a period of both uncertainty and promise. While no single approach fits all, an adaptable mindset and a willingness to embrace innovation can help municipal governments prepare for the future. For more information or guidance, contact Betsy Hedrick or Michael Garber, Partners on PBMares’ State and Local Government team.
