Survival and success for most professionals in the field of public finance will come easier to those who accept the inevitability of change, adapt to new technologies, avoid gimmicks, promote and practice continuous improvement, orchestrate long-term thinking by those around them, and brush up on their own self-awareness and interpersonal skills.
The most familiar and quantifiable aspect of this long game is fiscal sustainability. For starters, that requires a sober review and projection of the jurisdiction’s revenue and expense trends to question whether each year’s budget has habitually become a game of kicking the can to the next year and one’s successors. At a minimum, a fresh five-year financial forecasting exercise is now timely.
A comprehensive capital improvement plan should be coupled with long-term bond issuance strategies to take advantage of low interest rates during recessions and get ahead of potentially runaway federal debt and inflation. Inevitable costs of replacing infrastructure and heavy machinery should be built into simple financial models that every elected official can understand. Where shortfalls and funding gaps are projected, policymakers need to understand the strategic options to address and overcome those problems, even if it’s not what they want to hear.
Moving from the income/expense statement to the balance sheet, 2026 will be a great year to revisit shrinking rainy-day funds and operating fund balances to prepare to weather the worst of future fiscal storms. Although there is a remote chance that the political winds may shift and Uncle Sam will return to the rescue of distressed states, cities, counties and school districts, America’s burgeoning federal deficits make that mindset increasingly unlikely to prevail unless some kind of natural disaster, pandemic-level emergency or cyclical recession strikes multiple jurisdictions. Some risks may be insurable, but others are not. The need for healthy fiscal reserves has never been stronger.
Where pensions are still underfunded, the finance staff needs to show elected officials the inevitable math of ever-increasing payroll costs, and this applies even more to the retiree medical benefits known in the trade as OPEB, for “other post-employment benefits.” Many pension funds have made some headway with their funding ratios, but the explosion of employer payroll contribution rates into double-digit levels over 20 years demonstrates how expensive their prior neglect has become. Minnesota’s new legislative fix for underfunding is arguably incomplete but it’s directionally correct.
After 20 years of public debate, the OPEB monster keeps growing and now exceeds the unfunded liabilities of public pension plans. Combined, these obligations represent a $2 trillion deadweight on the backs of state and local taxpayers that cannot be deferred forever. The time has come to commence systematic amortization of these liabilities while the benefiting employees and recipient retirees are still alive. Nobody can assert with a straight face that this can-kicking is sustainable or fair to today’s citizenry under age 50.
For cities and counties, fiscal sustainability must also apply to the supply of essential municipal services, notably water and electricity. One report puts a $3.4 trillion number on the challenges in water finance alone. Look to the Government Finance Officers Association (GFOA) and the American Water Works Association for collaborative leadership in “gold standard” best practices for sustainable water supplies and financing. Santa Monica’s success with water recycling is a notable exemplar.
The same awareness must also now apply to power plants and electric utilities, with the demand surging as a result of the proliferating data centers that power AI technology. Financial planning and practices that assure uninterrupted and affordable water and power supplies will take center stage in many jurisdictions, and CFOs must play a key role in these initiatives. Likewise, the inevitable changes in mass transit and road funding will challenge state and local financiers in coming years as EVs and robotaxis become more prevalent, fuel-tax revenues recede and single-trip “mass personalization” transportation displaces personal autos and public transit systems.
The Challenges of Disruptive Technologies
As we enter the age of the artificial intelligence revolution, public financiers must play a dual role: They must themselves acquire the expertise and skills needed to harness the benefits of AI systems — not only personally but as departmental managers and then as vital strategic members of senior management. That includes not only learning and refreshing the basic skills of prompting and supervising advanced AI systems in their respective professional fields but also knowing which additional technologies are becoming available to their staffs and other departments. It’s that “other departments” aspect that presents the real challenge.
Governmental chief financial officers should keep a close eye on their counterparts in the corporate world. The private sector will deliver new capabilities and methods to perform financial functions more quickly and with fewer personnel, and public-sector CFOs must lead their counterparts in operating departments by example. In government, AI adoption will be incremental, at least initially, just as desktop word-processing software and business phone systems quietly fostered the elimination of millions of clerk-typist and secretarial jobs. Eventually the labor-replacement process may well be chunkier and widespread, depending on how fast and where the commercialized AI technology progresses. That’s the disruptive part of this — where labor enhancement eventually becomes labor replacement.
In the private sector, emerging information technologies are already being deployed to freeze or reduce headcount. It’s a safe bet that this trend will quickly find its way into government. Finance directors in particular now have a key role to play in the way senior management harnesses this new technology to deliver improved services — and eventually with materially fewer personnel organizationwide. They must understand the implications of the tech industry’s rapid evolution from generative to agentic to autonomous AI and eventually humanoid robotics, which will determine whether workforce reductions will be selective and limited to office workers, or extend into blue-collar jobs. Chinese technologists are already halfway there with robotic applications in the public-safety professions.
Artificial intelligence only needs to surmount the technology level of “inference” to enable automation, making a wave of white-collar state and local government labor displacement virtually inevitable later in this decade. (I personally noticed the first clear signs of applied AI inference in a Gemini response to a research probe last week, so it’s almost here.) The question is who will lead the charge as workflows are redesigned and re-engineered using software and applications that will be delivered to governmental managers by successful private-sector technologists who can demonstrate cost-effectiveness and superior efficiency. The strategy here should be the “fast follower” approach.
Internal Politics of Change
In government work, the natural impulse of managers in operating departments will be to enhance service delivery first — to deliver “more and better” — before moving on to shrinking labor budgets. Unlike the private sector, where bonuses, stock options and promotions typically reward line managers who reduce labor costs to boost profitability, there is no similar incentive structure in state and local government. Upward mobility for public management professionals is usually associated with experience in managing more, not fewer, personnel and resources. In the future, however, headcount data may well be replaced by robot-count and humanoid-versus-human-efficiency metrics being touted in ambitious public managers’ resumes.
Internal and elected foot-draggers and labor unions will advocate attrition rather than layoffs, of course, but over time that neo-Luddite incrementalism will fail to optimize new technologies. Nonetheless, try to tell a police or fire chief today that they should plan to materially reduce staffing by 2030 by employing these new technologies. So financial leaders who play the long game must skillfully persuade top brass and their colleagues in operating departments that technology-driven cost reduction is an essential and inescapable part of this wave of innovation. Efficiency must replace empire-building in the public sector, to avoid a backlash from cantankerous taxpayer associations and rancorous political skirmishes, with upper management caught in the crossfire.
Sharing this column (or selected excerpts) collegially with operating department heads is a good place to start. Management teams need to be mindful of the employment disruption (and even fear) taking root in the private sector that impacts attitudes of the citizens they serve, which will undermine voters’ tolerance of featherbed staffing.
Training for the Future
Getting senior managers comfortable in the use of AI themselves will be a place to start, and public financiers will look to professional networks like GFOA, the procurement and human resources associations, and the city/county managers’ and mayors’ associations to promote executive and managerial-level training in AI technology — and, more importantly, in its strategic application in workforce management and cost reduction.
Without provoking resentments and hostility, the skilled CFOs will be those who diplomatically prepare their colleagues on the senior management team for what are likely to be dramatic changes in their respective operations in the next decade. Some will even gain a second title, chief operating officer, to denote that they know as much as the public-facing department heads about how to deploy new technologies to cut costs while improving service in various functional silos.
So by the early 2030s, as the real cost of operating governmental agencies and delivering public services at today’s levels of output comes down as the result of rapidly evolving technologies, governments’ financial professionals will find themselves in the center of heated debates over whether those economies permit and even demand a cut in taxes or a “reinvestment” in expanded production of public services. First, however, many will need to internally confront can-kicking policymakers to deploy ongoing cost savings toward fiscal sustainability via rainy-day funds, full pension and OPEB funding, and fixing deferred maintenance and infrastructure replacement practices.
More is not better if it’s unsustainable in the long run. At some point, the taxpayer associations will weigh in with demands to reduce personnel costs and cut taxes. Getting ahead of that debate before 2030 will be the mark of visionary long-game leadership by public finance practitioners, top administrators and elected officials.
The Personal Side
Which brings us to the personal and interpersonal side of financial management for the long game. Difficult, divisive and uncomfortable choices will lie ahead, whether they result from hard-nosed confrontations with reality in addressing fiscal sustainability or in deploying AI technology. Those who prepare themselves for successful leadership in what promises to be a challenging period of disruptive changes will be far more likely to weather the many interpersonal storms that inevitably arise in such periods. Take it from one who’s been there: This aspect involves more than just technocratic expertise.
In the past, the CFO was too often the resented “bad guy” in the room whose job was to deliver the unwanted news that the numbers won’t support business as usual. Elsewhere, there have been many jurisdictions where know-it-all politicians, bureaucratic empire-builders or hostile taxpayer types have turned their ire on the financial manager for failing to subscribe to their priorities and tunnel vision. Rarely is the CFO portrayed as a hero. In such hostile environments, it’s been a common occurrence to witness professional burnout among those who find themselves in a relentless pressure cooker. To survive and prosper in the long game that lies ahead, financial managers must prepare themselves with sustainable survival, leadership and social skills built on self-awareness, media savvy, self-discipline and personal flexibility.
For decades, the city and county management profession has done a decent job of cultivating collegial networks to help provide the support systems needed to survive “hot seat” jobs. In recent years, GFOA and its affiliated statewide membership associations have made serious efforts to address similar needs. In the coming decade, these efforts must be redoubled, as the friction points are quite likely to magnify in places where business-as-usual becomes impossibly unsustainable. Otherwise the career casualty rate in this line of work will fester.
The financial and managerial professional associations can help the entire industry by providing workshops on these topics at their conferences, and by finding ways to embed lengthier self-assessment sessions into their educational programs. When politics become abrasive or personalized, more attention should be given to organized intervention strategies to identify and help colleagues and peers who are showing signs of stress, anxiety, dysfunctionality, misjudgments, irritability or burnout. Nobody in the public finance and management professions should be left hanging without proactive support systems. Every HR department should be tasked with this role before it’s too late, and foresighted financial managers everywhere should nudge them in this direction.
Perhaps ironically, there can be a role for AI in these support systems: It’s now within the realm of possibility that emotional support and survival strategies for hot-seat professionals will be accessible with agentic coaches. If nothing else, those in jeopardy may learn how others are seeing them, which promotes self-awareness before it’s too late. These capabilities will not be a panacea, but they could eventually be part of the professional survival kit.
Despite these challenges, the profession of public financial management has an important future ahead, if only because the economics and complexity of running state and local governments will become even more challenging in coming years. To that end, I offer two suggestions: First, get yourself a copy of Who is Government?, financial journalist Michael Lewis’ 2025 compendium of autobiographical essays. It’s tonic for the souls of those who still believe in public service. Second, take a quick spin through “Public Finance as a Profession,” an article I wrote for the Government Finance Review for GFOA’s 100th anniversary in 2006, to assess whether it’s really your calling. Hopefully one of those works will fortify readers’ commitment and confidence that it’s worth the effort to play the long game, even when the going gets tough.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
Related Articles
