The Bonadio Group’s 2026 State of the Local Government Study captures insights from more than 20 New York State local government entities, spanning counties, cities, and public authorities.
The overarching sentiment: cautious optimism. While many governments feel stable in the near term, they continue to navigate mounting challenges, including labor shortages, unfunded mandates, shrinking populations, and growing compliance pressures.
The study explores five key areas shaping operations today: financial strategies, technology investments, labor dynamics, top issues, and future outlook, offering a comprehensive look at how municipalities are adapting. Take a look at the key findings below.
Financial Strategies: Stability Improving, But Pressure Persists
Financially, there are signs of progress. Compared to recent years, fewer municipalities reported acute distress, and only about 10% cite persistent cash flow problems, which is a noticeable improvement. The number of governments forced into cuts or revenue losses has also eased, with a majority now saying they avoided those disruptions in 2026.
But stability hasn’t eliminated risk. Many organizations are still building the fundamentals needed for long-term resilience. In fact, more than a third have yet to establish a formal fund balance strategy, even as fund erosion has been a decade-long concern.
In response, governments are becoming more disciplined and creative. Multi-year budgeting and scenario planning are helping leadership teams anticipate volatility, while approaches like zero-based and priority budgeting force tighter alignment between spending and community needs.
At the same time, the search for new revenue streams has become more intentional. Over half of respondents now rely on dedicated resources to pursue grants, reflecting how critical external funding has become in an environment where property tax growth is capped. That constraint is driving difficult decisions: more municipalities are preparing to override the tax cap than in the past, underscoring how stretched local budgets have become.
To offset costs, collaboration is also gaining traction. Shared services, whether in emergency response, public works, or IT, are evolving from occasional partnerships into strategic tools for maintaining service levels without expanding budgets.
Technology Investments: Advancing Carefully in a Risk-Heavy Environment
Technology continues to be both a solution and a source of risk. While most governments reported avoiding major cyberattacks in recent years, a meaningful minority have experienced incidents, and more than a third reported some type of security issue in the past year alone.
What’s striking is the gap between risk and readiness. Even as cybersecurity threats grow more sophisticated, nearly 30% of governments still lack a dedicated IT department, highlighting uneven preparedness across the state.
That said, progress is visible. Most governments now have formal disaster recovery plans in place, reflecting a broader shift toward structured risk management in a regulated environment that now requires rapid reporting of cyber incidents.
Meanwhile, emerging technologies like AI are beginning to move from theory to application. Some governments see clear potential, particularly in controlling costs, improving forecasting, and supporting long-term planning. Still, adoption remains cautious. For many, the barrier isn’t resistance, it’s uncertainty. A significant share cited lack of knowledge or concerns about security and trust, suggesting that education and governance frameworks will be just as important as the tools themselves.
Labor Shortage Solutions: Recruitment Is the Real Challenge
Workforce pressures remain one of the most persistent challenges facing local governments, however, the nature of the problem is evolving.
While roughly 45% of respondents are still struggling to find enough labor, that figure has improved significantly from prior years, signaling that conditions may be stabilizing. Importantly, this isn’t a story of employees leaving. Turnover is actually low across most organizations, with the vast majority reporting minimal churn.
Instead, the issue is attracting new talent into public service in the first place. Governments don’t necessarily need massive hiring surges to close the gap either. Nearly half say that increasing their workforce by just a few percentage points would be enough to meet demand.
Operationally, this means many organizations are managing for now. Work backlogs tend to be short, and workloads relatively stable. But structurally, vulnerabilities remain. Less than half of governments have formal succession plans, and most still rely on fully in-person work environments, limiting their competitiveness in a labor market that increasingly values flexibility.
Looking ahead, talent strategies are shifting toward branding, benefits, and faster hiring processes, as municipalities rethink how they position themselves as employers.
Current Top Issues: Budgets, Housing & Infrastructure Take Center Stage
If there is one area where pressure is intensifying, it’s budgeting. More than half of respondents now identify it as their top concern, an increase from the previous year, reflecting growing anxiety over funding constraints and external aid reductions.
This financial strain is closely tied to broader structural challenges. Housing, for example, has become a dominant issue, with nearly two-thirds of governments reporting that their communities are directly impacted. Yet fewer than half have taken formal steps to address it, underscoring the complexity of implementing meaningful change at the local level.
Infrastructure presents a similar tension. Significant portions of respondents reported urgent needs in water systems, roads, and bridges, essential services that require substantial investment but compete for limited resources.
At the same time, operational concerns like procurement and fraud risk continue to draw attention. Governments are working to improve bidding processes and oversight mechanisms, recognizing that protecting taxpayer dollars is both a financial and reputational imperative.
Future Outlook: Planning for Uncertainty
Looking forward, local governments are preparing for a landscape shaped by uncertainty. Many have taken steps to strengthen their long-term planning, with most conducting financial analyses that look beyond the current budget cycle.
Still, the forces shaping the future are largely outside their control. Population decline in many regions is shrinking the tax base, while aging demographics increase demand for services. Funding remains heavily tied to state and federal sources, and costs, from pensions to healthcare to childcare, continue to rise.
Even workforce costs are expected to climb modestly, with most governments anticipating annual salary increases in the 3–4% range.
Against this backdrop, two themes stand out. First, financial discipline will remain essential, particularly as municipalities balance limited revenue growth against increasing obligations. Second, strategic investment (in technology, infrastructure, and workforce development) will play a defining role in determining which governments are able to adapt successfully.
The Bottom Line
The 2026 study reveals a sector operating under steady but sustained pressure, where incremental improvements coexist with long-term structural challenges.
New York’s local governments are holding the line, but their ability to move forward will depend on how effectively they plan, prioritize, and innovate in the face of constraints that aren’t going away anytime soon.
For a deeper dive into the data, trends, and strategic recommendations shaping the year, readers can explore the full 2026 State of the Local Government Study. If you would like to discuss any of these findings or explore what they mean for your government entity, our experts are ready to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
