When "States' Rights" Meets Silicon Valley
The Public AI Brief · Issue No. 21
The party of small government just discovered it prefers big government when tech billionaires ask for it. This week, the Trump administration doubled down on efforts to block state AI regulation, with the White House reportedly drafting an executive order that would withhold federal funding from states with AI laws deemed too restrictive. Meanwhile, a new 50-state policy scan reveals just how much regulatory activity the administration wants to preempt: states aren’t waiting for federal leadership, and they’re not backing down.
The political irony is hard to miss. Republicans traditionally champion states’ rights and local control, but those principles become flexible when Silicon Valley lobbying aligns with federal power. The result is an unusual intra-party rift, with Republican state officials defending their authority to regulate AI while their party’s administration works to strip it away.
Beyond the federalism fight, states are building governance capacity in real time while grappling with data center infrastructure demands that utilities can’t meet and communities didn’t consent to. The governance gap is widening faster than the technology gap.
This Week’s Key Developments:
Federal preemption escalates: White House drafts executive order targeting state AI laws
State policy landscape mapped: New scan shows widespread state regulatory activity despite federal pressure
Oklahoma elevates AI leadership: First state Chief AI and Technology Officer signals governance evolution
Data center power crunch: Utilities cite availability as top challenge while communities demand transparency
Washington revives union bill: Renewed push to require bargaining over public sector AI adoption
Education moves beyond basics: K-12 districts embedding AI in career pathways, not just prompting skills
Federal
The Preemption Push Intensifies
The White House isn’t waiting for Congress to act. A draft executive order circulating this week would withhold federal funding from states with AI regulations deemed overly punitive or in violation of the First Amendment. President Trump publicly called for Congress to establish a federal standard governing AI oversight, warning that varied state regulation risks slowing development. The administration is simultaneously pushing for preemption language in the annual defense policy bill or through executive action directing the Justice Department to challenge state laws in court.
This escalation comes months after 40 state attorneys general, including Republicans from Ohio, Tennessee, Arkansas, Utah and Virginia, urged Congress to reject a 10-year moratorium on state AI enforcement. The bipartisan coalition called the proposal “sweeping and wholly destructive of reasonable state efforts to prevent known harms.” Now the administration is pursuing the same goal through executive channels.
The federalism tension here is striking. The party that built its brand on limiting federal power and respecting state sovereignty is advocating for sweeping federal preemption of state consumer protection laws. Tech industry lobbying appears to have reordered traditional Republican priorities, and Republican state officials are pushing back against their own party’s federal leadership.
Federal Operations Continue
While the policy battle rages, agencies continue deploying AI. The Defense Logistics Agency’s CIO emphasized that accelerating Pentagon-wide AI adoption is critical to keeping pace with adversaries in China and Russia. U.S. Cyber Command appointed a new Chief Artificial Intelligence Officer amid leadership turnover at the military’s cyber enterprise. Lawmakers proposed a grant program that would enable qualified medical schools to receive up to $100,000 in funding to promote AI literacy, while House appropriators signaled support for using AI to prevent veteran suicides in the FY26 VA funding bill.
OSTP Director Michael Kratsios and Sen. Ted Budd advocated for amplifying U.S. tech policy abroad and maintaining a light-touch regulatory regime that has become a centerpiece of the Trump administration’s approach. The message is consistent across federal touchpoints: regulation should enable, not constrain, and states shouldn’t complicate that vision.
State
Mapping the State Policy Landscape
A new state-by-state AI policy scan from the Council of State Governments offers a clear view of what the federal government wants to preempt: states are actively seeking innovation with protection, building regulatory frameworks even as the administration eyes restrictions. The scan reveals widespread state activity on AI governance, demonstrating that states aren’t waiting for federal leadership and showing no signs of backing down despite pressure from Washington.
The public remains skeptical of AI, according to the report’s findings, which helps explain why state legislatures and attorneys general continue moving forward with consumer protections. States have been filling the regulatory void Congress created through inaction on data privacy, social media harms, and now AI. The pattern is consistent: federal paralysis creates state activity, then federal officials complain about the resulting “patchwork.”
Building Governance Capacity
States aren’t just resisting federal overreach. They’re building institutional capacity to govern AI effectively. Oklahoma appointed its first Chief AI and Technology Officer this week, elevating Tai Phan to a dual role leading responsible AI adoption and statewide technology strategy. The move signals how the CIO position is evolving from technical implementer to strategic translator between technology capabilities and policy realities. Phan brings experience in both public and private sector technology modernization, positioning Oklahoma to navigate AI adoption with organizational discipline rather than vendor-driven enthusiasm.
New Jersey released a report highlighting how AI is improving service delivery for critical resources like food assistance and unemployment insurance. The report demonstrates states are using AI to solve real operational challenges, not chase technology for its own sake. West Virginia deployed a data platform to address unemployment resulting from child care shortages, using technology to keep more residents in the workforce by filling childcare gaps.
A new report offers strategies for government leaders to encourage AI innovation that prepares communities for an AI-ready future, emphasizing that public sector leadership matters in shaping how AI develops locally.
Workforce Tensions Surface
Washington lawmakers plan to reintroduce a bill requiring government agencies to bargain with public sector unions over AI adoption. If passed, Washington would become the first state to explicitly mandate AI bargaining under the Public Employees’ Collective Bargaining Act. The bill stalled in 2025 but its prime sponsor is trying again in 2026, recognizing that AI deployment decisions are becoming labor relations issues, not just IT procurement choices. Workers want a voice in how AI changes their roles before systems go live, not after.
The Data Center Dilemma
States face mounting pressure around AI infrastructure, and the conflicts are intensifying. More than half of utility leaders in a Black & Veatch report said available power is the biggest challenge to getting data centers online, with more proactive planning needed. The gap between AI ambitions and electrical grid capacity is real, and utilities are struggling to keep pace with demand.
Communities are pushing back on projects imposed without their input. Energy bills, water use and noise are driving locals to fight for more say in data center approvals. As municipalities move to enact ordinances, some communities are turning to ballot measures while state lawmakers rush to pass legislation that may favor developers over residents.
Experts emphasized that governments and communities must work together to ensure AI data center projects meet residents’ current and future needs. Transparency isn’t a courtesy, it’s a requirement for projects that will affect everyone’s utility bills, water supply and quality of life. The economic benefits are real, but so is the backlash when communities discover they’re bearing costs for infrastructure they never approved.
Innovation in Practice
Not all state news involves conflict. Vail, Colorado, is adopting agentic AI tools for fire detection and public engagement, focusing on efficiency with everyday tasks. Raleigh is bringing together GIS, AI and other tools to develop a traffic management system that improves safety for all road users. These deployments reflect what’s possible when technology serves clear operational needs rather than searching for problems to justify the investment.
Education
Beyond “Googlification”
K-12 districts are figuring out what AI means for career preparation, and the answer goes deeper than teaching students to prompt ChatGPT. An official from the Association for Career and Technical Education discussed CTE programs moving beyond the “Googlification” of AI, examining its impact on culinary arts, HVAC programs and other vocational tracks. The question isn’t whether students can use AI tools, it’s whether they understand how AI will transform the careers they’re training for and whether they’re developing skills AI can’t easily replicate.
Bentonville Public Schools in Arkansas added an AI component to its “Ignite” career-track program, helping students understand how technology is transforming their potential future jobs. This is the practical application that matters: students need to see AI in the context of actual work environments and career pathways, not as an abstract technology topic disconnected from their futures.
Rural Schools Get Strategic Support
Washington State University researchers received $82,500 from Microsoft to develop an AI integration roadmap for rural K-12 schools in three northwestern states. Rural districts face distinct challenges around capacity, connectivity and resources that urban and suburban districts don’t experience. A one-size-fits-all approach won’t work, and this research recognizes that rural schools need strategies designed for their specific constraints and opportunities.
Key Insights for Practitioners
Infrastructure decisions require community consent: Data center conflicts reveal what happens when major infrastructure projects that affect everyone’s utilities and quality of life get imposed without meaningful community input. The backlash isn’t about opposing AI, it’s about demanding shared decision-making on projects with long-term public impact.
Action: If you’re planning AI infrastructure investments, engage community stakeholders and utility providers at the beginning of the process, not when you need final approvals. Build timelines that accommodate public input and treat community concerns as legitimate planning considerations, not obstacles to overcome.
CIO roles are fundamentally changing: Oklahoma’s creation of a Chief AI and Technology Officer position reflects a broader shift. The CIO role is evolving from managing IT systems to translating technology capabilities into policy realities and organizational strategy. Success increasingly depends on governance capacity, not just technical implementation.
Action: Evaluate whether your organization’s technology leadership structure matches the governance demands AI creates. If your CIO is still primarily focused on keeping systems running, you may need to rethink how technology leadership connects to policy, risk management and strategic planning.
Career preparation means understanding AI’s industry impact: The shift from “Googlification” to career-context AI education matters. Students don’t just need to know how to use AI tools, they need to understand how AI is transforming specific industries and careers, and which skills remain distinctly human.
Action: If you’re involved in workforce development or career training programs, audit whether your AI education focuses on tools or on career transformation. Partner with industry to understand how AI is actually changing specific jobs, not just general workforce trends.
What I’m watching: Whether the draft executive order on state AI law preemption moves forward, and if so, whether it triggers immediate legal challenges from states. The constitutional questions around using federal funding as leverage to override state consumer protection laws are substantial, and Republican state attorneys general defending state sovereignty against their own party’s administration would create fascinating federalism case law.
What’s your take on the federal preemption push? Should the administration use executive power and funding threats to override state AI laws, or do states have legitimate authority to protect residents when Congress won’t act? Share your perspective in the comments below.