New NEOGOV Report Finds Public Sector AI Adoption is Growing, but Workforce Readiness is Lagging
Survey of more than 4,200 public sector professionals finds agencies are using AI for data analysis, communications and workflow automation, while many still lack formal policies and employee training
Public sector HR teams are facing a new operating reality defined by workforce shortages, limited resources, growing workload demands and rapid technology change. Many agencies are no longer treating these constraints as temporary disruptions, but as ongoing conditions they must plan around with AI playing a major, but not yet perfected, role.
These findings and more were released today in a new research report from NEOGOV, a workforce management platform purpose-built for the public sector. NEOGOV’s 2026 Public Sector HR Trends Report surveyed more than 4,200 public sector professionals across city, county and state government agencies to identify the top workforce and operational trends shaping public sector HR in the year ahead.
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One of its key findings is that while agencies are beginning to adopt AI tools, there are gaps in how this use is systematized, governed and ultimately scaled. Several findings that stand out are:
- 21% of agencies report actively using AI today
- The most common use cases are data analysis (46%), internal communications (42%), and workflow automation (33%)
- Adoption is currently highest among HR leadership and executive roles, suggesting experimentation is being driven top-down
However, the data shows important gaps and growth opportunities for AI in the HR workspace because:
- Only 28% of agencies have formal AI policies in place
- Just 24% have provided AI training to employees
- Only 24% say they are very prepared to manage organizational change
“Public sector HR teams are being asked to do more than ever in an environment where staffing, budgets and time are all constrained, with no clear signs of that changing. AI is becoming a necessary and effective tool, but there’s still work to be done,” said Pamela Benjamin, former assistant city manager for the City of Columbia, SC, and local government executive advisor at NEOGOV. “This report shows that agencies are not lacking awareness or intent. The challenge is having the capacity, systems and readiness to act on the priorities they already know matter, but the industry is up for that challenge.”
Beyond the findings on AI, the report provides significant insight into challenges and opportunities facing public sector professionals around the country.
Workforce strain is becoming an enduring operational reality
Additional findings showed that staffing shortages continue to shape nearly every aspect of public sector HR. According to the report:
- 63% of agencies are experiencing staffing shortages
- 35% report that more than 10% of budgeted positions are currently unfilled
The top recruiting challenges include:
- 58% struggle to find qualified candidates
- 52% cite offering competitive salaries
- 48% point to slow hiring processes or time-to-hire
The report also demonstrates that many agencies are not yet using targeted recruiting strategies, with 71% saying they are not targeting specific candidate groups. NEOGOV’s findings suggest that workforce strain is not simply a candidate supply issue, but a broader challenge shaped by hiring speed, compensation limitations, employer brand, internal capacity and process constraints.
Efficiency is replacing expansion as the operating model
As agencies continue to operate with limited staff and resources, efficiency has become a central focus. The report found that 40% of agencies ranked operational efficiency as a top priority for 2026, ahead of retention, recruiting and other workforce initiatives.
This shift reflects a broader move from a “hire-to-grow” mindset to an “optimize-to-sustain” approach. Agencies are looking for ways to reduce manual work, improve coordination and strengthen internal processes with the people and resources they already have.
- Only 15% rated their operations as excellent
- 40% rated operational effectiveness as average or poor
- 63% spend 10% or less of their time on long-term strategic planning
Retention challenges are tied to workload, management and workplace conditions
Public sector retention challenges remain closely tied to compensation, retirement, workload and the employee experience:
- 52% cited higher pay as the leading reason employees leave
- 46% pointed to retirement
- 26% cited career changes
While many agencies are investing in workplace culture, wellness programs and recognition efforts, the report suggests these initiatives may not fully address the underlying conditions driving turnover. Respondents pointed to understaffing, burnout, workload and inconsistent management support as key pressures affecting employees’ decisions to stay or leave. Findings showed:
- Nearly 1 in 4 respondents cited poor management as a reason employees leave
- Managers were identified as needing improvement in communication, morale building and coaching and development.
Retirement risk is magnifying succession gaps
The report also highlights a growing disconnect between expected retirements and succession planning. Key findings include:
- Nearly 69% of agencies expect more than 5% of employees to retire over the next five years
- Only 14% identify succession planning as a top priority for 2026
The risk is especially significant because many public sector agencies rely on long-tenured employees who hold critical institutional knowledge. More than one-quarter of respondents said their agencies have no clear process for knowledge transfer when an employee leaves.
NEOGOV’s findings suggest that succession planning is not only a leadership issue, but a workforce continuity issue that affects frontline operations, compliance knowledge, service delivery and institutional resilience.
A framework for moving forward
The report concludes that public sector agencies do not need perfect conditions to make progress. Instead, NEOGOV recommends that agencies start by identifying the most urgent workforce pressure they face – staffing, efficiency, retention, retirement risk or AI readiness – and then focus on practical steps that build momentum.
Recommended actions include conducting employer brand audits, mapping time-consuming processes, holding stay interviews with high performers, identifying critical roles with retirement risk, and establishing clear AI use guidelines.
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