To Panic or Prosper? What California’s Budget Spells for Tech

There’s been a lot of ugly financial noise in tech lately, and any glimpse at the mainstream analysis is awash in either doom and gloom or some watered-down version of it. Should the SLED sector be in panic mode, or is there room to steer into the skid on a softer corner?

It’s a complicated question and one that e.Republic* Chief Innovation Officer Joe Morris spends a lot of time thinking about. During the State of Technology — California Industry Forum Thursday, Morris painted a less slippery picture of the winding road ahead.

The ink is now dry on the state’s $321 billion annual spending package, which Morris noted is more like $495.5 billion when all funds are on the balance. That’s a lot of money, and a good chunk is bound for tech. Despite uncertainty and fluidity at the federal level, he said California is sitting on reserves that could cushion any fiscal calamity coming down the pipe — at least in the short term.

Some of the major opportunity sectors Morris pointed to are in health and human services, K-12 and corrections, which all boast significant budgets for the 2025-2026 fiscal year. Health and human services are a prime focus at the federal level as efforts to weed out fraud, waste and abuse continue.

“I'm super optimistic on everything we're seeing in health and human services right now. Even if there were no projects at hand, that'd be the vertical for me to focus on. It's the largest IT spender across the nation. From an IT perspective, it spends north of $40 billion nationally on it a year,” Morris said. “That creates a lot of chaos and uncertainty, but it also creates opportunity.”

The underlying point Morris drove home is that proving the value of solutions is more essential than in years past. The days of buying tech just to buy tech are over, at least until the next surplus tsunami.

“If you're nice-to-have, that's going to be a rough go for you from a solutions perspective,” Morris said. “So, you've got to be focused on making sure that you're a need-to-have solution, and you're aligning to the specific problems that are being discussed in the room today.”

The long and short of it is that industry should prepare to be more flexible and more resilient in its dealings with state and local governments. Shifting sands at the federal level — say, an unexpected executive order — could completely change the needs for a project midflight, and departments and their partners should expect the unexpected.

Those problems, more globally, are going to include modernization efforts, building out more stable foundations for emerging technologies and data tools to manage and digest the state’s enormous stores of data.

“The great thing is … California has reserves on hand to dip into to give them a little bit of cushion, a little bit of flexibility,” he said. “I think technology is fairly safe, in fact, having gone through previous recessions, in my opinion, from my view, that's when you need technology the most.”

*e.Republic is the parent organization of Industry Insider — California.