Texas IT Leaders Point to Next Wave of AI, Modernization Challenges

AUSTIN — Texas technology leaders are beginning to confront a new set of operational challenges tied to artificial intelligence, legacy modernization and cybersecurity, including how to govern AI agents, control costs at scale and support aging systems while replacements are underway.

Those issues surfaced across several panel discussions at the Industry Insider — Texas State of Technology Texas Industry Forum on Tuesday, where officials outlined how agencies are moving from experimentation and planning into the more complex work of sustaining, integrating and governing new technology.

The discussions also come as agencies prepare budget requests for the 2028-29 biennium under joint guidance from Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dustin Burrows directing a 3 percent reduction in base spending requests.

For AI, one emerging issue is how agencies will manage increasingly complex agent environments.

Texas Department of Public Safety (DPS) CIO Jessica Ballew said many agencies now have basic AI policies and governance processes in place, but the next area they are working through involves environments with multiple agents. That includes release management, what agents can access and how agent identities are handled.

Ballew said those questions are among the areas where she and her peers are still trying to determine what best practices should look like and how they should be applied to individual agency environments.

Cost is another challenge emerging as AI moves beyond pilots.

Office of the Attorney General CIO Tina McLeod emphasized the need to establish baselines before an experiment begins so agencies can determine whether an AI deployment is actually producing measurable results. Forecasting operating costs can be difficult because expenses may vary depending on the model, token consumption and the size of prompts and context.

City of Austin CIO Kerrica Laake raised a related concern: whether a successful pilot can be supported once it moves into production. Monitoring token usage and other consumption costs becomes part of determining whether an agency can afford to sustain a deployment.

The Texas Department of Transportation (TxDOT) is also applying AI in operational settings. CIO Anh Selissen described uses that include identifying roadside cameras that may require attention and processing information from third-party responders to help speed responses to roadway disruptions. As those uses expand, TxDOT is also considering the resiliency and security implications of putting more AI into transportation operations.

Existing software costs can create pressure as well. Texas Comptroller of Public Accounts Data Management Officer Amberle Carter noted that licensing expenses are rising as vendors add AI capabilities to products agencies already use, potentially leaving less funding for new initiatives.

That pressure is becoming more relevant as agencies prepare for the next budget cycle. During a panel on government-industry partnerships, Carter pointed directly to the 3 percent reduction in base budget requests, while Texas Workforce Commission Executive Director Steve Pier said the reduction is real and that lawmakers are beginning to question the efficacy of technology investments.

Modernization presents another set of operational questions, particularly when agencies must keep older systems running while replacements are built.

Texas Department of Motor Vehicles CIO Wendy Barron said the agency is preparing to replace its Registration and Titling System, which has been in place for more than 30 years, along with the applications layered on top of it. The department is developing a solicitation with a goal of releasing it before the end of this year and beginning implementation next year.

AI could play a role in that transition. Barron described potential use cases that include preparing data for conversion and helping maintain the existing Registration and Titling System, which could free staff currently supporting the legacy environment to work on the replacement effort.

The broader discussions also challenged the idea that modernization must always mean replacing an existing system.

Carter said modernization can mean rebuilding a system, but it can also mean improving something that remains in place. Pier similarly stressed interoperability with older technology that agencies may not have an opportunity to replace or modernize.

DPS is taking a platform-oriented approach to its modernization work. Ballew said the agency unplugged its mainframe two weeks before the forum and is working toward shared services and scalable platforms that can meet multiple needs. She gave an example of reducing an environment of 500 applications to closer to 50 rather than continuing to support large numbers of separate systems.

Cybersecurity leaders are also considering operating models that extend capabilities beyond individual state agencies.

Texas Cyber Command Chief TJ White discussed Project Watershed 250, a federal pilot focused on cybersecurity for water and wastewater utilities across Texas. White said the pilot arrived without federal funding for fiscal year 2027, while participating companies have committed people, technology and other support to help demonstrate possible approaches. He said the goal is for cybersecurity services and solutions emerging from that demonstration to be brought to market.

White also described plans to strengthen the state's regional security operations centers and connect them with workforce development. The three existing centers are associated with universities, and White discussed paid internships that could give students hands-on experience in areas such as threat hunting, incident response and red-team/blue-team exercises.

He also outlined a longer-term vision for expanding the state's Volunteer Incident Response Team. The program currently has about 200 participants, and White said he envisions the possibility of eventually building a workforce of as many as 20,000 credentialed, trained and assessed volunteers who could support preventative cybersecurity work as well as incident response.