Special Briefing: AI in Government—More Efficiency but Fewer Workers?
This Special Briefing focused on the impacts of AI on government. From improving policing and trash collection to creating the documents of bureaucracy, Artificial Intelligence is slowly making its way into state and local governments. AI’s arrival heralds a new era of governmental efficiency while threatening the jobs of almost 18 million workers—11 percent of the US nonfarm labor force. Speakers included Jon Hartley, Policy Fellow, Hoover Institution; Leigh Palmer, Vice President, Google Public Sector LLC; Megan Kilgore, City Auditor, City of Columbus, Ohio; Howard Neukrug, Executive Director, The Water Center at Penn and Professor of Practice, Department of Earth and Environmental Science, University of Pennsylvania; and Thomas Sanchez, Professor, Landscape Architecture and Urban Planning, Texas A&M University.
Moderated by William Glasgall, Volcker Alliance Public Finance Adviser and Penn IUR Fellow, and Susan Wachter, Co-Director of the Penn Institute for Urban Research and Wharton Professor of Real Estate and Professor of Finance, this briefing was the sixty-third in a series of sixty-minute online conversations featuring experts from the national research networks of the Volcker Alliance and Penn IUR, along with other leading academics, economists, and federal, state, and local leaders.
Special Briefings are made possible by funding from The Travelers Institute, the Volcker Alliance, and members of the Penn IUR Advisory Board. Recordings of the entire Special Briefings series are available on the Volcker Alliance or Penn IUR websites.
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EVENT RECAP
The launch of ChatGPT in 2022 sparked an “AI arms race” with trillions of dollars in investment and profound implications for productivity and employment. For a discussion of how generative AI and related technologies are reshaping public sector operations, workforce needs, and infrastructure planning, Penn IUR and the Volcker Alliance convened a panel of government, academic, and industry experts for “Special Briefing on AI in Government—More Efficiency but Fewer Workers” on November 20, 2025.
Hartley framed the discussion by presenting new data on AI adoption and implications for the labor market. “As of the end of September, about 37 percent of American workers claim to be using generative AI at work,” he said. Adoption surged early in 2025 but plateaued over the summer, particularly among large firms. According to Hartley, there hasn’t yet been a substantial impact to pay, job openings, or the total number of jobs. He cited recent research showing only “small negative effects concentrated among young people.” Workers report using AI to complement tasks. Nevertheless, “It's still a TBD in terms of what the overall labor market impact is going to be… so far, I think we’re just in the early innings of what’s going to be a much longer baseball game,” said Hartley.
Palmer shifted the conversation to the public sector with a discussion on how local governments can effectively prepare for AI. “Everybody thinks about AI in terms of the models, but you need to prepare for a full stack” when getting ready for AI, she explained. “The bottom layer of the stack is the infrastructure and the compute>power that you're going to need in order to power the tools that you are deploying to your environment.”
Then comes data and analytics, “where the magic is going to start to happen. So many public agencies have their data locked away in silos,” said Palmer, identifying a key challenge and opportunity of AI deployment. Next in the stack are models like Google’s Gemini, platforms for access, and finally “the pointy end of the spear, where people are really interacting with these tools—the agents and applications where the interface with a citizen may happen.” Palmer highlighted real-world applications: The Chicago Transit Authority built a chatbot to provide timely train and bus information. In Illinois, the Department of Human Services now includes on-the-fly language translation. In New York, AI is being utilized to enhance cyber defense, enabling agencies to respond more quickly to digital threats. “We're just at the tip of the iceberg on the potential for this technology,” said Palmer.
“When you want to know something about what a state or city is really doing, you turn to the auditor or the comptroller, because they have their eyes and ears everywhere,” said Glasgall, setting the stage for Kilgore’s remarks on the transformative impact of AI on government operations in Columbus. “As City Auditor, I oversee the entire revenue side for one of the fastest-growing cities in America,” she said. As the leader of a “large, very financially- and technology-forward office, we've embraced modernization,” Kilgore said, stressing the need for a new mindset: “We need more goats—not sheep. People who are curious, courageous, and willing to climb into unfamiliar terrain as technology reshapes how we’re constantly working and ultimately serving the public.”
She also called for a shift in budgeting priorities: “We need to view building human infrastructure as well as investing in forward-thinking AI technology as on the same level of vitality as investing in that traditional form of hard infrastructure… Equally as important, governments have to start investing in the skills necessary to allow our public sector leaders and our workers here to really use those tools well: data literacy, ethical reasoning, and creative problem solving. I do believe AI will absolutely redefine public service.” Columbus has built a “digital twin” of its economy using AI to support modeling and projections, she said.
Neukrug introduced the newly launched Water AI Nexus Center of Excellence, focused on driving “equitable, groundbreaking solutions for both water for AI—minimizing water use in AI data centers—and AI for water—leveraging AI to tackle critical water challenges.” Data centers “generate an awful lot of heat, and water cooling is preferred over air cooling because it uses less energy and is less expensive. But this strains local supplies, especially in drought-prone regions… Our goal is to achieve net-zero or even net positive water using all different types of technologies,” said Neukrug. “Our goal is to work with local communities to ensure that data centers fully explore all available strategies to achieve or at least move forward toward net-zero water use.” For water, AI can optimize water systems using real-time sensor data, predict demand, and enable autonomous operations such as smart irrigation and wastewater treatment. “AI-powered digital twins can simulate entire water networks, helping planners test technologies virtually before real-world deployment, saving time and resources,” Neukrug said.
Sanchez spoke on AI’s dual role in urban planning. “We’re using sensors, we’re monitoring activity and then capturing information and in some cases using it in real time… distinguished from how we are using that information to plan for cities, or to look to the future.” Like Kilgore and Neukrug, he pointed to the potential of digital twins as powerful planning tools to simulate “what-if” scenarios. “What if we build these big data centers in a particular part of a metropolitan area? What does that do to water supply, energy rates, employment, environmental, social, and economic impacts?” Generative AI is reshaping planners’ day-to-day work now. “Planners generate a lot of text. We do a lot of communication. We think about different scenarios. We’re seeing that [AI] tools help us draw on large databases and knowledge across lots of different cities—not just our own.”
Sanchez explained the critical role for AI in the process of “building scenarios, communicating them to our stakeholders, getting feedback, and getting that back into the planning process for decision-making.” Sanchez echoed other panelists’ uncertainty around future trends and workforce impacts: “We’re still at the beginning of a lot of this, and we don’t know what the overall impacts are going to be, but we know they’re going to be fairly significant in terms of workforce.”
Wachter introduced the open discussion segment of the panel with a question from the audience: “When AI automates administrative functions, what metrics should governments and do governments use to determine whether the administrative function is actually improved?” Hartley emphasized the time-saving potential of AI innovations: “Conditional on using generative AI to complete a task, roughly two-thirds of the time that would traditionally be dedicated to that task is saved,” with the largest productivity gains for lower-income workers.
Glasgall posed a question on the role of education and training in AI adaptation: “How do we get people ready for this new job market?” Palmer pointed to free AI certification programs developed in collaboration with the Virginia state government as a pioneering example. Kilgore shared two on-the-job training efforts adopted in Columbus, including “Auditor Lab, a combination of training at basic levels all the way up to advanced for different technologies, programs, and apps,” as well as a “concerted effort to train critical thinking, helping people ask good questions.”
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Jon Hartley is an economist specializing in finance, labor economics, and macroeconomics. He is currently a Policy Fellow at the Hoover Institution, a Research Fellow at the UT-Austin Civitas Institute, a Senior Fellow at the Foundation for Research on Equal Opportunity (FREOPP), a Senior Fellow at the Macdonald-Laurier Institute, and an Affiliated Scholar at the Mercatus Center. Jon also is the host of the Capitalism and Freedom in the 21st Century Podcast, an official podcast of the Hoover Institution, a member of the Canadian Group of Economists, and founding chair of the Economic Club of Miami.
Jon has previously worked at Goldman Sachs Asset Management as a Fixed Income Portfolio Construction and Risk Management Associate and as a Quantitative Investment Strategies Client Portfolio Management Senior Analyst and in various policy/governmental roles at the World Bank, IMF, Committee on Capital Markets Regulation, U.S. Congress Joint Economic Committee, the Federal Reserve Bank of New York, the Federal Reserve Bank of Chicago, and the Bank of Canada.
Jon is a graduate of the University of Chicago (B.A. in Economics and Mathematics with Honors), from The Wharton School, University of Pennsylvania (M.B.A.), and the Harvard Kennedy School (M.P.P.), and an economics PhD Candidate at Stanford University.
Jon has also been a regular economics contributor for National Review Online, Forbes and The Huffington Post and has contributed to The Wall Street Journal, The New York Times, USA Today, Globe and Mail, National Post, and Toronto Star among other outlets. Jon has also appeared on CNBC, Fox Business, Fox News, Bloomberg, and NBC and was named to the 2017 Forbes 30 Under 30 Law & Policy list, the 2017 Wharton 40 Under 40 list and was previously a World Economic Forum Global Shaper.
Megan Kilgore is the elected City Auditor of Columbus, Ohio. She oversees seven divisions responsible for critical financial functions, including income tax collection ($1.3 billion annually), debt issuance and management (a $5 billion portfolio), investor relations, accounting and operations, payroll for more than 10,000 employees, and oversight of the City’s $2.8 billion investment portfolio. Her office also produces the Annual Comprehensive Financial Report and other major financial disclosures.
Under her leadership, Columbus has maintained its AAA/Aaa/AAA credit ratings—making it the largest U.S. city to hold this distinction.
A recognized leader at the intersection of public finance and technology, Megan is known for driving modernization in public systems and using data and innovation to drive outcomes. She advises fintech and infrastructure initiatives, including Airys (www.airys.tech), a platform designed to help governments springboard resiliency projects.
She received the 2023 Freda Johnson Award and has been recognized by The Bond Buyer, Women in Public Finance, and others for her leadership.
Before taking office, Megan worked as a municipal advisor to governments and public agencies across the country, specializing in complex financings, public-private partnerships, and long-range capital planning.
She is also an adjunct professor at The Ohio State University’s John Glenn College, where she teaches public finance and mentors rising leaders in government, business, and finance.
Howard Neukrug is the former Commissioner and CEO of Philadelphia Water, where he was responsible for all aspects of utility operations, environmental compliance, engineering, financing, budgeting, capital and strategic planning, customer service, human resources, and legal and policy decisions for its drinking water/wastewater/stormwater system serving 2.3 million people. At Penn, he is the director of the Water Center and teaching courses on the water industry and the role of water in urban sustainability and resiliency. He is also a Principal with CASE Environmental, LLC, where he provides consulting services to cities and utilities in urban planning, systems design, sustainability, organizational development, strategic planning and trends and innovations in the global water industry.
Leigh Palmer joined Google in 2022 as Vice President of Technology Strategy & Delivery for Google’s fast-growing Google Public Sector business. In this role, she is responsible for deliveringmission critical technology to public sector customers. Leigh also is responsible for the global managed services of Google’s Distributed Cloud Hosted product.
Prior to joining Google Cloud, Leigh served in executive leadership roles at BAE Systems, CSRA and, most recently, at General Dynamics Information Technology. During her time in these roles, Leigh led teams delivering complex digital transformation programs for the Federal Government focusing on the Department of Defense, Homeland Security, and Intelligence Community.
Leigh has a passion for executing business objectives by building high performing teams. She was recognized in 2021 by WashingtonExec as one of the Top 25 DOD Execs to Watch and by Virginia Business’ Women in Leadership Awards. Leigh is on the Board of Directors for the Intelligence and National Security Alliance, and the AFCEA International Executive Committee. Leigh earned her undergraduate degree at Virginia Tech, and a Masters degree from the University of Pennsylvania. She resides in Dunn Loring, VA with her husband and two children.
Thomas Sanchez, PhD, AICP, is a Professor in the Department of Landscape Architecture and Urban Planning at Texas A&M University. He earned his PhD in City Planning from Georgia Tech and a Master of City and Regional Planning from Cal Poly, San Luis Obispo. His research and teaching focus on planning methods, technology, and scholarly impact. His most recent books include Networks in the Knowledge Economy (with Denise Bedford) and Planning Knowledge and Research. His forthcoming book, AI for Urban Planning will be published by Routledge in 2025. Sanchez serves as the American Planning Association (APA) Education Committee Chair and as a member of APA’s Artificial Intelligence (AI) Foresight Community.
