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Payments & Invoices
Guide to Municipal IT Budget Planning
Learn about the components of an IT budget, essential cybersecurity line items, why you should take a risk-based budgeting approach, and how AI is impacting municipal technology.
IT lumped into a single line item
The entirety of a municipality’s IT sometimes appears as a single line item such as “computers” or “technology.” This categorization oversimplifies IT and misses important items.
IT spread across different departments
While a department may very well oversee its own IT budget, many municipalities centralize technology. By spreading IT and cybersecurity line items across departments, you lose insight into your overall IT assets and investments.
Incorrect labeling of IT
Some municipalities mislabel IT, categorizing it as “office supplies” or “professional fees.” When mislabeled, you lose visibility into your IT investments.
What's Inside this Municipal IT Budget Planning Guide?
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1
Components of an IT Budget
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2
IT Budgeting Categories
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3
Risk-Based Approach to IT Budgeting
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4
Let Technology Spur Your Vision
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5
Unique IT Budgeting Items for Police, Fire, and Water/Sewer Departments
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6
Presenting to Council: Connecting the Non-Technical to the Technical
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7
IT Budgeting Examples and Formats
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8
How Municipalities Are Adding AI to Budgets
Short on Time? Download the PDF ⬇️
Instead of viewing your IT budget as a list of random components, it’s helpful to look at it through a risk-based lens. Risk-based budgeting prioritizes and allocates resources based on an assessment of potential risks and the strategies needed to mitigate them.
With a risk-based approach, you examine your current IT budget to see if you’re:
- Underinvesting in important cybersecurity measures that help you protect sensitive information and assets, potentially leaving you wide open to a devastating cyberattack.
- Increasing the probability of downtime, permanent data loss, and operational system failures that negatively impact resident services and employee productivity.
- Threatening the success of important projects and initiatives because you don’t have basic foundational technology capabilities in place.
To approach IT budgeting from a risk-based perspective, it’s important to take a few steps to make sure your dollars are prioritized for maximum impact.
- Conduct an assessment of your environment and infrastructure: A thorough assessment identifies potential risks such as your ability to fend off cybersecurity threats, the impact of technology obsolescence, regulatory compliance challenges, IT-related project delays, and other uncertainties.
- Prioritize next steps: Once risks are identified, they are assessed and prioritized based on their potential impact. Risks that pose a higher impact and likelihood receive greater attention.
- Allocate budget for risks and contingencies: Resources are allocated in your budget based on the prioritized risks. Areas with higher risks may receive increased budget allocations to implement preventive measures, mitigation strategies, and contingency plans. This ensures that critical areas are adequately funded to address potential challenges.
Roadmapping is also part of the goal here. An IT budget is ideally used as a way to create a long-term plan where gaps are identified, investments are prioritized for the highest-risk areas, and items are checked off starting with the most critical.
Risk-based budgeting is an iterative process that involves continuous monitoring of risk factors and reassessment of your budget throughout the fiscal year. This enables municipalities to adapt their budgetary allocations in response to emerging risks or changing priorities.
By integrating risk considerations into the budgeting process, municipalities can enhance their ability to anticipate, respond to, and mitigate potential challenges. This approach promotes a more resilient and adaptive IT environment aligned with your risk tolerance and strategic goals.
To get started with a risk-based mindset, we’ve identified 5 common risks that often impact municipalities.
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1. WHEN WAS THE LAST TIME I CONDUCTED AN IT ASSESSMENT OR AUDIT?
If you haven’t conducted an IT assessment or audit in quite some time, then you may want to invest in one. An IT assessment can provide you information about:
- Adherence to IT best practices
- Gaps and risks
- Pressing needs
- Assets
- Cybersecurity and data protection
- Policies and procedures
With an assessment in hand, you will have specific recommendations that you can act upon and an easier business case to make for investing in critical areas.
Action items:
- Seek out experienced IT professionals or consultants to conduct an IT assessment/audit.
- Cooperate with the assessment/audit so that the professionals are working with as much information as possible.
- Act on the recommendations—do not sit on any high-risk areas identified in the assessment.
2. IS MY DATA BACKUP TESTED AND OPERATIONAL?
All it takes is one data loss incident to significantly impact a municipality’s budget. If you cannot recover or use your data for days or weeks, you impact municipal operations and risk increased expenses. We find that IT costs skyrocket for towns and cities that use inadequate data backup solutions, especially when a server fails and they cannot recover the data without time-consuming, expensive help.
Your municipal IT budget will need to accommodate several data backup and disaster recovery costs and investments.
- Hardware: Your data backup hardware will primarily consist of backup servers such as onsite servers for local backups, hosted servers in a data center, and/or virtual servers in the cloud. You may also have network-attached storage (NAS) devices (or dated technology such as external hard drives or tape drives) that serve as data backup hardware.
- Software: You need to budget for data backup and disaster recovery software that automates and manages the backup and recovery process.
- Cloud Storage: Part of your offsite data backup solution may include a monthly fee for sending and storing your data in the cloud. It’s important to budget for cloud storage in terms of monthly costs, especially so you can plan for your storage needs to increase over time as you create more data.
- Network Bandwidth: You may need to budget for additional bandwidth costs to accommodate backup data transfers, especially for cloud services.
- Maintenance and Support: Includes a backup vendor’s maintenance and technical support agreements to ensure the proper working of your data backup and disaster recovery hardware and software. You may also have a third-party vendor helping you with data backup testing, backup monitoring and alerting, and disaster recovery planning.
- Emergency Funds: You never know when a data backup incident will occur, whether caused by a cyberattack, natural disaster, or hardware failure. Having a contingency budget to cover unforeseen expenses related to backup and disaster recovery is important, especially if your data backup solution is limited, experiences frequent issues, or is untested.
In our experience, municipalities nearly always massively underestimate the costs of recovering from a cyberattack or data loss incident. It is essential that you budget appropriately for emergency funds – especially if you don’t feel confident that your municipality follows essential cybersecurity best practices.
Action items:
- Acquire an onsite/offsite data backup solution if you lack one. It is critical to invest in a data backup solution with an onsite and offsite component.
- Test your data backup solution to ensure that it works and your investment will pay off in the event of an incident.
- Account for the above costs in your IT budget, as needed, depending on the complexity of your data backup and disaster recovery solution.
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3. IS MY HARDWARE AT END OF LIFE?
Old hardware results in processing delays, server and desktop failure, and lost productivity. While you might feel you’re maximizing an investment by keeping hardware until it dies, hardware gives you significantly diminishing returns after many years—costing you money once it becomes obsolete, ineffective, and unable to meet the demands of municipal business.
Not upgrading or replacing hardware (especially with scenarios such as Windows 10 going end of life in October 2025) introduces various financial risks to your organization. Unsupported hardware:
- Opens you up to ransomware, malware, and cyberattackers from around the world.
- Opens the door to a wave of frozen, crashed, and slow computers.
- Potentially puts you out of compliance, from which you can experience substantial fines or your state taking away your municipality’s access to CJIS data.
- May not be covered by cyber insurance claims.
- May not allow you to use newer applications.
A municipal IT budget should account for hardware maintenance, upgrades, and replacements to ensure outdated hardware does not negatively impact your operations. Make sure your budget accommodates the following:
- Hardware Replacements: Budget for replacing outdated servers, workstations, networking equipment, and storage devices.
- Hardware Upgrades: Budget for upgrades, such as upgrading eligible workstations from Windows 10 to Windows 11.
- New or Upgraded Software Licenses: When you upgrade or replace hardware, you may need to budget for new or upgraded software licenses.
- Data Migration and Backup: Budget for the cost of migrating data from old hardware to new systems while ensuring it’s backed up.
- Extended Warranties and Support Contracts: If you stay on certain end-of-life hardware, you may need to budget for extended warranties and support contracts so that the hardware can still be maintained and made as secure as possible.
- Third-Party Support Services: You may need to budget for a third-party to maintain and secure your legacy systems after the vendor stops supporting them.
- Decommissioning Services: Budget for the cost of safely decommissioning and disposing of old hardware while complying with environmental regulations and standards.
- Contingency Funds: If you do not replace your hardware on a specific timeline and let it go past end of life, then you may need to budget for unexpected costs or emergency replacements if hardware failure occurs.
Hardware as a Service (HaaS) May Be Good for Your Budget
For municipalities leaning toward as many operational expenses as possible, HaaS is a good option. With HaaS, you can access and use hardware resources without having to purchase or own the physical devices outright.
HaaS providers often refresh hardware regularly to ensure users have access to the latest technology. This means municipalities can benefit from up-to-date and more efficient hardware without worrying about the cost of purchasing new equipment.
Action items:
- Assess the age of your hardware assets.
- Identify any assets at or near end of life. Some common end of life risks include:
- Windows Server 2012 (end of life now)
- Windows 10 (end of life October 2025)
- Windows Server 2016 (end of life January 2027)
- Budget for upgrades and replacements—the upfront investment will eventually pay for itself through lower support costs, increased operational productivity, and less chance of sudden equipment failure.
By accounting for end-of-life costs in a municipal IT budget, you can effectively manage the transition from end-of-life hardware to new systems—ensuring minimal disruption to your operations.
4. HAVE I RECENTLY EVALUATED OUR ISP OR TELECOM PROVIDER?
Have you used your current providers for many years? Are you locked into a multiyear contract? If so, those are clear signs that you could potentially shop around and lower your ISP/telecom costs. We’ve seen many towns and cities unknowingly suffering from poor yet expensive service, when higher quality and less expensive service exists. If you’ve neglected to examine or challenge this line item for many years, a switch in providers or a renegotiation may potentially save you money.
Action items:
- Use IT professionals to help you shop for competitive ISP and telecom options, especially if you haven’t sourced options in a long time.
- Use their information to see if you can reduce your costs while increasing quality of service—either through negotiating with your current provider or switching to a new provider.
5. ARE MY IT SUPPORT COSTS UNPREDICTABLE?
Many towns and cities use IT vendors or contractors that seem inexpensive on the surface but usually gouge a municipality’s
budget with expensive and unpredictable billing during the year. If your annual IT support costs are too unpredictable, you
can save money with a more efficient model that includes proactive IT support with a predictable monthly fee.
Action items:
- Look at your IT support costs. Do they vary wildly month to month, or year to year? Are you able to predictably budget for these services?
- If you see unpredictability, source more proactive IT support options and compare those costs—and what you’re getting—to your current IT support.
- Consider switching to a proactive IT support model with predictable budgeting so that a variety of commonly needed services are all under one fixed cost umbrella.
How Municipalities Are Adding AI to Budgets
Municipalities are increasingly leveraging artificial intelligence (AI) to enhance efficiency, improve services, and address various challenges. It’s a fascinating topic, but sometimes AI can seem impractical and too cutting-edge when you hear real world examples discussed in presentations or in the media.
To bring the discussion down to earth, we’ll address some of the common questions we hear about AI and municipal IT budgeting.
How does AI fit into an IT budget?
You’ll find AI increasingly embedded in the tools and platforms you already use. As a result, it is unlikely that you will need a separate AI line item or a large portion of your budget devoted to fancy AI tools. Instead, think of AI as a technology layer that touches multiple budget categories.
For most municipalities, AI enhances existing investments across your IT infrastructure, cybersecurity tools and solutions, data management activities, and resident services.
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So, you’ve got the components and you’ve taken a stab at some numbers. Looking at your current IT budget (or lack thereof), you might wonder what an IT budget should look like.
We’ll provide two examples that show what might be sufficient for a small and a medium municipality.
SMALL MUNICIPALITY BUDGET
A small municipality can budget for IT with a few line items. For example, a municipality of 5,000 people might have the following annual budget.
Note that each of the categories are not overwhelming to a small municipality. The few items in the IT budget all fit within the structure. Operational and capital expenses are noted, and most basic IT best practices are followed. The budget gives no insight into how the budget connects with the municipality’s vision, but this will either be more apparent in the overall budget document or give the municipality an opportunity to tie technology and vision together better next year.
MEDIUM MUNICIPALITY BUDGET
In this municipality of 20,000 people, there are simply more components that need to be tracked. They organized information slightly differently although all the components we’ve discussed are included.
As you can see, a larger municipality has more IT “stuff” to track—but the categories we provided in this whitepaper can expand to account for extra line items.
Many municipalities use simple spreadsheets for their IT budgets, especially if they are not terribly complex. Eventually, these IT budgets make their way into the overall municipal budget. Specialized IT budget and strategic planning apps exist that may help with adding structure and sophistication to your process.
