As we approach the end of the quarter, our team has tracked over 10,600 opportunities across the state, local and education markets in Q3, closely mirroring the market activity at the same point last year. Of the roughly $4.4 billion in opportunities, the largest share continues to be dedicated to IT services, including managed services, systems integration, SaaS and cloud solutions.

What does this mean? It’s good news that the market is tracking to be on target. These investments align with overall CIO priorities, which emphasize investments in cloud, services and SaaS. It is also worth mentioning that the education sector (both K-12 and higher education) accounted for 65 percent of these opportunities.

State Revenues Growing Slowly

The latest research report from the Urban Institute shows that state revenues have seen sluggish growth in the first half of 2024, with nominal state tax revenues increasing by just 3 percent in Q1 and 7.2 percent in Q2, but real growth remains minimal due to inflation. Personal income tax revenues fell, while corporate income tax revenues rose modestly. Economic uncertainty and recent tax policies, such as income tax cuts and rebates, have contributed to this slowdown. States are relying on rainy-day funds, but the long-term fiscal outlook remains uncertain.

In a little bit of good news, the Federal Reserve announced an interest rate cut of 0.5 percentage points to stimulate the economy. Recent Pew coverage breaks down how this announcement will affect state and local government finances by lowering borrowing costs for infrastructure projects and other investments.

Positive Impact: Lower rates may lead to increased borrowing, refinancing older debt and higher tax revenues due to boosted economic activity and stronger stock market performance.

What does this mean? While the economy continues to show signs of improving, you should be aware of tight budgets and prioritize value-driven solutions. The investment priorities of managed services, SaaS, cloud and overall optimization are going to be an ongoing strong investment area for your buyers.

See you next month!

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