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New AI Executive Order – What States and Local Governments Need to Know
On December 11, 2025, an executive order (EO), “Ensuring a National Policy Framework for Artificial Intelligence” was issued and created some uncertainty for state and local governments navigating AI governance. While the order is in line with the government’s “winning the AI race” intentions, it has left many local government leaders with more questions than answers. Through the noise, it has made one thing clear – your agencies’ ability to govern AI internally hasn’t changed.
How the Order Impacts States
Because of the federal government’s intentions of winning the AI race, innovation is at the forefront. To keep state regulations from hindering innovation, the EO gives the federal government oversight authority. Here’s what that means:
- Within 30 days of the EO, an AI Litigation Task Force will be established to challenge state AI laws inconsistent with federal policy
- Within 90 days of the EO, the Department of Commerce will evaluate existing state laws to identify “onerous” state laws that conflict with federal policy
- The Federal Communications Commission will decide whether to create a national standard for AI reporting that overrides state laws
- The Federal Trade Commission will clarify when state laws requiring AI models to alter their outputs may violate federal consumer protection rules
- Potential loss of federal broadband funding (BEAD program) for states with “onerous AI laws,” making these states ineligible for non-deployment funds
The administration’s core argument is clear in the order’s language: “United States AI companies must be free to innovate without cumbersome regulation” and that “excessive State regulation thwarts this imperative.”
What’s Not Changing for States
Here’s what many are missing in the headlines. The executive order explicitly states that it “shall not propose preempting otherwise lawful State AI laws relating to: child safety protections; AI compute and data center infrastructure; State government procurement and use of AI; and other topics as shall be determined.”
This means your AI policies can remain the same for:
- State government procurement of AI systems
- Internal AI use and governance policies
- AI use case inventories and approval workflows
- Risk management and oversight of AI deployments
As emphasized in recent policy discussions, the EO’s preemption efforts target private market regulation, not local public operations. State and local governments still hold full authority over their internal AI use and governance.
What This Means for Your AI Governance Strategy
Although there is uncertainty around this EO, it should be made clear that this news shouldn’t freeze your AI initiatives. As of today, executive order 14179 and OMB Memorandum M-24-10 still apply, meaning that existing state laws remain intact until challenged, and developing a strategy with AI governance will help your agency stay ahead of operational inefficiencies.
How VIP and Assembly Industries Can Help Navigate This Complexity
The evolving federal-state AI landscape requires agencies to strengthen internal governance while maintaining the flexibility to adapt to regulatory changes. That’s where VIP’s partnership with Assembly AI becomes strategic.
Assembly AI provides an enterprise AI platform with pre-built agents designed specifically for government compliance and operations. Their solution helps agencies meet federal requirements (OMB M-24-10, EO 14179) while building AI capabilities that work regardless of how federal-state tensions resolve. Assembly AI does this through their agents that:
- Automate compliance documentation (AI use case inventories, risk assessments, audit trails)
- Provide pre-deployment risk assessments and continuous bias monitoring
- Deploy citizen-facing conversational AI with built-in compliance controls
- Enable intelligent search across regulations and policies with full source citations
Our partnership with Assembly Industries, allows us to bring strategic implementation expertise to help your agency assess AI governance needs, implement Assembly’s platform, and navigate regulatory uncertainty while maintaining operational momentum. This isn’t just about compliance tools; we’re enabling agencies to see operational improvements quickly, demonstrate clear returns on technology investments, and transform how government IT delivers value to constituents.
The executive order has created a complex moment for state and local government AI adoption. But agencies that focus on strengthening their internal AI governance—the area explicitly protected from federal preemption—will be positioned for success regardless of how the EO challenges unfold.