After three lean spending years, pent-up demand and new funding is finally triggering slow but steady growth in the state and local (S&L) government IT market space. According to IDC, overall state IT spending should jump 7.6% by the end of 2005, and another 4.5% by the end of 2006. The compound annual growth rate (CAGR) from 2003 to 2008 will be 7%. Overall local spending should increase 4.7% between by the end of 2005, and 3.8% by the end of 2006. The CAGR from 2003 to 2008 is 6.3%. Hardware spending is a mixed bag. IDC forecasts substantial increases for laptops, handhelds, and networking equipment, but desktop PCs will show a decline and high-end servers are slowly being displaced by popular and less expensive “volume” servers. The top five states for IT spending will see slow steady growth now through 2008. Many other states will see slightly higher growth, with compound annual growth rates (CAGRs) of over 5%.