Despite the recognition that information is a strategic asset to any state government, there is a relative dearth of research on the information systems (IS) function in state government. This stands in contrast to the number of articles devoted to e-government initiatives. IS departments however are central to state agencies’ efforts to develop optimal responses to demands from their internal and external constituents. The authors examine the connections between perceptions of critical agency capabilities (socialization, coordination, and systems) and the absorptive capacity of state IS departments from the perspective of IS workers and IS managers. Findings indicate that two critical capabilities (socialization and coordination) explained 62.5% of the variation in absorptive capacity for IS workers and 47% of the variation for IS managers. In addition, the influence of the relevant knowledge of IS workers and managers is found to have differing influences on agency capabilities.