The recent Axiom 2027 In-House Legal Budget Report provided an interesting glimpse into how in-house legal departments are paying for AI. The bottom line: They largely aren't being given the money for it. When the business hands legal an AI initiative, no dedicated budget comes with it a whopping 92% of the time. Instead, teams cover the cost by reshuffling. 75% draw on the existing technology budget, 65% pull from other budget categories, and only 22% ask the CFO for additional funds.
That finding raises a question the report didn’t answer: How easily can legal actually move money between budget lines? We asked, and the answer complicates the “just reallocate” model considerably.
Reallocation usually requires a signature
We asked the 400 legal leaders in the survey how they are allowed to move funds between budget categories such as outside counsel, flexible talent, headcount, and technology. Only 14% said they can move money freely without approval. Another 34% need a manager’s approval, and nearly half (48%) need the CFO’s sign-off. Another 4% said shuffling between categories is limited.
All told, 86% of legal leaders can’t shift money from one budget line to another on their own authority. This matters because reallocation is the primary way AI is being funded. Legal departments are being asked to self-fund a new category of spending through a mechanism that, for most of them, runs through someone else’s approval.
Jimmy Yun, Director and Associate General Counsel at Meta, described the squeeze in the report. Legal departments, he said, are being asked to govern, implement, and evaluate AI “all from the same budget line that was already stretched.” The approval data adds a second layer. Namely, the line is stretched, and the authority to restructure it often lies outside legal.
The flexible option is gated, too
The same pattern shows up when we asked all 510 respondents, legal leaders and CFOs alike, what limits the in-house team operates under for specific outside resources.
For law firms, only 3% said the team can engage as needed within the overall budget. The rest described some form of control. 30% require pre-approval above certain thresholds or for all engagements, 29% limit firms to specific types of work, 19% set limits that can be exceeded only with approval, and 16% use preferred-provider panels with limits.
The more revealing result is for flexible legal talent and ALSPs, the resources teams use to add capacity without adding fixed cost. For this category, just 3% reported no limits. 30% restrict ALSPs to specific types of work, 28% require pre-approval, and 22% set limits that can be exceeded only with approval. In practice, the lower-cost, scale-up-and-down option is controlled about as tightly as the law firm spend it is meant to relieve.
There is an irony in that. The report found that 83% of CFOs suggest or actively encourage their legal teams to use ALSPs. Yet across all respondents, 28% say ALSP engagements still require pre-approval, and most of the rest describe other limits. The encouragement is real, but at many companies it comes with a gate.
CFOs say they want more flexibility, too
None of this suggests CFOs are the obstacle. Budget controls exist for sound reasons, and the report found that 99% of CFOs and legal leaders rate their working relationship as good to excellent.
It does suggest the two sides may want the same thing without having built it yet. Asked what would make the legal budget more valuable, 34% of CFOs chose “increased flexibility to reallocate resources,” tied for second place on their list. Only better ROI measurement ranked higher.
The report’s flexibility data points the same way. When legal leaders described how they protect budget flexibility for technology investments that they can’t forecast, working with the CFO on mid-year adjustments was among the less common approaches, cited by about one in six. More frequent revision cycles and cross-functional budget pools were more common. Indeed, more formal, planned flexibility, agreed to with finance in advance, seems to be the exception rather than the rule. For practical guidance on tracking costs and adjusting spend as needs change, see Axiom's legal spend management guide.
Where the budget conversation might shift
For a GC entering 2027 budget negotiation, the implication is that the size of the number is only part of the ask. Most teams expect a bigger budget in 2027: 83% of respondents anticipate an increase. But a larger budget with fixed walls between its lines may do less for an AI program than a slightly smaller one that legal can move within.
That points to a different kind of request. Rather than asking only for more money, legal leaders might ask for pre-agreed reallocation authority. That could mean a band within which funds can move between categories without requiring case-by-case approval, or standing approval to use ALSPs for defined types of work up to a threshold. Both address the funding gap the report documented without requiring new money.
Legal is being asked to pay for AI by moving money around. For most departments, the next budget cycle is the moment to ask for the authority to do that.
Methodology note: Data are drawn from the 2027 Axiom In-House Legal Budget Report survey, conducted online by InsightDynamo on behalf of Axiom, June 9–15, 2026, among 510 in-house legal and finance leaders at companies with at least $250 million in annual revenue across six countries. Findings on moving funds between budget categories reflect the 400 legal leader respondents. Findings on limits for law firms and ALSPs reflect all 510 respondents. Some findings were not included in the published report.