The Lazlo Defense Force (LDF) is a sort of open secret in some ways. Most nations believe Lazlo only has a volunteer militia but it does in fact have a full scale military at present. While for quite some time the volunteer militia was sufficient for many years, near the end of the first century PA the leaders in Lazlo could see the writing on the wall as it were. The Coalition States were becoming more and more aggressively militant towards non humans or magic users and while not "purposefully" expanding their territory, it was exactly what they had been doing in practice. With the tensions between the CS and Tolkeen becoming and ever increasing powder keg, it was obvious to the powers in lazlo that a mere militia would no longer make the grade for their own defense when the time came for such a thing. Add to that the serious issue of the Xiticix and their exponentially increasing numbers and the leaders at Lazlo felt there really was no choice but to establish and expand a dedicated defense force.
Beginning as early as 90 PA, Lazlo began aggressively, though relatively quietly, expanding their forces at a highly increased pace. Taking advantage of limited anonymity, they sent new recruits in "batches' to the mercenary training school in Merctown while also training new recruits themselves in Lazlo. Increased purchasing via third parties and the black market (as the black market by and large is just A market in a place like Lazlo) has also allowed the city-state to increase their wargear inventory multifold in a very short period of time.
Unlike Tolkeen, Lazlo took a much more pragmatic path for their defense, going with a largely conventional force and looking to augment it with magic use among other things (technowizardry devices) as opposed to the overly heavy use of magic that Tolkeen was espousing. To the minds in Lazlo, much like their own city-state, their defenses should mirror what and who they are and not depend on one aspect of thier existence no matter how powerful that aspect may have the potential to be.
When the Campaign of Unity was annouonced in 105PA, and war declared on Tolkeen, Lazlo was well into it's new Defense Force initiative and the CS's declarations only cemented the fact that Lazlo had indeed chosen the right course of action.
General Structure - https://worldofjaymz.wikia.com/wiki/Lazlo_Military_Structure
General Overview - https://worldofjaymz.fandom.com/wiki/General_Overview