Virginia lawmakers approved a two-year spending plan Monday, ending months of negotiations as the deadline to avoid a partial government shutdown approached.
The Senate approved the plan with a 23-16 vote, and the House of Delegates passed it 71-22. Now, it heads to Gov. Abigail Spanberger鈥檚 desk.
The votes end a saga that included name-calling and finger-pointing, as senators hoped to end a sales tax exemption for data centers. The House and Spanberger expressed concerns about the potential consequence of taking that step, hoping to keep existing agreements in tact.
The compromise, detailed late last week, keeps the sales tax exemption in place but calls for a new data center electricity consumption tax.
鈥淭his conference report took longer than most, but the senate conferees and I spent a lot of time trying to find the right balance between compromising with the House and the governor and having something that made the data centers pay their fair share,鈥� Sen. Louise Lucas said. 鈥淭his budget achieves that right balance, and the Senate and House and the governor鈥檚 office all had input into this final project.鈥�
Under the approved budget, there’s an $0.011 fee per kilowatt-hour of electricity used. It’s expected to create $600 million in additional revenue in each of the next two fiscal years, according to state projections.
In a statement after both chambers approved the budget, Spanberger called the statewide energy consumption tax the first of its kind in America, and an “idea I first proposed this spring, to ensure this industry pays its fair share and does not drive up costs for Virginia families.”
At least one group, Data Center Coalition, criticized it.
While Lucas said the budget package includes protections related to noise pollution and water conservation, she stressed the details of the proposed compromise, adding “expiring the data center sales and use tax exemption would be the best plan forward. However, this conference report provides an alternative path where data centers pay their fair share to support services for Virginia and ensure structural balance.”
Separately, the package includes a 4% raise for teachers and a 3.5% raise for other state workers.
It also paves the way for Virginia to create a retail marijuana market, an effort that former Gov. Glenn Youngkin vetoed several times. The marketplace, Spanberger said during an announcement last week, will open July 1, 2027. There will be 350 retail licenses available, though they won’t all be available at once.
“There’s a lot of good in the budget as it relates to pay raises for teachers, pay raises for our state employees, some much needed investments in our infrastructures and things of that nature, as well as raising the standard deduction,” Del. Terry Kilgore said Monday.
The plan increases the standard deduction to $9,200 for single filers and $18,400 for joint filers.
The debate over the tax exemption for data centers, which isn’t scheduled to expire until 2035, escalated in recent weeks. In a social media post, Lucas referred to Spanberger as “Data Center Diva” and House Speaker Don Scott as “Amazon Don.”
For weeks, Virginia faced its first ever government shutdown as July 1 approached. In a statement, Spanberger called the budget a compromise and added, “Failing to pass a budget would have been unprecedented in the history of our Commonwealth 鈥� and it was never an option.”
If Spanberger proposes changes to the budget package, lawmakers would have to return to Richmond for another special session.
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