Virginia lawmakers approved a state budget agreement Monday, sending the deal to Gov. Abigail Spanberger’s desk just days before a potential government shutdown deadline.
The agreement comes after months of negotiations, with tax exemptions for data centers emerging as the biggest sticking point between the State Senate and House of Delegates.
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The compromise keeps existing tax breaks for data centers in place, while creating a new tax on the electricity those facilities use. That tax is expected to generate about $600 million each year for Virginia’s General Fund.
Supporters say the deal balances economic growth with making sure data centers contribute more to the state.
“This compromise will bring hundreds of millions of dollars into our budget and at the same time make sure that they are paying their fair share,” said Delegate Sam Rasoul, D-Roanoke.
Rasoul and Senator David Suetterlein, R-Roanoke, both pushed for ending tax exemptions for data centers during negotiations. Suetterlein said he believes the final agreement does not go far enough, criticizing the decision to maintain tax exemptions for data centers while increasing taxes elsewhere.
“There’s a sales tax increase for working Virginians envisioned in this budget and at the same time the world’s largest corporations will not be paying sales tax on their data centers,” Suetterlein said.
Rasoul said the agreement represents progress after years of debate over how Virginia should handle the growing data center industry.
“I think it’s a great step forward. No one thought that this would be a $2 billion line item when this started about a decade ago,” Rasoul said. “Trying to make sure that they’re paying their fair share is top of mind for everyone.”
The deal is also drawing criticism from groups on both sides of the data center debate.
The Chesapeake Climate Action Network is calling for a pause on new data center construction until potential environmental impacts can be studied.
“We want to see safeguards for water use, energy efficiency, environmental standards for land use,” said Zander Pellegrino, a spokesperson for the group. “Most importantly for us as an organization is that we want to see meaningful action to address the climate crisis.”
Meanwhile, the Data Center Coalition, a group representing the industry, criticized the agreement, saying the changes could make Virginia less attractive for future investment.
“With this sweeping package of regulations and tax hikes intended to claw back the state’s economic development agreements, the General Assembly is breaking its commitments to an industry that has invested hundreds of billions of dollars, pays billions in annual taxes, and supports tens of thousands of jobs, including many blue-collar union workers who face an uncertain future as businesses prioritize new investment in states with competitive and stable business environments,” said Josh Levi, President and CEO of the Data Center Coalition.
House GOP Leader Delegate Terry Killgore, R-Gate City, issued a statement after the votes, criticizing the budget but expressing relief that a government shutdown was avoided.
“The budget has finally passed, but not in a manner that should make any Virginian proud. More than 100 days after the General Assembly adjourned, lawmakers were forced to consider a budget that was substantially rewritten at the last minute and loaded with policy provisions that should have been debated openly during the regular legislative session,” said Delegate Killgore.
The budget also includes several provisions impacting Virginians, including:
- A plan allowing retail cannabis sales to begin July 1, 2027, with a maximum of 350 stores.
- Four percent raises each year for SOQ-funded school positions, including many public-school employees.
- $6 million for Virginia Tech’s patent research center.
- $20 million toward an inland port project in Washington County.
- Funding to explore options for speeding up projects along Interstate 81, including the possibility of adding a third toll lane.
The budget now heads to Spanberger’s desk, who will review the legislation before it becomes law. The budget has already seen support from Lt. Gov. Ghazala Hashmi, who calls it a win for Virginians.
“Today, the State Senate and the House of Delegates passed the biennium budget bill that prioritizes Virginians, working families, and the health of our economy in the face of Republican-led Congressional attacks on critical programs such as healthcare funding, food assistance for hungry children, and essential services that protect the wellbeing of our communities,” said Lt. Governor Hashmi.