RICHMOND, Va. — Virginia's state budget passed both the House and Senate Monday, ending a standoff over data center tax policy that had stalled negotiations for months.
The two-year spending plan includes 4% raises for teachers, 3.5% raises for state employees, higher standard deductions for taxpayers, and a new energy consumption fee on data centers expected to generate $600 million each year for the life of the budget. The data center sales and use tax exemption remains in place.
The Senate approved the measure 23 to 16 before it cleared the House. The deal was reached less than two weeks before the current budget expires on June 30.
Watch related coverage: State Sen. Lucas brings data center debate to VB amid stalled budget talks
Democratic leaders say the budget represents a significant compromise after months of negotiations involving the House, Senate, and Gov. Abigail Spanberger over how much Virginia's data center industry should pay in taxes and fees.
In a statement, Sen. Louise Lucas (D-Portsmouth) said:
"This has been a long, hard-fought battle. We've been toiling with this since February, trying to make sure we got something in the budget that addressed the concerns that our citizens all across the Commonwealth had with the sales and use tax for data centers that we finally got there."
House Appropriations Chairman Luke Torian emphasized that Republicans were part of the process and that lawmakers chose to preserve Virginia's longstanding commitment to business by keeping the data center sales tax exemption in place.
Watch related coverage: Gov. Spanberger backs House budget proposal as deadline nears
Del. Luke Torian (D-Prince William) said:
"There's no vote that you saw today came about because the Republicans were involved in the organization. They were not left out of the conversation."
Republicans say the budget misses the mark on affordability for Virginians. Senator Ryan McDougle, who voted against the measure, said the budget spends billions of dollars in additional revenue while leaving families with higher costs.
Sen. Ryan McDougle (R-Hanover) said:
"What it does not do is it doesn't take away the tax that every employee is going to pay on their payroll. It still means that many Virginians are going to pay more in their power bill. It spends more money, continues to raise money from Virginians."
Other Republicans raised concerns about potential future tax increases and the decision to establish a marijuana marketplace through the budget process rather than separate legislation, with sales starting July 1, 2027.
Watch related coverage: Spanberger, lawmakers announce compromise to open retail marijuana market in Virginia
Del. Glen Sturtevant (R-Chesterfield) said:
"I don't want marijuana shops popping up like they've gotten in Colorado and California. I don't think it's good for families, or neighborhoods or the Commonwealth as a whole."
The budget now heads to Gov. Spanberger's desk for her consideration. In a statement, Spanberger said:
Today, the General Assembly has moved forward with a budget proposal — and that means we are keeping our government open and delivering for the 8.8 million people who call our Commonwealth home.
There is a lot to be proud of in this budget. It delivers raises for our teachers and public employees, makes new investments in our schools, includes a RGGI credit for residential customers and small businesses, and takes other tangible steps to make Virginia more affordable — all while protecting families from the devastating cuts in the so-called ‘One Big Beautiful Bill.’
Importantly, this budget positions the Commonwealth to be a national leader on data centers. For the first time anywhere in America, Virginia will institute a statewide energy consumption tax on data centers — an idea I first proposed this spring — to ensure this industry pays its fair share and does not drive up costs for Virginia families.
This is a compromise proposal — one my administration helped craft — and it builds a strong foundation for further discussions about the future of this industry in Virginia on issues like environmental and community impact.
Failing to pass a budget would have been unprecedented in the history of our Commonwealth — and it was never an option. My focus remains exactly where it has always been: lowering costs for Virginians, delivering for our schools and communities, and supporting the families who count on their government to meet its most basic responsibilities.
This story was initially reported by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy. To learn more about how we use AI in our newsroom, click here.
