Virginia lawmakers reach budget deal ahead of June 30 deadline

RICHMOND, Va. — Virginia budget negotiators reached an agreement on a new two-year budget Friday, according to lead Senate negotiator Sen. Louise Lucas (D-Portsmouth).

Lucas posted on X Friday evening that the new spending plan has been posted. The announcement came one day after she told CBS 6 that an agreement in principle had been reached.

The deal was reached less than two weeks before the current budget expires on June 30.

A list of the amendments can be seen here. A summary of the agreement can be seen here.

According to page 5 of the summary, the Conference report includes a consumption fee for data centers that will last for the life of the budget and is expected to generate $600 million each year.

A budget deal had been delayed for months due to disagreements between the House, Senate, and Governor Abigail Spanberger over data centers — specifically a sales and use tax exemption on computer equipment.

The exemption is set to expire in 2035, but Lucas wanted to get rid of it next year and said it cost the state more in lost revenue than was predicted (nearly $2b last fiscal year).

The House and Spanberger wanted to keep the exemption and argued it would harm Virginia’s business reputation but agreed data centers had to pay their fair share.

Spanberger had proposed a consumption tax for data centers in March.

Earlier this week, Lucas unveiled a new proposal that would keep the exemption and tax data centers based on the number of generators they have on site.

Josh Levi, President and CEO of the Data Center Coalition, spoke out Sunday against the compromise.

"Nothing about this hastily assembled scheme will make life more affordable for Virginians or encourage job creation. At a time when Virginia badly needs new jobs and investment, the General Assembly is adding more than a billion dollars in unnecessary new taxes that will raise costs on Virginians and Virginia businesses," he said in a statement. "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."

Along with the new consumption fee, the budget deal also creates a "Joint Subcommittee on Tax Policy” to study the sales and use tax exemption and report recommendations to the General Assembly by December 15, 2026.

Other Highlights

Among the other items included in the conference report:

• An increase in the standard deduction from $8,750 for single filers to $9,200 in taxable year 2027 and $9,300 in taxable year 2028. The increase for joint filers would increase on the same schedule from $17,500 to $18,400 to $18,600.
  
• It includes the deal reached by lawmakers and Spanberger for the creation of a recreational retail marijuana market, with sales starting July 1, 2027.
  
• It gives all localities the option to hold a referendum to ask residents if they want to create a new 1% sales tax that would be used to fund school construction (this was something that had been passed by lawmakers in previous years, but vetoed by former Gov. Glenn Youngkin).
  
• It has a 4% raise for teachers and state employees in each year of the budget.
  
• It puts $25 million towards a childcare pilot program where the state and employers would contribute to childcare costs for employees. The language said eligible families can make “up to 100% of state median income, with allowance for adjustments in areas with higher costs of living."
  
• It allocates $10.6 million to support the response and clean-up at the Shoosmith Landfill in Chesterfield County.
  
• It includes $15 million to support Richmond for the demolition of the Coliseum.

Lucas and House Appropriations Chair Del. Luke Torian (D-Prince William) shared the following joint statement on the agreement:

The Senate and House are both scheduled to return to Richmond on June 22. If the two chambers agree to the conference report, it will then go to Gov. Abigail Spanberger's desk for her signature.