RICHMOND, Va. — Virginia is 18 days away from a state shutdown if lawmakers cannot reach a budget deal before the current spending plan expires.
Negotiations between the House and Senate have been ongoing for months, with the future of a sales and use tax exemption for data centers at the heart of the debate.
Friday, the House unveiled what leadership and budget negotiators said is its latest offer to the Senate, coming less than a week before lawmakers are scheduled to return to Richmond to vote on a finished product.
But Senate leadership said they were "disappointed" and called the move "unprecedented."
"It is an opportunity we think to continue the conversation. We put forth our best offer. This is a proposal for a conference report," Speaker Don Scott (D-Portsmouth) said.
The House said the proposal includes many of the Senate's spending priorities.
"Three-percent raises for teachers in both years, and expanded access to school construction grants, special education services and school breakfasts," lead House negotiator Del. Luke Torian (D-Prince William) said. "This proposal also includes an additional $3.1 billion for Health and Human Services, fully funding Medicaid and CHIP forecast, and new SNAP costs due to HR1. It also provides premium access for Virginia's losing their federal health care subsidies."
At the local level, the proposal includes the Senate's $20 million for improvements and repairs Richmond's water treatment plant highlighted in an April 2025 report from the Virginia Department of Health. It also creates a Regional Water Workgroup that shall "review and make recommendations" related to maintenance, improvements, staffing and operations at the plant "to ensure its reliability as a supplier of drinking water."
"The Avula Administration is grateful to the House, the Senate, and the Administration for their diligent work on the biennial budget. We are closely following the developments, and will continue to monitor as the process continues," said Mira Signer, Press Secretary for Mayor Danny Avula, in response to a request for comment from CBS 6 about the latest proposal.
The proposal also includes a new allocation of over $10 million to the Department of Environmental Quality to address environmental issues at the Shoosmith Landfill in Chesterfield.
"Chesterfield is grateful the House conference proposal recognizes the urgency of environmental protection and closure activities at the Shoosmith Landfill. This is a positive milestone and we appreciate the collaboration among our state partners. As the budget process continues, we look forward to finalizing a comprehensive, long‑term solution that safeguards public health, the environment, and taxpayers. Until the General Assembly completes its work and the Governor acts, we will continue coordinating closely with state and federal agencies and stakeholders," a spokesperson for Chesterfield said in a statement in response to the proposal.
Lawmakers say they have also reached a deal with Gov. Abigail Spanberger to create a recreational retail marijuana market through the budget, after she vetoed earlier legislation.
"It's just a matter of finishing the legal edits," said Del. Paul Krizek (D-Fairfax), one of the patrons of the legislation. "The whole compromise should be ready by Tuesday morning."
But, on the central sticking point, the data center sales and use tax exemption, the House is holding the line.
The exemption is set to expire in 2035, but the Senate wanted to eliminate it next year, saying it costs the state nearly $2 billion in revenue each year, well beyond what was expected when it was extended in 2016.
House leadership and Spanberger have said data centers need to pay their fair share, but that eliminating the exemption early would hurt Virginia's business reputation. The new budget proposal creates a commission to examine all impacts of the industry and make recommendations by November.
Scott, who attended Thursday's Google event in Chesterfield, addressed the data center debate.
"We're not in a position to demonize any industry that's been good partners with us, but we are in a position to make sure that we hold them accountable," Scott said. "The question is not how we got here. The question is, how we fix it. But fix it responsibly, in a non-disruptive way. And the answer is not to blow up Virginia's families with a budget fight, they're counting on us."
Spanberger said she supported the House budget at it is one that "meets the moment" and added it was created in close coordination with her administration.
"The proposal is specific, it is substantive, it is balanced, it is purposeful, and that's reflected, certainly, in the funding priorities that exist within this budget. And it makes investments in public schools and infrastructure, affordable housing, our economy across Virginia," Spanberger said in a press call on Friday afternoon. "Importantly, as we are headed towards July 1, it is important that we have the certainty of a state budget, both for the for our ability, the localities and their ability to be able to plan and fund their local services, but also because with all of the chaos that we have coming out of Washington."
"We're excited to be at this point in time with the budget. We know we should have been here sooner, but we didn't get there, but we're here now," added Del. Terry Austin (R-Botetourt), a Republican member of the House budget team. "It's a great proposal, it's taken both sides into consideration, and a lot of work's gone into it. So, I think we do have a bipartisan issue."
Late Friday afternoon, the lead Senate budget negotiator Senator Louise Lucas (D-Portsmouth) released a statement on X that said, "the House conferees did not continue conversations with the Senate conferees."
"The Senate conferees have also worked on a proposal and are ready to discuss it with the House conferees–in accordance with our procedures. The Senate conferees and I remain committed to getting this right for Virginians," Lucas wrote. "The House and Governor insist on studying the impact of data centers when the issue has already been studied by the legislature. Virginians are dealing with the negative consequences of data centers today. They expect action now rather than waiting another year and want us to protect their interests rather than those of wealthy corporations."
Lucas then detailed what she said the Senate proposal to establish "a tiered state impact fee on data centers. The fee would be applied on a data center's permitted generator type and energy capacity–generating $1.7 billion in revenue."
Lucas said the funding would be used for rebates for taxpayers, a 4% increase for teachers in each year of the budget, and improving access to child-care.
Spanberger was asked about Lucas' letter during the press call and said ever since the Senate first raised the issue of the tax exemption, they had never put out a proposal until now.
"So, I think it marks important progress that there is now some level of definition as to what it is that the Senate actually wants to do. I would note that it is June 12 and we are rushing towards the end of the month, which is a serious, serious deadline," said Spanberger. "Importantly, there is no budget language associated with that tweet, and when there is, I'll certainly do a more thorough review of it, but we cannot govern just by tweets. We need a full budget, because the people of the Commonwealth are depending on us."
In response to reports of Spanberger's comments, Lucas posted, "We worked with the House and the Governor to come up with multiple compromises. We answered her questions and she continued to move the goal post every time. Any notion that she didn't know what our proposal was is just complete [expletive.]"
The House of Delegates are set to return to Richmond on June 18 to vote on a budget. Scott told reporters if a deal is not reached with the Senate by that time, they would move forward with the House proposal.
The Senate is scheduled to return to vote on a budget on June 22.
State funding runs out on June 30.
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