The General Assembly concluded the 2026 legislative session on Saturday without passing a biennial budget as the two chambers continue work to resolve differences regarding data center tax exemptions.
Lawmakers are expected to return to Richmond in a special session to take up the 2027-2028 spending bill. House of Delegates Majority Leader Charniele Herring introduced a joint resolution to ask Gov. Abigail Spanberger to call for a special session to begin on April 23. The General Assembly passed the resolution Saturday evening.
Sen. Louise Lucas, chair of the Senate Appropriations Committee and a budget conferee, has said she will not send a budget to Spanberger without a clause to end the tax exemptions for data centers in 2027. Those tax exemptions are slated to expire in 2035.
Del. Luke Torian, chair of the House of Delegates Appropriations Committee and a budget conferee, has said that it is crucial that Virginia not go back on contracts it signed with data centers that include those tax exemptions. Spanberger echoed Torian, saying that the commonwealth must honor those agreements.
In Virginia, data centers that meet certain requirements, including investing at least $150 million and creating at least 50 jobs — or, in economically distressed localities, $70 million and 10 jobs — are exempt from paying state retail sales and use tax on computers and other equipment.
A proposal to end the data center sales and use tax next year was included in the state Senate spending bill but was absent from the House of Delegates spending bill. The Senate proposal could generate nearly $1 billion in general fund revenue over the biennium.
All parties agreed that data centers must pay their “fair share,” but Lucas and Torian appear split on what that could look like.
The two chairs speak on the impasse
The lawmakers said on Friday that budget negotiations were moving forward after they met with data center representatives. The two appropriations chairs said the data center coalition will need to come back to lawmakers with an amount they are willing to pay and the lawmakers will determine if that is “fair.”
The deadline to present the budget to the General Assembly was Thursday at 5 p.m., in order to meet a requirement to give lawmakers 48 hours to read the legislation before they vote on it. The body was constitutionally required to adjourn “sine die,” which signifies the formal end of the regular session on March 14.
In a speech on the House floor Thursday evening Torian announced that there was no agreement between the two chambers.
“The other body has taken the position that a budget cannot be finalized, at least in their view, without eliminating the data center sales tax incentive,” he said. “This is not a position the House can or should agree to.”
He added that Virginia’s reputation as a “reliable place to do business” could be called into question if the tax exemptions were to end early.
Opponents of the effort to end the tax exemption program in 2027 have said that Virginia would no longer be a competitive state to attract more developers in the billion-dollar industry.
Supporters of the effort to end the tax exemptions early have said the tax revenue generated could pay for child care programs, school construction and cover funding cuts to federal programs.
The data center tax exemption was implemented in 2008 and saved the industry nearly $2 billion in fiscal year 2025. That amount is significantly greater than projections in fiscal year 2009, when the state Department of Taxation said it would cost $1.54 million, or about $2.37 million accounting for inflation, according to a report by Virginia Public Media.
Lucas initially supported the tax exemptions when they were passed in 2008. She addressed her 2008 vote on the Senate floor Friday and said that the goal was to incentivize the industry to create jobs in Virginia. Since then, Virginia has become known colloquially as the data center capital of the world.
Virginia’s data center boom is attributed not only to the tax incentives, but the proximity to a strong fiber network, access to land and other resources. That industry growth has added to higher energy prices and strain on the grid, Lucas said.
“Our objective has always been to invest in making life more affordable for Virginians by producing a balanced budget that invests in education, health care and other items that promote affordability,” she said. “To make these investments we need revenue, growth that supports our ongoing spending.”
“I will not back down from this,” Lucas said.
She added that the biennial budget will be ready “long before” June 30, when state funding is set to run out.
Among the bills the General Assembly passed on Saturday were:
Bill to legalize recreational marijuana sales passes
A bill to allow the sale of recreational marijuana to people 21 years of age or older, starting on January 1, 2027, is heading to the governor’s desk.
Lawmakers passed the cannabis framework bill on Saturday that will allow the state to issue licenses for up to 350 retail cannabis stores before January 2028. The cannabis board can decide to issue more after that date. There are currently 402 ABC stores.
The framework seeks to ensure that retail licenses are issued evenly across the commonwealth.
The cannabis board will determine a process to give a number of licenses to those who lived between 1999 and 2025 in an area determined to have been disproportionately policed for marijuana crimes, or who lived for at least three of the past five years in a historically economically disadvantaged community and meets one or more of the following criteria:
- Been convicted of marijuana crimes;
- Is closely related to those who have been convicted of marijuana crimes;
- Has attended a public elementary or secondary school located in a historically economically disadvantaged community for at least five years;
- Has received a Federal Pell Grant or attended a college or university for at least two years where at least 30% of the students, on average, are eligible for a Federal Pell Grant;
- Are U.S. military veterans; or
- Have qualified for financial assistance or relief from the U.S. Department of Agriculture as a distressed farmer in the last five years.
The framework also allows for five large indoor cultivation facilities of up to 35,000 square feet.
The state will include a 6% tax. Localities can add 1% to 3.5% in addition to the state tax. The tax rate is in line with most other eastern states regarding recreational sales. Some western state taxes are much higher with Washington state at 37% and Montana at 20%.
Bill to study VMI passes
The General Assembly also passed a bill to establish a task force to examine higher education at the Virginia Military Institute.
The legislative move was among the latest developments in a fight that began between Virginia Senate Democrats and then-Gov. Glenn Youngkin early last year. They’re also a continuation of the tension that’s been brewing at the institute ever since former Gov. Ralph Northam ordered an investigation of the school in fall 2020. That investigation and the replacement of VMI’s superintendent led to a push by some alumni for Youngkin to rein in what they saw as the school’s “woke” culture adjustments.
Lexington-based VMI has been under fire from some General Assembly Democrats since its board voted in February 2025 not to renew the contract of Maj. Gen. Cedric Wins, the first Black superintendent of VMI. The board has not explained why Wins was removed, indicating only that performance and “institutional needs” were considered.
Del. Dan Helmer, D-Fairfax, patroned the bill and confirmed it is a direct result of Wins’ ouster.
The task force is charged with determining the quality of VMI graduates through graduation rates, officer training performance and any data related to post-graduate performance in the U.S. military.
The task force will also evaluate the rigor of VMI’s current academic curriculum compared to other higher education public institutions in Virginia, if VMI’s academic offerings meet the needs of the commonwealth and whether additional programs should be approved. The task force will audit actions taken by the leadership of VMI following the release of the 2021 special investigative report to the State Council of Higher Education for Virginia, ordered by Northam in 2020.
The goal of the task force will be to determine if VMI has initiated changes to its policies, values and preventative, investigative and disciplinary procedures to reduce acts within its student body that could be perceived or classified as racist, sexist or misogynistic or as an act of sexual harassment or sexual assault. It will also work to determine if VMI has made efforts to distance itself from the Lost Cause narrative or other celebrations or promotions of the Confederacy in the American Civil War, among other issues.
The task force report will be due on the first day of the 2027 General Assembly session.
Bill to legalize electronic ‘skill’ games passes
The General Assembly also passed legislation to legalize and regulate the so-called “skill” games often found in convenience stores.
Bill to allow collective bargaining for state employees passes
This bill would include teachers, firefighters, state workers, home care workers and service staff at public universities to unionize.
We’ll publish a longer list of bills before this year’s legislature, and how they fared, on Tuesday.