House of Delegates conferees presented an updated biennial budget proposal on Friday that includes the legalization of retail cannabis and the creation of a commission to study the impact of data centers.
The House proposal does not include an end to the data center tax exemptions in 2027, eight years earlier than the current expiration, which has been a sticking point between the House and state Senate in the budget negotiations.
“The question is not how we got here, the question is how we fix it but fix it responsibly in a non-disruptive way,” House Speaker Don Scott, D-Portsmouth, said of the data center tax exemptions. “And the answer is not to blow up Virginia’s families with a budget fight, they’re counting on us.”
Scott introduced a “first in the nation” data center accountability commission in the House proposal which would investigate the effects of the facilities on energy costs, financial impacts, air quality, water conservation, renewable energy and community impacts. If adopted in the budget, the commission’s first report will be due in November of this year to allow lawmakers to pass “real lasting reforms” during the 2027 session, Scott said.
Governor Abigail Spanberger, who has line-item veto authority over the spending bill, issued her support for the House proposal in a statement on Friday.
“This is a balanced and purposeful budget proposal that will be impactful in investing in our public schools, our infrastructure, our localities, and Virginia’s economic growth. It includes raises for teachers and public employees, funding to address the devastating impacts of the so-called ‘One Big Beautiful Bill,’ and priorities that will help make Virginia more affordable,” she said. “I am confident that the General Assembly will send a budget to my desk that I can review and sign — on time. Because there is no other option.”
Del. Terry Austin, R-Botetourt County, a budget conferee, said that the proposal is a bipartisan one. He echoed Scott and Torian’s hopes that the state Senate will approve of it.
“We know we should have been here sooner but we’re here now,” he said. “It’s a great proposal, it’s taken both sides in consideration and a lot of work has gone into it.”
State Senate President Pro Tempore Louise Lucas, who chairs the Senate finance committee, said in a post on X that she was disappointed that the House conferees did not continue conversations with the Senate conferees. The Senate conferees have worked on a separate proposal that they were ready to share with the House, “in accordance with our procedures,” she said. Lucas released a high level summary of the Senate’s proposal in her social media post in response to the House’s public release of their proposal.
“I had hoped to discuss our proposal with the House first before releasing it publicly,” she said. “The Senate’s proposal would establish a tiered state impact fee on data centers. The fee would be applied on data center’s permitted generator type and energy capacity–generating $1.7 billion in revenue. This approach requires data centers to pay their fair share while also protecting our communities.”
The Senate proposal also contains the establishment of a “workgroup on the tax issue and additional responsible protections,” Lucas said.
The tax exemptions at the center of the budget battle
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.
The state Senate’s initial budget proposal which was presented in February, included a clause to end those exemptions in 2027, eight years earlier than their current expiration. The House’s initial budget proposal which was also presented in February included no such clause, creating a difference of more than $1 billion between the two proposals.
Lucas, D-Portsmouth, has been a strong proponent of ending the exemptions early. Del. Luke Torian, D-Prince William County, who chairs the House Finance Committee, has said that he believes Virginia must honor memorandums of understanding that it signed with the tech companies — a position shared by the governor.
Funding for the current biennium is scheduled to run out on June 30 at 11:59 p.m. Virginia could face a government shutdown if a spending bill for the biennium is not signed by then. The full House of Delegates is scheduled to return to Richmond on June 18, with the full state Senate to follow on June 22.
Speaker Scott said Friday the House will not vote on the updated proposal unless the state Senate conferees approve of it.
“It’s never ‘take it or leave it,’ we have too much respect for the Senate and leadership,” Scott said. “It is an opportunity, we think, to continue the conversation, we put forth our best offer. This is a proposal for a conference report, obviously there is no conference report if the Senate doesn’t sign off on it.”
Environmental standards that data centers would have been required to meet to qualify for the tax exemptions were absent from the newest House proposal. Those standards had been included in the previous iteration of the House budget proposal. The environmental standards can be added back into the spending bill during the 2027 session if the commission calls for it and lawmakers approve it, Scott said.
Retail cannabis framework included in House proposal, details to come
Del. Paul Krizek, D-Fairfax County, said that he and Sen. Lashrecse Aird, D-Henrico County, negotiated with the Spanberger administration to smooth over differences in the cannabis framework bill that had been vetoed by the governor in May. Krizek patroned the House bill and Aird patroned the Senate version.
“Sen. Aird and I have been in constant communication working very hard – I told her ‘session hasn’t ended for us yet,’” Krizek said during a Friday morning press conference. “But we have a deal, and it’s just a matter of finishing the legal edits.”
Details regarding the cannabis budget language were scarce on Friday. Krizek said those details are expected to be rolled out in a joint press conference with the governor on Tuesday morning.
Spanberger said her goal for the retail cannabis framework had been to set up a “safe and well-regulated” market in Virginia.
“I’m grateful to Senator Aird and Delegate Krizek for their partnership in delivering a new framework to move forward in a way that is paced appropriately for regulators, public health officials and law enforcement. I look forward to sharing more specific details soon,” she said in a statement.
The retail cannabis framework bill is the only legislative vetoed by the governor that is likely to be resurrected in the budget that the Speaker said he is aware of.
“Obviously the governor continues to have a lot of discretion,” he added.
What else is in the House’s updated budget proposal? And what about the Senate?
“This budget is our promise kept to the teacher, to the trooper, the fire fighter, to the healthcare worker, to the parent that’s trying to make ends meet,” Scott said during a press conference Friday morning.
“And, read my lips, not a single new tax,” Scott said, as he put his own spin on former President George H.W. Bush’s candidate acceptance speech at the 1998 Republican National Convention.
Scott added in an impromptu press conference that the House had acquiesced to a number of the Senate’s positions in their budget proposals.
“We agree with them that we need to do something about accountability for data centers, we just want to do it in a more thoughtful way other than dropping it in the budget in the middle of session,” he said.
Torian said the House’s proposal reflects a “structurally sound, fiscally responsible budget.”
“It addresses our core focus on affordability and certainty, it accomplishes this with existing resources and still reflects both House and Senate priorities,” he said. “It is my great hope that the Senate will take a look at the work that we’ve done, that we did partly together, and get this done for Virginia.”
The $74 billion budget proposal, which the House says is structurally balanced, also includes funding and language for:
- A Federal Uncertainty Contingency Fund to address the cost of federal changes for Medicaid and the Affordable Care Act premium assistance program and other programs;
- Authorizing referenda beginning in November for the local option 1% sales tax for school construction;
- A 3% raise each fiscal year for educators, as proposed by the state Senate;
- School construction grants, as proposed by the state Senate;
- Early childhood care;
- Healthcare initiatives at Radford, Virginia Tech and other higher education institutions to increase the number of nurses and doctors;
- Career and technical education and workforce credentialed programs at community colleges;
- Increasing the supply of affordable housing;
- Addressing federal changes to the SNAP program;
- Support for law enforcement and inmates;
- And other costs.
In response to the House proposal, Lucas included a high level overview of items presented in the Senate’s updated proposal in a post on social media.
Those items include funding for:
- 4% yearly raises for educators;
- A rebate for taxpayers;
- Increased support for special education, at-risk, and flexible spending students;
- Public-private partnerships for childcare;
- Health and human services, to cover federal changes to SNAP, Medicaid, and Affordable Care Act premium assistance, along with other items;
- Housing related initiatives including eviction reduction, weatherization, and Housing Trust Fund deposits;
- Support for higher education affordability;
- To offset future rate increases in state employee health insurance premiums; and
- To protect natural resources.
