General Assembly Passes Governor’s Budget, Averting Threat of Shutdown.

Richmond – Today, the General Assembly has approved a $205 billion budget proposal, following fourteen amendments by the Governor. This averted a government shutdown, which became an increasingly looming possibility during the tense months of negotiation preceding the special session.

The most significant debate on the Governor’s amendments came around the Governor’s fifth amendment, which addressed regulations around how much water data centers may use and whether they can use fresh water for evaporative cooling or prioritize less water-intensive methods. The amendment established a series of water scarcity areas and required data centers to prioritize water-sparing cooling methods in those areas. Because “water scarcity area” wasn’t clearly defined in the amendment, there was bipartisan concern about the way that policy would be enacted, with Senator Danica Roem joining Senator Richard Stuart in voting against the amendment (which nevertheless passed.)

“Our communities sent these legislators to Richmond to support our working families, and we’re relieved that they finally came together to pass a budget that delivers real wins,” said Ashleigh Crocker, Interim Executive Director at Progress Virginia. “There’s a lot to celebrate in this budget: an increase on the minimum wage, raises for teachers and state employees, paid family and medical leave, paid sick leave and a bump in child care funding for working families, housing investments, and critical buffers against federal cuts to SNAP and social services. However, we could have done bigger bolder things with our Democratic trifecta, and we’re especially disappointed that the legislature left real money on the table by refusing to fully repeal the data center sales tax exemption. Instead of closing a loophole that hands billions to one of the wealthiest industries in the world, they settled for a capped electricity consumption tax that brings in roughly half the revenue, and lacked the comprehensive, statewide environmental standards people in our community deserve. We will celebrate the victories for working families, and as our legislators return to the communities they serve, we’ll keep reminding them who they’re really working for.”

Background:

Wins in the budget:

New electricity consumption tax targeting data centers’ energy use (capped at $600 million per year), described by Governor Spanberger as a first-in-the-nation approach
Study of data center water usage and noise impacts, with new regulations for data centers in some regions beginning after July 1, 2027
4% raises for teachers and 3.5% raises for other state employees in each of the next two fiscal years
Establishment of a long-awaited retail marijuana market repeatedly vetoed by former Governor Youngkin (up to 350 stores statewide, opening July 1, 2027)
Additional funding for ACA subsidies
Funding for free clinics and community health centers
Contingency funding to buffer SNAP recipients and social services against potential federal cuts
Authority for localities to enact a 1% sales tax to fund school construction
$60 million for housing initiatives, including $40 million for the Housing Trust Fund and $20 million for a mixed-income housing pilot
$137.6 million to help families earning below the Virginia median income access child care

Revenue raisers in the budget:

Other concerns about the budget:

The data center electricity consumption tax will bring in roughly half the revenue that ending the full sales tax exemption would have generated, and does not come with comprehensive statewide environmental standards: different parts of Virginia will receive different levels of protection based on existing weak points.
Significant increases in fines for public marijuana consumption. A Justice Forward VA analysis shows that since marijuana was decriminalized, this charge has been disproportionately used against Black Virginians, and higher fines risk deepening that disparity