Virginia’s House and Senate passed their conference budget Monday, just weeks before the deadline. And in it is a new series of regulations and taxes on the data center industry. Legislators and advocates had mixed feelings about the deal.
“That was the number that was agreed to by the Senate,” said Democratic Prince William County Delegate Luke Torian talking about the $1.2 billion in new revenues to be collected from data centers as part of the budget deal approved Monday afternoon.
From over in the other chamber, Democratic Senate President Louise Lucas, who’d sought an end to tax breaks for data centers entirely: “Don’t love it; we can do better, but this is a good start.”
The powerful senator had spent months arguing data centers were adding to Virginian's energy bills while their owners collected billions — if not trillions — in revenue.
She also pointed to a work group the budget creates which aimed to report on the impacts from data centers. That report is due later in the year.
"I would have preferred another method," she said of the energy tax. "But we had to get a budget. We weren't going to let the government shut down."
The deadline for the state’s funding document is July 1st. Both chambers have been in special session since the 2026 legislative session ended in the spring without a budget.
Governor Abigail Spanberger waited till the end of both chamber's meetings to chime in on the budget compromise, released late Friday. In the statement, she took credit for the new data center deal.
“This is a compromise proposal — one my administration helped craft — and it builds a strong foundation for further discussions about the future of this industry in Virginia on issues like environmental and community impact," Spanberger said.
When asked if Spanberger's office was involved with negotiations on the deal, Torian said, "the governor is going to be pleased with the budget."
The powerful Democrat was also asked about a rebate program that would benefit some Dominion Energy Virginia and Appalachian Power customers after rejoining the Regional Greenhouse Gas Initiative. A campaign promise of Spanberger and a long-running target for Virginia Republicans, 45% of RGGI’s auction proceeds would return to household, church and small general service ratepayers. Estimates put it between $500-600 million a year.
"When the two bodies get together and have meaningful conversations, we can make some very good decisions," Torian said of the new program.
While a specific rebate number wasn't offered, RGGI is expected to add about $13 a month to Virginia ratepayers' bills.
Republican House Minority Leader Terry Kilgore was worried about the rest of the Commonwealth’s ratepayers.
"Hopefully someone will add co-ops and businesses that create jobs to the program," the Wise County delegate said from the chamber floor.
But Kilgore applauded keeping the tax break Lucas targeted. "We need to keep our word, or Virginia won't be a good place for business in the future," he said.
Notably, Kilgore and much of his GOP colleagues in both chambers voted against the compromise.
Among Republicans who voted 'yes' were House budget conferees such as Tazewell Delegate Will Morefield and Botetourt Delegate Terry Austin. Similarly in the Senate, Republican conferees Senator Todd Pillion from Abingdon and Montross Senator Richard Stuart.
"We have real restrictions coming to the eastern water districts," Stuart said on the chamber floor, defending some of the data center regulations.
"You can find things you don't like," Stuart said of the conference report more broadly. "In the perfect budget, you can find things you don't like."
Back in the House, Lucas' “good start” feeling was shared by Democratic Delegate David Reid. His Loudoun County district is the epicenter of Virginia’s data center development, with over $1.3 billion in revenue coming to his locality from the controversial facilities through local taxes.
Still, Reid said the new state tax comes from the amount of energy they use and that could help address some of the public’s concerns.
“This taxes them on the use of that energy," he told Radio IQ ahead of Monday's vote. "And it provides the right incentive to reduce the amount of energy they are using,”
As for the regulations, they include tasks for Virginia’s Department of Environmental Quality such as collecting evaporation data from "cooling water scarcity areas," new demands on air and water permits, and requiring closed loop cooling systems.
The Data Center Coalition, a group representing the hundreds of data centers across the Commonwealth, expressed their displeasure with the scheme in a statement Sunday night.
“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, drive away investment and job creation, and tarnish Virginia’s reputation as a reliable partner and a good place to do business,” DCC head Josh Levi said. “There appears to have been no serious consideration given to the feasibility of the budget’s onerous new regulations or what impact they may have on job creation, investment, and Virginia’s economy.”
Back in the Senate, Republicans were split on reasons to dislike the deal. Colonial Heights Senator Glenn Sturtevant didn’t think it went far enough.
“It gives the data center kid-glove-treatment while Virginia families are going to continue paying higher electric bills,” Sturtevant said in the Senate chamber.
While Southside Senator Bill Stanley was worried Virginia, despite Kilgore’s praises, was going back on its promise; using a backdoor to collect taxes the Commonwealth said it wouldn’t demand.
“You know the data center industry came to Virginia on a promise. I think we should keep that promise,” Stanley told Radio IQ
Stanley admitted he wasn’t for or against the facilities, even if his localities may have wanted them at some point.
“These data centers were supposed to be an incentive for Southwest and Southside Virginia,” he said. “But those areas aren’t going to be able to make those decisions to have them or not; it’s being made for them in Richmond.”
Environmental groups were also critical of the plan.
"We had an opportunity as a state with the highest concentration of data centers to set real standards," the Chesapeake Bay Foundation's Jay Ford told Radio IQ. "Instead, we're kicking the can."
"$1.2 billion is not nothing," he added. "That's certainly an important first step in trying to get data centers to pay their fair share."
Prince William County Senator Danica Roem, author of the original budget amendment that sought to repeal the data center tax exemption, echoed Ford's feelings in part.
"I know Lucas went as far as possible to get the best for us," she said of the body's president, promising to bring an end to the tax break again in 2027.
"The consumption tax doesn't go as far as we want," Roem added. "But $1.2 billion is not nothing."
While it seems no one left Richmond Monday happy, University of Mary Washington political science professor Stephen Farnsworth said any deal is better than no deal for the Democratic trifecta currently leading the Commonwealth.
"It's important to recognize compromises don't lead to happiness, but they do lead to relief," he told Radio IQ. "A trifecta that failed to deliver the budget by the end of June would have been deeply problematic for Democratic electoral prospects going forward."
"Any deal is better for Democrats than no deal," he added.
The budget now heads to Governor Abigail Spanberger who has seven days to sign or offer additional amendments. Rumors about possible amendments suggest another legislative session date ahead of the July 1st deadline.
