Virginia legislature passes budget proposal as partial government shutdown deadline nears
The Virginia legislature passed a budget compromise, averting a partial government shutdown, which includes a new statewide energy use tax on data centers projected to generate $600 million annually. While maintaining the sales tax exemption, the budget also adds new regulations concerning data center water consumption. This new energy tax, a first for any U.S. state, has been met with opposition from the Data Center Coalition.
The Virginia legislature has advanced a budget compromise to Governor Abigail Spanberger, narrowly avoiding a partial state government shutdown. The proposal, which passed both chambers with bipartisan support, was largely negotiated by Sen. Louise Lucas.
A key component of the budget is a new energy use tax on data centers, estimated to collect $600 million annually, while retaining their sales tax exemption. This move, a compromise, follows intense debate where some Senate Democrats, like Sen. Louise Lucas and Sen. Danica Roem, pushed to end the sales tax exemption, citing the billions of dollars left "on the table" from what they term "the richest corporations in America." The Data Center Coalition has voiced opposition to the new tax, though some Republicans, including Sen. Glen Sturtevant of Chesterfield County, believe data centers will find it acceptable.
Beyond data centers, the budget includes a 4% pay raise for teachers, a 3.5% raise for state employees, $150 million for WMATA, and support for the recreational cannabis market. Notably, the deal also introduces new regulations for data center water consumption, which Republicans hope will protect rural areas facing drought conditions.
Governor Spanberger expressed pride in the budget, highlighting that it positions Virginia as a national leader by instituting the first-ever statewide energy consumption tax on data centers.