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Speaker of the House of Delegates Don Scott, flanked by Appropriations Chair Del. Luke Torian, D-Prince William, and other bipartisan house members, unveiled the chamber鈥檚 latest budget proposal in Richmond on Friday, which they as a 鈥渃ompromise package鈥� that they urged the state Senate to accept.
The updated spending plan no longer includes environmental standards data centers would need to meet in order to be exempted from the state鈥檚 sales and use tax, an issue that has stalled budget negotiations for weeks and sparked speculation about a government shutdown if the parties can鈥檛 finalize the budget by June 30.
鈥淭his budget comes through for Virginians in a real and meaningful way without introducing a single new tax,鈥� Torian said in a statement. 鈥淚t anticipates future federal funding cuts by establishing a reserve 鈥� so when Washington turns its back again on Virginians we are prepared to step in.鈥�
The dueling House and Senate budget proposals differ over whether data centers should continue to be exempt from the state鈥檚 5.3% sales and use tax. State data shows the industry saves about $1.6 billion annually through the exemption, money Senate lawmakers say the state should recoup by ending the tax break.
Data centers have to routinely upgrade and replace pricey computer equipment, which is the bulk of where they save with the exemption.
The new House proposal removes the that would have mandated developers limit data centers from co-locating with power facilities that emit carbon emissions.
The previous proposal also outlined energy efficiency requirements for the digital warehouses, including using newer backup generator models that emit less carbon.
The instead proposes creating a commission of stakeholders and lawmakers to study the impacts and benefits of the data center industry in Virginia.
The commission would be required to report to the General Assembly by Nov. 1 on ways to ensure energy demands don鈥檛 put extra costs onto residential utility customers. The commission would also scrutinize local tax revenue impacts and 鈥渙ther ways to generate revenue from the industry鈥�.
鈥�(It will be a) full investigation into energy costs, financial impacts,鈥� air quality, water conservation, renewable energy, and community impacts,鈥� Scott said, 鈥淪o the 2027 General Assembly can pass real national reform. Or if the governor would like, we could come back right after that report 鈥� for a special session.鈥�
Scott has staunchly supported preserving data centers鈥� exemption, he said,聽 because of the local tax revenue the centers generate and the that come with the construction of the facilities.
Gov. Abigail Spanberger has also publicly supported keeping the exemption, saying the state should 鈥渉onor its commitments鈥� to businesses that have located in the commonwealth. She praised the updated House budget on Friday.
鈥淭his proposal creates a clear roadmap for evaluating the impact of the data center industry in Virginia and for reassessing the state鈥檚 incentives into the future, with a focus on fairness to ratepayers and the needs of local communities,鈥� Spanberger said in a statement.
Senate members鈥� response to the updated House budget was unclear Friday afternoon, with no comment from Finance Chairwoman Sen. Louise Lucas, D-Portsmouth.
Lucas has been adamant about ending the tax exemption for data centers since the Senate spending plan was introduced earlier this year.
鈥淚 want (the money) to go towards hard working families. We鈥檝e got people who are struggling to put food on the table, to put a roof over their heads, pay for their car payment, their kids school. I want that money to go back to them,鈥� Lucas said then.
The House is slated to return to Richmond to debate this proposal on June 18, while the Senate, who has not yet released an updated budget proposal, will return on June 22. If a budget is not passed by the end of the month, state services and employee pay will be interrupted.
