Spanberger backs House budget, but data center tax fight divides Democrats

Gov. Abigail Spanberger said Friday that she supports the Virginia House of Delegates‘ budget proposal, which includes an “expansive” data center commission that would present a report by Nov. 1.

The state also appears likely to create a cannabis retail market following the governor’s May veto.

During a brief press gaggle in Newport News, Spanberger said that she has “worked extensively with the patrons of the original cannabis bill,” Del. Paul Krizek and state Sen. Lashrecse Aird.

“I put forth many amendments, which weren’t accepted during the traditional process,” added the governor, “and I’ve been working with Sen. Aird and Del. Krizek to make sure that the priorities that I had — particularly as it relates to public safety, public health and timing — that we got to a place where we could ensure that the implementation of the recreational cannabis market would be paced appropriately for more of our communities and for our law enforcement partners, and to ensure that the day that this market actually launches, it is ready for prime time.”

Although the governor and the Democratic-controlled legislature seem to be closer to a resolution on marijuana, the same cannot be said about an intraparty conflict over tax breaks for data center development.

Until recent days, the unresolved budget standoff had raised the possibility that Virginia — despite unified Democratic control of the governorship and General Assembly — could face its first-ever partial government shutdown. While some Democratic lawmakers have floated the idea of passing a “skinny budget” to keep the state government running, Spanberger has reaffirmed her belief that lawmakers will pass a budget by the June 30 deadline, and Friday’s House proposal signaled forward momentum.

Spanberger released a statement Friday praising the House budget proposal and the work of Speaker Don Scott and House Appropriations Chairman Luke Torian on the plan, stating that their budget “creates a clear roadmap for evaluating the impact of the data center industry in Virginia and for reassessing the state’s incentives into the future, with a focus on fairness to ratepayers and the needs of local communities.”

Spanberger and Scott have been on the side of maintaining tax breaks for data centers that are scheduled to end in 2035, even as their cost to Virginia’s coffers extends beyond $1 billion and as federal funding cuts create budgetary holes. Senate Democrats, by contrast, have pushed for an immediate end to tax breaks that they argue have gone far beyond intended levels since enactment several years ago.

Senate Finance and Appropriations Chair Louise Lucas called Scott and Spanberger “Amazon Don and Data Center Diva” on X last week, adding that they were making a “monumental mistake” in pushing for continued tax breaks. On June 6, Lucas tweeted, “Why would anyone want to spend $1.6 billion … subsidizing Big Tech companies when that money could go to public education, health care or tax relief for our constituents?”

Speaking to the press following a groundbreaking ceremony at the Thomas Jefferson National Accelerator Facility (also known as Jefferson Lab) on Friday, Spanberger said the House budget calls for an extensive report on data centers due Nov. 1 so it could be used in the upcoming 2027 General Assembly session.

A thorough report, the governor added, would let the state “take a very thoughtful approach to understanding the full scope of investment brought to bear by the data center industry, whether it’s jobs created or local revenue paid, but also the impacts on our communities, whether it is energy consumption or water consumption.”

House Democrats, in a news release Friday, said the legislative body’s proposed budget includes the establishment of a commission to evaluate direct and indirect costs and benefits of the data center industry, as well as recommendations for legislative bills and budgetary changes to address financial, energy and environmental impacts in time for the 2027 regular session. The commission will “investigate all elements of data center impacts, including community benefits agreements” and data centers’ local and state tax revenue, the release said.

Another item of note in the proposed budget is a $225 million deposit to the Federal Uncertainty Contingency Fund established by the House, funds that would be used to “address any further federal retrenchment, as well as to mitigate forecast adjustment for Medicaid and the ACA premium assistance program.”

Meanwhile, a Washington Post-George Mason University Schar School of Policy and Government poll taken in late March showed that 56% of Virginia voters surveyed oppose tax breaks for data center developers, and more Americans oppose construction of larger data centers set to handle greater internet usage due to the artificial intelligence boom.

Sens. Mike Jones, Mamie Locke, Aaron Rouse and Lucas plan to host a “data center listening tour” in Hampton Roads and Richmond next week. Also, the Senate Finance and Appropriations Committee is set to meet in Richmond on June 16.