(The Center Square) – Virginia Senate leaders unveiled a budget proposal Tuesday that would raise an estimated $1.7 billion over two years through a new fee on data center generators as lawmakers continue negotiations on a state budget due June 30.
The proposal, presented during a Senate Finance and Appropriations Committee meeting, would impose a new tiered state impact fee on generators permitted by the Department of Environmental Quality beginning Jan. 1. Senate staff estimated the fee would generate about $582 million in fiscal year 2027 and roughly $1.16 billion in fiscal year 2028.
The proposal comes as negotiations remain unresolved over data center taxation, one of the final major issues separating the Senate from the House of Delegates and Gov. Abigail Spanberger.
Senate Finance and Appropriations Chairwoman Louise Lucas, D-Portsmouth, said the proposal was developed as lawmakers work toward an agreement before the start of the new fiscal year.
“Virginia will have a budget by June 30, and we are still working to get this right for Virginians,” Lucas said.
The proposal stops short of eliminating the industry’s sales and use tax exemption, which Senate leaders had previously sought to phase out.
Lucas said she still believes ending the exemption would be the preferred approach but described the fee proposal as an alternative path for requiring data centers to contribute additional revenue.
“However, the Senate conferees’ proposal provides an alternative path toward where data centers pay their fair share,” Lucas said.
During the meeting, Secretary of Finance Mark Sickles said Virginia’s updated revenue forecast adds $585.5 million in fiscal year 2026 resources and projects another $922.6 million during the 2026-28 biennium.
Sickles said fiscal year-to-date general fund revenues are running about $837 million ahead of forecast despite slower job growth and broader economic uncertainty.
“It is amazing that Virginia’s economy keeps doing as well as it does, given the fact that we have 41,000 fewer people working now, 11 months into the year,” Sickles told lawmakers.
According to Senate staff, the proposal would provide a one-time tax rebate of $100 for individual filers and $200 for joint filers, increase the standard deduction, fund teacher and state employee pay raises, and provide additional support for K-12 education, healthcare, childcare, housing and environmental programs.
Several senators questioned administration officials about budget negotiations and the possibility of failing to reach an agreement before the start of the new fiscal year.
Sickles said officials remained focused on reaching a budget agreement before June 30.
“We need to get our act together,” Sickles said.
Sen. Barbara Favola, D-Arlington, said she remained confident lawmakers would complete a budget.
“I feel very confident we will, in fact, produce a budget for the commonwealth,” Favola said.
Lawmakers must approve a budget before June 30, the end of Virginia’s fiscal year.
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