Virginia Avoids Shutdown, Passes $212 Billion Budget With Data Center Tax and Marijuana Legalization

What Happened

The Virginia General Assembly returned to Richmond on Monday, June 22, 2026, for a reconvened session and voted to pass a $212 billion two-year budget, averting a state government shutdown. The deal had been stalled for months, with Senate President Pro Tempore Louise Lucas, D-Portsmouth, holding out on the final agreement.

When Gov. Abigail Spanberger announced a Senate-ready plan that included a fee on data centers' excess electricity consumption, Lucas dropped her opposition. According to reporting by the Daily Signal, Lucas had only picked up that opposition in the previous six months, despite a long prior record of supporting sales tax abatements for technology equipment purchased by data centers.

The final budget also includes legalized marijuana. The Daily Signal's Joe Thomas reported that Lucas's late-stage resistance appeared less about the data center policy itself and more about securing marijuana legalization in the budget. Virginia officials have not publicly addressed that characterization as of June 22, 2026, and no formal investigation has concluded anything about her motives. The FBI has an ongoing investigation into Lucas's business ventures, but no charges have been filed and no findings have been made public.

The Data Center Fee

The electricity "usage fee" on data centers is the budget's key new revenue mechanism. Virginia is projecting it will generate $1.2 billion — and the legislature is already spending against that projection.

There's a real risk in that math. The data center industry has been aggressively pushing to make facilities self-sustaining on electricity through on-site generation, battery storage, and renewable procurement. That campaign has been gaining traction nationally. If Virginia's data centers reduce grid consumption significantly, the $1.2 billion figure could fall well short.

The comparison to Virginia's electric vehicle experience is worth taking seriously. As EV adoption rose, gasoline tax revenues declined faster than projected, leaving the Virginia Department of Transportation short. The General Assembly had to retrofit the system with a separate "highway use fee" for EV and hybrid owners. The same patch-and-scramble dynamic is plausible if data centers build around the fee.

The Data Center Tax Break Argument

Critics of the existing data center tax abatements — the sales tax exemptions on equipment purchases — argue that large corporations have been getting a sweetheart deal at Virginia taxpayers' expense for years, and that the new fee is long-overdue correction.

That concern deserves a straight look at the numbers. A 2025 report by Virginia's Joint Legislative Audit Review Commission found that each dollar of those tax breaks generated $6.10 in labor income. Given Virginia's 5.75% income tax rate, the commonwealth's actual revenue sacrifice per dollar of abatement was roughly 65 cents — and that's before accounting for the multiplier effect of higher-income workers spending in the local economy. The abatements were not free, but they were not obviously a bad deal either. Reasonable people can disagree about the tradeoff. The JLARC numbers need to be part of that conversation.

The Local Sales Tax Add-On

Buried in the budget is a provision allowing Virginia localities to impose a 1% local sales tax designated for school division capital expenditures. School construction and renovation funding is a legitimate need in high-growth areas, and local control over it has genuine appeal.

The concern is transparency. Capital expenditure budgets in school divisions are, as the Daily Signal notes, among the least publicly scrutinized parts of local government. Dedicated revenue streams without strong audit requirements have historically created opportunities for cost overruns and low-visibility spending. Whether Virginia built adequate oversight into this provision is not yet clear from available sources.

What's Still Unresolved

The $1.2 billion revenue projection for the data center fee is the most consequential number in this budget, and it is based on industry behavior that the industry is actively working to change. Virginia legislators are not in a position to compel data centers to keep consuming grid electricity at current levels.

The JLARC does periodic reviews of major tax and fee structures. Whether the commission will formally model the downside revenue scenarios for the data center fee and what trigger mechanism, if any, exists if collections fall short is the most concrete open question this budget leaves behind.