Virginia's legislative leaders cut a bipartisan budget deal behind closed doors and announced it late Friday night — preserving $1.9 billion in annual tax exemptions for data center owners while extracting just $600 million a year in new consumption fees from the industry.
The $185 billion biennial budget, announced by email at 8:47 p.m. Friday by Senate Finance Chair Louise Lucas and House Appropriations Chair Luke Torian, lets data centers keep their lucrative sales tax break on computer equipment. The Senate had pushed to eliminate the exemption entirely, which would have generated roughly $1.6 billion in revenue. But the House and Gov. Abigail Spanberger refused to break what they called existing contractual agreements with the industry. The compromise: a consumption fee of $0.011 per kilowatt hour of electricity used by data centers, capped at $600 million annually and expiring after this budget cycle.
The math is blunt. Data centers walk away with tax exemptions worth more than triple what the new fee will collect. As Augusta Free Press noted, tripling the consumption rate would nearly close the gap — but nobody at the negotiating table pushed for that.
The Friday night announcement timing was no accident. Document dumps after business hours are the oldest play in Richmond when politicians want minimal scrutiny. More than 14 hours later, Spanberger still hadn't commented publicly. Augusta Free Press reported the governor is effectively cornered — anything short of approval could invite impeachment proceedings, given the budget deadline looming and a potential state government shutdown.
The Norfolk Virginian-Pilot, which covered the deal's policy details more thoroughly, reported that the budget includes some provisions aimed at working Virginians: two 4% teacher raises over the biennium, $519 million in school construction grants, and a retail cannabis market launching next July with 350 licenses. It also sets aside $350 million in a Medicaid contingency fund and $150 million in health insurance premium assistance for people earning between roughly $22,000 and $40,000 a year who lost federal tax credits.
What the Virginian-Pilot buried: the sheer scale of the data center giveaway relative to those headline items. The industry keeps exemptions worth over $3 billion across the biennium, while the consumption fee recoups just $1.2 billion — and disappears after two years.
Lucas and Torian's joint statement called the deal a reflection of "our shared commitment to making Virginia more affordable for families." That language lands with a thud when the biggest winners are data center operators who won't pay the taxes that ordinary Virginia businesses do.
The question that matters: who lobbied hardest to preserve those exemptions, and what did they promise in return? In Richmond, as in Washington, bipartisan deals cut in the dark usually mean somebody's getting sold out — and it's never the well-connected.
