The fate of Virginia’s two-year state budget, which is scheduled to take effect on July 1, is in the hands of Democrats who control both houses of the Legislature and the governor’s mansion, even as the party remains divided over the tax treatment of data centers.
State Sen. L. Louise Lucas vowed that “there is not going to be a government shutdown.” Speaking to WTKR in Virginia Beach on Wednesday, she added, “As soon as I can get in the car, I’m on my way back to Richmond. We will have a budget.”
It was always obvious that Democrats were going to unite, of course, which Daily Signal contributor Joe Thomas pointed out on Wednesday. However, the months of debate have made it a rough first year for Gov. Abigail Spanberger as the party dickered over what is the most basic facet of governing: delivering a budget.
Lucas is president pro tempore of the Senate and a staunch opponent of a controversial retail sales and use tax exemption that encourages companies to build data centers in Virginia. She hasn’t been willing to move ahead with a budget that maintains it.
“Companies worth trillions of dollars are whining about paying their fair share,” Lucas insisted at an appearance in Chesterfield County on Tuesday. “We need to make sure these centers aren’t doing harm to our communities.”
She has since proposed an impact fee for data centers, which might generate as much as $1.7 billion over the next two years.
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State Sen. Mamie Locke, a Democrat from Hampton, said on Tuesday that the tax break is too expensive and should be repealed. When it was implemented, “the impact was supposed to be $1.5 million per year,” she said. “Now what is the impact? $2.9 billion a year and growing.”
For their part, leading Republicans also oppose the data center exemption. “I am somebody who thinks we need to get rid of the data center tax break, because I don’t think we need to be giving $2 billion a year to huge AI big tech firms,” state Sen. Glen Sturtevant told the Daily Signal. “It’s ultimately Virginians who pay for that in higher electric bills.”
Lucas has been barnstorming the state on what is billed as a “listening tour.” Tuesday’s stop was hosted by state Sen. Mike Jones, who told the crowd at Manchester Middle School that they would hear from “people from across the spectrum” about the issue.
However, all the invited speakers—including educators, a meteorologist, and county government officials—spoke in opposition to data centers.
“I’m not anti-data centers,” Jones said. “But I am pro-money and believe everyone should pay their fair share.” Earlier in the day, Jones was reportedly asked to leave an event where Gov. Abigail Spanberger was hosting a ceremonial bill signing, perhaps because of his support for Lucas’ visit.
The House of Delegates released a proposal late last week that would balance the budget and would also retain the tax break, which lawmakers drafted years ago to encourage high-tech development in the state. The exemption isn’t set to run out until 2035.
The governor has said she supports maintaining the tax break. “I’m not going to break a contract that the state has signed,” she told Cardinal News last month. “What if it’s XYZ industry tomorrow or another one the day after. And so, it is essential that the commonwealth of Virginia not just keep its word but actually abide by contracts.”
Spanberger also criticized senators for not putting forward a concrete plan. “What we’re seeing on the Senate side is there is no written proposal,” she told WTKR on Monday. “There is no explanation of how it is that they intend to arrive at whatever or what it is they’re proposing relative to data centers.”
House Speaker Don Scott, who presides over a 64-36 majority, warned that Lucas has triggered “a civil war among Democrats.” Scott told the Richmond Times-Dispatch that Lucas is “refusing to negotiate a compromise.” Scott had planned to convene the House on Thursday but has shelved that until there is some movement among Democrats. The Senate is scheduled to meet next week.
The commonwealth of Virginia has not had a state government shutdown in modern history. Democrats, however, are bringing a shutdown closer than it has been in modern memory.
We publish a variety of perspectives. Nothing written here is to be construed as representing the views of the Daily Signal.
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