Virginia lawmakers advanced competing budget proposals in 2025 including changes to data center tax exemptions and a recreational cannabis market. The state government faces a June 30 deadline to pass a budget to avoid a shutdown.

Virginia House of Delegates leaders presented an updated budget proposal totaling $74 billion. This House budget removes environmental standards previously required for data centers to maintain a tax exemption and preserves the exemption through 2035. Governor Abigail Spanberger supported the House budget plan, and she ordered a new revenue forecast last month that informed the updated House budget proposal. The House budget additionally proposes a commission of legislators and stakeholders to examine data center energy use and economic impacts.

Sen. Louise Lucas released partial details of an updated Senate budget proposal on social media. This Senate budget includes a tiered state impact fee on data centers, with the fee based on generator type and energy capacity. Lucas stated the tiered fee system would generate an estimated $1.7 billion in state tax revenue. The Senate budget also allocates funding for a work group to study the data center tax exemption and protections for ratepayers and local communities. Lucas shared that the Senate budget proposal includes a 4 percent raise for teachers, $345 million for health and human services initiatives, including food assistance for residents with low incomes, and a $100 rebate for individuals.

House Speaker Don Scott stated that the data center tax exemption supports union electrical and construction jobs. Spanberger said, "We want a little bit more help in understanding if we're making good choices for our communities. Such as rules of the road, best practices, whether it's setbacks or noise reductions, limits on diesel generators, requirements for battery backup."

In addition to data center changes, House lawmakers added a recreational cannabis retail market proposal to their updated budget. Del. Paul Krizek stated that details on the cannabis plan will be released at a joint press conference with Spanberger. "We have a deal, and it's just a matter of finishing the legal edits." Krizek said. The House budget allocates $865,000 annually and designates four positions to the Virginia Department of Agriculture and Consumer Services' Office of Weights and Measures for cannabis market implementation. Spanberger had previously vetoed legislation that would have created a retail market for recreational cannabis. The Senate budget allocates over $12 million for the Virginia Cannabis Control Authority over two years, following the Senate's passage of SB 542 to create a recreational cannabis marketplace.

The House budget also addresses health care initiatives, earmarking $130 million for new Supplemental Nutrition Assistance Program (SNAP) cost share benefit allotments. It maintains a $2.4 billion increase to fully fund Medicaid and Children's Health Insurance Program forecasts, and adds $39 million to partially restore proposed cuts to both programs. The budget also earmarks $3 million for social service staff compliance with federal SNAP and Medicaid standards. The updated House budget increases funding for state free clinics to $13 million and directs $79.1 million toward a state-level subsidy program that replaces expired federal Affordable Care Act subsidies.

No independent assessment was available for this report.