Bob Lewis -Virginia Mercury
The Virginia General Assembly has doused the flame on its 2026 winter session without completing its most important and consequential business: a new budget to fund the commonwealth into 2028.
That’s hardly uncommon.
This is the 11th time since 2000 that our 140 learned solons have failed to pass a budget before the regular session adjourns, requiring extracurricular work.
Not a lot of Virginians had legislative disunity and delay on their parlay cards this year considering Democrats control state government wall-to-wall. But intraparty budget fights complicate things sometimes, and they’ve yielded some interesting pyrotechnics.
This year’s hangup is a disagreement between the Senate and the House over whether to discontinue tax exemptions to the massive data centers that have flocked to Virginia — particularly Northern Virginia — like seagulls to discarded tater tots.
Data centers are a big deal. They’re the backbone of virtually everything virtual: streaming video, Zoom calls, cloud storage and computing, social media, e-commerce and the emerging Leviathan of artificial intelligence.
Statewide, Virginia data centers use about 30-40 terawatt-hours annually, an amount that’s expected to at least double by 2035 at current growth trends, according to a 2024 study by the Joint Legislative Audit and Review Commission, the General Assembly’s research and watchdog arm. That presents a whole different policy quagmire over who pays for immense electricity generating and transmission capacity expansions necessary to power data centers.
Three localities in the Washington, D.C., suburban sprawl — Fairfax, Loudoun and Prince William counties — host 35% of the world’s data centers, the largest concentration on the planet. According to data from JLARC, utility filings and the U.S. Energy Information Administration, the 24 TWh NoVa’s data centers consume annually exceeds some major cities, including Denver (14 to 16 TWh), Seattle (18-20 TWh) or San Diego (20-22 TWh).
The Senate version of the budget repeals a tax break dating to 2010 that frees the centers from paying retail sales and use taxes on a wide array of computer gear jammed into cavernous structures that could house multiple football fields. A repeal would add an estimated $1 billion in state revenues over the two-year budget period.
Data centers are not universally loved. They’ve bigfooted many residential neighborhoods, ruined their quiet character and diminished home valuations. Zoning hearings and boards of supervisors meetings are often jammed with homeowners fighting proposals to locate a center near them.
The House and Gov. Abigail Spanberger want the exemption kept in place, asserting that it’s unfair to pull the plug on incentives that helped lure the centers into Virginia. They say Virginia jobs would be lost if such tech giants as Microsoft, Meta, Google and Amazon opt to relocate them. According to the JLARC study, data centers contribute an estimated 74,000 jobs, $5.5 billion in paychecks and $9.1 billion in gross domestic product into Virginia’s economy annually.
It’s a significant dilemma in need of a Solomonic solution. How long that takes is likely how long it will take to get a budget deal.
Seven of the 10 times the General Assembly has resorted to special sessions this century to complete its budget, it has been an even-numbered year. That’s significant, because those are the years when lawmakers have to write a brand-new budget to fund government for another two years. It’s also when the most intractable disagreements usually arise. Miss the July 1 deadline and there’s no safety net. State agencies go dark, unable to pay employees, fund programs or send checks to vendors until a new budget becomes law.
Stalemates have happened three times in odd-numbered years — the midpoint of the biennial budget — when there’s less angst because there’s an underlying budget in place. The most notable was in 2001 when a dispute arose between the Senate on one side and the House and Republican Gov. Jim Gilmore on the other over his centerpiece policy achievement, the car tax phaseout.
Gilmore and the House’s GOP leadership were in lockstep behind advancing the phaseout of the despised local levy on personal vehicles from 45% to 70% as was scheduled that year.
The Senate — also under GOP control — balked, wary that higher costs of reimbursing localities during a recession for their lost tax revenue invited a fiscal disaster. The standoff was never resolved. Gilmore used his executive authority to make cuts and transfers between agencies and accounts but, because the budget was not amended, state employees and teachers missed pay raises.
What does this year’s data center embroglio have in common with the unresolved legislative loggerheads 25 years ago? Only this: not all disputes are partisan.
Hoary rivalries and turf battles exist that few who haven’t experienced them appreciate.
There’s the rivalry between the House and the Senate. Both can become very clubby and tribal, jealous of their prerogatives and protective of their history and traditions.
Members of the more free-wheeling House sometimes feel looked down upon by the traditionally staid Senate, whose members enjoy four-year terms instead of the delegates’ two years. They chafe at being called “the lower chamber.”
Senators bristle when they perceive that the House — the oldest deliberative body in the Western Hemisphere dating to the House of Burgesses in Jamestown 407 years ago — is condescendingly trying to sandbag them.
Never mind that there’s less than meets the eye to any of those conceits: perceptions matter when the pressure is on and tempers are strained.
And then there’s the even bigger rivalry between the Legislature and the Executive Branch.
Governors sometimes have a point when they accuse legislators of preening for constituencies back home at the expense of sound statewide policy, but governors also alienate the House and Senate at their own peril. There’s a new governor every quadrennium, but the Legislature abides.
As senior budget negotiators in the House and Senate reminded me in the wee hours of budget talks with House conferees repeatedly over my years covering Capitol Square, “The governor proposes; the General Assembly disposes.” Lofty agendas that lifted governors into office can quickly get gutted or lost altogether, even if — sometimes especially if — the governor and the legislature are of the same party.
There’s only one fairly reliable deterrent to unresolved budgets that go into extra innings: lawmakers’ own election-year appearances.
Just once in the past 26 years has the General Assembly required a special budget session in one of the odd-numbered years when all 100 House seats and all 40 Senate seats are up for grabs in legislative midterm elections.
That was 2023, when a dispute over Republican Gov. Glenn Youngkin’s proposed $1 billion permanent tax cut delayed midcourse amendments to the biennial budget until September. Two months later, Democrats wrested the House majority from the GOP, consolidating their legislative hegemony and blighting Youngkin’s policy goals for the second half of his non-renewable four-year term.
The lesson drawn from all those years of protracted, post-adjournment dealmaking is that it’s a pain in the ass, but the sun still rises.