Virginia General Assembly approves state budget, averts government shutdown

Virginia’s Democratically controlled General Assembly approved a two-year state budget on Monday, ending weeks of negotiations and avoiding what would have been the first government shutdown in the Commonwealth’s history.

The 2026-2028 budget, passed during a special session of the General Assembly, now heads to Governor Abigail Spanberger for her signature before the new fiscal year begins July 1.

The budget compromise follows a prolonged stalemate between the House of Delegates and Senate over how to address the rapidly growing data center industry and the tax incentives it receives. Negotiations intensified as the June 30 deadline approached, raising concerns that state services and employee pay could be interrupted if lawmakers failed to reach an agreement.

A key component of the final budget is a new electricity consumption fee on data centers. Lawmakers project the fee could generate up to $600 million annually for the state’s general fund while preserving existing sales tax exemptions that have helped attract data center investment to Virginia.

The spending plan also includes pay raises for public employees. Teachers will receive 4 percent salary increases in each of the next two fiscal years, while state employees will receive 3.5 percent raises annually during the same period.

In addition, the budget contains language establishing a framework for a legal recreational marijuana marketplace in Virginia, a move supporters say will create a regulated system for adult-use cannabis sales.

Other provisions include utility bill relief through Regional Greenhouse Gas Initiative (RGGI) credits for residential customers and small businesses, while maintaining funding commitments for public education, public safety, and other core government services.

The budget passed the Senate by a 23-17 vote and cleared the House of Delegates with bipartisan support.

Governor Spanberger praised the agreement, calling it a balanced compromise that supports economic growth while protecting Virginia families from higher costs.

The budget takes effect July 1, beginning Virginia’s 2027 fiscal year.