Editorial
At long last – three months after the adjournment of the General Assembly’s regular session – Virginia has a state budget. Just days before the start of a new fiscal year, the House of Delegates and state Senate each approved the budget on Monday. The budget now goes to Gov. Abigail Spanberger, who is expected to sign off on it.
It appears, at first glance, that the budget delivers mostly positive news. There are 4 percent pay raises for teachers. It would have been nice for localities to receive this bit of good news earlier when they were working on their budgets. Local governments will now have to go back and make revisions so that they can accept the state’s share of these raises. Still, this is nevertheless good news for our deserving public school teachers.
As expected, the budget includes a provision allowing localities to hold referendums on whether to institute a 1 percent local sales tax to pay for school construction projects. Buena Vista City Council took pre-emptive action on this anticipated provision last Thursday when it approved moving forward with asking a circuit court judge to order such a referendum this Nov. 3. If the referendum passes, City Council plans to use the tax proceeds to fund capital improvements for the merger of Parry McCluer middle and high schools.
The budget sets aside $150 million to help lower-income residents pay for rising health care costs. This was a response to the federal “One Big Beautiful Bill” that ended an enhanced tax credit for coverage under the Affordable Care Act, resulting in soaring premium rates for the working poor.
State income taxes are being lowered for many by increasing the standard deduction for single filers from $8,750 to $9,200 in 2027 and $9,300 in 2028 and for joint filers from $17,500 to $18,400 in 2027 and $18,600 in 2028.
The budget includes a previously announced plan to create a cannabis retail market by July 1, 2027. Licenses are to be issued for 350 stores statewide. The state sales tax on cannabis will be 6 percent initially and increase to 8 percent within two years. Localities will have the option to impose an additional local tax of 1 to 3.5 percent.
The big holdup to adoption of the budget had been a disagreement between the House of Delegates and Senate over whether to end a sales tax exemption for data centers. Under a compromise reached this past Friday among budget negotiators, the sales tax exemption is staying in place but a new energy consumption tax for data centers is to be imposed that is to generate up to $600 million per year. A provision in the budget is also included that directs the Department of Environmental Quality to establish criteria to minimize the impacts of data centers on water.
The budget compromise on data centers seems a reasonable resolution of the impasse and avoids what would have been an unprecedented shutdown of Virginia’s state government, had a budget not been adopted by June 30.
Even at this eleventh hour, we are grateful to have a state budget that contains what appears to be generally good news. We are among the many folks from across the state who are breathing a collective sigh of relief this week.
