Virginia Viewpoint: 2026 Session Recap & New Laws in Effect

After months of negotiations that required an extended special session, the General Assembly and Governor Spanberger landed on a roughly $207 billion two-year budget — resolving the fight over taxing data centers, funding new investments in education, delivering additional tax relief, and standing up a new adult-use cannabis retail market. This agreement closes out the first session under Governor Spanberger and an expanded Democratic majority in the House.

The General Assembly approved the Governor’s technical amendments just two days before the new fiscal year began. The budget took effect Wednesday, July 1.

All non-budget legislation was considered during the regular 60-day session, which ran as scheduled from January 14 to March 14. The Democratic majorities advanced several priorities, including constitutional amendments on marriage equality, reproductive freedom, and automatic restoration of voting rights.

Overall, members introduced 2,366 bills this session; 1,156 reached the Governor’s desk. She acted on 180 and vetoed 31, and while no vetoes were overturned, the General Assembly rejected several of her amendments at Reconvened Session on April 22. Ultimately, 1,131 bills were enacted, with most taking effect July 1.

Below is a rundown of the key outcomes from both the budget and the legislative session.

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Constitutional Amendments Headed to Voters

Three constitutional amendments cleared the General Assembly and will appear on the November ballot:

• Reproductive rights (HJR 1/SJR 1):Establishes a fundamental right to reproductive freedom.
• Voting rights restoration (HJR 2/SJR 2):Automatically restores voting rights to formerly incarcerated individuals.
• Marriage equality (HJR 3/SJR 3):Enshrines the right to marry regardless of sex, gender, or race.

Data Center Consumption Tax Established

Data center taxation drove this budget fight from the start. At issue was Virginia’s longstanding sales and use tax exemption for the industry, worth an estimated $1.6 billion a year to the state. The Senate proposal aimed to eliminate it to unlock additional state revenues, while the House wanted to preserve it to protect industry investment.

The final deal keeps the exemption but adds a new data center energy consumption tax — $0.011 per kilowatt-hour used monthly at each facility — that is expected to raise up to $600 million annually. Over the biennium, it’s projected to net the state $1.2 billion in additional revenue.

The budget also tasks the SCC to collect data on data centers’ electric service agreements, water use, and generator permitting, and directs DEQ to develop noise regulations and map areas at risk of cooling-water scarcity. The underlying tax exemption may resurface as an issue during the 2027 session once the Joint Subcommittee on Tax Policy completes its review on the exemption’s impacts on state revenue later this year.

Cannabis Retail Market To Open on July 1, 2027

After vetoing the General Assembly’s original retail cannabis bill, Governor Spanberger negotiated a revised framework through the budget with Sen. Aird and Del. Krizek.

Retail sales launch July 1, 2027, and will initially be capped at 350 stores statewide. The combined tax rate runs 12.3%–16.5% (6% state excise, 1%–3.5% local, plus the standard 5.3%–7.0% sales tax), with the excise rate set to climb to 8% in 2029. The Cannabis Control Authority can issue up to 100 microbusiness licenses by May 1, 2027, and public consumption will carry a $250 civil penalty.

Standard Deduction Increase

The standard deduction rises for both filing types over the biennium. Single filers go from $8,750 to $9,200 in 2027 and $9,300 in 2028; joint filers go from $17,500 to $18,400 in 2027 and $18,600 in 2028.

Labor and Workforce

This session brought some of the most significant shifts in Virginia labor policy in years, with new requirements established around wages, leave, and paid sick leave.

• Minimum wage (HB 1/SB 1):Sets scheduled increases to the minimum wage to $13.75/hour on January 1, 2027, then $15/hour in 2028, and indexed to inflation thereafter.
• Paid family and medical leave (SB 2/HB 1207):Directs the Virginia Employment Commission to establish a paid family and medical leave insurance program by April 1, 2028, funded by mandatory contributions from employers with more than 10 employees and their workers. Contribution amounts are due by October 1, 2027, with claims payable starting December 1, 2028.
• Paid sick leave (SB 199/HB 5):Requires employers to provide one hour of paid sick leave for every 30 hours worked, phased in by employer size beginning July 1, 2027.
• Noncompete limits, severance (SB 170):Bars employers from enforcing many noncompete agreements against workers terminated without severance pay, unless the termination was for cause.
• Noncompete limits, healthcare workers (SB 128/HB 627):Bars noncompete agreements for many licensed healthcare workers, including nurses, counselors, psychologists, and physicians. Violations carry civil penalties of up to $10,000 each.
• Salary transparency (HB 636/SB 215):Requires employers to disclose salary ranges in public job postings and bars them from asking applicants about salary history or using it to influence an offer.

K-12 Priorities

Education was a major priority in the budget, with new money spread across several priorities:

• Teacher pay:4% raises each year of the biennium for SOQ-funded instructional and support staff.
• School construction sales tax:Localities can ask voters to approve a 1% local sales tax for school construction/renovation (or, in Planning District 8, transportation); referendums could appear later this year.
• Special education:$148.4 million over the biennium more than doubles the Special Education Add-On, raising rates from 4.75% to 9.25% (Level I) and 5.25% to 17.5% (Level II), plus $10 million to expand SISNA and reduce private day school placements.
• Per-pupil funding:$60 million GF to boost the Infrastructure and Operations Per Pupil amount.
• At-risk add-on:$28.9 million to raise the maximum rate to 48.85%, with expanded use for student physical and mental health.
• School breakfast:$17.8 million to raise the per-meal reimbursement from $0.28 to $0.50.
• Early childhood:$137 million for additional Child Care Subsidy Program slots (families up to 85% of state median income), plus $25 million to launch an Employee Child Care Assistance Program through FY 2030.

Legislation (SB 108) also passed requiring school divisions to prohibit student cellphone and smart-device use from the start of the school day through dismissal, with exceptions for medical or educational needs.

RGGI Reentry

The budget requires Virginia to rejoin the Regional Greenhouse Gas Initiative and redirects 45% of RGGI revenue to ratepayer utility rebates, though large commercial customers are excluded. That money was previously reserved entirely for flood preparedness and low-income energy efficiency programs.

Failed Legislation That Could Return in 2027

Several notable proposals didn’t make it across the finish line this session but are worth watching next year:

• Collective bargaining (SB 378/HB 1263):Would have repealed Virginia’s longstanding ban on collective bargaining for public employees. Governor Spanberger vetoed it over cost concerns.
• New high-earner tax brackets (HB 188):A proposal to create new income tax brackets for high earners was continued in subcommittee.
• Expanded sales tax base (HB 978):A proposal to extend the sales tax to a wide range of additional services was tabled in subcommittee.
• Net investment income tax (HB 378):A proposal to impose a tax on net investment income was continued in subcommittee.

Looking Ahead

Notably, the special session that was originally convened for the purposes of extending budget negotiations remains open. Rather than adjourning, the General Assembly recessed in a procedural move that preserves its ability to reconvene as it wishes. Meanwhile, legislative workgroups, commissions, and select committees will continue meeting in the interim.

Attention now turns to 2027. Prefiling for the regular session opens July 20, and Governor Spanberger will introduce her proposed budget amendments this December. The regular session itself convenes January 13, 2027 for a “short” 46-day term — the window in which legislators can revisit and amend the newly enacted two-year budget.

In Due Course: 2026 Changes to Virginia’s Laws

By Division of Legislative Services Staff

Here are 10 notable new Virginia laws that will take effect July 1

By Markus Schmidt, Virginia Mercury

These new Virginia laws take effect July 1. Here’s what to know

By Jessie Nguyen, WRIC

Lawmakers accept Spanberger’s budget amendments, averting state funding crisis

By Jahd Khalil & Patrick Larsen, VPM

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