Virginia Viewpoint: Heading to Overtime

Heading to Overtime

Like a tie game heading into overtime, Virginia legislators adjourned the 2026 legislative session without a budget resolution — setting up a high-stakes special session to break the deadlock.

The General Assembly adjourned sine die on Saturday, March 14, formally concluding a fast-paced 60-day regular session and triggering the Governor’s 30-day bill review period. However, legislators left Richmond without reaching agreement on a new two-year budget and will have to return for a special session on April 23 to resolve the impasse. In the interim, budget conferees in the House and Senate will continue negotiations. The new budget year begins on July 1, adding urgency to resolve the differences sooner rather than later.

In the meantime, attention now shifts to Governor Spanberger. The Governor has until midnight on April 13 to act on legislation passed by the General Assembly, with the authority to sign, amend, or veto bills. Legislators will then return to Richmond on April 22 for the annual reconvened session to consider the Governor’s amendments and vetoes, before beginning the special session on April 23 to address the budget.

Meanwhile, voters will weigh in on a redistricting referendum during a special election on April 21, with early voting already underway.

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Budget Update: Data Centers at the Crossroads

The current budget impasse centers on a nearly $2 billion budget divide tied to the future of Virginia’s data center industry. At issue is a long-standing sales tax exemption that allows qualifying data centers to be exempt from paying the state’s 5.3% sales tax on equipment such as servers and infrastructure — an incentive credited with helping Virginia become the world’s leading data center hub. The General Assembly established the exemption in 2008 and it was not set to expire until 2035.

However, the Senate budget proposes eliminating the exemption this year, arguing it now costs the state upwards of $1.9 billion annually in foregone revenue. With the anticipated revenue from repealing the exemption, the Senate budget funds additional teacher pay raises, one-time tax rebates, and infrastructure investments.

Meanwhile, the House budget preserves the data center tax exemption, citing Virginia’s competitive position and warning that abrupt changes could disrupt a key economic driver. However, the budget does include additional conditions for data centers to follow clean energy requirements in order to maintain the tax exemption.

While this is just one budget item, it has a cascading effect on the entire revenue forecasts that are critical to a balanced budget. As a result, the General Assembly adjourned without a budget, and conferees will continue negotiations ahead of the April 23 special session.

The Affordability Debate Dominates Session

Affordability dominated the debate this session, including efforts to address cost-of-living pressures across housing, healthcare, and energy. This legislative push was paired with immediate executive action from Governor Spanberger, who made affordability the defining theme of her administration from day one.

Within hours of taking office in January, the Governor signed a series of executive orders aimed at lowering costs across the Commonwealth. These included:

• A statewide affordability directive requiring all executive agencies to identify actionable ways to reduce costs for Virginians (EO 1)
• The creation of an Interagency Health Financing Task Force to improve efficiency in healthcare spending and reduce costs (EO 2)
• A review of housing regulations and permitting processes to increase housing supply and lower barriers to development (EO 3)

On the legislative side, legislators advanced policies targeting each major cost driver. In healthcare, reforms focused on prescription drug costs and insurance practices. Housing policy emphasized increasing supply and preserving affordability through local and statewide tools. Energy measures similarly prioritized cost relief, including efforts to reduce utility burdens and expand efficiency programs.

Major Labor and Workforce Policy Shifts

The General Assembly approved several significant changes to Virginia’s labor framework, which now await final action from Governor Spanberger:

• Minimum Wage Increase (HB 1& SB 1): Legislators advanced a requirement to increase the state minimum wage, reinforcing prior efforts that were vetoed in prior sessions. The legislation would increase the minimum wage to $15 per hour in 2028 and indexed to inflation thereafter.
• Paid Family and Medical Leave Program (SB 2& HB 1207): Legislation established a statewide paid leave framework, funded by an employer payroll tax.
• Mandatory Paid Sick Leave (SB 199& HB 5): Legislation requiring all employers to provide paid sick leave, with a phased-in approach based on the number of employees.
• Collective Bargaining (SB 378& HB 1263): Legislators repealed a long-standing prohibition on collective bargaining for public employees, marking a significant shift in Virginia’s labor policy environment.

Constitutional Amendments Advance to Voters

The majorities in the Senate and House approved three major constitutional amendments, sending them to voters this November:

• Reproductive Rights Amendment(HJR 1 & SJR 1): Provides that every individual has the fundamental right to reproductive freedom.
• Voting Rights Restoration Amendment(HJR 2 & SJR 2): Amends the constitution to automatically restore voting rights to formerly-incarcerated individuals.
• Marriage Equality Amendment(HJR 3 & SJR 3): Enshrines the right to marry regardless of sex, gender, or race of such persons.

Retail Marijuana Sales Nears the Finish Line

Before adjournment, the General Assembly approved legislation to establish a regulated retail cannabis market, sending the measure to the Governor’s desk.

While Virginia legalized possession in 2021, efforts to establish a retail structure have been vetoed in consecutive years under Governor Youngkin. Under the new Spanberger Administration, this year’s legislation is likely to become law. Under the legislative framework, Virginia would create a system for licensing, taxation, and oversight, allowing legal sales to begin as early as January 2027.

Looking Ahead

The Governor’s bill review period and the reconvened session will determine the final details of major policy changes passed this year. But the bigger test will come in the special session, where legislators need to resolve the current budget standoff.

The redistricting referendum also carries massive weight. Beyond its immediate political impact, it will shape the broader environment the administration is operating in — and, as a result, affect the scope and timing of policy priorities in the years ahead.

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