MANASSAS, Virginia — Virginia’s debate over data centers has turned into a Democrat-on-Democrat battle that could send the state government into its first shutdown.
The Virginia General Assembly and Gov. Abigail Spanberger (D) face a June 30 deadline to reach a budget deal. But progress has been stalled for months as lawmakers grapple over the future of data center subsidies.
Senators are trying to curb tax incentives for data centers that have grown to an annual value of nearly $2 billion, while Spanberger and House negotiators defend the sector as a key economic driver. The fight has already left scars on the new Democratic trifecta, underscoring the intraparty tensions unleashed by the data center boom — and foreshadowing more fights to come in a state that’s become the industry’s global capital.
Virginia state Senate President Pro Tempore L. Louise Lucas (D), who has led the upper chamber’s budget negotiations as chair of the state Senate Finance Committee, launched a statewide circuit of town halls on data centers to pressure the governor, whom Lucas has started calling a “data center diva.”
“Governor, read the damn room,” Lucas said Monday to a standing ovation from about 200 attendees at her listening tour’s stop in Manassas, where developers have sought to build a massive data center project near a Civil War battlefield.
Lucas argued that the public would blame Spanberger for a state government shutdown — and Democrats along with her, as the party risks getting on the wrong side of a public backlash against data centers that’s sweeping across both parties in states nationwide.
A spokesperson for Spanberger said the governor is focused on delivering a budget that invests in the state’s education and housing while also addressing data centers.
“Throughout this process, Governor Spanberger has been clear that data centers must pay their fair share while not breaking existing contracts that would risk thousands of Virginia jobs and jeopardize billions in business investment,” Jack Bledsoe, Spanberger’s press secretary, said in a statement.
After lawmakers did not reach a budget deal during the legislative session, Bledsoe added, the governor offered proposals that would address data centers’ energy and water use, incentivize them to use clean energy and steer more money to community investments and lowering families’ cost of living.
Lucas’ town hall indicated that the fight over tax incentives is just the beginning.
Attendees urged state senators to hold their position to curb incentives — and to consider new restrictions in the future, from outright moratoriums to limits on local officials’ ability to sign nondisclosure agreements with data center developers.
Speakers said the data center boom brought air pollution, unbearable noise, alarming water use and corporate influence over local officials that residents cannot match. Several described feeling hopeless about their homes and families coexisting with a sector that’s spreading over the state.
Jessica Grove, a resident of Gainesville, Virginia, said plans for a massive data center campus within a mile of her house made her consider moving away — only to despair at the industry’s regional impacts on air, water and infrastructure.
“Where can we go at this point?” she asked. “I hate saying this — it has affected us so much, I tell my children, ‘Please don’t have children.’”
Senators said they can’t ignore that growing public backlash.
“You have emboldened us,” Democratic state Sen. Danica Roem told attendees at Lucas’ event. “It’s kinda hard to be in this room today and [then go back to Richmond and] say, ‘No, no, we’re going to back down.’”
‘Fix it responsibly’
Each side released offers and counteroffers over the past week that underscored how far apart they remain.
Backed by Spanberger, the state House wants to drop a limit it agreed to earlier this year — to condition data center tax incentives on environmental standards — and instead form a new commission to study the issue.
Meanwhile, the state Senate is proposing to add a new impact fee tied to pollution from data centers’ on-site generators, estimated to raise as much as $1.7 billion over the next two years.
“If you look at what the House put out, they’ve even taken the environmental impacts out of their budget. What sense does that make? That is insanity,” Lucas told reporters after the town hall. “I am a chasm apart from the House.”
House leaders Tuesday canceled a scheduled legislative session this week, citing the lack of progress on a budget deal.
The chamber’s Democrats say that data centers should pay their fair share for electricity and other infrastructure. But they argue that repealing the sector’s tax incentives — which have historically enjoyed broad bipartisan support — would undercut jobs and ongoing business investments that net the state billions of dollars in tax revenues.
“Some of the folks who have issues [with data centers] now, they all voted for it,” state House Speaker Don Scott (D) said last week while unveiling the latest budget proposal backed by Spanberger.
“The question is how we fix it,” he added. “But fix it responsibly — in a nondisruptive way. And the answer is not to blow up Virginia’s families with a budget fight.”
Scott said the House proposal would allow the state to closely examine how to responsibly manage data center development. But critics said the state already did that study in 2024.
The Data Center Coalition — which said it was not involved in shaping the House’s latest proposal — blasted the Senate’s proposal as “the same bad approach that will raise costs and prices, hurt Virginia’s business reputation, violate commitments the Commonwealth has made, and stifle job creation and investment when Virginia needs both.”
Lucas argued the stalemate could hinder Spanberger’s future public career.
“What’s she going to look like in her first [year], having either a shutdown or a skinny budget,” Lucas said, referring to a truncated spending agreement that would fund Virginia’s essential services while lawmakers continue negotiating a full budget. “I think our governor has aspirations to go further, and I don’t think this is the way to get there.”
