Tom Dunlap, a Riverkeeper with the James River Association, looks over Swift Creek where toxic leachate from the Shoosmith Landfill is leaking in June 2026. (Photo by Shannon Heckt/Virginia Mercury)
The Virginia General Assembly allocated $10.6 million in the two-year budget lawmakers passed this week for the Department of Environmental Quality to help contain toxic leachate spilling from the bankrupt Shoosmith Landfill in Chesterfield County.
The emergency funds will be used “to prevent it from becoming a catastrophe”, according the Sen. Glen Sturtevant, R-Chesterfield.
It represents a fraction of the $173 million needed to fully close down the landfill located off of Route 10 in Chester. The landfill, which has not taken in new trash since 2022 and whose owners filed for bankruptcy in 2025, reportedly generates about 50,000 gallons of leachate a day, a toxic wastewater made up of runoff from the garbage in the landfill.
View of Shoosmith Landfill through trees surrounding a nearby neighborhood along Swift Creek. June 2026. (Photo by Shannon Heckt/Virginia Mercury)
The creek flows into the Appomattox River and eventually into the James River at Hopewell – where drinking water is collected. Tom Dunlap, a riverkeeper with the James River Association, emphasized that if the leachate continues flowing into the environment it could lead to a major disaster, impacting clean drinking water and healthy streams for wildlife.
“You have to treat that discharged waste fluid to protect the environment,” Dunlap said. “It can be laden with all sorts of things from heavy metals to PFAS chemicals, and on and on. To have that leachate wind up directly in the environment is one of the worst case scenarios that we could be experiencing.”
The leachate is part of normal operations when managing a landfill, but must be treated before being discharged into wastewater treatment systems. In 2018, the county board of supervisors denied a request to expand the landfill by including a lined disposal cell in a nearby rock quarry.
Supervisors said the disposal of the wastewater below the water table could pose serious health and safety risks for residents.
The landfill has a history of improperly managing the leachate from the facility.
Chesterfield County reported that between 2019 and 2023, elevated levels of ammonia were found in the wastewater treatment plant that were traced back to Shoosmith. The landfill wasn’t properly treating the leachate it was discharging into the municipal system, an investigation found, which is a violation of its permit and the Clean Water Act.
This led the county to suspend Shoosmith’s permit to discharge the leachate into the county system; the liquid had to then be hauled offsite to be disposed of.
When filing for bankruptcy, DEQ approved the surety bonds from the facility’s owners to the tune of $19 million. This money was earmarked for the bankruptcy trustee to oversee the continued clean up of the leachate. In a May 26 letter to DEQ, the senator asked what could be done to make sure taxpayers are not left holding the bag to close this private facility.
Local residents in the surrounding neighborhoods have warned for years that the leachate has been getting into streams and odors have been permeating from the landfill.
A group called Chesterfield Citizens for Responsible Government said that the $10.6 million in state funding is not enough to cover the environmental and infrastructure needs laid out in the bankruptcy filings and engineers budget report for the closure of the landfill.
“These are not theoretical concerns. They are documented operational deficiencies at a landfill located adjacent to critical waterways. Immediate action is needed to protect public health, groundwater, and the environment,” the group said in a statement.
The James River Association estimates that about $50 million is needed over the next two years to establish an on-site leachate and treatment facility to slow the spread into the local environment.
“That engineering report cited elevated temperatures and all the knock-on effects of that which includes potential gases that are coming out of it, concerns with the stability of the landfill overall, identifying some of the more rapid-than-expected subsidence and collapses in the landfill,” among other concerns, Dunlap said.
Sturtevant said that the $10 million is just the first step and that the state – alongside the EPA and local officials – are evaluating other revenue streams to help shut down the landfill and manage the leachate before it gets too dangerous.
“This allows the federal, state and local folks the time to develop a plan to stop the leachate to prevent it from becoming a catastrophe, which is where it was headed, because they told us we’re gonna run out of money as soon as August,” Sturtevant said.
The bipartisan delegation of lawmakers that represent the Chesterfield area have been engaging with DEQ and Secretary of Natural and Historic Resources David Bulova on how to protect residents in the interim.
They are also considering how to claw back more funds from the company that abandoned the landfill when bankruptcy was filed.
“It would appear that there were a lot of things that failed along the way, and we have these governmental rules and regulations and agencies in place for the purpose of not allowing that to happen,” Sturtevant said. “So it’s going to require some legislative changes to make sure that there’s not an opportunity for this kind of thing to happen again.”
Gov. Abigail Spanberger signs legislation in Richmond in April. Spanberger’s first six months in office have been marked by clashes over vetoes, affordability policies and ongoing budget negotiations tied to data center tax incentives. (Photo courtesy of the Virginia Governor’s Office)
Back in January, Gov. Abigail Spanberger arrived in office promising pragmatism, affordability and a less combative style of politics.
Fast forward a few months, and Virginia’s first woman governor finds herself navigating one of the rockiest starts to a Democratic administration in years, with budget negotiations intensifying weeks before a shutdown deadline, frustration simmering inside her own party over a wave of vetoes and lawmakers openly questioning her governing style.
“I think it’s outrageous that we are where we are, and I hear from many legislators that they are displeased with the process,” Spanberger said during an interview with The Mercury at her office in Richmond Thursday, referring to the state’s still unfinished biennial spending plan.
“And I know that they are making that known to their individual bodies. And we will get there, because we have to.”
The impasse has overshadowed much of Spanberger’s opening months in office. Democratic leaders remain divided over whether to scale back Virginia’s lucrative data center tax incentives and how aggressively to regulate the fast-growing industry.
Lawmakers face a June 30 deadline to approve a spending plan before the new fiscal year begins July 1. Without a deal, Virginia could enter an unprecedented government shutdown.
The fight has also exposed tensions between Spanberger and some top Democrats in the legislature who expected a smoother relationship with a governor from their own party after four years of divided government under Republican Gov. Glenn Youngkin.
Political analyst Bob Holsworth said the administration’s first few months have been shakier than many Democrats anticipated.
“By and large, I think it’s been a wobbly term for sure,” Holsworth said. “We’ve never seen the kind of vetoes that we had before, and the Democrats are in a position that’s almost embarrassing in terms of the budget.”
Still, Spanberger rejects the idea that her administration so far has been defined mainly by conflict.
“I’ve signed more than 100 bills that Governor Youngkin had vetoed,” she said.
Richmond versus the rest of Virginia
Spanberger said one of the biggest surprises on the job has been the disconnect she sees between debates dominating Capitol Square and the concerns she hears while traveling the commonwealth.
“How different things are here in Richmond, or even Capitol Square, versus everywhere else in Virginia,” she said, recalling recent visits to Abingdon, Washington County, Blacksburg and Surry County during Virginia Agriculture Week.
“The things people are talking about at times are very, very different from the things that people are talking about in Richmond,” she said.
Spanberger said that disconnect has influenced how she approaches many of the biggest issues coming out of the General Assembly.
While progressive lawmakers pushed for sweeping changes on labor, environmental and criminal justice issues, Spanberger said she often evaluates legislation differently now as governor, focusing more heavily on implementation, agency capacity and long-term economic effects.
“It’s important to me that not only are we getting it right, but when there’s clear places and areas for improvement in terms of how we can set up state agencies or entities for that implementation, we need to make those changes,” she said.
Spanberger pointed to paid family and medical leave as an example of a policy she supports but also requires careful implementation.
“Virginia is the 14th state in the country to adopt a policy like this. It’s a policy that I think people are going to feel in a positive way, but it is a major shift, and we have to get it right,” she said.
But Holsworth said many lawmakers expected clearer guidance from the governor earlier in the legislative process, especially relating to the state budget.
“She could have been involved earlier there,” he said. “Typically governors really try to do a more determined job of setting the parameters of the budget early on.”
Holsworth also argued the tensions reflect ideological shifts within the Democratic Party of Virginia.
“Virginia’s always had these pro-business governors, Democratic or Republicans,” he said. “But the legislative branch of the Democratic Party has moved a little further to the left.”
The data center divide
Sen. Louise Lucas on the Senate floor at the Virginia State Capitol in Richmond during this year’s legislative session. Lucas has emerged as one of the leading voices pushing to scale back Virginia’s data center tax incentives amid ongoing state budget negotiations. (Photo by Shannon Heckt/Virginia Mercury)
Much of the budget dispute comes down to disagreements over Virginia’s sales and use tax exemption for data center equipment, an incentive credited with helping the commonwealth become the world’s largest data center hub.
Sen. Louise Lucas, D-Portsmouth, the chair of the powerful Senate Finance and Appropriations Committee, wants to eliminate the incentive, arguing the state is subsidizing highly profitable corporations while residents face rising utility costs and environmental concerns.
Last week, Lucas announced that she would take the data center debate directly to the voters, launching a statewide listening tour focused on the industry’s impact on communities statewide.
Stops are planned across Virginia, including Hampton Roads on Sunday, Richmond and Northern Virginia as lawmakers continue weighing whether the state should scale back billions of dollars in tax incentives for the rapidly expanding sector.
Spanberger, however, has taken a more cautious approach.
“What is less part of the discussion is the end goal,” she said, warning that abruptly dismantling the tax break could trigger lawsuits, damage Virginia’s business reputation and destabilize local governments heavily dependent on data center revenue.
“Look at Mecklenburg, where they’ve built multiple public schools fully with data center funding,” Spanberger said. “When you have localities with nearly half their local revenues coming in from data centers, there’s some localities that are saying, wait, why are you going to pull up the ladder behind you?”
At the same time, she said the industry should face stricter standards on energy consumption, water usage and environmental impacts.
“If energy generation and energy consumption is a problem — and I’ve been very clear that data centers need to pay their fair share as relates to energy consumption — well, how do we get there?” she said.
Spanberger argued Virginia still holds leverage because companies want to locate in the commonwealth.
“We have a pretty significant stance to be able to say we have these very high standards, and we want you all to meet them,” she said.
On Friday, the House released a new budget proposal that would preserve the existing sales and use tax exemption for data centers while creating a commission to study the industry’s long-term impact on Virginia’s power grid, water resources and economy.
The revised plan also eliminated earlier Senate-backed environmental requirements opposed by industry groups and some business advocates. Spanberger, who has repeatedly argued the state should “honor its commitments” to companies that invested in Virginia under the current incentive structure, praised the House approach Friday.
“This proposal creates a clear roadmap for evaluating the impact of the data center industry in Virginia and for reassessing the state’s incentives into the future, with a focus on fairness to ratepayers and the needs of local communities,” Spanberger said in a statement.
Meanwhile, Senate Minority Leader Ryan McDougle, R-Hanover, blamed Democrats broadly — and Spanberger specifically — for the ongoing impasse.
“She’s the governor and it’s her party,” McDougle said in an interview Friday. “She should take the blame.”
McDougle also criticized what he described as a lack of policy engagement from the administration during the session.
“My conversations with the governor during the legislative process were always polite and courteous, but nothing substantive about policy. I would expect such conversations would have a significant policy component, and I did not see that from my perspective. And we did not see representatives of the administration at many of the committee hearings and debates,” McDougle said.
Holsworth said the budget stalemate has exposed deeper tensions over Virginia’s economic identity.
“You have one group of Democrats, with Spanberger leading it, saying that if we do this, our ranking, as the best state for business, is really going to take a hit,” he said.
“On the other hand, you have Senator Louise Lucas and other people in the Senate, some Republicans included, saying, ‘Why in the world are we paying a couple of billion dollars a year to the richest people in the world as a tax exemption? We should get rid of it, or at least tone it down in some fashion.’”
Senate Minority leader Ryan McDougle, R-Hanover, speaks with reporters outside the Virginia State Capitol in Richmond last month as lawmakers continued negotiations over the state budget and data center tax incentives. (Photo by Shannon Heckt/Virginia Mercury)
Affordability and political pressure
Spanberger campaigned heavily on affordability last year, but acknowledged many Virginians still don’t feel economic relief.
“The measure of success keeps changing because all of the pressures that require us to work on issues of affordability and lowering costs keep getting worse,” she said.
She highlighted insulin cost reforms, healthcare changes involving insurance pre-authorization and housing measures she said will help residents more directly.
However, Spanberger acknowledged those gains collided with inflation and rising fuel prices.
“The progress we’re making is muted by the fact that there’s still pressures and bad policies that are negatively impacting people,” she said.
Republicans have repeatedly argued that Democratic policies are contributing to higher household costs.
McDougle said the governor’s policies contradict her campaign messaging on affordability and bipartisanship.
“She talked a lot about being for people and bipartisanness and affordability on the campaign trail. And then her initial policies, right out of the gate, were to raise everybody’s power bill through RGGI,” he said, referring to Democrats’ move to rejoin the Regional Greenhouse Gas Initiative.
The Spanberger administration pointed out that 75% of the governor’s “Affordable Virginia Agenda” passed with bipartisan support.
But Holsworth said Republicans moved quickly after Spanberger took office to define her politically before she could fully establish her governing identity.
“They went after her early, and I think they caught that team a little unaware,” Holsworth said. He added that many of Spanberger’s affordability initiatives may ultimately prove popular but are not tangible to many voters.
“The average person in the street knows that their electric bills and insurance bills are going up,” he said.
What comes after the budget
Even with the budget fight and criticism from some Democrats, Spanberger said she remains focused on longer-term priorities, particularly housing, childcare and administrative reforms.
“There’s more to do to continue to really push on the supply side challenge,” she said, referring to housing and childcare.
The governor is also closely watching Dominion Energy’s proposed merger with NextEra Energy, which would create one of the nation’s largest utility companies.
Spanberger said she sees possible benefits if the merger expands renewable energy production and lowers costs for ratepayers, but she also expressed concerns about long-term impacts on Virginia jobs and consumers.
“There also has to be some clear financial benefit for the fact that these two gigantic companies are endeavoring to merge to become even more enormous,” she said.
Spanberger also acknowledged that, as Virginia’s first woman governor, some reactions to her leadership may be shaped by expectations that previous governors did not face.
“I think that things are scrutinized differently, assumptions are made differently,” she said. “I might not be exactly in the model that people are used to.”
Still, she suggested that some of the criticism surrounding her first few months in office reflects discomfort with a governing style that does not fit traditional expectations of Virginia governors.
“The way that people will level critiques against me just objectively, they wouldn’t do it (to others),” Spanberger said. “They haven’t.”
Virginia Gov. Abigail Spanberger stands outside the Executive Mansion in Richmond as her administration faces growing tensions with some fellow Democrats over a series of high-profile vetoes and amendments to major legislation. (Photo by Markus Schmidt/Virginia Mercury)
Virginia Democrats spent years waiting for unified control of state government after an unprecedented string of bruising vetoes under Republican Gov. Glenn Youngkin.
But nearly six months into Gov. Abigail Spanberger’s four-year term, some Democratic lawmakers and progressive allies say the former congresswoman is governing less like the leader of a blue-state trifecta and more like the cautious centrist Virginians elected to Congress eight years ago.
The pushback has exposed ideological and procedural tensions inside Virginia’s Democratic Party at a moment when lawmakers had hoped to capitalize on full control of Richmond after years of divided government.
Spanberger, however, rejects the idea that her vetoes reflect dysfunction or political drift.
“As I view it, I’m doing my job,” Spanberger said during a lengthy interview with The Mercury at her office at the Patrick Henry Building in Richmond Thursday. “The General Assembly passes bills, the governor has the responsibility to amend, sign, or veto.”
The governor argued that Democrats entered the 2026 legislative session with what she described as “some sort of pent-up interest” after four years of Youngkin, noting that she has signed more than 100 bills previously vetoed by her Republican predecessor.
“My focus is on implementation,” Spanberger said. “Especially some of the larger bills that need to be implemented and people will feel or see if they are not implemented well. That is on my administration.”
Tensions emerge inside Democratic trifecta
The friction has become increasingly public in recent weeks.
Labor groups blasted Spanberger after she vetoed collective bargaining legislation backed heavily by unions. Progressive lawmakers privately complained that the governor’s office failed to engage during the legislative session, only to unveil sweeping substitute proposals after bills had already reached her desk.
Sen. Louise Lucas, D-Portsmouth, the Senate’s president pro tempore, continues to air her frustration with the governor on social media.
And Senate Majority Leader Scott Surovell, one of the chamber’s most vocal lawmakers, said Spanberger’s approach differs significantly from the four prior governors he has worked with since he was first elected to public office.
“In the 17 years I’ve served, governors just tend to leave the details of a bill to the legislature,” Surovell said in a recent phone interview. “And if they have issues with details, they’re usually raised during session.”
But this year, he said, lawmakers were often presented with late-stage substitute proposals that fundamentally rewrote legislation without time for enough public debate or negotiation.
“It’s hard to work with a governor’s office that has opinions when they don’t share them before they act, or they don’t share them during the legislative process,” Surovell said. “Governor Spanberger’s proposals were serious policy proposals, but they were made about two months too late.”
The criticism reflects a growing complaint among some Democrats that Spanberger, who served three terms in Congress before winning the governorship last year, brought a more executive-driven style to Richmond that clashes with the relationship-heavy culture of the Virginia legislature.
In a strongly-worded resolution, the Virginia AFL-CIO accused Spanberger of abandoning campaign commitments after she vetoed the collective bargaining proposal for public employees.
The labor federation said Spanberger campaigned on ending what it called a “historic injustice” and noted that unions had agreed to changes requested by her administration during negotiations over the bill.
The resolution said the governor later offered a substitute measure containing “poison-pill terms” before ultimately rejecting it, which they framed as Spanberger choosing “to betray her commitment and vetoing the legislation.”
Spanberger, who said she supported the core idea of the proposal, dismissed suggestions that the criticism reflects a wider collapse in Democratic support.
“Here’s a place where I will say, there’s a backlash among some organized groups and advocates, and then there’s the opinions of people and communities,” she said in the interview.
Spanberger said local governments raised concerns about the cost and complexity of implementing collective bargaining systems, particularly in smaller jurisdictions.
“Those concerns were significant,” she said. “People can react to their anger or their disappointment in me as they choose, but I’m going to do what I think is right.”
Virginia Senate Majority Leader Scott Surovell, D-Fairfax, has emerged as one of the most vocal Democratic critics of Gov. Abigail Spanberger’s approach to vetoes and late-stage amendments during her first months in office. (Photo by Nathaniel Cline/Virginia Mercury)
Governor defends cannabis veto
Spanberger’s veto of legislation establishing a legal cannabis retail market by early next year became another major source of tension.
Virginia legalized adult possession of marijuana in 2021 but never created a legal framework for commercial sales, leaving the state in what many lawmakers have described as a legal gray area.
Spanberger said she supports eventually creating a regulated market and called the current system “not optimal.” But she argued the legislation moved too quickly and did not give regulators enough time to build enforcement systems.
“There’s not enough time to stand up the CCA,” she said, referring to the Virginia Cannabis Control Authority. “There’s not enough time to train law enforcement under the CCA. There’s not enough time to get their regulations for the licenses in place.”
She also defended her decision to veto the bill and revisit changes at a later time. Conversations between her administrations and lawmakers to wrap a revised measure into the state budget are currently underway.
“I did have people say, why not just sign it and we’ll fix it later?” Spanberger said. “To which I said, I sent back a list of all the things I wanted to fix, but you didn’t vote them up or down.”
Surovell said lawmakers were alarmed by portions of the governor’s substitute proposal, including felony penalties tied to marijuana transportation offenses.
Spanberger’s proposed substitute, he said, had a Class 2 felony for carrying 50 pounds of marijuana over the state line.
“I don’t think I’ve ever voted for a Class 2 felony in 17 years,” he said.
Spanberger also vetoed or amended several immigration-related measures tied to federal Immigration and Customs Enforcement, drawing criticism from several top Democrats and immigrant-rights advocates.
The intra-party clashes have revived an old debate inside Virginia Democratic politics about how progressive statewide Democrats can afford to be.
“Virginia Democrats are continuing to struggle with a question of identity,” Steven Farnsworth, a political scientist at the University of Mary Washington, said. “How conservative or how moderate do you have to be to win a statewide election is a question that has bedeviled Virginia lawmakers since the days of (former Governor) Chuck Robb.”
Farnsworth noted that Spanberger campaigned and served in Congress as a centrist Democrat.
“If Virginia liberal Democrats were unhappy with that record, then why was the governor unopposed in the Democratic primary last year?” he said.
The governor’s approval ratings have also slipped since her election victory last November. A Washington Post-Schar School poll released in April found 47% of Virginia voters approved of her performance while 46% disapproved.
While she eventually backed the effort, some Democratic activists criticized what they viewed as a lukewarm embrace of a proposal designed to help Democrats pick up U.S. House seats in the 2026 midterms.
Farnsworth said Spanberger appears to be caught between different audiences.
“The governor’s current battle is really to persuade Virginians to support her over the Democratic majority of the Senate,” he said.
Still, Farnsworth said tensions between governors and legislatures are hardly unique.
“The first year for every new governor tends to be a rough one,” he said. “Even if members of the same party hold all the key positions of power, there are still significant differences of opinion between what the governor wants and what the legislature wants.”
Sen. Schuyler VanValkenburg, D-Henrico, one of the state Senate’s more liberal members, said lawmakers still accomplished major priorities this year despite disagreements with the governor.
“I think we had an incredibly productive session, the most productive session we’ve had in four years,” VanValkenburg said in a recent interview.
He acknowledged frustration over some vetoes but argued the broader picture remains positive.
“Every time a governor comes in, there’s growing pains, people have to feel each other out,” he said. “We’re going to get those other things done. Maybe it’s not all going to be this year, but this happens every four years.”
Virginia state Sen. Schuyler VanValkenburg, D-Henrico, said disagreements between Gov. Abigail Spanberger and Democratic lawmakers are part of the adjustment period that often comes with a new administration and legislature. (Photo by Markus Schmidt/Virginia Mercury)
Budget battle is governor’s, legislature’s next test
Spanberger and lawmakers are facing another looming challenge: a budget stalemate tied largely to disagreements over when Virginia should scale back tax incentives for data centers.
Democratic lawmakers are expected to return to Richmond in the coming weeks and pass a new biennial spending plan before the June 30 deadline to avoid a government shutdown.
Farnsworth said the budget fight may ultimately force both sides toward compromise.
“The idea of an impasse lasting past June 30 would be very unappealing for all Democrats,” he said.
For now, Spanberger insists her ties with her party remain intact despite the public criticism.
“I don’t think it’s in a difficult place, I think it’s in a strong place,” she said of her relationship with legislative Democrats.
“But a legislator who might think that I was going to come in and do everything they wanted me to do is probably not happy with the fact that I’m an executive who takes my role very seriously.”
The Virginia General Assembly Building stands in Capitol Square in Richmond. Virginia lawmakers are expected to return later this month to continue negotiations on the state budget ahead of the June 30 fiscal deadline. (Photo by Markus Schmidt/Virginia Mercury)
Virginia’s revenue outlook has improved by $1.5 billion over the next three fiscal years, giving lawmakers more breathing room as negotiations over a stalled state budget are set to continue in Richmond later this month.
Gov. Abigail Spanberger on Monday afternoon released the updated revenue forecast she ordered last month, telling top legislative budget writers that Virginia is projected to collect substantially more General Fund revenue through fiscal year 2028 than previously expected.
The revised forecast projects revenues for fiscal year 2026 will exceed the official estimate by $585.5 million. Another $922.6 million in General Fund revenue is projected for fiscal years 2027 and 2028, including $582.4 million in 2027 and $340.2 million in 2028.
The new projections arrive while lawmakers remain stuck in negotiations over Virginia’s next two-year budget, with disagreements over data center tax incentives and spending priorities continuing to hold up a final deal.
In a letter to Sen. Louise Lucas, D-Portsmouth, and Del. Luke Torian, D-Prince William — the chairs of the legislature’s money committees — Spanberger said lawmakers need updated economic information as they work toward a budget deal.
“As General Assembly leadership and budget conferees continue their important work, it is critical they have the most current and accurate information available,” Spanberger said in a statement.
“While forecasted General Fund revenues have increased, I remain concerned by rising national economic instability, the ongoing conflict in Iran, and the continued impacts of federal workforce cuts. We must account for these evolving economic conditions as we plan for the long-term strength of our commonwealth.”
The updated forecast arrives as lawmakers prepare to return to Richmond later this month for another attempt to break the budget impasse before the start of the new fiscal year.
The House is scheduled to reconvene its special session June 18, followed by the Senate on June 22, as budget conferees continue working toward a compromise spending plan that can pass both chambers and reach Spanberger’s desk before the June 30 deadline.
The revised forecast reflects strong tax collections even as parts of Virginia’s economy show signs of slowing.
General Fund revenues have grown 7.3% on a fiscal year-to-date basis and are running 3.3% ahead of forecast. Virginia is currently $851 million ahead of expectations, though nearly 70% of that amount — about $578 million — comes from nonwithheld income tax payments and individual refunds, two of the state’s most volatile revenue categories.
Virginia Secretary of Finance Mark Sickles said the revised forecast attempts to balance the state’s recent revenue growth against growing uncertainty in the national economy.
“The updated forecast confirms that the commonwealth’s revenue performance remains solid but also factors in the deteriorating economic conditions and increased uncertainty in the national outlook,” Sickles said in a statement.
“The additional $1.5 billion in updated projected revenues should provide the General Assembly with enough resources to craft a structurally balanced budget that mitigates any potential risks related to national market volatility.”
The updated forecast follows warnings from state finance officials last month that Virginia’s economy is facing slower job growth, persistent inflation and weakening consumer confidence even as tax revenues continue to exceed expectations.
During a May presentation of the Senate Finance & Appropriations Committee, Sickles said Virginia had lost 41,900 jobs since the beginning of fiscal year 2026 while General Fund revenues remained more than $850 million ahead of forecast.
At the time, Sickles suggested the surplus could help lawmakers move past the budget stalemate.
“It would not be unprecedented for us to use some of this money to get past this impasse, if we needed to,” Sickles told the committee.
Spanberger ordered the updated forecast May 19 while budget negotiations remained unsolved. The revised projections extend through fiscal year 2031 and are intended to give lawmakers updated economic data before final spending decisions are made.
The prolonged budget standoff has raised concerns about whether lawmakers will finish work on a revised spending plan before the new fiscal year begins July 1.
Lawmakers adjourned a special session in April without an agreement. Disputes over data center tax incentives, transportation funding and competing priorities between the Democratic-controlled House and Senate have remained major obstacles.
The stronger revenue forecast could give negotiators additional flexibility on spending priorities including education, transportation, healthcare and state employee compensation. But administration officials cautioned that economic risks remain.
Federal workforce reductions continue weighing heavily on Northern Virginia and Hampton Roads, both of which have large concentrations of federal employees and contractors. State officials have also pointed to instability in financial markets and international tensions as possible threats to future economic growth.
Even with revenues ahead of forecast, Virginia officials have repeatedly noted that much of the current surplus comes from revenue streams that can fluctuate significantly from year to year.
The Virginia House chamber during a special session at the Capitol in Richmond last month. Lawmakers adjourned without reaching agreement on the state's biennial budget, leaving negotiations unresolved ahead of a planned June return to Richmond. (Photo by Markus Schmidt/Virginia Mercury)
Virginia lawmakers are set to return to Richmond this month for another attempt to reach a budget deal, with just days until the start of the new fiscal year and no agreement yet on the state’s next two-year spending plan.
The House of Delegates is scheduled to reconvene its special session June 18 at 10 a.m., followed by the Senate on June 22 at noon, as negotiators continue working toward a compromise budget that can pass both chambers and reach Gov. Abigail Spanberger’s desk before the June 30 deadline.
Failure to enact a budget before the new fiscal year begins would result in a government shutdown, creating fiscal uncertainty for state agencies, local governments and school divisions that depend on state funding. Spanberger has repeatedly warned against allowing negotiations to extend beyond the deadline.
“It’s absolutely unacceptable if the General Assembly would allow for the state to go past July 1,” she told Cardinal News last month.
Lawmakers have remained at an impasse since the regular 2026 General Assembly session ended without a budget, despite Democrats controlling both chambers of the legislature. A special session in April also ended without a deal.
The biggest sticking point is a Senate-backed proposal to begin phasing out the state’s sales and use tax exemption for data centers before it expires nine years from now.
Senate Finance and Appropriations Committee Chair Louise Lucas, D-Portsmouth, has argued the fast-growing industry places increasing demands on Virginia’s electrical grid and water resources while producing relatively few long-term jobs.
Spanberger and House Democrats have opposed ending the incentive prematurely, arguing it could damage Virginia’s reputation with businesses and discourage future investment.
The tax exemption was approved in 2008 and is authorized through 2035. Lawmakers originally estimated it would reduce state revenue by about $1.5 million annually. Today, its value is estimated at nearly $2 billion a year, as Virginia has become the world’s largest data center market.
Spanberger said she is open to discussions about what happens after 2035.
“There are efforts afoot in the General Assembly, as it relates to the budget, to ensure that data centers are paying their fair share, as I think everyone broadly agrees is necessary,” Spanberger said in mid-April. ”And so that will continue to play out in those negotiations.”
But the governor said she opposes changing the policy before the exemption lapses.
“If Virginia were to take an adversarial stance towards any particular industry, it sends the wrong signal broadly, and we’re already seeing it with the decision to move away from the tax abatement,” she told Cardinal News in an interview published last week.
“It is the absolute prerogative of the General Assembly to look towards the future and to have conversations about incentives they do or do not want to give into the future.”
She also warned that ending the incentive early could invite legal challenges.
“As governor, I’m not going to break a contract that the state has signed — one, because who’s going to fund those lawsuits when we have to defend ourselves from broken contracts?” Spanberger said.
The dispute has put the governor at odds with Lucas, one of the Senate’s most powerful members.
In a series of posts Wednesday on X, formerly Twitter, Lucas blamed the administration and House Democrats for the continued stalemate.
“The Governor and the House are the ones that are gambling with our future by allowing the data centers to expand without concern for power, water, or paying their fair share of taxes,” Lucas wrote.
“The Governor should be honest and tell the public what she won’t do — she won’t tax billion dollar corporations to provide long term revenue to help pay for K12 and public safety and to backfill the federal cuts from Trump.”
“That’s the budget hold up!! Once again, the Governor is wrong on the policy and knows Virginians will cook her if there is a government shutdown.”
Lucas has repeatedly defended the Senate proposal during budget discussions.
At a Senate Finance Committee meeting in May, she argued the state should not continue providing the incentive without additional policy changes.
“Data centers will employ very few permanent jobs for a sizable tax giveaway,” Lucas said.
“This is imperative to encourage responsible growth in the commonwealth to protect our electric grid and natural resources, while also ensuring hard working Virginians are not asked to pick up higher utility costs to fund a higher share of our existing core services,” she added.
Despite the disagreement, Lucas said at the time that she expects lawmakers to reach a deal before the new fiscal year begins.
“Virginia will have a budget by June 30,” she said. “We will have to get this right for Virginians.”
Meanwhile, state officials are preparing updated financial projections to aid negotiations.
Earlier this month, Spanberger directed state finance officials to roll out a revised revenue forecast that will include projections through fiscal year 2031. The administration said the updated forecast is intended to give budget conferees a clearer picture of the state’s fiscal outlook.
“When making long-term budget commitments, it is important that policymakers have the most current and accurate information available,” Spanberger said in a statement. “This updated forecast will help provide budget conferees and the public with greater confidence as negotiations continue on the commonwealth’s next two-year budget.”
The request came as Virginia Secretary of Finance Mark Sickles warned that parts of the state’s economy are showing signs of weakness.
During last month’s meeting of the Senate’s money committee, Sickles pointed to slower job growth, persistent inflation and declining consumer confidence, even as state revenues continue to exceed expectations.
Those stronger revenues have given negotiators additional room as they work toward a budget agreement before July 1.
