The Lyceum: Virginia Daily — Mar 15, 2026

Virginia's Democrats controlled every lever of power in Richmond and still couldn't pass a budget — amid a billion-dollar fight with themselves over whether data centers should keep getting a tax break. The General Assembly adjourned sine die yesterday with a historic stack of signed legislation (legal weed retail, $15 minimum wage, an AI safety law, public-sector collective bargaining) and a gaping hole where the two-year spending plan should be. A special session is coming April 23. Until then, every school superintendent, state agency head, and county budget planner in the Commonwealth is working without a number.

The 2026 General Assembly session ended Saturday night with a joint resolution asking Governor Abigail Spanberger to call lawmakers back on April 23 to finish the one thing they couldn't: a budget for fiscal years 2027–2028.

The impasse centers on a single, concrete disagreement. Sen. Louise Lucas, chair of the Senate Appropriations Committee, wants to end Virginia's sales-tax exemption for data center equipment in 2027 — eight years ahead of its scheduled 2035 expiration — arguing the move would generate nearly $1 billion in new revenue over the biennium. Del. Luke Torian, the House Appropriations chair, says Virginia can't renege on incentive contracts it already signed with companies that invested billions under those terms. Spanberger sides with the House.

The downstream damage is already materializing. Richmond Public Schools faces a potential $15 million shortfall if the budget isn't resolved by July 1; Mayor Danny Avula called an emergency meeting to explore stopgap funding. Fairfax County and Prince William County superintendents warned this morning that unresolved state funding will force hiring freezes for the 2026–2027 school year — hundreds of positions, larger class sizes, real consequences for Northern Virginia families.

Virginia's fiscal year starts July 1. There's runway, but not as much as Richmond thinks.

For five years, Virginians could legally possess marijuana but had no legal way to buy it. That limbo ends — if Spanberger signs, as expected — with a retail market opening January 1, 2027.

The compromise: a 6% state cannabis tax, with localities allowed to add 1–3.5% on top. Combined with existing sales tax, buyers will pay roughly 12–16% total. Existing medical cannabis operators must pay $10 million to enter the retail market — a split-the-difference figure between the House's $5 million and the Senate's $15 million proposals. Del. Paul Krizek of Fairfax carried the House version, and Northern Virginia's suburban consumer base is expected to drive significant retail demand.

The equity provisions matter and will be easy to overlook. The Cannabis Control Authority must create a licensing process that prioritizes applicants who lived between 1999 and 2025 in areas disproportionately policed for marijuana offenses, or who spent at least three of the past five years in historically economically disadvantaged communities. Richmond neighborhoods with long enforcement histories stand to benefit — but only if the CCA implements those provisions with rigor. Watch the rulemaking, not just the signature.

Virginia exempts data centers that invest at least $150 million and create 50 jobs from paying state sales tax on equipment. That exemption built the world's largest data center cluster in Loudoun County's Ashburn corridor — and data centers now generate nearly half of Loudoun's property tax revenue.

Senate Democrats want to end the exemption early and capture roughly $1 billion for the state budget. House Democrats and Spanberger say that breaks Virginia's word to companies that invested under the deal. The state and the county want two different things from the same industry: Loudoun wants to keep the property tax windfall; Richmond Democrats want a cut of the sales tax that currently flows to no one.

The fight is intensifying at the local level. The Loudoun County Board of Supervisors faced a heated public hearing over Amazon's proposed 300 MW data center campus near Route 7 — residents packed the room to oppose residential-to-industrial rezoning, and supervisors appeared split. Separately, Prince William County delayed a vote on extending its temporary moratorium on new data center projects after intense developer lobbying. An environmental report circulating among Loudoun county staff estimates that on-site backup generation at some facilities could cause millions of dollars a year in health-related damages for nearby communities.

If the state changes the tax math, expect more of these local fights — and more hearings where county planners try to reconcile Dominion Energy capacity studies with real estate filings that keep arriving regardless.

Even as the state budget is frozen, the federal contracting engine that actually pays most Northern Virginia salaries keeps running. Reston-based Leidos announced a roughly $600 million contract with the U.S. Navy to modernize shore-based IT systems — a deal expected to support several hundred jobs in the region.

It's not the only win. Northrop Grumman secured a Defense Department extension for missile-warning sensor work that company officials say sustains roughly 1,200 Northern Virginia defense supply-chain jobs. These contracts matter because they highlight a structural split in the regional economy: AI talent in National Landing and Reston remains in high demand thanks to federal work, while Richmond's municipal and state-funded projects are more likely to pause for budget clarity and AI-law rulemaking.

If federal prime contractors begin inserting Virginia's new AI law compliance language into subcontracts — and early signals suggest some are considering it — the state's rules will start influencing contracts well beyond the Commonwealth's borders.

A legislature that controls every branch of government and still can't agree on a spreadsheet; a county where the aquifer now has more say over data center approvals than the Board of Supervisors; and a Pokémon game that quietly built a better map of your sidewalk than Google has.

Virginia just proved you can pass a sweeping AI safety law and a legal weed market in the same weekend — and still not figure out who pays for the schools.

Until tomorrow. —The Lyceum

If someone you know works in Virginia government, schools, or tech and isn't reading this — forward it. They need it more than you do.