Compromise Achieved: How the Proposed Budget Will Impact Public Education

Proposed K-12 Education Budget for 2026-2028 

After months of sometimes contentious negotiations and infighting between conference committee members and with Governor Spanberger, the conference committee has reached a compromise on the 2026-2028 budget. The legislature passed the proposed budget on June 22^nd and now the Governor has until June 30^th to veto any line items or sign the budget bill. 

A major sticking point in the conference was regarding the data center tax exemption and whether or not those tax breaks should be continued into the future. To date, that tax exemption has saved data center developers billions of dollars at the expense of providing much-needed revenue to the Commonwealth. Or, another way of putting it is that data center developers have cost taxpayers billions of dollars in revenue that could be used for Virginians.

One of the biggest needs for revenue is funding K-12 public education. In 2023 Virginia’s Joint Legislative Audit and Review Commission it was reported that Virginia’s K-12 public education has been inadequately funded for years. The Commonwealth’s per student funding is lower than average values for all 50 states, the Mid-Atlantic region, and three of the Commonwealth’s bordering states. During the latest General Assembly, legislators tried to pass bills that would help alleviate funding shortfalls including SB66 which would have allowed a referendum in each locality for an additional 1% local sales and use tax to support schools.

In December 2025, outgoing Governor Youngkin proposed a budget for 2026-2028 with his typical inadequate funding for public education. His budget was the starting point for the Virginia General Assembly budget revisions for the next biennium. Since January, the Virginia Senate and House of Delegates have been working on that revised budget with a looming deadline of June 30, 2026, while the entire Commonwealth waited with baited breath. 

Data Center Tax Compromise

In an effort to attract businesses to Virginia during the Great Recession, the Commonwealth gave generous tax breaks to data center developers to attract high tech investment, allowing Virginia to become the Data Center Capital of the world. The Data Center Retail Sales & Use Tax Exemption, which is in effect until 2035, allowed data centers to avoid paying $1.6 billion in taxes for the year 2025 alone. 

Governor Spanberger and some legislators were hesitant to renege on the tax breaks, and instead they decided on the compromise that would tax electricity use by data centers. That alone is expected to raise up to (a capped amount of) $600 million a year for a total of $1.2 billion over the course of the biennium budget.

As the Fund Our Schools coalition points out, the tax compromise is a positive first step in helping to mitigate the underfunding of Virginia’s public education system, but the new electricity tax expires on July 1, 2028. Virginia needs a permanent solution to ensure that industry pays its fair share. 

Others commented on the inadequacy of the data center tax compromise. For example, Michelle Moore of Bridge 2 Blue noted that the compromise did nothing to mitigate the air or noise pollution from backup diesel generators nor did it “place limits on data center and utility expansion, utility cost reforms so data centers, not ratepayers, cover the infrastructure and energy costs they create, and tougher natural resource, environmental, and health and safety protections for both new and existing facilities in our communities.” 

Returning Lab School Funds to the General Fund 

An additional amount of funding for the Commonwealth came from the proposed transfer of unobligated lab school balances to the general fund. This will provide an estimated $10,670,000 to the general fund in 2026. 

4 Public Education has published extensively about Governor Youngkin’s push for lab schools, finding that Youngkin lacked legal authorization, the schools themselves were likely unconstitutional, and they were expensive and more similar to after school activities than real schools.

A Positive Proposed Budget for Education

With the resulting budget compromise, Virginia’s K-12 public education will receive better funding than previous years. The following are key K-12 investments taken directly from the June 22, 2026 Fund Our Schools statement on the conference budget (note: dollar amounts are two-year totals, FY27 and FY28, unless otherwise noted):

• Special Education Add-On: The budget more than doubles the flexible add-on for students with disabilities, with an investment of $148 million, which local school systems would have flexibility in determining how to use for special education. The budget also adds $10 million for students with intensive support needs, enabling them to learn alongside their peers in public schools. Despite these increases, the state continues to provide far less than is needed to cover its share of a high-quality education for students with disabilities.

• Funding for Students in Low-Income Communities: The final agreement includes almost $29 million to boost the At-Risk Add-On for K-12 students living in the highest-poverty communities. This is far less than earlier proposals would have provided, and far less than what schools need in order to make sure that students facing economic disadvantages have meaningful access to learning.

• Teacher and Staff Compensation: The budget provides the state share of 4% salary adjustments each year (2026-2027 and 2027-2028) for teachers and other school staff. While these adjustments will help school employees keep pace with the cost of living, some staff may not receive the full 4% increase because their local government may not be able to provide their share of the costs, particularly since most have already approved their local and school budgets for the upcoming school year.

• School Funding Formula Modernization: The budget includes $1.25 million to support the Joint Subcommittee on Elementary and Secondary Education Funding as it continues its work to modernize how Virginia funds its schools. 

• Local Option for School Construction: The budget authorizes all localities to hold voter referendums on an additional 1% local sales tax dedicated to school construction and capital needs, giving communities a new tool to address aging facilities and long-delayed building projects.

• Student Well-Being: So schools can address the needs of students as whole persons, the budget adds $17.6 million for school breakfasts, $5 million for the community schools model, and funding for the implementation of evidence-based restorative practices to resolve student conflicts.

According to the Fund Our Schools Coalition:

This budget reflects real, hard-won progress for Virginia’s public schools, and we are grateful to the advocates, educators, and families whose voices helped shape it. But Virginia’s students, especially those in our highest-poverty communities, deserve more than incremental gains. 

Public education is the key to a thriving community, and our K-12 schools have the potential to be anchors for our communities across Virginia. Governor Spanberger and the General Assembly, our public schools, students, and families are being given opportunities that were not available in the recent past under the previous governor.