JAHD KHALIL: Governor, thank you so much for talking with us.

Can you tell us where Virginia's budget is today?

ABIGAIL SPANBERGER: Right now we are in the middle of June and we have to have a budget passed through the House of Delegates and the State Senate and to my desk before the end of the month.

Right now what we have is the text of a proposed conference report from the House of Delegates.

That is, I think, the clear base document for any additional negotiations that might occur in this very short time frame.

We need the General Assembly to move forward very, very quickly.

JAHD KHALIL: So there's an impasse that we have right now, right?

So the House of Delegates and you would like to preserve a data center tax exemption.

The state senate is hoping to end that early and in the process get $2 billion extra, according to estimates.

I would classify it slightly differently.

I think that your assessment of the Senate's position is correct.

I think that, certainly, my position but as reflected in the House budget, is a desire to actually make a very thoughtful, long-term decision as it relates to the sales and use tax exemptions that data centers do or don't get.

In the House of Delegates proposed budget language, it's comprehensive in terms of understanding the revenues, the jobs, the impact, positive, negative, environmental, community-wide the data centers have had so far.

And also makes clear recommendations on what can be done, what should be done, and how Virginia can be in a leader position of leadership across the country in terms of what requirements we may put on data centers in addition to what changes, reassessments or revisions we may choose to make into the future on the sales and use tax incentive program.

So from my perspective, anything is on the table but I do think that it needs to be well considered and based on a full understanding of what would be the benefits, what would be the impacts, and make sure that there are no unintended consequences.

JAHD KHALIL: I've heard you say in the past that Virginia needs to stand by its commitments and that sounds to me like it's a very like principle-based approach to this debate.

The Senate, I kind of see that as a lot of it has to do with price.

So this debate of price versus principle, I think, is interesting.

You know, given that the tax exemption is growing a lot and you have three and a half more years in office, is there a point at which it becomes too expensive for Virginia to have this tax exemption?

ABIGAIL SPANBERGER: I think importantly it is a question of what does the exemption do?

And across the board, Virginia has 82 different sales and use tax exemptions across industries, whether it's data centers, aquaculture, agriculture, railroads, airlines, manufacturing, because the basic premise is we as a commonwealth, and other states do the same, have certain incentives that we put in place in order to attract business and the investment that comes with them.

It is the state's choice to forgo collecting one particular type of tax while those same data centers pay local sales tax and local property tax.

And so that equates to billions upon billions of dollars that flow to local communities.

And so it becomes a question of are we going to summarily break contracts, which does open the state to legal exposure, or are we going to make a plan into the future about what it is that want direction we to take any type of incentive?

JAHD KHALIL: Can I ask you about those contracts?

So there's a memorandum of understanding that the Virginia Economic Development Partnership has data centers sign.

And in that, it has a clause or language that talks about how the data center tax exemption could be subject to change.

So can you talk about how that kind of squares with this idea that we would be breaking our commitments if there's sort of an agreement between the state and these companies that the data center tax exemption could change?

ABIGAIL SPANBERGER: And certainly, but let me make two points.

One, it's middle of June.

We need a budget.

Right, these are conversations that should have happened quite some time ago, right?

And notably, I wasn't in the General Assembly voting for these incentives time, and time and time again as recently as three years ago.

And so it's been a consistent position of the General Assembly and Virginia more broadly to continue offering incentives.

Importantly, my conversations with the AG's office, they said, well, there should be money in the budget for more attorneys because while there are provisions that the state always has the ability potentially to break contracts, we should expect to be sued.

We should expect that to impact our reputation and certainly the willingness of other companies to come invest in Virginia if we're so willing to break contracts.

But importantly, looking forward, I think everything is on the table and that I think it isn't again, it isn't a binary choice between we rip up agreements that exist or we do nothing.

JAHD KHALIL: Senator Lucas put out a sort of a document on social media that was talking about a tiered system of fees.

I kind of heard saw that as like an echo or a rhyme of an earlier statement that you had told us, the media, about maybe a consumption tax or something like that.

Is this just sort of working around the data center tax exemption if there's just something else that's making up for that, you know, kind of potential revenue?

And is that in the basic concept, this tiered system, something that you're open to?

ABIGAIL SPANBERGER: I'm open to anything.

And in my conversations with the senator, my question had been, what is the goal?

Is the goal an X amount of money?

Is the goal changing the landscape in Virginia?

Like, what is the goal?

You have to have a defined goal.

You know, for me, certainly a core part of this discussion is ensuring that data centers are paying their fair share as it relates to energy consumption.

I brought up the idea of a consumption tax.

Again, this was months ago when there would have been plenty of time and runway to create thoughtful potential policy in this space.

In terms of the couple-page document that was released on Twitter, that isn't a plan.

If there's a plan behind it, if there's a proposal behind it, like I said, I am willing and open to pursuing and considering any plan that is actually sort of detailed and available for consideration.

I haven't seen that yet.

And what I have seen is the House's proposal, which is, you know, comprehensive, detailed, and wants to look at a holistic view of the data center industry.

We have benefited in terms of additional jobs.

Certainly the local revenue in the form of both property tax and sales and use tax at the local level.

Those are dollars that localities are now using to keep life affordable.

JAHD KHALIL: Your bill review process for regular legislation was seemingly quite extensive.

We're looking at something like a week for you to make amendments or changes.

ABIGAIL SPANBERGER: Presuming there's a vote on the 22nd, which [knock knock] there needs to be.

JAHD KHALIL: So, presuming that we — that the legislature does get this done by the 22nd, you have about a week to consider that.

Is that enough time?

Like, how are you going to deal with that shorter timeline for — ?

ABIGAIL SPANBERGER: Well, I think importantly, the budget is is very different than individual pieces of legislation, right?

I'm of the opinion that no one single issue and no one single person should hold up the budget and potentially risk the entire... economic stability of the Commonwealth of Virginia.

And in these circumstances, certainly my goal is to recognize the completeness of the budget.

I think that the budget that the House put forward last week is complete.

If I were writing the budget soup to nuts myself, I might have done this differently or dotted that I differently, but that's not what the budget is.

The budget is a giant document that enables the state to function.

And certainly that is an important piece.

I'm endeavoring to stay really apprised of everything that is in it.

And, you know, hopefully we'll see some outcomes to of this week's negotiations between the House and Senate conferees.

JAHD KHALIL: Thank you so much.

ABIGAIL SPANBERGER: Thank you.