A BILL to require the Department of Education to revise the local composite index school funding formula to account for data center revenue.
HB1101 requires the Virginia Department of Education, working with the Department of Taxation, to revise the local composite index (LCI) school funding formula so that local revenue generated by data centers is counted in the calculation of required local effort. The bill specifically directs the agencies to include data-center-related real property taxes and business personal property taxes in the formula, using the definition of “data center” already found in the tax code.
The bill also builds in a safeguard intended to prevent school divisions without data centers from being disadvantaged by the change. Before the revised formula can be used, the Department of Education must submit it to the General Assembly for approval by December 1, 2026, and any approved revision would take effect beginning with the 2028–2030 biennium.
If enacted and approved through the required legislative process, HB1101 would alter how Virginia calculates local school funding obligations by treating data center tax revenue as part of a locality’s capacity to support schools. That would likely increase required local effort for school divisions that host large data centers and could reduce state aid or shift the local-state funding balance in those jurisdictions, while preserving the existing formula structure for other divisions. The bill affects the Department of Education, the Department of Taxation, local school divisions, and the statutes and budget provisions governing the local composite index and school finance.
The available record shows no committee transcript or recorded votes, so there is no documented floor or committee debate to gauge support or opposition. The bill was introduced and referred to the Education Committee, then left in Education, suggesting it did not advance further in the available history. Based on the text alone, the measure appears policy-driven and technical rather than overtly partisan, but the absence of recorded discussion limits any firm conclusion about sentiment.
The main point of potential contention is whether data center tax revenue should be treated as a local fiscal capacity factor in school funding calculations. Supporters would likely argue that rapidly growing data center revenues should be reflected in the LCI because they increase a locality’s ability to fund education, while opponents may worry that the change could penalize host localities, complicate the formula, or create unintended effects for school funding equity. The bill attempts to address one concern by stating that non-host localities should not be disadvantaged, but the mechanics of that protection and the impact on future appropriations could still be debated.