
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, July 6, 1994                   TAG: 9407060067
SECTION: VIRGINIA                    PAGE: C-6   EDITION: METRO 
SOURCE: By DAVID M. POOLE STAFF WRITER
DATELINE: RICHMOND                                LENGTH: Medium

GENERAL ASSEMBLY SET TO SETTLE RETIREES' SUIT

The General Assembly rolls back into town today with hopes running high that it finally will resolve a five-year tax dispute with federal and military retirees.

Legislative leaders have rallied around a proposed $340 million deal in which the state would refund federal pensioners during the next five years for taxes collected in the 1980s under a policy later ruled illegal.

But the assembly may take several days to work through a host of technical hang-ups. The special session could come down to a test of wills between between two of the legislature's most formidable personalities: House Finance Chairman Richard Cranwell of Roanoke County and Senate Finance Chairman Hunter Andrews of Hampton, both Democrats.

Cranwell drew up the proposed pension settlement in a series of private meetings with representatives from retiree groups. Andrews has put forward an alternative scheme that draws in other issues, including a plan to boost pensions of state retirees by 3 percent and eliminate a controversial Social Security offset on state tax forms.

``That's part of the legislative process,'' Andrews said of the differences in the two plans. ``But we think we will come to a conclusion in a reasonable amount of time.''

Earlier Tuesday, leaders representing some of the state's 180,000 federal and military retirees staged a news conference to urge the Assembly not to let its differences scuttle an agreement.

``I don't care how you do it; just do it,'' said Michael J. Kator, a Washington lawyer representing a group of retirees in a lawsuit against the state.

At issue is a state policy that taxed federal pensions but not those of state workers from 1985 to 1988. The U.S. Supreme Court ruled the policy illegal but left open the question of whether the state must refund the estimated $460 million collected from federal and military retirees. Retirees are suing the state for refunds plus interest.

Gov. George Allen and Attorney General Jim Gilmore, both Republicans who campaigned last fall on promises to settle the lawsuit, put forward an initial offer of $234 million in April.

But pensioners, upset that they had not been consulted, rebuffed the offer. A bipartisan coalition in the General Assembly killed the Allen-Gilmore plan in an April special session, opening the door for Cranwell and the legislature's Democratic leadership to craft a workable settlement.

Gilmore appeared at Tuesday's news conference to endorse the Cranwell plan.

A possible sticking point could be the Senate's insistence on repealing the Social Security offset, which reduces a taxpayer's senior citizen deduction by the amount of Social Security benefits. Some Republicans say the offset - introduced in 1989 - is a separate issue and should not be part of the settlement.

Keywords:
GENERAL ASSEMBLY 1994

by CNB