THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: WEDNESDAY, June 1, 1994 TAG: 9406010708
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: 940601 LENGTH: RICHMOND
Most said they would be willing to accept a $340 million settlement brokered by House Majority Leader C. Richard Cranwell, D-Roanoke County, and supported by the governor.
{REST} George Wallace, retired from Norfolk Naval Aviation Depot, said he was pleased that the plan promises to reimburse most federal pensioners for all the Virginia taxes they paid from 1985 to 1988 under a state policy that was later declared unconstitutional.
``We're not getting any younger,'' said Wallace, 67. ``We could have waited for something better, but who would be around to collect it?''
Leaders of retiree groups held a news conference to endorse the plan, which would repay federal and military pensioners over a five-year period, with the first installment coming early next year.
The deal would cost the state $60 million the first year, then $70 million over each of the next four years. Cranwell said rising state tax revenue should cover the costs without significant cuts in state programs.
The settlement would bring to a close a tax controversy that helped sink Democrat Mary Sue Terry in last year's gubernatorial campaign and had the potential to cripple the state budget.
Joining the retiree leaders at the news conferencewere Cranwell, a bipartisan delegation from the House of Delegates, and Republican Attorney General James S. Gilmore III.
Absent, however, were representatives of the state Senate.
Senate Finance Committee Chairman Hunter B. Andrews, D-Hampton, said in a telephone interview that the Senate would take its time to review the House plan.
``We are studying it; we did not receive it until Thursday,'' he said.
At the news conference, House Speaker Thomas W. Moss Jr., D-Norfolk, said he thought the legislature could reconvene sometime in the next two weeks to approve the settlement.
``I am confident that before it is all over, they (senators) will see the wisdom of this,'' Moss said.
The tax issue dates to 1989, when the U.S. Supreme Court ruled it was illegal for states to tax the pensions of former federal workers, while at the same time exempting pensions of former state employees.
More than 400 federal pensioners living in Virginia banded together to sue the state for back taxes that, with interest, totaled more than $720 million.
In April, Republicans Gilmore and Gov. George F. Allen sought to make good on a campaign promise to settle the tax litigation by offering pensioners a settlement of 50 cents on the dollar.
But the Republicans fumbled the initiative. Retirees were peeved that Allen and Gilmore did not consult them before making what many pensioners perceived as a ``take-it-or-leave-it'' offer. The General Assembly rejected the $240 million deal last month.
Into the void stepped Cranwell, the legislature's consummate deal-maker. He met privately with the leaders of several of the largest retiree groups over several weeks to hammer out the basic outline of the settlement offer presented Tuesday.
The key to the deal, Cranwell said, was convincing retirees that any settlement would have to be fair to both pensioners who were owed money and taxpayers who would have to foot the bill.
``All they wanted was what was fair,'' he said. by CNB