Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 9, 1993 TAG: 9307090162
SECTION: VIRGINIA PAGE: B-3 EDITION: NEW RIVER VALLEY
SOURCE: BY WARREN FISKE STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium
Wilder announced he won't call a special session of the General Assembly in September to ask to lawmakers to authorize a nonbinding referendum this fall asking voters whether the suit should be settled.
Legislative leaders vowed to oppose the referendum, saying a settlement should not be considered until courts rule conclusively that Virginia must refund the taxes. Many accused Wilder, who plans to run for the U.S. Senate next year, of making a populist ploy.
Wilder did not acknowledge the legislative opposition in a written statement setting out his reasons for dropping the proposal. Instead, he said a competing lawsuit filed Wednesday by state government retirees left him unable to "address the . . . tax issue at this time."
The state retirees' suit, which also potentially involves millions of dollars, alleges that the state broke its "contractual obligations" in 1989 when it began taxing state retiree pensions. Twenty-four former state employees are plaintiffs.
The legislature began taxing their pensions to comply with a U.S. Supreme Court ruling that states must impose equal levies on the retirement benefits of state and federal workers. The retirement benefits were increased to offset the taxes, but the retirees claim the increases were insufficient.
Prior to that, Virginia taxed the pensions of federal employees but not state employees. The discrimination was defended as a fringe benefit for state employees who generally earned lower salaries than federal workers.
The high court ruling sparked a lawsuit on behalf of more than 200,000 federal retirees in Virginia to reclaim an estimated $457 million in state income taxes wrongly assessed from 1985-88.
Last month, the U.S. Supreme Court ruled that Virginia must refund the money unless it can prove that it had a procedure by which retirees could contest the taxes before paying them.
The case was sent back to the Virginia Supreme Court, which must determine whether such a procedure existed and, if not, how much the state should refund. The court is not expected to take up the case until next year.
Wilder, saying he wanted to resolve the controversy before his term expires in January, proposed the referendum two weeks ago. The idea was roundly criticized by retirees, editorial writers and legislators.
On Wednesday, Senate Majority Leader Hunter Andrews, D-Hampton, and Minority Leader Joseph Benedetti, R-Richmond, took the unusual step of writing a joint letter urging Wilder to abandon the plan.
"A referendum would inevitably short circuit the legal process," they wrote. "Moreover, the issues involved in this case are complex. Any attempts to dilute them into ballot questions would inevitably skew or oversimplify. . . . The debate leading to the election would be both confusing and divisive. The results of such a referendum would be of dubious policy-making value."
House Speaker Thomas Moss, D-Norfolk, said he was relieved by the governor's retreat. "It was a bad idea," he said. "An advisory referendum would serve no purpose other than perhaps the governor's political purposes."
Wilder insisted he was motivated "solely by a reluctance to leave" the potential debt to federal retirees "to my successor without acknowledging and addressing it in my administration."
A Wilder administration source said Thursday that the governor has not ruled out the possibility of negotiating a settlement with the federal retirees, but added that such a course is unlikely.
Wilder's action could lower the focus on the pension case in this fall's gubernatorial race. Democratic nominee Mary Sue Terry was attorney general in 1989 and Republicans have assailed her for failing to warn the General Assembly that the Supreme Court might find the state's pension tax policy unconstitutional.
by CNB