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

DATE: SATURDAY, July 31, 1993                   TAG: 9308030258
SECTION: VIRGINIA                    PAGE: C-3   EDITION: METRO  
SOURCE: By Bonnie V. Winston staff writer
DATELINE: RICHMOND                                  LENGTH: Medium

PENSION SUIT SENT BACK TO COURT

Virginia's 200,000 federal and military retirees were given mixed signs of hope and delay Friday in their legal battle to win refunds of more than $400 million in taxes the state illegally collected from them.

The Virginia Supreme Court ordered that the pensioner's suit against the state be returned to the Alexandria Circuit Court where it originally was filed. The move virtually assures that the case will be dragged through several more stages - and years - of appeals no matter which side prevails.

However, Gov. Douglas Wilder, responding to the state court's action Friday, said he has ordered his staff to meet with the state's attorney general and lawyers for the retirees to fashion a settlement.

"as I have stated before, the responsible course of action for Virginia publioc servants is to begin drafting appropriate remedies," Wilder said. "This matter should be settled."

Last month, Wilder floated the idea of holding a special General Assembly session to deal woith the matter, but key lawmakers balked. Friday's statement was the strongest indication yet that Wilder wants to settle the case.

"I find the timing of [Wilder's] statement very interesting, particularly since nothing significant happened today." Attorney General Stephen Rosenthal said through a spokeman.

Michael Kator, the lawyer representing the retirees' group, was unavailable for comment.

"The state is not going to make it easy for us by any stretch," said Ernest F. Kerekes, the Norfolk-Virginia Beach vice president of the National Association of Retired Federal Employyes.

"They must realize the tenacity the [retired] federal employees have. We're going to hang on," Kerekes said.

In mid-June, the U.S. Supreme Court ruled unconstitutional Virginia's Virginia's almost 50-year practice of taxing the pensions of federal retirees while exempting those of retired state workers.

The high court ordered the case returned to the Virginia Supreme Court to determine how much - if anything - should be refunded to the federal pensioners for the tax years 1985 through 1988.

However, the court gave the state wide latitude in fashioning a remedy, noting that if the state has a process by which taxpayers can contest or challenge tax assessments and their validity before payment, then the state may owe nothing to the retirees.

Rosenthal has said the state has such a process for challenge, and that the retirees are due nothing.

However, Kator has argued that the process doesn't adequately protect their rights.

by CNB