Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, January 11, 1994 TAG: 9401110043
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: BONNIE V. WINSTON STAFF WRITER
DATELINE: LENGTH: Medium
In a three-page decision made public Monday, Circuit Judge Donald H. Kent upheld the state's contention that the pensioners could have gone to court to challenge the taxes before paying them, but didn't.
As a result, they are not due refunds, Kent said.
The decision maintains a pattern in the five-year court battle over the pensions. The federal pensioners have twice been rebuffed by state courts in earlier proceedings only to win favorable rulings from the U.S. Supreme Court.
While the decision lets Virginia off the financial hook - at least temporarily - the case is far from settled. The retirees vowed to continue their fight, even if it takes several more years and a third trip to the U.S. Supreme Court.
Key state lawmakers, poised for Wednesday's opening of the 1994 General Assembly and the new administration of Gov.-elect George Allen, signaled their support for negotiations to begin with the pensioners for an out-of-court solution.
"This [decision] creates a good opportunity for everybody to sit down and try to work this out," said House Majority Leader Richard Cranwell, D-Roanoke County.
Cranwell said the state would be hard-pressed to pay $500 million if the retirees ultimately win the case. And he said the retirees don't want to walk away with nothing should they lose.
"Maybe we can start a dialogue," Cranwell said, suggesting that either tax credits or bonds payable over 10 to 20 years be given the retirees.
The Supreme Court reaffirmed in June that Virginia's taxing of pension benefits of federal and military retirees, while exempting from tax the benefits of state retirees, was unconstitutional. But it also said Virginia courts should decide whether and how much of a refund should be paid the pensioners, whose claims covered taxes paid from 1985 through 1988.
The Alexandria court was to decide whether state law provided adequate avenues for challenging the taxes before they were paid.
Del. Howard Copeland, D-Norfolk, whose Hampton Roads district includes hundreds of retired federal and military workers, said Monday he will introduce a bill to repay retirees by earmarking $100 million in state lottery profits annually during the next five years. The retirees would have the choice of receiving a cash refund or a tax credit each year, Copeland said.
"But if the parties wish to settle this in another manner, I'm all for it," Copeland said.
Allen and Attorney General-elect Jim Gilmore, who will be sworn in Saturday, campaigned on the position that the pensioners were taxed unfairly and that a settlement should be reached.
But questioned Monday, Allen seemed to backpedal slightly.
He said he is looking for a way to end the case that will "be fair for the taxpayers as well as for the people who've been taxed unlawfully."
Later, Allen's spokesman tried to bolster his position.
"The governor-elect has always said he wants to seek a settlement, and he looks forward to working with the attorney general to seek a settlement that's fair to both the pensioners and the taxpayers of the commonwealth," said Ken Stroupe, Allen's press secretary.
Gilmore's spokesman said the attorney general-elect would have no comment until he takes office.
Attorney General Stephen Rosenthal, who holds office until Saturday, said there should be no settlement. "I am gratified by Judge Kent's ruling. What Virginia did, it did in good faith," he said.
Oscar Honeycutt, former Virginia president of the National Association of Retired Federal Employees, said he will push for a settlement but is "prepared to appeal it all the way back to the U.S. Supreme Court if we have to."
"I was informed many years ago when this first started that we'd never get a fair hearing in Virginia courts. It was a Virginia legislator who told me that. The more time passes, the more I'm convinced he was right," Honeycutt added.
by CNB