Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, February 28, 1994 TAG: 9403010011
SECTION: EDITORIAL PAGE: A5 EDITION: METRO
SOURCE: JIM GILMORE
DATELINE: LENGTH: Long
In a case decided in 1989, Davis vs. Michigan Department of Treasury, the U.S. Supreme Court was faced with the issue of whether it was unfair and unlawful for a state to treat federal retirees' pension income as taxable while treating state retirees' pension income as nontaxable. The Supreme Court ruled that under those circumstances, the tax on federal retirees was unlawful. As attorney general, and as a candidate for attorney general, I have said repeatedly that I believe the federal retirees have been treated unfairly.
However, the issue now before the court is whether - even though the tax was unlawful - the commonwealth is obligated to repay the taxes it took from the retirees. If the commonwealth prevails, all Virginia taxpayers are spared a $700 million liability. If the commonwealth is required to pay the $700 million, the cost would be so great that it would jeopardize the future of our schools, law enforcement and other essential services.
The attorney general represents all the people of Virginia. The policy of Gov. George Allen and myself is to be fair to the retirees and to offer a reasonable settlement. A responsible offer takes into consideration fairness to the retirees, which is a cornerstone of our negotiating position, as well as fairness to every taxpayer in Virginia. This means a professional and legal assessment of the obligation of every taxpayer to refund the money to the retirees.
My predecessors have taken the position that the pensioners should receive no refund. Former Attorney General Mary Sue Terry chose to fight every step of the way against the pensioners, gambling that the full tax liability would never have to be paid. Former Attorney General Stephen Rosenthal also maintained that position and has recently been quoted in newspaper accounts to the effect that even in the face of the commonwealth's increased exposure, we should not settle the case.
Given the extraordinary potential liability at issue in Harper, and the devastating effect a loss could have on the finances of the commonwealth and on our children's future, I believe those positions to be unwise, if not reckless.
Gov. Allen and I have made it clear that we believe the retirees have not been accorded fair treatment, and a settlement should be made. But I ask the retirees to remember that the tax money they paid was not thrown away, but went to schools for our children, health care for our elderly, roads for our commuters, enhancement of job opportunities for our working people, and for police officers and prisons to make Virginia safer. Every dollar paid back to the retirees comes directly out of those funds that were spent for the public good. I do not believe the pensioners should walk away from their refunds, but they should remember that every dollar refunded comes out of those important public obligations.
In that spirit, I have entered into settlement negotiations with the attorney for those few pensioners who brought suit. To date, the attorney has shown little, if any, flexibility in reaching a fair compromise. Settlement, after all, does not mean simply raising the white flag. There are risks to both sides in this case. As attorney general, I believe it is in the best interests for both sides to be flexible and to fashion a solution fair to all of the retirees and to all of the taxpayers of Virginia as well.
Because of the potential impact of Harper on the commonwealth's finances, we have been in daily communication with members of the General Assembly. When the new evaluation of the liability in the case was reassessed from $500 million to $700 million, the governor asked that all the leadership of the legislature join him in his Capitol office. I was present at that meeting and briefed the legislators in as much detail as possible without jeopardizing the confidentiality that surrounds, and is necessary to, any settlement negotiation.
At the time, there was no objection that I was not being as forthcoming as prudence would permit. Indeed, a key Democratic leader, and head of one of the financial committees in the legislature, acknowledged that the attorney general ought not to jeopardize the future of the negotiations by revealing information that is appropriately held as confidential. No one in the room contradicted that view.
Therefore, it was a surprise when, several days later, the Democratic Caucus issued a news release complaining that the attorney general had not kept the General Assembly informed and quoting Speaker Thomas Moss, Majority Leader Richard Cranwell and Caucus Chairman Alan Diamonstein - all of whom had been present at our meeting in the governor's office. The news release also complains that the attorney general has not been quick enough to settle this case - even though I have been in office for only six weeks. This case has been in litigation for five years, during which time the commonwealth's exposure has been very high. Where were these legislators in previous years when my predecessors were following a no-refund, no-settlement policy?
Should a judgment of $700 million be entered against the commonwealth, it would cripple our ability to provide essential services such as education and law enforcement; it could impose a crushing tax burden on all of our citizens and dampen future economic development; and it would place a cloud over the future of our children and grandchildren.
As attorney general, I am proceeding professionally and expeditiously to try to resolve this case. But my job and the state's legal difficulties are going to be more difficult if members of the General Assembly attempt to appoint themselves attorney general of Virginia and try to negotiate the case on their own. There is no better way to ensure that settlement negotiations fail.
Resolving Harper is too important a goal to be left to politics as usual, and I hope the members of the General Assembly will put aside gamesmanship to work in good faith for the benefit of the commonwealth.
Gov. Allen and I are pleased that the Democratic leaders have reversed themselves, and now are calling for a settlement. If we can achieve a reasonable settlement, we will need the support of legislators of both parties to appropriate the necessary funds to be fair both to the pensioners and to all Virginians.
There is an opportunity here for statesmanship, for fair play, for a satisfactory settlement acceptable for all sides - if all of those involved will put aside their partisanship and work together for the future of Virginia.
\ Jim Gilmore is attorney general of Virginia.
Keywords:
GENERAL ASSEMBLY 1994
by CNB