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

DATE: TUESDAY, April 26, 1994                   TAG: 9404260146
SECTION: VIRGINIA                    PAGE: B-4   EDITION: METRO 
SOURCE: By DAVID M. POOLE STAFF WRITER
DATELINE: CHESAPEAKE                                LENGTH: Medium

ALLEN DEFENDS TAX REFUND OFFER

Gov. George Allen flew here Monday to trumpet the accomplishments of his first 100 days in office, but left dogged by questions about his first major setback - the unraveling of his settlement offer to illegaly taxed federal and military retirees.

Allen acknowledged that his 50-cents-on-the-dollar offer to federal retirees whose pensions were improperly taxed by the state in the 1980s may only be a starting point in negotiations.

Allen charged that some of the same General Assembly Democrats who have criticized the settlement offer stonewalled on the pension matter for five years, allowing the state's potential obligation to mushroom from $468 million to more than $700 million.

``As folks posture and promote their agenda, we need to remember that they are the ones who got us into this mess in the first place,'' Allen told members of the Hampton Roads Chamber of Commerce,

A leading Democrat defended the delay, saying the legislature could not have afforded to address the retiree issue at a time when the economic recession cut deeply into state tax revenues.

House Majority Leader Richard Cranwell, D-Roanoke County, said in an interview that he had been prepared to offer a pension payback earlier this year as revenue projections improved. But Republican Attorney General Jim Gilmore asked him to hold off, Cranwell said, to allow the state to seek an out-of-court settlement with Virginia's 186,000 federal and military retirees.

Gilmore - with Allen's blessing - later offered to pay back 50 cents on the dollar with no interest. Many veterans have rejected the offer as inadequate.

``They talked down to the retirees, gave them an ultimatum and made them madder than the dickens,'' Cranwell said.

As an alternative, Cranwell has suggested setting up a trust fund that would refund the full $468 million in taxes paid by retirees. Those with refunds under $2,000 would be paid right away, but those with larger refunds would be paid in equal installments over 10 years.

Allen said he was not opposed to Cranwell's plan, but would like to find out more details before he takes a position.

The General Assembly will take up the matter May 11.

by CNB