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

DATE: TUESDAY, May 3, 1994                   TAG: 9405030162
SECTION: VIRGINIA                    PAGE: B5   EDITION: METRO 
SOURCE: Associated Press
DATELINE:    RICHMOND                                LENGTH: Medium

ALLEN'S PLAN FOR REFUNDS 'NOT VIABLE'

Andrews, chairman of the Senate Finance Committee, said the assembly is not ready to consider Allen's plan at a special session set for May 11.

``I don't think we can conclude it,'' he said after a meeting of a Senate subcommittee studying the proposal. ``There's no consensus in this subcommittee.''

Allen's plan to refund to the 186,000 federal retirees half the taxes they paid is ``not viable,'' said Andrews, D-Hampton.

Leaders of federal retirees' groups have criticized Allen's $234 million plan for not being generous enough. They want a full refund of the $468 million they paid in income taxes under a policy overturned by the U.S. Supreme Court in 1989. They have indicated a willingness to compromise on interest, which would raise the total cost to $707 million.

Ken Stroupe, Allen's press secretary, said the governor is willing to work with the legislature on another plan.

``We have now made a proposal, and it's now up to the legislature to act on that proposal or another one that would be good for the pensioners,'' Stroupe said. ``It is in the best legal interest of the state to have this resolved this spring.''

Andrews and another subcommittee member, Sen. Richard Holland, D-Windsor, questioned whether the assembly should enter the negotiations by coming up with its own plan.

``Constitutionally, I'm not sure we can do that,'' Andrews said, because the attorney general's office is supposed to handle negotiations in a lawsuit. The legislature's role, he said, is to vote the proposed settlement up or down.

House of Delegates Majority Leader Richard Cranwell, D-Roanoke County, has floated the idea of creating a trust fund that would provide retirees full refunds over as many as 14 years. Allen wants to pay off retirees in four years.

While Allen wants to move quickly with a settlement, Andrews said he sees no rush. The U.S. Supreme Court will not schedule arguments on a Georgia pension tax refund case until October and a ruling is unlikely before next year, he said.

``The urgency of having to settle the matter by September is not there,'' Andrews said.

Retirees seeking refunds from Virginia have yet to present their arguments to the state Supreme Court, but the ruling in the Georgia case could affect Virginia as well.