Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, May 5, 1994 TAG: 9405060025
SECTION: EDITORIAL PAGE: A-17 EDITION: METRO
SOURCE: Ray L. Garland
DATELINE: LENGTH: Long
The latest villain of the piece is none other than the retirees' former savior, Gov. George Allen, who has been accused of being "insulting and mean-spirited" for offering $234 million in four annual installments of $58 million. That would represent half the state income taxes collected on federal retirement pay in the four years prior to March 28, 1989. That's the date of the Supreme Court's decision holding that states could not tax federal pensions while exempting their own.
Allen had hoped to win legislative approval for his plan - including the budget cuts needed to fund the first year's payment - at a special session immediately following last month's veto session. But the Democratic majority wasn't buying. This had been the millstone around their collective neck for more than three years, and they were pleased to see Allen and Republican Attorney General James Gilmore wear it awhile.
When the assembly adjourned April 20, it expected to be back May 11 to take up the pension-case settlement. Now, Senate Majority Leader Hunter Andrews, D-Hampton, says Allen's proposal is not viable and there's no point in bringing the legislature back. Nor did he feel it would be proper for the General Assembly to initiate a settlement, pointing out that state law puts the attorney general and the governor in charge of settling lawsuits.
But Andrews and other lawmakers also say there should be no rush to produce an agreement. They point out that no court, state or federal, has yet ordered Virginia to make any refunds - in fact, the contrary - and the case is on further appeal at both levels.
The U.S. Supreme Court recently agreed to hear arguments on this subject for the third time in a case arising from Georgia's refusal to pay refunds. That decision is not expected before next spring. Since Georgia's stance was similar to that taken by Virginia during the tenure of former Gov. Douglas Wilder, some legislators believe it would be foolish to do anything until the high court speaks again.
You certainly can't blame Democrats for wanting a measure of revenge for Allen's adroit use of the issue against them in last fall's election. As attorney general, Mary Sue Terry had taken a courageously hard line against the claims of federal retirees during a period when the state was in the grip of a fiscal crisis. As her party's candidate for governor, she relentlessly maintained that position against all the rules of politics.
I have never believed the retirees had a very good case for the simple reason they never pointed to the existence of an obscure federal statute (passed in 1942) permitting the states to tax federal pensions so long as they did not exempt their own until this case arose more than 40 years later.
When the Supreme Court did the only thing it could do and said the states must tax their own and federal pensions equally or not at all, Virginia immediately complied and gave an equal (and rather generous) tax break to all persons over 65. That is, the state put all retirees on the same footing regardless of the source of their retirement income, which was the only fair way to do it.
Moreover, the money the federal retirees wanted back had not been squirreled away in a Swiss bank, it had been spent on things like education that might, presumably, have benefited the retirees as much as the vast majority of taxpayers they now looked to for recompense. That is, having eaten dinner without complaint as to the quality of the bill of fare, they demanded a refund from the other diners.
Now what about the "second-class citizen" complaint that was so frequently on their lips as they licked the plate set before them? Well, there was no malice in the legislature's decision 50 years ago to exempt such few and modest pensions as were paid state and local government retirees in Virginia. It was more in the realm of a sentimental gesture, no doubt foolish, that once begun could not easily be terminated.
If the recipients of federal pensions are second-class citizens, what exactly does that make the far more numerous class of people receiving pensions from employment in the private sector or living upon their personal savings, and who have always been assessed state income taxes? The fact that they also supplied no small measure of the taxes required to pay both federal and state pensions might make them eligible for status as third-class citizens. But none has standing to sue the state. In fact, very few have even complained publicly of their place so far below the salt.
Still, a great state should not have so many people existing in a mood of grievance and sour displeasure: A settlement was in order and Allen was not wide of the mark in proposing $234 million - hardly a bagatelle - as meeting the competing equities of the situation.
In fairness, it should be said that Attorney General Gilmore's poll of the federal retirees found a majority prepared to accept an even less generous offer, and more than a few happily content with nothing at all.
It must also be noted for the record that despite what some of the more militant spokesmen for the retirees claim, candidate Allen never promised anything more than partial restitution spread over several years.
By holding out for all or most of the $700 million they say the rest of us owe them, it would be poetic justice if they got nothing. But the governor would do well to test the water with one final proposal: immediate, 100 percent payment of all monies due those retirees drawing the smallest incomes, and not a brass farthing for those retired officers, judges, congresspersons, etc. whose pensions compounded with annual cost-of-living adjustments can easily exceed $5,000 a month.
Ray L. Garland is a Roanoke Times & World-News columnist.
by CNB