
                         THE VIRGINIAN-PILOT
                 Copyright (c) 1994, Landmark Communications, Inc.

DATE: FRIDAY, June 3, 1994                    TAG: 9406030022 
SECTION: FRONT                     PAGE: A16    EDITION: FINAL  
SOURCE: Medium 
DATELINE: 940603                                 LENGTH:

VIRGINIA AND FEDERAL RETIREES\

{LEAD} Gov. George Allen, Attorney Gen. James Gilmore and the Democratic leadership of the House of Delegates have announced a proposed $340 million settlement of the federal retirees' claim for a refund of state taxes paid from 1985 to 1988. The state Senate leadership has said it will study the proposal. That's fine, but the legislature should move quickly to protect the state's fiscal health and settle the issue.

The proposed settlement, brokered by House Majority Leader C. Richard Cranwell of Roanoke County, calls for refunding $60 million to federal retirees in early 1995 and $70 million in each of the four years thereafter.

{REST} State Senate Democratic leader Hunter Andrews of Hampton says the Senate needs time. He wants to explore the implications of the proposed payout for, among other things, higher education, public education and Governor Allen's projected ending of parole for violent criminals.

The panel also would welcome assurance that federal retirees generally find the outlined terms acceptable. Fierce objections by the refund lawsuit's key players - the 420 retirees who turned to the courts to redress their grievances - doomed Republican Governor Allen's $245 million settlement offer. The General Assembly, which is controlled by Democrats, balked at saying yea or nay.

The key players in the controversy, however, have signaled that the Cranwell-fostered offer is to their taste. Some retirees would no doubt like to hold out for return of the full principal with interest, but it seems unlikely that the bulk of the retirees would turn down a bird in the hand in favor of paying lawyers to seek two in the bush.

Allen and Gilmore promised in their campaigns last year to settle the claim that their Democratic predecessors had fought. The $245 million they initially offered was less than half that demanded by the federal retirees who had sued. They alleged wrongful taxation by the state between 1985 to 1988, when Virginia taxed federal and private-sector retirees' pensions, but not those of its own state-government retirees.

The U.S. Supreme Court has ruled that exempting state retirees' pensions from state taxation - the practice in more than a score of states - constituted unlawful discrimination. While no court has ruled that Virginia specifically owes anyone anything, the voters resolved the issue politically by electing Allen and Gilmore.

By brokering the tentative settlement, Cranwell seeks credit for the House Democratic leadership for settling with the retirees. The governor and attorney general argue that their tough stance paved the way to a settlement.

Allen and Gilmore took a responsible position of not gambling with the state's fiscal integrity. One house of the legislature is willing to go along. The Senate ought not to drag its feet. This issue should be removed from the state agenda as quickly as possible.

by CNB