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

DATE: SATURDAY, June 18, 1994                    TAG: 9406180235 
SECTION: LOCAL                     PAGE: B4    EDITION: FINAL  
SOURCE: ASSOCIATED PRESS 
DATELINE: 940618                                 LENGTH: RICHMOND

SENATE GROUP CONSIDERS OPTIONS IN RETIREES CASE \

{LEAD} A lawyer for illegally taxed federal retirees said Friday that allowing a judge to oversee a proposed $340 million settlement with the state might be the fairest and quickest way to resolve the case.

The possibility of structuring the settlement as a class-action case in circuit court arose during a meeting of the Senate Finance Committee, which indicated a willingness to consider that option.

{REST} The House Finance Committee is pushing a settlement negotiated by its chairman, Del. C. Richard Cranwell, D-Roanoke County, that would be administered by the state Department of Taxation.

Cranwell stepped in and negotiated the settlement after the retirees angrily rejected Gov. George F. Allen's $234 million offer.

Allen said it appears the dispute finally can be settled.

``I think we're pretty close as far as I'm concerned,'' Allen told reporters in Norfolk. ``What I've cared about from day one is that the state live up to its responsibility.''

The General Assembly will meet in special session July 6 to consider the settlement.

Michael Kator, attorney for the federal retirees, said the class-action structure discussed by the Senate panel ``ensures procedural fairness because you have a judge supervising it.''

He also said disbursement of money might be ``marginally quicker'' if handled by a court. ``That might be sufficient reason in itself'' to go the class-action route, he said.

But he said the bottom line is that the retirees want the case settled. The process is only a secondary concern, he said.

John C. Chapman, president of the 35,000-member Military Retirees Taxpayers Association of Virginia, said he prefers the deal endorsed by House leaders. Their Senate counterparts, he noted, have not committed to a specific dollar amount.

The settlement agreed upon by the House leaders and the retiree groups would pay the pensioners a first installment of $60 million on March 31, 1995. There would be payouts of $70 million in each of the succeeding four years.

State Finance Secretary Paul W. Timmreck told the House Finance Committee on Thursday that the state should be able to handle the first installment without cutting services. The General Assembly already has earmarked $30 million for that purpose, but Timmreck did not indicate where the rest of the money would come from.

The lawsuit is pending in the Virginia Supreme Court. The state's total liability if the case is not settled could exceed $700 million.

{KEYWORDS} INCOME TAX FEDERAL RETIREES by CNB