THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, July 14, 1994 TAG: 9407140014
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 54 lines
Gov. George Allen and Attorney General James Gilmore deserve credit for moving to settle the dispute over the taxing of the pensions of federal retirees in Virginia while the pensions of state retirees went untaxed. If the retirees accept the settlement, and most are expected to do so, then checks could be mailed next spring.
The governor and the attorney general were right to step up to the plate and confront this issue, while previous Democratic administrations and the General Assembly sought to pretend it just wasn't there. Potential liability had mounted to around $750 million. Given that previous U.S. Supreme Court decisions had tended in the direction that states could not tax some pensions and exempt others, playing Russian roulette in the courts with that kind of money simply wasn't financially prudent.
The settlement that was finally reached provides about $340 million, to be paid out over a period of five years to the 186,000 affected retirees. The state has the option of withdrawing the agreement if retirees with more than $20 million in outstanding claims decide to forgo the settlement and sue the state for the full amount.
That seems unlikely, given the old ``one in the hand is worth two in the bush'' way of looking at the situation. The federal retirees are also getting an unexpected windfall. No private-sector retirees, who paid the same taxes, are getting any relief from this bill whatever.
Although Gov. Allen and A.G. Gilmore were roundly criticized by General Assembly Democrats for the supposed stinginess of their initial proposed settlement of $245 million, the two deserve credit for sticking to that position in order to smoke out what the retirees were really willing to settle for. The Democrat-controlled legislature, after all, spent years ignoring the problem and was not in much of a position to criticize those who were dealing with it.
Mr. Gilmore also deserves credit for refusing to support designating any portion of the settlement as fees for Michael Kator, the lawyer for some of the retirees. Whatever Kator is going to be paid should be an issue between him and his clients, not an additional burden on the taxpayers.
During last year's campaign, Gov. Allen and Mr. Gilmore pledged to resolve this issue that had been festering for nearly five years, and they have done so just six months after taking office. Politicians keeping their campaign promises is a rare thing these days, and they should be recognized when they do so.
KEYWORDS: PENSION VIRGINIA STATE TAX FEDERAL RETIREES
by CNB