THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, December 8, 1994 TAG: 9412080465
SECTION: FRONT PAGE: A17 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 74 lines
Some 185,000 federal retirees living in Virginia will face the old ``bird-in-hand'' dilemma next week when state income tax refund offers begin arriving in their mailboxes.
Should they take the state's offer to repay about 85 cents of every dollar illegally collected from federal and military pensioners from 1985-88? Or should they hold out and hope that a U.S. Supreme Court decision Tuesday in a Georgia case could lead to a full refund, plus interest?
The dilemma has divided the retiree leaders who helped write the state settlement this summer.
William F. Wollenberg, a retired Army colonel from Petersburg, urged retirees not to rush into accepting the state's offer. The deadline for a decision is Feb. 1.
``It will be hard to go out and advise people just to take it when there's an opportunity to regain more of their loss,'' he said.
But Oscar J. Honeycutt, a retired federal worker from Chesterfield County, warned that aging former federal workers may never see their money if they walk away from the state offer and face additional years of delay.
``A lot of people are getting older,'' said Honeycutt, 77. ``Just like me; I just lost my wife.
``I feel we made a good faith settlement with the state. I think it's up to us and the state to honor the agreement.''
Under the settlement offer, the General Assembly would refund some $351 million to illegally taxed retirees over the next five years. More than a quarter of the retirees, who have claims under $1,450, would get all their money by April 1. Retirees with claims over $4,300 would receive payments over five years.
The General Assembly can withdraw the offer if retirees whose claims represent more than $20 million opt out.
Odds that a large number of retirees will decline the state's offer improved Tuesday when the nation's highest court ruled that Georgia must provide ``meaningful backward-looking relief'' to federal retirees whose pensions were illegally taxed in that state.
Michael J. Kator, a Washington lawyer for federal retirees in Virginia who helped craft the settlement offer, said he hoped the General Assembly would sweeten its offer in light of the court ruling.
``I'm not sure if the deal we made in June or July makes sense today now that (the Georgia case) is decided,'' Kator said.
The Supreme Court ruling was especially inconvenient for Gov. George F. Allen, who now faces additional uncertainty as he readies his budget recommendations for the General Assembly session that starts in five weeks.
It would cost the state more than $700 million to give federal retirees full refunds and interest. Allen already faces a difficult task in finding a way to pay for his $2 billion prison building program and make good on his offer to cut taxes by $2 billion over the next five years.
Del. C. Richard Cranwell, a Roanoke County Democrat who negotiated the pension settlement, said Allen's tax-cut plan may have undercut the retiree agreement.
Cranwell said federal retirees, who last summer were told the state could not afford to pay them a full $700 million refund without hurting essential state services, now are being told the state can afford to slash taxes by $2 billion.
``That's called getting hoisted on your own petard,'' Cranwell said.
Leaders of several retiree groups will huddle with Cranwell today in Fredericksburg to discuss the Georgia case.
Cranwell cautioned that retirees who pass up the state offer will face at least two more years of legal maneuvers.
``The grim reaper is the greatest enemy of this group,'' he said. ``They really need to get it resolved, unless they just want the money to go to their estates.''
KEYWORDS: PENSION FEDERAL RETIREES SETTLEMENT < by CNB