Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, June 20, 1990 TAG: 9006200294
SECTION: VIRGINIA PAGE: A-1 EDITION: STATE
SOURCE: MARGIE FISHER RICHMOND BUREAU
DATELINE: RICHMOND LENGTH: Long
Already thwarted by a revenue shortfall expected to top $350 million during his first year in office, Wilder could be forced to deal with more than one budget-busting court decision before the end of his term in early 1994.
"His options are already limited, and if one or two of these come down against the state, they would limit him even more," said Tom Morris, a political-science professor at the University of Richmond.
Whereas other governors have been able to mostly set their own spending priorities, Wilder faces the prospect of having large priorities set by the courts.
In each instance, the potential court decisions would address problems that are not of Wilder's making. "We inherited a bunch of stuff," said Walter McFarlane, an attorney who is Wilder's executive assistant for policy.
Nonetheless, it's happening on Wilder's watch.
His office is closely monitoring several matters that are either already in the courts or could end up in the courts, and it is quietly drawing up contingency plans for dealing with the potential financial impact, according to Wilder's press secretary, Laura Dillard.
The most pressing concern is the possibility that the state may have to give tax refunds totaling about $400 million to federal retirees. Some legal scholars have suggested recently that it may also have to pay them back with interest.
This case, brought on behalf of about 200,000 former federal workers who live in Virginia, is now before the Virginia Supreme Court.
It is the result of a U.S. Supreme Court decision that invalidated pension tax systems used by Virginia and 23 other states. For many years, Virginia had taxed federal benefits but had exempted those of state and local government retirees.
The General Assembly has repaired the tax system, but federal retirees say they should be reimbursed for unlawful taxes Virginia has collected.
The state won the first round in this debate when Alexandria Circuit Court ruled in February that retroactive refunds would cause the state government undue economic hardship.
Attorneys for the federal pensioners have appealed, and at least one more recent U.S. Supreme Court decision indicated that the high court could ultimately order the refunds in Virginia.
The legislature has not set aside funds in the state's budget to pay the refunds if the state should lose the case, and some have warned that Wilder might have to break his pledge not to raise taxes.
Potentially, even more financially devastating than the pension case are threats of suits being filed against Virginia to end disparities in spending among the state's public school systems.
By moving quickly in appointing his special commission to study the disparity issue and make recommendations for solving the problem, Wilder may have bought time for the state. If the suits are brought, he may have put Virginia in position to argue that it is making a good-faith effort to equalize spending in rich and poor school districts.
Morris noted that several other states have already been forced to raise taxes $500 million or more per year to comply with court orders to end disparities.
Last week, the U.S. Supreme Court gave the Wilder administration a new worry wrinkle in ruling that Virginia hospitals can sue the state for more money for treating poor people.
The Virginia Hospital Association filed a suit in 1986 challenging the state's Medicaid reimbursement system, and the high court decision cleared the way for the suit to proceed. No one is certain about the possible financial impact, but a VHA spokeswoman said a "guesstimate" is about $13 million.
By some estimates, the state stands to lose another $20 million in tax revenues as a result of a state Supreme Court ruling involving state residents who own businesses in the District of Columbia. The court said essentially that the state can no longer deny those residents tax credits for taxes they have paid in D.C.
The threat of legal action also followed Wilder's order that state agencies divest themselves of South Africa-related investments. News that the order could force the state employee retirement fund to sell off more than a quarter of its stock brought warnings of possible lawsuits by state retirees if they feel divestment endangers their pensions.
And although the stakes are more political than financial, the Wilder administration is also embroiled in the Justice Department's suit to end the male-only admissions policy at Virginia Military Institute.
Morris and other longtime observers of state government said they could not recall any other governor who has faced such a potentially heavy court docket and the fallout from so many judicial decisions.
A couple of decades ago, a prison riot and inmates' demands for more rights dragged the administration of Republican Linwood Holton into the courts in a headline-making suit that eventually led to more due process for inmates and the separation of corrections and welfare agencies in Virginia.
Legal challenges involving desegregation of colleges and universities dogged both of Mills Godwin's administrations, and threats of federal action in this area continued to hang over the state through the administration of Gov. Charles Robb.
Robb and his successor, Gerald Baliles, also lived with the threat of a possible federal lawsuit against the state to force an end to prison and jail overcrowding.
"That's another one that could still come at Wilder," Morris said.
For Wilder, it seems like "it's all coming at once," Dillard said.
The press secretary attributed the full plate of potential legal problems for her boss to "a more litigious society." Advocates for special causes are more sophisticated these days, Dillard said. In addition to lobbying the legislative and executive branches and making their case for change in the news media, "they know that the judicial branch is out there as well."
by CNB