
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, August 31, 1993                   TAG: 9308310259
SECTION: VIRGINIA                    PAGE: C2   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Medium

LEGISLATORS STUDY RETIREE REFUND PLANS

With November elections looming, House of Delegates leaders have formed a subcommittee to examine ways to repay federal retirees whose pensions were wrongly taxed by the state.

Though key legal questions about refunding $489 million in pension taxes still are before the state courts, House Finance Committee Chairman Richard Cranwell, D-Roanoke County, named a subcommittee to begin looking into how the state can pay back the money.

In June, the U.S. Supreme Court ruled that unless Virginia can prove otherwise, the state will have to compensate about 200,000 federal pensioners for taxes the state collected while exempting the pensions of state and local government employees. The case was returned to state courts for resolution.

Del. William Howell, R-Fredericksburg, who was named to the subcommittee last week, said it will study the nuts and bolts of compensating retirees.

He said House leaders are concerned that "we're going to lose this case, and we're not going to be prepared legislatively to crank out the refunds."

Howell said the subcommittee hopes to have legislation ready when the General Assembly convenes in January. Possibilities include a tax credit or state-issued tax-free bonds for retirees in lieu of a refund, he said.

"You want to give people options, but at the same time not cripple the state," Howell said.

With interest accruing on the taxes each month, Howell said, the state's obligation could easily grow to more than $500 million.

All 100 seats in the House of Delegates are at stake in the Nov. 2 elections, and the pension case has become a politically charged issue in those races as well as in the contest for governor.

Republican George Allen has called for the state to reach a settlement with retirees, while Democrat Mary Sue Terry, who was state attorney general when the pension case came up, has said the state should allow the legal battle to run its course before acting.

by CNB