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

DATE: SATURDAY, April 9, 1994                   TAG: 9404110169
SECTION: NATL/INTL                    PAGE: A-1   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Medium

OFFICIALS OFFER SETTLEMENT TO PENSIONERS

Virginia Attorney General Jim Gilmore said the settlement would amount to 50 cents for each dollar the retirees paid in 1985-88 under a tax policy overturned by the courts in 1989. Interest is not included.

"It's fair to the retirees. It's also fair to all the other Virginians," Gilmore said in announcing the offer at a news conference.

State tax officials estimate that the retirees would be due $707 million if they were refunded all the taxes they paid plus interest.

Gilmore said the settlement would be paid in equal installments over four years. Each retiree would get an average settlement of about $1,500, he said.

Retirees who wanted to challenge the settlement would have to file in Richmond Circuit Court by Sept.15, Gilmore said.

The settlement, which Gov. George Allen supports, will be considered by the General Assembly at an April 20 session called to consider matters vetoed by the governor.

Gilmore said Allen is working on budget amendments to cover the $58.5 million annual cost of the settlement.

``I think it will be approved,'' said Sen. Charles Colgan, D-Manassas, one of several General Assembly leaders briefed on the settlement Thursday.

``We're hopeful that our revenue projections are a little low and we'll have a little extra money at the end of the year,'' he said.

But some pensioners said they may push ahead with their lawsuit seeking a full refund.

``It's a step in the right direction, but we still want what we paid in. We can negotiate on the interest,'' said Rose Musumeci, Virginia president of the National Association of Retired Federal Employees.

``If the shoe was on the other foot, the Virginia Tax Commission would not accept our payment of 50 cents on the dollar,'' she said.

Gilmore has been negotiating with about 420 retirees who filed the lawsuit. He said he did not discuss the proposed settlement with them first because he wanted to make an announcement that would reach all 185,000 pensioners.

The retirees' lawsuit is pending before the Virginia Supreme Court. Alexandria Circuit Judge Donald H. Kent ruled in January that the state does not owe refunds.

The U.S. Supreme Court has found that states must pay refunds unless the retirees had an adequate chance to contest the taxes before they were paid.

The refund case arose after the nation's high court ruled that states could not give a tax break to state and local government retirees while excluding federal pensioners. The ruling affected about 16 states, but Virginia faced by far the largest liability. Several states already have made settlements.