THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, July 6, 1994 TAG: 9407060396
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 60 lines
The General Assembly rolls back into town today with hopes running high that it finally will resolve a five-year tax dispute with federal and military retirees.
Legislative leaders have rallied around a proposed $340 million deal in which the state would refund federal pensioners over the next five years for taxes collected in the 1980s under a policy later ruled illegal.
But the Assembly may take several days to work through a host of technical hangups. The special session could come down to a test of wills between between two of the legislature's most formidable personalities: House Finance Chairman C. Richard Cranwell of Roanoke County and Senate Finance Chairman Hunter B. Andrews of Hampton, both Democrats.
Cranwell developed the proposed pension settlement in a serious of private meetings with representatives from retiree groups. Andrews has put forward an alternative scheme that draws in other issues, including a plan to boost pensions of state retirees by 3 percent and eliminate a controversial Social Security offset on state tax forms.
``That's part of the legislative process,'' Andrews said of the differences in the two plans. ``But we think we will come to a conclusion in a reasonable amount of time.''
Earlier Tuesday, leaders representing some of the state's 180,000 federal and military retirees staged a news conference to urge the Assembly to not let its differences scuttle an agreement.
At issue is a state policy that taxed federal pensions - but not those of state workers - from 1985 to 1988. The U.S. Supreme Court has ruled the policy illegal, but left open the question of whether the state must refund the estimated $460 million collected from federal and military retirees. Retirees are suing the state for refunds, plus interest.
Gov. George F. Allen and Attorney General James S. Gilmore, who campaigned last fall on promises to settle the lawsuit, put forward an initial offer of $234 million in April.
But pensioners, upset that they had not been consulted, rebuffed the offer. A bipartisan coalition in the General Assembly killed the Allen-Gilmore plan in an April special session, opening the door for Cranwell and the legislature's Democratic leadership to craft a workable settlement.
Gilmore, a Republican, appeared at Tuesday's news conference to endorse the Cranwell plan.
A possible sticking point could be the Senate's insistence on repealing the Social Security offset, which reduces a taxpayer's senior citizen deduction by the amount of Social Security benefits. Some Republicans say the offset - introduced in 1989 - amounts to a hidden tax.
On Tuesday, a Senate Finance subcommittee moved to replace the Social Security offset with a flat age deduction. The result will mean that those who receive more than $6,018 in Social Security will get a tax break, while those who receive less in benefits will pay more.
``We are dead-set against it,'' Oscar J. Honeycutt, immediate past president of the Virginia Chapters of the National Association of Retired Federal Employees, told the Senate Finance subcommittee. by CNB