9.

10.

is estimated to reduce the budget authority and outlays of the LGRF by $169 million in 1990 and by $10 million in 1991. Because the savings attributable to sections 401-403 of S.13 are largely the result of permanently authorizing the origination fee, the enactment of section 9001 (a) before the enactment of S.13 would reduce the savings from sections 401403 by these same amounts.

Section 9001 (b) of the Senate Veterans' Affairs Committee's reconciliation provisions would extend for one year VA's authority to sell vendee loans without recourse to the government in the event of default. This provision is substantively identical to section 404 of S.13. The savings estimated for the two provisions are the same.

On May 17, 1989, CBO prepared an estimate of H.R.1415, as ordered reported by the House Committee on Veterans' Affairs on that same date. This bill is similar in many respects to Title IV of S.13. Differences in the provisions of the two measures, however, result in lower savings estimated for H.R.1415 than for Title IV of S.13.

ESTIMATE PREPARED BY:

K. W. Shepherd and Richard Curley (226-2820)

ESTIMATE APPROVED BY:

James L. Blum
Assistant Director

for Budget Analysis

REGULATORY IMPACT STATEMENT

In compliance with paragraph 11(b) of rule XXVI of the Standing Rules of the Senate, the Committee on Veterans' Affairs has made an evaluation of the regulatory impact which would be incurred in carrying out the Committee bill. The Committee finds that the Committee bill would not entail any significant regulation of any individuals or businesses or result in any significant impact on the personal privacy of any individuals and that, except as noted below, the paperwork resulting from enactment would be minimal. In the cases of provisions requiring reports to the Congress to provide program data and evaluations (sections 204 to 207, 213 to 216, 219, 224, 251, 269, 309, 401, 503, 603, and 701), notices to individuals (703), and the automated exchange of data between Government agencies (section 704), the amount of paperwork would be reasonable in light of the beneficial objectives of the legislation.

TABULATION OF VOTES CAST IN COMMITTEE

In compliance with paragraph 7 of rule XXVI of the Standing Rules of the Senate, the following is a tabulation of votes cast in person or by proxy by members of the Committee on Veterans' Affairs at a July 27, 1989, meeting. The Committee voted unanimously to report S. 13, with an amendment in the nature of a substitute, favorably to the Senate by a vote of 10-0, as follows:

On March 2, 1989, the Committee Chairman requested the Administrator of Veterans' Affairs (Secretary of Veterans Affairs as of March 15, 1989) for reports setting forth the agency's views on S. 13. On March 16 and 22, May 9, and June 7, 1989, the Committee Chairman requested the Secretary of Veterans Affairs for reports setting forth the Department's views on S. 564, S. 574, S. 900, and S. 1092 respectively. On June 15, 1989, the Committee Chairman requested the Secretary of Veterans Affairs for reports setting forth the Department's views on S. 1145, S. 1146, and S. 1158, and on June 30 and July 20 and 26, the Department's views on S. 1188, S. 1306, and S. 1341, respectively. The views submitted in response to those requests follow.

I am pleased to respond to your request for a report on S. 13, 101st Congress, the "Veterans Benefits and Health Care Act of 1989." This measure, if enacted, would, among other things, authorize cost-of-living increases in the statutory rates of disability compensation and dependency and indemnity compensation (DIC) and authorize increases in the allowances paid to disabled veterans pursuing rehabilitation programs and to dependents and survivors of certain disabled veterans pursuing programs of education.

COMPENSATION AND OTHER BENEFITS
Cost-of-Living Allowance: Compensation

Section 101 would authorize cost-of-living increases in the statutory rates of compensation and DIC benefits for veterans and survivors in the same percentage as will be provided to Social Security recipients and VA pension beneficiaries. The proposed rate adjustment is thus designed to assure that these beneficiaries keep abreast of the increasing cost of living. S. 613, which you introduced at the Administration's request on March 16, 1989, would index compensation cost-ofliving allowances (COLA's) and thus seeks to accomplish the same purpose through a different approach. Therefore, these measures will be discussed together. Both propose an effective date of December 1, 1989, for the next cost-of-living increase.

Disability compensation benefits are payable under chapter 11 of title 38, United States Code, to provide monetary relief from impairments in earning capacity suffered by veterans disabled during, or as a result of, military service. Rates of compensation vary with the degree of disability demonstrated, and additional compensation is payable for dependents if the veteran's disability is rated 30 percent or more disabling. DIC benefits are payable under chapter 13 of title 38 to the surviving spouses and children of veterans whose deaths are service connected. Payments at DIC rates may also be made

2.

Honorable Alan Cranston

if a veteran's death is not service connected but the veteran was rated totally disabled for a specified period prior to death.

Administration of the disability compensation and DIC programs is one of VA's most important missions. We recognize a duty to recommend periodic adjustments in monthly rates as economic conditions change. In recent years, compensation adjustments have generally been keyed to indexed COLA's in Social Security and VA pension. However, these compensation increases have not been automatic. Rather, they have been accomplished by the enactment of separate public laws designed for that purpose, the last being Public Law No. 100-687, title XI, 102 Stat. 4105, 4123 (1988). Since 1973, legislation has been enacted every year but one (1983) granting increases in these benefits to compensate for increases in the cost of living. We have consistently supported these adjustments.

The Administration strongly supports COLA's based upon actual increases in the cost of living. However, we believe this would best be done by legislation that would provide for an automatic annual increase in compensation rates indexed to the periodic Consumer Price Index (CPI) increases, as in the case of pension and a number of other governmental benefits. Tying compensation and DIC rates to the CPI would assure veterans and their survivors that they would receive full increases, commensurate with inflation, in a timely manner. Had such a provision been in place in 1987, there would not have been the unfortunate delay in giving effect to the compensation COLA provided by Public Law No. 100-227 (1987). Our proposal would also save Congress from the difficulty of regularly considering new veterans' COLA legislation, as it has been required to do virtually every year for over a decade and twice in the same year in one instance.

Accordingly, while we do support a cost-of-living increase for compensation and DIC recipients, we feel, for the reasons stated above, that the measure should be amended to index future compensation and DIC COLA's to annual changes in the СРІ.

3.

Honorable Alan Cranston

Based on the most recent breakout of the compensation caseload by degree of disability and dependency status, the analogous DIC records, and the currently-planned Social Security increase of 3.6 percent, we estimate the first 5-year cost resulting from enactment of the COLA as specified in S. 13 would be as follows:

Cost-of-Living Allowance: Chapters 31 and 35

Section 102 would amend present section 1508(b) of title 38 relating to rates of subsistence allowance for serviceconnected disabled veterans participating in rehabilitation programs under chapter 31 of title 38, to increase by 13.8 percent, effective January 1, 1990, the rates of such allowances. Similarly, section 103 would amend chapter 35 of title 38, relating to survivors' and dependents' educational assistance, to increase by 13.8 percent the rates of educational assistance, effective January 1, 1990.

While we cannot support a rate increase of this magnitude, VA does support a 5 percent increase for these benefits in the context of the overall budget negotiations. We estimate the 5 percent rate increase in benefits would cost $5.2 million in FY 1990, with a five-year cost of $32.9 million.

The cost of the 13.8 percent rate increases proposed in sections 102 and 103 is shown below. The 1990 cost reflects costs over a 9-month period beginning with the proposed January 1, 1990, effective date.