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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-647
_______________________________________________________________________


 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 1996

_______________________________________________________________________


 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Stump, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3458]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 3458) to increase, effective as of December 1, 1996, 
the rates of compensation for veterans with service-connected 
disabilities and the rates of dependency and indemnity 
compensation for the survivors of certain disabled veterans, 
having considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                              Introduction

    On May 15, 1996, the Chairman and Ranking Member of the 
Subcommittee on Compensation, Pension, Insurance and Memorial 
Affairs, the Honorable Terry Everett and the Honorable Lane 
Evans, along with the Chairman and Ranking Member of the 
Veterans' Affairs Committee, the Honorable Bob Stump and the 
Honorable G.V. (Sonny) Montgomery, introduced H.R. 3458, which 
would provide a cost-of-living adjustment (COLA) in the rates 
of service-connected disability compensation and dependency and 
indemnity compensation (DIC), effective December 1, 1996.
    On May 22, 1996, the Subcommittee on Compensation, Pension, 
Insurance and Memorial Affairs met and ordered H.R. 3458 
reported favorably to the full Committee by unanimous voice 
vote.
    On June 20, 1996, the full Committee met and ordered H.R. 
3458 reported to the House by unanimous voice vote.

                      Summary of the Reported Bill

    H.R. 3458 would:

    Increase, effective December 1, 1996, the rates of 
compensation for service-connected disabilities and the rates 
of dependency and indemnity compensation for surviving spouses 
and children of veterans who die of service-connected causes, 
the additional amounts for dependents and survivors, and the 
clothing allowances for certain veterans. The amount of 
increase would be the same as increases automatically provided 
to Social Security beneficiaries.

      Background of the Compensation and Dependency and Indemnity 
                         Compensation Programs

    There were 2.2 million veterans receiving disability 
compensation as of May 1996. The Department of Veterans Affairs 
expects expenditures for disability compensation to be more 
than $15 billion for fiscal year 1997. The basic purpose of the 
disability compensation program is to provide a measure of 
relief from the impaired earning capacity of veterans disabled 
as the result of their military service. The amount of 
compensation payable varies according to the degree of 
disability, which, in turn, is required by law to represent, to 
the extent practicable, the average impairment in earning 
capacity resulting from such disability or combination of 
disabilities in civil occupations.
    To be eligible to receive disability compensation, a 
veteran must have contracted a disease, suffered an injury 
which is not the result of willful misconduct, or aggravated an 
existing disease or injury in the line of duty during active 
duty service, and have been discharged under other than 
dishonorable conditions.
    The responsibility for determining a veteran's entitlement 
to service connection for a disability rests solely with the 
Department of Veterans Affairs.

  Dependency and Indemnity Compensation for Survivors of Veterans Who 
                 Have Died of Service-Connected Causes

    As of May 1996, there were 300,934 surviving spouses and 
children receiving dependency and indemnity compensation (DIC). 
The VA expects DIC expenditures of $3 billion in fiscal year 
1997. Widows and children of veterans who died of causes 
determined to be service-connected are entitled to receive 
monthly DIC.
    The purpose of this benefit under chapter 13 of title 38 is 
to provide partial compensation to the appropriate survivors 
for the loss in financial support due to the service-connected 
death. Income and need are not factors in determining a 
surviving spouse's or child's entitlement since the Nation 
assumes, in part, the legal and moral obligation of the veteran 
to support the spouse and children.
    In 1992, Congress reformed the manner in which payments of 
DIC are made. Under current law, for deaths occurring on and 
after January 1, 1993, a base rate of $810 per month is payable 
to a surviving spouse. Such amount is increased by $177 if the 
veteran suffered from a service-connected disability which was 
rated as totally disabling for a period of eight years 
immediately preceding death and if the veteran and surviving 
spouse were continuously married during that period. For 
service-related deaths occurring prior to January 1, 1993, 
payments of DIC are made on the basis of the veteran's military 
pay grade if that would result in a higher benefit level than 
under the new payment structure. Rates for these 
``grandfathered'' surviving spouses range from $837 for the 
surviving spouse of an E-7 to $1,724 for the surviving spouse 
of an O-10. Surviving spouses are currently entitled to an 
additional $200 per month for each child.
    There is an additional allowance of $205 monthly which is 
payable to eligible surviving spouses who are patients in a 
nursing home or who are in need of the regular aid and 
attendance of another person.
    If there is no surviving spouse receiving dependency and 
indemnity compensation benefits but there is a surviving child, 
the child is entitled to $336 monthly with additional benefits 
for other children with certain limits due to age, disability, 
and status as a student.

                  History of Cost-of-Living Increases

    The Committee annually reviews the service-connected 
disability compensation and DIC programs to ensure that the 
benefits provide reasonable and adequate compensation for 
disabled veterans and their families. Based on this review, the 
Congress acts annually to provide a cost-of-living adjustment 
(COLA) in compensation and DIC benefits. The Congress has 
provided annual increases in these rates for every fiscal year 
since 1976.

                    Discussion of the Reported Bill

 COST-OF-LIVING ADJUSTMENT IN RATES OF COMPENSATION AND DEPENDENCY AND 
                         INDEMNITY COMPENSATION

    H.R. 3458 would direct the VA to compute and provide 
increases in the monthly rates of compensation and DIC, 
effective December 1, 1996. The rates would be increased by the 
same percentage as the Social Security COLA that will take 
effect on that date. If the increase does not result in a whole 
dollar amount, it shall be rounded down to the next lower whole 
dollar amount. The bill would provide a full COLA for both old- 
and new-law DIC recipients.
    The Administration's proposed fiscal year 1997 budget 
request, submitted on March 18, 1996, recommended a 2.8 percent 
rate increase be given to all compensation beneficiaries, 
including DIC spouses and children, effective December 1, 1996. 
This is the expected increase in the Consumer Price Index.
    The Committee is following its recent practice of setting 
the COLA by reference to the yet to be determined Social 
Security increase.

                      Section-By-Section Analysis

    Section 1 would be cited as the ``Veterans' Compensation 
Cost-of-Living Adjustment Act of 1996''.
    Section 2(a) would authorize the Secretary of Veterans 
Affairs to increase, effective December 1, 1996, the dollar 
amounts in effect for the payment of disability compensation 
and dependency and indemnity compensation.
    Section 2(b) would specify the programs to receive 
increased dollar amounts: compensation, additional compensation 
for dependents, clothing allowance, new DIC rates, old DIC 
rates, additional DIC for surviving spouses with minor 
children, additional DIC for disability, and DIC for dependent 
children.
    Section 2(c)(1) would increase the dollar amounts for those 
specified in subsection (b) based on the amount in effect on 
November 30, 1996, and specify that each amount shall be 
increased by the same percentage by which benefits are paid 
under title II of the Social Security Act (42 U.S.C.).
    Section 2(c)(2) would round down to the next lower dollar 
amount all compensation and DIC benefits, when the amount is 
not a whole dollar amount.
    Section 2(d) would provide a special rule authorizing the 
Secretary of Veterans Affairs to adjust administratively, 
consistent with the increases made under subsection (a), the 
rates of disability compensation payable to persons within the 
purview of section 10 of Public Law 850857, who are not in 
receipt of compensation payable pursuant to chapter 11 of title 
38, U.S.C.
    Section 3 would require the Secretary of Veterans Affairs 
to publish in the Federal Register the amounts specified in 
section 2(b), as increased pursuant to section 2.

                           Oversight Findings

    No oversight findings have been submitted to the Committee 
by the Committee on Government Reform and Oversight.

               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 20, 1996.
Hon. Bob Stump,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3458, the 
Veterans' Compensation Cost-of-Living Adjustment Act of 1996, 
as ordered reported by the House Committee on Veterans' Affairs 
on June 20, 1996.
    The bill would affect direct spending and thus would be 
subject to pay-as-you-go procedures under section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                           June E. O'Neill,
                                                          Director.

    Attachment

               Congressional Budget Office cost estimate

    1. Bill number: H.R. 3458
    2. Bill title: Veterans' Compensation Cost-of-Living 
Adjustment Act of 1996
    3. Bill status: As ordered reported by the House Committee 
on Veterans' Affairs on June 20, 1996.
    4. Bill purpose: The bill would provide cost-of-living 
adjustments (COLAs) in 1997 for veterans with service-connected 
disabilities and for survivors of certain disabled veterans. 
The COLAs would be rounded to the next lower dollar.
    5. Estimated cost to the Federal Government:

                                                                                                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                     1996     1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                                 DIRECT SPENDING                                                
Spending under current law:                                                                                     
  Estimated budget authority.....................   14,979   15,211   15,511   15,805   16,067   16,335   16,606
  Estimated outlays..............................   13,794   15,222   15,451   15,780   17,198   15,161   16,583
Proposed changes:                                                                                               
  Estimated budget authority.....................        0      -21      -25      -25      -26      -27      -29
  Estimated outlays..............................        0      -19      -24      -25      -28      -25      -28
Spending under proposals:                                                                                       
  Estimated budget authority.....................   14,979   15,190   15,486   15,780   16,041   16,308   16,577
  Estimated outlays..............................   13,794   15,203   15,427   15,755   17,170   15,136   16,555
----------------------------------------------------------------------------------------------------------------


    6. Basis of estimate: As specified in the Balanced Budget 
Act, the baseline assumes that monthly rates of disability 
compensation paid to veterans and of dependency and indemnity 
compensation (DIC) paid to their survivors are increased by the 
same COLA payable to Social Security recipients, and the 
results of the adjustments are rounded to the nearest dollar. 
This bill would round 1997 adjustments down to the next lower 
dollar. The effect of rounding down the benefit was estimated 
using the current table of monthly benefits and the numbers of 
beneficiaries assumed in the baseline
    7. Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts through 1998. The bill would have the following pay-
as-you-go impact:

                                                                        
                [By fiscal years, in millions of dollars]               
------------------------------------------------------------------------
                                                 1996     1997     1998 
------------------------------------------------------------------------
Change in outlays............................        0      -19      -24
Change in receipts ..........................        Not applicable     


    8. Estimated cost to State, local, and tribal governments: 
H.R 3458 contains no intergovernmental mandates as defined by 
Public Law 104-4 and would not affect the budgets of State, 
local, or tribal governments.
    9. Estimated impact on the private sector: This bill would 
impose no new federal private-sector mandates, as defined in 
Public Law 104-4.
    10. Previous CBO estimate: None.
    11. Estimate prepared by:

          Federal cost estimate: Mary Helen Petrus.
          Impact on State, local, and tribal governments: Marc 
        Nicole.
          Impact on private sector: Ellen Breslin Davidson.

    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                     Inflationary Impact Statement

    The enactment of the reported bill would have no 
inflationary impact.

                  Applicability to Legislative Branch

    The reported bill would not be applicable to the 
legislative branch under the Congressional Accountability Act, 
Public Law 104-1, because the bill would only affect certain 
Department of Veterans Affairs benefits recipients.

                     Statement of Federal Mandates

    The reported bill would not establish a federal mandate 
under the Unfunded Mandates Reform Act, Public Law 104-4.

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