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109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-521

======================================================================



 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 2006

                                _______
                                

 June 22, 2006.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 4843]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 4843) to increase, effective as of December 1, 2006, 
the rates of disability compensation for veterans with service-
connected disabilities and the rates of dependency and 
indemnity compensation for survivors of certain service-
connected disabled veterans, and for other purposes, having 
considered the same, report favorably thereon with amendments 
and recommend that the bill as amended do pass.
  The amendments (stated in terms of the page and line numbers 
of the introduced bill) are as follows:
  In section 2(b), strike paragraph (6) (page 3, lines 1 
through 3) and insert the following:

          (6) Additional dic for surviving spouses with minor 
        children.--The dollar amounts in effect under section 
        1311(b) of such title and paragraph (1) of section 
        1311(f) of such title (as redesignated by subsection 
        (e) of this section).

  At the end of section 2 (page 4, after line 9), insert the 
following new subsection:

  (e) Designation Correction.--Section 1311 of title 38, United 
States Code, is amended by redesignating the second subsection 
(e) (added by section 301(a) of the Veterans Benefits 
Improvement Act of 2004 (Public Law 108-454; 118 Stat. 3610)) 
as subsection (f).

                              Introduction

    On March 2, 2006, the Chairman and Ranking Member of the 
Subcommittee on Disability Assistance and Memorial Affairs, 
Honorable Jeff Miller and Honorable Shelley Berkley, 
respectively, along with the Chairman and Ranking Member of the 
Veterans' Affairs Committee, Honorable Steve Buyer and 
Honorable Lane Evans, respectively, introduced H.R. 4843, the 
Veterans' Compensation Cost-of-Living Adjustment Act of 2006, 
which would provide a cost-of-living adjustment in the rates of 
service-connected disability compensation and dependency and 
indemnity compensation, effective December 1, 2006.
    On April 6, 2006, the Subcommittee on Disability Assistance 
and Memorial Affairs held a hearing on seven bills, including 
H.R. 4843.
    On June 8, 2006, the Subcommittee on Disability Assistance 
and Memorial Affairs met and ordered H.R. 4843 reported 
favorably to the full Committee by unanimous voice vote.
    On June 22, 2006, the full Committee met and ordered H.R. 
4843 reported favorably, as amended, to the House by voice 
vote.

                      Summary of the Reported Bill

    H.R. 4843, as amended, would:
    Provide effective December 1, 2006, a cost-of-living 
adjustment to the rates of disability compensation for veterans 
with service-connected disabilities and to the rates of 
dependency and indemnity compensation for survivors of certain 
service-connected disabled veterans. The percentage amount 
would be equal to the increase for benefits provided under the 
Social Security Act, which is calculated based upon changes in 
the Consumer Price Index.

                       Background and Discussion

    Increase in rates of disability compensation and dependency 
and indemnity compensation.--Section 2 of the bill would 
increase, effective December 1, 2006, the rates of compensation 
for service-connected disabilities and the rates of dependency 
and indemnity compensation (DIC) for surviving spouses and 
children of veterans who die of service-connected causes, as 
well as the additional amounts for dependents and survivors, 
and clothing allowances for certain veterans. Congress has 
provided annual increases in these rates for every fiscal year 
since 1976.
    The Committee is following its longstanding practice of 
setting the cost-of-living adjustment (COLA) by reference to 
the yet-to-be-determined Social Security increase. At the time 
of the filing of this report, the increase is expected to be 
2.6 percent, but it may be higher or lower depending on changes 
in the Consumer Price Index; the exact percentage is calculated 
as of September 30, 2006. Last year's increase was 4.1 percent.
    The purpose of the disability compensation program is to 
represent, to the extent practicable, the average impairment in 
earnings capacity as a result of a disability or combination of 
disabilities incurred or aggravated by military service. The 
amount of compensation payable varies according to the degree 
of disability.
    To be eligible to receive disability compensation, a 
veteran's disability must not be the result of willful 
misconduct, and the veteran must have been discharged under 
other than dishonorable conditions. The responsibility for 
determining a veteran's entitlement to service-connection for a 
disability rests with the Department of Veterans Affairs (VA). 
More than 2.6 million veterans were receiving service-connected 
disability compensation as of May 2006.
    Surviving spouses and dependent children of veterans who 
died of disabilities determined by VA to be service-connected 
(including veterans who died while on active duty) or who had a 
service-connected disability rated at 100 percent for certain 
periods of time prior to death are entitled to receive monthly 
DIC benefits. Additional amounts are paid to survivors who are 
housebound, in need of aid and attendance, or have minor 
children. The purpose of DIC authorized under chapter 13 of 
title 38, United States Code, 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 because the Nation in part assumes the 
legal and moral obligation of the veteran to support the spouse 
and children. As of May 2006, there were more than 311,000 
surviving spouses and more than 29,000 children receiving DIC.
    Public Law 108-454 authorized an additional DIC payment of 
$250 a month provided for the first 2 years of DIC eligibility 
to surviving spouses with minor children. This additional 
benefit is aimed at easing the transition following the death 
of the servicemember or veteran. Payment is based on the family 
unit, not per child, and terminates prior to the end of the 2-
year period if there are no longer children under the age of 
18. H.R. 4843, as amended, would provide a cost-of-living 
adjustment to this 2-year transitional DIC benefit.

                      Section-by-Section Analysis

    Section 1 of the bill would provide that this Act may be 
cited as the ``Veterans'' Compensation Cost-of-Living 
Adjustment Act of 2006''.
    Section 2(a) of the bill would require the Secretary of 
Veterans Affairs to increase, effective December 1, 2006, the 
dollar amounts in effect for the payment of disability 
compensation and dependency and indemnity compensation.
    Section 2(b) of the bill would specify the programs to 
receive increased dollar amounts: compensation in effect under 
section 1114 of title 38, United States Code; additional 
compensation for dependents in effect under section 1115(1) of 
title 38, United States Code; clothing allowance in effect 
under section 1162 of title 38, United States Code; new DIC 
rates in effect under paragraphs (1) and (2) of section 1311(a) 
of title 38, United States Code; old DIC rates in effect under 
section 1311(a)(3) of title 38, United States Code; additional 
DIC for surviving spouses with minor children in effect under 
section 1311(b) and paragraph (1) of section 1311(f) of title 
38, United States Code; additional DIC for disability in effect 
under sections 1311(c) and (d) of title 38, United States Code; 
and DIC for dependent children in effect under sections 1313(a) 
and 1314 of title 38, United States Code.
    Section 2(c)(1) of the bill would increase the dollar 
amounts for those programs specified in subsection (b) based on 
the amount in effect on November 30, 2006.
    Section 2(c)(2) of the bill would specify that each amount 
shall be increased by the same percentage by which benefits are 
increased under title II of the Social Security Act (42 U.S.C. 
401 et seq.).
    Section 2(c)(3) of the bill 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) of the bill 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 85-857 
(72 Stat. 1263), who are not in receipt of compensation payable 
pursuant to chapter 11 of title 38, United States Code.
    Section 3 of the bill would require the Secretary of 
Veterans Affairs to publish in the Federal Register the amounts 
specified in subsection (b), as increased pursuant to that 
section.

                    Performance Goals and Objectives

    The reported bill would authorize benefits and program 
enhancements under laws administered by the Secretary of 
Veterans Affairs. The Department of Veterans Affairs' 
performance goals and objectives are established in annual 
performance plans and are subject to the Committee's regular 
oversight and evaluation by the U.S. Government Accountability 
Office. VA also publishes a performance and accountability 
report for each fiscal year.

             Statements of the Views of the Administration

    The Administration's fiscal year 2007 budget request, 
submitted in February 2006, recommended a cost-of-living 
adjustment based on the change in the Consumer Price Index 
(CPI) be given to all compensation beneficiaries, including DIC 
recipients, effective December 1, 2006. The estimated increase 
is 2.6 percent.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 22, 2006.
Hon. Steve Buyer,
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. 4843, the 
Veterans' Compensation Cost-of-Living Adjustment Act of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

H.R. 4843--Veterans' Compensation Cost-of-Living Adjustment Act of 2006

    H.R. 4843 would increase the amounts paid to veterans for 
disability compensation and to their survivors for dependency 
and indemnity compensation by the same cost-of-living 
adjustment (COLA) payable to Social Security recipients. The 
increase would take effect on December 1, 2006, and the results 
of the adjustment would be rounded to the next lower dollar.
    The COLA that would be authorized by this bill is assumed 
in CBO's baseline, pursuant to section 257 of the Balanced 
Budget and Emergency Deficit Control Act, and savings from 
rounding it down were achieved by the Balanced Budget Act of 
1997 (Public Law 105-33) and extended to 2013 by the Veterans 
Benefits Act of 2003 (Public Law 108-183).
    Because the COLA is assumed in CBO's baseline, the COLA 
provision would have no budgetary effect relative to that 
baseline. Relative to current law, CBO estimates that enacting 
this bill would increase spending for these programs by $530 
million in 2007. (The annualized cost would be about $710 
million in subsequent years.) This estimate assumes that the 
COLA effective on December 1, 2006, will be 2.2 percent.
    H.R. 4843 would also apply the COLA to a benefit for 
surviving spouses with children under age 18. Under current 
law, surviving spouses who are eligible for Dependency and 
Indemnity Compensation (DIC) and have one or more children 
under age 18 have their monthly DIC payment increased by $250 
for up to two years from the date that the survivor becomes 
eligible for DIC. Section 2 would increase the $250 benefit by 
the same cost-of-living adjustment payable to Social Security 
recipients on December 1, 2006. Based on an assumed COLA of 2.2 
percent, CBO estimates that this monthly benefit would increase 
to $255 (after rounding down to the next lowest dollar) for 
2007 and each subsequent year relative to current law and CBO's 
baseline. Therefore, CBO estimates that enacting this provision 
would increase direct spending for veterans compensation by 
less than $200,000 in 2007, by $1 million over the 2007-2011 
period, and by $2 million over the 2007-2016 period.
    H.R. 4843 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On May 11, 2006, CBO transmitted a cost estimate for H.R. 
4843 as introduced on March 2, 2006. H.R. 4843, as ordered 
reported, is similar to the introduced bill, but also contains 
a provision that would increase the additional $250 benefit for 
surviving spouses with children under 18 by the same cost-of-
living adjustment payable to Social Security recipients on 
December 1, 2006. The differences in the estimates reflect the 
differences in the two versions of the bill.
    The CBO staff contact for this estimate is Dwayne M. 
Wright. This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                     Statement of Federal Mandates

    The preceding Congressional Budget Office cost estimate 
states that the bill contains no intergovernmental or private 
sector mandates as defined in the Unfunded Mandates Reform Act.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

              SECTION 1311 OF TITLE 38, UNITED STATES CODE


Sec. 1311. Dependency and indemnity compensation to a surviving spouse

  (a) * * *

           *       *       *       *       *       *       *

  [(e)] (f)(1) Subject to paragraphs (2) and (3), if there is a 
surviving spouse with one or more children below the age of 18, 
the dependency and indemnity compensation paid monthly to the 
surviving spouse shall be increased by $250, regardless of the 
number of such children.

           *       *       *       *       *       *       *