The Honorable Kent Conrad, Chairman

The Honorable Judd Gregg, Ranking Member

Committee on the Budget, United States Senate

Washington, DC  20510

Dear Senators Conrad and Gregg:

            Pursuant to Section 301(d) of the Congressional Budget Act of 1974, I, as Ranking Member of the Committee on Veterans' Affairs (hereinafter, "Committee"), submit this report to the Committee on the Budget on the proposed fiscal year 2008 (hereinafter, "FY08") budget for Function 700 (Veterans' Benefits and Services) programs.

GENERAL COMMENTS

            From time to time, it is worth repeating the obvious.  We are a nation at war.   The fourth anniversary of the war in Iraq, and the sixth anniversary of the war in Afghanistan will occur this year.  Hundreds of thousands of volunteers have been sent into harm's way.  Thousands have given their lives in combat; thousands more have returned with severe disabilities.   The mission statement of the Department of Veterans Affairs (hereinafter, "VA"), "To care for him who shall have borne the battle, and for his widow, and his orphan?," is more relevant now than ever.  These brave men and women expect, and deserve, our best, as do all who suffer disabilities as a result of military service.  They are the reason VA exists.  Our shared values demand that they, above all others, have first call on the nation's resources.   Within the context of a near $87 billion budget for VA, few can argue that resources are not there to meet our obligation to those suffering disabilities as a result of current and past conflicts. 

            We must also acknowledge that we are a nation with deficits and debt.  After meeting our commitment to those for whom VA benefits and services were created, we cannot escape the reality of resource constraints.  It is with this reality in mind that I make my recommendations on the President's FY08 budget.  Almost exactly ten years ago, every member of the Committee on Veterans' Affairs, on a bi-partisan basis, signed a views-and-estimates letter expressing similar sentiments.  I believe the following excerpt from that letter provided the appropriate framework for debate on VA's budget then and still does today:

In preparing these comments, the Committee's members have kept in mind the fiscal limitations within which we must operate if we are to get Federal spending under control and thereby reduce the Federal deficit and debt.  We believe that the Government can be fiscally responsible while still fulfilling its commitments to the most deserving among us -- including our Nation's veterans.  We also are mindful of the fact that uncontrolled Federal spending threatens the long-term health of the Nation's economy and, in turn, could adversely affect the provision of veterans' benefits.  Thus, we recognize that those who have worn the uniform in defense of the Nation seek, as we do, to protect the health of the Nation's economy. 

SUMMARY

            Function 700 is comprised of budget authority and outlays associated with four entities under the jurisdiction of the Committee:  VA; the Department of Labor's Veterans' Employment and Training Service (hereinafter, "VETS"); the American Battle Monuments Commission (hereinafter, "ABMC"); and the United States Court of Appeals for Veterans Claims (hereinafter, "CAVC").  I support the President's request for total Function 700 discretionary funding and, except as noted below, the President's total mandatory funding request.  With a few exceptions, I endorse the President's allocation of Function 700 spending among the various appropriations accounts.  The exceptions are noted in the following chart and will be discussed in greater detail in the body of this letter.[1] 

 VA 

            The President requests total budget authority for VA in FY08, including revenue from medical collections authorized under existing law, of $86.757 billion.  This total consists of $44.978 billion for mandatory programs and $41.779 billion for discretionary programs.  The $41.779 billion request for discretionary programs is comprised of $2.352 billion in expected revenue from collections and $39.427 billion in appropriations.  I do not recommend increases beyond those requested by the President for discretionary programs.  Furthermore, I agree with the President that discretionary spending from general appropriations be limited to $39.427 billion.

            With respect to mandatory programs, the President's budget assumes offsetting receipts of $355 million in FY08, and $2.313 billion over five years, from the enactment of revenue-generating proposals.  As will be discussed below, I do not support revenue from these or other revenue-generating proposals being used as offsets against mandatory spending.

Veterans' Employment and Training Service

            The President requests $228 million for the Department of Labor's VETS programs and services.  I recommend that $300,000 be added to the President's request to increase funding for the National Veterans' Training Institute (hereinafter, "NVTI") and the Veterans' Workforce Investment Program (hereinafter, "VWIP").

United States Court of Appeals for Veterans Claims

            The CAVC requests $21.2 million.  I support the CAVC's full request provided that it continues to use its statutory authority to recall retired judges throughout FY08. 

American Battle Monuments Commission         

            The President requests $42.1 million for ABMC.  I enthusiastically support the President's request.

DISCUSSION

I.   MANDATORY PROGRAMS

            Within Function 700, only VA programs contain mandatory account expenditures.  The President's request for FY08 is $44.978 billion in budget authority for mandatory programs. 

            The President's budget assumes offsetting receipts of $355 million in FY08, and $2.313 billion over five years, from the enactment of legislation that would:  apply a progressive annual premium on veterans without service-disabling conditions whose family income exceeds $50,000; increase pharmacy co-payments from $8 to $15 per 30-day supply of medication for priorities 7 and 8 veterans; and end VA's practice of offsetting first-party co-payment debt with third-party collections.  I agree that the proposals put forth by the President merit serious consideration and I recommend adoption of some mixture of revenue-generating proposals.  However, I do not support revenue from these or other proposals being used as offsets against mandatory spending.  Rather, all revenue generated from new collections should be used to fund veterans' medical care.

            As was noted in last year's letter, VA entitlement spending has nearly doubled in a 10-year period. The bulk of the accelerated spending is attributable to growth in the Compensation and Pension (hereinafter, "C&P") account.  The C&P account funds disability compensation payments for veterans with service-connected disabilities; compensation payments to surviving spouses and dependents of veterans who die as a result of service-related conditions; pension payments to disabled or elderly wartime veterans; pension payments to needy spouses of wartime veterans; and payment of certain burial-related expenses.

            During his testimony at the Committee's February 13, 2007, hearing, VA Secretary R. James Nicholson attributed the growth in VA's entitlement expenditures to a variety of factors, chief among them VA's efforts to inform eligible veterans of the benefits to which they may be entitled. VA expects net accession to the compensation roles to continue to increase, even in the face of an overall declining veterans' population.

            Looking at specific drivers of cost growth, VA projects that average compensation payments to veterans will continue to increase due to a variety of factors:  1) More veterans filing disability claims (primarily Gulf War era and Vietnam-era veterans); 2) More veterans filing for and being granted service-connection for multiple disabilities (the number of veterans filing for at least eight or more disabilities has doubled in five years); 3) Increases in average disability ratings (as veterans age, their disabilities may worsen and they may be granted increased disability ratings); 4) Increases in Individual Unemployability claims; 5) Cost-of-living adjustments; and 6) More military retirees filing for disability compensation spurred by new laws allowing partial concurrent receipt of military retired pay and VA disability pay (43% of the nation's 1.96 million military retirees are now receiving VA disability compensation).

            A number of bills, including some I have authored, already have been referred to the Committee proposing additional VA entitlement program spending. Although I am aware of and, in many cases, sympathetic to efforts to address gaps in educational assistance, compensation, insurance, and other benefits, I believe it is important during a time of fiscal restraint to live within our means.  Therefore, it will be my policy to adhere to existing budgetary guidelines and find spending offsets to pay for any new, non-emergency entitlement spending.