[Budget of the U.S. Government]
[VI. Investing in the Common Good: The Major Functions of the Federal Government]
[26. Veterans Benefits and Services]
[From the U.S. Government Publishing Office, www.gpo.gov]
26. VETERANS BENEFITS AND SERVICES
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Table 26-1. FEDERAL RESOURCES IN SUPPORT OF VETERANS BENEFITS AND SERVICES
(In millions of dollars)
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Estimate
Function 700 1996 -----------------------------------------------------------------
Actual 1997 1998 1999 2000 2001 2002
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Spending:
Discretionary Budget Authority
\1\............................. 18,359 18,910 18,750 18,719 18,715 18,702 18,706
Mandatory Outlays:
Existing law................... 18,820 20,579 21,735 22,850 24,443 21,463 23,151
Proposed legislation........... ......... ......... 593 294 690 1,057 1,547
Credit Activity:
Direct loan disbursements........ 1,442 1,933 2,189 2,249 2,273 2,287 2,269
Guaranteed loans................. 28,676 30,230 28,948 25,458 25,032 24,566 24,059
Tax Expenditures:
Existing law..................... 2,775 2,940 3,105 3,285 3,480 3,680 3,895
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\1\ Proposed legislation will supplement the budget authority with receipts (estimated at $0.5 billion in 1998).
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The Federal Government provides a broad range of benefits and
services, to veterans (and their survivors) who served in conflicts as
long ago as the Spanish-American War and as recent as the Persian Gulf
War. In providing these benefits and services, the Government recognizes
the sacrifices that wartime and peacetime veterans made during their
service in the military. The $40 billion a year in veterans benefits and
services, and $4.7 billion in tax benefits, compensate for service-
related disabilities, provide medical care to low-income and disabled
veterans, and help returning veterans prepare for reentry into civilian
life through education and training. In addition, veterans benefits
provide financial assistance to needy veterans of wartime service and
their survivors.
About six percent of veterans are military retirees. This group of
veterans can receive both military retirement from the Defense
Department (DOD) and veterans benefits from the Department of Veterans
Affairs (VA). Active duty military personnel are eligible for veterans
housing benefits, and they can make contributions to the Montgomery GI
Bill program for education benefits that are paid later. To deliver
these services to veterans, VA employs about 20 percent of the non-
Defense workforce of the Federal Government--almost 250,000 people.
About 220,000 of these employees deliver medical services to veterans
(as described in Chapter 22, Health).
The veteran population is declining, with much of the decline among
draft-era veterans, meaning that a rising share of veterans is coming
from the All-Volunteer Force (see Chart 26-1). Thus, the types of needed
benefits and services likely will change. Further, as the veteran
population shrinks and technology improves, access to, and the quality
of, service should continue to improve.
The Veterans Benefits Administration (VBA) processes veterans claims
for benefits in 58 regional offices across the country. Several factors,
including the introduction of judicial review to the claims adjudication
process in 1988 and DOD downsizing from 1992 to 1994, significantly
increased the claims and appeals workload. Workload peaked in 1993 and
1994, with 500,000 backlogged claims and 214 days needed to process a
claim.
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But, as the veteran population declines, the number of new claims and
appeals will decline with it. At the end of 1996, the backlog shrunk to
346,000 claims, and the number of days needed to process a new claim
averaged 150. To further the progress to date, VBA is developing a
comprehensive strategic plan that will reengineer the way it processes
claims, including the post-decision review process, and integrate
information technology into program administration.
The following discussion describes the major components of benefits
and services (other than health care) to which veterans are entitled.
Income Security
Along with Federal income security programs for the general
population, such as Social Security and unemployment insurance, several
VA programs help certain veterans and their survivors maintain their
income when the veteran is disabled or deceased. Spending for this
purpose will total an estimated $19.8 billion in 1998, including the
funds that Congress approves each year to subsidize life insurance for
certain veterans who are too disabled to get affordable coverage from
private insurance.
Service-Connected Compensation: Veterans with disabilities resulting
from, or coincident with, military service receive monthly compensation
payments scaled to the degree of disability. The payment does not depend
on the veteran's income or age, or on whether the disability is the
result of combat or a natural-life affliction. The amount depends on the
average fall in earnings capacity that the Government presumes for
individuals with the same degree of disability. Survivors of veterans
who die from service-connected injuries receive payments in the form of
dependency and indemnity compensation. Benefits are indexed annually by
the same cost-of-living adjustment (COLA) as Social Security, which is
2.7 percent for 1998.
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The number of veterans and survivors of deceased veterans receiving
compensation benefits will total an estimated 2.6 million in 1998,
remaining at that level through 2002. While the overall veteran
population will decline, the compensation caseload is expected to remain
relatively constant due to changes in eligibility and enhanced outreach
efforts. At the same time, mainly due to anticipated COLAs, spending for
compensation benefits will rise from an estimated $16.8 billion in 1998
to $18.8 billion in 2002.
Non-Service-Connected Pensions: The Government provides pensions to
lower-income, wartime-service veterans, or veterans who have become
permanently and totally disabled after their military service. Survivors
of wartime-service veterans may qualify for pension benefits based on
financial need. Veterans pensions, which also increase annually with
COLAs, will cost an estimated $3.2 billion in 1998. The number of
pension recipients will continue to fall from an estimated 714,000 in
1998 to 650,000 in 2002, as the population of wartime veterans drops.
Burial and Other Benefits: Families of deceased veterans who received
pension or compensation benefits and who are buried in private
cemeteries may receive burial benefits to help defray funeral costs. For
veterans buried in VA's National Cemeteries, the Government reimburses
additional amounts to the National Cemetery System for headstones,
markers, and graveliners. Over 90,000 veterans' survivors received a
burial allowance in 1996. Spending for these benefits will total an
estimated $119 million in 1988.
Insurance Programs: Because most private insurance excludes coverage
of war-time service, the VA administers life insurance programs.
Veterans pay the total cost for this insurance through premiums,
calculated by assuming that the veteran will see no combat. If insurance
claims in any year exceed expectations due to combat, DOD pays the extra
cost of coverage. These programs will continue to provide over $480
billion of coverage to nearly 5.5 million veterans and active duty
personnel in 1998.
Veterans Eeducation, Training, and Rehabilitation
Several Federal programs support job training and finance education
for veterans and others. The Labor Department runs several programs
exclusively for veterans. In addition, several VA programs provide
education, training, and rehabilitation benefits to veterans and
military personnel who meet specific criteria. The programs include the
Montgomery GI bill (the largest of them), the post-Vietnam-era education
program, the Vocational Rehabilitation program, and the Work-Study
program. Spending for all VA programs in this area will total an
estimated $1.4 billion in 1998.
The Montgomery GI Bill (MGIB): The Government created MGIB as a test
program, with more generous benefits than the post-Vietnam-era education
program, to help veterans move to civilian life as well as to help the
armed forces with their recruitment. The President and Congress made the
program permanent in 1987. Service members electing to enter the program
have their pay reduced by $100 a month during their first year of
military service. The VA administers the program and pays the costs of
basic benefits once the service-member leaves the military. Basic
benefits now total about $15,000 (about 12 times the original reduction
in the service members' pay).
MGIB beneficiaries receive a monthly check based on whether they are
enrolled in school on a full- or part-time basis. They are entitled to
36 months worth of payment, but they must certify monthly that they are
in school. DOD may provide additional benefits to help recruit certain
specialties and critical skills. Nearly 350,000 veterans and service
members will use these benefits in 1998. The MGIB also provides
education benefits to reservists while they are in service. DOD pays
these benefits, and the VA administers the program. In 1998, over 80,000
reservists are expected to use this program. Over 90 percent of MGIB
beneficiaries use their benefits to attend a college or university.
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Veterans Housing
Along with the mortgage assistance available to veterans through the
Federal Housing Administration (FHA) insurance program, VA-guaranteed
and direct loan programs will help an estimated 280,000 veterans get
mortgages in 1998. Guaranteed commitments for mortgage loans in 1998 are
expected to reach almost $29 million. The $192 million in estimated
spending in 1998 reflects the estimated Federal subsidies that are
implicit in the veterans' home loans issued during the year. Slightly
over 40 percent of veterans who have owned homes have used the VA loan
guaranty program. In 1996, 56 percent of all guaranteed loans went to
first-time home buyers.
National Cemetery System
The VA provides burial in its National Cemetery System for eligible
veterans, active duty military personnel, and their dependents--with the
VA managing over 100 national cemeteries across the country. Spending
for VA cemetery operations, excluding reimbursements from other
accounts, will total an estimated $84 million in 1998. Over 70,000
veterans and their family members were buried in National Cemeteries in
1996.
Related Programs
Many veterans get help from other Federal income security, health,
housing credit, education, training, employment, and social service
programs that are available to the general population. A number of these
programs have components specifically designed to assist veterans. Some
veterans also receive preference for Federal jobs. In addition, starting
in 1998, the children of Vietnam veterans will receive compensation if
they are afflicted with spina bifida, which the Government will presume
was caused by a veteran parent's exposure to herbicides.
Military Retirement
About 1.6 million military retirees and survivors will receive an
estimated $28 billion in retirement benefits in 1988. Normal retirement
eligibility occurs after 20 years of service. The initial annuity base
for most current retirees is 2.5 percent of final pay for each year of
service--50 percent at 20 years--up to a maximum 75 percent of final pay
at 30 years. For those entering between September 1980 and July 1986,
the Government will use the average of the highest three years of basic
pay to calculate the annuity base, instead of final basic pay. Benefits
for both groups are fully indexed to the Consumer Price Index (CPI).
Members entering military service after August 1, 1986 face a cut in
their initial retirement benefit if they retire before age 62 with less
than 30 years of service. The initial formula for their annuity remains
at 2.5 percent per year of service, but this multiplier is cut by one
percent for each year of service below 30. The cut ends when the member
reaches age 62. Also, benefits for these retirees rise at the rate of
the CPI minus one percent, with a one-time catch-up at age 62 to restore
the full purchasing power of the annuity. After age 62, the benefit is
again adjusted by CPI minus one percent. In addition, to help shrink the
size of the military forces, the Government has provided temporary
authority for certain military members to retire with as little as 15
years of service.
Tax Incentives
Along with direct Federal funding, certain tax benefits help
veterans. The law keeps all cash benefits that the VA administers
(disability compensation, pension, and GI bill benefits) free from tax.
Together, these three exclusions will cost about $3 billion in 1998. The
Federal Government also helps veterans obtain housing through veterans
bonds that State and local governments issue, the interest on which is
not subject to Federal tax. In 1998, this provision will cost the
Government an estimated $35 million.