[Senate Report 105-120]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 233
105th Congress                                                   Report
                                 SENATE

 1st Session                                                    105-120
_______________________________________________________________________


 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 1997

                                _______
                                

                October 29, 1997.--Ordered to be printed

_______________________________________________________________________


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

                              R E P O R T

                         [To accompany S. 987]

    The Committee on Veterans' Affairs, to which was referred 
the bill (S. 987) to amend title 38, United States Code, to 
authorize a cost-of-living adjustment in the rates of 
disability compensation for veterans with service-connected 
disabilities and dependency and indemnity compensation for 
survivors of such veterans; to revise and improve certain 
veterans compensation, pension, and memorial affairs programs; 
and for other purposes, having considered the same, reports 
favorably thereon and recommends that the bill, as amended, do 
pass.

                          COMMITTEE AMENDMENTS

    The amendments are as follows:
    Strike out all after the enacting clause as follows:

[SECTION 1. SHORT TITLE; REFERENCES TO TITLE 38, UNITED STATES CODE.

    [(a) Short Title.--This Act may be cited as the ``Veterans' 
Compensation Cost-of-Living Adjustment and Benefit Programs Improvement 
Act of 1997''.
    [(b) References.--Except as otherwise expressly provided, whenever 
in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of title 
38, United States Code.

                  [TITLE I--COMPENSATION AND PENSIONS

[SEC. 101. INCREASE IN COMPENSATION RATES AND LIMITATIONS.

    [(a) In General.--(1) The Secretary of Veterans Affairs shall, as 
provided in paragraph (2), increase, effective December 1, 1997, the 
rates of and limitations on Department of Veterans Affairs disability 
compensation and dependency and indemnity compensation.
    [(2) The Secretary shall increase each of the rates and limitations 
in sections 1114,1115(1), 1162, 1311, 1313, and 1314 of title 38, 
United States Code, that were increased by the amendments made by the 
Veterans' Compensation Cost-of-Living Adjustment Act of 1996 (Public 
Law 104-263; 110 Stat. 3212). This increase shall be made in such rates 
and limitations as in effect on November 30, 1997, and shall be by the 
same percentage that benefit amounts payable under title II of the 
Social Security Act (42 U.S.C. 401 et seq.) are increased effective 
December 1, 1997, as a result of a determination under section 215(i) 
of such Act (42 U.S.C. 415(i)).
    [(b) Special Rule.--The Secretary may adjust administratively, 
consistent with the increases made under subsection (a)(2), 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.
    [(c) Publication Requirement.--At the same time as the matters 
specified in section 215(i)(2)(D) of the Social Security Act (42 U.S.C. 
415(i)(2)(D)) are required to be published by reason of a determination 
made under section 215(i) of such Act during fiscal year 1998, the 
Secretary shall publish in the Federal Register the rates and 
limitations referred to in subsection (a)(2) as increased under this 
section.

[SEC. 102. ROUNDING DOWN OF COMPENSATION-RATE INCREASES.

    [In computing rates and limitations pursuant to legislation enacted 
for fiscal years 1998 and thereafter which increases by a specified 
percentage, or which directs the Secretary of Veterans Affairs to 
adjust administratively, the rates and limitations in sections 1114, 
1115(1), 1162, 1311, 1313, and 1314 of title 38, United States Code, 
the Secretary of Veterans Affairs shall round down to the next lower 
whole-dollar amount any amount which as so computed is not an even 
multiple of $1.

[SEC. 103. EXTENSION OF INCOME-VERIFICATION AUTHORITY.

    [(a) Section 5317 is amended by striking out subsection (g).
    [(b) Subparagraph (D) of section 6103(1)(7) of the Internal Revenue 
Code of 1986 (relating to disclosure of return information to Federal, 
State, and local agencies administering certain programs) is amended by 
striking ``Clause (viii) shall not apply after September 30, 1998.''.

[SEC. 104. EXTENSION OF LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF 
                    MEDICAID-COVERED NURSING HOME CARE.

    [Section 5503(f) is amended by striking out paragraph (7).

[SEC. 105. PROHIBITION REGARDING PAYMENT OF COMPENSATION FOR DISABILITY 
                    OR DEATH DUE TO TOBACCO USE.

    [(a) Service Connection.--Chapter 11 is amended by adding at the 
end of subchapter I the following new section:

[``Sec. 1103. Special provisions relating to claims based upon effects 
                    of tobacco products

    [``(a) Notwithstanding any other provision of law, a veteran's 
disability or death shall not be considered to have resulted from 
personal injury suffered or disease contracted in line of duty in the 
active military, naval, or air service for purposes of this title on 
the basis that it resulted from injury or disease attributable in whole 
or in part to the use of tobacco products by the veteran during the 
veteran's service.
    [``(b) Nothing in subsection (a) shall be construed as precluding 
the establishment of service connection for disability or death from a 
disease or injury which became manifest or was aggravated in active 
military, naval or air service or became manifest to the requisite 
degree of disability during any applicable presumptive period specified 
in section 1112 or 1116 of this title.''.
    [(b) Clerical Amendment.--The table of sections at the beginning of 
chapter 11 is amended by adding the following new item after the item 
relating to section 1102:

[``1103. Special provisions relating to claims based upon 
    effects of tobacco products.''.

    [(c) Effective Date.--The amendments made by this section shall 
apply to claimsfiled after the date of enactment of this Act.

[SEC. 106. REIMBURSEMENT OF COSTS ASSOCIATED WITH COMPENSATION AND 
                    PENSION MEDICAL EXAMINATIONS.

    [(a) Authorization.--Chapter 77 of title 38, United States Code, is 
amended by adding at the end of subchapter I the following new section:

[``Sec. 7705. Reimbursement for compensation and pension medical 
                    examinations

    [``(a) Reimbursement.--The Under Secretary for Benefits is 
authorized to reimburse the Veterans Health Administration for costs 
associated with the conduct of medical examinations requested by the 
Veterans Benefits Administration in connection with claims for benefits 
under this title.
    [``(b) Source of Funds.--Reimbursements under this section shall be 
made from amounts available to the Secretary of Veterans Affairs for 
payment of general operating expenses.''.
    [(b) Clerical Amendment.--The table of sections at the beginning of 
chapter 77 is amended by adding the following new item after the item 
relating to section 7703: [``7705. Reimbursement for compensation and 
pension medical examinations.''.

                      [TITLE II--MEMORIAL AFFAIRS

[SEC. 201. STATE CEMETERY GRANTS PROGRAM.

    [(a)(1) Amount of Grant Relative to Project Cost.--Section 2408(b) 
is amended by striking out paragraphs (1) and (2) and inserting in lieu 
thereof the following:
          [``(1) The amount of any grant under this section may not 
        exceed--
                  [``(A) in the case of the establishment of a new 
                cemetery, the total of--
                          [``(i) the cost of improvements to be made on 
                        the land to be converted into a cemetery, and
                          [``(ii) the initial cost of equipment 
                        necessary to operate the cemetery; or
                  [``(B) in the case of the expansion or improvement of 
                an existing cemetery, the total of--
                          [``(i) the cost of improvements to be made on 
                        any land to be added to the cemetery, and
                          [(ii) the cost of any improvements to be made 
                        to the existing cemetery.
          [``(2) If the amount of a grant under this section is less 
        than the amount of costs referred to in paragraph (1), the 
        State receiving the grant shall contribute the amount by which 
        the costs exceed the grant, in addition to any land acquired or 
        dedicated by the State for the cemetery.''.
    [(2) Effective Date.--The amendment made by this subsection shall 
become effective 60 days after the date of enactment of this Act.
    [``(b) Authorization of No-year Appropriation.--Section 2408(d) is 
amended by striking out ``the end of the second fiscal year following 
the fiscal year for which they are appropriated'' and inserting in lieu 
thereof ``expended''.]

and insert in lieu thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Veterans' Compensation Cost-of-
Living Adjustment Act of 1997''.

SEC. 2. INCREASE IN COMPENSATION RATES AND LIMITATIONS.

    (a) In General.--(1) The Secretary of Veterans Affairs shall, as 
provided in paragraph (2), increase, effective December 1, 1997, the 
rates of and limitations on Department of Veterans Affairs disability 
compensation and dependency and indemnity compensation.
    (2) The Secretary shall increase each of the rates and limitations 
in sections 1114, 1115(1), 1162, 1311, 1313, and 1314 of title 38, 
United States Code, that were increased by the amendments made by the 
Veterans' Compensation Cost-of-Living Adjustment Act of 1996 (Public 
Law No. 104-263, 110 Stat 3212). This increase shall be made in such 
rates and limitations as in effect on November 30, 1997, and shall be 
by the same percentage that benefit amounts payable under title II of 
the Social Security Act (42 U.S.C. 401 et seq.) are increased effective 
December 1, 1997, as a result of a determination under section 215(i) 
of such Act (42 U.S.C. 415(i)).
    (3) In the computation of increased dollar amounts pursuant to 
paragraph (2), any amount which as so computed is not an even multiple 
of $1 shall be rounded to the next lower whole dollar amount.
    (b) Special Rule.--The Secretary may adjust administratively, 
consistent with the increases made under subsection (a)(2), 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.
    (c) Publication Requirement.--At the same time as the matters 
specified in section 215(i)(2)(D) of the Social Security Act (42 U.S.C. 
415(i)(2)(D)) are required to be published by reason of a determination 
made under section 215(i) of such Act during fiscal year 1998, the 
Secretary shall publish in the Federal Register the rates and 
limitations referred to in subsection (a)(2) as increased under this 
section.
    Amend the title so as to read:
    A bill to increase, effective December 1, 1997, 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.

                              introduction

    On July 7, 1997, Committee Chairman Arlen Specter 
introduced S. 987, the proposed ``Veterans' Compensation Cost-
of-Living Adjustment and Benefit Programs Improvement Act of 
1997,'' at the request of the Department of Veterans Affairs 
(VA). S. 987, as introduced, would have provided for a December 
1, 1997, cost-of-living adjustment (COLA), equal to the 
December 1, 1997, COLA in Social Security benefits, in the 
rates of compensation for veterans who have service-connected 
disabilities and in the rates of dependency and indemnity 
compensation (DIC) for the survivors of those who died from 
service-connected causes. S. 987, as introduced, also included 
the following provisions unrelated to the proposed cost-of-
living adjustment:
    1. It would have made permanent VA's authority under 
section 5317 of title 38, United States Code, to gain access to 
certain records for the purpose of verifying a claimant's 
annual income in cases where the claimant was seeking ``means-
tested'' VA benefits.
    2. It would have made permanent the limitation on pension 
benefits specified in subsection (f) of section 5503 of title 
38, United States Code.
    3. It would have enacted special provisions relating to 
claims for benefits for injuries or diseases attributable in 
whole or in part to the use of tobacco products by the veteran 
during service.
    4. It would have authorized VA's Veterans Benefits 
Administration (VBA) to reimburse VA's Veterans Health 
Administration (VHA) for costs incurred by VHA in providing 
medical examinations to veterans in connection with VBA's 
adjudication of claims for benefits.
    5. It would have modified provisions of law relating to VA 
grants to the States in support of the establishment of State 
Cemeteries for the interment of veterans.
    On July 25, 1997, the Committee held a hearing to receive 
testimony on the proposed COLA, on the other provisions of S. 
987, and on other bills pending before the Committee. The 
Committee received testimony from Senator Daniel K. Inouye, 
Senator Barbara Boxer, Representative Bob Filner, and 
Representative Benjamin A. Gilman, and received testimony for 
the record from Representative Sue W. Kelly. The Committee also 
received testimony from Stephen L. Lemons, Ed.D., VA's Acting 
Under Secretary for Benefits, Thomas L. Garthwaite, M.D., VA's 
Deputy Under Secretary for Health, and from representatives of 
The American Legion, Veterans of Foreign Wars, Disabled 
American Veterans, and Vietnam Veterans of America. Testimony 
was also submitted for the record of the hearing by the Office 
of Veterans Affairs, Philippine Embassy; Paralyzed Veterans of 
America; AMVETS; the American Coalition for Filipino Veterans; 
the Coordinating Council of Leaders of Veterans Organizations 
in Southern California; Filipino War Veterans, Incorporated; 
the National Coalition for Homeless Veterans; and LA Vets.
    All of the witnesses at the Committee's July 25, 1997, 
hearing who addressed the issue of a cost-of-living adjustment 
expressed support for that portion of S. 987.

                           committee meeting

    After carefully reviewing the testimony from the July 25, 
1997, hearing, the Committee met in open session on October 7, 
1997, and voted by unanimous voice vote to report S. 987, as 
amended, favorably to the Senate.

                     summary of s. 987 as reported

    S. 987 (hereinafter referred to as the ``Committee bill'') 
contains freestanding provisions that would require the 
Secretary of Veterans Affairs to increase, effective December 
1, 1997, the rates of and limitations on compensation paid to 
veterans with service-connected disabilities and the rates of 
dependency and indemnity compensation paid to certain service-
connected disabled veterans' survivors by the same percentage 
as the COLA provided to Social Security recipients and VA 
pension beneficiaries that becomes effective on that same date.
    The COLA would apply to:
          1. basic compensation rates for veterans with 
        service-connected disabilities and the rates payable 
        for certain severe disabilities;
          2. the allowances for spouses, children, and 
        dependent parents paid to service-connected disabled 
        veterans rated 30 percent or more disabled;
          3. the annual clothing allowance paid to veterans 
        whose compensable disability requires the use of a 
        prosthetic or orthopedic appliance (including a 
        wheelchair) that tends to tear or wear out clothing, or 
        requires the use of a medication prescribed by a 
        physician for a service-connected skin condition if the 
        medication causes irreparable damage to the 
veteran'souter garments; and
          4. the DIC rates paid to:
                  (a) surviving spouses of veterans whose 
                deaths were service connected;
                  (b) surviving spouses for dependent children;
                  (c) surviving spouses who are so disabled 
                that they need aid and attendance or are 
                permanently housebound; and
                  (d) the children of veterans whose deaths 
                were service connected if no surviving spouse 
                is entitled to DIC, the child is age 18 through 
                22 and attending an approved educational 
                institution, or the child is age 18 or over and 
                became permanently incapable of self-support 
                prior to reaching age 18.
    The Committee bill would require the Secretary of Veterans 
Affairs to increase the rates of and limitations on 
compensation paid to veterans with service-connected 
disabilities and the rates of dependency and indemnity 
compensation paid to survivors of certain service-disabled 
veterans effective December 1, 1997. The adjustment would be 
the same percentage increase as the fiscal year 1998 COLA for 
Social Security and VA pension benefits and would take effect 
on the same date as those increases. CBO's most recent estimate 
was that the COLA will be 2.8 percent; the Office of Management 
and Budget has estimated that the COLA will be 2.7 percent.

                               background

Disability compensation.

    The service-connected disability compensation program under 
chapter 11 of title 38, United States Code, provides monthly 
cash benefits to veterans who have disabilities incurred or 
aggravated during active duty in the Armed Forces.
    The amount of compensation depends on the nature of the 
veteran's disability or combination of disabilities and the 
extent to which the disability impairs earning capacity. VA 
rates compensable disabilities according to its Schedule for 
Rating Disabilities on a graduated scale ranging from 0 to 100 
percent, in 10-percent increments. VA pays higher monthly rates 
(known as ``special monthly compensation'') to totally disabled 
veterans with certain specific, very severe disabilities or 
combinations of disabilities.
    As of August 1, 1997, VA was providing disability 
compensation to 2,260,798 veterans with service-connected 
disabilities. Among the veterans receiving such compensation 
were 246 World War I veterans; 618,665 World War II veterans; 
182,770 Korean-conflict veterans; 723,319 Vietnam-era veterans; 
and 198,224 veterans of the Persian Gulf War era.
    A veteran with a disability rated at 30 percent or more may 
receive additional compensation on behalf of the veteran's 
spouse, children, and dependent parents. These dependents' 
allowances are prorated according to the percentage of 
disability. As of March 31, 1997, 677,471 veterans received 
additional compensation on behalf of 1,023,676 dependents.

Dependency and indemnity compensation

    Under chapter 13 of title 38, VA pays dependency and 
indemnity compensation to the survivors of service members or 
veterans who died on or after January 1, 1957, from a disease 
or injury incurred or aggravated during military service. 
Survivors eligible for DIC include surviving spouses, unmarried 
children under the age of 18, certain helpless children age 18 
or older, children between the ages of 18 and 22 who are 
enrolled in school, and certain needy parents. Under section 
5312 of title 38, parents' DIC rates are adjusted automatically 
at the same time and by the same percentage as Social Security 
and VA pension benefits. Surviving spouses, children, and 
parents who are receiving death compensation based on deaths 
before January 1, 1957, may elect to receive DIC instead of 
death compensation.
    For deaths prior to January 1, 1993, surviving spouses 
received DIC at rates determined by the pay grade (service 
rank) of the deceased veteran. For deaths on or after January 
1, 1993, surviving spouses receive $833 per month and, if the 
deceased veteran was totally disabled for 8 years prior to 
death, an additional $182 per month. Surviving spouses who had 
been receiving benefits under the prior DIC program are paid 
under whichever program will pay the higher benefit.
    A surviving spouse who is so disabled as to be housebound 
or in need of regular aid and attendance is eligible to receive 
an additional amount. A surviving spouse also may receive 
additional allowances on behalf of the veteran's surviving 
children.
    Children are entitled to DIC if there is no surviving 
spouse, if they are 18 years or older and became permanently 
incapable of self-support before reaching age 18, or if they 
are 18 to 22 years old and pursuing an approved course of 
education.
    As of August 1, 1997, VA was paying DIC benefits to, or on 
behalf of, 280,732 surviving spouses, 34,060 children, and 
14,327 needy surviving parents.
    Under section 1318(b) of title 38, VA pays benefits at DIC 
rates to the surviving spouses and children of veterans whose 
deaths are not service connected if the veteran, immediately 
prior to his or her death, had been receiving (or had been 
entitled to receive) compensation at the 100-percent rate 
continuously for 10 or more years or for at least 5 years from 
the date of discharge or release from active duty.

History of cost-of-living increases

    The Committee periodically 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 periodically to provide a cost-of-living 
adjustment in compensation and DIC benefits. In fact, the 
Congress has provided annual increases in these rates for every 
fiscal year since 1976. The following table shows the 
percentage increases since 1975.

 HISTORY OF SERVICE-CONNECTED DISABILITY COMPENSATION INCREASES, 1975 TO
                                 PRESENT                                
------------------------------------------------------------------------
                                                  Increase    Cumulative
         Fiscal year            Effective date   (percent)   (1969=$100)
------------------------------------------------------------------------
1976.........................  August 1975....         11.8       158.55
1977.........................  October 1976...          8.0       171.23
1978.........................  October 1977...          6.6       182.53
1979.........................  October 1978...          7.3       195.86
1980.........................  October 1979...          9.9       215.25
1981.........................  October 1980...         14.3       246.03
1982.........................  October 1981...         11.2       273.58
1983.........................  October 1982...          7.4       293.82
1984.........................  April 1983.....          3.5       304.11
1985.........................  December 1984..          3.2       313.84
1986.........................  December 1985..          3.1       323.57
1987.........................  December 1986..          1.5       328.42
1988.........................  December 1987..          4.2       342.22
1989.........................  December 1988..          4.1       356.25
1990.........................  December 1989..          4.7       372.99
1991.........................  December 1990            5.4       393.13
                                \1\.                                    
1992.........................  December 1991..          3.7       407.68
1993.........................  December 1992..          3.0       419.91
1994.........................  December 1993..          2.6       430.83
1995.........................  December 1994            2.8       442.89
                                \2\.                                    
1996.........................  December 1995            2.6       454.41
                                \2\.                                    
1997.........................  December 1996..          2.9       467.59
1998.........................  December 1997        \3\ 2.8   \3\ 480.68
                                \2\.                                    
------------------------------------------------------------------------
\1\ Payment of the December 1990 increase was delayed until January 1992
  by section 8005(b) of Public Law 101-508.                             
\2\ December 1994, 1995 and 1997 increases are rounded to the next lower
  dollar amount pursuant to sections 2(c)(2) of Public Law 103-418 and  
  Public Law 104-57, and section 8031 of Public Law 105-33,             
  respectively.                                                         
\3\ Estimate.                                                           

                             committee bill

    The Committee bill would direct VA to compute and provide 
increases in the monthly rates of compensation and DIC, 
effective December 1, 1997. The rates would be increased by the 
same percentage as the Social Security and VA pension COLA that 
will take effect on that date. In accordance with section 8031 
of the Balanced Budget Act of 1997 (Public Law 105-33), amounts 
of compensation so computed that are not even multiples of $1 
will be rounded down to the next lower whole dollar amount.
    The increases in DIC automatically would result in 
identical percentage increases in benefits paid at DIC rates 
under section 1318 of title 38 to the surviving spouses and 
children of veterans who had a service-connected disability at 
the time of death for which they continuously were rated 
totally disabled for at least either (1) 10 years, or (2) 5 
years from the date of discharge from active duty.
    Under section 156(e)(1)(A) of Public Law 97-377, the DIC 
increases also automatically would result in the same 
percentage increases in Social Security benefits that were 
terminated by section 2205 of the Omnibus Budget Reconciliation 
Act of 1981 (OBRA 1981) (Public Law 97-35). Prior to OBRA 1981, 
those benefits had been paid to certain surviving spouses of 
those who died on active duty or from a service-connected 
disability on behalf of their children under 18 and children 
over age 19 who were secondary-school students; OBRA 1981 
reduced the eligibility cutoff age from 18 to 16 years old.
    Section 314 of Public Law 100-322 amended section 156(a)(1) 
of Public Law 97-377 to restore the benefits eliminated by the 
OBRA 1981. The DIC increase also would apply to these restored 
benefits, effective December 1, 1997.
    The Committee bill would excise all provisions of S. 987, 
as introduced, not related to an increase, effective December 
1, 1997, in the rates of compensation for veterans who have 
service-connected disabilities and in the rates of DIC for the 
survivors of those who died from service-connected causes. The 
Committee intends to continue its recent practice of limiting 
COLA bills to that subject matter.
    CBO, in its most recent baseline, estimated that the fiscal 
year 1998 Social Security COLA, and thus the COLA provided for 
by the Committee bill, will be 2.8 percent. The Office of 
Management and Budget's corresponding estimate (as of September 
1997) was 2.7 percent. The actual Social Security COLA could 
differ from either of these estimates. Rather than selecting 
any particular percentage adjustment at the time the Committee 
ordered the bill reported, the Committee followed its prior 
practice of setting the COLA by reference to the Social 
Security increase. The Committee believes this is the most 
equitable means of providing increases in these important 
service-connected benefits.

                             cost estimate

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, the Committee, based on 
information supplied by CBO, estimates that, compared to the 
CBO baseline, there would be no costs or savings resulting from 
enactment of the Committee bill.
    The cost estimate provided by CBO follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 8, 1997.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 987, the Veterans' 
Compensation Cost-of-Living Adjustment Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mary Helen 
Petrus.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

S. 987--Veterans' Compensation Cost-of-Living Adjustment Act of 1997

    For 1998, the bill 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, 1997, and the 
results of the adjustment would be rounded to the next lower 
dollar. The COLA is assumed in the budget resolution baseline, 
pursuant to section 257 of the Balanced Budget and Emergency 
Deficit Control Act of 1985, and savings from rounding it down 
were achieved by the Balanced Budget Act of 1997 (Public Law 
105-33). As a result, the bill would have no budgetary effect 
relative to the baseline as modified by the Balanced Budget Act 
of 1997.
    The bill would affect direct spending and thus pay-as-you-
go procedures would apply. S. 987 contains no intergovernmental 
or private-sector mandates as defined in the Unfunded Mandates 
Reform Act of 1995 and would not affect the budgets of state, 
local, or tribal governments.
    This estimate was prepared by Mary Helen Petrus. This 
estimate was approved by Robert A. Sunshine, Deputy 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 that 
would be incurred in carrying out the Committee bill. The 
Committee finds that the Committee bill would not entail any 
regulation of individuals or businesses or result in any impact 
on the personal privacy of any individuals and that the 
paperwork resulting from enactment would be minimal.

                 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 its October 7, 1997, meeting. On that 
date, the Committee, by unanimous voice vote, ordered S. 987, 
as amended, reported favorably to the Senate.

                             AGENCY REPORT

    On July 25, 1997, Stephen L. Lemons, Acting Under Secretary 
for Benefits, Department of Veterans Affairs, submitted 
testimony on, among other things, S. 987, as introduced. An 
excerpt from that testimony is reprinted below:

 Statement of Honorable Stephen L. Lemons, Acting Under Secretary for 
                Benefits, Department of Veterans Affairs

    Mr. Chairman and Members of the Committee, I am pleased to 
be here this morning to discuss those items on your agenda that 
would impact the Veterans Benefits Administration, the National 
Cemetery System, and the Board of Veterans' Appeals. Your 
letter of invitation asked that we address each of the 
following bills and draft proposals: S. 987 (VA requested draft 
legislation proposing a compensation cost-of-living adjustment 
and other program improvements); S. 464; S. 623; S. 714; S. 
730; Committee Print (to increase the Medal of Honor pension); 
S. 813; S. 986 (VA requested draft legislation proposing home 
loan program improvements); Committee Print (to make technical 
amendments to Public Law 104-275); and Committee Print 
(codification of FY 1997 cost-of-living adjustment legislation, 
Pub. L. No. 104-263).


          s. 987 (compensation cola and program improvements)


    S. 987, which the Chairman introduced at VA's request, 
would authorize a cost-of-living adjustment (COLA) for fiscal 
year (FY) 1998 in the rates of disability compensation and 
dependency and indemnity compensation (DIC), and would revise 
and improve certain veterans compensation, pension, and 
memorial affairs programs. We thank the Chairman for 
introducing this bill, and urge its favorable consideration.
    Section 101 of S. 987 would direct the Secretary of 
Veterans Affairs to increase administratively the rates of 
compensation for service-disabled veterans and of DIC for the 
survivors of veterans whose deaths are service related, 
effective December 1, 1997. The rate of increase would be the 
same as the COLA that will be provided under current law to 
veterans' pension and Social Security recipients, which is 
currently estimated to be 2.7 percent. This proposed COLA is 
necessary and appropriate in order to protect the benefits of 
these most deserving recipients from the eroding effects of 
inflation. We estimate that enactment of this section, in 
conjunction with section 102 of this bill, would result in 
benefit costs of $330.7 million during FY 1998 and $1.94 
billion over the five-year period from FYs 1998 to 2002. The 
costs associated with the compensation COLA are considered to 
be part of the compensation baseline and not subject to the 
pay-as-you-go provisions of the Omnibus Budget Reconciliation 
Act (OBRA) of 1990.
    Section 102 would require the Secretary, in computing new 
rates of (or limitations affecting) disability compensation and 
DIC pursuant to the enactment of any legislation requiring the 
Secretary to increase such rates to provide a COLA for fiscal 
year 1998 and thereafter, to round down to the next lower whole 
dollar any rate that is not evenly divisible by one dollar. 
This proposal is consistent with the congressionally-mandated 
calculation methods applied to COLA's for fiscal years 1994, 
1995, and 1996. We acknowledge the Committee's favorable 
consideration of a similar proposal in its recommendations 
regarding budget reconciliation. We estimate that section 102 
would reduce the FY 1998 benefits costs associated with the 
COLA proposed in section 101 of this bill by $17 million and 
reduce the five-year benefit cost for FYs 1998 through 2002 by 
$287 million, as compared to the cost of that COLA and future 
COLAs based on rounding odd dollar amounts to the nearest whole 
dollar. These savings would be subject to the pay-as-you-go 
provisions of OBRA 1990.

          CHANGES IN EXISTING LAW MADE BY S. 987, AS REPORTED

    Since the Committee bill would not repeal or amend any 
provisions of current law, this report does not contain the 
material described in clauses (a) and (b) of paragraph 12 of 
rule XXVI of the Standing Rules of the Senate.

                                
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