[Senate Report 110-135]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 283
110th Congress                                                   Report
                                 SENATE
 1st Session                                                    110-135

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



 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 2007

                                _______
                                

                 July 24, 2007.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 423]

    The Committee on Veterans' Affairs, to which was referred 
the bill (S. 423) to increase, effective as of December 1, 
2007, 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 
and recommends that the bill do pass.

                              INTRODUCTION

    On January 29, 2007, Committee Chairman Daniel K. Akaka 
introduced S. 423, a bill to increase, effective as of December 
1, 2007, 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. Committee Ranking Minority Member Larry E. Craig is 
an original cosponsor of S. 423, as are Committee Members John 
D. Rockefeller IV, Patty Murray, Sherrod Brown, Bernard 
Sanders, Jim Webb, and John Ensign. Senators Barbara A. 
Mikulski, Claire McCaskill, and Olympia J. Snowe were later 
added as cosponsors. The bill was referred to the Committee.

                           COMMITTEE HEARING

    On May 9, 2007, the Committee held a hearing on legislation 
pending before the Committee. Among the measures on which the 
Committee received testimony was S. 423. Testimony on S. 423, 
among other bills, was offered by: Daniel L. Cooper, Under 
Secretary for Benefits, Department of Veterans Affairs; Carl 
Blake, National Legislative Director, Paralyzed Veterans of 
America; Eric A. Hilleman, Assistant Director, National 
Legislative Service, Veterans of Foreign Wars; Brian E. 
Lawrence, Assistant National Legislative Director, Disabled 
American Veterans; and Alec S. Petkoff, Assistant Director, 
Veterans Affairs and Rehabilitation, American Legion.

                           COMMITTEE MEETING

    On June 27, 2007, the Committee met in open session to 
consider legislation pending before the Committee. Among the 
measures so considered was S. 423. The Committee voted by voice 
vote to report favorably S. 423, as introduced, to the Senate.

               SUMMARY OF THE COMMITTEE BILL AS REPORTED

    The Committee bill contains freestanding provisions that 
would require the Secretary of Veterans Affairs to increase, 
effective December 1, 2007, the rates of, and limitations on, 
certain benefits paid by VA by the same percentage as the cost-
of-living adjustment (hereinafter, ``COLA'') provided to Social 
Security recipients and VA pension beneficiaries that become 
effective on the 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 allowance 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's outer garments; and
    4. the dependency and indemnity compensation (hereinafter, 
``DIC'') rates paid to:

    (a) surviving spouses of veterans whose deaths were 
service-connected;
    (b) surviving spouses for dependent children below the age 
of eighteen;
    (c) surviving spouses who are so disabled that they need 
aid and attendance or are permanently housebound;
    (d) surviving spouses covered under section 1318 of title 
38, United States Code; and
    (e) 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 Congressional Budget Office (hereinafter, ``CBO'') 
currently estimates that the COLA to be provided to Social 
Security recipients in 2008 will be 1.5 percent.

                       BACKGROUND AND DISCUSSION

A. 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 paid depends on the nature and 
severity of the veteran's disability or combination of 
disabilities and the extent to which the disability impairs 
earning capacity. The Department of Veterans Affairs 
(hereinafter, ``VA'') rates compensable disabilities according 
to its Schedule for Rating Disabilities on a graduated scale 
ranging from 10 to 100 percent, in 10 percent increments. VA 
pays higher monthly rates (known as ``special monthly 
compensation'') to disabled veterans with certain specific, 
very severe disabilities or combinations of disabilities.
    According to VA, as set forth in its Fiscal Year 2008 
budget, the department estimates that it will provide 
disability compensation to 2,867,329 veterans with service-
connected disabilities in Fiscal Year 2008. Among the veterans 
estimated to receive such compensation are 2 Mexican Border 
Period veterans; 3 World War I veterans; 288,777 World War II 
veterans; 155,980 Korean-conflict veterans; 993,494 Vietnam-era 
veterans; 845,085 veterans of the Persian Gulf War era; and 
595,988 veterans who served during peacetime.
    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.

B. Dependency and Indemnity Compensation

    Under chapter 13 of title 38, United States Code, VA pays 
DIC to the survivors of servicemembers 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, children age 18 or older who are permanently incapable of 
self-support, 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 on or after January 1, 1957, but 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, DIC is paid at 
a flat rate. Surviving spouses currently receive $1,067 per 
month and, if the deceased veteran was totally disabled for 
eight years prior to death, an additional $228 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 of age 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.
    Parents of deceased veterans whose incomes are below 
statutorily prescribed income thresholds are eligible for DIC 
under section 1315 of title 38. As previously noted, parents' 
DIC rates are adjusted automatically at the same time and by 
the same percentage as Social Security and VA pension benefits.
    In its Fiscal Year 2008 budget, VA estimates that it will 
pay DIC benefits to 340,702 survivors, a total that includes 
surviving spouses, children, and needy surviving parents.
    Under section 1318 of title 38, United States Code, 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 five 
years from the date of discharge or release from active duty. 
VA also pays DIC benefits to the surviving spouses and children 
of veterans who were former prisoners of war who die after 
September 30, 1999, and whose deaths were not service-connected 
if the veterans had been receiving (or had been entitled to 
receive) compensation at the 100 percent rate continuously for 
not less than one year preceding death.

Committee Bill

    The Committee bill would direct VA to compute and provide 
increases in the monthly rates of compensation and DIC, 
effective December 1, 2007. 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. In 
2003, this provision was extended until 2013 by section 706 of 
Public Law 108-183.
    The increases in DIC would automatically result in 
identical percentage increases in benefits paid at DIC rates 
under section 1318 of title 38, United States Code, 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 (1) 10 
years, (2) five years from the date of discharge from active 
duty, or (3) one year if the veteran was a former prisoner of 
war who died after September 30, 1999, and whose death was not 
service-connected if the veteran had been receiving (or had 
been entitled to receive) compensation at the 100 percent rate 
continuously for not less than one year preceding death.
    Under section 156(e)(1)(A) of Public Law 97-377, the DIC 
increases also would automatically result in the same 
percentage increases in Social Security benefits that were 
terminated by section 2205 of the Omnibus Budget Reconciliation 
Act of 1981 (hereinafter, ``OBRA 1981'') (Public Law 97-35). 
Prior to OBRA 1981, those Social Security 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, the Further Continuing Appropriations Act 
of 1993, to restore the benefits eliminated by OBRA 1981. The 
DIC increase also would apply to these restored benefits, 
effective December 1, 2000.
    The CBO, in its most recent baseline, estimated that the 
Social Security COLA affecting Fiscal Year 2008 payments, and 
thus the COLA provided for by the Committee bill, will be 1.5 
percent. The actual Social Security COLA could differ from this 
estimate. 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 the CBO, estimates that enactment of 
the Committee bill would, relative to current law, increase 
spending by $373 million in 2008 and by $500 million annually 
in subsequent years, but that such increases in spending are 
assumed in the budget resolution baseline and thus will have no 
budgetary effect relative to the baseline. Enactment of the 
Committee bill would not affect the budget of state, local, or 
tribal governments.
    The cost estimate provided by CBO, setting forth a detailed 
breakdown of costs, follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC 20515, July 2, 2007.
Hon. Daniel K. Akaka,
Chairman,
Committee on Veterans' Affairs,
U.S. Senate, Washington, DC 20510.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 423, the Veterans' 
Compensation Cost-of-Living Adjustment Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright, who can be reached at 226-2840.
            Sincerely,
                                           Peter R. Orszag,
                                                          Director.
    Enclosure
    cc: Honorable Larry E. Craig, Ranking Member.

    S. 423 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, 2007, 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 those programs by $373 
million in 2008. (The annualized cost would be about $500 
million in subsequent years.) This estimate assumes that the 
COLA effective on December 1, 2007, will be 1.5 percent.
    S. 423 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 March 16, 2007, CBO transmitted a cost estimate for H.R. 
1284, the Veterans' Compensation Cost-of-Living Adjustment Act 
of 2007, as ordered reported by the House Committee on 
Veterans' Affairs on March 15, 2007. The two versions of the 
legislation are identical, as are the two estimates.
    The CBO staff contact for this estimate is Dwayne M. 
Wright, who can be reached at 226-2840. This estimate was 
approved by Peter H. Fontaine, 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 S. 423 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 June 27, 2007, meeting. On that date, 
the Committee, by voice vote, ordered to report S. 423, a bill 
to increase, effective as of December 1, 2007, 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.

                             AGENCY REPORT

    On May 9, 2007, VA Under Secretary for Benefits, Mr. Daniel 
Cooper, appeared before the Committee on Veterans' Affairs and 
submitted testimony on, among other things, S. 423. Excerpts 
from this statement are reprinted below:

              STATEMENT OF THE VIEWS OF THE ADMINISTRATION

            Daniel L. Cooper, Under Secretary for Benefits, 
                    Department of Veterans' Affairs

    Mr. Chairman and Members of the Committee, thank you for 
the opportunity to testify today on several bills of great 
interest to veterans. I will comment today only on the 
provisions of the bills that affect the Department of Veterans 
Affairs (VA).

           *       *       *       *       *       *       *


                                 S. 423

    S. 423, the ``Veterans' Compensation Cost-of-Living 
Adjustment Act of 2007,'' would mandate a cost-of-living 
adjustment (COLA) in the rates of disability compensation and 
dependency and indemnity compensation (DIC) payable for periods 
beginning on or after December 1, 2007. The COLA would be the 
same as the COLA that will be provided under current law to 
Social Security benefit recipients, which is currently 
estimated to be an increase of 1.4 percent. This proposal is 
identical to that proposed in the President's Fiscal Year 2008 
budget request to protect the affected benefits from the 
eroding effects of inflation. VA supports this proposal and 
believes that the worthy beneficiaries of these benefits 
deserve no less.
    VA estimates that enactment would result in benefit costs 
of $348.4 million for FY 2008 and $4.7 billion over the period 
FY 2008-2017.

           *       *       *       *       *       *       *


          CHANGES IN EXISTING LAW MADE BY THE COMMITTEE BILL 
                              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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