programs is sufficiently large and unique to warrant separate budgetary accounts. The Administration feels a more informative presentation of the budget will result from this approach.

Over 2.3 million veterans with service-connected disabilities will receive monthly compensation under existing legislation totaling $7 billion. Over 357 thousand survivors of veterans whose deaths were service-connected or related to service-connected disabilities will receive benefits totaling $1.5 billion. In addition, legislation is proposed by the Administration for a 12.3 percent cost-of-living increase in compensation payments to be effective October 1, 1981. This legislation will add $1,038.8 million to the monthly benefits described above and will bring total compensation payments for FY 1982 to $9.7 billion.

Approximately 878,000 wartime veterans and 989,000 survivors will receive monthly pensions totaling over $4.1 billion in FY 1982. Pension payments are based on financial need. These estimates include a costof-living adjustment, estimated at 12.3 percent effective July 1, 1981.

The various life insurance programs administered by the Veterans' Administration will provide coverage of $93.2 billion to the families of 7.5 million service persons and veterans.

There is essentially no change anticipated in the net workload of this activity in FY 1982 over 1981. There will be, however, a slight change in the mix of work indicators which will have a mutually offsetting effect.

The FY 1981 GOE request included 179 work years and 301 positions for an expanded debt collection effort. The debt collection program will be further expanded in FY 1982. The FY 1982 request includes 318 work years and positions devoted to collection of debts. Resources for debt collection are included in the four following activities: General Counsel; Department of Veterans' Benefits; Data Management and Controller.

DVB's debt collection effort will be expanded in FY 1982. The FY 1982 request includes 197 work years, or an increase of 116 work years over the FY 1981 employment level for the collection of accounts receivable.

The Loan Guaranty program provides housing credit assistance to eligible veterans and service personnel through guarantees of loans made by private lenders and through direct loans to severely disabled veterans. The program also assists totally disabled veterans in receiving specially adapted housing grants.

297,447 loans were guaranteed during FY 1980 and the availability of credit reduced the number of direct loans to 1,160. Both these figures represent a decrease from the prior year attributed to a tighter money market with escalating interest rates.

During FY 1980, 138,323 GI loan defaults were reported by holders of guaranteed mortages-an increase of 15 percent and substantially higher than prior recent years. Aggressive VA loan servicing reduced the number of these defaults going to foreclosure to 11,048-a 16 percent decrease in the number of properties foreclosed over the prior year.

A higher level of loan activity is anticipated in 1982. The VA program, to be competitive, must have timely adjustments in interest rates accompanied by aggressive property and loan servicing efforts. It is only reasonable to expect an increase in defaults in FY 1982 in light of existing economic conditions.

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Notwithstanding these facts, the proposed budget reflects a slight decrease in loan originations; a decrease in property acquisitions; a decrease in properties disposed of-reversing last year's trend and a decrease in claims processed. The proposed budget calls for a cut of 160 in average employment for FY 1982. FY 1980 actual employment was 2,349. The current FY 1981 estimate is 2,322, with a projection of needs at 2,162. The most recent figure available at the end of November, 1980, showed 2,173 employees in field offices.

This 160 man year cut is expected to produce a reduction of $2.9 million in budgetary requirements. The best estimates the staff has been able to obtain calls for a personnel need of 2,500 people.

If unwarranted reductions should be made, reduced services to veterans will not be the only result. While delays in servicing loan applications and a reduction in the total number of loans processed will inevitably result, substantial and expensive increases in the number of loan defaults going to foreclosure and a substantial reduction in the number of acquired properties being disposed of will be seen. These eventualities are potentially very expensive to the Nation-far more expensive than the $2.9 million saving projected.

B. Veterans education, training and rehabilitation

The number of Vietnam era veterans in G.I. bill education programs is expected to continue to decrease, as eligibility for this benefit expires 10 years after a veteran is discharged from service. One Administration legislative proposal would extend eligibility by two years for this program to certain disadvantaged Vietnam era veterans. A second proposal would eliminate the authorization for flight and correspondence training. Total trainees for all VA administered education and training programs in 1982 are estimated at 773,000, a decrease of 202,000 under 1981. This will result in a decrease of $402,650 million in expenditures, for a Fiscal Year 1982 total of almost $1.7 billion (down from $2 billion in Fiscal Year 1981).

These education and training programs constitute major programs of intense interest to millions of veterans and their families. For persons who entered active duty in the Armed Forces after December 31, 1976, there has been no accrual of G.I. Bill benefits. In its place, Congress established a voluntary contributory Post Vietnam-Era Education Program (VEAP) (PL 94-502). There will be no new enrollments under the VEAP Program after December 31, 1981, unless the President recommends to Congress by June 1, 1981 that the program continue, and if Congress agrees, the program will be funded entirely by the Department of Defense.

The Department of Veterans' Benefits (DVB) administers the readjustment programs, and average employment for DVB will be reduced for Fiscal Year 1982. What effect this reduction in personnel in Veterans' Administration Regional Offices will have in Fiscal Year 1982 is only speculation at this time, but it would be safe to predict that there will be an adverse impact on the processing of veterans' claims for rehabilitation, education and training benefits.

The 96th Congress liberalized and improved the rehabilitation program for service-connected disabled veterans (PL 96-466). The average employment for rehabilitation and counseling services will be up

by 60 in Fiscal Year 1982 to provide additional services for an estimated 27,000 veterans contemplated by the revised rehabilitation programs for disabled veterans. The Fiscal Year 1982 budget also includes $6 million for the additional 60 personnel.

The Carter budget proposes legislation to eliminate flight and correspondence training at an estimated savings of 45,600 trainees and $32.2 million in costs, and to extend the delimiting date for two years for veterans in on-the-job training and educationally disadvantaged Vietnam veterans in vocational, technical or high school training at an additional cost of $63 million and 36,300 trainees.

C. Veterans housing

In 1982, VA expects to guarantee more than 315,000 loans to veterans made by private lenders. These loans, estimated at $22.7 billion, will bring the total amount of guaranteed loans outstanding to $114.4 billion. Direct loans totalling less than $1 million will be made to an estimated 30 Service-Disabled Veterans.

D. Other veterans benefits and services

The Compensation, Pension, and Education TARGET System is fully operational and full benefits of improved service to veterans and employment savings to the VA will be achieved in 1982.

The Fiscal Year 1982 budget request to operate the Department of Memorial Affairs is $34.4 million, an increase of only $2 million over Fiscal Year 1981. The average employment for this department will be substantially the same at 1,165. It is estimated that there will be an increase of 4,000 burials in National Cemeteries in Fiscal Year 1982, with basically no increase in the number of applications for headstones or markers. A new cemetery is scheduled to be opened at Fort Indian Town Gap, Pennsylvania late in 1982. The straightlining of average employment for this department will undoubtedly adversely impact on the maintenance and operation of the 140 existing VA cemeteries, with its approximately 1.5 million grave sites.

The Committee has received a number of criticisms of the quality of maintenance and care of National Cemeteries which are attributed primarily to the lack of personnel. A secondary problem is the replacement of old equipment and the purchase of new and up-to-date machinery. The Fiscal Year 1982 budget, therefore, should, at a minimum, reflect the actual cost-of-living increases which have occurred. during Fiscal Year 1981 and include estimated cost-of-living pay increases for the employees of this department.

The State Cemetery Grants program is administered by the Department of Memorial Affairs which provides grants for the establishment, expansion and improvement of State Veterans' Cemeteries, $10 million was appropriated for this program for Fiscal Years 1980 and 1981. The Veterans' Administration estimates that it has adequate funds on hand to take care of the requirements for this program for Fiscal Year 1982. Therefore, the Veterans' Administration has requested no funding for the program for this year. This program should be carefully monitored to assure the Veterans' Administration is responding promptly to applications for grants under this program and that there are adequate funds for qualifying States.

There are a number of employment programs for veterans that have been approved by Congress which are administered by the Department of Labor. These include preferences, affirmative action, job assistance and reemployment rights.

The official in the Department of Labor designated by Congress to be the principal advisor to the Secretary of Labor on veterans' programs is the Assistant Secretary for Veterans' Employment. The posi tion of Assistant Secretary for Veterans' Employment was established by PL 96-466 because the previous office (Deputy Assistant Secretary for Veterans' Employment) lacked stature and effectiveness in the Department of Labor. President Reagan is expected to fill the position of ASVE, which requires confirmation by the Senate. The budget for the Office of the Assistant Secretary for Veterans' Employment is minimal. For example, the Fiscal Year 1982 budget request for the Department of Labor is $34.5 billion in budget outlays. Of this amount, $12.1 billion has been requested for education and training activities. The budget for the Office of Assistant Secretary for Veterans' Employment is part of the overall education and training activities budget, and is only $8.4 million for Fiscal Year 1982. The Office of ASVE has a small staff of 225 positions, which includes a State Director of Veterans' Employment (SDVE) in each State with assistants in States with a heavy veteran population. The largest expenditure in the Office of ASVE is travel. În Fiscal Year 1981, travel funds were exhausted and State Directors were unable to attend State and national veterans organizations conventions, and to meet with local State Employment Security agencies to make necessary evaluations of existing veterans employment programs.

The Office of ASVE is requesting funds for four additional State Directors due to changes in the population census of 1980, for a total of 229. No additional funds have been requested for travel, but the projected need was an additional $250,000 for travel which is not part of the Fiscal Year 1982 budget request.

During Fiscal Year 1981 funds from CETA programs were used for ASVE outreach and public information service, and for the Disabled Veterans Outreach Program (DVOP) which the Congress made permanent in PL 96-466. The Office of ASVE estimates it will cost approximately $49 million to fund the DVOP Program for Fiscal Year 1982. The Department of Labor has earmarked $22.1 million for the DVOP Program. However, the Department of Labor contemplates funding the DVOP program from grants to States for the Employment Service by 1983, and other funds for Fiscal Year 1982. Funding, therefore, for ASVE to fully carry out its mission is in doubt until further action by the Administration on the CETA program and its amended budget request on Department of Labor programs.

In summary, the Department of Labor has an excellent opportunity to rearrange its priorities and provide veterans with the preference and job assistance Congress has authorized. The Committee will, through oversight hearings, review these programs to assure that veterans are receiving the assistance which Congress intended.

DEPARTMENT OF MEDICINE AND SURGERY

This budget request projects that over 1.3 million inpatients will be treated in the VA direct and contract medical care delivery system in 1982 and 18.6 million outpatient medical and dental visits will be made.

The VA will continue to meet the changing health care needs of the veteran population. To this end, the 1982 budget contains resources for 4 new nursing home care units, 1 new outpatient clinic, and various specialized medical programs.

Similarly, VA's construction budget has been identified in a multiyear planning effort. New construction budget authority of $649.9 million represents an increase over FY 1981. The request continues emphasis on the highest priority construction categories such as correction or elimination of code and structural deficiencies and expanded outpatient and extended care facilities to meet the needs of an aging veteran population. The request includes funding for 780 nursing home care beds and six outpatient clinic improvements. The request also includes design funds for a modernization of the VA medical center at Albuquerque and construction funds for a clinical addition at Denver.

The Committee is quite concerned that President Carter did not include requests for funding in either the supplemental appropriation request for FY 1981 or this budget request for the newly-enacted Veterans' Administration health professional scholarship program.

This program will provide scholarships for individuals to complete medical and nursing school. It is designed to help solve many of the long-range problems now confronting the Veterans' Administration's Department of Medicine and Surgery in recruiting and retaining physicians, dentists and nurses. It would substantially increase the quantity and quality of full-time physicians employed by the Department; reduce substantially the need for the VA to spend millions of dollars annually in contracting for critical services such as radiology, pathology, anesthesiology, etc. which exceeded $15,000,000 last year; bring about a drastic reduction in the number of foreign medical graduates employed by the Department which is now almost 37 percent of all employed VA physicians; and maintain in the VA health care delivery system 400 young doctors and 600 nurses when fully implemented.

At the Joint House/Senate Veterans' Affairs Committees oversight hearing held October 25, 1979, the VA acknowledged that it was experiencing problems in recruiting and retaining nursing staff in certain locations. The national average turnover rate was 12.8 percent per year for registered nurses as of September 1979. The inability to recruit nurses has caused temporary bed closings in some instances, thereby curtailing services to eligible veterans. The Committee is well aware of this situation and believes that the inclusion of nurses in the VA Scholarship Program is an added resource to aid recruitment and retention of nurses. Assigning these nurses in critical shortage areas will benefit the VA, the veteran patient, and, ultimately the Nation. Again, the VA and the Federal Government will derive the