OMB, I noticed on their list of options still had an option of reducing spending. I think that is the frame of reference placed in the consolidation of some of the regional offices, and we went through a little scenario and effort in regards to the office in Columbus, Ohio, and I am not sure it resulted in any saving. But what is the situation? Is there any additional information on that? Miss STARBUCK. I don't think there will be any consideration of possible regionalization or consolidation in 1982 or 1983. I don't think that the idea has died. I think somewhere it still germinates. And I feel that it is incumbent upon the Department of Veterans' Benefits to review the operations of the Regional Office to assure that this mechanism of the Regional Office or some, perhaps change in that mechanism, is the most effective delivery system for veterans' benefits, and so that at the end of such a review we can go to the Administrator confident that we do have an honest and fully evaluated package that he can support before the Office of Management and Budget.

Mr. WYLIE. Thank you.

That is all the questions I have right now, Mr. Chairman.

Mr. HALL. On your rating board, doctors who did not get the 4.8 increase, do you anticipate any problems in recruitment?

Miss STARBUCK. No, sir; we do not, nor does the Board of Veterans' Appeals.

Mr. HALL. Miss Starbuck, we thank you for your very excellent statement. It always is good. I am not telling you anything I haven't said before.

Miss STARBUCK. Thank you, Mr. Chairman.

Mr. HALL. We appreciate your being here, and accompanied by your entourage that you always have when you come to Congress. Miss STARBUCK. Well, as I used to say when I traveled about the European Theater of Operations in World War II, I was coming out of the I. G. Farben Building after lunch one day and someone approached me and said, "How come you are always accompanied by these three captains?'

I said, "Any aircraft in this theater that is as big as I am has to have a fighter escort." [Laughter.]

Mr. HALL. You would like to have that on the record, would you not?

Miss STARBUCK. Not necessarily, sir.

Mr. HALL. Well, it's on there for good.

Miss STARBUCK. Thank you, Mr. Chairman.

Mr. HALL. Thank you.

Next we have Comdr. John Wanamaker representing the Retired Officers Association.

STATEMENT OF COMDR. JOHN F. WANAMAKER, U.S.N., RETIRED, REPRESENTING THE RETIRED OFFICERS ASSOCIATION

Commander WANAMAKER. Mr. Chairman and members of the subcommittee, I am Comdr. John F. Wanamaker, U.S. Navy (retired), I am the deputy director of legislative affairs of the Retired Officers Association which has its national headquarters in Alexandria, Va.

Our association has a membership of over 305,000 former and active-duty officers of the seven uniformed services.

I want to thank the members for providing me this opportunity to present the views of the Retired Officers Association on issues within the oversight responsibility of this subcommittee.

The disability compensation program is the largest benefit program administered by the Veterans' Administration, and I want to commend this committee for holding these oversight hearings to insure that the current programs are accomplishing the purpose for which they were intended, but also to insure that the taxpayers' dollars are being best utilized to meet the requirement of providing disabled veterans compensation for loss of potential earnings.

The veterans' disability compensation program's purpose is to provide relief for the impaired earning capacity due to disease or injuries resulting from military service. The current disability compensation program has serious flaws which I would like to bring to the attention of this subcommittee for consideration.

First, the basic rates of disability compensation are inadequate. The ratings according to section 355, title 38, are "to be based, as far as practicable, upon the average impairments of earning capacity resulting from such injuries in civilian occupations."

I would call the committee's attention to a comparison to the Government's range of compensation for its civilian employees. The monthly rate of compensation under section 8110, title 5 of the United States Code, states that it may not be more than 75 percent of the monthly pay of the maximum rate of basic pay for a GS-15, and in the case of total disability may not be less than 75 percent of the monthly pay of the minimum rate of basic pay for a GS-2 or the amount of the monthly pay of the employee, whichever is less.

These rates would currently be $3,132 a month and $586.29 per month. I would suggest from this that those military employees that receive the basic pay equal to the GS-15 and are totally disabled should receive the same or similar compensation, which is 66% percent of their monthly pay or $2,784.

The military veteran employee with similar earnings would receive $1,130 or less than one-half as much.

This single comparison of the total disability ratings between veterans and civilians is sufficient for the committee to task the Administration to develop a comparison for all percentages of disability ratings.

I maintain that should the military employee be an aviator or nuclear engineer or medical officer, of such specialized skills and other educational accomplishments, his disability loss in earning capacity should be considered when making compensation determinations.

I believe that the members of this committee should insure that a service-connected disabled veteran receives at least as favorable compensation as that paid to a disabled civilian employee.

I strongly urge the committee to review the wording in section 355 of title 38 and I suggest that the vague term "average impairments of earning capacity" does not meet the veteran's requirement for disability compensations.

It is very probable that the statute requirement that disabilities must be rated in percentages does not provide the Veterans' Administration Administrator enough flexibility in making compensation determinations.

When one tries to provide compensation for persons disabled one must consider the individual differences of the earning capability lost, such as between a private and a skilled medical officer. A single percentage rate will not satisfy this difference, and it may be necessary to start all over and develop a new program.

Mr. Chairman, there exists one group of veterans that are not adequately compensated for service-connected disabilities. The group to which I refer are those veterans who have served 20 or more years and who have become retirement-eligible for years of service. If they should become disabled on active duty these veterans would receive the greater of the disability retired pay or retired pay based on years of service.

The length-of-service retiree who is also disabled must in effect pay for his own disability compensation. He must forfeit an equal amount from his retired pay for years of service, in order to receive the VA disability compensation.

Veterans' disability compensation is paid to replace future earnings lost because of disease or illness attributed to military service. Military retired pay for longevity, on the other hand, has no connection with disease or injury.

The payments are for two completely different circumstances and should be paid concurrently.

An inequity occurs when a civil service employee veteran can receive VA disability compensation while employed and also while in retirement without a reduction in either annuity. He can even use his years of military service for credit toward his civil service retirement.

I ask you, Mr. Chairman and members of the subcommittee, where is the basis for fair and equal compensation for injuries in these situations? I strongly urge this subcommittee to favorably consider legislation currently before this committee to correct this inequity.

As of April 1, 1980, the various States, in order to meet the Federal approval of their unemployment compensation systems, reduced unemployment compensation by the amount an individual receives in other retirement income. This other income includes periodic payments received as military disability retired pay and veterans' disability compensation.

This Federal law has now been amended to allow States the option to offset the unemployment compensation for those receiving retirement income. Most States still require an offset by receipt of VA disability compensation.

I maintain that this completely refutes the intention of the Congress in providing the disability compensation. I strongly urge this committee to favorably consider legislation to correct this anomaly. I believe that VA disability compensation should be just that, and should not be the basis for reduction in other Federal or State entitlements, programs to which they may otherwise be eligible. The Public Assistance and Unemployment Compensation Subcommittee, Committee on Ways and Means, is addressing this issue

in hearings tomorrow. I urge the members of this subcommittee to bring their influence upon that committee in this important matter.

Mr. Chairman, I will now address the dependency and indemnity compensation program. This program provides benefits to the survivors of a member or former member whose death occurs on active duty or as a result of a service-connected disability. The monthly rates paid to a surviving spouse are based on the pay grade of the service member at the time of death or release from military service.

I recommend that the benefit schedule be truly increased, as necessary, to reasonably insure the maintenance of the survivors' standard of living.

Our Nation has a long outstanding record in providing benefits to the survivors of those whose husbands and fathers may have given their lives in the service of their country. For this our Nation and this committee in particular in exercising its responsibilities in this regard can be justly proud.

There have been some who have expressed the opinion that a standard "flat rate" be established to pay all surviving dependents. Those who advocate this have no understanding of the basic concept under which the dependency and indemnity compensation program is established.

I might add that a 940-page study conducted by the Senate in 1978 recommended that the current DIC method based on grade/ rank be maintained and adjusted periodically for the cost of living. The DIC program attempts to replace the potential earnings lost to a family as a result of the service member's death.

I have prepared a chart which illustrates the replacement of wages through the DIC program administered by the Veterans' Administration and then makes a comparison with that provided to Federal civilian employees of similar income.

You will note in referring to the chart that I have converted the military basic pay to regular military compensation, which includes factors for subsistence and housing allowances. These components are generally valued at approximately one-third the basic pay of the service member.

By using the accepted replacement income of 50 percent and comparing column 5 of the chart, all but the lowest enlisted grade categories fall below this accepted level under the current DIC program for a surviving spouse with no dependents.

As an example, you will note that the surviving widow of an O-5, which is a commander or lieutenant colonel, with 16 years of service will receive an amount of $676 a month in dependency and indemnity compensation. This replaces only 18 percent of regular military compensation at time of death.

Generally one-fourth is considered the amount a family would expend for shelter alone. This widow would be unable to provide the other necessities of life. Obviously this widow would be in trouble if she should lose her husband, and I believe that most members would agree, the DIC annuity does not meet this woman's basic needs in income replacement.

I would now ask the members of the committee to compare the 50 percent income replacement of the Federal Civil Service with the military member, compare the DIC [column 4] with column 8, payable to a civil service surviving spouse. I implore the committee to provide a similar program to its military members.

The committee should look at the difference between a careerist and a civilian soldier who comes on active duty for a limited period during an emergency. I think there should be a distinction between these two.

The civil service surviving widow can receive the benefit until death or until she remarries before reaching age 60. This committee should authorize surviving widows who are receiving benefits under the DIC program to continue to receive these benefits if they should remarry after age 60.

Other Federal programs such as social security, military survivors benefit plan and the civil service survivorship annuity plan have been modified to prevent the necessity for these older beneficiaries from living in sin. I urge you to provide the same consideration for the DIC widows. The costs of such a program would be minimal.

Regarding the budget impact on the compensation program, I am pleased to hear the comments of Miss Starbuck this morning to indicate that the October 1 increased payments are being made very rapidly, without a long delay.