APPENDIX

DEMOCRATS

GV (SONNY) MONTGOMERY, MISSISSIPPI

DON EDWARDS, CALIFORNIA

808 EDGAR, PENNSYLVANIA

SAM B. HALL, JR. TEXAS

DOUGLAS APPLEGATE, OHIO

RICHARD C. SHELBY, ALABAMA

DAN MICA, FLORIDA

THOMAS A DASCHLE, SOUTH DAKOTA

WAYNE DOWDY, MISSISSIPPI

LANE EVANS, ILLINOIS

MARCY KAPTUR, OHIO

ALAN B. MOLLOMAN, WEST VIRGINIA

TIMOTHY J PENNY, MINNESOTA

HARLEY O STAGGERS, JR, WEST VIRGINIA

J. ROY ROWLAND, GEORGIA

JOHN BRYANT, TEXAS

JAMES J. FLORIO, NEW JERSEY

KENNETH J. GRAY, ILLINOIS

PAUL E KANJORSKI, PENNSYLVANIA

TOMMY F. ROBINSON, ARKANSAS

MACK FLEMING

CHIEF COUNSEL AND STAFF DIRECTOR

Honorable Harry N. Walters

Administrator of Veterans Affairs

Veterans Administration

Washington, D. C. 20420

Dear Mr. Administrator:

Thank you for your letter of February 1 notifying us of your intention to proceed with a planned reorganization of the Department of Veterans Benefits proposed by the President in his 1986 budget request.

In accordance with the provisions of section 210(b)(2) of
title 38, before the Administrator may implement an adminis-
trative reorganization in any fiscal year, the Administrator
must, under certain circumstances, first submit to the appro-
priate committees of the Congress a report containing a
detailed plan and justification for the administrative
reorganization. Such report shall be submitted not later than
the day on which the President, pursuant to section 1105 of
title 31, submits to the Congress the budget for the fiscal year
in which the administrative reorganization is to be implemented.
In addition, no action to carry out the reorganization may be
taken after the submission of such report until the first day of
such fiscal year.

Mr. Administrator, if the two-page letter of February 1 is
supposed to be the detailed plan and justification required
under 210(b)(2), it is inadequate. For example, the statute
requires that you inform the committee of how the consolidation
would enable you to take better advantage of the advances of
recent years in management and communications technology, as you
suggest it would do. We expect you to set out how the proposed
consolidation would further improve the agency's delivery of
veterans benefits and provide for continuing high quality
service to veterans. We're not aware of any effort being made
to purchase high tech equipment that would enable the agency to
offset the reduction of employees by 17 percent over the 1986-88
time frame as you indicate in your letter.

(105)

The committee would be interested in knowing how the FY 1986 reduction of 624 FTEE would affect each individual station. The committee would like a breakdown by regional office of the total number of FTEE losses over the three-year period. You state that the employee reduction would be accomplished through centralization of the designated functions. The committee expects to have the specifics of how this would be accomplished. We want to know more about the staff reductions projected to take place through attrition. For example, have any surveys been conducted as to how many staff you expect to leave the agency over this three-year period through attrition? Are you aware of any specific data that would indicate the number of voluntary reassignments that would take place? Finally, we would be interested in knowing more details about the specific incentives for employee placement which you envision.

The committee would like to know what sites have been surveyed and/or selected for the three centralized locations where consolidation would take place. You indicate that a task force has been established to develop an implementation plan by July 1985 and that the task force will provide definitive plans on locations and relocation strategies, as well as detailed estimates on translocation and equipment costs. We would suggest to you that under the statute cited above, unless the detailed plan is submitted by the date specified (which has now passed) the agency is without authority to make this move; therefore, the move is not to take place in July of 1986 or at any future time unless there is total compliance with current law.

We would be pleased to discuss this matter with you further should you desire to do so.

Sincerely,

G. V. (SONNY MONTGOMERY
Chairman

GVM/JPH:cls

Jakubaul

JOHN PAUL HAMMERSCHMIDT
Ranking Minority Member

DEMOCRATS

GV (SONNY, MONTGOMERY, MISS

DON EDWARDS, CALIF

BOB EDGAR, PA.

SAM HALL JR. TEX

DOUGLAS APPLEGATE, Q10

MARVIN LEATH, TEX

RICHARD C. SELBY, ALA

DAN MICA FLA

THOMAS A.DASCHLE, S. DAK

WAYNE DOWDY. MISS.

MATTHEW G. MARTINEZ, CALIF.

LANE EVANS, KL

MARCY KAPTUR, OHIO

FRANK HARRISON, PA

ALAN B. MOLLOMAN, W VA

TIMOTHY J. PENNY, MIN.

HARLEY O STAGGERS, JR, W. VA

J. ROY ROWLAND, GA

JIM SLATTERY, KANS.

JOHN BRYANT, TEX

JAMES J. FLORIO, J.

MACK FLEMING

CHIEF COUNSEL AND STAFF DIRECTOR

Honorable David A. Stockman

Director

Office of Management and Budget

Washington, D. C. 20503

Dear Dave:

Having seen you on the David Brinkley show yesterday, I'd like to respond to something you said during the program. You did very well as you always do; however, I must take issue with a statement you made about the health care of certain veterans.

I am very concerned that you would categorize the treatment of non-service-connected veterans in VA hospitals as "a sacred Cow". The treatment of non-service-connected veterans in Veterans Administration hospitals is limited by law. These veterans can only be treated if space and resources are available for such treatment at the time their application is submitted. According to VA's estimate, more than 200,000 non-serviceconnected disabled veterans needing care are being turned away each year.

Our Committee has cooperated with the Administration in
trying to make the Veterans Administration more cost effective.
Based on the President's budget during the past four years, our
Committee and the Congress have taken action that will result in
savings in FY 81 84 of more than $1 billion. Among many
cost-savings provisions, we have taken action to terminate flight
training, limit correspondence training, eliminate certain dental
benefits, delay cost-of-living increases for veterans drawing
compensation and pension, limit burial benefits and revise the VA
home loan guaranty program, including a requirement that the
veteran pay a one percent loan origination fee for a VA home loan
(which I personally thought was a big mistake).

I don't think it is fair to suggest that veterans programs could be referred to as "a sacred cow" in any form. I think a review of what we have accomplished in the last four years will establish that fact.

Dave, many government programs (percentage-wise) in the last five years have shown substantial growth. That is not the case with veterans programs. As Chairman of the Committee on Veterans' Affairs, I will oppose any further reductions in our medical program. That is not to say that I will not provide leadership to make some adjustments where I feel it will not adversely affect the ability of deserving veterans to receive care and treatment when they need it. As the saying goes, "They've earned it."

On the cost-of-living issue, I will oppose any effort to freeze compensation and pension increases unless there is a freeze across-the-board for all other federal recipients. All groups must be treated alike. Veterans cannot be treated any differently than social security recipients. I think you will find that if the freeze is applied fairly and across-the-board, veterans will not object. If any.group is to receive a cost-of-living increase, I can assure you veterans will insist that they receive an increase as well.

The federal government has obligations of varying degrees to many citizens of this country; however, I firmly believe that no segment of our society is more deserving of benefits and services from the federal government than veterans who have served their nation in time of need. That obligation must be honored. When Congress establishes its priorities and begins to conduct an analysis of those who can sustain reductions and those who cannot, veterans will be rated among the top of those who will have their obligations fulfilled.

I look forward to working with you and other members of the Administration as we seek to resolve our differences on these

I have read with great interest and considerable misgivings Secretary Regan's proposal to tax service-connected veterans' compensation. These benefits have from their inception been exempted from taxation, and I cannot imagine any justification that would warrant a departure from this long-standing policy.

Veterans compensation is designed to replace lost earning
capacity attributable to disability. Since the benefit has
traditionally been tax exempt, the rates reflect this status.
For example, the rate for a single veteran who is totally
disabled is only $15,540 per year. The difference between this
rate and the average earnings of wage earners today reflects the
tax exempt status of compensation benefits. To use the language
of Treasury policy analysts, the present benefit rates are
calculated on a "net replacement" basis. If the benefit were to
be taxed, we in the Congress would have to raise the rates to
their average earning loss equivalent. This action would
probably more than offset the increased taxes to be realized.

Consider also that in addition to a proposed tax on the benefit, it has been proposed to deny a COLA in FY 1986. Taken together, the effect of these two policies is a double penalty imposed on some of our most deserving citizens, those who suffered grievous loss in the service of our country. It is indeed ironic that some of our most deserving citizens should have to bear an unjustly heavy tax burden.

The Congress has long recognized that changes in the structure of the labor market also change the effects that various disability levels have on earning capacity. We have adjusted to this by making the compensation rates incremental rather than straight line. For example, the rate for a 10% disability ($66 per month) is only 5% of the rate for total