schmidt and I have sent to Secretary Jim Baker, who will now be the administration's chief spokesman on the tax reform package.2 I am hopeful Secretary Baker will take a different view on this matter and that he will convince the President not to ask the Congress to change the current law.

Mr. Administrator, these are but a few of the observations I want to make at this time. If you could limit your remarks to 15 minutes, that would certainly help the members. We do have the Prime Minister of Great Britain here at 11 o'clock in a joint session. I do appreciate very much the members who are here this morning. We didn't know it when we scheduled this meeting, but there will be no votes in the House of Representatives this week. We are proud of the members who are here this morning to hear your testimony.

Before you make your remarks, I would like to recognize Mr. Hammerschmidt.

STATEMENT OF HON. JOHN PAUL HAMMERSCHMIDT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

Mr. HAMMERSCHMIDT. Thank you very much, Mr. Chairman. The committee has before it a Veterans' Administration budget request which raises many important and difficult issues. It recognizes it is imperative to address the national deficit, and it recognizes that the VA is not and should not be immune from that endeavor. As we examine the budget request, our committee must now make its independent assessment of it.

In that connection, I align myself with you, Mr. Chairman, in declaring that veterans' services and benefits should have a very high national priority. I am confident that our report to the House Budget Committee and our advice to the House Appropriations Committee will reflect that judgment.

Mr. Chairman, the administration has properly sent to Congress a lean and frugal budget. It reflects some changing missions in VA medicine, such as new medical activations and conversion of medical care beds to nursing care beds. It notes the needs of the aging veteran and it predicts a slight increase in the number of outpatients and inpatients treated. In actual medical dollars, the budget is up by $236 million to a total of $9.2 billion.

However, when the pay increase of January 1, 1985, and inflation are considered, and when other increased costs are taken into account, the medical budget request would seem to not be a real dollar increase but a decrease or standstill budget, thus showing that, in fact, the President's budget does recognize VA's role in deficit reduction and does require the VA to be an integral part of it. Mr. Chairman, this budget calls for several significant things to be done which involve large sums of money. They involve veterans, dependents of veterans, and the entire administrative structure of the Veterans' Administration. They are: A 5-percent reduction in pay for all VA employees, grade reductions of employees at the GS-11 to GS-15 level, a savings of 1,916 positions in DM&S through management improvements, a savings of some 105 posi

2 See p. 119.

tions in the central office medical management staff and related functions, a reduction in research money, a transfer of certain automatic data processing activities from Fort Snelling, MN to Austin, TX, and transfer of such other activities from Los Angeles, CA to Hines, IL; the imposition of a means test for certain nonservice-connected veterans applying for medical care; the recovery of medical care costs from third parties; a proposed reduction in construction funds; a reduction in the number of cemetery employees; a proposal to increase user fees on GI loans from 1 percent to 5 percent; a proposal to transfer the VA prosthetic function from New York City to Washington, DC; and a proposal to have an extensive reorganization of the Department of Veterans Benefits for the large reduction of employees not only for fiscal year 1986 but also for the years thereafter.

Incidentally, Mr. Chairman, this is a proposal which this committee rejected 4 years ago, and which I think we ought to again reject.

Finally, we have a proposal for a cost-of-living increase in compensation and pension for veterans and their dependents and survi

vors.

Mr. Chairman, these proposals deserve our committee's closest scrutiny. What are they really designed to accomplish? Will they save money, or will they cost money? What will be the effect on the quality of service? Did VA propose them, or were they imposed on VA? Are unsettled legal implications involved? What budget refinements will be needed if the Congress does not accept some of them?

When the question period comes, Mr. Chairman, I am sure we will want detailed answers from the Administrator and his associates as to each of these matters.

Mr. Chairman, I firmly believe that the veterans of this Nation and the organizations which represent them have made sizable contributions over these past few years to the solution of the Nation's financial problems. They have the right to be proud of that. Perhaps there is more to be done. I would therefore urge upon this committee a position of prudence, a position of realism, and a position of restraint. But just as important, Mr. Chairman, I would urge a position of high national concern for those programs for our Nation's veterans that have been so carefully crafted and nourished by the Congress over these past years under your careful guidance and gifted leadership.

Thank you very much, Mr. Chairman.

The CHAIRMAN. Thank you for that strong statement.

I would like to point out to the members of the committee that this committee in the past 4 years has certainly cooperated with this administration. We have slowed down spending by $1 billion in the last 4 years in veterans benefits, and we have hurt some of the programs that I was concerned about. But I think now is the time to take a good hard look at what this administration has sent up here.

I have instructed my staff to see if we can find ways to make savings without hurting the basic benefits for the veterans, certainly we want to look into that and cooperate. But as far as I'm con

cerned, we're going to go slow on what the President has recommended and sent up here in this budget.

Mr. Edgar.

Mr. EDGAR. Thank you, Mr. Chairman.

Mr. Chairman, I would like to ask unanimous consent to insert in the record my opening statement, along with a chart which shows the actual and real dollars expended over the last 10 years on veterans' programs.

The CHAIRMAN. Without objection.

[The statement of Mr. Edgar appears at p. 121.]

STATEMENT OF HON. BOB EDGAR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA

Mr. EDGAR. Mr. Chairman, I want to commend you for not only holding this hearing but for your leadership within this committee over the years. You have done a good job of looking carefully at veterans' programs and making sure that the dollars we expend are expended and targeted to those veterans who have needs, and particularly to the service-connected veteran who has problems.

I want to say that in my opening statement I share some very strong language in terms of concern in three basic areas: First, I am concerned about the disguised reduction in necessary staffing for the VA health care system, and I will ask some questions in that area.

Second, I am concerned about the legislative initiatives contained in the President's budget message. Our subcommittee has not scheduled hearings on these initiatives because the administration has not formally transmitted the proposals to Congress. These are very significant changes and I want to assure both the chairman and Mr. Walters that we intend to look very carefully and with the chairman's direction, go very slowly on those initiatives.

Finally, I want to indicate my strong concern about the information contained in the VA's report on caring for the older veterans and the lack of response within the President's budget initiative. Now, I have a great deal of respect for Mr. Walters and his work, and I hope that he continues in that capacity for a long time. But I have a great deal of concern, frustration, and anger at some of the budget numbers that I see, and I will include some of that concern and anger in some of my questions-constrained, of course. Thank you, Mr. Chairman.

The CHAIRMAN. Do any other members want to make a statement now? The Chair recognizes the gentleman from Pennsylvania.

STATEMENT OF HON. PAUL E. KANJORSKI, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF PENNSYLVANIA Mr. KANJORSKI. Mr. Chairman, I want to congratulate you on holding these hearings today on the massive changes the administration has proposed in our Nation's veterans programs. We owe a great deal of gratitude to the millions of brave men and women who have willingly laid down their lives on the line to protect our Nation and for what it stands. It is only fitting that we meet to

publicly discuss the issues of such great importance to those who have risked their lives and limb for their country.

I am proud of our veterans and proud to be their advocate here in Congress. It saddens and angers me to hear Mr. Stockman attack the benefit programs which our veterans depend on. We owe our lives and freedoms to these brave men and women. Pensions and disability aid are not handouts. The benefits they receive are their compensation for the sacrifices they have made on our behalf. For the first time in our Nation's history the administration has proposed placing a means test on health benefits for veterans who are over 65. A half-million veterans will lose the important medical benefits they counted on receiving in their retirement years. The administration proposes this change in order to save money, but it has failed to calculate the effect it will have on other Federal health programs. The proposal will shift nearly 200,000 veterans into the Medicare system. In the end, this money saving plan could add an extra $600 million a year to the Medicare costs, thus wiping out any savings in the VA budget.

The administration also proposes to increase fivefold the fee veterans must pay to obtain VA home loan financing. For the average vet, this plan would add $3,000 to their borrowing cost and could deny them the chance to own their own home.

As a representative of an area still trying to work its way out of the last recession, I am particularly disturbed by the administration's proposal to eliminate the Emergency Job Training Program for Vietnam era veterans. This program has a proven record of success in developing job opportunities for veterans who have been hardest hit by the recession.

Mr. Chairman, I am outraged by the attitude that, once a soldier has done his duty to our society, we owe him no more. As a member of the Veterans' Affairs Committee, I will fight to honor the commitments we have made to our Nation's veterans and their families.

Thank you, Mr. Chairman.

The CHAIRMAN. I thank the gentleman for his statement.
The Chair recognizes the Administrator.

STATEMENT OF HON. HARRY N. WALTERS, ADMINISTRATOR OF
VETERANS AFFAIRS; ACCOMPANIED BY EVERETT ALVAREZ,
JR., DEPUTY ADMINISTRATOR; PAUL T. BANNAI, CHIEF MEMO-
RIAL AFFAIRS DIRECTOR; JOHN W. HAGEN, JR., ACTING CHIEF
BENEFITS DIRECTOR; AND JOHN W. DITZLER, M.D., CHIEF MED-
ICAL DIRECTOR

Mr. WALTERS. Thank you, Mr. Chairman. I won't take 15 minutes, rest assured.

My formal statement will be submitted for the record. I have about 5 minutes of summary.

The CHAIRMAN. Without objection, so ordered.

Mr. WALTERS. Thank you, Mr. Chairman.

I think I would like to introduce my staff first, particularly for the new members of the committee.

The CHAIRMAN. Let the record show that Mr. Solomon was here, one of the ranking minority members, and he had to leave.

Go ahead, Mr. Walters.

Mr. WALTERS. Mr. John Hagan is our Acting Chief Benefits Director; Dr. John Ditzler is our Chief Medical Director; Everett Alvarez is our Deputy Administrator; and Paul Bannai is our Director of Memorial Affairs. Our Acting General Counsel, Bob Coy, sits behind me to my right.

I would like to tell you that I think your honoring Dorothy Starbuck today is a very nice thing to do. When she came to me and said she was going to retire, she asked me if she could be allowed to leave without any fanfare. I promised her I would not allow that to happen, and I can see you didn't let her down, either. She has received a lot of praise in 40 years of service to the Federal Government. I think it is worthwhile, Mr. Chairman, that you took your time and this committee's time to honor her this morning. We thank you.

The CHAIRMAN. Thank you, Mr. Administrator. This is one of the largest crowds we have had at a hearing, and I am sure a good part of that crowd was on account of Dorothy Starbuck.

Mr. WALTERS. Mr. Edgar, off the cuff, I would just like to say that General Bradley once said—and I quote "I can't think of a job I would rather not have than Administrator of the VA, nor a job I would like to do better." Your comments about my staying on may be a bit sadistic on your part, I'm not sure. But I will take that with a good sense of humor and in the right spirit.

Mr. Chairman and members of the committee, I am grateful for the opportunity to appear before you today to discuss the Veterans' Administration's 1986 budget. When I was confirmed as Administrator of Veterans' Affairs, I said I would be the advocate for our Nation's veterans. In that regard, no budget can adequately repay our veterans for all they have done for America. However, I, like the veterans the VA supports, realize the Nation has a challenge confronting it. It's called the national deficit.

Veterans have always been willing to share in solving America's problems, so long as they were treated fairly in comparison to those who did not serve. This year's budget, in my view, does treat veterans fairly in relation to other Government activities. I believe this fact shows the importance the President places on veterans and veterans' benefits.

This year's budget calls for $27.1 billion in new budget authority, of which $26.3 billion is the appropriation request-$61.8 million for proposed legislation and $851 million is for permanent authorizations. The largest portion of the budget request continues to be in our benefits programs. Overall, the benefits request of $15.6 billion represents over 59 percent of the total request. The benefits program includes proposed legislation for a 4.1-percent rate increase which will be effective December 1, 1985 for compensation and pensions.

For medical care, this budget shows an increase of $236 million over the 1985 level for direct medical care. The employment level for direct medical care is projected to increase by 199 over an adjusted 1985 employment level of 191,849. Workload projections for the inpatient treatment and outpatient medical visits show increases over 1985.