JULY 29 (legislative day, JULY 19), 1977.-Ordered to be printed Mr. CRANSTON, from the Committee on Veterans' Affairs, REPORT [To accompany H.R. 7345) The Committee on Veterans' Affairs, to which was referred the bill (H.R. 7345) to amend title 38 of the United States Code to increase the rates of disability and death pension and to increase the rates of dependency and indemnity compensation for parents, and for other purposes, having considered the same, reports favorably thereon with an amendment in the nature of a committee substitute and recommends that the bill, as amended, do pass. (379) 7 INTRODUCTION The Subcommittee on Compensation and Pension, chaired by Senator Herman E. Talmadge, conducted a hearing on June 21, 1977, to review the Veterans' Administration's non-service-connected disability and death pension program and the dependency and indemnity compensation program for surviving parents. The hearing also examined pending legislation, including S. 1642, the Veterans and Survivors Pension Adjustment Act of 1977, and H.R. 7345, a Housepassed pension adjustment measure. The Subcommittee received testimony in person or by submission from representatives of the Veterans' Administration, The American Legion, the Disabled American Veterans, the Veterans of Foreign Wars, AMVETS, the Veterans of World War I, the Paralyzed Veterans of America, the Blinded Veterans Association, the Society of Military Widows, and the Non Commissioned Officers Association. On July 15, 1977, the Committee unanimously voted to report favorably H.R. 7345, with a Committee amendment in the nature of a substitute. On July 22, 1977, based on a letter from the Director of the Congressional Budget Office containing its revised estimate of the increase in the Consumer Price Index, the Committee revised H.R. 7345 as reported to reflect a slightly lower estimate, 6.5 percent rather than 6.7 percent, of the increase in the cost of living for the period January 1977 to January 1978. SUMMARY OF H.R. 7345 AS REPORTED Basic Purpose The basic purpose of H.R. 7345 as reported is to provide a cost-ofliving adjustment in the rates and annual income limitations applicable to pension for non-service-connected disabled veterans and their surviving spouses, for surviving parents receiving dependency and indemnity compensation, and in the annual income limitations applicable to persons receiving pension under section 9(b) of the Veterans' Pension Act of 1959 ("old law"). Summary of Provisions The basic provisions of the Veterans and Survivors Pension Adjustment Act of 1977 would: (1) provide an increase of approximately 6.5 percent in rates of disability and death pension under current law, including the additional amount authorized for dependents; (2) increase by approximately 6.5 percent the rates of dependency and indemnity compensation (DIC) payable to parents; (3) increase by the same percentage the maximum income limitations applicable to pensioners and parents entitled to DIC under current law, and to beneficiaries under the protected pension law; (4) increase by the same percentage the amount of additional pension and DIC payable to those recipients so entitled based upon aid and attendance or housebound status; and (5) increase additional allowances for recipients of wartime death compensation by the same percentage based upon need for regular aid and attendance. 8 DISCUSSION Pension Reform Restructuring the needs-based pension program under chapter 15 of title 38, United States Code, for non-service-connected disability or death has been a priority of the Committee for some time. In June, 1973, the Veterans' Administration testified that the current pension program contained "inconsistencies, inequities, and anomalies, which cannot be corrected unless the entire framework of the program is restructured." Following extensive investigation, congressional hearings, and studies conducted by the VA, the Senate Committee on Veterans' Affairs favorably reported on December 9, 1975, S. 2635, a comprehensive pension reform measure. This bill was passed unanimously by the Senate on December 15, 1975, but the House did not act on it. Since December 15, 1975, the Congress has enacted two pension rate adjustment acts: Public Law 94-169, enacted December 23, 1975, and Public Law 94-432, enacted September 30, 1976, Neither of these acts addressed the question of pension reform; however, section 404(a) of Public Law 94-432, the Veterans and Survivors Pension Adjustment Act of 1976, declared it to be the sense of the Congress that the existing pension program (1) does not provide sufficient assistance to meet the needs of some eligible veterans and survivors; (2) has developed some inconsistencies, inequities, and anomalies which prevent it from operating in the most efficient and equitable manner; and (3) subjects many pensioners annually to reductions in their pensions. The Congress also declared that it lacked sufficient long-range information as to actual and anticipated financial characteristics of potential pensioners and their families upon which to estimate costs of existing alternative pension programs; and in section 404 (b) it directed the VA to conduct a thorough and comprehensive study of existing and alternative non-service-connected pension programs and to submit its report to the Congress on October 1, 1977. The Committee has been advised by the Veterans' Administration that the study mandated by Public Law 94-432 is well underway and will be submitted in a timely manner. The Committee, in its March 15, 1977, Report to the Budget Committee of its Budget Views and Estimates for Fiscal Year 1978, reiterated its commitment to pension reform by allocating $500 million for this purpose in its recommendations to the Budget Committee for Function 700 (Veterans' Benefits and Services). This commitment was highlighted in the letter from Senator Alan Cranston, the Chairman, and Senator Robert T. Stafford, the Ranking Minority Member, transmitting the Committee's report, as follows: The Committee would like to stress the critical need for pension-reform legislation (subfunction 701). Last year the Committee favorably reported and the Senate passed a pension-reform bill (S. 2635). The House did not consider the reform measure; instead it passed a 7 percent cost-of-living increase which Congress enacted in Public Law 94-432. That 96-189 O-77-25 9 law required the VA to complete and submit a major study 1978. The Committee recommended to the Budget Committee that $20.471 billion in budget authority and $20.501 billion in outlays be allocated to Function 700 in the First Concurrent Resolution on the Budget for Fiscal Year 1978. However, the Budget Committee, in its recommendations to the Senate, reduced each of these amounts to $19.8 billion. Thereafter, during consideration by the Senate of the First Concurrent Resolution on the Budget for Fiscal Year 1978 (S. Con. Res. 19), the members of the Committee successfully sponsored an amendment, based in substantial part on the need for additional funding for pension-reform legislation, which resulted in increases of $500 million in budget authority and $400 million in outlays for the allocation to Veterans' Benefits and Services, from $19.8 to $20.3 billion in both budget authority and $20.2 billion in outlays, respectively, in the Senate-passed version of the First Concurrent Resolution. In the final version of that Resolution, those increases were retained virtually intact, the final budget authority figure being decreased to $20.25 billion and outlays being retained at $20.2 billion. These levels allow for the enactment of pension-reform legislation with an effective date in fiscal year 1978. At a meeting of the Committee on July 15, 1977, members of the Committee again expressed their interest in the pension study underway at the VA and their commitment to pension reform, emphasizing that the cost-of-living increase in pension rates was intended as a stopgap measure, and that a pension-reform measure would be introduced in this session of Congress in order to provide for a new pension program under which automatic annual benefit increases would be keyed to the rise in the Consumer Price Index to protect needy veterans and survivors against pension reductions attributable solely to cost-ofliving increases in social security. Such a pension-reform measure would equalize benefits between veterans and survivors and would provide a basic amount sufficient to remove veterans and their families who are dependent on pension income from "poverty" status. Nevertheless, pending the development and consideration of pension-reform legislation, the Committee recognizes the need to address the immediate problem of the hardship which pensioners who must live on fixed incomes suffer from inflation. It has carefully monitored the increase in the Consumer Price Index (CPI) for the period from the date on which the last increase became effective, January 1, 1977, to the present and the predictions made by the Congressional Budget Office for the period remaining before January 1, 1978, the effective date of the next increase. 10 The increase recommended in the Committee bill is intended to offset the decline in purchasing power attributable to inflation experienced by veterans and survivors receiving pension and is measured by the predicted increase in the CPI as estimated most recently by the Congressional Budget Office. On July 21, 1977, the Director of the Congressional Budget Office, responding to a request from the Chairman, advised in a letter that, based on current economic indicators, the CPI increase over the period January 1977 to January 1978 would be 6.5 percent. The Veterans' Administration had previously recommended an increase in pension rates of 6.7 percent, and the Congressional Budget Office had then confirmed this as the likely CPI increase. Accordingly, on July 15, 1977, the Committee had ordered the bill reported with a 6.7-percent increase to offset the then anticipated CPI increase. On July 22, based on the economic projections made available by the Congressional Budget Office, the Committee adjusted the increase to 6.5 percent in the bill as ordered reported. It should be noted that there are no differences in the dollar amounts payable under a 6.5-percent increase, on the one hand, and a 6.7-percent increase, on the other. For example, the basic amount of pension for an eligible veteran who has no dependents and who has countable income of $500 or less under a 6.7-percent increase would be $197; under a 6.5-percent increase, this amount would be the same. The annual income limitation for a veteran with no dependents, however, is $3,775 with a 6.7-percent increase, and $3,770 with the 6.5-percent increase proposed by H.R. 7345 as amended, and for a veteran with dependents, the comparable figures are $5,080 with a 6.7-percent increase and $5,070 with a 6.5-percent increase. These increases would become effective January 1, 1978. Current Pension Benefits and Characteristics of Pensioners Under current law, a veteran may be eligible for pension benefits if: First, he or she served in the Armed Forces at least 90 days, including at least 1 day of service during wartime; Second, his or her income does not exceed the limits specified in the law-currently $3,540 if the veteran is single and $4,760 if he or she has a dependent; Third, he or she is permanently and totally disabled (for the purposes of the pension law, veterans age 65 or older are defined as totally disabled); and Fourth, his or her net worth is not excessive as determined by the Veterans' Administration. Surviving spouses and children of deceased wartime veterans are also eligible for pension benefits if they qualify on the basis of need. As provided by Public Law 94-432, for an eligible veteran without dependents, the monthly pension rates range from $5 to $185 with a limitation on countable annual income of $3,540. Monthly rates of $5 to $185 are provided for veterans with dependents where the annual countable income does not exceed $4,760. Surviving spouses with no children are subject to the same income limitations as veterans alone although the pension rates vary from $5 to $125. The $4,760 annual income limitation for veterans with dependents also applies to surviving spouses with children. The rates for surviving spouses with one child range from $57 to $149; the applicable rate is increased by $24 |