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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-108

======================================================================



 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 2003

                                _______
                                

  May 19, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Smith of New Jersey, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 1683]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 1683) to increase, effective as of December 1, 
2003, the rates of disability compensation for veterans with 
service-connected disabilities and the rates of dependency and 
indemnity compensation for survivors of certain service-
connected veterans, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                              Introduction

    On April 9, 2003, the Chairman and Ranking Member of the 
Veterans' Affairs Committee, Honorable Christopher H. Smith and 
Honorable Lane Evans, along with the Chairman and Ranking 
Member of the Subcommittee on Benefits, Honorable Henry E. 
Brown, Jr. and Honorable Michael H. Michaud, introduced H.R. 
1683, which would provide a cost-of-living adjustment (COLA) in 
the rates of service-connected disability compensation and 
dependency and indemnity compensation, effective December 1, 
2003.
    On May 7, 2003, the Subcommittee on Benefits met and 
ordered H.R. 1683 reported favorably to the full Committee by 
unanimous voice vote.
    On May 15, 2003, the full Committee met and ordered H.R. 
1683 reported favorably to the House by unanimous voice vote.

                      Summary of the Reported Bill

    H.R. 1683 would:

    Provide effective December 1, 2003, a cost-of-living 
adjustment to the rates of disability compensation for veterans 
with service-connected disabilities and to the rates of 
dependency and indemnity compensation for survivors of certain 
service-connected disabled veterans. The percentage amount 
would be equal to the increase for benefits provided under the 
Social Security Act, which is calculated based upon changes in 
the Consumer Price Index.

                       Background and Discussion

    Increase in rates of disability compensation and dependency 
and indemnity compensation.-- Section 2 of the bill would 
increase, effective December 1, 2003, the rates of compensation 
for service-connected disabilities and the rates of dependency 
and indemnity compensation (DIC) for surviving spouses and 
children of veterans who die of service-connected causes, as 
well as the additional amounts for dependents and survivors, 
and clothing allowances for certain veterans. The 
Administration anticipates the percentage increase to be 2 
percent, but it may be higher or lower depending on changes in 
the Consumer Price Index. The Committee is following its recent 
practice of setting the COLA by reference to the Social 
Security increase, which will be determined as of September 30, 
2003. Last year's increase was 1.4 percent.
    More than 2.4 million veterans were receiving service-
connected disability compensation as of April 2003. The basic 
purpose of the disability compensation program is to provide a 
measure of relief from the impaired earning capacity of 
veterans disabled as the result of their military service. The 
amount of compensation payable varies according to the degree 
of disability. This amount in turn is required by law to 
represent, to the extent practicable, the average impairment in 
earning capacity in civilian occupations resulting from such 
disability or combination of disabilities.
    To be eligible to receive disability compensation, a 
veteran must have a disability incurred or aggravated during 
military service, which is not the result of willful 
misconduct, and have been discharged under other than 
dishonorable conditions. The responsibility for determining a 
veteran's entitlement to service-connection for a disability 
rests solely with the Department of Veterans Affairs.
    As of April 2003, there were 296,684 surviving spouses and 
29,953 children receiving dependency and indemnity compensation 
(DIC). Widows and children of veterans who died of disabilities 
determined by VA to be service-connected (including veterans 
who died while on active duty) are entitled to receive monthly 
DIC benefits.
    The purpose of DIC benefits, authorized under chapter 13 of 
title 38, United States Code, is to provide partial 
compensation to the appropriate survivors for the loss in 
financial support due to the service-connected death. Income 
and need are not factors in determining a surviving spouse's or 
child's entitlement because the Nation in part assumes the 
legal and moral obligation of the veteran to support the spouse 
and children.
    The Committee annually reviews the service-connected 
disability compensation and DIC programs to ensure such 
benefits provide reasonable and adequate compensation for 
disabled veterans and their families. Based on this review, 
Congress acts annually to provide a cost-of-living adjustment 
(COLA) in compensation and DIC benefits. Congress has provided 
annual increases in these rates for every fiscal year since 
1976.

                      Section-by-Section Analysis

    Section would provide that this Act may be cited as the 
``Veterans' Compensation Cost-Of-Living Adjustment Act of 
2003''.

    Section 2(a) would authorize the Secretary of Veterans 
Affairs to increase, effective December 1, 2003, the dollar 
amounts in effect for the payment of disability compensation 
and dependency and indemnity compensation.
    Section 2(b) would specify the programs to receive 
increased dollar amounts: compensation, additional compensation 
for dependents, clothing allowance, new DIC rates, old DIC 
rates, additional DIC for surviving spouses with minor 
children, additional DIC for disability, and DIC for dependent 
children.
    Section 2(c)(1) would increase the dollar amounts for those 
programs specified in subsection (b) based on the amount in 
effect on November 30, 2003.
    Section 2(c)(2) would specify that each amount shall be 
increased by the same percentage by which benefits are 
increased under title II of the Social Security Act (42 U.S.C. 
401 et seq.).
    Section 2(c)(3) would round down to the next lower dollar 
amount all compensation and DIC benefits, when the amount is 
not a whole dollar amount.
    Section 2(d) would provide a special rule authorizing the 
Secretary of Veterans Affairs to adjust administratively, 
consistent with the increases made under subsection (a), the 
rates of disability compensation payable to persons within the 
purview of section 10 of Public Law 85-857, who are not in 
receipt of compensation payable pursuant to chapter 11 of title 
38, United States Code.

    Section 3 would require the Secretary of Veterans Affairs 
to publish in the Federal Register the amounts specified in 
subsection (b), as increased pursuant to that section.

                    Performance Goals and Objectives

    The reported bill would authorize veterans benefits 
enhancements under laws administered by the Secretary of 
Veterans Affairs. The performance goals and objectives of the 
Department of Veterans Affairs are established in annual 
performance plans and are subject to the Committee's regular 
oversight and evaluation by the U.S. General Accounting Office. 
VA also publishes a performance and accountability report for 
each fiscal year.

             Statements of the Views of the Administration

    The Administration's Fiscal Year 2004 budget request, 
submitted in March 2003, recommended a cost-of-living 
adjustment based on the change in the Consumer Price Index 
(CPI) be given to all compensation beneficiaries, including DIC 
recipients, effective December 1, 2003. The estimated increase 
in the CPI at that time was 2 percent.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 16, 2003
Hon. Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1683, the 
Veterans' Compensation Cost-of-Living Adjustment Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman, who can be reached at 226-2840.

            Sincerely,
                                       Douglas Holtz-Eakin,
                                                           Director
    Enclosure. 

               Congressional Budget Office Cost Estimate

H.R. 1683, Veterans' Compensation Cost-of-Living Adjustment Act of 2003

As ordered reported by the House Committee on Veterans' Affairs on May 
                                15, 2003

    H.R. 1683 would increase the amounts paid to veterans for 
disability compensation and to their survivors for dependency 
and indemnity compensation by the same cost-of-living 
adjustment (COLA) payable to Social Security recipients. The 
increase would take effect on December 1, 2003, and the results 
of the adjustment would be rounded to the next lower dollar.
    The COLA that would be authorized by this bill is assumed 
in the budget resolution baseline, pursuant to section 257 of 
the Balanced Budget and Emergency Deficit Control Act, and 
savings from rounding it down were achieved by the Balanced 
Budget Act of 1997 (Public Law 105-33). The authority to round 
down the COLA increase was extended to 2011 by the Veterans 
Education and Benefits Expansion Act of 2001 (Public Law 107-
103).
    Because the COLA is assumed in the baseline, the COLA 
provision would have no budgetary effect relative to the 
baseline. Relative to current law, CBO estimates that enacting 
this provision would increase spending for these programs by 
about $420 million in 2004. (The annualized cost would be about 
$560 million in subsequent years.) This estimate assumes that 
the COLA effective on December 1, 2003, would be 2.2 percent.
    H.R. 1683 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On April 25, 2003, CBO transmitted a cost estimate for H.R. 
1683, as introduced on April 9, 2003. The two versions of the 
legislation are identical, as are the two estimates.
    The CBO staff contact is Melissa E. Zimmerman, who can be 
reached at 226-2840. This estimate was approved by Peter H. 
Fontaine, Deputy Assistant Director for Budget Analysis.

                     Statement of Federal Mandates

    The preceding Congressional Budget Office cost estimate 
states that the bill contains no intergovernmental or private 
sector mandates as defined in the Unfunded Mandates Reform Act.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''