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Taxpayers Tab Issue #6

February 13, 2014

 

 

 

Vol. 5 Issue 6, February 13, 2014

Legislative Spotlight: Veterans’ Benefits Reform: One Bill, Billions of Dollars

Senator Bernard Sanders (I-VT) recently unveiled legislation that would make sweeping changes to a number of federal veterans' retirement and health benefits programs. First offered as S. 1950, and later reintroduced as S. 1982, the Comprehensive Veterans Health and Benefits and Military Pay Restoration Act of 2014 is an omnibus bill that includes over 100 different provisions ranging from scholarship extensions to medical treatments for disabled veterans and survivor benefits.

The bill lays out an ambitious reform agenda that will cost billions of dollars. While it does include some savings, many of these are backloaded: 64 percent of the savings occur after 2019. The bill also includes a questionable plan to "pay for" the new spending by setting a cap on funding for Overseas Contingency Operations (OCO) from FY 2018 to 2021. This may cover the costs on paper, but in reality may not lead to any actual spending reductions.

In this edition of The Taxpayer's Tab, NTUF examines some of the proposals laid out in the bill and why relying on future OCO spending cuts to pay for them could be problematic.

Background

As Chairman of the Senate Committee on Veterans' Affairs, Senator Sanders has introduced omnibus veterans legislation earlier in the 113th Congress, as S. 944. He has also drafted stand-alone legislation for many of the provisions that appeared in S. 1950, an earlier version of S. 1982. The former was first unveiled in January, but later re-introduced as S. 1982 after including an additional title with offsets to pay for its proposals. The bill comes in at over 400 pages long, substantially larger than Sanders' previous omnibus veterans legislation (S. 944).

In a press release, the Senator referred to the bill as "the most comprehensive piece of veterans' legislation to be offered in decades," stating that it "addresses many of the challenges facing service members, veterans and their families."

What It Means For Taxpayers

The Congressional Budget Office (CBO) estimated the bill would increase direct spending by nearly $9.7 billion over the next ten years. Over 43 percent of this spending (about $4.1 billion) would be incurred by 2019. The legislation also contains proposals to partially offset the spending. CBO identified decreases amounting to $4.2 billion over ten years. Just $1.5 billion of this amount (36 percent) will be realized by 2019. On net, the bill will result in $5.5 billion of additional direct spending over ten years. It remains unclear how S. 1982 would affect discretionary expenditures in relation to current budgetary baselines.

NTUF analyzed the CBO's estimate and identified which proposals would increase or decrease spending, and how much of those amounts would be realized by 2019. A section-by-section breakdown is available online.

One of the more expensive proposals in the legislation is the repeal of one percent reductions in cost of living adjustments (COLA) for military retirement benefits. This reform was enacted just two months ago in the Bipartisan Budget Act of 2013 to reduce retirement payments for veterans under the age of 62. The omnibus spending bill passed in January, H.R. 3547, repealed the COLA reductions for disabled veterans who are unable to work; this would entirely repeal the provision. NTUF previously reviewed several stand-alone bills that would aim to accomplish similar goals to varying degrees.

Over the next ten years, the COLA proposal alone accounts for almost 70 percent of the bill's direct spending increases. Just 23 percent of that amount ($1.6 billion) will be realized by 2019. The other 77 percent -- over $5.2 billion -- is projected to come in the four years after that. This reflects the demographic shifts putting pressure not just on the military, but agencies across the government that will face increasing costs for mandatory health and retirement benefits as America's population ages.

Among the other provisions that will affect direct spending are:

  • expansions of certain scholarships for eligible servicemen and women;
  • enhanced compensation claims for victims of sexual trauma during military service; and
  • greater access to benefits for surviving family members of deceased veterans.

The largest proposal for savings in direct spending that's included in the legislation is a measure that would allow the Department of Veterans Affairs to increase the fees that it charges in order to guarantee certain loans. That would save about $2.2 billion over the next ten years, according to CBO's estimate, but only 32 percent of that amount would be realized by 2019.

"Savings" From Future Cuts?

As mentioned above, the bill contains an offsetting proposal that may not lead to any realizable savings. Section 917 of the bill would set a budgetary cap on discretionary spending for Overseas Contingency Operations/Global War on Terror funding. Starting in 2018, the bill would limit budget authority for this funding to $94 billion. The cap would be increased by roughly $2 billion in each successive year through 2021.

CBO notes that this cap would be $20 billion less than its projection for OCO, but also notes that its estimate is just that: a projection. Moreover, since no funds have been set aside for OCO, "reductions relative to the baseline might simply reflect policy decisions that have already been made and that would be realized even without such funding constraints." It should also be noted that the OCO cap proposed in the bill for 2018 is higher than the amount enacted for FY 2014: $85.2 billion. The White House's Mid-Session budget review forecasts OCO spending to decline to $38 billion per year starting in FY 2015. While actual OCO spending may not actually decline this far, it has been trending downward over recent years, and barring an emergency, is likely to continue to decrease. If there is an emergency situation, it is expected that Congress would provide the necessary money regardless of any budgetary cap.

For these reasons, NTUF will not count this an offset to the spending in our score for this bill in our BillTally program.

Veterans' Benefits Reform: The Next Step

According to the latest BillTally report, there were 34 Veterans-related proposals introduced in the House of Representatives during the first six months of the 113th Congress, totaling $6.5 billion in net new spending. In the same time, the Senate introduced 21 such measures, at a net total cost of $5.8 billion. The data shows that Veterans-related legislation tends to not only be costly, but is also popular, especially as government officials have announced plans to wind down U.S. involvement in long-term overseas conflicts and currently-serving personnel become eligible for benefits.

Volunteering for military service is a noble sacrifice that deserves recognition and support. As Congress weighs the merits of various proposals to reform veterans' benefits and their administration, Members should consider not only the associated costs, but also how those reforms can be funded. If that means cutting proposed spending from other military programs, there needs to be a realistic analysis of whether those cuts would actually translate into savings for taxpayers, or if they're simply the result of clever accounting and legal procedures.

Photo Credit: NorthJersey.com, The NY State Senate, Department of Veterans Affairs (Flickr)

To learn more or discuss this bill visit WashingtonWatch.com.

 

   

Changes Coming to the Tab!

With the resounding end-of-year support from NTU Foundation Members, we will be able to redesign The Taxpayer's Tab and provide taxpayers more information on the proposals that will affect government spending. Thank you! Be on the look out for a sleeker, easier-to-share Tab in February.

Interested in helping NTUF educate Americans and up-and-coming students participating in our renowned Associate Policy Analyst program? Make a tax-deductible contribution on our online donation page or mail us a check (made out to National Taxpayers Union Foundation)!


We Want You!

NTUF is looking for spring and summer associate policy analysts to participate in our internship program. Associates assist with BillTally research and other policy projects. Academic credit is possible. Email questions to ntuf@ntu.org. To apply visit our internship page. Join us and help keep a tab on Congress!


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About NTUF

The National Taxpayers Union Foundation is a research and educational organization dedicated solely to helping citizens of all generations understand how tax policies, spending programs, and regulations at all levels affect them now and in the future. Through NTUF's timely information, analysis, and commentary, we're empowering citizens to actively engage in the fiscal policy debate and hold public officials accountable every day.

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This information is for educational purposes only and is not intended to aid or hinder the passage of any legislation or as a comment on any Member's fitness to serve.

 

 



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