The Congressional Budget Office (CBO) published a cost estimate this week for the VET-TEC Authorization Act. As amended by the House Committee on Veterans' Affairs, the bill contains spending increases amounting to $413 million over the next ten years, with 90 percent of that going out the door over the first five years. But with one weird budget trick, the spending is offset by a provision to extend a mortgage guarantee fee by five additional months... in 2032.
As originally introduced by Rep. Juan Ciscomani (R-AZ), H.R. 1669, the VET-TEC Act would make a previous pilot program permanent. The Veteran Employment Through Technology Education Courses program was established in a veterans education assistance law in 2017. The program was authorized for five years and, at the time, CBO estimated that the program would spend $70 million to provide training in computer programming, computer software, media application, data processing, or information services.
The VET-TEC Act was marked up by the Veterans Committee in late April. Chair Mike Bost's (R-IL) amendment to the bill would authorize the program for five years at a cost of $373 million, per CBO. In addition, Bost's changes added additional spending provisions to the Act, including an expansion of burial benefits and flight training, that amount to a ten-year cost to $413 million.
Bost's amendment also adds in the questionable offset to extend higher fees in the Veterans' Administration's Mortgage Guarantee program by five months in 2032. The program helps veterans to get better loan terms for mortgages and the fees help defray the subsidy costs of the programs when loans go into default.
In the markup hearing, Chair Bost said, "Finally, this amendment, in a nature of substitute, is fully offset by extending the current VA home loan funding fees to 2031 [sic]. This is a bipartisan offset that we have used in the past and that is supported by veteran service organizations...”
This fee gimmick certainly has been used often in the past. While the Mortgage Guarantee program was established in 1944, the fees to cover the subsidy costs were enacted in 1982. Several laws over the years have extended the fees further and further out in time in order to achieve offsets as part of larger spending bills. Currently, the fee rates expire after November 14, 2031. The VET-TEC Act extends them through April 30, 2032.
If an offset pops up enough times over a short period of time in multiple different bills, it is most likely a gimmick. Just last year alone, NTUF counted that the offset was included in nine different House bills, including extensions from nine days to several months. This budget trick takes advantage of scoring rules to get a favorable estimate from CBO.
There is also the timing problem with this offset. There is a disconnect between when most of the spending occurs in the VET-TEC Act from when the offset takes place. As noted, 90 percent of the bill's spending would occur over the next few years. Before the five-month fee extension goes into effect, the VET-TEC Act would add $397 million to the deficit through 2031. Using CBO's interactive budget workbook, NTUF finds that this would increase debt service costs by $88 million.
The most concerning use of this fee extension as an offset is that the fees already have a dedicated budgetary purpose: to protect taxpayers from the subsidy costs of the VA Mortgage Guarantee program. In a special report in 2021, CBO noted that the annual dollar volume of the VA's loan guarantees has dramatically increased. In FY 2020, VA guarantees totaled more than $375 billion.
Conclusion
The head of the Veterans’ Affairs Committee noted that certain veterans groups support use of this fee as an offset. However, there are concerns among those who prioritize honest budgeting. Extending fees by a few weeks or months years from now only serves to game CBO's scoring guidelines to make it appear as though legislation is "fully paid for."
This budget trick glosses over the timing gap between front-loaded spending and an offset that appears nine or ten years out, the near-term impact on debt financing of the spending that is claimed to be offset, and the fact that the fees are intended to protect taxpayers when VA-backed loans aren't paid back.
Lawmakers should advance changes that ensure these fees are included permanently in the baseline to prevent the use of this ploy.