STATEMENT OF NORA EGAN
DEPUTY UNDER SECRETARY FOR MANAGEMENT
VETERANS BENEFITS ADMINISTRATION
DEPARTMENT OF VETERANS AFFAIRS
BEFORE THE
HOUSE COMMITTEE ON VETERANS' AFFAIRS
SUBCOMMITTEE ON BENEFITS

June 18, 1998

Mr. Chairman and Members of the Subcommittee, I am pleased to be here this morning to provide the views of the Department of Veterans Affairs (VA) on a draft bill to provide a cost-of-living adjustment in rates of compensation paid to veterans with service-connected disabilities and to make various improvements in education, housing, cemetery, and other programs benefiting veterans.

Title I - Compensation Cost-of-Living Adjustment (COLA)

Section 101 of the draft bill would direct the Secretary of Veterans Affairs to increase administratively, effective December 1, 1998, the rates of compensation for service-disabled veterans and of dependency and indemnity compensation (DIC) for the survivors of veterans whose deaths are service related. The rate of increase would be the same as the COLA that will be provided under current law to veterans’ pension and Social Security recipients. In determining the new rates, the Secretary would be required to round any fractional dollar amounts to the next lower whole dollar. We believe this proposed COLA is necessary and appropriate in order to protect the benefits of these very deserving recipients from the eroding effects of inflation. Accordingly, VA strongly supports this provision.

Title II - Education Benefits

Title II of the draft bill would make several amendments to improve VA’s educational assistance programs. In general, we support these provisions.

Section 201 of the draft bill would make an adjustment to the manner in which VA calculates the reporting fees it pays to educational institutions and training establishments as compensation for reports and certifications they are required by law to submit to VA. Currently, the reporting fees paid to these entities are computed for each calendar year based upon the number of veterans receiving VA educational assistance who are enrolled on October 31st of that year. This amendment would provide for the reporting fee to be calculated based on the veteran enrollment during the entire year. Many educational institutions now offer courses during accelerated or nonstandard terms. This amendment would allow educational institutions to be reimbursed for each veteran they certify to VA instead of being reimbursed only for those veterans enrolled on October 31. This provision would allow VA to make its reporting fee payments on a more equitable basis. This section also would make the reporting fees mandatory. Currently, these fees are paid from the general operating expenses discretionary account. Thus, this proposal would increase direct spending. Preliminary estimates indicate that this proposal would cost approximately $4 million each year, starting in Fiscal Year (FY) 2000.

Section 202 of the draft bill would allow advance payments under VA’s work-study program to be at the option of the individual receiving the payment. Under current law, VA contracts for the services of certain individuals who are pursuing VA vocational rehabilitation, education, or training programs to work in various areas such as VA outreach or preparing and processing documents at educational institutions or VA regional offices. For these services, VA pays the individuals in the program an additional educational assistance allowance consisting of pay at the minimum wage for each hour worked. Current law directs that VA make an advance payment of this work-study allowance to the individual in an amount equal to 40 percent of the total amount agreed upon under the work-study contract. The individual then would work without further compensation until the advance is paid off.

A number of individuals in the work-study program have indicated that they do not want to receive an advance payment of their allowance. They would prefer reimbursement for work as it is performed so they may receive payment on a regular basis and, thus, avoid periods during which they receive no work-study allowance under the current system. This section would allow the individual the option of receiving the advance payment of work-study allowance.

Section 203 of the draft bill would amend the Montgomery G.I. Bill (MGIB)-Active Duty program (chapter 30) eligibility requirements to allow veterans who successfully complete or are granted academic credit for the equivalent of 12 or more semester hours to participate in that program. Generally, under current law, an individual must, among other requirements for entitlement to chapter 30 education assistance, have completed the requirements of a high school diploma (or its equivalent) or have completed 12 standard college degree credits. (This requirement must be met either before the individual’s completion of the initial obligated period of active duty or before applying for benefits, depending on the qualifying criteria applicable to the individual.) Today, however, many institutions of higher learning will admit students without a high school diploma and grant credit toward a degree for an individual's knowledge and life experience. This practice particularly affects veterans and servicemembers who gain considerable life experience in their military careers.

This section would allow an individual to satisfy the prior education requirement when the individual has been granted 12 or more credits toward a standard college degree based on the individual’s knowledge and previous life experience. VA supports this change, believing that an individual who has acquired collegiate credit through such means has manifested a level of knowledge, maturity, and ability that is necessary to successfully pursue postsecondary education and is at least equal to that of individuals who otherwise qualify for benefits under the current eligibility requirements. Our preliminary estimates indicate that there would be some small costs associated with this proposal.

Section 204 of the draft bill would amend the flight training provisions of the MGIB to clarify the criteria for complying with that program’s medical requirements. Under current law, VA education benefits may be paid for flight training, provided that, among other things, the individual continuously meets the medical requirements for a commercial pilot’s license during the course of flight training. This section would require that the individual submit evidence at the beginning of training showing that he or she meets the medical requirements for the license sought. We see this change as beneficial to program operation since it would reduce the administrative burden on trainees and schools while still providing adequate assurance that trainees can qualify for the objective for which they are training.

Section 205 would provide, in addition to the current advance payment opportunity, a new accelerated payment option for veterans and eligible persons under the chapter 32 contributory G.I. Bill, the MGIB, and the chapter 35 Dependents’ and Survivors’ Educational Assistance programs. The individual would have the choice of receiving either an advance payment for the beginning and subsequent months of the enrollment period or an accelerated payment consisting of two times the rate of monthly allowance payable during the enrollment period, with entitlement charged accordingly. The accelerated payment would be subject to the same terms and conditions on eligibility, application, and delivery as currently apply to advance payments. This change seems conceptually consistent with comments received from VA focus groups which have indicated that, due to increased educational costs, more "up front" money is needed to pay tuition. Preliminary estimates indicate that this proposal would increase direct spending by approximately $2 million over the period FY 1999 - FY 2003.

Section 206 of the draft bill would exempt Federal, state, and local government training establishments from meeting the incremental wage increase requirements currently in place for approval of on-job training for veterans. Under current law, to receive approval for a training program, a training establishment must certify that, among other criteria, wages paid to a trainee will be regularly increased until they equal not less than 85 percent of the full wage ordinarily paid for the job before the end of the training program. We have been advised by many State Approving Agencies (SAAs), which approve programs of job training for VA, that some worthwhile programs run by State or local governments, such as those leading to a career in law enforcement, health, or public safety, cannot be approved because the trainee, in accordance with Federal, State, or local civil service regulations, does not receive the first pay increase until after the training program is completed. This provision would allow approval, for VA education benefit purposes, of such beneficial government-operated training programs. Preliminary estimates indicate that this proposal would increase direct spending by approximately $2.5 million in FY 1999, and almost $13 million during FYs 1999-2003.

Section 207 of the draft bill would promote improved education outreach to servicemembers who have elected to participate in the MGIB by providing for the distribution of information concerning benefits, limitations, requirements, and procedures to those individuals as soon as possible after they have met their $1,200-basic-pay-reduction-eligibility requirement. It would also provide for the distribution of like materials to educational institutions, training establishments, and military education personnel.

MGIB usage rates are currently lower than VA would like to see. It has come to our attention that many individuals do not fully understand the MGIB eligibility requirements that must be satisfied to receive their education benefits under that program, such as the requirement for obtaining a secondary school diploma or its equivalent within a specified timeframe (a requirement that section 203 of this draft bill would modify). Still others believe they will receive a lump sum to defray the cost of their education rather than the monthly allowance that they actually receive.

Placing this outreach provision within chapter 30 obviously would focus such efforts on MGIB participants. Moreover, by expanding chapter 30 outreach to include active-duty MGIB participants, the provision would promote early dissemination of information to them about the MGIB benefits available, including pertinent requirements and limitations. This also likely would encourage ser-

vicemembers to seek further information and assistance to better prepare them to maximize the benefits of the MGIB to meet their educational or vocational goals. We believe this provision, if enacted, would have a beneficial impact on MGIB participants. Preliminary estimates indicate that this proposal would increase direct spending by approximately $1.2 million over the period FY 1999 – FY 2003.

Section 208 of the draft bill would amend sections 3011 and 3012 of

title 38, United States Code, to require that the Department of Defense (DOD) inform each member of the Armed Forces who indicates an intent to request early discharge or release from his or her initial obligated active duty period, for the convenience of the Government, of the minimum active duty service required for entitlement to educational assistance under the MGIB-Active Duty program. Apparently, this section would seek to assure that members are aware that their early discharge or release possibly may affect MGIB entitlement. A report describing the effect of the new information requirements imposed by this section must be submitted to Congress within 18 months of the date of enactment of this provision. Since DOD would be responsible for administering this provision, we would defer to that Department’s views on its merits.

Title III - Other Matters

Section 301 of the draft bill would subject contracts for goods and services with respect to properties VA acquires under the housing loan program to the Federal contracting requirements in title III of the Federal Property and Administrative Services Act of 1949. This section is similar to H.R. 2887, 105th Congress, which is also on today’s agenda. VA opposes this measure.

In most instances where a VA guaranteed loan is foreclosed, the loan holder has a statutory election to convey the property to the Secretary. If VA forecloses a loan that it made or acquired, then VA would normally acquire the property at the foreclosure sale. In either event, VA then sells the property to the general public in an effort to recoup a portion of the Government’s loss on the loan termination. VA’s goal is to be able to sell each property as quickly as possible for the most favorable price.

Before selling a property, VA often contracts for a variety of goods or services with respect to the property, such as: routine maintenance, repairs necessary for safety or structural soundness, and other minor repairs VA determines to be necessary in order for the property to compare favorably with similar properties on the market. VA may also contract for property management and legal services. Most contracts are relatively small. As of November 1997, VA’s average expenditure for contractual services per property was $2,553. This sum may represent several contracts per property; i.e., painting, cutting the grass, repairing the furnace or plumbing, and replacing the carpeting.

Current law authorizes the Secretary to exercise the powers granted by section 3720 of title 38 regarding VA-owned properties without regard to any other law governing the expenditure of public funds. That section, however, requires VA to comply with the advertising requirements of section 5 of title 41, United States Code, with regard to contracts in excess of $25,000.

When Congress exempted VA acquired properties from other Federal laws relating to contracting more than 50 years ago, Congress apparently recognized the unique nature of these properties. They are not Federal facilities. Rather, they are single-family residences that are sold as quickly as possible to return money to the loan fund and reduce the loss to the Treasury on the loan transaction.

Nevertheless, VA strives to let contracts in a fair and competitive manner, and regional offices follow procedures for obtaining goods and services for our acquired properties that very closely mirror the FAR. Therefore, in most cases, section 301 of the draft bill would not have a significant impact on VA.

We are concerned, however, that some sales could be adversely impacted. Any delay in a sale may increase the loss through vandalism to the property. In addition, we are concerned about the adverse impact our vacant properties have on the surrounding neighborhood.

We are also concerned that occasional bid protests for relatively small procurements could cause additional delays. In certain situations agencies are required to stay contract award or performance until resolution of a protest. If VA’s decision to buy carpeting or a refrigerator for a home were protested by a losing bidder, VA’s ability to market that property could be delayed for several months while the bid protest was being considered. Meanwhile, that property would sit vacant.

VA believes the current law, which requires reasonable advertising for larger procurements, and under which VA’s actions voluntarily mirror FAR requirements, has been fair and adequate for over 50 years. From all indications we have received, contractors and potential contractors are generally satisfied with the manner in which VA obtains goods and services for our properties. We appreciate the concerns of the Committee, but based on past performance, VA questions the need for this amendment. However, if the Committee believes this provision is in the best interest of the VA housing loan program, VA would not oppose section 301.

Section 302 of the draft bill would make permanent the housing loan entitlement currently given to persons whose only service was in the Reserves, including the National Guard.

Prior to 1992, only persons who had served on active duty, other than active duty for training, (and certain spouses or surviving spouses of POW/MIAs and persons who died from a service-connected cause) qualified for VA housing loan benefits. Public Law 102-547, enacted October 28, 1992, granted loan entitlement to persons who had at least 6 years of honorable service in the Selected Reserve. Entitlement for Reservists expires October 27, 1999.

Reservists pay a loan fee that is generally 75 basis points higher than other veterans. For example, on a no-downpayment loan which is the veteran’s first use of VA housing loan entitlement, most veterans would pay a fee equal to 2 percent of the loan amount. Reservists would pay a fee of 2.75 percent of the loan amount for the same loan.

The Armed Forces continue to rely heavily on the Reserve Components, including the National Guard. They are asked to perform a number of duties and are given assignments that were previously conducted only by active duty personnel. VA has noticed, so far, that loans made to Reservists have a lower default rate than loans made to veterans with active duty. Further, 67.2 percent of Reservists who

obtained VA guaranteed loans were first-time homebuyers.

We believe it is important to recognize the valuable contributions of members of the Selected Reserve. However, since the current authority does not expire until October 28, 1999, the Department would like to defer comment on this provision.

Section 303, which was recently added to the draft bill, would amend section 2301 of title 38, United States Code, to require the Secretary to furnish a burial flag for a deceased member or former member of the Selected Reserve who is not otherwise eligible for a burial flag, and who: (1) completed at least one enlistment as a member of the Selected Reserve, or in the case of an officer, completed the period of initial obligated service as a member of the Selected Reserve; (2) was discharged before completion of the person’s initial enlistment as a member of the Selected Reserve, or in the case of an officer, the initial period of obligated service as a member of the Selected Reserve, for a disability incurred or aggravated in line of duty; or (3) died while a member of the Selected Reserve. A flag would not be furnished in the case of a person whose last discharge from service in the Armed Forces was "under conditions less favorable than honorable."

At this time, the Department wishes to defer comment on this provision. While we believe it is important to recognize the valuable contributions members of the Selected Reserve have made to insure the security of this Nation, we need additional time to assess the impact of this proposal, including its fiscal implications. We would be pleased to work with the subcommittee staff to fully address this matter.

Section 304(a) of the draft bill would amend section 2408(b) of title 38, United States Code, to make state cemetery grants more attractive to States. We view the State Cemetery Grants Program as a complement to, and not a replacement for, the construction of new national cemeteries. VA supports the provisions of the proposal to enhance that program.

Section 2408(b) authorizes the Secretary to make grants to States to assist them in establishing, expanding, or improving State veterans’ cemeteries. Currently, the amount of a State cemetery grant is limited to 50 percent of the total of the value of the land to be acquired or dedicated for a cemetery and the cost of improvements to be made on the land. The remaining amount of the cost must be contributed by the State receiving the grant. Pursuant to the amendments proposed in this section, the amount of a State cemetery grant could not exceed, in the case of the establishment of a new cemetery, the total of the cost of improvements to be made on land to be converted into a cemetery and the initial cost of equipment necessary to operate the cemetery. In the case of the expansion or improvement of an existing cemetery, the amount of the grant could not exceed the total of the cost of improvements to be made on any land to be added to the cemetery combined with the cost of improvements to be made to the existing cemetery. If the amount of a grant should, for any reason, be less than the amount of those costs, the State receiving the grant would be required to contribute the remaining amount, in addition to providing any land necessary for the cemetery project.

Also, under current law, if at the time of a grant the State receiving the grant dedicates for the cemetery land which it already owns, the value of the land may constitute up to 50 percent of the State’s contribution. Once that land value is so used, it may not constitute part of the State’s contribution for any subsequent grant under section 2408. Under the amendments proposed in section 304(a) of this draft bill, a State would be responsible for providing any land required for a cemetery project, since the grant amount would no longer be based partly on the value of land to be acquired or dedicated for a cemetery.

We believe that excluding the value of land to be acquired for a cemetery from the basis of a grant would not discourage States from participating in the State Cemetery Grants Program. In our experience, in every case, the State has dedicated land that was donated or transferred for that purpose, or land that it already owned. Further, any reduction of the basis from which a grant is calculated may be offset by an increase from 50 percent to up to 100 percent in the proportion of the amount of a project’s cost that could be assumed by the Federal Government. Moreover, since, under the proposal, a grant may cover the entire cost of improvements (and initial cost of equipment in certain cases), a State may not have to contribute cash toward the initial cost of a project.

Another feature that would make grants more attractive to States is the inclusion in the basis of a grant of the initial cost of equipment necessary to operate the cemetery. Providing funds to acquire the equipment necessary to operate a cemetery will, we believe, be a critical financial incentive to encourage States to establish new cemeteries. Such equipment is as essential to the establishment of an operational cemetery as are the land and the improvements made on it. However, because the proposed amendment includes only the initial cost of equipment for the establishment of a cemetery, the State would retain the responsibility for long-term maintenance and operation of the cemetery, including costs associated with the acquisition of replacement equipment. Each Federal grant would assist in the establishment and activation of new veterans’ cemeteries, or in the expansion or improvement of existing cemeteries, but the States would bear the costs of continuing operation and long-term maintenance.

VA wishes to provide every eligible veteran with the option of burial in a veterans’ cemetery. Statistics indicate that about 80 percent of veterans interred in national cemeteries resided within 75 miles of the cemetery closest to them. We believe it is not practicable for VA to build and operate national cemeteries in sufficient numbers to ensure that all eligible veterans reside within 75 miles of a national cemetery. Increasing the number and size of State veterans’ cemeteries would foster an enhanced partnership with the States in satisfying our Nation’s obligations to those who served. VA supports section 304 (a), which is similar to legislation proposed by this Department.

Section 304(b) would authorize "no-year" appropriations for the State Cemetery Grants Program. Under 38 U.S.C. § 2408(e), funds appropriated for State cemetery grants remain available only until the end of the second fiscal year following the fiscal year for which they are appropriated. However, in Public Law 104-204, Congress appropriated funds for State cemetery grants, "to remain available until expended." Section 304(b) would amend section 2408(e) to reflect this no-year-funding policy, which VA supports.

Finally, section 304(c) would authorize to be appropriated $10 million for each of the next six fiscal years (FY 1999 - 2004) to fund the State Cemetery Grants Program. VA supports this authorization.

Section 305 of the draft bill would amend subsection 4103A(a)(1) of

title 38, United States Code, to revise the formula for determining the number of disabled veterans’ outreach program specialists to be appointed pursuant to that subsection in support of the Disabled Veterans’ Outreach Program. That program is administered by the Department of Labor (DOL). Accordingly, VA defers to DOL’s views on this provision.

Section 306 of the draft bill would amend section 5503(a)(1)(B) of title 38, United States Code, effective October 1, 1997, to make permanent VA’s authority to deposit into VA medical facility revolving funds amounts of pension that are not paid to veterans as the result of payment limitations that apply to certain veterans being furnished nursing home care by VA. Section 5503(a)(1)(B) provides that where any veteran having neither spouse nor child is being furnished nursing home care by VA, no pension in excess of $90 per month shall be paid to or for the veteran for any period after the end of the third full calendar month following the month of admission for such care. In 1992 Congress amended this section to provide that, through September 30, 1997, any amount in excess of $90 per month that is not payable to a veteran shall be deposited into a revolving fund at the VA medical facility which furnished the veteran nursing home care. These funds are then available without fiscal year limitation to help defray the operating expenses of the particular facility. VA supports this provision.

Section 307 of the draft bill would amend pertinent provisions in chapter 71 of title 38, United States Code, to: (1) provide that Board of Veterans’ Appeals (Board) members (other than the Chairman) also be known as "veterans administrative law judges;" (2) require that members of the Board be members in good standing of the bar of any State; and (3) clarify that Board members who were civil-service attorneys prior to appointment to the Board, and whose appointments are not continued, may, at their option, "revert" to attorney status with the Board, if qualified. VA supports each of these amendments.

Under chapter 71 of title 38, United States Code, persons making determinations in proceedings before the Board, other than the Chairman and the Vice Chairman, are known only as "members" of the Board. Section 307(a) would amend section 7101(a) of title 38 to provide that members of the Board shall also be known as veterans administrative law judges. Individuals deciding appeals at the administrative level in many other Federal agencies who perform essentially the same functions as members of the Board are known as "administrative law judges," or, in some cases, "administrative judges." The draft bill would more accurately convey a Board member's function to veterans than the term "member." In addition, the change would enhance the confidence of veterans in the administrative appellate process by providing recognition that appeals in the VA system are adjudicated by legal professionals, as are benefit appeals in other administrative systems.

Chapter 71 of title 38 does not currently specify qualifications for members of the Board. Section 307(b) would amend 38 U.S.C. § 7101A to provide that all members of the Board shall be members in good standing of the bar of a State.

Historically, members of the Board were either licensed attorneys or physicians. In Colvin v. Derwinski, the United States Court of Veterans Appeals held that the Board may only consider independent medical evidence to support its findings and that Board members may not use their own unsubstantiated medical opinion in deciding appeals. Because of the growing legal emphasis in the adjudication of appeals for veterans’ benefits, it is essential that Board members be trained in the law.

Section 307(c) would amend 38 U.S.C. § 7101A to clarify the "reversion" rights for Board members who are not recertified. Section 7101A of title 38, added by Pub. L. No. 103-446, provides that members of the Board must be periodically recertified in their positions. Section 7101A(d)(2) provides that a member who is noncertified shall revert to the civil service grade and series he or she held before appointment as a Board member, provided that the member was a "career or career conditional employee in the civil service" prior to commencement of service as a Board member.

Attorneys in the Federal civil service are not "career or career-conditional employees." Rather, they hold what are referred to as "excepted service" appointments. Almost all members of the Board were appointed to that position while serving as attorneys for the Board. Virtually all Board members were serving as attorneys in the Federal civil service at the time of their appointment. Most Board members have spent their entire civil service careers as attorneys.

In supporting passage of what became section 7101A, it was the Department's intention that Board members who were noncertified under 38 U.S.C. § 7101A(d)(1), and who had previously served as Board attorneys, would revert to Board attorney status. On September 20, 1996, VA's General Counsel opined that only Board members who had held career or career-conditional positions would be entitled to reversion under section 7101A(d)(2). Because most Board members have spent their entire careers in the "excepted," or "non-career" service, they would not benefit from the current reversion provision.

This legislation would further what we believe was the original intent of section 7101A(d)(2) by providing that a noncertified Board member who previously served as an attorney in the Federal civil service shall be appointed to an attorney position at the Board, with grade and step protection for those whose immediate prior position was as an attorney at the Board. VA has no objection to the provision that the Secretary is not required to appoint a noncertified member to an attorney position if the individual is not qualified.

We do note that, although many provisions aimed at improving veterans benefits are included in this bill, our proposal in the President’s FY 1999 Budget to merge "H" policyholders into the larger National Service Life Insurance fund’s "V" program is not included. We think this proposal is worthy of your consideration for inclusion in this bill and would be glad to provide you the required bill language.

Mr. Chairman, this concludes my prepared testimony on this draft legislation.