39–010 

Calendar No. 217 

109TH CONGRESS REPORT " ! SENATE 1st Session 109–138 

VETERANS’ COMPENSATION COST-OF-LIVING 

ADJUSTMENT ACT OF 2005 

SEPTEMBER 21, 2005.—Ordered to be printed 

Mr. CRAIG, from the Committee on Veterans’ Affairs, 

submitted the following 

R E P O R T 

[To accompany S. 1234] 

The Committee on Veterans’ Affairs (hereinafter, ‘‘Committee’’), 

to which was referred the bill (S. 1234) to increase, effective as of 

December 1, 2005, the rates of compensation for veterans with 

service-connected disabilities and the rates of dependency and indemnity compensation for the survivors of certain disabled veterans, having considered the same, reports favorably thereon, and 

recommends that the bill do pass. 

INTRODUCTION

On June 14, 2005, Committee Chairman Larry E. Craig introduced S. 1234, a bill to increase, effective as of December 1, 2005, 

the rates of compensation for veterans with service-connected disabilities and the rates of dependency and indemnity compensation 

for the survivors of certain disabled veterans. The bill was referred 

to the Committee on Veterans’ Affairs. 

COMMITTEE HEARING

On June 23, 2005, the Committee held a hearing on legislation 

pending before the Committee. Among the measures on which the 

Committee received testimony was S. 1234. The Committee received testimony from, among others, representatives of the Department of Veterans Affairs (hereinafter, ‘‘VA’’), and from representatives of The American Legion, the Veterans of Foreign 

Wars, the Disabled American Veterans, AMVETS, and the Paralyzed Veterans of America. 

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COMMITTEE MEETING

On July 28, 2005, the Committee met in open session to consider 

legislation pending before the Committee. Among the measures so 

considered was S. 1234. The Committee voted by unanimous voice 

vote to report favorably S. 1234, as introduced, to the Senate. 

SUMMARY OF THE COMMITTEE BILL AS REPORTED

The Committee bill contains freestanding provisions that would 

require the Secretary of Veterans Affairs to increase, effective December 1, 2005, the rates of and limitations on certain benefits 

paid by VA by the same percentage as the cost-of-living adjustment 

(hereinafter, ‘‘COLA’’) provided to Social Security recipients and VA 

pension beneficiaries that become effective on the same date. The 

COLA would apply to: 

1. basic compensation rates for veterans with service-connected 

disabilities and the rates payable for certain severe disabilities; 

2. the allowance for spouses, children, and dependent parents 

paid to service-connected disabled veterans rated 30 percent or 

more disabled; 

3. the annual clothing allowance paid to veterans whose compensable disability requires the use of a prosthetic or orthopedic appliance (including a wheelchair) that tends to tear or wear out clothing, or requires the use of a medication prescribed by a physician 

for a service-connected skin condition if the medication causes irreparable damage to the veteran’s outer garments; and 

4. the dependency and indemnity compensation (hereinafter, 

‘‘DIC’’) rates paid to: 

(a) surviving spouses of veterans whose deaths were service-connected; 

(b) surviving spouses for dependent children; 

(c) surviving spouses who are so disabled that they need aid and 

attendance or are permanently housebound; 

(d) surviving spouses covered under 38 U.S.C. § 1318(b); and 

(e) the children of veterans whose deaths were service-connected 

if no surviving spouse is entitled to DIC, the child is age 18 

through 22 and attending an approved educational institution, or 

the child is age 18 or over and became permanently incapable of 

self-support prior to reaching age 18. 

The Congressional Budget Office (hereinafter, ‘‘CBO’’) currently 

estimates that the COLA to be provided to Social Security recipients in 2006 will be 2.3 percent. 

DISCUSSION

BACKGROUND

Disability compensation 

The service-connected disability compensation program under 

chapter 11 of title 38, United States Code, provides monthly cash 

benefits to veterans who have disabilities incurred or aggravated 

during active duty in the Armed Forces. 

The amount of compensation paid depends on the nature of the 

veteran’s disability or combination of disabilities and the extent to 

which the disability impairs earning capacity. VA rates compensable disabilities according to its Schedule for Rating Disabilities 

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on a graduated scale ranging from 0 to 100 percent, in 10 percent 

increments. VA pays higher monthly rates (known as ‘‘special 

monthly compensation’’) to totally disabled veterans with certain 

specific, very severe disabilities or combinations of disabilities. 

According to its fiscal year 2006 budget, VA estimates that it will 

provide disability compensation to 2,688,248 veterans with serviceconnected disabilities in fiscal year 2006. Among the veterans estimated to receive such compensation are 12 World War I veterans; 

347,126 World War II veterans; 162,549 Korean-conflict veterans; 

944,799 Vietnam-era veterans; and 639,690 veterans of the Persian 

Gulf War era. 

A veteran with a disability rated at 30 percent or more may receive additional compensation on behalf of the veteran’s spouse, 

children, and dependent parents. These dependents’ allowances are 

prorated according to the percentage of disability. 

Dependency and indemnity compensation 

Under chapter 13 of title 38, United States Code, VA pays DIC 

to the survivors of servicemembers or veterans who died on or after 

January 1, 1957, from a disease or injury incurred or aggravated 

during military service. Survivors eligible for DIC include surviving 

spouses, unmarried children under the age of 18, children age 18 

or older who are permanently incapable of self-support, children between the ages of 18 and 22 who are enrolled in school, and certain 

needy parents. Under section 5312 of title 38, parents’ DIC rates 

are adjusted automatically at the same time and by the same percentage as Social Security and VA pension benefits. Surviving 

spouses, children, and parents who are receiving death compensation based on deaths before January 1, 1957, may elect to receive 

DIC instead of death compensation. 

For deaths prior to January 1, 1993, surviving spouses received 

DIC at rates determined by the pay grade (service rank) of the deceased veteran. For deaths on or after January 1, 1993, surviving 

spouses currently receive $993 per month and, if the deceased veteran was totally disabled for 8 years prior to death, an additional 

$213 per month. Surviving spouses who had been receiving benefits 

under the prior DIC program are paid under whichever program 

will pay the higher benefit. 

A surviving spouse who is so disabled as to be housebound or in 

need of regular aid and attendance is eligible to receive an additional amount. A surviving spouse also may receive additional allowances on behalf of the veteran’s surviving children. 

Children are entitled to DIC if there is no surviving spouse, if 

they are 18 years or older and became permanently incapable of 

self-support before reaching age 18, or if they are 18 to 22 years 

old and pursuing an approved course of education. 

In its fiscal year 2006 budget, VA estimates that it will pay DIC 

benefits to 335,081 survivors, a sum that includes surviving 

spouses, children, and needy surviving parents. 

Under section 1318(b) of title 38, VA pays benefits at DIC rates 

to the surviving spouses and children of veterans whose deaths are 

not service-connected if the veteran, immediately prior to his or her 

death, had been receiving (or had been entitled to receive) compensation at the 100 percent rate continuously for 10 or more years 

or for at least 5 years from the date of discharge or release from 

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active duty. VA also pays DIC benefits to the surviving spouses 

and children of veterans who were former prisoners of war and, 

after September 30, 1999, whose deaths were not service-connected 

if the veterans had been receiving (or had been entitled to receive) 

compensation at the 100 percent rate continuously for not less than 

one year preceding death. 

History of cost-of-living increases 

The Committee periodically reviews the service-connected disability compensation and DIC programs to ensure that the benefits 

provide reasonable and adequate compensation for disabled veterans and their families. Based on this review, the Congress acts 

periodically to provide a cost-of-living adjustment in compensation 

and DIC benefits. In fact, the Congress has provided annual increases in these rates for every fiscal year since 1976. The following table shows the percentage increases since 1975. 

HISTORY OF SERVICE-CONNECTED DISABILITY COMPENSATION INCREASES 

(1975 TO PRESENT) 

Fiscal year Effective date Increase 

(percent) 

Cumulative 

(1969=$100) 

1976 ...................................... August 1975 ....................................................................... 11.8 158.55 

1977 ...................................... October 1976 ...................................................................... 8.0 171.23 

1978 ...................................... October 1977 ...................................................................... 6.6 182.53 

1979 ...................................... October 1978 ...................................................................... 7.3 195.86 

1980 ...................................... October 1979 ...................................................................... 9.9 215.25 

1981 ...................................... October 1980 ...................................................................... 14.3 246.03 

1982 ...................................... October 1981 ...................................................................... 11.2 273.58 

1983 ...................................... October 1982 ...................................................................... 7.4 293.82 

1984 ...................................... April 1983 ........................................................................... 3.5 304.11 

1985 ...................................... December 1984 ................................................................... 3.2 313.84 

1986 ...................................... December 1985 ................................................................... 3.1 323.57 

1987 ...................................... December 1986 ................................................................... 1.5 328.42 

1988 ...................................... December 1987 ................................................................... 4.2 342.22 

1989 ...................................... December 1988 ................................................................... 4.1 356.25 

1990 ...................................... December 1989 ................................................................... 4.7 372.99 

1991 ...................................... December 1990 1 ................................................................. 5.4 393.13 

1992 ...................................... December 1991 ................................................................... 3.7 407.68 

1993 ...................................... December 1992 ................................................................... 3.0 419.91 

1994 ...................................... December 1993 ................................................................... 2.6 430.83 

1995 ...................................... December 1994 2 ................................................................. 2.8 442.89 

1996 ...................................... December 1995 2 ................................................................. 2.6 454.41 

1997 ...................................... December 1996 ................................................................... 2.9 467.59 

1998 ...................................... December 1997 2 ................................................................. 2.1 477.41 

1999 ...................................... December 1998 2 ................................................................. 1.3 483.62 

2000 ...................................... December 1999 2 ................................................................. 2.4 495.23 

2001 ...................................... December 2000 2 ................................................................. 3.5 512.56 

2002 ...................................... December 2001 2 ................................................................. 2.6 525.89 

2003 ...................................... December 2002 2 ................................................................. 1.4 535.88 

2004 ...................................... December 2003 2 ................................................................. 2.1 547.13 

2005 ...................................... December 2004 2 ................................................................. 2.7 561.90 

2006 ...................................... December 2005 2 ................................................................. 3 2.3 3 574.82 

1 Payment of the December 1990 increase was delayed until January 1992 by section 8005(b) of Public Law 101–508. 

2 December 1994–1995 and 1997–2006 increases are rounded to the next lower dollar amount pursuant to sections 2(c)(2) of Public Law 103–418 and Public Law 104–57, section 8031 of Public Law 105–33 and section 205 of Public Law 107–103, and section 706 of Public 

Law 108–183. 3 Estimate. 

COMMITTEE BILL

The Committee bill would direct VA to compute and provide increases in the monthly rates of compensation and DIC, effective 

December 1, 2005. The rates would be increased by the same perVerDate Aug 31 2005 01:36 Sep 24, 2005 Jkt 039010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\SR138.XXX SR138
5 

centage as the Social Security and VA pension COLA that will take 

effect on that date. In accordance with section 8031 of the Balanced 

Budget Act of 1997 (Public Law 105–33), amounts of compensation 

so computed that are not even multiples of $1 will be rounded 

down to the next lower whole dollar amount. In 2003, this provision was extended until 2013 by section 706 of Public Law 108–

183. 

The increases in DIC automatically would result in identical percentage increases in benefits paid at DIC rates under section 1318 

of title 38, United States Code, to the surviving spouses and children of veterans who had a service-connected disability at the time 

of death for which they continuously were rated totally disabled for 

at least (1) 10 years, (2) 5 years from the date of discharge from 

active duty, or (3) 1 year if the veteran was a former prisoner of 

war. 

Under section 156(e)(1)(A) of Public Law 97–377, the DIC increases also automatically would result in the same percentage increases in Social Security benefits that were terminated by section 

2205 of the Omnibus Budget Reconciliation Act of 1981 (hereinafter, ‘‘OBRA 1981’’) (Public Law 97–35). Prior to OBRA 1981, 

those benefits had been paid to certain surviving spouses of those 

who died on active duty or from a service-connected disability on 

behalf of their children under 18 and children over age 19 who 

were secondary-school students; OBRA 1981 reduced the eligibility 

cutoff age from 18 to 16 years old. 

Section 314 of Public Law 100–322 amended section 156(a)(1) of 

Public Law 97–377 to restore the benefits eliminated by the OBRA 

1981. The DIC increase also would apply to these restored benefits, 

effective December 1, 2000. 

The Congressional Budget Office (hereinafter, ‘‘CBO’’), in its most 

recent baseline, estimated that the Social Security COLA affecting 

fiscal year 2006 payments, and thus the COLA provided for by the 

Committee bill, will be 2.3 percent. The actual Social Security 

COLA could differ from this estimate. Rather than selecting any 

particular percentage adjustment at the time the Committee ordered the bill reported, the Committee followed its prior practice of 

setting the COLA by reference to the Social Security increase. The 

Committee believes this is the most equitable means of providing 

increases in these important service-connected benefits. 

COST ESTIMATE

In compliance with paragraph 11(a) of rule XXVI of the Standing 

Rules of the Senate, the Committee, based on information supplied 

by the CBO, estimates that enactment of the Committee bill would, 

relative to current law, increase spending by $538 million in 2006 

and by $720 million annually in subsequent years, but that such 

increases in spending are assumed in the budget resolution baseline and thus will have no budgetary effect relative to the baseline. 

Enactment of the Committee bill would not affect the budget of 

state, local, or tribal governments. 

The cost estimate provided by CBO, setting forth a detailed 

breakdown of costs, follows: 

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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, August 3, 2005. 

Hon. LARRY E. CRAIG, 

Chairman, Committee on Veterans’ Affairs, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN. The Congressional Budget Office (CBO) 

has prepared the enclosed cost estimate for S. 1234, the Veterans’ Compensation Cost-of-Living Adjustment Act of 2005. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Dwayne M. Wright. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, 

Director. 

Enclosure. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 1234—Veterans’ Compensation Cost-of-Living Adjustment Act of 

2005 

S. 1234 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, 2005, 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 

CBO’s 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) and extended to 2013 by the Veterans Benefits Act 

of 2003 (Public Law 108–183). 

Because the COLA is assumed in CBO’s baseline, the COLA provision would have no budgetary effect relative to that baseline. Relative to current law, CBO estimates that enacting this provision 

would increase spending for these programs by $538 million in 

2006. (The annualized cost would be $720 million in subsequent 

years.) This estimate assumes that the COLA effective on December 1, 2005, would be 2.3 percent. 

S. 1234 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 June 29, 2005, CBO transmitted a cost estimate for H.R. 

1220, the Veterans’ Cost-of-Living Adjustment Act of 2005, as ordered reported by the House Committee on Veterans’ Affairs on 

June 23, 2005. H.R. 1220, as ordered reported, contains provisions 

that are not included in S. 1234—specifically, provisions that would 

increase the amount of additional assistance paid to surviving 

spouses with dependent children under age 18; direct the Department of Veterans Affairs (VA) to conduct a demonstration project 

to improve business practices within the Veterans Health Administration for recovering payments from third-party payors; and authorize VA to establish six centers to conduct research, education, 

and clinical activities related to Parkinson’s disease. Differences in 

the estimated costs reflect differences in the two bills. 

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On June 2, 2005, CBO transmitted a cost estimate for H.R. 1220, 

as introduced on March 10, 2005. S. 1234 contains similar language to H.R. 1220, as introduced, and the associated costs are 

identical. 

The CBO staff contact is Dwayne M. Wright. This estimate was 

approved by Peter H. Fontaine, Deputy Assistant Director for 

Budget Analysis. 

REGULATORY IMPACT STATEMENT

In compliance with paragraph 11(b) of rule XXVI of the Standing 

Rules of the Senate, the Committee on Veterans’ Affairs has made 

an evaluation of the regulatory impact that would be incurred in 

carrying out the Committee bill. The Committee finds that S. 1234 

would not entail any regulation of individuals or businesses or result in any impact on the personal privacy of any individuals and 

that the paperwork resulting from enactment would be minimal. 

TABULATION OF VOTES CAST IN COMMITTEE

In compliance with paragraph 7 of rule XXVI of the Standing 

Rules of the Senate, the following is a tabulation of votes cast in 

person or by proxy by members of the Committee on Veterans’ Affairs at its July 28, 2005, meeting. On that date, the Committee, 

by unanimous voice vote, ordered to report S. 1234, a bill to increase, effective as of December 1, 2005, the rates of compensation 

for veterans with service-connected disabilities and the rates of dependency and indemnity compensation for the survivors of certain 

disabled veterans. 

AGENCY REPORT

On June 23, 2005, VA Under Secretary for Benefits, the Honorable Daniel L. Cooper, appeared before the Committee on Veterans’ Affairs and submitted testimony on, among other things, S. 1234. 

Excerpts from this statement are reprinted below: 

STATEMENT OF DANIEL L. COOPER, UNDER SECRETARY FOR

BENEFITS, DEPARTMENT OF VETERANS AFFAIRS

Mr. Chairman and members of the Committee, I appreciate this opportunity to testify today on several bills concerning important programs administered by the Department of Veterans Affairs (VA). 

* * * * * * * 

S. 1234 

Section 2 of S. 1234, the ‘‘Veterans’ Compensation Costof-Living Adjustment Act of 2005,’’ would direct the Secretary of Veterans Affairs to administratively increase the 

rates of disability compensation for veterans with serviceconnected disabilities, additional compensation for their 

dependents, the clothing allowance, and dependency and 

indemnity compensation for the survivors of veterans 

whose deaths are service related, effective December 1, 

2005. As provided in the President’s fiscal year (FY) 2006 

budget request, the rate of increase would be the same as 

the cost-of-living adjustment (COLA) that will be provided 

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under current law to veterans’ pension and Social Security 

recipients. We believe this proposed COLA is necessary 

and appropriate to protect the benefits of affected veterans 

from the eroding effects of inflation. These worthy beneficiaries deserve no less. 

We estimate that enactment of this bill would cost $399 

million during FY 2006 and $5.5 billion over the period 

FYs 2006–2015. However, because the cost is already assumed in the Budget baseline, enactment of this provision 

would not result in any additional cost. 

* * * * * * * 

CHANGES IN EXISTING LAW MADE BY THE COMMITTEE BILL AS

REPORTED

Since the Committee bill would not repeal or amend any provisions of current law, this report does not contain the material described in clauses (a) and (b) of paragraph 12 of rule XXVI of the 

Standing Rules of the Senate. 

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