VA chief: Budget shortfalls are behind us

Senators and advocacy groups on Thursday questioned the projections behind a fiscal 2007 budget request that would significantly boost spending at the Veterans Affairs Department. But department officials said the proposal is sound and is not subject to the same problems that led to an unexpected shortfall last summer.

In testimony at a Senate Veterans Affairs Committee hearing, VA Secretary James Nicholson discussed the details of a 2007 budget proposal that would give the department $80.6 billion, a 12.2 percent increase over the spending level enacted for this year.

"We're confident; we've spent a lot of time on this," Nicholson told committee chairman Sen. Larry Craig, R-Idaho. Last June, lawmakers were informed of an unanticipated $1 billion shortfall in the VA's fiscal 2005 budget that the department attributed to errors in forecasting health care system needs.

A budget amendment signed by the president in August 2005 gave the VA an additional $1.5 billion to tide it over to the end of the fiscal year. At the time, Craig described the situation as "extremely frustrating."

At Thursday's hearing, Nicholson said last summer's shortfall resulted from the long timeframe for budget development. The fiscal 2005 budget was based on 2002 data that did not reflect operations in Iraq, he said, whereas the 2007 budget is based on 2004 data that reflects the increased rate of veterans applying for benefits following combat service.

"We did go back to the model the VA has used for years," Nicholson said. "We've been over it many times back at the department, and we think we're on top of it."

As a result of last summer's problems, the VA has started reporting quarterly to its Senate oversight committee, and officials say they are seeking closer coordination with the Defense Department to get early notice of discharge rates.

VA spokesman Terry Jemison said the department has made "significant improvements" to its actuarial model that supports budget requests, including enhancements to how it estimates illness rates and veterans' reliance on other medical providers. Accuracy in veterans' assignment to income-based priority groups also has improved, as have projections of the needs of veterans returning from the Middle East, he said.

In questioning, senators raised concerns over several other aspects of the proposed budget, including a projected 38 percent increase in fee collections attributed in part to a controversial proposal to charge annual fees and co-pays to certain non-service-disabled veterans. Other questions addressed the accuracy of the VA's estimates for health care spending for veterans returning from Iraq and Afghanistan, and increased applications for benefits by eligible seniors steered toward VA by enrollment assistants with the Medicare drug program.

Signaling concern for looming budget problems, Craig urged committee members to work together to find lasting solutions -- such as the proposed user fees -- to the VA's overall rising costs. Craig said VA medical care appropriations have increased 69 percent since 2001, a rise that VA's Jemison said "roughly tracks" medical inflation rates.

"If the president's proposals are not acceptable, then let's discuss other options," Craig urged committee members. "What will occur in the near future . . . is that VA spending will collide with spending demands made in other areas of government."

"VA's budget," he said, "presents mathematical realities that Congress will be forced to address."