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Appropriators feel the squeeze of budget caps as veterans health funding grows

Nondefense programs could soon see spending cuts unless Congress makes adjustments

Richard Shelby wearing a suit and tie standing in front of a mirror
“It’s going to be a challenge,” said Senate Appropriations Chairman Richard C. Shelby, R-Ala. (Bill Clark/CQ Roll Call file photo) (CQ Roll Call)

Appropriators and stakeholders have begun coming to grips with the reality of narrow funding increases under next year’s budget caps, as politically sacrosanct veterans health care spending continues to grow and eat into what’s left for all other nondefense programs.

Last summer’s two-year budget deal front-loaded its spending cap increases into the first year, allowing about 4 percent more for discretionary spending in fiscal 2020. In fiscal 2021, increases are capped at less than 0.4 percent, or $5 billion, despite fixed costs for veterans health care that are likely to require substantially more.

“It’s going to be a challenge,” Senate Appropriations Chairman Richard C. Shelby, R-Ala., said with characteristic understatement.

On the defense side of the ledger, last year’s deal didn’t account for current hostilities in the Middle East, culminating in the targeted killing of Iranian Gen. Qassem Soleimani and Iran’s reprisal against U.S. bases in Iraq. But lawmakers have consistently voted to support more money for overseas war-fighting if necessary.

The same can’t be said for nondefense appropriations. Without a special “cap adjustment” for veterans health care accounts that provide access to private care in certain situations, observers say, other nondefense programs could suffer cuts to their budgets next year.

“We should and will meet our commitment to veterans, but without some kind of cap increase you’re holding everything flat, or cutting items,” a senior congressional aide said.

Accounting for veterans medical care already provided through advance appropriations for fiscal 2021 — an arrangement allowed for veterans health and a few other programs — all other nondefense spending would fall by about 1 percent next year, according to CQ Roll Call calculations. And if recent history is any guide, appropriators will likely need to pony up at least a few billion dollars extra for veterans health care in next year’s spending bill.

‘MISSION’ creep

After the 2014 wait-time scandal that engulfed the Department of Veterans Affairs, lawmakers enacted what used to be called the “VA Choice” program, providing $10 billion in initial mandatory appropriations so veterans could see doctors in their local communities rather than go to VA hospitals.

The program proved so popular that in 2017, Congress had to provide an additional $4.2 billion. The following year, lawmakers overhauled the program and replaced Choice with broader “community care” services and added $5.2 billion more, in what was dubbed the “VA MISSION Act.”

Starting in fiscal 2019, however, appropriators had to start accounting for the new costs, adding $1 billion to that year’s spending bill that they didn’t need to come up with previously. In the fiscal 2020 spending law enacted last month, that figure grew to $8.9 billion. Already, $11.3 billion has been set aside through advance appropriations for fiscal 2021.

All told, VA medical appropriations for next year are already set at $87.6 billion, a 9 percent increase over this year, before any additional needs are identified in the department’s budget request due Feb. 10.

The increase in VA MISSION costs alone eats up nearly all of the additional $2.5 billion nondefense funding for fiscal 2021 allotted under the new budget caps.

“We think that all of VA MISSION should be exempt” from the caps, said Carlos Fuentes, director of Veterans of Foreign Wars’ National Legislative Service.

House Democrats last year pushed for a $10 billion cap adjustment in fiscal 2021, but the proposal went nowhere in spending talks with the White House. There’s no sign of the administration reversing course thus far for next year.

“The administration will fully fund the VA MISSION Act and other important priorities within the [nondefense discretionary] caps,” Office of Management and Budget spokesman Rob Kuhlman said in a statement.

Shelby in the past has expressed sympathy for exempting new veterans medical costs from the caps, arguing they are requirements imposed by other committees that should continue to be funded on the mandatory side of the budget, as in the early years of VA Choice.

But fiscal conservatives argue that discretionary spending has still been growing at a rapid pace under the budget deals of recent years. Since the original across-the-board “sequester” triggered under the 2011 deficit reduction law, nondefense discretionary spending has risen on average by 3.5 percent annually through fiscal 2021, even if VA health care spending stays at current projections.

Backing out VA health care, which has grown at a 6.7 percent average annual clip, all other nondefense spending has increased about 3 percent per year since fiscal 2013, more than keeping pace with inflation. In fiscal 2018 alone, nondefense funding minus VA health care jumped nearly 11 percent by CQ Roll Call calculations.

Sen. James Lankford, R-Okla., is one Appropriations Committee member who doesn’t believe total spending should go up any more than planned.

“We should always look for other areas where we can spend less, if we’ve got to spend more. And VA MISSION is one of those areas we’ve got to be able to spend more. We’ve all agreed on that,” Lankford said.

The situation has interest groups that advocate for domestic appropriations across a range of programs on edge as lawmakers look to the upcoming budget cycle.

‘Basically a freeze’

“In practical terms it’s basically a freeze,” said Matt Dennis, acting executive director at the Coalition for Health Funding and a former aide to House Appropriations Chairwoman Nita M. Lowey, D-N.Y. “Now it’s a freeze at a level that folks were by and large happy with in fiscal 2020, but challenges continue to grow.”

On the defense funding front, given the large increases of recent years, the bigger issue may pertain to when the fiscal 2021 bill will be enacted.

Depending on the outcome of November’s elections, the incoming administration and congressional leadership may want to put their own stamp on federal budgets, including the Pentagon. That could result in a lengthy stopgap measure that precludes new initiatives and is viewed by the military and their contractors as an inefficient way to budget.

David Berteau, president and CEO of the Professional Services Council, a federal contractors association, said $740.5 billion — the fiscal 2021 amount envisioned under the budget deal, a $2.5 billion boost over this year — should be enough to perform America’s necessary national security missions. But getting the money on time is key, he said.

“It’s incumbent on the administration and the Congress to move in a regular order and a timely way to put those appropriations in place,” Berteau said.

John M. Donnelly contributed to this report.

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