Democrats want to reclassify some Veterans Affairs spending as mandatory during the current negotiations for a fiscal 2023 omnibus, but Republicans object to the effort as a chance for Democrats to increase nondefense spending in other policy areas.

Rep. Debbie Wasserman Schultz, D-Fla., the chair of the House Military Construction-Veterans Affairs Appropriations Subcommittee, said Tuesday that classification of the funding as discretionary or mandatory is part of the omnibus negotiations. 

“In the negotiations generally, whether or not you have it all discretionary, or some mandatory, or some combination, is part of the talks,” she said. 

Wasserman Schultz said with increasing veterans’ health care costs provided in legislation passed this summer and in previous years, Democrats need to move that spending into the mandatory category in order to afford other priorities. 

“If we don’t move over the funding on the health care side of the VA, then you are going to end up having veterans health care spending eat up most of the discretionary spending that we do in the whole government,” she said. “So we have to address it.” 

The Senate voted overwhelmingly this summer in favor of the legislation that makes servicemembers who contracted any of 23 conditions after being deployed to Iraq, Afghanistan and other combat zones automatically eligible for VA benefits. 

[Veterans toxic exposure bill clears Senate after tortuous path]

Lawmakers billed the legislation at the time as creating a new set of health care and disability benefits for veterans, which would be funded as mandatory spending — not subject to limits on discretionary funds that appropriators face.

But when the Congressional Budget Office “scored” the measure, it found existing VA spending would likely end up intermingled with the new toxic exposure benefits, putting nearly $400 billion in pre-existing VA funds over the next decade into the mandatory category as well.

That sparked opposition from some conservatives, including Sen. Patrick J. Toomey, R-Pa. Toomey pushed to amend the bill to keep the spending in the discretionary category, but his amendment was defeated in a 47-48 vote. 

The CBO estimated at the time that under the toxic exposure law, $25.4 billion in existing VA budget authority and $1.4 billion in new funding would become mandatory spending in fiscal 2023.

That’s roughly the amount that’s currently in dispute in the omnibus talks, as Republicans aim to whittle down Democrats’ demand for an extra $26 billion in nondefense discretionary funds. While Democrats and Republicans have essentially reached agreement on a defense spending level of $858 billion, the two sides remain at odds over nondefense spending. 

That’s where the idea of claiming credit for some existing VA discretionary funds shifting over to the mandatory part of the ledger comes in. Sen. Jon Tester, D-Mont., said he’s proposed that some funds be classified as mandatory in the omnibus; he declined to provide a figure but said it’s “entirely workable, conservative, not a slush fund.”

That would give Democrats some breathing room on the nondefense side, with their earlier plan to wall off VA health care funds into their own discretionary category getting a cool reception from Republicans.

‘That’s baloney’

But the GOP hasn’t been very receptive so far to shifting more money to mandatory, which would reverse a decision lawmakers made in a 2018 law to keep VA health care funds discretionary.

Sen. John Boozman, R-Ark., said part of the negotiations around the toxic exposure bill included agreeing that while the new spending in the legislation would be mandatory, current spending would remain discretionary. “They’d like to move it someplace so they can have more of those dollars for spending on other stuff,” he said. 

Democrats are proposing nondefense increases to IRS funding, climate initiatives and other nondefense spending that Republicans oppose, according to a GOP aide, who said Republicans fully support veterans health care.

The aide pointed out that the Democrats did not shift funding for veterans healthcare into mandatory spending in their partisan appropriations bills posted over the summer, and have not brought the issue up to Republicans during negotiations.

Tester, who in addition to being the top Democrat on Defense Appropriations chairs the Veterans’ Affairs Committee, helped write the toxic exposure benefits law. It passed with overwhelming bipartisan support, 342-88 in the House and 86-11 in the Senate in August, even as Republicans said they’d like to revisit the notion of VA funds being redesignated as exempt from budget caps.

“People who voted for it continue to try to undermine it,” Tester said of this summer’s law. “I think that’s baloney, and I’m being generous with my descriptive terms.”

A Republican aide pointed out that during the summer debate on the toxic exposure bill, Tester pledged that appropriators would keep funding existing benefits on the discretionary side of the ledger. When Toomey sought to amend the measure, Tester blasted his efforts as “about not even trusting the people in this body.”

“We have an Appropriations Committee, and we vote on appropriations bills, and we set the levels in the accounts based off of appropriations,” Tester said during floor debate. “Let the process work. Let’s not tie the hands of appropriators.”

Both the House and Senate fiscal 2023 Military Construction-VA bills include $135 billion in discretionary spending for the VA, 20 percent above the fiscal 2022 level. Of that, nearly $119 billion is for health care, a 22 percent increase above the fiscal 2022 level — a big driver of the overall increase in nondefense appropriations that Democrats are seeking.

Democrats on both sides of the Capitol are characterizing the dispute over toplines as a fight to support veterans. House Appropriations Chair Rosa DeLauro, D-Conn., “does not believe that honoring our commitment to veterans is ‘unnecessary spending,’” DeLauro spokeswoman Katelynn Thorpe said in a statement.

Time dwindling

As the talks drag on, there’s increasing chatter about what happens when the Dec. 16 government funding deadline approaches, as virtually no one thinks lawmakers will be able to wrap up a fiscal 2023 omnibus package by then. Senate Commerce-Justice-Science Appropriations ranking member Jerry Moran, R-Kan., said it would take two weeks just to write the bill once a funding framework is agreed to.

A one-week continuing resolution extending current funding levels is an option, but Democrats and some Republicans are increasingly dismissing that idea — perhaps as a negotiating ploy.

Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday that the more likely fallback option might be a short-term CR into the new year, which is a shift for McConnell, who’d been in the camp of wrapping up this year’s work in the lame-duck session. 

“Time is ticking. We have not been able to agree on a topline yet. and I think it’s becoming increasingly likely that we may need to do a short-term CR into early next year,” he said. “We’re running out of time, and that may end up being the only option left that we could agree to pursue.”

Meanwhile, Democrats continue to say a full-year stopgap bill is the more likely contingency plan, given the lingering stalemate. But numerous “anomalies” would be needed, as outlined by the White House budget office in a memo to lawmakers Monday night.

Senate Democrats laid out the potential impacts in their own report Tuesday. Among the adverse effects, Senate Appropriations Chairman Patrick J. Leahy’s staff pointed out, include a $7.5 billion shortfall at the VA to cover costs of the new toxic exposure benefits law.

A 28 percent increase in funding authorized by the bipartisan “CHIPS and science” law to boost industrial competitiveness with China wouldn’t happen under a full-year CR. And highway and transit agencies would lose out on a $1.6 billion boost envisioned under the bipartisan infrastructure law enacted last year, according to the analysis by Leahy, D-Vt.

Senate Minority Whip John Thune, R-S.D., said even if leaders could reach agreement soon on topline spending, it’s hard to see them resolving various issues on unrelated policy riders before the Christmas holiday. The parties have already spent a few extra days haggling over riders to the defense authorization bill, the leftovers of which “probably migrate over to the discussions around the spending bill,” he said.

Thune acknowledged Democrats may decide to try a super short stopgap that would keep lawmakers in town until Christmas or have them return afterward before New Years to keep the pressure on for an omnibus deal. Wasserman Schultz acknowledged that possibility, saying, “I’ve seen us go all the way past Christmas before. … December 31 is the deadline.”