As individuals working for or dealing with the Department of Veterans Affairs (VA) know, the VA is exempt from the sequestration that took effect on March 1 of this year. This does not mean, however, that the VA does not feel the effects of sequestration. A hit to the Department of Defense (DoD) results in collateral damage to the VA and the veterans it supports.
What is sequestration?
“Sequestration” is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled to enforce certain budget policy goals. It was included as an enforcement tool in the Budget Control Act of 2011 (BCA). It can also occur under the Statutory Pay-As-You-Go Act of 2010.
On March 1, 2013, sequestration occurred because a Joint Select Committee on Deficit Reduction failed to develop legislation to reduce the deficit by at least $1.2 trillion. Under the BCA, Congress was supposed to adopt this legislation by January 12, 2013. Because it did not, this triggered a series of automatic spending reductions. This included sequestration of mandatory spending for fiscal year (FY) 2013 through FY 2021, a one-year sequestration of discretionary spending for FY 2013, and lower discretionary spending limits for FY 2014 through FY 2021.
What departments and programs are exempt?
Since sequestration occurred, the exemptions and special rules of Sections 255 and 256 of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, as amended in 1985) apply. Most exempt programs are mandatory, and include Social Security and Medicaid; refundable tax credits to individuals; and low-income programs such as the Children’s Health Insurance Program, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and Supplemental Security Income. Some discretionary programs also are exempt, including all programs administered by the VA.
A look at VA exemptions
Under the letter of the law, the VA and its medical care programs are exempt from sequestration. This was not, however, initially clear, which resulted in concern within the VA and veteran community. Section 255 of the BBEDCA specifically excludes from sequestration all programs administered by the VA, which includes veterans’ medical care. This conflicts with Section 256(e) of the BBEDCA, which allows a maximum 2% reduction in budget authority for VA medical care for any fiscal year. To clarify the issue, on April 23, 2012, the Office of Management and Budget (OMB) issued a letter stating that “all programs administered by the VA, including Veterans’ Medicare Care, are exempt from sequestration under Section 255(b).” (Access the letter here).
The Collateral Effects on Veterans
Despite the exemption from sequestration, both the VA and the veterans it serves will feel the effects of sequestration. This is due to the fact that support received from other agencies will lessen due to the resource strain within these agencies. This applies to the DoD in particular, which works in collaboration with the VA to meet many objectives. (About 800,000 civilian defense employees face one-day-a-week furloughs and a 20 percent dent to their paychecks, which are set to start next month). Programs operated by the VA in conjunction with other agencies will also be affected.
In addition to the direct impact on VA departments and programs, veterans will also see a reduction in services or resources due to a ripple effect from the DoD. This includes the following:
- The Department of Labor’s VETS job-training program – This was being revamped and has been touted by the Obama administration as a key weapon in reducing high unemployment among post- 9/11 era veterans, and it is subject to cuts.
- Department of Labor’s employment and transition assistance programs – Acting Labor Secretary Seth Harris said last month that about 55,000 veterans and 44,000 service members would not receive employment and other transition assistance to help them find civilian jobs because of sequestration. Labor officials now say the exact number s are unknown but will amount to “tens of thousands.” In addition cuts to the Jobs for Veterans state grants program will mean an estimated 33,000 fewer veterans will be served.
- Homeless veteran programs – A program using Housing and Urban Development (HUD) vouchers that is credited with reducing the number of homeless veterans by 17 percent since 2009 may be harmed. According to Sandra Henriquez, the assistant secretary for public housing, while the vouchers are exempt, administrative funding is being cut, which HUD fears will have a “serious effect” on the number of local housing authorities willing to accept the vouchers because they would have to make up the deficit.
- Mental Health Counselor Availability – The number of DoD mental health counselors assisting service members returning from combat zones with issues such as post-traumatic stress disorder may be cut, Gen. Raymond Odierno, the Army chief of staff, told Congress last month.
Time will show how sequestration affects the VA and the veterans it serves. For now, however, one point is clear: the VA may have dodged a bullet, but it will suffer from the collateral damage caused by cuts to the DoD and other agencies.
