On June 27, The American Legion submitted written testimony to a House hearing in Washington, warning that many community-based outpatient clinics (CBOCs) across the country, operated by the Department of Veterans Affairs (VA), will not be replaced when their leases expire.
Congress failed to provide funding for the CBOCs because of concerns over the high cost – based on a new method of calculating the leases designed by the Congressional Budget Office (CBO). The new formula requires all long-term leasing costs to be paid up-front in the first fiscal year of a contract.
For example, if VA were to sign a 20-year lease for a building in Valparaiso, Ind., to serve as a CBOC for veterans in the greater Chicago area, the department would have to budget for the entire 20-year amount in the first fiscal year of the lease. The Legion questioned the validity of such a budget-scoring process in its written testimony for the hearing by the House Committee on Veterans’ Affairs: "Assessing VA’s Capital Investment Options to Provide Veterans’ Care."
In a 2005 Economic and Budget Issue Brief, CBO wrote that "if agencies do not initially record the full cost of governmental activities, the budget understates the size of the federal government and its obligations at the time when those obligations are made." CBO’s brief also warned that in case of early termination, the federal government could be liable for the total cost of a lease. Yet the Legion is aware of only one such case in the past 20 years, and the government suffered no total-cost liability.
VA’s current budget has insufficient funds for major and minor construction, as far as the Legion is concerned. Therefore, it is calling on Congress to consider the government’s expense to own, operate and maintain facilities after they have outlived their competitive usefulness.
In the past two decades, VA has leased nearly 600 buildings nationwide to house CBOCs. Without effective leasing programs, the Legion is concerned that VA will be saddled with an inventory of antiquated facilities, leaving veterans with substandard care and reduced access to quality care facilities and outdated technology. The lease model provides VA with an exit strategy for inefficient facilities. Exit strategies for VA-owned property are less clear and possibly more expensive.
While The American Legion understands that CBO’s budget-scoring method is not politically motivated, it does question whether the opinion, in this case, is based on best business practices. Treating investment costs as annual operating expenses may make it easier to get projects funded by eliminating the need for substantial up-front appropriations.
Long-term leases should not be burdens placed upon the federal treasury for a single fiscal year. Rather, they should be budgeted and paid for annually, as is the private-sector practice. The Legion has found no statistical or empirical data to support CBO’s claim that long-term leases require a disproportionate obligation on the budget for the first fiscal year of the contract.
Last May, The American Legion passed a resolution that calls on Congress to provide an annual or permanent exemption for VA leases from CBO’s scoring process, "so as to give flexibility to VA to meet the health care needs of veterans."
If Congress doesn’t counter CBO on the issue of these CBOC leases, then the cost of serving our disabled veterans in the affected communities will be exponentially increased because each veteran will then be relegated to contract services, which are far less cost-effective than leasing buildings for VA medical facilities.