Partners in progress Your business is our business Support of ALA these days is not optional….it...
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- Slide 1
- Slide 2
- Partners in progress
- Slide 3
- Your business is our business Support of ALA these days is not
optional.it is necessary part of your business and an investment
that returns many fold in many ways.
- Slide 4
- Dynamic environment calls for energized partnership Publicly
supported entities usually predictable This has changed
Manufacturing, distribution, store support Industry employment
Industry respects agency prerogatives Stability and predictability
key to cost control Agency decisions reverberate across the chain
Industry can react and support with adequate notice Advance notice
avoids disruption of product flow Cooperation and communication key
in dynamic environment Patron support is mutual bottom line
- Slide 5
- Your investment in ALA proved its worth in 2014 Support of ALA
yields real, tangible benefits for your business. Furloughs and
closures averted by 11 days resulting in hundreds of millions of
dollars in sales that would not have otherwise occurred. $200
million cut in 2015 would have resulted in $3 billion lost sales
and $600 million cut in 2016 would have resulted in $6 billion in
lost sales. Averted major issues that could have impacted exchange
ability to earn revenue and contribute MWR dividends. Averting
hundreds of millions in lost sales.
- Slide 6
- Keep your seat at the table 2015 is going to be a pivotal year
Things are going to change and a lot of balls are going to be
thrown up in the air. Need pull the cart where you want it to go
instead of getting dragged behind it. Active participation in ALA
ensures that your interests are represented in decisions that are
g0ing to be made Decisions on product availability reverberate in
commercial sector
- Slide 7
- Strength in Numbers Table is going to be set this coming year.
Help your Board of Directors reach out to sign up companies in the
Association. Help demonstrate to policy-makers that the power of
industry is behind us.
- Slide 8
- American Logistics Association Logistics is our middle name
Members have invested hundreds of millions of dollars in systems,
facilities and other programs to support resale agencies
Manufacturers, Distributors and Brokers represent 95 percent of the
supply chain Have a stake, hand and a voice in what happens Can
help agency partners get to where they need to get
- Slide 9
- SITREP DoD is targeting the commissary appropriation in its
2016 budget submission, reducing $322 million of the $1.4 billion
annual appropriation, $1 billion in 2016, leaving it with $400
million The proposal is direct reduction to military compensation
and is inciting fierce opposition. On-base business model
threatened
- Slide 10
- Saw storm clouds gathering five years ago $1.4 trillion deficit
Budget problems and the sequester Sprung into action Gathered data
Mobilized key constituencies Created coalition to Save Our Shopping
Benefit Educated allies
- Slide 11
- System is strong but fragile and vulnerable Convergence of
factors all at once could destroy it
- Slide 12
- Convergence of challenges Commissary funding & Title
changes SDT and base operations funding Product and pricing
restrictionstobacco (CVS), beverage alcohol Wage hikes (minimum and
SCA) Shrinking force structure Cross category encroachment
(legislative proposal) Off-base competition
- Slide 13
- Initiated and launched the Coalition to Save our Military
Shopping Benefits to increase patronage and galvanize affinity
group and patron support against threats. Worked to gain Authority
in the NDAA to allow exchanges to borrow from the Treasury to
finance operations. Worked with House Armed Services Committee,
Ways and Means, Senate Finance Committees to repeal the 3 percent
withholding requirement. Worked to get relief on interchange fees
in the Dodd-Frank bill.
- Slide 14
- Protecting tax immunity Internet tax immunity Protecting FAR
immunity & fighting other restrictions Protecting MWR NAF
siphoning to support legitimate appropriated fund requirements
Protect private & public sector mix
- Slide 15
- Fighting for freedom of choice Alcohol & Tobacco
restrictions Dietary supplements Sugar Fight supply chain
impediments Support open most efficient sourcing and resist
unreasonable local sourcing Support keeping commissaries open to
drive more exchange traffic
- Slide 16
- Fighting the Bangladesh provision Protecting second destination
appropriations and appropriations in other categories Advancing
Federal Financing Bank authority for exchange debt ASER relief
Resisting outright privatization initiative Expanding patronage in
cyber and brick and mortar--Veterans
- Slide 17
- Worked to turn back and discredit: The Congressional Budget
Office recommendation on consolidation of commissaries and
exchanges, price increases, and commercially redeemable vouchers.
It also results in price increases, primarily for retirees.
Findings of the Bowles Simpson Deficit Reduction Commission to
reduce commissary and exchange funding and raise prices to
patrons.. S 277 as discharged by the full Senate Veterans Affairs
Committee to provide benefits for injured military personnel at
Camp Lejeune, North Carolina. The bill payer was the commissary and
exchange benefit. Senator Tom Coburn (R-WV) Back in Black report
that recommended consolidation of commissaries and exchanges and
price increases as part of a $9 trillion deficit reduction
proposal. An amendment proposed to the 2014 National Defense
Authorization Act to consolidate and increase prices.
- Slide 18
- Protecting status of NAF workforce Protecting status of DeCA
workforce Health care, pensions, other benefits, Portability
- Slide 19
- Slide 20
- JCS Hearing Cutting commissaries is a sore point for methe
commissary issue is radioactiveGeneral Amos Marine Corps Commandant
$200 million initial impact will be modestAdmiral Winnefeld,
Vice-Chairman, JCS Difficult to understand the effect that a
reduction in the subsidy will have, until you make a decision to do
it. -- General Dempsey, Chairman, Joint Chiefs of Staff Private
label can make up for support reduction.
- Slide 21
- Slide 22
- Next moveDoDs top line House and Senate working their budget
blueprint this week Defense hawks want $561 B (Presidents request)
$38 B above budget caps in BCA HASC already marking above caps SASC
to Budget Committeelift the caps If caps busted for defense, others
want it busted for non-defense Budget Committees indicate staying
within BCA Use OCO as an escape valvego from $51 B to $90 B? Raise
defense and domestic caps by equal amounts?
- Slide 23
- Next moveDoDs top line CHIMPSChanges in Mandatory SpendingMoney
Treasury is obligated to spend without going to Congress every
yearwould enable shifting spending to discretionary
spending--Defense Point of Order Senatecould block defense spending
hike Always defaults to appropriations committees Higher number
provides flexibility for Congress to add back DeCA cuts
- Slide 24
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- State of playFY 2015 Administration recommended a $200 million
cut for Fiscal 15 that begins October 1. Congress pushed back. HASC
and HAC only allowed a $100 million cut. SASC and SAC said no cuts
for 15 and asked to wait for the Commission report and is seeking
other information, i.e., usage statistics. etc. OutcomeSAC fully
restored commissary cuts
- Slide 26
- 2016 Defense budget request $322 million cut to DeCA $183
million in reduced operating costs $139 million in
efficiencies
- Slide 27
- 2016 Defense budget request Scheduled store closures: $27.3M
Labor reduction of 200 FTEs (10.9 percent of above store level
support): $18.8M Transportation efficiencies of fresh fruits and
vegetables to the Pacific: $40.8M (assumes contract start date by
January 1, 2016, but is subject to change based on ACTUAL contract
start date) Cancellation of case lot sales events: $900K
Elimination of subsidy to six overseas NEXMARTs (Navy Exchanges
that sell specific lines of commissary goods at cost): $3.0M
- Slide 28
- 2016 Defense budget request Close stores on holidays: $4.5M
Reduce operating hours: $29.5M Reduce days of operation (includes
direct labor and contract labor reductions): $58.2M Major impacts
of reducing days and hours of operation include: Reduction of 1,480
FTEs (in addition to the 200 above store level FTEs set forth
above) Reduces the average number of employees per store to 45 a
reduction of 6 per store
- Slide 29
- 2016 Defense budget request Days of operation per week would be
reduced at 183 stores: 30 stores would go from being open 7 to 5
days per week; 47 stores would decrease from 7 to 6 days a week;
and 106 stores from 6 to 5 days a week. Examples of reduced hours
and days include: Kaneohe Bay Marine Corps Base Hawaii would have
its weekly operating days and hours reduced from 7 days and 60
hours per week to 5 days and 49 hours per week; Fort Irwin,
California, reduced from its current posture of 7 days and 62 hours
per week to 5 days and 42 hours per week; Minot Air Force Base,
North Dakota, reduced from its current 6 days and 66 hours per week
to 5 days and 42 hours per week; and Yokosuka Naval Fleet
Activities, Japan, reduced from its current 7 days and 75 hours per
week to 5 days and 50 hours per week. Second and third order of
effects include: Larger crowds and longer checkout lines Potential
decrease in exchange sales: According to the Army and Air Force
Exchange Service, approximately 20 to 30 percent of military
exchange traffic is directly tied to customers visiting the
commissary
- Slide 30
- 2016 Defense budget request An additional $139M reduction.
Including transportation of commissary goods shipped overseas in
the price of the goods (second destination transportation
(SDT))--$100M Shifting the funding source for commissary operating
supplies from the Defense Working Capital Fund (DWCF) to the
commissary surcharge. --$39 M
- Slide 31
- 2016 Defense budget request Authorize collection of a fee for
service for value-added commercial practices (online
ordering/shopping and curb-side pickup). Authorize the collection
of a fee for the use of single-use plastic and paper. Authorize
demonstration project to contract out the operation of the produce
department
- Slide 32
- 2016 Defense budget request Pursue a $1B reduction in
appropriated fund support of DeCA with more robust legislative
relief to: Eliminate the current sale-at-cost model, allowing items
to be sold at a markup; and Enable additional revenue generation by
authorizing the sale of additional goods and services that are
commonly available in commercial grocery stores, such as beer and
wine, a variety of gift cards, greeting cards, and seasonal
items..
- Slide 33
- 2016 Defense budget request Authorize markup of product and
establish sales prices of products to off-set appropriated fund
operating costs. Authorize the sale of all items (except distilled
spirits), sold by commercial supermarkets, to generate revenue. Use
cost recovery as a primary criteria in establishing and closing
commissaries in non-remote U.S. locations. Authorize purchase of
goods from whatever source has the best price. Modify the Berry
Amendment to authorize the purchase of operating supplies necessary
to process products (e.g., meat trays) and protective clothing in
overseas areas from non-U.S. sources. Exempt the provision of goods
and services for Defense Retail Systems from the application of the
Service Contract Act.
- Slide 34
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- Slide 36
- Economic Case 70 percent increase in food stamp redemption Sunk
costs buying the car but not putting gas in it Sales
imperativeincrease share of AD who use benefit Tax savings alone
justify benefit Family and Veteran employment Contribution to
economy/balance of payments
- Slide 37
- Benevolence and Good Will Wounded Warriors Snowball Express
Joining Forces Fisher House USO NMFA Cause promotions and a
multitude of others
- Slide 38
- ALA position on MCRMC and Commissary proposals Budget proposal
would destroy commissary benefit. Commission stands behind
commissary benefit. Review of MCRMC must consider warnings from
past studies. Dont bank savings ahead of reality. Budget cuts wreck
benefit before any savings proposals can be realized. Commissaries
and exchanges rank at top of list for beneficiaries. Shell game
stacked with illusory savings that transfer costs to beneficiaries.
Troops already have co-pays in resalemark-ups and surcharge. $750
million of own capital financed by the troops.
- Slide 39
- ALA position on MCRMC and Commissary proposals Shell game
stacked with illusory savings that would transfer costs to the
exchanges and put the burden of financing their own benefits
squarely on the backs of the troops. Cuts target those who need
these programs the most military families with children and retired
folks on fixed incomes. The troops already have a co-pay that
finances their own commissary and exchange benefits through
surcharges and mark-ups on their purchases. Last year, nearly
three- quarters of a billion dollars of their own programs were
financed by the troops. DoD proposes to up this amount by another
$1 billion.
- Slide 40
- ALA position on MCRMC and Commissary proposals The Commission
cited surveys that showed 90 percent use these benefits, and a host
of other surveys show that commissary and exchange benefits
consistently rank at the top of the compensation items that are
provided to the military. Yet they cost less than one percent of
the total compensation cost of the military and less than.3 percent
of the DoD budget. Commissary benefit advocates were encouraged
when the President told Marines and families at Camp Pendleton that
closing commissariesis not how a great Nation should be treating
its military and military families. It also was encouraging when
the White House publicly thanked the resale system and its
supporting industry for being the first to step forward to hire
25,000 veterans and family membersthe first major contribution to
First Lady Michelle Obamas Joining Forces initiative, an initiative
personally launched by President and Mrs. Obama at Langley Air
Force Base.
- Slide 41
- ALA position on MCRMC and Commissary proposals Supports keeping
protections in law for commissary and exchange benefits in place
until the Department of Defense renders an objective report that
documents how DoD plans to achieve reductions to the commissary
appropriation without diminishing the savings that are realized by
commissaries and the impact on exchange operations and patrons.
Fair and objective process free of any pre-determined budgetary
constraints.
- Slide 42
- ALA position on MCRMC and Commissary proposals Commissaries and
exchanges have already taken out costs over the years in excess of
$1 billion a year. They stand as a model for the rest of Government
to emulate, not decimate for short term-budget expediency. Consider
facts, not conjecture aimed at hitting a budgetary target
regardless of the risk to a system that has given and continues to
give so much to so many for so little. Congress and past
Administrations have carefully designed and crafted resale programs
that provide the right balance of taxpayer and patron support. Yes,
they receive a level of appropriations, but the benefits that
military families, DoD, and the Nation derives from these programs
are way out of proportion to their cost.
- Slide 43
- ALA position on MCRMC and Commissary proposals This list is
long, from financing on-base community programs, providing
subsistence to families trying to make ends meet, providing healthy
programs that serve to reduce health care costs, to tens of
thousands of jobs for military families, to maintenance of a
stateside support base for overseas operations, a secure source of
products for military families in times of danger and threat, and
massive impact to exchange operations from commissary cutbacks and
closures that will result in major reductions to exchange earnings
that are used to sustain vital military community programs.
- Slide 44
- ALA position on MCRMC and Commissary proposals Congress and the
White House review must take great care not to allow radical and
irreversible changes to these benefits that they will regret
without looking at the facts, assessing a broad range of unintended
consequences that will reverberate across the force, the families,
and the base support programs that sustain the military
community.
- Slide 45
- Slide 46
- Obama at Pendleton-Aug 7, 2013 Closing commissaries Not how a
great Nation should treat its military and military families
- Slide 47
- Slide 48
- Compensation Commission
- Slide 49
- Talk of cost-cutting started in 2008post-9/11 spending spree
July 22, 2010 DBB Report Reducing Overhead and Improving DoDs
Business Operations Spend more on health care and benefits for
former military than on troops in uniform Personnel costs
unsustainable Cost per person in active force increased 46 percent
75 percent of budget At current growth rate, personnel costs will
consume entire defense budget by 2039 OK as long as budget
risingnow it is colliding
- Slide 50
- Compensation Commission Retirement payments expected to double
by 2035 to $116.9 billion By 2017, DoD plans to have 100,000 fewer
troops but spend as much as today on personnel Army personnel costs
grown by 50 percent over last ten years Health care costs up $30
billion over last decade Iraq and Afghanistan health care bubble 80
percent say they would trade retirement policy changes for a 1
percent increase in pay
- Slide 51
- Compensation Commission Included in 2013 NDAA Military
Compensation and Retirement Modernization Commission Ensure
long-term viability of all-volunteer force Enabling high quality of
life for military families Achieving fiscal sustainability of
compensation and retirement systems Examine all laws and policies
affecting various programs and benefits
- Slide 52
- Compensation Commission Added by conferees: Department of
Defense morale, recreation, and welfare programs, the resale
programs (military exchanges and commissaries) and dependent school
system Closely weigh its recommendations regarding the web of
interrelated programs supporting spouses and families of members of
the uniformed services, so that changes in such programs do not
adversely impact decisions to remain in the uniformed
services.
- Slide 53
- Compensation Commission -- exchanges $512 million in
appropriations SDT--$188.2 In theater support--$224.5 Other--$99.8
Sales--$13,379 million Earnings--$350 million MWR
contributions--$320 million
- Slide 54
- Compensation Commission Recommendation 9: Protect both access
to and savings at Department of Defense commissaries and exchanges
by consolidating these activities into a single defense resale
organization.
- Slide 55
- Compensation Commission A single organization should be
established that consolidates DoDs commissaries and three exchange
systems into a single defense resale system, herein referred to as
the Defense Resale Activity (DeRA).
- Slide 56
- Compensation Commission Would decrease DoD budgetary costs and
Federal outlays by $1.0 billion during FY 2016FY 2020 and result in
annual steady-state savings of $515 million by FY 2021. Reductions
result from a series of efficiencies, primarily in consolidating
back office functions, logistics systems, and staffing. Studies
have projected that both financial savings and nonfinancial
benefits can be achieved through a consolidation of the three
exchanges. Including the commissaries in such a consolidation
increases potential efficiencies. Proposes a new defense resale
executive team that would be responsible for evaluating, selecting,
and implementing these potential efficiencies. Realized costs and
savings therefore depend upon the set of efficiencies selected for
implementation.
- Slide 57
- Compensation Commission A DeRA Executive Director should be
appointed who reports to a consolidated and simplified BOD. The BOD
should replace the boards that currently oversee each of the
separate exchange systems and DeCA. The consolidated DeRA BOD
should also assume the responsibilities of the Executive Resale
Board and the Cooperative Efforts Board and should incorporate
expertise from private-sector retail.
- Slide 58
- Compensation Commission A DeRA executive team, along with
operational advisors from the current organizations, should
immediately be established to define the key attributes of the new
organization and plan the transition. Creation of a single
organization should facilitate consolidation of many back-end
operation and support functions, alignment of incentives and
policies across commissaries and exchanges, as well as consistent
implementation of best practices for aligning with the needs of
Service members and the Military Services.
- Slide 59
- Compensation Commission Core commissary and exchange benefits
should be maintained at military installations around the world by
continuing the sale of groceries and essential items at cost (plus
a surcharge) and other merchandise at a discount. Some or all
commissary staff could be converted from APF to nonappropriated
funds (NAF) employees to reduce commissary employee costs.
- Slide 60
- Compensation Commission Branding of the current exchange
systems and commissaries initially should be retained. A director
for each of these branded exchange systems and the commissaries
should be appointed under the DeRA Executive Director. These
directors should oversee operation of these systems as needed to
represent the unique needs of each military service. Personnel
evaluations for these executives should be cosigned by the DeRA
executive director and appropriate Service representatives.
Branding and organizational structure can be modified over time by
the BOD.
- Slide 61
- Compensation Commission DeRA should assume responsibility for
the operation of exchanges but not the other organizations
currently managed by NEXCOM and MCCS. If approved by the BOD, the
current points of integration and shared resources can be
maintained through liaison positions and formal memoranda of
agreement. For example, if it is mutually advantageous to share
support staff between DeRA and Marine Corps MWR, options are
available to continue the arrangement that currently exists with
the MCX.
- Slide 62
- Compensation Commission Laws and policies should be updated to
reflect this consolidated structure and allow greater flexibility
related to how products are sourced, where they are sold, and how
they are priced: Allow the sale of convenience items in
commissaries at a profit, including products and services typically
found in commercial grocers. Food and other essential items should
continue to be sold at cost when sold in commissaries or combined
commissary and exchange stores (excluding convenience stores). This
expanded commissary product line would include beer and wine.
- Slide 63
- Compensation Commission Allow for the payment of second
destination transportation costs with NAF. Allow significant
flexibility on local sourcing overseas, particularly when it is
beneficial to the Service member. Allow more flexibility in the
creation of combined stores, as currently controlled by Section
2488 of Title 10 of the U.S. Code. Allow the use of the commissary
5 percent surcharge for similar expenses in the exchanges.
Conversely, allow the use of exchange profits to cover commissary
costs currently covered by the surcharge.
- Slide 64
- Compensation Commission A portion of Military Service MWR
programs should continue to be funded from DeRA profits. The BOD
should approve the amount of net revenue to be contributed as MWR
dividends and should ensure an equitable distribution among the
Military Services.
- Slide 65
- Compensation Commission 10 U.S.C. 2481 should be amended to
make clear that commissary and exchange stores may be combined into
single stores, and that commissary stores or the commissary
sections of combined stores must still sell grocery items at
reduced prices. It should also state that the Secretary of Defense
will designate the defense resale systems executive director and
the DeRA BOD described above. 10 U.S.C. 2483 should be amended to
authorize the defense resale system to receive appropriated and
nonappropriated funds, and to use nonappropriated funds generated
by the system to cover the expenses of operating the system.
- Slide 66
- Compensation Commission 10 U.S.C. 2483 should be amended to
authorize the defense resale system to receive appropriated and
nonappropriated funds, and to use nonappropriated funds generated
by the system to cover the expenses of operating the system. 10
U.S.C. 2484 should be amended to state that the commissaries
requirement to sell items at reduced prices should be limited to
the following categories of items: (A) Meat, poultry, seafood, and
fresh-water fish. (B) Nonalcoholic beverages. (C) Produce. (D)
Grocery food, whether stored chilled, frozen, or at room
temperature. (E) Dairy products. (F) Bakery and delicatessen items.
(G) Nonfood grocery items.
- Slide 67
- Compensation Commission 10 U.S.C. 2485 should be amended to
establish the DeRA BOD granting the Secretary of Defense the
authority to establish the board, which should include five voting
members A senior representative from each Military Service Under
Secretary of Defense for Personnel and Readiness Nonvoting members
with experience related to logistics military personnel and
entitlements, and other relevant areas.
- Slide 68
- Compensation Commission 10 U.S.C. 2487 should be amended to
eliminate references to the separation of commissaries and
exchanges and disestablish the Defense Commissary Agency. U.S.C.
2488, which sets forth limited conditions under which commissary
and exchange stores may be combined, should be repealed.
- Slide 69
- Slide 70
- Boston Consulting Group Study Determine the qualitative and
quantitative effects of: Using variable pricing in commissary
stores to reduce the expenditure of appropriated funds to operate
the defense commissary system; Implementing a program to make
available more private label products in commissary stores;
Converting the defense commissary system to a nonappropriated fund
instrumentality; and Eliminating or at least reducing second
destination funding.
- Slide 71
- Boston Consulting Group Study The impact of changes to the
operation of the defense commissary system on commissary patrons,
in particular junior enlisted members and junior officers and their
dependents, that would result from displacing current value and
name-brand products with private-label products; and (B) reducing
or eliminating financial subsidies to the commissary system The
sensitivity of commissary patrons, in particular junior enlisted
members and junior officers and their dependents, to pricing
changes that may result in reduced overall cost savings for
patrons.
- Slide 72
- Boston Consulting Group Study The feasibility of generating net
revenue from pricing and stock assortment changes The relationship
of higher prices and reduced patron savings to patron usage and
accompanying sales, both on a national and regional basis. The
impact of changes to the operation of the defense commissary system
on industry support; such as vendor stocking, promotions,
discounts, and merchandising activities and programs.
- Slide 73
- Boston Consulting Group Study The ability of the current
commissary management and information technology systems to
accommodate changes to the existing pricing and management
structure. The product category management systems and expertise of
the Defense Commissary Agency. The impact of changes to the
operation of the defense commissary system on military exchanges
and other morale, welfare, and recreation programs for members of
the Armed Forces.
- Slide 74
- Boston Consulting Group Study The identification of management
and legislative changes that would be required in connection with
changes to the defense commissary system. An estimate of the time
required to implement recommended changes to the current pricing
and management model of the defense commissary system. Report by
September 1, 2015.
- Slide 75
- Defense Chief Management Office
- Slide 76
- Press reportApril 23, 2015: Weighing plan to convert DeCA
workforce to NAF. Align pay, benefits and job protection with NAF.
Savings on personnel, standardized accounting, joint contracts,
combined supply operations. Argues that shift to NAF would allow
considerable savings on store operations while preserving current
business models for resale activities and service-unique exchange
operations.
- Slide 77
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- Slide 79
- Distract and Divide
- Slide 80
- Slide 81
- ALA is mobilizing Educating members of Congress. Putting data
to use Gathering more data
- Slide 82
- Outreachdont lobby ourselves 80 briefings to Senate and House
Economic report More underway Frame the argument and shape the
debate Blunt new normal Support our friends, educate adversaries
Coalition and patron involvement Energizing advocacy groups Grass
roots--Unions Moving resale to top priority Congressional Caucus
Messaging economic, compassionate, mission DoD outreachmilitary and
civilian
- Slide 83
- Slide 84
- Slide 85
- Prevention Pre-emption Preservation
- Slide 86
- ALA positions on the budget The Pentagon has a budget problem
but the resale system is part of the solution and not part of the
problem.
- Slide 87
- ALA positions on the budget and the Commission Budget proposal
will wreck cherished benefits Budget is a shell game stacked with
illusory savings Hits those who need it mostfamilies fixed income
retirees Transfers costs to the exchanges.
- Slide 88
- Slide 89
- Rand raising overall price levels will not be a successful
strategy to cover shortfalls in costs caused by the elimination of
the annual Department of Defense appropriation. Raising prices will
also negatively affect servicemembers and retirees who currently
patronize the commissary system through increased grocery bills
changes in commissary pricing may have negative secondary and
nonmarket effects, including effects on retention and recruitment;
reductions in contributions to Morale, Well-Being, and Recreation
programs; possible demand reductions for military exchanges; and
changes in the calculated cost of living adjustment.
- Slide 90
- Slide 91
- BENS T he benefit appears to have strong value. Makes up two
percent of an active duty officers and four percent for active duty
enlistee's compensation while costing less than one percent of the
military compensation budget. DeCA estimates military families are
receiving $3 billion in annual savings for DoDs $1.3 billion dollar
investment more than a 2:1 return on investment. Informal survey
results from the Army Times and the Center for Strategic and
Budgetary Assessments indicate service members from all ranks and
age groups value the benefit more than it costs to provide. Any
increased cost of the program has largely been attributed to
inflation, BENS found. Numbers from the Department of Defense (DoD)
in fact show that the cost of the commissary system has steadily
decreased or flattened since the inception of DeCA in 1990 if cost
is evaluated through constant dollars. The oft cited rise in costs
can therefore be misleading absent this perspective.
- Slide 92
- BENS there is intrinsic value in the military having a system
of grocery distribution in place, both domestically and especially
internationally. Additionally, since the subsidy covers the costs
of staffing the commissaries, not of buying the groceries, that
subsidy creates jobs, and 64% of those jobs are held by persons
connected to a military service member. If the commissaries were to
close, the consequences would go beyond increased food prices; the
jobs of many spouses and youths in military families would be
eliminated.
- Slide 93
- Slide 94
- AFGE Commissaries and exchanges are an earned benefit treasured
by military families. Converting DeCA employees to NAF status will
cause significant hardship for the agencys workforce. DeCA
employees would face a significant reduction in pay. Highest paid
NAF cashier makes 10 percent less and 23 percent less for highest
paid cashiers. NAF-ing the DeCA workforce means a shopping pay cut
for employees doing the same work.
- Slide 95
- AFGE DeCA employees would face a reduction in benefits. NAF
employees not eligible for Federal Employees Health Benefits. Lose
civil service protections against job loss. NAF employees are
at-will employees subject to business- based actions. Exempt from
20 USC 2461 restricting outsourcing. Working and middle class
Americans who work for DeCA are often military spouses.
- Slide 96
- AFGE Walmartizing the DeCA workforce in order to generate fake
and punitive economies at the expense of American workers is wrong.
Savings from consolidation are illusory at best. Commission
acknowledged that DeCA and AAFES have achieved significant savings
on their own from implementing better business practices. No
programs provide more bang for the buck. Modest cost of providing
military families with inexpensive but essential goods and services
is almost invisible to DoDs budget.
- Slide 97
- 80 percent of all active duty, retirees, and spouses ranked
commissaries as a high or the highest priority benefit, and the
Defense Manpower Data Center confirmed that commissaries are used
by 90 percent of military service members.
- Slide 98
- Tread lightly on merger How to reconcile structural disparity
could far more complicated. Potential minefield for the troops
Devil is in details Congress must vet every last wrinkle to ensure
beneficiaries do not get shortchanged. Very much an open
question.
- Slide 99
- Army resiliency assessment Startling signs of problems
Nutrition Scored well14 % Scored borderline30 % Scored poorly56
%
- Slide 100
- Shareholders have a voice The system belongs to the troops
- Slide 101
- ALA position on the budget and the Commission findings Applaud
the Commission for recognizing the value of the benefits Keep
protections and budget intact until proof is presented If it aint
broke, dont break it Consequences will reverberate across the base
commerce ecologyMWR, exchanges, base support services
- Slide 102
- Slide 103
- ALA position Puts at risk $500 million in annual industry
support. Eliminates $300 million in patron co-pays Puts at risk
$500 million in earnings and dividends from exchanges to military
community programs. Still requires DoD to underwrite overseas and
remote location operations but eliminates the supply chain and
economies of scale.
- Slide 104
- ALA position percent of compensation costs 1 fifth of a percent
of tot DoD budget 2 percent of the DoDs health care budget. Yet one
of the most valued benefits. Patrons have financed billions of
dollars in facilities. System is nearly fully capitalized. Helps
keep cost of living allowance costs low.
- Slide 105
- ALA positions on budget System has already cut no more
cuts-inherently efficient Stop irresponsible dialogue with factsno
more new normal As a vital compensation program, should be exempt
from cuts. For Sequestration, these programs should not be cut
disproportionately beyond the minimum reductions that are mandated
by law. Certainly should not be singled out for major reductions or
ill- advised experimentation or reengineering The resale system is
inherently efficient with DeCA alone reducing its annual operating
costs nearly $900 million a year. These programs are part of the
solution not part of the problem as our report Costs and Benefits
of the Military Resale System demonstratestheir contribution to the
Defense Department far outweighs their costs by a factor of
6:1.
- Slide 106
- ALA positions on budget Nonappropriated funds and surcharge
funds are generated by charges to military personnel and their
families. These funds should not be siphoned off in a convoluted
shell game to pay for legitimate appropriated fund obligations that
have been set forth by Congress over the years. NAF balance sheets
should not be used to balance the budget on the backs of the
troops
- Slide 107
- ALA position on the budget There should be no commissary
reductions beyond the over $700 million a year in annual reductions
that have already been taken out of the commissary budget (includes
the $46 million in the just-passed Omnibus FY 2014 Appropriations
Act, and the $500 million inventory savings from outsourcing
distribution. Commissaries are one of the few DoD programs that has
held costs constant; in FY92 constant dollars, commissary
appropriations have actually declined since 1992. The primary
purpose military families use the commissary is the savings
offered, they will stop coming when the savings go away.
- Slide 108
- ALA position on the budget This is an earned benefit, not just
a store. Commissaries and exchanges are a community hub and bring
the military together. Food inflation is expected to double this
year. Would greatly impact DoDs efforts to promote healthy
lifestyles. DoD may say the stores will remain open but the
practical effect of the appropriations reductions will be that the
stores in the U.S. will close. Cutting commissaries is punishing
success. These operations have already cut spending while other
Defense programs continue to increase.
- Slide 109
- ALA position on the budget The cuts will reduce the current 30
percent savings to zero and the stores in the U.S. would close.
Economies of scale would be lost for remaining overseas stores and
costs and prices would rise. There are huge unknown consequences
such as cascading impact on military PX operations and on-base
community support programs, loss of U.S. supply infrastructure to
support remote and overseas operations. Commissary cuts would
demoralize the military at a time when there is so much uncertainty
over the entire compensation package and force structure cuts.
- Slide 110
- ALA position on the budget DoD says that commissaries will not
have to pay rent or taxes under their proposal. Commissaries should
not have to pay rent anyway on stores built and maintained with
patrons funds. The military is already exempt from taxes under the
Supremacy clause of the Constitution. If you shut down the
stateside hub stores, the supply chain will lose economies of scale
and prices overseas will rise as well. Commissaries support the
Defense mission including DoD efforts to promote healthy
lifestyles.
- Slide 111
- H.R. 1735FY16 NATIONAL DEFENSE AUTHORIZATION BILL CHAIRMANS
MARK
- Slide 112
- Committee action, April 29, 2015 Section 4501, Title XLVOther
Authorizations Working Capital Fund, DeCA Request--$1,154 M
Committee recommendation--$1,476 M Restoration of proposed
efficiencies--$183 M Restoration of Savings from Legislative
Proposals--$139 M
- Slide 113
- HASC provisions added last night By Walsh--to prevent any
closures of commissaries until reports are completed and assessed
by Congress. By Hunter--amendment protecting the commissary benefit
by requiring a comprehensive review of the Asia- Pacific produce
supply before any harmful changes are made to regional second
destination policy. By Hunter--amendment upholds the commissary
benefit and military readiness by urging DoD to maintain existing
overseas transportation funding.
- Slide 114
- Slide 115
- Rational Access
- Slide 116
- Military personnel are entitled at least to the same rights and
privileges as the citizens they are charged to defend.
- Slide 117
- Sectors have inherent challenges Just in past year: Concessions
Tobacco Alcohol Supplements Energy drinks Sugar Healthy foods
- Slide 118
- Hunter Amendment (Sec. 633) The Secretary of Defense and the
Secretaries of the military departments may not take any action to
implement any new policy that would limit, restrict, or ban the
sale of any legal consumer product category sold as of January 1,
2014, in the defense commissary system or exchange stores system on
any military installation, domestically or overseas, or on any
Department of Defense vessel at sea.
- Slide 119
- ALA position Military folks are entitled to the same shopping
rights and privileges as the citizens they are charged to defend.
Products that are legal in the general civilian market should be
available to military personnel. From a practical standpoint, we
find that if legal consumer products are regulated on base, it
merely forces the troops to go off base. If the military wants to
control consumption of any product, it has to be a behavioral
change, not an access change.
- Slide 120
- ALA position The debate over individual product categories such
as alcohol and tobacco (or any other product) should be settled in
the general American populace and marketplace and not specifically
targeted to military personnel. Over the years, the oversight
committees have adopted this view and have judiciously and
deliberately expanded product availability through Title 10 and
review of the Armed Services Exchange Regulations. By exercising
this authority, the Defense
- Slide 121
- ALA position authorizing committees have been able to monitor
and sometimes intervene when other members of Congress or
committees have attempted to regulate product availability. The
SASC and HASC viewpoint generally reflected prevailing practices
and product availability in the civilian marketplace. Usually, the
Executive branch conforms to this philosophy but Congress has
occasionally stepped in when efforts have been made to prejudice
product availability.
- Slide 122
- ALA position The wide price disparity between off base and on
base for tobacco and alcohol has narrowed over the years to the
point where it is virtually even. The demographic has changed where
most of the military live off base and artificial market
manipulation merely serves to inconvenience those on base.
Manipulating the military marketplace for legal products is a
slippery slope that opens the door for further sanctions on a wide
range of other products directed only at the military.
- Slide 123
- Durbin provisionSAC-D bill SEC. 8068. The Secretary of Defense
shall issue regulations to prohibit the sale of any tobacco or
tobacco-related products in military resale outlets in the United
States, its territories and possessions at a price below the most
competitive price in the local community: Provided, That such
regulations shall direct that the prices of tobacco or tobacco-
related products in overseas military retail outlets shall be
within the range of prices established for military retail system
stores located in the United States.
- Slide 124
- Report language on Sec. 8068 The Committee applauds these
efforts and encourages the Department to continue to advance
rapidly toward a tobacco-free military. In support of these goals,
the Committee includes a provision directing the elimination of the
price subsidy provided to tobacco products at military exchanges.
This reform directs the Department to implement a consistent,
verifiable price benchmark for tobacco products at exchanges, as
recent surveys by the National Institutes of Health indicate that
Army and Air Force exchange prices for cigarettes in practice to be
between 1425 percent lower than market price, despite Department of
Defense Instruction 1330.9, which allows only a 5 percent
discount.
- Slide 125
- ALA position on Veteran online shopping Support any effort to
open military resale offerings to larger, deserving audience.
- Slide 126
- 2015 Timetable Budget Committees set top line numberMarch 20
Presidents Commission report to CongressApril 1 or may be delayed
to May 1 or later HASC Mark-up of Defense billApril 29 House floor
action on Defense billMay 13 ALA Congressional Caucus & Public
Policy Forum-June 10 SASC Mark-up of Defense billJune/July???
Senate floor action on Defense billSeptember BCG report to
CongressSeptember 1 at latest HASC/SASC conferenceSeptember-October
Appropriations billsdischarged from Committee in July
Appropriations bills floor action--September
- Slide 127
- 2015 Congressional Caucus June 10 Rayburn House Office Building
The premiere event on the politics & policy of resale Members
of Congress Defense experts Pentagon and Administration
Officials
- Slide 128
- Congressional Caucus Congressman Scott Rigell, Seapower and
Projection Forces Subcommittee, House Armed Services Committee
Steven Parker, Joining Forces Executive Director, The White House
Rory Brosius, Joining Forces Deputy Director, The White House
Congressman Sanford Bishop, Co-Chairman, Military Family
Caucus
- Slide 129
- Congressional Caucus Honorable John Conger, Deputy Under
Secretary of Defense, Installations and Environment Mr. Charles
Milam, Director, Military Family and Community Policy Steve Ham
Defense Policy Advisor to Senator Barbara Mikulski, Chairwoman,
Senate Appropriations Committee Ms. Joan Walters, Chief Operating
Officer and Vice President for Military Medical Research, Samueli
Institute Congressman Walter Jones, Personnel Subcommittee, House
Armed Services Committee Senator Tim Kaine, Member, Senate Armed
Services Committee Congressman Robert Wittman, Chairman, Readiness
Subcommittee, House Armed Services Committee Mr. Tom Philpott,
Author, Military Update
- Slide 130
- Congressional Caucus Mr. John Kamensky, Senior Fellow, IBM
Center for the Business of Government Congresswoman Susan Davis,
Ranking Member, Personnel Subcommittee, House Armed Services
Committee Mr. Russell Rumbaugh, Director, Budgeting for Foreign
Affairs and Defense, and Senior Associate, The Stimson Center
Congressman Randy Forbes, Chairman, Seapower and Projection Forces
Subcommittee, House Armed Services Committee Congressman Joe
Wilson, Chairman, Emerging Threats Subcommittee, House Armed
Services Committee Congressman Buck McKeon, former Chairman, House
Armed Services Committee
- Slide 131
- ALA & Resale Protecting the Benefit