ALA Public Policy Advocacy

1. ALA Public Policy Advocacy

2. American Logistics Association • Logistics is our middle name • Manufacturers, Distributors and Brokers represent 95 percent of the supply chain • Have a hand and a voice in what happens • Can help agency partners get to where they need to get

3. Outreach—don’t lobby ourselves • 72briefings 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 • Moving resale to top priority • Congressional Caucus • Messaging – economic, compassionate, mission • DoD outreach—military and civilian

4. This is no drill ALA prepared

6. Revolution is what happens after the change already has taken place.

7. SITREP • DoD is targeting the commissary appropriation in its 2015 budget submission, reducing $200 million of the $1.4 billion annual appropriation in 2015, $600 million in 2016, and $1 billion in 2017, leaving it with $400 million • The proposal is direct reduction to military compensation and is inciting fierce opposition. • Exchange programs are under stress • On-base business model threatened

8. Strategic Choices and Management Review • Don’t just chip away at existing structures and practices but…fashion entirely new ones that better reflect 21st Century realities. • Prior modest reforms met political opposition • “We are now in a different fiscal environment dealing with new realities that will force us to confront these tough and painful choices.” • Aim to conclude review by May 31, 2013 • Foundation for the Quadrennial Defense Review due to Congress in February 2014

9. System is strong but fragile and vulnerable • Convergence of factors all at once could destroy it

10. “The law will protect us!!”

11. Significant dates • HASC • Subcommittee marks--April 30, May 1 • Full committee mark—May 6th • No cuts in subcommittee—maybe in full committee • SASC • Subcommittee marks—Personnel May 21, other May 20 • Full committee May 21 • JCS testimony to SASC—May 6 • Compensation Commission Report – February 15, 2015 • HASC-mandated report—February 1, 2015 • Appropriations Bills TBD

12. FY 2015 Defense Authorization

13. HASC Bill Language • Requires review by independent firm experienced in grocery analysis. • Look at variable pricing, private label, converting DeCA to a NAFI, eliminating or reducing SDT • Impact of these changes to enlisted and junionr officers • Feasibility of genrating net revenue from pricing and stock assortment changes • Impact of changes on industry support (vendor stocking, promotions, discounts, merchandising)

14. HASC Bill Language (cont.) • Ability of current commissary management and information technology systems to accommodate changes to existing pricing and management structure. • Category management expertise of DeCA • Impact on exchanges and MWR • Identify necessary legislative changes • Time required to do and recommended changes. • Submit to Congress by February 1, 2015.

15. Full Committee—May 6th $100 million reduction? Part of reconciliation of entire HASC bill.

16. Implications/Spin-offs of Commissary Proposal • Proposal dies outright—no legislative changes—offset reductions • Commercial grocers pounce • Exchanges sell food • Compromise solution

17. Convergence of exchange challenges • SDT and base operations funding • Product and pricing restrictions—tobacco (CVS), beverage alcohol • Wage hikes (minimum and SCA) • Shrinking force structure • Commissary as destination • Commissary category encroachment (legislative proposal) • Off-base competition

18. Exchange product assortment • Servicemen and women are entitled to the same privileges and product access as the citizens they defend

19. Early proposal • Exempts DECA from Small Business Act, Federal Prison Industries legislation, Service Contract Act, Javits-Wagner-O’DayAct • APF for NEXMARTS is eliminated – these operations are completely and exchange function with no APF subsidy • Combined commissary & exchange operations no longer exist / authorized • DECA can purchase / sell beer & wine (but not distilled spirits) • DECA is exempt from Berry Amendment (currently required for supplies such as bags, meat trays, plastic wrap, etc) • DECA is authorized to supervise construction of surcharge related projects – avoiding necessity of using surcharge for Service oversight • APF funding reduced as follows: FY15 -$200M; FY16 – $600M; FY17 -$1,000M—actual cut unclear----carryover $80M could reduce2015 actual cut or actual offset required to $120 M.

20. Early proposal • Can sell other than “brand named” items • Can sell merchandise at a “marked up” price – which revenue can be used to paid for operational expenses • eliminates Congressional notification prior to closing a commissary – closures become a business decision • APF support is for operation of overseas and remote & isolated location • Competition between military retail activities must be avoided to greatest extent possible • Receipts from several other sources of income will augment appropriations: mark up of merchandise, sale of recyclable material, sale of excess property, license fees, royalties, “co-op”    funding     from vendors, fees similar to those found in retail grocery sector

21. Early proposal • Authorized merchandise categories are eliminated – can sell any merchandise • Eliminates requirement to purchase from exchanges, including tobacco (exchanges would lose tobacco profits) • Can contract out to operate specified store functions (I read this as concessionaires), but cannot contract out supervision of stores • Eliminates DECA Board of Directors – however a Board can be established to advise senior officials • Revenue from dishonored check fees and licensing of scanner data can be used for operations (vice surcharge account)


22. AAFES proposal to run commissaries—March 17, 2015 • Said was prompted by DeCA proposal • Will cost AAFES $1 billion if commissaries close • Needs more analysis • Would result in closure of commissaries and destruction of exchanges’ dividends. • Don’t create another NAFI • Serve same customer • Combine DeCA and exchange buying power • AAFES would run commissaries

23. DepSecDef email—March 26, 2015 • Proposal to OMB makes two significant changes to the statute by eliminating restrictions on selling goods at cost and on selling only brand name goods. • These two changes will provide DeCA with enough price and product flexibility to generate sufficient revenue to account for the $200M reduction in FY 2015. • Further direct CAPE to review other changes to statute and consider adopting an exchange business model and other options for consolidation of commissary and exchange functions.

27. In announcing the cuts as part of the budget roll-out, Secretary Hagel says that: • DoD needs to cut compensation costs • No commissaries would close • Overseas and remote commissaries would continue to receive appropriations • Commissaries will operate like PXs and still offer substantial (stated as 10% in briefing) savings • Would continue to get free rent and pay no taxes • Military in the United States can shop at Target or Wal-Mart

30. Obama at Pendleton-Aug 7, 2013 Closing commissaries “Not how a great Nation should treat it’s military and military families”

39. “I don’t think we ought to cut the commissary budget. ... I think if we want to look at the stress military families are facing, we need to look at their activities of daily living and look at this holistically. ... [The commissary] is one of the most important tools you have for the health and well-being of the military and the garrisons in this country,”

40. Senator Begich--Alaska “Increasing commissary costs would be a kick in the teeth to Alaska’s 10,000 retirees and 65,000 active duty service members and their families. These costs will do little more than increase out-of-pocket costs for them…for DoD to propose more out-of-pocket costs from service members and vets is just adding insult to injury.” Letter to the Chairman, Senate Armed Services Committee.

42. Sergeant Major of the USMC “I personally think it’s ridiculous that we’re going after something that saves a young lance corporal $4,500 a year.”

43. Compensation Commission • Retirement payments expected to double by 2035 to $116.9 billion • Om 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

44. Warner/Chambliss bill “…the monthly amount of funds made available by the Department of Defense for the defense commissary system during fiscal year 2015 may not be reduced below the average monthly amount of funds made available for that system during fiscal year 2014 until the date ofthereport of the Military Compensation and Retirement Modernization Commission…”

45. Forbes bill • Randy Forbes of Virginia • Military Sustainment Act • Prohibit funding reductions for commissaries in 2015 pending a report of the Military Compensation and Retirement Modernization Commission. • “Reducing commissary services is essentially cutting the pay of those who volunteer to wear this nation’s uniform and is an unacceptable breach of faith with our warriors and their families.”

46. Army Times on Comp Cuts “Some context: In a $496 billion plan rife with bloated weapons acquisition programs, these pay and benefits proposals would save the $2.1 billion next year—about 0.4 percent. The Pentagon loses more than that in its couch cushions each year.”

47. Thad Cochran—SAC/D Vice Chm “I disagree with the notion that closing base commissaries of raising charges to service members should be used to cur the budget of the Department of Defense…punishing those who have served in the military and who may be called upon to risk their lives for our freedom and security it not justified. “

48. CBS News “It would directly affect my household budget,” said Rheanna Bernard, spouse of an Air Force Tech Sergeant who plans every meal.” It would cause stress because then you’re trying to figure our where else you can cut. You can’t cut out where you live, you can’t cut out your food, you can’t cut out your heat.”

49. Military Times • “If we were forced to shop off post for groceries, I would have to go from place to place to save money, and I believe I still wouldn’t save what I do at the commissary.” Rachel Anderson, Army Staff Sergeant Spouse • “Other than health care, the commissary is one of the most important things that people need to get by,” said Jes Hogan, Army spouse and motherof four children. Hogan worries about her grocery bill,--the cost of her 18-month-old baby’s diapers. Discounted prices at the military grocery store are a lifesaver.”

50. NBC News “This is a pay cut, pure and simple,” said Jeremy Hilton whose wife is an Air Force officer who deployed to Afghanistan. “Anyone who tells you otherwise is playing an inside-the-beltway, fuzzy math game that doesn’t take into account the bottom line for most military families. It’s going to be painful.”