ALA Public Policy Advocacy

ALA Public Policy Advocacy

ALA Public Policy Advocacy

American Logistics AssociationLogistics is our middle nameManufacturers, Distributors and Brokers represent 95 percent of the supply chainHave a hand and a voice in what happensCan help agency partners get to where they need to getOutreachdont lobby ourselves72 briefings to Senate and HouseEconomic reportMore underwayFrame the argument and shape the debateBlunt new normalSupport our friends, educate adversariesCoalition and patron involvementEnergizing advocacy groups Grass rootsMoving resale to top priorityCongressional CaucusMessaging economic, compassionate, missionDoD outreachmilitary and civilian

This is no drillALA prepared

Revolution is what happens after the change already has taken place.SITREPDoD 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 millionThe proposal is direct reduction to military compensation and is inciting fierce opposition.Exchange programs are under stressOn-base business model threatened

Strategic Choices and Management ReviewDont just chip away at existing structures and practices butfashion entirely new ones that better reflect 21st Century realities.Prior modest reforms met political oppositionWe 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, 2013Foundation for the Quadrennial Defense Review due to Congress in February 2014System is strong but fragile and vulnerableConvergence of factors all at once could destroy itThe law will protect us!!

Significant datesHASCSubcommittee marks--April 30, May 1Full committee markMay 6thNo cuts in subcommitteemaybe in full committeeSASCSubcommittee marksPersonnel May 21, other May 20Full committee May 21JCS testimony to SASCMay 6Compensation Commission Report February 15, 2015HASC-mandated reportFebruary 1, 2015Appropriations Bills TBD

FY 2015 Defense Authorization

HASC Bill LanguageRequires review by independent firm experienced in grocery analysis.Look at variable pricing, private label, converting DeCA to a NAFI, eliminating or reducing SDTImpact of these changes to enlisted and junionr officersFeasibility of genrating net revenue from pricing and stock assortment changesImpact of changes on industry support (vendor stocking, promotions, discounts, merchandising)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 DeCAImpact on exchanges and MWRIdentify necessary legislative changesTime required to do and recommended changes.Submit to Congress by February 1, 2015.Full CommitteeMay 6th$100 million reduction?Part of reconciliation of entire HASC bill.Implications/Spin-offs of Commissary ProposalProposal dies outrightno legislative changesoffset reductionsCommercial grocers pounceExchanges sell foodCompromise solution

Convergence of exchange challengesSDT and base operations fundingProduct and pricing restrictionstobacco (CVS), beverage alcoholWage hikes (minimum and SCA)Shrinking force structureCommissary as destination Commissary category encroachment (legislative proposal)Off-base competition

Exchange product assortmentServicemen and women are entitled to the same privileges and product access as the citizens they defendEarly proposal Exempts DECA from Small Business Act, Federal Prison Industries legislation, Service Contract Act, Javits-Wagner-ODay ActAPF for NEXMARTS is eliminated these operations are completely and exchange function with no APF subsidyCombined commissary & exchange operations no longer exist / authorizedDECA 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 oversightAPF funding reduced as follows: FY15 -$200M; FY16 $600M; FY17 -$1,000Mactual cut unclear----carryover $80M could reduce2015 actual cut or actual offset required to $120 M.

Early proposalCan sell other than brand named itemsCan sell merchandise at a marked up price which revenue can be used to paid for operational expenseseliminates Congressional notification prior to closing a commissary closures become a business decisionAPF support is for operation of overseas and remote & isolated locationCompetition between military retail activities must be avoided to greatest extent possibleReceipts 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 sectorEarly proposalAuthorized 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 storesEliminates DECA Board of Directors however a Board can be established to advise senior officialsRevenue from dishonored check fees and licensing of scanner data can be used for operations (vice surcharge account)AAFES proposal to run commissariesMarch 17, 2015Said was prompted by DeCA proposalWill cost AAFES $1 billion if commissaries closeNeeds more analysisWould result in closure of commissaries and destruction of exchanges dividends.Dont create another NAFIServe same customerCombine DeCA and exchange buying powerAAFES would run commissariesDepSecDef emailMarch 26, 2015Proposal 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.

In announcing the cuts as part of the budget roll-out, Secretary Hagel says that:DoD needs to cut compensation costsNo commissaries would closeOverseas and remote commissaries would continue to receive appropriationsCommissaries will operate like PXs and still offer substantial (stated as 10% in briefing) savings Would continue to get free rent and pay no taxesMilitary in the United States can shop at Target or Wal-Mart

Obama at Pendleton-Aug 7, 2013Closing commissaries Not how a great Nation should treat its military and military families

I dont 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,Senator Begich--AlaskaIncreasing commissary costs would be a kick in the teeth to Alaskas 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 themfor 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.

Sergeant Major of the USMCI personally think its ridiculous that were going after something that saves a young lance corporal $4,500 a year.Compensation CommissionRetirement payments expected to double by 2035 to $116.9 billionOm 2017, DoD plans to have 100,000 fewer troops but spend as much as today on personnelArmy personnel costs grown by 50 percent over last ten yearsHealth care costs up $30 billion over last decadeIraq and Afghanistan health care bubble80 percent say they would trade retirement policy changes for a 1 percent increase in pay

Warner/Chambliss billthe 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 CommissionForbes billRandy Forbes of VirginiaMilitary Sustainment ActProhibit 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 nations uniform and is an unacceptable breach of faith with our warriors and their families.Army Times on Comp CutsSome context: In a $496 billion plan rife with bloated weapons acquisition programs, these pay and benefits proposals would save the $2.1 billion next yearabout 0.4 percent. The Pentagon loses more than that in its couch cushions each year.Thad CochranSAC/D Vice ChmI 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 Defensepunishing 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. CBS NewsIt 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 youre trying to figure our where else you can cut. You cant cut out where you live, you cant cut out your food, you cant cut out your heat. Military TimesIf 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 wouldnt save what I do at the commissary. Rachel Anderson, Army Staff Sergeant SpouseOther 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 babys diapers. Discounted prices at the military grocery store are a lifesaver.NBC NewsThis 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 doesnt take into account the bottom line for most military families. Its going to be painful.2014 Congressional CaucusJune 24Rayburn House Office BuildingMembers of CongressDefense expertsPentagon and Administration Officials

Compensation Commission

Compensation Commission

Compensation CommissionIncluded in 2013 NDAAMilitary Compensation and Retirement Modernization CommissionEnsure long-term viability of all-volunteer forceEnabling high quality of life for military familiesAchieving fiscal sustainability of compensation and retirement systemsExamine all laws and policies affecting various programs and benefits

Compensation CommissionTalk of cost-cutting started in 2008post-9/11 spending spreeJuly 22, 2010 DBB Report Reducing Overhead and Improving DoDs Business OperationsSpend more on health care and benefits for former military than on troops in uniformPersonnel costs unsustainableCost per person in active force increased 46 percent75 percent of budgetAt current growth rate, personnel costs will consume entire defense budget by 2039OK as long as budget risingnow it is collidingCompensation CommissionAdded by conferees:Department of Defense morale, recreation, and welfare programs, the resale programs (military exchanges and commissaries) and dependent school systemClosely 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.Compensation CommissionNine members & $10 millionMajority and Minority Leader of House and Senate appoint two each within 4 monthsAll hearings open to publicPresident to report to Congress within 60 days of receiving the reportGrandfather benefits to current membersProvides for expedited consideration of recommendations by Congress

Compensation CommissionWithin 5 monthsprinciples addressing:Maintaining recruitment and retention of the best military personnelModernizing retirement and compensation systemsDifferentiating between reserve and active serviceEnsuring fiscal sustainabilityWithin 9 months, SecDef to transmit his recommendations to the Commission and concurrently to CongressReport within 15 months to the PresidentReport delayed until early 2015Compensation CommissionInput ongoingALA positioned to input with economic reportand resale research data

President RecommendationsCurrent members can choose to switch to new retirement system but not requiredEnsuring compensation comparable to outsideSufficiently flexible to adjust to economic conditionsGenerous enough to motivate and retainGrandfather ALA Mobilizing

PreventionPre-emptionPreservation

ALA positions on budgetSystem has already cut no more cuts-inherently efficientStop irresponsible dialogue with factsno more new normalAs 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 reengineeringThe 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.This is an earned benefit, not just a store. Commissaries 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.

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.

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.

Insufficient analysis/study of the consequences of the reductionsCongress, at the Administrations request, established the Military Compensation and Retirement Modernization Commission and specifically included commissaries as part of the review. The Commission was to look at commissaries in relation to other compensation benefits and provide recommendations to the Congress. The commission should be allowed to do its work.Commissary is an earned benefit in recognition of service.Reductions to the commissary benefit are out of proportion to the reductions that are shared by other Defense programs

Power military household income with$2.8 billion in price savings and another $250 million in income for family members who work there. Is a cherished and well-used benefit with 90 percent of active duty families using it last year and over 98 million customer transactions. Large operations in the United States anchor and indirectly underwrite operations in remote and overseas areasequalizing the benefit no matter where our people serve.Are a flexible benefit that expands and contracts with the size of the force structure with nearly 150 of the stores closed corresponding with successive rounds of BRAC and force realignment over the years.

Have a declining budget, with funding for the benefit remaining stable and dropping in real terms during the Defense budget ramp-up and even when the number of eligible beneficiaries increased. Allow the Department to economize on cost-of-living allowances and personnel and operating costs in other areas such as direct pay and transportation. Commissaries support multiple Administration objectives including: hiring of Veterans and family members, supporting military quality of life; providing minority and small business opportunities; and opportunities for the blind and severely disabled. The Defense Commissary Agency is one of the few organizations in the Department that has been able to produce a clean financial statement, a major objective of the DoD.

Commissary patrons have built billions of dollars in facilities with their five percent surchargeFood inflation is expected to double in the coming yearRepresent a partnership between the public and private sector, taking advantage of a private sector supply chain that contributes an additonal $500 million a year ancillary support to the military.Represent a partnership between the beneficiaries and the DoD with these beneficiaries offsetting nearly 20 percent of the operating costs.Provide a tremendous amount of no-cost compensation to the Department through state and local tax savings for beneficiaries valued to the Department at nearly $300 million.

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.

Dynamic environment calls for energized partnershipPublicly supported entities usually predictableThis has changedManufacturing, distribution, store supportIndustry employmentIndustry respects agency prerogativesStability and predictability key to cost controlAgency decisions reverberate across the chainIndustry can react and support with adequate noticeAdvance notice avoids disruption of product flowCooperation and communication key in dynamic environment Patron support is mutual bottom line

The caseCompassionateEconomicNational Security Mission

We are part of the solution,not part of the problemALA & ResaleProtecting the Benefit

The Defense Commissary SystemUnderstanding Commissary Value, Benefits, and Impacts

Contents

DoD Proposing To Eliminate Appropriations That Support Commissaries2DoD Legislative Proposal To Cut Commissary Benefits2Chairman, Senate Appropriations Committee Strongly Opposes Commissary Cuts3Irreversible Damage To A Valued Earned Benefit3Major Impact To Enlisted Pay4Faces Behind The Bases A Real Human Impact5Who Supports Commissary Cuts?7Who Opposes Commissary Cuts?7Hold Your Fire On Benefit Cuts8Legislative Proposals Against The Commissary Cuts8What DoD Says:9The Defense Commissary System Taking Care Of Our Military9The President and The First Lady10Devastating Ripple Effects11What Opponents To The Cuts Say:12Support For These Worthy Causes Destroyed By Commissary Cuts15Commissaries A Major Return On Investment17Toys For Tots FoundationMarines Toys for Tots Foundation is hosted at the commissary by Acosta Military Sales. This program deals with younger children who must brave the hardships of having a parent or even both deployed away from home.

Wounded Warrior ProjectAcosta Military Sales supports Wounded Warrior Project, the Believe in Heroes! program in various sales promotions throughout the year.

Special OlympicsProcter & Gamble supports the Special Olympics annually with promotional pricing resulting in large donations to the non-profit.

Scholarships For Military ChildrenAcosta Military Sales and Kelloggs supports Scholarships for Military Children annually. Kelloggs partners with NASCAR as a third party and depending on which place the Kelloggs car comes in the race depends on how much money is donated to the scholarship fund.

Fisher House FoundationFisher House Foundation is supported year round by many of DeCA Industry members: The Hershey Company, Kelloggs, Keebler, Unilever, Advantage Continental, Acosta, and OSC.

Box Tops for EducationGeneral Mills offers Box Tops for Education program as a school fundraiser. The program awards cash winnings for participating schools that have collection points for box tops. General Mills is the commissarys top supporter of this program.

DoDs Military PathwaysThe Department of Defense-funded program Military Pathways partners with DeCA to help military families embrace a healthier lifestyle and highlight the important relationship between physical and psychological health issues. In the past the commissaries have distributed free reusable grocery bags with Military Pathways info printed on them.

DoDs Real Warriors ProgramReal Warriors Program is supported by DeCA. This is also a DOD-funded program that covers all active duty military service members returning from the war and assisting them with re-entering the mainstream of society. DeCA has in the past displayed posters in the stores with their contact info and has endorsed the program through print media.

DoDs Mental Health MonthMay is Mental Health Month. In observance of this DOD-funded Mental Health Self-Assessment Program, DeCA partners with their office assisting them to get the word out on their assistance program, through electronic and print media.

Operation Enduring Care ProgramProcter & Gamble and USOs Operation Enduring Care Program, a program that helps wounded warriors recover, spend quality time with families and prepare for their transition back in to the local community.

National Breast Cancer FoundationProcter & Gamble supports the National Breast Cancer Foundation by donating a portion of sales to assist with early detection of breast cancer. Nestle` supports the National Breast Cancer Foundation by donating a portion of sales towards the research of breast cancer.

Soldiers Angels Adopt a Soldier ProgramOverseas Service Corporation partners with the Soldiers Angels Adopt a Soldier program, a volunteer foundation that supports the armed forces and their families.

Crisco CaresOverseas Service Corporation created Crisco Cares sending part of their sales to a base-supported charity.

The Women in Military Service to America MemorialAcosta Military Sales donates a portion of their sales to The Women in Military Service to America Memorial, located near the entrance too Arlington National Cemetery.

Starlight FoundationColgate-Palmolive has over 20 years partnering with the Starlight Foundation, a non-profit organization dedicated to helping seriously ill children cope with their situation through entertainment, education and family activities.

Canine Assistants ProgramBig Heart Pet Brands/Del Monte has for years offered the Canine Assistants Program for commissary customers in an effort to help make daily life a little easier for members of the military and their families. Instead of needing to ask someone for assistance, selected recipients receive a specially trained Canine Assistants service dog.

Feeding America ProgramConAgra Foods donate meals to help feed hungry children through the Feeding America program. When customers purchase specially marked ConAgra Foods packages and enter a package code to activate a meal donation.

National Military Family AssociationS & K Sales Company supports the National Military Family Association through high-value coupons for the customer and donations to the association through their Salute to Military Families program.

Project Healing WatersS & K Sales Company supports Project Healing Waters by donating sales proceeds which helps raise money for an all-volunteer, nonprofit organization that helps wounded veterans and active-duty military recover physically and emotionally by introducing them to the skills of fly fishing.