Advocacy
 Representing common interests
 Preserving the benefit
 Advancing member issues
 Work with White House/OMB, Defense,
Homeland Security, Transportation,
HASC, SASC, HFSC, HAC-D, SAC-D,
SFC, GRO, HSGAC, W & M, Banking
Past year
 3 percent withholding
 1099 requirement
 Interchange fees
 Coburn amendment
 Burr Bill (S. 277)
 Bowles-Simpson
 Defense Budget Review
2011 Active—2012 More Active
 Big issue is the budget
 Perennial disagreement over cuts versus taxes
 Budget Control Act (BCA) August 2011
 Raised the debt ceiling
 Pledge to cut deficits $2.1 T from 2012-2021
 Half from Defense
 Chainsaw running in the basement
 Sequester not neutral—Defense represents 19 percent of
budget but would absorb 50 percent of cuts--$500 Billion
more from Defense in addition to $487 B already taken and
$178 billion under Secretary Gates—13 percent of budget by
2017
Key Dates
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April 13, 2011—President presents plan to reduce deficit by $4 T
August 2011—Budget Control Act—Supercommittee
November 21, 2011—Supercommittee fails
January 5, 2012—President and SecDef announce new defense
strategy at Pentagon
January 26—DoD budget released
November 6—Election day
December 31—Bush tax cuts expire
January 2—Sequestration begins
January--Debt Ceiling increase
January 1—Payroll Tax Cuts Expire
January 3—113th Congress begins
Armageddon Perfect Storm
 Most predicting no action before election
 January 2013—
Debt Ceiling reached—default threatened
Tax cuts expire
Continuing resolution needed
Medicare doctor increases
Payroll tax cut expires
Sequestration takes effect
Combination—4 percent hit on GDP
Defense Budget Timetable
 Pentagon and OMB lawyers already studying how sequestered
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cuts would take place. Comptroller looking at cuts to
individual accounts, i.e., —Navy shipbuilding or Army O & M.
Panetta—”Across the board to all Defense Programs”. ”Inflict
severe damage on Department of Defense.” ”Planning would
have to begin this summer”
$56 B in added Defense Cuts in January 2013
Depends on baseline—2013 real cuts under sequestration in
$30 to $50 Billion range
Comes in the middle of January 2013 “Perfect Storm”
 Bush tax cuts of 2001 and 2003 expire at year end
 Sequester start looms
 Need to raise debt ceiling (could be November 2012)
Budget Control Act of 2011
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FY 2011 Continuing Resolution Fight/Resolution
Near-term—Gates Cuts
Budget Control Act of 2011
2012—DoD $525 B--$5 B below 2011, $25 B less than
requested
 Beyond 2013—Caps on overall discretionary spending-$350 B to DoD over 10 years in line with $400 B
Obama cuts by 2023
 Next round—Doomsday Machine--$54.7 billion in
Defense cuts each year beginning in 2013 through 2021
Budget Control Act of 2011
 Half of $1.2 T from Security (050)
 Exempts health care, retirement, wars with option to
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exempt military pay
Ax falls on O&M, Procurement, R&D—O&M outlay rich
Committee could come in under $1.2 T—deduct passed
legislation from the $1.2 T
Consequences January 2013 (after election)
Trigger worst case--$99B cuts in 2013, $970B over 10 years
July 29, 2013 DoD budget proposals were submitted
Cuts already hitting some sectors—Air Force, Army, Navy
base operations reductions—i.e. ,6500 IMCOM positions
cut in 2012
Budget Control Act--Defense
 Can’t touch wars
 DoD already building budget for $400 B in reductions--will
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have to adjust for new reductions
Worst case, DoD another $600 Billion over 10 years
Appropriators already resetting their allocations
DoD already readjusting budget
Debt ceiling deal forces appropriators to reset their
allocations to Defense
DoD had planned on $400 B in reductions on top of Gates
reductions of $172 billion —now must plan for another
$400 Billion to $1 Trillion over 10 years
Sequestration
 Indiscriminate cuts with half aimed at Defense
 HBC Action March 29—replace sequester with
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reconciliation instructions to six committees for cuts, for
subsidies for health care insurance, child tax credits, and
the social services block grant—opposed by Democrats
E & C Committee—April 25—Cut healthcare, rescind funds
for other programs – opposed by Democrats
April 23—Veterans programs ruled exempted
Senate Budget Committee – Bowles-Simpson
Majority Leader Reid—”Adhere to Budget Control Act”
Strategy and 2013 Defense Budget
 2 more rounds of base closures—2013 and 2015
 By 2017, the Army is projected to shrink by 72,000 soldiers to
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490,000, the Marines will shrink by 20,000 to 182,000, the Navy
will shrink by 6,200 to 319,500 and the Air Force will shrink by
4,200 to 328,600. Pre-war levels.
80K reduction—Marines and Army
Reduce Europe—Brigades out of Baumholder and Schweinfurt—
About 30K each. Keep Vicenza and Vilseck brigades, Okinawa
2500 personnel from Okinawa to Hawaii…5000 to Guam—pares
back $21 billion ramp-up in Guam
Military Retirement Modernization Commission that will have
the time and staff to look at this very complicated area of
military compensation and make recommendations.
Strategy and 2013 Defense Budget
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Tricare fee increase
Protect “number of (commissary) stores”
Cut DeCA $5 M
Top line $525 billion—2 percent less than 2012, $259 billion
less than programed over 5 years--$487 billion less over 10
years – still above 2008 levels
 Personnel—one-third of budget represents on 10 percent of
the reductions
 “Efficiencies”--$60 B over five years—Army--$19 B, Navy-$6 B, AF--$7 B—other $30 B—illusory??
 Pay raises in 2013 and 14 but more limited in 2015
2012 changes
 DeCA—organizational restructuring, $6M savings,
eliminate outreach and marketing, health and nutrition
program, annual commissary assessment, eliminate
administrative positions
 Convert commander AAFES and NEXCOM to SES
Appropriations Apportionment
 Hard decisions are made on outlays in Appropriations
Committees
 SAC 302 (b) allocations April 17--$511 B HAC April 24-$519 B
 In past, would make up in supplemental requests
 Flexibility door closes for restoration as supplementals
are more closely monitored.
FY 2012 NDAA
 Funds DeCA, Exchange, and MWR request
 Report on extending commissary and exchange
benefits to Federal employees overseas—reimbursed
 3% withholding—exempt resale and MWR
 Treasury has capability to certify compliance
 Judicious use of IRS capability to determine tax status
can be used to exempt DeCA, exchanges and MWR
without loss of revenue to government
 Exchanges may access Federal Financing Bank. Saves
$30-$50 M -- Sec 645
FY 2013 NDAA—HASC Mark-up
 Extend through 2018 period of eligibility for 2 years of
commissary and exchange benefits for involuntarily
separated military
 Eliminates requirement for SecDef to report changes
in merchandise restrictions required to prevent
violation of treaty obligations of the U.S. & host nation
laws
 Establish guidelines for identification and purchase of
fresh meat, poultry, seafood, produce and other
products raised through sustainable methods
 Personnel S/C resale hearings—October??
CBO Budget Option Findings
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Included with Deficit Reduction Commission Report
Comments sought by OMB on proposal
Components
Exchanges have more flexibility in procurement and
personnel practices than DeCA.
Consolidate Exchanges and DeCA.
Eliminate duplicative administration.
Convert commissary employees to NAF.
Consolidate over 5 years.
At year 6 budget authority lowered by $2 billion/year.
Return 1/3 of the $2 billion to active duty with grocery
allowance.
CBO Budget Option Components
 Grocery allowance phased in to coincide with
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consolidation at each base
Net annual savings by 2016 would be $1 billion.
Save $8 billion in outlays over next decade.
Charge 7 percent more for groceries.
Would cost active duty, retired and reserve $1.4 billion
annually.
Active duty would pay $400 more per year offset by
grocery allowance.
CBO Budget Option Components
 Families benefit from longer store hours, one-stop
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shopping, access to private label currently not
authorized in DeCA.
Greater certainty in benefit not subject to
appropriations.
$400 grocery allowance targeted to specific pay grades
with larger allowances to junior enlisted.
Consolidated system better able to compete with offbase enterprises.
Retirees would pay $325 more per year on groceries.
.S 277—Senate Veterans Affairs Bill
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Passed full Senate Veterans Affairs Committee
Despite assurances—still a threat
Eliminates all Title 10 prohibitions to CBO option
Eliminates key Title 10 protections—pricing, stock
assortments, consolidation restrictions
Single system by 2013
Self sustaining by 2016
CBO estimates 20 percent savings from efficiencies, rest
from increased prices in combined system—7 percent price
increase
Saves $2.5 B from 2013-2016
Other actions aimed at resale
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Coburn Back in Black Report
Coburn amendment to 2012 NDAA
Bowles-Simpson adopts CBO proposal
S. 277 still alive in committee
H.R. 649—Welch/Doggett
 Consolidate by January 1, 2013
 No appropriations used thereafter
 Referred to HASC
 Title 10 currently prohibits
 Sitting in committee
March 6, 2012 testimony--SBC
“An End to Commissaries and Exchanges. On
benefits side…an end to commissaries and
exchanges should be seriously considered.
These provide benefits unequally and
somewhat anachronistically to military
service members and their families, and it
makes more sense to eliminate them than to
consider further cuts in compensation.”
Michael O’Hanlon
Brookings Institution
O&M Defense Commissary Agency
and Exchanges—HASC Report 9/11
 “Appropriated funds for commissaries and exchanges
reduced in FY 13 and eliminated in FY 14”
 “Grocery savings for families are decimated (30%
reduced to 15% or even zero”
 “Option—elimination of exchanges in favor of selfsustaining enhanced commissaries exclusively selling
high profit exchange goods”
 “Exchanges on life support except where they can sill
make a profit selling limited range of goods and
overseas where they will required some appropriated
fund support—exchange support of MWR stops”
ALA
Mobilizing
Prevention
Pre-emption
Preservation
Total Market Capture
 What is the total amount of discretionary spending for
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the military marketplace?
3 percent pay raises means we lose ground each year if
sales are flat
What are we capturing?
Sales--$16 B—Marketplace $200 B
1 percent increase--$2 billion
Why and Why not?
Use it or lose it—especially for younger troops
Coalition driving to increase sales
ALA Assault on S 277 & CBO Cut
 Increase grocery prices while increased food stamps
 Guts key part of White House military family effort
 Throw 50,000 family members and Vets out of work
 Take away benefit while fighting two wars
 Take away billions invested by shareholders
 Force military overseas to shop off base
 Gut funding for critical military community programs
 Kill key public/private partnership program
 Kill programs rating highest on federal accountability
ALA Testimony
 To HASC Personnel Subcommittee--February 10, 2011:
 Defend funding for full benefit
 5:1 ROI—savings, COLAs, infrastructure improvements, family
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employment, Industry in-kind support, transportation efficiencies,
retention value
Cost constant—other programs increased 100-200%
Accountable stewards
DeCA $1 billion in annual efficiencies since 1991—Efficiencies
continue—DeCA August 5 2011 announcement
Exchanges inherently efficient, direct mission support
Cost cutting in DNA
Single, affordable base access cards
Congressional Support Gathering
 ALA, Marketing Council, COMID, Military Coalition
 Appropriations Committees Chairmen Stated Support
 67 Members signed letter to Sec. Panetta “…commissaries and
exchanges should remain insulated from radical restructuring.”
 Letter to Defense Business Board by Wilson/Davis
 Wilson/Davis Op-ed August 14—Washington Times:
“…the purpose, power and efficiency of the commissary and
exchange systems must not be overlooked.” “…the need to care
for military families is a top priority for Congress.”
“(discontinuing) these programs would increase costs to military
families, cause higher unemployment for families, and would
end one of the government’s most efficient programs.”
69 Members of Congress to
Secretary of Defense Panetta 7/21
 “Look past the rhetoric by budget-minded advocates
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and understand the immense value and cultural
necessity of the military resale systems.”
“Few programs can match the power of military
commissaries and exchanges to rally and solidify the
security and strength of the military community.”
“Are among the most highly prized benefits.”
“Consider the purpose, power and efficiency of
commissary and exchange activities.”
“Should be insulated from radical restructuring.”
HASC Committee Report 9/22
 “Breaking faith with the military.”
 “Cuts of this magnitude require a fundamental
cultural shift in the commitment to DoD
school systems, military commissaries and
exchanges, and other morale, welfare and
recreation programs, significantly reducing
support of military families and retirees.
Family readiness will be degraded.”
HASC to Defense Business Board
 “We are aware that the Defense Business Board has been
examining commissary and exchange programs in recent months
(and) …inclined to recommend the current military resale systems
be dismantled and the benefit reduced or eliminated.”
 “Military resale stores … contribute directly to the welfare of the
military communities that sustain the combat readiness of our
deployed forces.”
 “These programs are highly efficient and effective in delivering
this important benefit and we strongly believe it would be a tragic
waste of a treasured benefit if they were to be discarded.”
The case
Compassionate
Economic
National Security Mission
Build the economic case
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$20 billion over 20 years
Challenge CBO assumptions & findings
Families save $6500 to $7000 per year
Boosting patronage & Protecting benefit one in same
Resale has constantly been in cost cutting or no growth
mode
 Other QoL areas realizing 30, 40, and often 100 & 200
percent increases
 Talking about health care co-pays: We’ve always had copays—it’s called mark-ups and surcharge
Economic Case
 70 percent increase in food stamp redemption
 Sunk costs – buying the car but not putting gas
in it
 Sales imperative—increase share of AD who
use benefit
 Tax savings alone justify benefit
 Family and Veteran employment
 Contribution to economy/balance of payments
Economic case
 Strong force in our National economy and with the military
 Member companies contribute nearly $1.2 trillion to the economy
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and generate millions of jobs
System builds nearly $600 million in facilities each year
generating thousands of construction jobs in the private sector
Support for large manufacturing jobs and a large number of
small businesses that are vital to the future growth of our
economy
Military market -- $18 billion sales and produce 30,000 jobs for
American industry
100,000 jobs for military family members—billions in additional
household income
Compassionate Case
 Military coming off fighting two wars
 Families under stress
 Compensation being squeezed in other areas
 Care for those deployed
 Care for those at home
 Multitude of benevolent causes run through system
 Veteran and wounded warrior hiring
National Security Mission case
 Ingrained in OSD fabric
 Not inextricable without a major cost
 Adapts for force structure
 Brigade re-stationing
 BRAC
 Schweinfurt, Baumholder, Okinawa relocations
 Underpins transportation system
 Maintains ties with installations
 Supports deployed forces—forward combat areas—95 sites in
theater—resale workers deployed
 All things to all people world-wide
 Underpins DoD’s overseas transportation system
 $150,000 to $200,000 to train a troop and $1 million for pilots,
doctors, specialists
Equity
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Patrons are shareholders
They have equity in the system
Management runs the system but patrons own it
Have invested billion in capital through surcharge and
mark-ups and have capitalized at nearly $50 billion
Contribute $600 million each year
$20 Billion to facilities and programs since 1992
Have taken capital loss at closed and realigned bases
Can’t take what’s not yours
Wilson/Davis Op-Ed—8/15
 “The commissary system delivers a remarkable
$2.08 return benefit for every dollar expended...”
 “…one of the federal government’s most costeffective operations…”
 “Few programs can match the power of the
military resale systems to rally and solidify the
strength of the military community, the bedrock
of military readiness.”
 “Defense officials must weigh the immense value
and cost savings of the military resale systems
against fleeting political rhetoric.”
Consistent with FLOTUS goals
 Support Military Quality of Life
 Support healthy life style
 Support reducing child obesity
 ALA taking initiative with exchanges and
commissaries to put resale in front of FLOTUS
 Presentation of all resale positives
 Cooperative effort of industry and
exchanges/commissaries
Galvanizing Industry Support
 250 of the major consumer packaged
goods companies in the United States.
 Brokers and distributors
 Specialty vendors
 Already supports USO, Fisher House,
Wounded Warriors, NMFA, NIB, NISH
and other causes
Industry/resale synergy with
Joining Forces
 Large industry and military community support
system specifically established to take care of the
military member and family, responsive and ability to
quickly adapt.
 Leveraging the resale infrastructure and all associated
vendors to focus support to family members and
programs.
 Leverage a holistic community in a more focused way
that is at the very heart of the intent of Joining Forces
 Comprehensive approach to supporting military
families, crossing traditional agency boundaries
affording a coordinated approach. Our industry
partnerships can expand the capacity and quality
of support by channeling philanthropic and cause
marketing support while strategically expanding
the communication about existing support
infrastructure already in place on base
Other support programs
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School feeding program OCONUS
Facilities at home
Facilities downrange
Welcome Home Events
Personal Shopping for wounded warriors
Community engagement – contests/prizes
You Made the Grade – rewarding military kids
Social Media – Helping friends/family connect
Smooth Move – Assisting with PCS transfers
Military Star proprietary credit card – lower interest rate
www.shopmyexchange.com website
Help Our Troops Call Home
Gifts from the Home front
Next steps—White House
 Continuing strategy sessions to define objectives and
develop programs
 Orlando ALA Convention—Announce Major Cooperative
Effort—Industry Support
 Joining Forces umbrella branding of major ALA & Resale
initiatives including:
 Events
 Sweepstakes
 Competitions
 Cause Promotions and Sales
 Living well and family member employment
ALA Priorities
 Support Coalition
 Patron awareness—Power of viral internet—sales increases—benefit
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value—get non-shoppers in
Raise visibility with White House and agencies
Don’t lobby each other—have meaningful outreach
Support adequate budget levels
Support shipment of American products
Support funding for BRAC affected sites
Protect immunities
Affordable, one-card access
Support Guard and Reserve
Support familiar war zone offerings
Expand benefit to more vets
ALA 2012Congressional and
Public Policy Forum
June 19 – Rayburn House Office Building
Critical industry supports
House and Senate
Issues based
2013 impact and 2014 Budget Deliberations, Basing,
Force Structure, Contracting in a volatile budget
environment, Congressional actions affecting resale,
Executive Branch initiatives
 House and Senate leader perspectives
 Administration perspective
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ALA & Resale
Protecting the Benefit