Your business is our business
Participation in ALA these days is
not optional….it is necessary part
of your business and an
investment that returns many
fold in many ways.
Your investment in ALA proved its
worth in 2014
 Participation in 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.
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
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.
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
Dynamic environment calls for
energized partnership
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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
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
Mobilizing for fiscal 2016
Educating members of Congress.
Input to multiple reports
Working with Compensation
Commission
Gathering more data
ALA position on the budget
The Pentagon has a
budget problem but the
resale system is part of
the solution and not
part of the problem.
Outreach—don’t lobby ourselves
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40 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
Moving resale to top priority
Congressional Caucus
Messaging – economic, compassionate, mission
DoD outreach—military and civilian
System is strong but fragile
and vulnerable
Convergence of factors all at
once could destroy it
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
 Off-base competition
Easy-credit retailer sues troops worldwide
Money was tight, and neither Aguirre, 21, nor his wife had much credit
history as they settled into life at Fort Carson, Colorado, in 2010.
That’s when he saw an ad for USA Discounters, guaranteeing approval
for service members. In military newspapers and maga- zines, on the
radio, and on TV, the Virginia-based company’s ads shout, “NO
CREDIT? NEED CREDIT? NO PROBLEM!” The store was only a few
miles from Fort Carson.
Army Spc. Angel Aguirre needed a washer and dryer.
From there, USA Discounters files lawsuits against service members
based anywhere in the world, no matter how much inconvenience or
expense they would incur to at- tend a Virginia court date. Since 2006,
the company has filed more than 13,470 suits and almost al- ways
wins, records show.
Associated Press—August 18, 2014
Rational Access
Military personnel are entitled
at least to the same rights and
privileges as the citizens they
are charged to defend.
Sectors have inherent challenges
Just in past year:
 Concessions
 Tobacco
 Alcohol
 Supplements
 Energy drinks
 Sugar
 Healthy foods
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.
ALA position on Sec. 633
 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.
ALA position—Sec. 633
 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
…
ALA position—Sec. 633
 …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.
ALA position—Sec. 633
 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.
Taking beverage alcohol issues
head on
 Actively work to reverse and pre-empt any ill-advised
policies aimed at limiting access to beverage alcohol
on military bases.
 SecDef said that “policies are going to be revised where
necessary to address risks that alcohol poses to others.”
 Working with industry experts, think tanks and
associations to educate policy-makers.
 Engaged DoD Sexual Assault Prevention & Response
Office—offer industry resources to deal with issue.
Tobacco--Durbin provision—SAC-D
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 tobaccorelated products in overseas military retail outlets shall be
within the range of prices established for military retail
system stores located in the United States.
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 14–25 percent lower than market price, despite
Department of Defense Instruction 1330.9, which allows
only a 5 percent discount.
Tobacco
 Outright ban to tobacco being considered.
 SecDef report on tobacco imminent
 Not judging the health effects of tobacco
 Interested in ensuring troops are not
prejudiced
 Need data to show that any ban would curb
use
Minimum wage and SCA
 Favorable prices have emerged as a key benefit of military
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service.
Military only wages create disparities and higher
prices/reduced commissions on base.
Contracts constantly renewing and some concessionaires
won’t bid.
Exchange and MWR earnings will drop.
Troops want familiar name brands but now will pay higher
prices or be denied their favorite food altogether.
DoL acknowledge that these wages impose a “uniquely
burdensome obligation” on military fast food restaurants
ALA position on wage rules
 Major consequences
 Military access to favorite brands should be protected.
 Will have the effect of denying these programs.
 Contractors pay rent and a portion of sales to
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exchanges and MWR.
Most are small businesses.
Military-only application will prejudice the troops.
Off base competitors not affected.
DoL pressed forward anyway.
Corporate tax inversions
 Rep. Jackie Spier, (D-Calif) wants DoD to end exchange
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contracts with Burger King because of merger with
Canadian Company & corporate flight from the U.S.
Only would affect military Burger King outlets on military
bases.
Singles out military and will deprive troops and families of
a highly popular brand.
Yet another example of an attempt to deprive access based
on a fight over a larger national issue.
Tells DoD to enhance exchange oversight “to ensure
business integrity”.
Veteran online shopping
Support any effort to
open military resale
offerings to larger,
deserving audience.
Commissaries
This is no drill
Prevention
Pre-emption
Preservation
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
Strategic Choices and Management
Review
 Don’t just chip away at existing structures and
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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
Here we go again
is gearing up a new effort to cut overhead and
• Pentagon
administrative costs.
will target the “Fourth Estate” — everything other
• Initiative
than the military services and combatant commands,
according to Deputy Defense Secretary Robert Work.
components for cuts include the Office of the
 Targeted
Secretary of Defense and the 16 defense agencies, including
the Tricare Management Agency and the Defense Logistics
Agency.
 Those account for about 20 percent of the overall defense
budget.
ALA position on the budget
Budget calls for a reduction of
the “subsidy”
Crops are subsidized
Troops are not subsidized…
They’re compensated
ALA position on budget
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System has already cut no more cuts-inherently efficient
Stop irresponsible dialogue with facts—no 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 illadvised 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” demonstrates—their contribution to the Defense
Department far outweighs their costs by a factor of 6:1.
ALA position 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
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.
ALA position on the budget
 This is an earned benefit, not just a store.
 Commissaries are a community hub and bring the military
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together.
Food inflation is expected to double this year.
Would greatly impact DoD’s 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.
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.
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.
ALA position on the budget
 Insufficient analysis/study of the consequences of the
reductions
 Congress, at the Administration’s 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
ALA position on the budget
 Commissary patrons have built billions of dollars in facilities
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with their five percent surcharge
Food inflation is expected to double in the coming year
Represent a partnership between the public and private sector,
taking advantage of a private sector supply chain that contributes
an additional $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.
ALA position on the budget
 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 areas—equalizing
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.
ALA position on the budget
 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.
More Military Families Are Relying
On Food Banks And Pantries
Despite the economic recovery, more than 46
million Americans — or 1 in 7 — used a food
pantry last year. And a surprisingly high
number of those seeking help were households
with military members, according to a new
survey by Feeding America, which is a network
of U.S. food banks.
NBC News—August 19, 2014
Economic Case
 70 percent increase in food stamp redemption
 Sunk costs – buying the car but not putting gas
in it
 Huge return to DoD and the Nation
 Sales imperative—increase share of AD who
use benefit
 Tax savings alone justify benefit
 Family and Veteran employment
 Contribution to economy/balance of payments
Benevolence and Good Will
 Wounded Warriors
 Snowball Express
 Joining Forces
 Fisher House
 USO
 NMFA
 Cause promotions
 …and a multitude of others
State of play
 Administration recommended a $200 cut for Fiscal 15 that
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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.
No Congressional defense bills have passed.
Pentagon sees Congressional intent and it would be
unlikely they would short-fund DeCA in fiscal 15 without
seeing outcome of Congressional deliberations.
State of play
 So, meanwhile, DeCA is adequately funded for fiscal
2015.
 Also, the other good news is that it is highly unlikely
that this coming year we will experience the closures
from furloughs or a government-wide shutdown that
we experienced last year.
State of play
• Under an omnibus (a bill including several agencies'
funding) DeCA would be cut anywhere from $100 M to
zero, depending on the conference negotiations.
• Under regular order (a stand-alone Defense
authorization and appropriations bill for 2015), DeCA
funding reductions would from $100 M to zero,
depending on the conference negotiations.
• Under a CR, DeCA is funded at last year's levels
(manageable).
State of play
 Congress returns November 12
 Current CR expires December 11
 Must pass $1 trillion-plus omnibus spending bill including
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$550 billion Defense bill and $60 billion in OCO—Could
fold-in Ebola and ISIS
Or another CR
Defense Authorization Act
Authorization to train Syrian rebels (current authorization
expires December 11 (or could be folded into the
Authorization Act.
AUMF for Iraq/Syria folded into Authorization Bill
State of play
 Many want to hold-off on major policy decisions until
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new Congress is seated in January.
“Pre-conference” is taking place on Authorization Bill
Senate has not passed its bill
239 amendments have been filed
House has passed its authorization bill
We may not know who is in the majority in the Senate
until January (run-offs in Ga., N.C., Louisiana)
State of play
 Overall, we are no means out of the woods. DoD still has a massive
funding problem across the board and the DeCA funding problem will
persist as long as the sequester is in effect. It will continue to seek
reductions and the Deputy Secretary of Defense stated the other day
that they are going to take another bite at the compensation apple
(probably including DeCA). $600 million cut still in 2016 budget plan.
$1 billion cut still in 2017 budget plan.
 Congress has requested reports on DeCA covering various issues
including consolidation of exchanges and commissaries and
introduction of more private label. Reports are due in the Spring in
time for deliberations on the fiscal 16 budget.
 All is being set up for the Compensation Commission report that is due
February 15, 2015. So far, the Commission is favorably inclined for
commissaries but that could change as they balance the books.
 In announcing the cuts as part of the budget roll-out,
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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 WalMart
JCS Hearing
 “Cutting commissaries is a sore point for me…the
commissary issue is radioactive”—General Amos—
Marine Corps Commandant
 “$200 million initial impact will be modest”—Admiral
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 reduciton.
Obama at Pendleton-Aug 7, 2013
Closing commissaries
“Not how a great Nation
should treat it’s military
and military families”
Warner/Chambliss bill—3/14
“…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 of the
report of the Military Compensation and Retirement
Modernization Commission…”
Sec. 631—SASC FY 2015 bill
(f) Special Rule for Brand-Name Commercial Items.— The
Secretary of Defense may not use the exception provided in
section 2304 (c) (5) of this title regarding the procurement of a
brand-name commercial item for resale in, at , or by
commissary stores unless the commercial item is regularly
sold outside of commissary stores under the same brand
name as the name by which the commercial item will be sold
in, at, or by commissary stores. In determining whether a
brand name commercial item is regularly sold outside of
commissary stores, the Secretary shall consider only sales of
the item on a regional or national basis by commercial
grocery or other retail operations consisting of multiple
stores. for the procurement of any commercial item (including
brand-name and generic items) for resale in, at, or by commissary
stores.
Senate Appropriations Committee
Defense Commissary Agency.—The Committee recommends an increase of
$200,000,000 for the Defense Commissary Agency [DECA] in fiscal year 2015
which is consistent with S. 2410, the National Defense Authorization Act for Fiscal
Year 2015, as reported. The Committee also directs that the Committees on
Appropriations of the House and Senate be recipients of the reporting
requirements directed in the report accompanying S. 2410, the National Defense
Authorization Act for Fiscal Year 2015, as reported, titled ‘‘Department of Defense
proposal to modify commissary benefit.’’
Additionally, the Committee directs the Secretary of Defense to provide the
following information to the congressional defense committees no later than
December 1, 2014:
—a breakdown showing the average percentage of commissary patrons by
enlisted members, officers and retirees;
—surveys or other data on the value placed on commissary access by its patrons,
especially in comparison to other benefits; —a description of the impact of
sequestration in fiscal year 2013 on the Defense Commissary Agency and
commissaries; and
—a detailed description of how the fiscal year 2015 proposal to limit appropriated
fund support to commissaries would be implemented in each year of the future
years defense program if approved by Congress.
Senate Armed Services Committee
 The budget request included $1.1 billion for the
Working Capital Fund, Defense Commissary Agency
(DeCA). The budget assumed savings of $200.0 million
associated with a legislative proposal to streamline and
reform commissary operations. The committee
declined to support this proposal.
 Accordingly, the committee recommends an increase
in the Working Capital Fund, DeCA of $200.0 million
to restore these assumed savings.
Senate Armed Services Committee
 Department of Defense proposal to modify commissary benefit
 Commissaries have a major positive impact on the quality of life of all
servicemembers—active, reserve, and retired—and their families.
Commissaries, on average, afford savings of more than 30 per- cent on
items purchased. Additionally, commissary patrons frequently use base
exchanges when they come on post to shop at the commissary.
Increased usage of the base exchanges results in additional dividends
that are returned to the military community for morale, welfare, and
recreation activities. The cumulative effect of all of these benefits from
commissary patronage is particularly important to junior enlisted
servicemembers.
 The committee is concerned that consequences of the Department of
Defense proposal to increase costs to patrons of the commissary
benefit in order to reduce appropriated fund support for the Defense
Commissary Agency have not been fully evaluated, and that other
business models that may not have the same detrimental impact were
not considered.
Senate Armed Services Committee
Directs the Secretary of Defense to submit a report to the Military Compensation and
Retirement Modernization Commission and to the Committees on Armed Services of
the Senate and the House of Representatives, not later than December 1, 2014,
describing:
 How changes to the financial structure and funding of commissaries would impact
the purchasing power of military families, especially young enlisted members and
their families;
 The impact on commissary sales volumes if prices for groceries and other goods rise
significantly under a new financial and funding structure;
• The collateral impact of the Department’s proposal on sales volumes in the military
exchange system;
• The impact of lower sales volumes in military exchanges on monetary dividends
provided to support the morale, welfare, and recreation programs of the military
services; (5) An assessment of adoption by the commissary system of a business
model similar to that of the military exchange system; and
• Other options for consolidation of commissary and exchange system functions. The
committee expects the Commission to consider this report as it addresses the
commissary benefit in the report that it submits to Congress and to the President.
House Armed Services Committee
 REVIEW REQUIRED.—The Secretary of Defense shall
conduct a review, utilizing the services of an independent
organization experienced in grocery retail analysis, of the
defense commissary system to determine the qualitative
and quantitative effects of—(1) using variable pricing in
commissary stores to reduce the expenditure of
appropriated funds to operate the defense commissary
system; (2) implementing a program to make available
more private label products in commissary stores; (3)
converting the defense commissary system to a nonappropriated fund instrumentality, and (4) eliminating or
at least reducing second-destination funding.
House Armed Services Committee
ADDITIONAL ELEMENTS OF REVIEW.—The review required by this
section also shall consider the following:
(1) 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.
(2) The sensitivity of commissary patrons to pricing changes.
(3) The feasibility of generating net revenue from pricing and stock
assortment changes.
(4) The relationship of higher prices and reduced patron savings to patron
usage and accompanying sales, both on a national and regional basis.
(5) 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.
House Armed Services Committee
(6) The ability of the current commissary management and information
technology systems to accommodate changes to the existing pricing and
management structure.
(7) The product category management systems and expertise of the Defense
Commissary Agency.
(8) 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.
(9) The identification of management and legislative changes that would be
required in connection with changes to the defense commissary system.
(10) An estimate of the time required to implement recommended changes to the
current pricing and management model of the defense commissary system.
(c) SUBMISSION.—Not later than February 1, 2015, the Secretary of Defense shall
submit to the Committees on Armed Services of the Senate and the House of
Representatives a report containing the results of the review required by this
section.
State of play
By December 1, 2014–
CR--100 percent
Omnibus--50percent
Regular order--20 percent
Authorization bill 30 percent
State of play
By January 1, 2014–
CR--100 percent
Omnibus—60 percent
Regular order--20 percent
Authorization bill—80 percent
State of play
By February 1, 2014–
CR--100 percent
Omnibus—60 percent
Regular order—80 percent
Authorization bill –80 percent
Mid-term election outcomes
If Senate goes Republican, McCain takes the chair of the
SASC.
If it stays a Democrat majority, Senator Jack Reed of Rhode
Island will take the chair. Senator Cochran would take the
appropriations chair and has been supportive and would
probably not override Senator Mikulski on this
issue. (Mikulski like commissaries).
On the House side, Buck McKeon is retiring and it looks like
Mac Thornberry has the inside track for the Chair of the
HASC. Mr. Thornberry has voiced support for lifting of the
sequester. While he has not directly committed to full
commissary funding, he is listening to the supporters of the
benefit on the HASC that we have been working with.
Who’s kidding whom?
The next time you hear a four- star whine to Congress about how
military pay and benefits are wreaking havoc on the defense budget
and must be rolled back, think about this item buried deep in the
news mix last week:
According to the Washington Post, a few years ago the Defense
Department spent nearly half a billion dollars of U.S. taxpayer
money to buy 20 Italian cargo planes for the Afghan Air Force.
Unfortunately, the only thing likely to alter this rigged game is
troops voting with their feet — as they did in the ’90s, the last era in
which defense leaders habitually squeezed pay and benefits, to the
point of sending recruiting and retention off the cliff. It took many
years, great effort and a lot of money to fix that damage.
Military Times—10/27/14
Compensation Commission
Compensation Commission
• Talk of cost-cutting started in 2008—post-9/11 spending
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spree
July 22, 2010 DBB Report “Reducing Overhead and
Improving DoD’s 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 rising—now it is colliding
Compensation Commission
 Retirement payments expected to double by 2035 to
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$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
Compensation Commission
Compensation Commission
 Included in 2013 NDAA
 “Military Compensation and Retirement
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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
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.”
Compensation Commission
 Nine members & $10 million
 Majority and Minority Leader of House and Senate
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appoint two each within 4 months
All hearings open to public
President to report to Congress within 60 days of
receiving the report
Grandfather benefits to current members
Provides for expedited consideration of
recommendations by Congress
Compensation Commission
 Within 5 months—principles addressing:
 Maintaining recruitment and retention of the best military
personnel
 Modernizing retirement and compensation systems
 Differentiating between reserve and active service
 Ensuring fiscal sustainability
 Within 9 months, SecDef to transmit his
recommendations to the Commission and concurrently to
Congress
 Report within 15 months to the President
 Report delayed until early 2015
President Recommendations
 Current members can choose to switch to
new retirement system but not required
 Ensuring compensation comparable to
outside
 Sufficiently flexible to adjust to economic
conditions
 Generous enough to motivate and retain
 Grandfather
Compensation Commission
 Input due by November 1, 2013—Federal Register
Notice
 Second round of input after Secretary
Recommendations
 ALA positioned to input with economic report
and resale research data
Compensation Commission interim
report—June 2014
 For over a decade, our men and women in uniform have participated in
one of the most extraordinary chapters of service in the history of our
Nation. ...They come from all walks of life and all stations; Active,
Reserve, and National Guard; serving together to protect our people,
while giving others a chance to lead a better life. We owe each and every
one of them and their families a tremendous debt of gratitude for their
sacrifice, service, and patriotism.
 Our Nation requires a strong military for our security and for the
defense of American values and principles abroad. While we have
successfully transitioned from a conscripted force to an All-Volunteer
Force, sustaining this force requires responsive and prudent
management, especially given the fiscal challenges we face as a Nation.
The President’s Principles for Modernizing the Military
Compensation and Retirement System, 2014
Compensation Commission interim
report
“…any modernization recommendations must protect
the overall value of the current benefits package and the
quality of life of the 21st century force—those who serve,
those who have served, and the families who have
supported them. “
“The Commission also understands that the uniformed
services must have modern and relevant compensation
tools to continue to recruit and retain the high-quality
men and women needed to protect and defend our
Nation into the future.”
Compensation Commission interim
report
“…today’s military compensation and benefit programs
comprise a series of piecemeal programs. Some of these
programs are decades old, while others were conceived to
address short-term, force-shaping requirements.”
“…fundamental objective is to forge integrated and flexible
compensation and personnel management systems that will
continue to be valued by Service members.”
“…review these compensation programs to determine if they
are designed to keep pace with changes in our society, the
uniformed services, the preferences of Service members, and
the priorities of upcoming generations. Similarly, the
uniformed services must be empowered with flexible
personnel management tools to shape the force as security
needs change. “
Compensation Commission interim
report
“…Much of this growth is attributed to inflation
(particularly medical inflation),5 policy-driven increases
in compensation to counteract recruiting and retention
challenges, and personnel funding that supported 13
years of war. In addition, introduction of several new
benefits for Service members and veterans contributed
to growth in compensation funding. Regardless of the
reasons behind this growth, military compensation
funding has consistently represented roughly 30 percent
of the DoD budget (with Federal civilian employee
compensation representing another 15 percent). “
Compensation Commission interim
report
“The Commission found a widely varied, but
deeply interdependent, set of programs, often
tied to key life events, such as marriage,
childbirth, divorce, injury, health challenges,
and deployment. These programs, as a whole,
are used throughout the entire military
lifecycle, from accession through retirement
and post- separation, by all military and
dependent populations. “
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
Compensation Commission
 Interim report issued in June—”Findings”
 Arrays all compensation programs
 Major sections on exchanges, MWR and commissaries
 Thorough research
 Factual
 No recommendations
 Final report February 1, 2014
2014 Congressional Caucus
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June 24
Rayburn House Office Building
The premiere event on the politics & policy of
resale
Members of Congress
Defense experts
Pentagon and Administration Officials
2015 session date to be determined when new
Congress reconvenes and we know when they
are in session
2014 Congressional Caucus
 Congressman Scott Rigell, Seapower and Projection Forces
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Subcommittee, House Armed Services Committee
Steven Parker, Joining Forces Executive Director, The White
House
Rory Brosius, Joining Forces Deputy Director, The White
House
Congresswoman Nancy Pelosi, House Democratic Leader
(invited)
Congressman Eric Cantor, House Republican Leader
(invited)
Congressman Sanford Bishop, Co-Chairman, Military
Family Caucus
2014 Congressional Caucus
 Honorable John Conger, Deputy Under Secretary of Defense,
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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
2014 Congressional Caucus
 Mr. John Kamensky, Senior Fellow, IBM Center for the Business of
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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, Personnel Subcommittee,
House Armed Services Committee
Congressman Buck McKeon, Chairman, House Armed Services
Committee
“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,”
ALA & Resale
Protecting the Benefit