American Logistics Association continues to “sound alarm” on commissary cuts & price increases: 2015 Rand report substant...
31 March 2015 - 8:30PM
Business Wire
Rand National Defense Research Institute released a report this
week on “The Likely Effects of Price Increases on Commissary
Patronage.” The report cited, “raising overall price levels will
not be a successful strategy to cover shortfalls in costs caused by
the elimination of the annual Department of Defense
appropriation.”
Key report findings confirmed that, “Raising prices will also
negatively affect servicemembers and retirees who currently
patronize the commissary system through increased grocery bills…”
“In addition, changes in commissary pricing may have negative
secondary and nonmarket effects, including effects on retention and
recruitment; reductions in contributions to Morale, Well-Being, and
Recreation programs; possible demand reductions for military
exchanges; and changes in the calculated cost of living
adjustment.”
“The Rand impact analysis, produced at the request of the
Department of Defense, substantiates the findings of our 2012
economic report — The Costs and Benefits of the Department of
Defense Resale System — that when you pull the commissary thread
the fabric of the critical resale and MWR base support structure
starts to unravel,” stated Patrick Nixon, ALA president and former
director of the Defense Commissary Agency. Commissaries drive
traffic to exchanges; exchanges provide nearly $500 million a year
in earnings to underwrite the cost of vital military community and
family support programs.
The Department of Defense (DoD) 2016 budget proposes to cut $1
billion in fiscal year 2017 annually from the $1.3 billion annual
commissary appropriation, beginning with a reduction of $322
million in fiscal year 2016 – achieved by cutting back operating
days and hours, and increasing commissary prices. Defense officials
claim the plan would shrink the value of the benefit for military
patrons from its current 30 percent savings to 10 percent compared
to off-base grocery prices, but military families would be left to
cover the out-of-pocket costs. However, Nixon said that, “the $1
billion reduction will destroy patronage and economies of scale,
leading to wholesale closures of the stores.” DoD proposed a $200
million cut in 2015, but Congress restored it.
“While the Rand report is correct in pointing out flaws in DoD’s
arguments and major second and third order effects of destroying
this benefit, it only scratches the surface of the major
consequences of pulling the rug out from under a very successful
program that delivers so much to so many for so little,” said
Nixon.
The ALA report points out that the military resale system is a
powerful engine behind the U.S. economy, producing $18 billion a
year in revenue and providing goods at affordable prices, no matter
where military personnel are stationed. This system also produces
$10.97 billion in economic benefit to the Department of Defense.
This equates to a $6.24 return for every $1.00 of appropriations
used. The DeCA Director testified last year that they have taken
out over $700 million in annual operating costs, savings that few
if any other Defense institutions can make. “DeCA was efficient
before efficiency was cool,” Nixon said. “It is an agency and
working public private partnership that should be emulated for its
success, not decimated and punished for its success.” According to
Nixon, there is already in place a system for the rational and
methodical closure of commissaries: “It’s called BRAC—DeCA has
closed 180 of its 420 stores aligned with basing and force
structure reductions, a claim that no other benefit provided to the
military can make.”
The resale system is the only benefit provided by DoD to its
personnel and their families wherein costs to the government
decline the more it is used. While costs of other DoD programs have
doubled and even tripled in the past ten years, the cost for the
military resale system has been kept constant or dropped in real
terms.
Commissary and exchanges are also an integral part of the
military fabric. Ninety percent of the military community uses
these benefits, which consistently rank as a top compensation
benefit, yielding returns far out of proportion to the taxpayer
support used. They provide critical jobs for military families and
veterans – over 60 percent of employees are military affiliated –
and provide healthy living alternatives both stateside and
overseas. Service members and their families are partners with
taxpayers, having financed billions of dollars in facilities and
over 13 billion in quality of life programs.
“DoD is sailing in dangerous and uncharted waters and Congress
needs to look behind the curtain and examine DoD’s proposal to cut
off the blood flow to this benefit that is cherished and valued by
millions of military, particularly young families and fixed income
retirees," added Nixon.
To access the 2012 economic report and executive summary and the
2015 Rand report.
ABOUT THE ALA
The American Logistics Association (ALA) is a 95-year old trade
association representing some of the largest consumer package
companies and companies that support improved quality of life for
our military and their families through strong resale (commissary
and exchange) and morale, welfare and recreation programs (MWR) for
the Departments of Defense, Veterans Affairs, and Homeland
Security. For more information, visit www.ala-national.org.
American Logistics AssociationCandace Wheeler,
202-466-2520cwheeler@ala-national.org