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House panel rejects commissary cuts, delays other changes

Apr. 30, 2014 - 06:32PM   |  
A display of fresh produce in the Fort Bragg North Commissary, N.C.
A display of fresh produce in the Fort Bragg North Commissary, N.C. (Defense Commissary Agency / Thomas Hannan)

Lawmakers have not completely shut down the Defense Department’s plan to drastically cut funding for commissaries, but they have at least delayed the significant changes that would almost certainly raise prices for shoppers.

In the first round of the consideration of the personnel portion of the 2015 defense authorization bill, the House Armed Services Committee’s military personnel panel agreed to “reverse some of the cuts in the budget to the commissary system,” said Rep. Joe Wilson, R-S.C., panel chairman, at a hearing Wednesday.

But the subcommittee’s portion of the authorization bill would require the Defense Department to conduct a review of the commissary system, using an independent organization experienced in retail grocery analysis, with the results due to Congress by Feb. 1.

Rep. Susan Davis, D-Calif., ranking member of the subcommittee, said that she supports the decision not to include proposed legislative changes to the commissary system — as well as changes to housing allowance rates and health care benefits — in the 2015 bill.

But, Davis added, “I do believe that we need to begin a conversation to address these issues.”

She said that conversation should be based on the results of the work of the congressionally mandated Military Compensation and Retirement Modernization Commission, which is due to produce a report early next year.

“These are difficult times, particularly with sequestration still in effect for [DoD], and hard decisions will need to be made in order to protect and sustain the all-volunteer force into the future,” Davis said.

House staffers said separate legislative amendments to the bill may be offered the week of May 5 related to improving the efficiency of commissaries without hurting the benefit. Discussions over the last months have included suggestions such as allowing commissaries to sell generic products, rather than only name-brand items.

DoD’s 2015 budget proposal calls for cutting the annual commissary budget by two-thirds over the next three years. In the end, DoD’s goal is to shrink the annual taxpayer subsidy for commissaries from the current $1.4 billion to just $400 million a year, which would be used to operate only the stores overseas and in remote areas of the U.S.

In the first year of the plan, fiscal 2015, DoD would have reduced the budget by $200 million. In the end, the current average commissary savings of 30 percent compared to off-base grocery stores would have dropped to about 10 percent because prices in stores would have to rise to offset the reduced taxpayer funding.

Raising prices would degrade the benefit for troops and families, and could ultimately destroy the commissary system, military community advocates say — while also having negative effects on the military exchanges and other morale, welfare and recreation programs on bases. Many of the customers drawn by the commissaries’ prices also shop at exchanges, and exchange profits partly fund MWR programs.

But DoD’s plan would require significant changes in law — such as allowing the commissaries to raise prices rather than sell groceries at cost from distributors and manufacturers; and allowing commissaries to sell generic products, rather than limit the product inventory to name-brand goods only.

The subcommittee did not approve any of these changes in its bill, but would require these issues to be included in the review. That review also would look at converting the commissary system into a nonappropriated fund organization, like the military exchanges; and reducing or eliminating the funding for shipping products overseas that equalizes the prices in overseas and domestic commissaries.

The subcommittee’s bill also requires DoD to conduct an anonymous, random survey of troops regarding pay and benefits, ultimately asking them to rank the importance and value they ascribe to certain forms of compensation — basic pay, allowances for housing and subsistence, bonuses and special pays; dependent health care benefits; health care benefits for retirees under 65 and for Medicare-eligible retirees; and retirement pay.

Commissaries are not specifically included in that mix, but the bill language does leave an opening for DoD to include other issues related to pay and benefits in such a survey. The bill makes no mention of surveying family members.

Among the issues DoD will be required to review in the separate, comprehensive study of commissaries by the independent organization are:

■ The impact of changes allowing private-label products on customers, particularly junior enlisted members and junior officers and their families.

■ The sensitivity of customers to price changes and the relationship between higher prices and customers’ willingness to shop.

■ The feasibility of generating revenue from pricing and stock assortment changes.

■ The impact of changes to the commissary on military exchanges and other morale, welfare and recreation programs.

The House subcommittee action is only the first step in the lengthy legislative process on the defense bill. The full armed services committee, and then the full House, must approve the bill.

The Senate independently works on its own version of the bill in similar fashion, and the two versions must be reconciled in a conference before a final version is approved and sent to the White House for the president’s signature.■

Staff writer Leo Shane contributed to this report.

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