This article has been updated to add responses from the Department of Defense.
The commissary budget will take a 21 percent cut in fiscal 2020, if the Defense Department’s budget request is approved by Congress.
Defense officials are asking for $995 million in taxpayer funding to operate the 236 commissary stores worldwide, down from $1.27 billion in fiscal 2019, according to DoD budget documents released Tuesday.
The Defense Commissary Agency’s budget reduction “is tied to a series of DoD internally directed cuts that began in fiscal 2016,” said DoD spokeswoman Air Force Lt. Col. Carla Gleason. Since that time, she said, the commissary agency has been taking steps, to “reduce its operating costs to meet anticipated topline funding, while still maintaining customer service levels and congressionally mandated patron savings levels.”
Gleason said the Defense Commissary Agency doesn’t expect the cut to have any impact on customers.
Part of the reduction is due to an 11 percent decrease in the commissary work force. Those work force cuts in the Defense Commissary Agency started in fiscal 2019 and will carry forward into fiscal 2020 — going from 14,000 employees worldwide to 12,500.
The reduction in the number of employees, “as a result of the efficiencies we are gaining, helps position us to absorb a portion of the cut,” Gleason said. The agency will continue to make changes in its staffing, to include the reduction of an additional 500 employees in fiscal 2020, while making sure “that our stores will have the right number of people to deliver the expected level of service," she said.
The budget cut comes as the Defense Department is moving toward merging the three military exchange systems and the commissary system into one “defense resale enterprise,” in efforts to save money. But that proposal hasn’t yet been approved — at this writing it was awaiting approval by Acting Deputy Secretary of Defense David Norquist. A report and legislative proposals will then be sent to Congress. In a memo signed March 1, Lisa Hershman, acting DoD chief management officer, approved the business case for the merger.
In order for DoD to fully merge those systems, some laws will have to be changed, such as the current law requiring separate commissary and exchange systems.
But a commissary-exchange merger proposal has to get past Congress first.
For a number of years, some within the Defense Department have floated proposals to reduce the commissary budget. The commissary proposed budget is about 0.13 percent of the overall defense budget request, which has increased this year.
The budget overview states there’s a $400 million net decrease from the fiscal 2019 funding for military family support programs, and that is driven by the commissary’s use of funds left over from the previous year and “military construction phasing of DoD school projects.” In its long-term effort to replace and renovate schools, the Department of Defense Education Activity is proposing to spend about $150 million in 2020 on three schools and an administrative office; about $218 million less than what they spent in fiscal 2019.
Funding for other programs in the “family support” category stayed the same, except for a $100 million increase in warfighter and family support programs, up to $1.8 billion.
Funding for child care and youth programs remained level at $1.4 billion; and for MWR programs, level at $1.6 billion.
The budget proposal doesn’t specify how much taxpayer funding was left over in the commissary budget from the previous year, or why there were funds left over. But it doesn’t appear that those funds would offset the $271 million decrease in the budget request, compared to fiscal 2019.
Gleason didn’t specify the amount of funding left over from last year, but said it is normal to have funds left over in their working capital fund.
The commissary has introduced a number of private label products, and has gone from a system that previously sold all products at cost from the vendor, to a system that allows them to mark up or mark down prices — thus generating profit that can be used to pay for some operating costs and reduce taxpayer dollars.
“As we evolve from a cost center business model to a profit and loss model, we have conducted rigorous reviews of our requirements to ensure we are the most efficient we can be while maintaining the benefit for our patrons,” Gleason said. “We are confident that the [funds left from the previous year] along with our revenue generated will bridge the gap between the budget submission and our requirements.”
“I find it interesting that the budget briefing doesn’t mention reduced appropriations due to offsetting revenues derived from operational efficiencies, [such as] private label and variable pricing. You would think that would be something to tout,” said Tom Gordy, president of the Armed Forces Marketing Council.