Base grocers want store consolidation idea shelved

Tuesday , March 18, 2014 - 1:44 PM

Tom Philpott

As congressional inaction on the debt crisis deepens the threat of indiscriminate axe-wielding on defense programs by next January, advocates for base grocery stores hope to emboss a “hands off” sign on military commissaries and their $1.3 billion annual appropriation.

In particular, they want Congress to ignore a “dangerously flawed” cost-saving option presented last year by the Congressional Budget Office, to merge the commissary system and the three military exchange services into a single base resale operation.

The CBO idea is to phase out all taxpayer support of commissaries, allow grocery prices to rise by at least seven percent and then soften the blow for active duty families by paying an annual grocery allowance of $400.

Retirees and other store patrons would get no such allowance. They would just see shopping discounts decline under what CBO has labeled “Discretionary Spending—Option 6” in its 2011 Reducing the Deficit report.

Like a can of beans on a grocer’s shelf, the cost-saving option is among many already priced and endorsed by CBO, which gives them credibility with deficit hawks and with congressional leaders who might be pressured by approaching deadlines to slash federal spending fast.

Patrick Nixon, president of the American Logistics Association, which represents manufacturers, brokers, distributors and service companies that do business with the military resale system, aggressively attacked the CBO military store consolidation option during a June 7 hearing of the House Armed Services Subcommittee on Military Personnel.

Later, in an interview, Nixon said he had good reasons for doing so. First, though CBO has a reputation for objectivity and solid research, in this case its assumptions on cost-savings and the after-effect of consolidation on store operations simply “unravel” on inspection, he said. Yet the consequences, if the option were adopted, likely would include over time the demise of discounted grocery sales on military bases, Nixon said.

“The reason we attacked it is that an uninformed reader is going to say, ‘This looks like it might work,’ ” Nixon said. “But when you look at it, line item by line item, you want to put Congress and anybody else on alert. … This is not a panacea. This is a hodgepodge of recommendations. A lot of them are catastrophic, and some of them make no sense at all.”

A second reason the ALA, the Armed Forces Marketing Council and other lobbyists for military stores want flaws in the CBO option exposed is the debt crisis, a “perfect storm … with extreme implications for every American,” Nixon said, and which a bitterly divided Congress seems unable to address.

Suspicions and partisanship resulted last year in a mindless “sequestration” tool being inserted in the 2011 Budget Control Act. So if Congress fails to reach a fresh compromise on spending cuts and tax increases by Jan. 1, 2013, sequestration would be triggered automatically and begin to lop nearly $600 billion off defense programs over the next decade. Witnesses agreed with Wilson that would be “catastrophic.”

The fresh cuts would be atop $487 billion in defense cuts over 10 years that Republicans and Democrats agreed on as part of last year’s budget deal. So far commissaries would be fully funded under the Obama administration plan to implement the first wave of cuts and both the House and Senate versions of the fiscal 2013 defense authorization bill.

If sequestration occurs, however, every major program could be cut 8 to 12 percent, according to one estimate of the complex sequestration formula. And whether sequestration occurs, or some alternative deficit reduction package is adopted, lawmakers might be tempted to pull CBO options off the shelf to protect more favored or vital defense programs.

As Nixon reminded the House subcommittee, one debt reduction panel already included the CBO option on military store consolidation in its final report. And last year Sen. Richard Burr (R-N.C.), ranking member on the Veterans Affairs committee, persuaded colleagues to adopt that option so the commissary system’s $1.3 billion annual subsidy could be used instead to provide health care to veterans and families exposed years ago to contaminated water at Camp Lejeune, N.C.

Strong reaction to that effort from military families and retirees has stalled Burr’s bill, S. 277. His staff has assured ALA they are looking for alternative savings to cover health care for former Lejeune residents.

“So you can see what can happen if you don’t challenge” the CBO cost-saving option, Nixon told me.

Rep. Joe Wilsonm, R-S.C., chairman of the military personnel subcommittee, got more than 60 House colleagues to sign a letter opposing the Burr amendment. But he said risks to base shopping are still growing.

“Unfortunately we cannot declare victory in this battle as the continuing pressure to shift budgets within (DoD) will energize the people who do not fully appreciate the value of these programs. This pressure can only be expected to increase in the coming months as the Congress debates the devastating reductions to defense accounts that are associated with the sequestration process scheduled to begin next year.”

Joseph H. Jeu, director of the Defense Commissary Agency, testified that although commissaries are a highly prized benefit for service families, and provide taxpayers a two-for-one return on their investment, critics still raise the notion they’ve become “antiquated.”

They have not, Jeu said.

“Last fiscal year, the commissary provided direct savings to customers of $2.8 billion for a taxpayer cost of $1.34 billion … With 260,000 patrons visiting a commissary every day, buying $16 million in goods, there is no doubt that the commissary remains relevant and an invaluable element of the nonpay compensation package.”

Robert L. Gordon, deputy assistant secretary of defense for military community and family policy, assured Wilson that DoD “has no plan at this point to examine exchange consolidation.” He said seven past studies “have basically shown that consolidation of our exchanges actually can do more harm than good in terms of cost savings and innovation.”

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