ALA Public Policy Advocacy

ALA Public Policy Advocacy Mr. Steve Rossetti

ALA is a Full Partner in Protecting Benefit • Association definition: An organization of people with a common purpose • Do collectively what we can’t do individually • All have day jobs—dealing with business issues like bosses, clients, competitors • Representing common interest items • Work with Agencies, HASC, SASC, HAC, SAC, SFC, GRO, HSGAC, W & M and others

National Budget Deliberations • Disagreement over cuts versus taxes • Different plans—Ryan, Gang of 6, Erskine/Simpson DR, Obama $4T 12 years—included CBO Budget Option for military resale • Coburn Proposal--$9 Trillion over 10 years—included CBO Budget Option for military resale • Senate Veterans Committee Proposal • Budget Control Act of 2011

Defense Budget Timetable • February 14—President submitted $671B Defense Budget—includes $118B in war funding • $571B in 2013, $586B in 2014, $598B in 2015 and $611 B in 2016—not counting wars • Services pledged $100B in savings over five years • Appropriations apportionment • FY 2012 Appropriations Bills • NDAA conference on-going • Budget Control Act of 2011—August 2, 2011 • Budget Control Act Super-Committee deliberations on-going

Gates Efficiency Initiatives • Guidance just out to find $70-$100B in cuts in addition of $178B already identified • March 14 Gates memo: • $13B in cuts from OSD, combatant commands and Defense agencies • DeCA—organizational restructuring, $6M savings, eliminate outreach and marketing, health and nutrition program, annual commissary assessment, eliminate administrative positions • Convert commander AAFES and NEXCOM to SES

Gates Efficiency Initiatives • $8 billion in 2012 ($2B per Service) • $3 B then $4 B then $7 B • Agencies $1 billion • $2 B then $3 B then $7 B • Services keep savings • New guidance for 2013—more cuts, efficiencies and savings • Will force transformation/innovation

Appropriations Apportionment • $121B in cuts Federal wide for FY 2012 • DoD will receive $17B less than 2011 • $8.9B less than President’s request • SASC, HAC, SAC, HASC all cutting Defense requests • In past, would make up in supplemental requests • Flexibility door closes for restoration as supplementals are more closely monitored

Budget Control Act of 2011 • FY 2011 Continuing Resolution Fight/Resolution • Near-term—Gates Cuts • Budget Control Act of 2011 • 2012: DoD $525 B—$5B below 2011, $25 B less than requested • Beyond 2013: Caps on overall discretionary spending—$350B to DoD over 10 years in line with $400B Obama cuts by 2023 • Next round: Doomsday Machine—$54.7 billion in Defense cuts each year beginning in 2013 through 2021

Budget Control Act of 2011 • Caps discretionary spending through 2021 • Require vote on balanced budget amendment • Establish procedure to increase debt limit by $400 B • Establish procedures to allow increase in two steps for cumulative increase between $2.1 and $2.4 Trillion • Create “Super Committee” or Congressional Joint Select Committee on Deficit Reduction • Senate—Baucus, Kerry, Portman, Murry, Toomey, Kyl • House—Camp, Beccerra, Clyburn, Hensarling, Upton, Van Hollen • Committee must achieve by Nov. 23 $1.8 Trillion in savings over 10 years — must pass Dec. 23. • If deadlines not met—and President does not sign a bill to cut spending by $1.2 T by Jan. 15, 2012, Trigger pulled—but not enforced until January 2013

Budget Control Act of 2011 • Half of $1.2T from Security (050) • Exempts health care, retirement, wars with option to exempt military pay • Ax falls on O&M, Procurement, R&D—O&M outlay rich • Committee could come in under $1.2T—deduct passed legislation from the $1.2T • Consequences January 2013 (after election) • Trigger worst case—$99B cuts in 2013, $970B over 10 years • July 29, 2013 DoD budget proposals were submitted • Cuts already hitting some sectors—Air Force, Army, Navy base operations reductions—i.e. 6500 IMCOM positions cut in 2012

Budget Control Act—Defense • Can’t touch wars • DoD already building budget for $400 B in reductions--will have to adjust for new reductions • Worst case, DoD another $600 Billion over 10 years • Appropriators already resetting their allocations • DoD already readjusting budget • Debt ceiling deal forces appropriators to reset their allocations to Defense • DoD had planned on $400 B in reductions on top of Gates reductions of $172 billion —now must plan for another $400 Billion to $1 Trillion over 10 years

FY 2012 NDAA • Funds DeCA, Exchange, and MWR request • Report on extending commissary and exchange benefits to Federal employees overseas—reimbursed • 3% withholding—exempt resale and MWR • Treasury has capability to certify compliance • Judicious use of IRS capability to determine tax status can be used to exempt DeCA, Exchanges and MWR without loss of revenue to government • Exchanges may access Federal Financing Bank. Saves $30-$50M — Sec 645

FY 2012 NDAA • Expanded contracting authority for NAF—Sec 642 • May enter into single or multi-year contracts • Private sector, other DoD or Federal agencies • To provide or obtain goods and services beneficial to military community and effective management of NAFIs • Authorize NAFIs to participate in partnerships with private sector to provide services on military bases

NDAA Provision — ”Enhanced” Commissary Stores • Can sell alcoholic beverages and tobacco and other items determined by the SecDef • Eliminates pricing restriction of Title 10 for these new items. • SecDef determines pricing but not more than 10 percent below outside retail. • Net can be used to offset costs. • Cannot operate after December 2013 • New budget item to working capital fund and adds $2 million

CBO Budget Option • Included with Deficit Reduction Commission Report • Comments sought by OMB on proposal • Components • Exchanges have more flexibility in procurement and personnel practices than DeCA • Consolidate Exchanges and DeCA • Eliminate duplicative administration • Convert commissary employees to NAF • Consolidate over 5 years • At year 6 budget authority lowered by $2 billion/year • Return 1/3 of the $2 billion to Active Duty with grocery allowance

CBO Budget Option Components • Grocery allowance phased in to coincide with consolidation at each base • Net annual savings by 2016 would be $1 billion • Save $8 billion in outlays over next decade • Charge 7 percent more for groceries • Would cost active duty, retired and reserve $1.4 billion annually • Active duty would pay $400 more per year offset by grocery allowance

CBO Budget Option Components • Families benefit from longer store hours, one-stop shopping, access to private label currently not authorized in DeCA • Greater certainty in benefit not subject to appropriations. • $400 grocery allowance targeted to specific pay grades with larger allowances to junior enlisted • Consolidated system better able to compete with off-base enterprises • Retirees would pay $325 more per year on groceries

Exchange Consolidation • Proposed by H.R. 649—Welch/Doggett • Consolidate by January 1, 2013 • No appropriations used thereafter • Referred to HASC • Title 10 currently prohibits • Sitting in committee

S 277—Senate Veterans Affairs Bill • Passed full Senate Veterans Affairs Committee • Eliminates all Title 10 prohibitions to CBO option • Eliminates key Title 10 protections—pricing, stock assortments, consolidation restrictions • Single system by 2013 • Self sustaining by 2016 • CBO estimates 20 percent savings from efficiencies, rest from increased prices in combined system—7 percent price increase • Saves $2.5 B from 2013-2016

S 277 Co-Sponsors • Burr—NC • Blumenthal—CN • Graham—SC • Grassley—IA • Hagan—NC • Harkin—IA • Isakson—GA • Johanns—NE • Leahy—VT • Nelson—FL

O&M Defense Commissary Agency & Exchanges— HASC Report 9/11 • “Appropriated funds for commissaries and exchanges reduced in FY 13 and eliminated in FY 14” • “Grocery savings for families are decimated (30% reduced to 15% or even zero)” • “Option—elimination of exchanges in favor of self-sustaining enhanced commissaries exclusively selling high profit exchange goods” • “Exchanges on life support except where they can still make a profit selling limited range of goods and overseas where they will required some appropriated fund support—exchange support of MWR stops”

What Are We Doing About It?

ALA Assault on S 277 & CBO Cut • Increase grocery prices while increased food stamps • Guts key part of White House military family effort • Throw 50,000 family members and Vets out of work • Take away benefit while fighting two wars • Take away billions invested by shareholders • Force military overseas to shop off base • Gut funding for critical military community programs • Kill key public/private partnership program • Kill programs rating highest on federal accountability

ALA Testimony • To HASC Personnel Subcommittee--February 10, 2011: • Defend funding for full benefit • 5:1 ROI—savings, COLAs, infrastructure improvements, family employment, Industry in-kind support, transportation efficiencies, retention value • Cost constant—other programs increased 100-200% • Accountable stewards • DeCA $1 billion in annual efficiencies since 1991—Efficiencies continue—DeCA August 5, 2011 announcement • Exchanges inherently efficient, direct mission support • Cost cutting in DNA • Single, affordable base access cards

Congressional Support Gathering • ALA, Marketing Council, COMID, Military Coalition • Appropriations Committees Chairmen Stated Support • 67 Members signed letter to Sec. Panetta “…commissaries and exchanges should remain insulated from radical restructuring.” • Letter to Defense Business Board by Wilson/Davis • Wilson/Davis Op-ed August 14—Washington Times: • “…the purpose, power and efficiency of the commissary and exchange systems must not be overlooked.” “…the need to care for military families is a top priority for Congress.” “(discontinuing) these programs would increase costs to military families, cause higher unemployment for families, and would end one of the government’s most efficient programs.”

69 Members of Congress to Secretary of Defense Panetta 7/21 • “Look past the rhetoric by budget-minded advocates and understand the immense value and cultural necessity of the military resale systems.” • “Few programs can match the power of military commissaries and exchanges to rally and solidify the security and strength of the military community.” • “Are among the most highly prized benefits.” • “Consider the purpose, power and efficiency of commissary and exchange activities.” • “Should be insulated from radical restructuring.”

HASC Committee Report 9/22 • “Breaking faith with the military.” • “Cuts of this magnitude require a fundamental cultural shift in the commitment to DoD school systems, military commissaries and exchanges, and other morale, welfare and recreation programs, significantly reducing support of military families and retirees. Family readiness will be degraded.”

HASC to Defense Business Board • “We are aware that the Defense Business Board has been examining commissary and exchange programs in recent months (and) …inclined to recommend the current military resale systems be dismantled and the benefit reduced or eliminated.” • “Military resale stores … contribute directly to the welfare of the military communities that sustain the combat readiness of our deployed forces.” • “These programs are highly efficient and effective in delivering this important benefit and we strongly believe it would be a tragic waste of a treasured benefit if they were to be discarded.”

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Economic Case • Resale has constantly been in cost cutting or no growth mode • Other QoL areas realizing 30, 40, and often 100 & 200 percent increases • Talking about health care co-pays: We’ve always had co-pays—it’s called mark-ups and surcharge

Resale Benefit—Huge ROI to DoD • $8 billion in savings at cash register • Hundreds of millions in cost avoidance to DoD COLAs • $600 million annually in improvements to DoD’s physical plant • Non-pay compensation • 30,000 family members employed adding $900 million to their households • 20,000 family members employed by industry adding another $600 million to household income • $400 million in MWR contributions

Ingrained in the OSD Fabric • Not inextricable without a major cost • Adapts for force structure • Brigade re-stationing • BRAC • Underpins transportation system • Maintains ties with installations • Supports deployed forces

Economic Case • Underpins DoD’s overseas transportation system • $150,000 to $200,000 to train a troop and $1 million for pilots, doctors, specialists • 70 percent increase in food stamp redemption • Sunk costs – buying the car but not putting gas in it • Sales imperative—increase share of AD who use benefit • Don’t buy the car and not put gas in it

Equity • Patrons are shareholders • They have equity in the system • Management runs the system but patrons own it • Have invested billion in capital through surcharge and mark-ups and have capitalized at nearly $50 billion • Contribute $600 million each year • Have taken capital loss at closed and realigned bases • Can’t take what’s not yours

DeCA is Efficient Agency • Savings from consolidation • Savings from distribution • August 5, 2011 announcement • Director Jeu: “…we will become more efficient, streamlined, and strategically organized”. “DeCA has emerged from growing pains of consolidating four systems. We are living testimony for DoD on how an agency can save taxpayer funds by eliminating redundant command structures and business systems, reduce the number of people to manage and work the stores, and still focus on delivering a world-class benefit in the balance.”

Wilson/Davis Op-Ed—8/15 • “The commissary system delivers a remarkable $2.08 return benefit for every dollar expended...” • “…one of the federal government’s most cost-effective operations…” • “Few programs can match the power of the military resale systems to rally and solidify the strength of the military community, the bedrock of military readiness.” • “Defense officials must weigh the immense value and cost savings of the military resale systems against fleeting political rhetoric.”

Consistent with FLOTUS Goals • Support Military Quality of Life • Support healthy life style • Support reducing child obesity • ALA taking initiative with exchanges and commissaries to put resale in front of FLOTUS • Presentation of all resale positives • Cooperative effort of industry and exchanges/commissaries

ALA Industry & ResaleSupport for Joining Forces

Consistent with and Supports Joining Forces Goals • Military family quality of life • Healthy life style • Spouse and family employment • Engine for commerce and jobs for the U.S. economy

Galvanizing Industry Support • 250 of the major consumer packaged goods companies in the United States. • Includes Procter & Gamble, Kraft Foods, General Mills, Unilever, Ocean Spray, Coca Cola, Anheuser Busch, Kimberly Clark, Gillette, small business • Already supports USO, Fisher House, Wounded Warriors and other causes

Military Community Contributions • $4 billion in savings at the cash register for daily household needs. Largely comprised of name brand, recognizable products with those three key words--"Made in America". • $10B contribution to military families over the last 10 years • Servicemen and women are shareholders. Troops have contributed nearly $15 billion of dollars in building the system over the past ten years. • Forms the social core of the military community. • Diversity, EEO, Industries for the Blind

Industry/Resale Synergy with Joining Forces • Large industry and military community support system specifically established to take care of the military member and family, responsive and ability to quickly adapt. • Leveraging the resale infrastructure and all associated vendors to focus support to family members and programs. • Leverage a holistic community in a more focused way that is at the very heart of the intent of Joining Forces

Strong Force in the Economy • Strong force in our National economy and with the military • Member companies contribute nearly $1.2 trillion to the economy and generate millions of jobs • System builds nearly $600 million in facilities each year generating thousands of construction jobs in the private sector • Support for large manufacturing jobs and a large number of small businesses that are vital to the future growth of our economy • Military market -- $18 billion sales and produce 30,000 jobs for American industry • 100,000 jobs for military family members—billions in additional household income

ALA Public Policy Advocacy