ALA Public Policy Advocacy

1. ALA Public Policy Advocacy

2. Your business is our business Participation in ALA these days is not optional….it is necessary part of your business and an investment that returns many fold in many ways.

3. Your investment in ALA proved its worth in 2014 • Participation in ALA yields real, tangible benefits for your business. • Furloughs and closures averted by 11 days resulting in hundreds of millions of dollars in sales that would not have otherwise occurred. • $200 million cut in 2015 would have resulted in $3 billion lost sales and $600 million cut in 2016 would have resulted in $6 billion in lost sales. • Averted major issues that could have impacted exchange ability to earn revenue and contribute MWR dividends. Averting hundreds of millions in lost sales.

4. Keep your seat at the table • 2015 is going to be a pivotal year • Things are going to change and a lot of balls are going to be thrown up in the air. Need pull the cart where you want it to go instead of getting dragged behind it. • Active participation in ALA ensures that your interests are represented in decisions that are g0ing to be made • Decisions on product availability reverberate in commercial sector

5. Strength in Numbers • Table is going to be set this coming year. • Help your Board of Directors reach out to sign up companies in the Association. • Help demonstrate to policy-makers that the power of industry is behind us.

6. American Logistics Association • Logistics is our middle name • Manufacturers, Distributors and Brokers represent 95 percent of the supply chain • Have a hand and a voice in what happens • Can help agency partners get to where they need to get

7. Dynamic environment calls for energized partnership • Publicly supported entities usually predictable • This has changed • Manufacturing, distribution, store support • Industry employment • Industry respects agency prerogatives • Stability and predictability key to cost control • Agency decisions reverberate across the chain • Industry can react and support with adequate notice • Advance notice avoids disruption of product flow • Cooperation and communication key in dynamic environment • Patron support is mutual bottom line

8. SITREP • DoD is targeting the commissary appropriation in its 2015 budget submission, reducing $200 million of the $1.4 billion annual appropriation in 2015, $600 million in 2016, and $1 billion in 2017, leaving it with $400 million • The proposal is direct reduction to military compensation and is inciting fierce opposition. • Exchange programs are under stress • On-base business model threatened

9. Mobilizing for fiscal 2016 • Educating members of Congress. • Input to multiple reports • Working with Compensation Commission • Gathering more data

10. ALA position on the budget The Pentagon has a budget problem but the resale system is part of the solution and not part of the problem.

11. Outreach—don’t lobby ourselves • 40 briefings to Senate and House • Economic report • More underway • Frame the argument and shape the debate • Blunt new normal • Support our friends, educate adversaries • Coalition and patron involvement • Energizing advocacy groups – Grass roots • Moving resale to top priority • Congressional Caucus • Messaging – economic, compassionate, mission • DoD outreach—military and civilian

12. System is strong but fragile and vulnerable • Convergence of factors all at once could destroy it

13. Convergence of exchange challenges • SDT and base operations funding • Product and pricing restrictions—tobacco (CVS), beverage alcohol • Wage hikes (minimum and SCA) • Shrinking force structure • Commissary as destination • Off-base competition

14. Easy-credit retailer sues troops worldwide Money was tight, and neither Aguirre, 21, nor his wife had much credit history as they settled into life at Fort Carson, Colorado, in 2010. That’s when he saw an ad for USA Discounters, guaranteeing approval for service members. In military newspapers and maga- zines, on the radio, and on TV, the Virginia-based company’s ads shout, “NO CREDIT? NEED CREDIT? NO PROBLEM!” The store was only a few miles from Fort Carson. Army Spc. Angel Aguirre needed a washer and dryer. From there, USA Discounters files lawsuits against service members based anywhere in the world, no matter how much inconvenience or expense they would incur to at- tend a Virginia court date. Since 2006, the company has filed more than 13,470 suits and almost al- ways wins, records show. Associated Press—August 18, 2014

15. Rational Access

16. Military personnel are entitled at least to the same rights and privileges as the citizens they are charged to defend.

17. Sectors have inherent challenges Just in past year: • Concessions • Tobacco • Alcohol • Supplements • Energy drinks • Sugar • Healthy foods

18. Hunter Amendment (Sec. 633) The Secretary of Defense and the Secretaries of the military departments may not take any action to implement any new policy that would limit, restrict, or ban the sale of any legal consumer product category sold as of January 1, 2014, in the defense commissary system or exchange stores system on any military installation, domestically or overseas, or on any Department of Defense vessel at sea.

19. ALA position on Sec. 633 • Military folks are entitled to the same shopping rights and privileges as the citizens they are charged to defend. • Products that are legal in the general civilian market should be available to military personnel.   •  From a practical standpoint, we find that if legal consumer products are regulated on base, it merely forces the troops to go off base.  • If the military wants to control consumption of any product, it has to be a behavioral change, not an access change.  

20. ALA position—Sec. 633 • The debate over individual product categories such as alcohol and tobacco (or any other product) should be settled in the general American populace and marketplace and not specifically targeted to military personnel.   • Over the years, the oversight committees have adopted this view and have judiciously and deliberately expanded product availability through Title 10 and review of the Armed Services Exchange Regulations.  By exercising this authority, the Defense …

21. ALA position—Sec. 633 • …authorizing committees have been able to monitor and sometimes intervene when other members of Congress or committees have attempted to regulate product availability.  The SASC and HASC viewpoint generally reflected prevailing practices and product availability in the civilian marketplace.  Usually, the Executive branch conforms to this philosophy but Congress has occasionally stepped in when efforts have been made to prejudice product availability.

22. ALA position—Sec. 633 • The wide price disparity between off base and on base for tobacco and alcohol has narrowed over the years to the point where it is virtually even. • The demographic has changed where most of the military live off base and artificial market manipulation merely serves to inconvenience those on base. • Manipulating the military marketplace for legal products is a slippery slope that opens the door for further sanctions on a wide range of other products directed only at the military.

23. Taking beverage alcohol issues head on • Actively work to reverse and pre-empt any ill-advised policies aimed at limiting access to beverage alcohol on military bases. • SecDef said that “policies are going to be revised where necessary to address risks that alcohol poses to others.” • Working with industry experts, think tanks and associations to educate policy-makers. • Engaged DoD Sexual Assault Prevention & Response Office—offer industry resources to deal with issue.

24. Tobacco--Durbin provision—SAC-D SEC. 8068. The Secretary of Defense shall issue regulations to prohibit the sale of any tobacco or tobacco-related products in military resale outlets in the United States, its territories and possessions at a price below the most competitive price in the local community: Provided, That such regulations shall direct that the prices of tobacco or tobacco- related products in overseas military retail outlets shall be within the range of prices established for military retail system stores located in the United States.

25. Report language on Sec. 8068 • The Committee applauds these efforts and encourages the Department to continue to advance rapidly toward a tobacco-free military. In support of these goals, the Committee includes a provision directing the elimination of the price subsidy provided to tobacco products at military exchanges. This reform directs the Department to implement a consistent, verifiable price benchmark for tobacco products at exchanges, as recent surveys by the National Institutes of Health indicate that Army and Air Force exchange prices for cigarettes in practice to be between 14–25 percent lower than market price, despite Department of Defense Instruction 1330.9, which allows only a 5 percent discount. 

26. Tobacco • Outright ban to tobacco being considered. • SecDef report on tobacco imminent • Not judging the health effects of tobacco • Interested in ensuring troops are not prejudiced • Need data to show that any ban would curb use

27. Minimum wage and SCA • Favorable prices have emerged as a key benefit of military service. • Military only wages create disparities and higher prices/reduced commissions on base. • Contracts constantly renewing and some concessionaires won’t bid. • Exchange and MWR earnings will drop. • Troops want familiar name brands but now will pay higher prices or be denied their favorite food altogether. • DoL acknowledge that these wages impose a “uniquely burdensome obligation” on military fast food restaurants

28. ALA position on wage rules • Major consequences • Military access to favorite brands should be protected. • Will have the effect of denying these programs. • Contractors pay rent and a portion of sales to exchanges and MWR. • Most are small businesses. • Military-only application will prejudice the troops. • Off base competitors not affected. • DoL pressed forward anyway.

29. Corporate tax inversions • Rep. Jackie Spier, (D-Calif) wants DoD to end exchange contracts with Burger King because of merger with Canadian Company & corporate flight from the U.S. • Only would affect military Burger King outlets on military bases. • Singles out military and will deprive troops and families of a highly popular brand. • Yet another example of an attempt to deprive access based on a fight over a larger national issue. • Tells DoD to enhance exchange oversight “to ensure business integrity”.

30. Veteran online shopping Support any effort to open military resale offerings to larger, deserving audience.

31. CommissariesThisis no drill

32. Prevention Pre-emption Preservation

33. Saw storm clouds gathering five years ago • $1.4 trillion deficit • Budget problems and the sequester • Sprung into action • Gathered data • Mobilized key constituencies • Created coalition to Save Our Shopping Benefit • Educated allies

35. Strategic Choices and Management Review • Don’t just chip away at existing structures and practices but…fashion entirely new ones that better reflect 21st Century realities. • Prior modest reforms met political opposition • “We are now in a different fiscal environment dealing with new realities that will force us to confront these tough and painful choices.” • Aim to conclude review by May 31, 2013 • Foundation for the Quadrennial Defense Review due to Congress in February 2014

36. Here we go again • Pentagon is gearing up a new effort to cut overhead and administrative costs. • Initiative will target the “Fourth Estate” — everything other than the military services and combatant commands, according to Deputy Defense Secretary Robert Work. • Targeted components for cuts include the Office of the Secretary of Defense and the 16 defense agencies, including the Tricare Management Agency and the Defense Logistics Agency. • Those account for about 20 percent of the overall defense budget.

37. ALA position on the budget Budget calls for a reduction of the “subsidy” Crops are subsidized Troops are not subsidized… They’re compensated

38. ALA position on budget • System has already cut no more cuts-inherently efficient • Stop irresponsible dialogue with facts—no more new normal • As a vital compensation program, should be exempt from cuts. • For Sequestration, these programs should not be cut disproportionately beyond the minimum reductions that are mandated by law.  • Certainly should not be singled out for major reductions or ill-advised experimentation or reengineering • The resale system is inherently efficient with DeCA alone reducing its annual operating costs nearly $900 million a year.  These programs are part of the solution not part of the problem as our report “Costs and Benefits of the Military Resale System” demonstrates—their contribution to the Defense Department far outweighs their costs by a factor of 6:1. 

39. ALA position on budget • Nonappropriated funds and surcharge funds are generated by charges to military personnel and their families.   These funds should not be siphoned off in a convoluted shell game to pay for legitimate appropriated fund obligations that have been set forth by Congress over the years.  • NAF balance sheets should not be used to balance the budget on the backs of the troops

40. ALA position on the budget • There should be no commissary reductions beyond the over $700 million a year in annual reductions that have already been taken out of the commissary budget (includes the $46 million in the just-passed Omnibus FY 2014 Appropriations Act, and the $500 million inventory savings from outsourcing distribution. • Commissaries are one of the few DoD programs that has held costs constant; in FY92 constant dollars, commissary appropriations have actually declined since 1992. • The primary purpose military families use the commissary is the savings offered, they will stop coming when the savings go away.

41. ALA position on the budget • This is an earned benefit, not just a store. • Commissaries are a community hub and bring the military together. • Food inflation is expected to double this year. • Would greatly impact DoD’s efforts to promote healthy lifestyles. • DoD may say the stores will remain open but the practical effect of the appropriations reductions will be that the stores in the U.S. will close. • Cutting commissaries is punishing success. These operations have already cut spending while other Defense programs continue to increase.

42. ALA position on the budget • The cuts will reduce the current 30 percent savings to zero and the stores in the U.S. would close. • Economies of scale would be lost for remaining overseas stores and costs and prices would rise. • There are huge unknown consequences such as cascading impact on military PX operations and on-base community support programs, loss of U.S. supply infrastructure to support remote and overseas operations. • Commissary cuts would demoralize the military at a time when there is so much uncertainty over the entire compensation package and force structure cuts.

43. ALA position on the budget • DoD says that commissaries will not have to pay rent or taxes under their proposal. Commissaries should not have to pay rent anyway on stores built and maintained with patrons funds. The military is already exempt from taxes under the Supremacy clause of the Constitution. • If you shut down the stateside hub stores, the supply chain will lose economies of scale and prices overseas will rise as well. • Commissaries support the Defense mission including DoD efforts to promote healthy lifestyles.

44. ALA position on the budget • Insufficient analysis/study of the consequences of the reductions • Congress, at the Administration’s request, established the Military Compensation and Retirement Modernization Commission and specifically included commissaries as part of the review. The Commission was to look at commissaries in relation to other compensation benefits and provide recommendations to the Congress. The commission should be allowed to do its work. • Commissary is an earned benefit in recognition of service. • Reductions to the commissary benefit are out of proportion to the reductions that are shared by other Defense programs

45. ALA position on the budget • Commissary patrons have built billions of dollars in facilities with their five percent surcharge • Food inflation is expected to double in the coming year • Represent a partnership between the public and private sector, taking advantage of a private sector supply chain that contributes an additional $500 million a year ancillary support to the military. • Represent a partnership between the beneficiaries and the DoD with these beneficiaries offsetting nearly 20 percent of the operating costs. • Provide a tremendous amount of no-cost compensation to the Department through state and local tax savings for beneficiaries valued to the Department at nearly $300 million.

46. ALA position on the budget • Power military household income with$2.8 billion in price savings and another $250 million in income for family members who work there. • Is a cherished and well-used benefit with 90 percent of active duty families using it last year and over 98 million customer transactions. • Large operations in the United States anchor and indirectly underwrite operations in remote and overseas areas—equalizing the benefit no matter where our people serve. • Are a flexible benefit that expands and contracts with the size of the force structure with nearly 150 of the stores closed corresponding with successive rounds of BRAC and force realignment over the years.

47. ALA position on the budget • Have a declining budget, with funding for the benefit remaining stable and dropping in real terms during the Defense budget ramp-up and even when the number of eligible beneficiaries increased. Allow the Department to economize on cost-of-living allowances and personnel and operating costs in other areas such as direct pay and transportation. • Commissaries support multiple Administration objectives including: hiring of Veterans and family members, supporting military quality of life; providing minority and small business opportunities; and opportunities for the blind and severely disabled. • The Defense Commissary Agency is one of the few organizations in the Department that has been able to produce a clean financial statement, a major objective of the DoD.

48. More Military Families Are Relying On Food Banks And Pantries Despite the economic recovery, more than 46 million Americans — or 1 in 7 — used a food pantry last year. And a surprisingly high number of those seeking help were households with military members, according to a new survey by Feeding America, which is a network of U.S. food banks. NBC News—August 19, 2014

49. Economic Case • 70 percent increase in food stamp redemption • Sunk costs – buying the car but not putting gas in it • Huge return to DoD and the Nation • Sales imperative—increase share of AD who use benefit • Tax savings alone justify benefit • Family and Veteran employment • Contribution to economy/balance of payments

50. Benevolence and Good Will • Wounded Warriors • Snowball Express • Joining Forces • Fisher House • USO • NMFA • Cause promotions • …and a multitude of others